In their latest episode of the VALUE: After Hours Podcast, Tobias Carlisle, Jake Taylor, and Rudy Havenstein discuss:
- The Fed’s Role in Financial Crises
- Corruption, Insider Deals, and the Revolving Door
- Crypto Skepticism and Meme Coins
- The Housing Market and Fed Manipulation
- The Fed’s Real Priorities and Bailouts
- Lizard Strategy: Rock, Paper, Scissors of Investing
- Macroeconomics vs Microeconomics
- Nominally Bullish, Realistically Bearish
- Market Predictions and Cash as Optionality
- Inflation, Interest Rates, and the Endgame
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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Transcript
Tobias: I think we’re live. This is Value: After Hours. I am Tobias Carlisle. Joined as always by my cohost, Jake Taylor. Our special guest today, Rudy Havenstein.
Jake: Rudy, Rudy, Rudy.
Tobias: [laughs] How are you, sir?
Rudy: Great to be here. No, thank you. Great. I mean, the best I’ve been in a week. Like I said, I’ve had this cold. And if I go mute for a bit, it’s because I have a coughing fit. So, I hope I can do this. But go with you, guys, I wouldn’t miss it. It wouldn’t cancel.
Tobias: I don’t want to ask too many directed questions. So, maybe we’ll just open it up. [Jake chuckles] What’s happening in the markets?
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Market Predictions and Cash as Optionality
Rudy: Well, they fluctuate.
Jake: Thank you, Mr. Morgan.
Rudy: I had an expose from years ago said, I predict the markets will fluctuate. I think I’ve been proven correct. I never try to predict the markets, because I’m not very good at short-term timing. Longer-term, I’m okay. I listen to a lot of podcasts. I read a lot of people. They’re smart guys right now that’ll tell us we’re starting a new Walmart. We’re going to blow past 6,100 and go to the moon. They have very great arguments, and there’s people who say, “Oh, no, we’re going to go down to 4,800 or pick a number.” I have no idea. I’ve given up on trying to predict the market. Fundamentals, they don’t matter anymore, really. Overall, I think someone said the other day markets go up 90% of the time, so I would expect markets to go up 90% of the time.
Well, just in the last 25 years, we had 50% down in the indexes and 80% in the NASDAQ in 2001 to 2003. We had 50% down in the SPX in 2008 or 2009. That can happen, and I was aware that could happen. So, I always like to keep what’s a CFA would say, too much cash or something. But that’s an option. It’s an optionality on future buying. I have no FOMO. So, if I miss out on the big rally, then so be it.
Tobias: Do you think that we’ve eliminated those big crashes? There was one in 2000, there was one in 2009. 2020 was a flash crash, bounce like a golf ball off a concrete path. And then, 2022 was a gradual– I thought 2022 was looking pretty nasty.
Jake: Start of something real and then–
Tobias: Shrugged enough.
Jake: Yeah. Is the Fed put a real thing?
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The Fed’s Role in Financial Crises
Rudy: I think it was Grantham who had a great line about “Feds got your back. Feds got your back.” Well, the Fed had our back in 2008 or 2009 too.
Tobias: If you’re in jiu jitsu, it’s not a good thing to hear someone’s got your back.
Jake: [laughs]
Rudy: Yeah. I’ve posted before the charts of the Fed funds rate during a cutting cycle and all through 2001 to 2002 or whatever. And from 2008, 2009, you have this massive cutting cycle as the markets are crashing.
Tobias: Yeah.
Jake: Of course.
Rudy: So, lower rates are not necessarily the answer. Now, in 2020, they threw what, $5 trillion or something. I mean, they were buying $500 billion of MBS in a month or something. That was insane. So, they went insane, I think. I mean, they really went insane. People say, “Powell, he’s not Bernanke and Yellen.” They sure did. Actually, Greenspan started it. He’s patient zero in my opinion. But Bernanke, yes.
I have nothing but contempt for Bernanke and Yellen. But I don’t take Powell off the hook, because he went insane. They had $0 in MBS in 2008, and Bernanke bought a couple trillion and then bought a trillion. And then, Powell got it up to what, almost $3 trillion. And that just totally screwed up the housing market for our lifetime, I think, or at least until reality sets in at some point. But that was unnecessary.
===
Corruption, Insider Deals, and the Revolving Door
Rudy: I was just reposting an old thing about the guy that was running the treasury program to buy corporate bonds back then had a vested interest in his own dad’s company that owned a ton of high yield bonds. And so, basically, he’s trading his book from the US Treasury. And that’s a constant theme with me, is this insider trading. We see it now. Trump’s going to announce some crypto thing. I just saw a headline today to buy his meme coins. But it’s constant.
With Stan Fischer’s death the other day, there was a chart that I think Olivier Blanchard or whatever put out. And in the center of the chart is Fischer, and then all the economists he’s connected to, okay, over the years. Many of them people don’t know, but a lot of them are household names. Yellen, Bernanke, Draghi, Summers, Krugman. The point I made is it’s amazing how these same people who provided– And Fischer too. He’s made a ton of money. The same people that provided intellectual cover for policies that led to massive spike in wealth inequality also gained generational wealth from the same people.
Fischer was hired by BlackRock. Bernanke’s at Citadel and Pimco. Yellen just went to Pimco. Kashkari was at Pimco. Dick Fisher went to Barclays. Dudley is basically a Goldman Sachs mole, his entire life. [Jake laughs] So, in my mind, it’s absolute– They are not working for the American people. The Fed is not. They’re unaccountable and they’re never held to account and they’re never fired or anything. They just go back to their reward.
Before she was Treasury Secretary, she was making $300,000 of speech talking to the same banks that a year before she was the head regulator of. What’s up with that? And of course, nobody in Congress– We don’t have any sheriffs, because Congress doing the same thing. To me, it’s blatant corruption. If you’re on the House Financial Services Committee regulating Citigroup and then you go work and get a big payday at Citigroup.
It’s just like one of the New York prosecutors that was working to prosecute Bill Black for some allegations, he ends up going to a boutique law firm that defends Bill Black. So, these deals are made. If you got enough money, there’s no– Ever since Ken Lay and Jeff Skilling– Ken didn’t even go to jail. He passed away before he did. When is any white-collar criminal ever gone to jail in the United States? People see that and they think like, “Well, heck, if I steal $5–” Well, in California, you got to steal a $1,000.
Jake: [laughs]
Rudy: But if I steal $1,000 from a store, I’m going to do a couple years maybe or something. But you can still steal billions and– Look at a bank like JPM, that not only had dealt with Epstein for 15 years and violated a number of reporting requirements, but they’ve been convicted of five criminal felony charges at least while Jamie Dimon has been CEO and no executive apparently for these criminal actions. This happens at every big bank. It’s the brick and mortar and the shareholders that pay the fine.
That should outrage the shareholders, but everybody loves Jamie Dimon, who’s– As Ben Hunt says, “Generationally rich for being a manager of a bank that the government won’t allow to fail.” It’s a scam. Scams everywhere now. Grifting everywhere, bugs me.
Jake: Yeah.
Tobias: Is the solution, bitcoin?
===
Crypto Skepticism and Meme Coins
Jake: [laughs] Oh, boy. Stepping on that mine already.
Tobias: Tips [crosstalk] [laughs]
Rudy: Hey, don’t set me off on a coughing ramp, please. Yes, bitcoin fixes all of this. I don’t know, it seems like every– Listen, let’s just say crypto, because I don’t want to–
Tobias: Yes, let’s not promote. [crosstalk]
Rudy: Satoshi was this libertarian ideal of this money that was exempt from government control. And now, you’ve got Larry Fink as its biggest backer. It’s been called crypto, because I don’t want– People say, “Well, you haven’t studied it enough?” Okay, crypto [Jake laughs] has been coopted by some of the worst billionaire scamming sleazeballs and nobody seems to care. And you know what? Trump with his meme coin and all that. There’s no shame. It’s just avarice. I don’t know.
President used to have some sort of dignity. Even Clinton was embarrassed I think when he got caught. I joked years ago. I should have a Rudy coin and I could probably make a million bucks, but I’m just not motivated. I probably could, because it’s such a joke. You’re just scamming people. And that seems to be the big business in America today is scamming people.
Tobias: Do any of the coins do anything?
Rudy: I don’t know. I looked into some white papers years ago, there was one coin called Monkey Coin. I was reading this white paper. They had the white papers back then, like Tether has attestations. I’m reading it, and it’s complete nonsense. It’s just complete nonsense. So, the CEO of Monkey Coin, starts calling me all these names on Twitter that I’m– And of course, they ended up I think being charged with fraud and all that. It’s just funny.
Tobias: It’s no Fart Coin, the Monkey Coin.
Jake: Yeah.
Tobias: Fart Coin is the gold– [crosstalk]
Rudy: Can you believe that had the market cap of forward at some point. I don’t know– [crosstalk]
Tobias: I think it’s probably holding up, isn’t it? I don’t know.
Rudy: Well, look at Dogecoin. The guy that created Dogecoin is like– He’s like-
Tobias: As a gag. Yeah.
Rudy: -“I created it as a joke. I can’t believe.” Someone asked, “Aren’t you concerned about the energy consumption that’s used to produce Dogecoin?” And his reply, I think it was on Twitter, goes, he’s like, “Dude, I thought about it for like 10 minutes before creating it.” He goes-
Jake: [laughs] Yeah.
Rudy: -“No, I didn’t put a lot of thought into the ecosystem that it would affect.” We’re in a time where everyone’s grubbing for money. You’ve got house hacking and all this other– My post today on Substack is like a great [unintelligible 00:10:14] of mine– I’m going to say for your home is shelter and suddenly home has become an investment. That’s been a huge part of the problem in our country. Young people can’t buy houses, but Tom Barrett can buy a $100,000 or $10,000 or whatever. It’s just not right. It’s not good for society.
I think Marc Faber had a great quote about GDP. He goes, “GDP doesn’t mean anything. You can add GDP by digging holes and filling them in. GDP is the standard of living of the average person, are they doing better. I think in this country, they’re not.” I think [unintelligible 00:10:51] talks about, you have an island where 10 people. Nine of them make a $1,000 and one of them makes $10 million. And the average is what? You’ll say, well, the average income on that island is $5 million or $4 million something, but that’s a total distortion. There is no average there. And the median is a little bit meaningless. But yeah. Anyway. I’m not coughing, so that’s good.
Jake: [laughs]
===
The Housing Market and Fed Manipulation
Tobias: Did the Fed buying all those MBS have more of an impact on the housing market or is it-
Rudy: I think so.
Tobias: -private equity buying up a whole lot of housing? Is both of those things squeezing out– [crosstalk]
Rudy: Well, there’s a guy on X who– Randy Woodward. And he sells bonds to banks. He’s a bank– [crosstalk]
Tobias: Yeah, I know.
Rudy: So, he knows more than I do about this stuff. You know Randy, right?
Tobias: Convert bond or something like that. No, no, no. [crosstalk]
Rudy: So, he deals with banks all the time. [crosstalk] There’s an interview I posted of him– Sometimes I go through after I do these podcasts and I’ll repost some of the things I’m talking about, because I can back up all this stuff. But Randy has a little few minute talk where he goes, “I don’t know why the Fed was buying MBS.” He goes “My clients were buying them. They were falling.” But he says, “But I think they were trying to save someone and I hear it was in Europe. They were trying to bail someone out.”
I think that that’s what happens. You know in 2020, Ken Griffin is on the phone or has Ben Bernanke get on the phone with Jay Powell. Janet Yellen was working for Magellan Financial back then. I couldn’t even find a single news article about that, but I saw it in their promo material. She was working for them.
===
The Fed’s Real Priorities and Bailouts
Rudy: So, you don’t think they were calling Powell and telling him, you need to bail out Citadel? You need to make sure that Magellan’s funds don’t go down? It’s like, I was talking about this treasury guy earlier. They’re just protecting themselves. You don’t think Dick Fischer was saying, “Hey, can you, guys– Barclay’s is losing some money.” You had Bill Ackman. I mean, God, I have clips of this comes on as you remember. Literally crying on TV, “Oh, my. Don’t kill my dad. We need help.” [Jake laughs] And then, he gets this massive bailout. And two weeks later, two weeks later, there’s an article, “Bill Ackman boasts that he made $2.6 billion on COVID bounce trade,” okay?
Come on. No, Ackman’s on the New York Feds advisory board, on advisory committee. I don’t know if it’s a plunge protection type team, but it’s called something else, working group. He’s on that. There’s other guys I’ve posted before too that are on it. Anybody can look it up, but I’m the only one that does sometimes. You don’t think Amman was calling Powell going, “I need you to save the market and buy high yield bonds.” [Jake laughs] You know what? I see this. Joseph Peck doesn’t see it, because he’s too busy trying to survive, but I see it and I think it’s corruption and I don’t like it. Now, people say, “Well, what are you going to do about it? Nothing’s going to change.” I go, “Well, I know, but I’m just like-
Tobias: Tweet about it.
Jake: Yeah.
Rudy: -keep plugging away.” Well, as I’ve said– I’m sorry. The purpose of my account is to amuse me. And for future historians, if there are any. And of course, no one will read. The history is written by the winners. I think these people I’m mad at are going to be the winners. They always are.
Tobias: Let me just give a shoutout.
Jake: I think that the court gesture role is super important though.
Rudy: Well, people have called me a troll before. And I said, “I’m not a troll. I’m a historian. I’m pointing out stuff.” I decided a long time ago, if I’m going to say, “Oh, the Fed is–” I’m just not going to say the Fed is dumb. I’m going to say, this is why the Fed is hurting most Americans. And then, have a link to it and have a chart and have all that, so I can pretty much back up. So, I don’t get people much anymore come at me go, “No, you’re wrong. Ben Bernanke saved the world.”
There’s a guy who called me the second worst account on Twitter. I think Zero Hedge must have been the first. We had an exchange in the– Well, I think what it was is he was a money manager and he thought Ben Bernanke was God’s gift to money managers and I disagreed with that.
Tobias: [crosstalk]
Jake: Yeah.
Rudy: Yeah, he is. I found fault with that message, because I think Ben Bernanke’s the enemy of about 300 million Americans. So, remember, 10% of people own 93% of the stock, something like that. So, yeah, I’m quite comfortable debating anybody, but I choose not to. Now, I don’t want to pick fights or anything sometimes. So, if I realize someone’s completely hates me or is an irrational or something, I just say, “All right, man, we disagree,” and mute them or something. I encourage people to block me. So, save us both some grief. Why put yourself through this?
Jake: Yeah.
Rudy: But you’re going to miss the funny stuff.
Tobias: Let me give a shoutout to the folks at home. Bixby. Petah Tikva, Israel. What’s up? Tallahassee. Tomball, Texas. How are you, Tyler? Ireland. Philly. Springfield, Alabama. Dubai. Washington, D.C. Valparaiso. What’s up, Mac? London. Lausanne, Switzerland. Oklahoma City. Boise. Oregon. Houston. Bulgaria. Fredericia, Denmark. Cincinnati, Ohio. Surbiton.
Jake: Please only write in if it’s a two-syllable city so that Toby can accurately pronounce it. [laughs]
Tobias: [crosstalk]
Rudy: Are these people all complaining, how the hell did you get this guy on as a guest, put on somebody who knows that is someone normal?
Tobias: They’re pretty positive for the most part.
Rudy: Well, I’m trying to say something controversial.
Tobias: “What is this guest name @Twitter or X?” It’s Rudy Havenstein. Rudy Havenstein is the–
Rudy: Sound it out. S-T-E-I-N. You can pronounce it whatever way you want.
Tobias: Yeah. I don’t know how its pronounced.
Rudy: He was a central banker in Germany in the 1908-1923.
Tobias: Did he have a PhD-
Rudy: I don’t believe he did.
Tobias: -back in those days?
Rudy: I think he was a judge by background.
Tobias: Yeah. And he still blew it up.
Rudy: Huh?
Jake: Strong beard.
Tobias: Good mustache.
Rudy: I wish I could grow a mustache, a beard like that. No, I can’t. Yeah, the hair is thinning like that though.
Jake: [laughs]’
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Macroeconomics vs Microeconomic
Rudy: Yeah, I just picked that. Well, there’s a reason I picked him as a warning, not as encouragement I tell people.
Jake: [laughs] Yeah. What were you trying to do?
Rudy: 13 years ago. Yeah, well, it turned out it’s more of an encouragement than a warning.
Jake: Cassandra.
Tobias: I find the breakdown between microeconomics and macroeconomics a little bit mind bending. Microeconomics makes sense to me pretty much like– [crosstalk]
Jake: That’s just business.
Tobias: Demand.
Rudy: That’s the Australian view. Yeah.
Tobias: And then, macro is just politics.
Jake: Keep views. Yeah.
Tobias: They work backwards.
Rudy: Yeah. Some of the best traders. I’m not a trader. There’s a guy, Jason Shapiro, I think he said– I agree. it’s something like macro is– I read macro all the time and I post charts of macro and I love hearing podcasts on macro. And it’s completely useless for making money, in my opinion. Prechter, you remember him, he has a book all about how it’s not that the events change the stock prices, the stock prices lead to the events. So, we have causality backwards. I don’t know if I buy that, but it’s an interesting theory. So, a lot of days, there’ll be some news and someone will go, “Oh, the market’s going to drop 5%.” And then, it ends up the day.
Tobias: Yeah.
Rudy: How many times that happened? That’s why I can’t predict anything. Neither can anyone else, frankly.
Tobias: One of the funniest ones that I’ve tracked really closely was when– I don’t know if you remember, UnitedHealthcare was the only one that wasn’t participating, but it was all the other four insurers were combining two of them– There were two deals, and it was two and three and whatever it was, found and five or something like that combining together. And there was some chance that they were going to be blocked by the Obama admin.
Before they were blocked, you’ve got this distribution of outcomes that includes the worst-case scenario and the best-case scenario. And the day that the announcement was made that they were actually blocked, they all rallied. That was the worst-case outcome, but getting rid of the uncertainty made them rally.
Rudy: Yeah. You got to think many levels deep. I could never play online 10 games of poker at once, about two was all I could handle. So, I can’t take that many levels deep to try and figure out not only what your response could be– what other people’s response is going to be to your response and then you’re–
Jake: 4D chess.
Rudy: I’m sure AI will solve it. We’ll have an AI that’ll come out every day and say, “The Dow will be up 400 points today. And there it goes.” I used to say, years ago, I go, “Why does the Fed just tell us what the closing prices are every day and then we can all just go to the beach?”
Jake: [laughs] Yeah. Get rid of the pretense. Let’s just–
Rudy: Get rid of the pretense. Well, I don’t know if I brought up Mike Green. I love– He’s the best on this whole passive stuff. He says that every dollar that goes in to these index funds creates about $8 in market cap. I believe that’s what he said.
Tobias: Wow.
Rudy: So, as long as you have funds coming in from 401(k)s and from all that, nothing stops this train, as Walter White would say. But now that can someday work in reverse. [crosstalk]
Tobias: I thought we were at that point a few years ago, where the boomers were now net sellers of equities. I think that was what Mike Green’s point was. I forget the year where it was 2018, at the end of 2018, it was a bit of weakness. I think that was the first year.
Rudy: Are they?
Tobias: Because– [crosstalk]
Rudy: I thought the public was going nuts diving in. I don’t know. I don’t know the answer on that.
Tobias: This is just net saving for that generation. 2018, they would have been 68, the ones born in 1950.
Rudy: Yeah.
Jake: The math checks out.
Rudy: But are they living longer and holding on to their stocks longer? I know guys that own a decent amount portfolio of stocks. These are the kind of guys that call me when the market is down a few percent, “Oh my God, what’s going on?” None of them have sold. Yeah, even when we were down in April or whenever it was, we had with 20% drop, they didn’t sell. They were freaking out, but they didn’t sell. And then, apparently, at least in May or whatever, the public came in size. I heard it was the institutions that were pulling out and the public was diving in. So, I don’t know. People think the public’s dumb money, but I don’t know. There’s plenty of guys on Wall Street that are dumb money too, I think. So, I don’t have the answer.
Tobias: I saw a chart today that said that M2 exploded through COVID, and then they’ve been draining it until pretty recently and it started ticking back up again. It looks it’s back on the long-term path according to this chart that I saw today. Do you have any thoughts on M2?
Rudy: I look at it once in a while. Let’s look here. Yeah, number goes up.
Jake: [laughs]
Rudy: It hit about what, 21 points. I’m looking at the FRED site now. $21.9 trillion in April 2022, and now it’s back at $21.8 trillion. So, it had a little dip there. [crosstalk]
Tobias: It’s still up from the more recent low? [crosstalk]
Rudy: Oh, yeah. Looks like it it’s been rising since of summer of last year.
Jake: It is funny though, the M2– People used to hang on that. It would come out on Wednesdays and everyone would be looking at it in the 1980s and 1990s. And now, I don’t know, it just faded as a thing that people cared about.
Rudy: Right. And Greenspan’s briefcase, how thick was it. That was another one they used to look at. [Jake laughs] That’s how ridiculous it is. But there used to be times I remember– I’ve been paying attention to markets since the 1980s, but really closely since the 1990s. And there were days where no one to mention the Fed at all and I miss those days.
Tobias: Hard to believe. Does the Fed governor gives a talk every day now?
Jake: Yeah. Just job– [crosstalk]
Rudy: Oh, no. Not just one. Yeah, they’ve had 20 speakers a week sometimes. It’s insane. And that’s new too. They need to end that. Powell needs to just say, just nobody except his vice chair can talk, because it’s meaningless. I’ve posted on inflation for a half dozen different Fed governors and Fed FOMC members. I do a timeline of their quotes about inflation starting in 2020. It’s like, “Inflation is too low. We need higher inflation. We would be happy if inflation is 3%. We want inflation higher for longer.” And then, they go, “Oh, my God, inflation is a problem. Oh, no. Our top priority is fixing inflation.”
It’s like, it’s arsonists running around trying to [Tobias laughs] put out the fires that they caused. And we laugh. But you know what? These guys have incredible power. Congress thinks they’re a bunch of witches that live in the sky. Congress has no idea that Congress created the Fed and could put a leash on it if they really wanted to. But they don’t want to, because the Fed’s Congress is a drug dealer.
Jake: How do you lay blame percentage wise between the Fed, and accommodative policy and then Congress running trillion-dollar deficits, so fiscal versus modern type of policy?
Rudy: Kevin Warsh has a great statement on this. He said, it was the Fed that got into politics on a permanent basis. What is the message to Congress when you drop rates to zero and you buy up all the MBFs and treasuries? The message is you can spend as much as you want. And he goes, “You don’t have to encourage Congress to spend as much as they want and they did.” I have that clip too, everything. Just ask me, I’ll send it to anybody.
Yeah. So, it was the Fed that should have been taken away the punch bowl and now they are spiking the punch bowl or they were. And then, inflation got to 9%. Official inflation, by the way, everyone listening here should know that I think the CPI model is nonsense. But official inflation got to 9%.
I think they got a little freaked out and Powell probably yelled at a few staffers and then they raised quite. I never thought they would raise that quick, I have to say. But you know what? Now, we’re back to normal. We finally normalized after what, 15 years. 17 years, we finally normalized. People are freaking out. But you know what? Apparently, stock market’s almost at all-time highs with 4.5%, 4.3% rates. We’re below average actually.
Same thing on mortgage rates. The 30-year mortgage. FRED goes back to 62. I think the average is like 7%. Median is like 7%. So, we’re still below average on, I think both Fed funds and MBS or on mortgage rates. And if we’re not, we’re damn near it.
Jake: If I told you that they would raise rates from call it zero to five in the speed that they did and let’s say this was, five years ago, would you have thought more would have broken in that process?
Rudy: Yes. Yes. And I wonder about that, because–
Jake: Why and what happened?
Rudy: You got to think there’s trillions in derivatives out there based on interest rates alone, right?
Jake: Yeah.
Rudy: Somebody must have blown up. Now, I don’t know if they were quietly bailed out. The Fed does not have to provide minutes on– In 2020, they passed this new law where Fed can do whatever it wants. Congress is not going to do anything. The Fed’s done illegal things. I think Gundlach has talked about that quite a bit. So what? They’re not going to get called down on it. And if they do, Congress will legalize it, whatever they did. Because like I said, they’re Congress’ drug dealer.
Yeah, I was very surprised they went from what, 0.08% to 5.3% in a year or two. Yeah, the reason 5% rates are dangerous is because of the decade of ZIRP and all the insanity that went on then, and we’re going to be paying for that for a long time.
Jake: I guess the First Republic and Silicon Valley bank holders are telling me that I’m an idiot for saying that nothing broke, but I was surprised that there wasn’t more that got shook loose.
Rudy: Well, the depositors got saved.
Jake: Yeah.
Rudy: And especially in Silicon Valley bank, it was– And we weren’t just bailing out Bill Ackman. We were bailing out Chinese companies and other billionaires that are less well known. Janet Yellen’s Treasury Secretary now, and she gets $300,000 speeches from a lot of these banks and stuff. Bill Ackman’s on the New York Fed advisory committee along with other people. You don’t think she was getting hammered? You got to save us. You got to save us, Janet. And she’s thinking, “Well, I could probably ask Bernanke money now, 500k a speech maybe or something.”
I think people assume that that’s not going through their minds. I think it absolutely has to be, because as I point out with Paulson and Bernanke, they did nothing that Jeff Skilling wouldn’t have done in their positions. They acted in every manner, just like Powell did to save his private equity buddies. They are all-star forever plutocracy heroes. That’s where their bread is buttered. They don’t care about. They really don’t.
I make a joke about Powell saying he’s met the homeless and then he corrects himself. He goes, “Oh, by homeless, I thought you meant people with second and third homes.”
[laughter]Rudy: So, yeah, I think that there is– Look at all of them. Krugman 20 years ago was making 50 grand a speech to investment bankers. God knows how much Larry Summers has made over the year. He made $20 million at least in the financial industry, from the time he left after repealing Glass-Steagall, until he went to work for Obama along with Rubin. Those are two of the worst financial or criminals around.
So, yeah, there’s just so much corruption and there’s no cops on the beat and it’s discouraging. So, everybody says, “Well, fine, everything’s corrupt and whatever. I’m just going to make money.” And I’m like, “Okay, that’s great. I want to make money too.” But you know what? We have a society and I have a vested interest in not having this Bolivian level of wealth inequality where the super-rich live in walled cities and on Elysium and on– What was it? What was the train movie? Snowpiercer. And then, everyone else just like Darwinian capitalism.
So, I think we have a fascist system, largely of big business and big government. That’s fascism. So, Larry Fink, in my mind, that’s the face of fascism. But a lot of people don’t see that, and I wish more would. Some do, and more than 10 years ago, but I don’t know, we need something to change, and Trump’s not the leader to do that.
Tobias: On that point, what do you think of Musk saying, “Doge can’t achieve anything. We can only grow our way out of this.”
Rudy: Well, can you imagine being a– Well, certainly, he’s hooked to the gills with intelligence and with government subsidies. But going from his company, where he’s probably treated– He can do whatever he wants, right, walking into government. It had to have been a culture shock for him. Well, the real reason I think he left is because I think Vance wanted him out. Vance didn’t like sharing the attention, because I heard an audio that I couldn’t verify. I saw it. Someone posted on Reddit or something. But it’s an audio of Vance talking about Musk. And he’s like, “It should be me that’s leading this and not him.” I believe that was part of it.
I think Musk, you know, you don’t go in saying you’re going to have $2 trillion and then end up with like $9 billion or something. Come on. And you know what? You don’t say you’re going to release the Epstein files on day one and then totally not do it. It’s the whole administration.
Jake: Wait, are you saying that he sometimes over promises on–? [laughs]
Rudy: Yeah, I do. I do. Now, as I have to point out from time to time, I’m very happy that Kamala Harris lost and that the demons of the Biden administration are hopefully no longer running the country. I don’t know, I like to see a lot of things that aren’t happening and I don’t like seeing some of the things that are happening. I’m like, “Did they close the border?” I don’t think you can have unrestricted immigration. I think that’s a good thing.
Some of the other things, I don’t know. It’s funny if you criticize Democrats, you must be a Republican. If you criticize Republicans, you must be a Democrat. No, I have no party. I criticize or praise both. I got a picture of Dennis Kucinich with Ron Paul. Dennis, very left guy from Democratic Party, and Paul’s a very right guy from the Republican Party. Well, he’s not really a Republican. But I said, “Let’s try to find some common ground.”
So, I have a lot of common ground with people on what you would call the left and people on the right. And so, if we have a Venn diagram where we agree on a bunch of stuff, I’d rather let’s work on that together. Civil forfeiture is an issue I think both sides could work against, but instead of arguing over what we disagree on.
So, anyway, that’s all. Common ground is the way to go, I think. Bottom up your neighborhood, your family, ultimately, you’re not going to be able to save the world and you shouldn’t try. People always scare me when they– The people who say they’re going to save the world really terrify me. [chuckles]
Tobias: Community first. Save your family, save your community.
Rudy: Yeah.
Jake: I agree with Taleb on that point about different levels of government, and you should have different approaches.
Tobias: Socialism in the family?
Jake: Yeah, socialism in the family.
Tobias: Communism in the family?
Jake: yeah.
Rudy: Yes, I’ve read that. Yes. Yeah, he follows me, oddly enough. Yeah. I admire his books quite a bit. He’s one of the guys I don’t ever want to get into a fight with on Twitter. Chris Bloomstran is another man.
If you’re an analyst and you do say something stupid or something Chris can– he knows his stuff. I follow Chris. I told him one time, “Yeah, you’re on my list. I don’t want to get an argument with you,” because he has some 23-long thread where he’s just ripping what something that somebody was talking– [crosstalk]
Tobias: [crosstalk] footnotes.
Rudy: -from the company. Yeah. So, now Taleb’s the same way. I don’t want to get in a fight with him. But most other people, sure.
[laughter]Jake: [crosstalk]
Rudy: No, I’m about peace and love. That’s what I want.
Tobias: JT, top of the hour. Not top of the– close to the top of the hour. 11:04. I mean, top of the hour, plus four minutes. Mark it, veggie nerds.
===
Lizard Strategy: Rock, Paper, Scissors of Investing
Jake: All right. Let’s do it. So, let me take you to the sun-bleached cliffs of California. It’s the early 1990s. I imagine that there’s these two biologists, Barry Sinervo and Curt Lively, and they’re trudging through the high desert, canvas hats and clipboards, sweat soaking their shirts. They’re studying these, what are called, side-blotched lizards. They’re these little reptiles with throats that glow like neon highlighters. Not metaphorically vibrant. Actually, literally bright orange, deep blue, or canary yellow. They come in three flavors.
At first blush, it looks like maybe Mother Nature has been watching too many episodes of Power Rangers. But those colors really aren’t random. They map genetically and hardwired to specific mating strategies. They’re primarily controlled by this single genetic locus known as the O-B-Y locus. Whatever, it doesn’t matter.
But here’s the flavors that come in. Orange are the alphas. They’re territorial brutes and they keep harems of these hot lady lizards. These guys swagger around and they’re bullying all the other colors and collecting mates like monopoly properties. The blue lizards, they play a different game. They’re monogamous and loyal, and they defend a small patch and one partner with a lot of tenacity. And then, there’s the yellow ones. And these guys are the sneaky mimics. They look like the females, except they slip past the orange alphas while they’re off conquering the blues kingdoms. They hook up and leave no forwarding address while they’re there. So, Toby, is it true that you went through a yellow lizard phase in college?
[laughter]Tobias: I thought I had a blue shirt on.
Jake: Okay. All right. So, here’s the interesting thing. No one strategy ever dominates in this. You think that evolution would settle this, like declare a winner, sweep the rest into history’s genetic dustbin. But decade after decade, these strategies, they that keep cycling. Yellow beats orange, orange will beat blue, blue beats yellow. What we have here is actually reptilian edition of Rock Paper Scissors.
What’s happening here is a textbook case of called Frequency Dependent Selection, a fancy term for a very simple idea. The more a strategy becomes common, the worse it performs, okay? So, its strength leads to its own demise. That’s not really just a lizard thing. That’s a systems thing. It’s how ecosystems maintain balance.
Let’s see if we can stick our analogy. You guys probably already know where this is going. Let’s try to map our lizard trichotomy onto investing strategies, okay? Orange is the growth guys. Flashy, high multiple, moonshots, dominating markets. Think like Tesla and Shopify and-
Tobias: Blue better be value.
Jake: -FAANG era winners.
Tobias: Yellows is value, we are making this podcast forever.
Jake: Uh-oh. We know where this is going. Blue is a quality guys.
Tobias: Oh, my God.
Jake: Boring but robust, clean balance sheets, Microsoft, Visa, etc. Yellow, unfortunately, Toby is–
Tobias: Are you going to tell me that’s deep value?
Jake: Is a value. [laughs] It’s the forgotten corners, low expectations, stocks trading at three times earnings. Good co, bad co, as if it was some transvestite lizard. [laughs] But each style has its own season. Growth thrived when money was free and Silicon Valley were printing these platform economics, value minted all these gurus in the 2000-2007 post dotcom. Quality has had a really long epic run since 2015, really thriving on these durable franchises and businesses that could get bigger than anyone ever imagined.
Maybe the rotation is triggered by macro events. Low rates going to high rates. Inflation driving up and changing the economic crisis, perhaps making a reevaluation. Maybe it’s more behavioral like investors chase heat, they get burned, they run for cover, they get bored, they find their way into the next trap. You rinse and repeat. All those are plausible, but maybe it’s like a little bit deeper. It’s really not a rotation like clockwork, but more like maybe an immune system.
Whenever one lizard gets to be too dominant, something in the environment shifts, the predators change, the resources get reshuffled. Evolution has these countermeasures, and the system really adapts. You don’t really need to have all that vivid of an imagination to see these same dynamics in markets. The styles don’t really rotate, because it’s “time.” They rotate because systemic dominance triggers an adaptive pressure.
Too much capital crowding into one style will distort the expectations. It compresses the forward returns, creates the exact conditions for its own underperformance. So, this isn’t really like some random wheel of fortune. It’s reflexive. So, what are some of the takeaways?
There’s probably more Rock Paper Scissors influence in your portfolio than you would care to admit. Shifting styles in anticipation of the next winner is really hard. Especially if you’re a professional, it looks like you’re a flip flopper and you don’t know what you’re doing– Your job might be depend on you staying consistent and being an orange growth lizard or a yellow value lizard.
Tobias: Yellow value lizard.
Jake: Even if you think that maybe blue is going to be the next one to win, it’s really difficult as a professional to shift. So, each style succeeds not necessarily, maybe even by being the best, but by being under owned, underrepresented. So, I think it’s perhaps that style drift gets a bad rap in some ways, because that’s really what the market index does on purpose a lot. It drifts to survive, and there’s a Darwinian survival to it that it ends up being more adaptable than pure ideology of sometimes professional investors get stuck to. So, anyway, different lizards playing Rock Paper Scissors biologically, and then– I think sometimes we’re doing the same thing in markets on occasion.
Tobias: Good veggies, JT. I quibble with the characterization of the different styles. But aside from that, yeah, good– [crosstalk]
Rudy: You’re a yellow lizard.
Jake: I had to [crosstalk]
Tobias: I’ve had the same goal for 20 years. I’m a good boy.
Rudy: Good for you.
Jake: All right. You’re a blue lizard, Toby. Is that better?
Tobias: I’m a blue lizard.
Jake: Yeah. [laughs]
Rudy: I’m a polka dot lizard. So, I don’t really fit in. [Jake laughs] Yeah.
Tobias: What do you think, Rudy– If you had to make a bet here, how does all of this craziness play out? Does it just keep getting–
Rudy: Which craziness? There’s so much.
Tobias: Pin the rates down low, spend crazy. What’s the end game there? Does somebody finally– I mean I think that there’s been some–
===
Nominally Bullish, Realistically Bearish
Jake: Let me redirect. Does buy the dip ever stop working?
Rudy: Well, it did in twice the last—[crosstalk] It did in 2001. It did in 2008 or 2009. Everyone thinks that, well, they’ll just print $20 trillion next. There’s numbers that have been thrown out that are just insane. I forget who it was. You’re talking insane numbers of your balance sheet.
So, nominally, I’m not bearish. If someone said you couldn’t touch– This is how I operate. I’m not a trader. I have a dozen stocks, stuff I’ve held forever and then stuff that I trade. But you want to have a portfolio where if the market closed for 10 years, you wouldn’t freak out. I think I have that. I could be wrong, but that’s just how I look at it. Anything can happen.
Jake: That’s a scary idea of nominally bullish, real bearish.
[laughter]Rudy: Well, you know what, I say that I’m bearish in theory but not in practice. So, that’s very true, because I can argue either way after all these years. But I’ve learned not to try. I haven’t shorted since 2009, because I saw I can’t fight the Fed. I can mock the Fed, but I can’t fight the Fed. So, yeah, I gave up on that.
Sometimes I’ll buy puts if I want to hedge against capital gains. [Jake laughs] I did make money on puts. I think in 2020, I had SPX puts. And then, of course, I sold them and then it really plunged another 15%. But yeah, short-term trading, I’m not very good. I like to look at weekly or monthly charts. That’s why I made a joke the other day with David Lynch with his head in his hands, I said this, “When I see a 10-year housing chart,” or something. Or, people will say, “Well, how long you been a realtor?”
Oh, I’ve been a realtor since 2012. You don’t know anything. It’s almost like, “When did you start trading?” “Well, 2020, when I got my check, my covet check,” I often wonder, like no one has any memory of anything. I can still remember 1982. I didn’t have a lot of stocks back then, but I had some. I remember 1987. It wasn’t heavily invested, I was working too hard. But I remember that crash and I was working. I really couldn’t pay attention to it like I do now.
Jake: Did you have a 20% home mortgage in that time?
Rudy: Yeah, over 10. I didn’t hit the 20s. I know people who did. But I remember in 1987, the only thing I remember from that day for me, is I think I owned compact computer. You remember them? It was down 20% that day or something. But you’re young. It’s best to learn your lessons when you’re young and not later on.
I started trading very early, and always had a job, got no money from my parents. For some reason, I was interested in the stock market, even though my parents, I’m sure, never owned a stock. He was a teacher, and she took care of kids. But yeah, I’ve always had an interest in it. In fact, when I did my first podcast with Grant and other people too, they were surprised, “You’re not in the business?” I’m like, “No.” I’m not stupid.
Jake: That’s how you get to see it more clearly.
Rudy: I pay attention for years, and I absorb and I listen to smart people like Jake Taylor and Tobias Carlisle.
Tobias: Well, there’s the problem.
Rudy: Yeah, that’s probably been my-
Jake: Finally, we go wrong.
Rudy: -biggest problem over the years. Well, I made a joke. I think I said it to you one time, where it’s like, there’s someone posted, “What’s the worst investment strategy in history?” And someone had answered, “Value investing,” [laughs] which I forget– I like gallows humor, so I got a kick out of that. I don’t know if I ever said that to you. But if I did, it wasn’t intended to be mean.
Tobias: I see them all the time. Unironically, people say that.
Rudy: Yeah.
Tobias: My question before was more like Fed still– It’s not entirely true the rates are up a little bit. I’ve watched the 30-year. So, I watched the yield curve a little bit, because I like watching the inversion, seeing what’s happening there. But one thing that has really stood out in 2020– every year since 2020, the 30-year has crept up about a point. So, the 30-year now sits close to seven. And the front end of the curve has whipped around a fair bit. And so, the front end of the curve is now, again, it’s flat, close to inversion down from where it was before. I just watch it just for the torture of it I guess.
Jake: For the pain. Yeah.
Tobias: For the pain.
Jake: It’s like, a loose tooth that you can’t stop–
Rudy: The 30-year?
Tobias: Yeah.
Rudy: Wait. What’s the 30-year? Isn’t it trading more like– Hang on, let me look.
Tobias: Or, maybe it’s–
Rudy: I think it’s lower than that. It’s not at around five?
Tobias: Maybe the 30-year mortgage is closer to seven.
Rudy: Oh, yeah. Yeah, yeah, yeah. The 30-year mortgage. Yeah, I got the 30-year treasury yield as pushing almost five, Fortnite.
Tobias: It’s been up pretty consistently over the last five years is basically my point. I think it’s up like a point a year pretty consistently, whereas the front end of the curves– [crosstalk]
Rudy: Well, it’s normalized. Remember, we talked for entire time last 15 years about normalization and then finally we got it, and people are freaking out. Let’s see. 30-year mortgage rate according to FRED, which I do use FRED. Yeah, it was at, what, 2.7 or something in 2021 when the Fed was buying hundreds of billions in MBS. It looks like it peaked around October 2023, around 7.63. This is the FRED number. So, other numbers. This is from Freddie Mac. So, 6.89. So, yeah, you’re right. Close to seven. I thought you were talking about the 30-year bond.
Tobias: I think I was. But yeah, I’m talking all over the shop here.
Rudy: Well, yeah, you’re confused like me. Yeah, it’s pushing seven on the 30-year mortgage. But that’s like a rate. But like I said, that’s the average. We’ve been living through the aberration. That’s what people don’t realize.
Tobias: Yeah.
Jake: Rudy, how come Yellen didn’t issue a hundred-year bond when it would have been practically zero.
Rudy: I don’t know. Because it seems like every corporation and every individual in America refinanced, even those with far less sophistication than Janet Yellen, not that she’s particularly sophisticated.
Tobias: She split all the way down to the front end of the curve. What was that about?
Rudy: I don’t know. I think it was expedience. I hear Bessent’s doing the same thing. Every day I follow the site, FinancialJuice, and they’ll say, Fed bids every day for whatever they’re bidding. I always retreat that, because people say– The QT has essentially stopped.
Tobias: Yeah.
Rudy: Maybe the MBS are still dropping drips and drops, but I think for the treasuries– And the question is, when will they have to start again? Because you look at this bill that just passed– I know you could talk to Dennis Hastert or something or whatever, what’s his name? Hassett. Kevin Hassett. I’m thinking of the other guy. Kevin Hassett, he’ll tell you, “Oh, it’s going to save all this money.” But it doesn’t appear that’s going to be true. So, we’re just spending more.
I don’t ever want to hear Republicans say, they’re the party of small government or responsible fiscal policy or anything. They’re not. They’re nonsense. What’s Trump doing today? He’s bashing Rand Paul and Thomas Massie. So, that ticked me off. So, somebody has step principles in this country, and it should start at the top, but it doesn’t.
Tobias: You never get elected.
Rudy: No, you won’t. I’m bipartisan. What does it take? A billion dollars to get elected? What do you got to do to get a billion dollars? You got to either have a billion dollars, in which case you’re probably going to take care of your buddies anyway. I got a whole thread on Powell’s private equity career. This guy feasted on ZIRP.
In 2020, he did everything that you would expect a private equity mogul to do to help private equity moguls. That’s why I was surprised that they shot up so quick. I think Powell probably panicked. The thing about him is he doesn’t have an econ PhD. So, that’s normally the excuse for why someone’s an idiot. But I don’t know why he did what he did. He just went nuts and bought—
The MBS to me is inexcusable. [crosstalk] I don’t know. What are you going to do? If they start refinancing at 30-year at what is it, 5%? I just had it up here. What’s the 30-year TYX? Hang on. You can edit this part out. This is the boring part.
Jake: Yeah, we’re live.
Tobias: [laughs]
Rudy: I know I just realized that today and I thought–
Tobias: We just asked the ask cloud, the hive mind. The hive mind will tell us sometimes.
Rudy: Yeah, what’s the two year at? Okay. So, the 30-year’s at almost five and the 10– What’s the two-year? Two-year treasury is around four. So, if they refinance it 30 years, it costs them a percent. Maybe that’s worth doing if you can lock it up for 30 years. Ideally, they would refinance. I had a post. I said, we should issue 100-year bonds back in 2020 or 2021. This is insane.
Tobias: Argentina got them away.
Rudy: Yeah. I’m not a PhD economist, but it made sense to me and I don’t know why they didn’t do it, but they must have had a reason. I think they still wanted to stimulate. I don’t know. I just think they’re self-interested and they’re worried about the top 1%, these Fed guys. I really do.
===
Inflation, Interest Rates, and the Endgame
Jake: Do you think we see a day where the Fed buys directly into the public equity markets?
Rudy: Yellen has suggested that.
Jake: Yeah.
Rudy: Can you imagine the Fed, which we know is overwhelmingly Democratic, could start saying to boards, “You need to give everybody a 20% raise. You need to stop investing in [unintelligible 00:51:49].” They started imposing their social policies. “You need to spend X amount on Zero Carbon.” It would be insane.
Jake: By the way, you need to buy all these US Treasuries we’re printing too.
Tobias: [laughs]
Rudy: Most of these people, they went into college and they never left. They graduated with their PhD, and then they go to the Fed as a research assistant or something and then they spend their lives there. That was Jim Bullard, who was one of the worst, one of the absolute worst. He’s the guy that was promoting the average inflation targeting, who said, “Well, if inflation is low, we should have high inflation.” He’s an idiot and he’s gone now, but we got another guy in,
Druckenmiller says, “We’ve never had a deflationary collapse in this country, because inflation was 1% or 0%. We’ve had them because of bursting asset bubbles.” And the Fed does not understand asset bubbles. They’re proven on that. There’s smarter guys than me like Grantham or [unintelligible 00:52:46] or anybody that can talk about this. So, they don’t understand them.
They don’t model the financial system. It excludes the financial system in their DGSE models. It’s totally insane. And yet, this is the system we have. I look at Venezuela, I look at Weimar. My worst-case scenario for this country, hope it never happens. I think it absolutely led to the rise of Hitler. But if you look at nominal stock prices and they are quality companies, like you point out, Jake, is one of the– Was that the blue or was it– Yeah.
Jake: Yeah, that’s the– [crosstalk]
Rudy: Blue lizards. Then you survive.
Tobias: That’s the yellow lizard.
Rudy: You survive, because stocks theoretically are a claim on real assets, you ride out the hyperinflations of which are the worst possible thing for 95% of this country. History, I love reading contemporary accounts of hyperinflations. Without exception, the Bill Ackman’s and the Larry Fink’s, they come out wealthier than ever and the vast majority of people are just ruined. I don’t want to see that. So, that’s why I said my icon is a warning and not an encouragement. But unfortunately, our leaders are going down different paths.
Jake: There’s a kind of a common lament amongst value guys who think about this thing that that they felt crowded out by the Fed, not letting prices get to or valuations to a place that would be attractive to a value guy.
Rudy: That would be a good question for Charlie Munger and Warren Buffett, because I don’t think their phone rang much in 2020, because the Fed guys–
Jake: They talked about it a little bit in some of the meetings and said, “We would have done better if–”
Rudy: Right. Right. So, what you have is they bail out the incompetent to compete with the competent. Creative destruction, I think is a wonderful thing about capitalism. You have to be able to fail. FDIC insurance? Fine, so that mom, pa don’t lose their life savings in a crash. But you know what? Bill Ackman can get it wiped out and the world will go on.
Jake: Well, that’s the thing. Like, the asset doesn’t disappear. It’s just the ownership changes hands.
Rudy: Correct. Now, in some cases, it’s true. But most people think a bankruptcy is, “Oh, company goes down a black hole. All the employees are gone, everything’s gone.” No, in a lot of cases, you just wipe out the debt and you bring in new ownership.
Tobias: And the equity. [crosstalk]
Rudy: And the equity. Well, you know what? You’re an equity holder again. Try to get higher up the food chain. That’s the way it should work. What we’ve done is we don’t allow failed firms to fail.
Goldman Sachs was a failed hedge fund in 2008 that suddenly became a bank, insured by the taxpayers. Wasn’t that nice? I think that might be, because the country was being run by ex-Goldman Sachs CEO at that time, because Bush abdicated to him. So, same thing with Morgan Stanley. They were going under. They were going under and they became a bank too.
Well, the pizza parlor down the store would probably like to become a bank too, if they’re having a crunch and they’re about to go bankrupt. But it’s almost like above a certain level, there’s no accountability and there’s certainly none at the Fed ever. You had insider trading of the most grotesque kind that came out, and they came out and said, “Oh, well, we’re not going to do it anymore.” I’m like, “You can’t get more insider trading than your Fed reserve to say.”
I’m like, “You guys have been in business since 1913 and you just discovered now that it’s wrong to be trading.” Goldman Sachs, Kaplan, I think, was trading a trillion dollars a trade at that time, right around March 2020. And nothing. Nothing. And now, CNBC keeps bringing him and [unintelligible 00:56:52] back on every day to yak. It drives me.
Oh, there’s no accountability. There’s no history. Nobody remembers anything. These are not good people, and the Fed is not a good system. It has overwhelmingly helped the top 10% of the population at the expense of the other 90%. A lot of smart billionaires are waking up and talking about the massive spike in wealth inequality that Druckenmiller said, “QE was the single biggest exacerbator of.” So, you should look at that.
Jake: Do you agree with the finding that perhaps there’s more war to be waged in this kind of system if you don’t have to pay the bill as you will?
Rudy: Yes. Wars are expensive and we put them on the credit card. Let the grandkids pay for it. If you had to raise taxes to go fight in Iraq years ago, you think we would have gone to Iraq? No, I don’t think so. Afghanistan maybe. Because people they thought that was where he was, even though he was in Pakistan, our good ally. But yeah, I don’t know. I don’t know.
Tobias: Do you think they should be more explicit about the rules that they’re following? There’s a talk of you know they use various rules, the Taylor rule and so on, although I don’t know whether they use them or not.
Jake: Dot plots?
Tobias: They abandon them whenever they want.
Rudy: Dot plots are a joke. Total joke. Yeah, I don’t think they know what they’re doing. Tom McClellan is a smart market guy. He says, “Just replace the FOMC with the two-year yield.”
Tobias: Yeah. Yeah, I follow the two-year yield for that reason. They do that, they trunk it.
Rudy: Yeah, because Fed funds tends to follow the two-year yield. So, what would that mean, the two years? What did I just say? What’s the two year at?
Jake: Four.
Rudy: Four?
Tobias: I actually have a little–
Rudy: No, I think it was lower. Let’s see.
Tobias: I’ll track the indicator.
Rudy: It’s 4.4 roughly, let’s say. So, what’s the Fed funds at? That’s right about where the Fed funds at, isn’t it? Oh, no, I’m looking at the 10-year. I’m looking at the 10 year.
Tobias: Yeah. So, Fed funds are 4.33.
Rudy: Yeah. The two-year is around 3.9. So, fine. Cut, raise to 3.9. Big deal. Do it. And then everybody will be happy and Scott Wapner will stop crying.
Tobias: Inflation’s under last print, two point– It’s hard to see actually on these charts.
Jake: Must not be buying eggs, Toby.
Rudy: CPI–
Tobias: 2.39. Yeah.
Rudy: What is CPI?
Tobias: 2.39, according to this.
Rudy: Yeah. I don’t say inflation. I say CPI is 2.39. [Jake laughs] What’s the cost of living going up though? That’s totally different thing. Two totally different things.
Tobias: Rudy, we made it to the end.
Rudy: Hey, I didn’t have many coughing fits, so [crosstalk] was muted. Thank you. You guys are great. I always enjoyed you, guys. As I mentioned earlier, I want to thank you for standing up for me during many of my permanent suspensions from Twitter.
Tobias: So, it’s that DMCA. They get you with the DMCA all the time.
Rudy: Well, a couple times, they didn’t tell me what I did. I had a bunch of one day bans.
Jake: [laughs]
Rudy: I was permanently suspended for four times. Four times. I don’t know if anybody’s been permanently spending more and kept the same account. A lot of people come back as different accounts. So, I’m still the same me, so it’s all out there.
Jake: That’s the badge of honor I think you should-
Rudy: Yeah.
Jake: -wear that proudly.
Rudy: Yeah. I wish I would have said something really controversial that they banned me for. It really was trivial things.
Jake: You don’t even really have any commentary. You’re just loke posting things that are absurd and it’s just–
Rudy: Yeah. Well, no.
Jake: Well, sometimes.
Tobias: Is it a Chesterton quote you got there? “My way of joking is to tell the truth.” It’s such a–
Rudy: Yes, that’s a Bernard Shaw quote. Yeah. Yeah, that’s in my profile forever for 12 or 13 years.
Tobias: That’s a good one.
Rudy: Yeah.
Tobias: Thanks so much for joining us.
Rudy: Thank you.
Tobias: Do you want to plug your Twitter account? Yeah.
Jake: Yeah.
Rudy: Sure. @rudyhavenstein.
Tobias: Just spell that.
Rudy: H-A-V-E-N-S-T-E-I-N. And then, I have a Substack, rudy.substack.com. So, that should be easy to remember. I’m having fun with that. I may get so sick of Twitter at some point that I– Because it’s awful now. And so, I may do a lot more over there. If you look, there’s a ton of free posts on my Substack. Check them out.
Tobias: Well, thanks so much for joining us. Folks, we’ll be back next week, same bat time, same bat channel. Thanks, JT.
Jake: Thanks, Rudy.
Rudy: Thank you.
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