back to indexE58: November's CPI, preparing for a downturn, macro outlook, Better.com's botched layoffs & more
Chapters
0:0 Bestie Intro: Chamath's happy hour and sweater feud
7:11 Breaking down the new 6.8% CPI number, reflecting on old inflation takes, jobs report, understanding why CPI is misleading
23:5 How growth stocks got overblown, current valuation outlook, government as capital allocators
40:12 Deficit trouble: will another president ever try and balance the budget? Areas of positivity in the economy
50:29 Better.com's botched layoffs, impact of overcapitalization, macro outlook for founders
71:16 Lessons from the Jussie Smollett saga
00:00:03.060 |
So I was hanging with J. Cal and we're talking to Beeple. 00:00:07.040 |
And for some reason, J. Cal was being nice to me and he said to Beeple, he said, 00:00:16.640 |
And then I said to Jace, I'm like, you know, this is Beeple. 00:00:19.660 |
And he just sold like $260 million like NFTs. 00:00:25.180 |
And without missing a beat, J. Cal says, well, maybe for the next year. 00:00:41.040 |
And it said, we open sourced it to the fans and they've just gone crazy with it. 00:01:02.300 |
You can tell from the backyard behind Shamath that it's the evening. 00:01:06.080 |
And he's cracked open a little something, something. 00:01:38.980 |
And the pods over there are getting 150,000 views. 00:01:45.780 |
I went to see the locations when I was in Miami. 00:01:50.540 |
And you'll have more information soon about that. 00:01:56.300 |
With us today, as always, is the Sultan of Science, 00:01:59.660 |
moi himself david friedberg the rain men yeah he's definitely back from art basel of course he went 00:02:06.140 |
to our basel and i don't know if he bought any art but i was on his boat with him uh or his rented 00:02:11.740 |
boat david sax and i were on a boat and a boat well i mean he hasn't bought one yet but i think 00:02:17.340 |
he's moving there and then of course the dictator himself chamali polyhapiti here tamale with 00:02:23.420 |
an obnoxiously expensive sweater tell us about that yes yes everybody wants to know what animal 00:02:30.700 |
was killed to make that what animal was killed for that horrible ernie sweater this this is a 00:02:36.140 |
collection oh god of the foreskins of some white tigers i'm out i'm out i mean it is incredibly 00:02:45.900 |
soft and smooth i literally got a complaint like foreskins are oh god i'm just really going in a 00:02:53.260 |
right i've literally got a complaint freebrick and sax are like what are they talking about 00:02:57.100 |
i literally got a complaint on dm about chamak's conspicuous consumption of his sweaters and they 00:03:05.500 |
and she was like listen i don't mean to tell you your business but i think chamath is turning off 00:03:10.620 |
the audience with these letters was it an angry mid-level white it wasn't white but a very 00:03:16.380 |
extremely successful one i'll leave it at that anyway uh really really they were just concerned 00:03:23.100 |
really really we have to go through chamath's sweater does she pay does she pay attention when 00:03:27.900 |
i put in 700 million dollars a year into climate change how has she put in that much uh with her 00:03:32.380 |
shitty sweaters uh okay listen enough give him some more give him some more wine someone text 00:03:37.740 |
now it's gonna be one of those just checking if we're gonna if we're gonna start moral virtue 00:03:43.420 |
signaling over here all right well there's a we got a lot to cover i mean this is just absolutely 00:03:47.820 |
crazy finish a glass of wine real quick and then roll into the show this is this is going well this 00:03:52.140 |
show is going to go off the rails i've already lost control of the show uh all right we got to 00:03:56.460 |
start with inflation and the economy uh while sax and i were in uh miami for our basal there was an 00:04:05.660 |
absolute uh panic going on two three in the morning people checking their robin hood and 00:04:11.260 |
coinbase accounts to figure out how much they had lost in their crypto holdings but today 00:04:15.900 |
i lost more in the robin hood stock than i have in the robin hood app 00:04:19.820 |
that's too soon bruh that's too soon for me i'm about to distribute i'm like do i distribute now 00:04:27.740 |
or wait that thing has been a stone sinking to the floor of the ocean well i mean it's pretty 00:04:33.900 |
never to be found no i mean listen it's 17 18 billion dollars a pretty great valuation 00:04:39.660 |
uh right now i think it's an opportunity for people but i'll leave it at that let's talk 00:04:43.820 |
about inflation inflation but we're not dispensing stock advice we're not stock advice but i'm not 00:04:49.820 |
selling any of my shares i'm telling you right now before i distribute my stock and mark my 00:04:54.940 |
capital gains i'd like to advocate to people like robin chumak i'm going to just ask you don't show 00:05:01.580 |
up drunk for the next episode oh my lord i can't even get through the first story here okay inflation 00:05:08.620 |
does this woman even own a cashmere sweater that she has can we get off of who is this person 00:05:14.220 |
oh please beep that out god almighty all right 00:05:19.420 |
what a loser stop i'm glad to hear you're doing something with all those foreskins because 00:05:24.940 |
we don't want them to go to waste what do they do with the foreskins all those circumcisions 00:05:30.220 |
i would love for you to just drive here and touch the sweater i mean i i can't i'm like 00:05:35.500 |
this is something to do on a friday night um all right inflation numbers this is important folks 00:05:42.460 |
uh inflation year over year sorry but excuse me but if you're if you're spending your time 00:05:49.180 |
crypto and fighting climate change it's wrong to buy a cashmere sweater like all of a sudden 00:05:54.540 |
you also have to look like a homeless you know the lumberjack 00:05:58.940 |
because being ugly is so cool now the idea was do we have to start the show with your fashion 00:06:06.860 |
you started with that statement by this person who better be good looking or well 00:06:13.340 |
dressed otherwise they have no right to make this claim all right calm down chamath let's get to the 00:06:19.100 |
show you insulted his sweater game that's the definition now we know what he's most sensitive 00:06:24.300 |
honestly you might as well have called me a oh dude you might as well dude dude 00:06:31.900 |
stop it's just a sweater comment and it's just conspicuous consumption is that what she's really 00:06:37.500 |
trying to say she's trying to maybe she's trying to call me the people because you brought it up 00:06:42.540 |
who is it out her i'm not asking let's cancel her we're not getting nobody's getting canceled for 00:06:48.860 |
pointing out that you're talking about four thousand dollar chinchilla sweaters i've never 00:06:52.860 |
said how much they cost we beeped it out i've never said how much this one do you want a sweater 00:06:58.540 |
worth more than four thousand dollars of course i do all right i rest my case i own many but that's 00:07:06.540 |
what the point guilty on all charges because it's a big u.s consumption uh cpi the past 00:07:13.580 |
three months today was 6.8 year over year it's the largest increase since 1982. we're getting 00:07:18.620 |
back to the post jimmy carter era uh and when reagan got in there inherited that mess september 00:07:24.860 |
was 5.4 october 6.2 november 6.8 points up 0.6 or approximately 10 over october 1.4 over september 00:07:34.380 |
and um here's the chart for those of you watching on the youtube channel 00:07:42.300 |
this all started in march of 2021 that was the first month where the cpi rose over 00:07:48.380 |
two percent and who was wrong on inflation well the fed chairman jerome powell called it transitory 00:07:54.780 |
numerous times over the past two years treasury secretary janet gallon uh in her senate 00:07:59.900 |
confirmation hearing in december of 2020 yellen said she believed the fed and binding admin could 00:08:04.380 |
take advantage of interest rates being near zero and spend more on stimulus 00:08:07.500 |
economist paul krugman thought it was transitory in his op-ed how not to panic about inflation 00:08:12.700 |
that did not age well quote our business is actually starting to set prices and wages based 00:08:18.140 |
on the expectation of high future inflation if they aren't and my bet is they won't be 00:08:23.820 |
then the lesson of 2010 to 2011 will remain don't panic my god he could not have been more wrong who 00:08:29.740 |
was right on inflation jamie dimon in march i would suspect there is a pretty good chance you're 00:08:34.700 |
going to see rates going up and people are starting to worry about that the american public 00:08:39.580 |
specifically gen z has been on top of this issue uh 77 percent of americans were either somewhere 00:08:46.700 |
or somewhat or very concerned about inflation back in march and gen z uh people aged 18 to 24 00:08:53.500 |
had the highest rate of very concerned about inflation at 52 percent larry summers also got 00:08:58.220 |
this right sax what are your thoughts on inflation which now seems acute and permanent right well 00:09:05.420 |
it's definitely not transitory um remember when it was at about 5.1 percent over the summer 00:09:10.860 |
that the administration said no big deal this is transitory don't panic um then it went to six 00:09:16.460 |
point two now it's six point eight looks like it's headed to seven percent and the real problem here 00:09:22.060 |
is that these guys the administration have not adjusted course in light of this data what they've 00:09:27.340 |
tried to do instead is now speciously claim that the same bills that they had written and conceived 00:09:33.660 |
the build back better bill somehow even though it was conceived at a time uh that was really 00:09:39.660 |
deflationary that somehow this is going to fight inflation they're essentially repurposing 00:09:43.980 |
they're just changing the arguments they're using as opposed to 00:09:46.220 |
changing their their legislative priorities and just today we got a report from cbo 00:09:51.340 |
saying that this build back better bill wasn't going to cost 2 trillion like the administration 00:09:56.380 |
said it's going to cost 5 trillion and add 3 trillion to the deficit for 10 years correct 00:10:00.860 |
over 10 years if those programs are not sunsetted so there's a bunch of budgetary gimmicks that were 00:10:05.980 |
put in the bill basically a lot of the programs would sunset after one year or three or six years 00:10:11.820 |
and so that's the only way they've gotten it to this you know 1.9 00:10:15.980 |
trillion dollar price tag the reason why that's a gimmick is because once the programs are created 00:10:22.140 |
there's going to be it will create a special interest or constituency who is now dependent 00:10:26.860 |
on those programs and no one's ever going to want to cut them milton friedman's milton freeman 00:10:31.260 |
famously said that there's nothing quite so permanent as a temporary government program 00:10:34.940 |
so that is the game that progressives are playing is they're going to create the dependent the 00:10:39.740 |
dependency the constituency who once they receive the program is never going to want to give it up 00:10:44.860 |
and they're counting on the fact that they're going to be able to cut them and they're going to 00:10:45.740 |
be able to get the money out of the bank and they're going to be able to get the money out of 00:10:46.700 |
the bank and they're going to be able to get the money out of the bank and they're going to be 00:10:47.820 |
able to get the money out of the bank and they're going to be able to get the money out of the bank 00:10:48.060 |
which means they will cost five trillion and it will add three trillion to the to the debt um to 00:10:53.100 |
the deficit so you know the problem is it'd be one thing if we were in a deflationary environment if 00:10:58.540 |
the economy was in the tank but these guys are continuing to pump more and more stimulus into 00:11:03.900 |
an economy that has enough and really larry summers made this point all the way back in 00:11:08.460 |
february i think this is worth reading what he said he said there's a chance that macroeconomic 00:11:12.940 |
stimulus on a scale closer to world war ii level of inflation is going to be a big problem and 00:11:15.500 |
the global economy is going to be a big problem and the global economy is going to be a big problem 00:11:15.900 |
and the global economy is going to be a big problem and normal recession levels 00:11:17.740 |
were set off inflationary pressures of a kind we have not seen in a generation 00:11:21.420 |
he said this in february everyone in the administration dismissed him all the 00:11:25.260 |
liberal economists that you mentioned basically derided him he turned out to be exactly right 00:11:30.220 |
and he was just saying this about the the one point the roughly two trillion they passed back 00:11:36.060 |
in february for of covet stimulus and you know since then they passed 1.2 trillion 00:11:42.060 |
for infrastructure and now it's this another five 00:11:45.260 |
trillion for build back better so you know the real problem here is that they are not adjusting 00:11:50.940 |
course in light of this data that keeps coming out that inflation is a bigger and bigger so what's 00:11:56.220 |
the right thing to do in your mind sax and then what about you elon said it can this bill we don't 00:12:00.380 |
need it this is not what biden was elected to do you know he was elected to provide normalcy stop 00:12:06.700 |
the chaos and he never got a mandate for this kind of you know whatever 10 trillion dollars 00:12:12.940 |
we've been wanting to do an infrastructure bill 00:12:15.020 |
bill for a long time but we didn't that was prior to pumping so much stimulus into the system 00:12:21.020 |
it's just done the infrastructure bill and not the build back better it would have been one thing 00:12:24.860 |
um but we're this is basically the the third hyper stimulatory bill that that they've sought to pass 00:12:31.980 |
first they did the covet release bill at a time when really the economy didn't need that stimulus 00:12:38.380 |
dovetailing this and chamath involved in this is the jobs report uh november non-farm payroll 00:12:44.780 |
rolls increased only 210 they expected it to be 573 so it's a big miss however kind of a 00:12:50.700 |
missed bag because there's over 11 million job openings and we're now at 4.2 unemployment rate 00:12:56.620 |
which is the lowest which is getting towards the pandemic lows and you know this is like before the 00:13:02.300 |
2008 financial crisis chamath how do you reconcile inflation along with this crazy bizarre job 00:13:10.060 |
situation where people will not go back to work people are planning on resigning there continues 00:13:14.540 |
to be resignations and there's too many job openings and people are raising salaries and 00:13:18.140 |
still can't hire people well i think we did a pretty good job of unpacking the great resignation 00:13:24.700 |
i think it was last pod so right remember like yeah there are three structural issues at play 00:13:30.220 |
in the jobs front one is that you have this really meaningful under immigration that's happened 00:13:36.860 |
because of trump the second was you've had a big mismatch between the degreed classes in america and 00:13:44.300 |
the jobs that they can have for what they think they should earn meaning you go to school you get 00:13:50.220 |
into all this debt you try to become a teacher or something and then you realize you can make more at 00:13:54.780 |
an amazon warehouse crazy strange and then the fourth is you have all these boomers with an 00:14:00.780 |
enormous amount of savings 30 40 50 trillion dollars who are pulling forward their retirement 00:14:06.300 |
and also subsidizing their kids you put it all together there's less of an incentive to be in 00:14:11.020 |
the job force unless you pay higher wages now 00:14:14.060 |
so i think that's a really important thing to think about 00:14:16.060 |
and i think that's a really important thing to think about 00:14:18.060 |
and i think that's a really important thing to think about 00:14:20.060 |
let's just put a pin in that for a second i think the thing that sax talked about is really 00:14:22.060 |
important which is that we have to really figure out whether inflation is transitory or it's 00:14:26.060 |
persistent and it's here and i just want to bring up i'll nick i'll send you these texts uh these 00:14:32.060 |
the the twitter links to this but uh bill ackman tweeted out these two things today which is that 00:14:36.620 |
if you fan of the pod brilliant investor by the way uh great human being brilliant investor two 00:14:43.820 |
the word consumer price index which is a very important component of the consumer price index 00:14:47.820 |
and it's really important because it's a very important component of the consumer price index 00:14:51.820 |
and it's really important because it's a very important component of the consumer price index 00:14:55.820 |
and it's really important because it's a very important component of the consumer price index 00:14:58.460 |
and it's really important because it's a very important component of the consumer price index 00:15:01.820 |
right how much can somebody basically charge rent to other people 00:15:04.780 |
the way that they calculate that which is 30 percent of the uh 30 of the calculation is they 00:15:13.580 |
survey a handful of people the problem is you don't need to survey because the actual exact data 00:15:20.460 |
is available from single-family rentals that report this number so their survey showed basically a 00:15:28.860 |
much much smaller increase than what the actual increase is and let me just give it so the largest 00:15:36.540 |
owners of nationwide single-family rentals are reporting a 17 year-over-year rent increase wow 00:15:43.340 |
the the oer that was calculated quote unquote by survey and the cpi was 3.5 percent if you flow that 00:15:50.220 |
through it means that core cpi actually went from 4.9 percent today to actually nine percent 00:15:58.060 |
and the cpi print which was 6.8 percent was actually 10.1 percent so it just goes to show 00:16:07.340 |
you we have sources of data that the government is not in a position to collect or measure 00:16:13.980 |
we have horribly inaccurate econometric models that we use you know you know that phrase sort 00:16:20.460 |
of in out so unfortunately you get very bad garbage you get very bad crappy data 00:16:25.740 |
and now all of a sudden we're printing numbers we're supposed to make policy against those 00:16:30.380 |
numbers but the numbers that underlie this decision making is fundamentally flawed 00:16:34.700 |
and it's flawed in the wrong direction okay let's bring friedberg in freeburg 00:16:38.380 |
what do you think is happening here vis-a-vis uh also the creation of companies 00:16:42.860 |
and entrepreneurship because one of the weird things that's occurring is we're starting to hit 00:16:46.860 |
a record number of llc's s-corp c-corps being created it seems like a lot of people are 00:16:52.300 |
becoming freelance nation uh hundreds of thousands of new companies during the pandemic were started 00:16:57.740 |
that is probably one of many places where the water is flowing when you fill my cup 00:17:04.540 |
and it shall overflow with um i was talking to a guy this week who's just a small eight 00:17:12.620 |
was not that bad yeah come on yeah put the wine down no no let him drink the wine um and uh fast 00:17:21.340 |
this guy has a multi-billion dollar consumer credit portfolio in subprime which means you know 00:17:26.220 |
he's got the a bunch of consumers owe him money that um generally there's going to be a high 00:17:31.820 |
default rate and his no comment not and um he said that this year the portfolio performed beyond like 00:17:41.500 |
the one percentile of the model distribution of what they expected to happen they they had the 00:17:46.700 |
yield on the portfolio be 40 higher than they thought it would be because there's so much 00:17:51.900 |
liquidity in the hands of individuals and so i think you know um jason while you might make the 00:17:57.820 |
argument that companies and jobs are being created that is one of many places where like you know you 00:18:03.020 |
overflow a river and lots of streams start to flow you know we're seeing asset bubbles everywhere in 00:18:11.260 |
crypto in startups in new startups and new ideas in home prices and everything sneakers 00:18:16.700 |
now the problem with inflation is um you know it's a uh definition we all use this term and we throw 00:18:23.980 |
it about but like inflation is really the measure of price going up over a period of time and 00:18:30.860 |
generally you want to have inflation of some amount that allows you to see economic growth 00:18:35.900 |
and expansion that allows you to fund the debt that you used to create that growth in the first 00:18:41.020 |
and so without infl without some sort of an inflationary pressure which is the output of 00:18:45.180 |
economic growth you end up you know being unable to meet your debt obligations and then things get 00:18:50.540 |
really ugly and uh the system as it was constructed because most of these governments and systems like 00:18:55.500 |
we have today are funded by debt so um you know uh stan druckenmiller gave a good interview in 00:19:01.900 |
q2 he was kind of on a road show you know um sounding the alarm bells around what was going 00:19:06.540 |
on he was saying the market is not speaking right now because basically you know the market is not 00:19:10.780 |
speaking right now because basically the fed kept canceling the market signals uh with their um 00:19:15.580 |
with their interest rate policy and by canceling those market signals it seemed like we had a free 00:19:20.540 |
for all at the government level to keep spending and so i i do think that these two are pretty 00:19:24.780 |
interrelated the fact that we've kept interest rates low have allowed policy makers to say you 00:19:29.340 |
know what the cost of debt for this government is zero we can do anything we want just like consumers 00:19:33.500 |
are saying we can do anything we want we can buy anything we want we can spend any way we want 00:19:37.340 |
and as a result we're kind of seeing this you know inflationary pressure 00:19:40.620 |
uh persist now the problem is if you then raise rates and you can't borrow that money and suddenly 00:19:44.860 |
people have to start to pay that debt down with um without economic growth having occurred the 00:19:50.220 |
business goes the whole system goes bankrupt so the challenge that the fed has is how do we raise 00:19:55.500 |
rates without triggering an economic recession and if people are now have overspended and are 00:20:01.340 |
over levered once again and rates go up it's going to get really ugly really fast and so 00:20:06.380 |
this is a first derivative balancing act so you know if you're going to have a good balance of 00:20:10.380 |
money you're going to have to be able to keep your money in the bank and then you're going to have to 00:20:13.260 |
have to have to pay the debt that you owe so that's the first derivative balancing act and yeah 00:20:18.140 |
there's no simple and easy solution unfortunately meanwhile technology is causing deflationary 00:20:23.020 |
pressures which is exactly you know maybe what you don't want to see happen when you're trying to 00:20:26.460 |
realize economic growth um and that's uh yeah the other thing that we talked about is that the fed 00:20:32.060 |
basically changed the or the government changed the rules on the percentage basically what qualifies 00:20:40.140 |
a million dollars. And if you think about it, most Americans, you know, 80 to 90% of 00:20:45.720 |
their true underlying wealth is their home, to the extent that they build, you know, positive 00:20:50.380 |
net worth. And if you all of a sudden, you know, push up the upper bound on what a conforming 00:20:56.060 |
mortgages to a million, a million dollars, that effectively means it's, it's roughly 00:21:00.820 |
about 20%. That effectively means that you're moving people's net worth up by about four 00:21:06.060 |
million. That's right. So and so if they take that, and then they take that money out of 00:21:10.560 |
their home via a HELOC or an equity line of credit, right home equity line of credit. 00:21:15.860 |
And then you know, to your point, Friedberg, they spend it or they invested or they you 00:21:19.800 |
know, it could be a real disaster scenario in five or six years. No, no, this is more 00:21:25.960 |
like 1929. Kind of Yeah, by the way, if you go back to the remember when we were in like 00:21:31.000 |
the depths of the market collapsing and everything when basically the economy shut down with 00:21:36.060 |
And I was speaking to a senior banker at that like that day. And he told me, look, it's 00:21:42.300 |
pretty simple what's going to happen. The Fed's going to drop interest rates to zero 00:21:45.560 |
and they're going to pump money into the system. Because that's the only way you're going to 00:21:49.180 |
be able to keep asset prices from collapsing. And we're going to artificially inflate asset 00:21:53.380 |
prices and we're going to do it for a long time. Because then people look at the stock 00:21:56.840 |
market and they say, Oh my gosh, stocks are going up. Oh my gosh, revenue is going up. 00:22:01.620 |
Everything gets inflated by pumping money into the system. And the problem is, while 00:22:06.060 |
a, you know, a perceived you keep saying the home price goes up, and I keep saying 00:22:09.420 |
stocks go up. But the purchasing power that arises when the inflation is higher than what 00:22:15.840 |
those things are going up at indicates economic recession underlying that inflationary bubble. 00:22:21.380 |
And the circumstance needs to be analyzed, unfortunately, a little bit more deeper than 00:22:25.520 |
that, which is it's not just about inflation. It's about have we pumped enough money in 00:22:29.600 |
to trigger economic growth, that we can come to balance where the growth can outpace the 00:22:35.680 |
Well, superimposed on this, I think about it. Sorry, let me just say, let me just say 00:22:39.320 |
one simple analogy. Let's say I've got 50 clams. And you know, there's suddenly a bunch 00:22:44.140 |
of clams come into the clam market. Now I got 100 clams. And if the number of clams 00:22:48.280 |
has gone up by three x, my purchasing power has actually gone down by a third. While it 00:22:52.420 |
might look like I've now got twice as many clams, I can only buy one third as much as 00:22:56.600 |
I could buy before, because there's so many more clams floating around. And that's the 00:22:59.960 |
problem. Clams, you look like clams, clams, clams, so you like I'm just, listen, I did 00:23:06.060 |
a little bit of math, I've been watching the price to sales ratios of some of the top companies, 00:23:12.740 |
we can pull this up on the screen. And the price to sales of companies, including zoom, 00:23:22.080 |
obviously was ridiculous. During the pandemic, that was a pandemic stock. So on top of all 00:23:28.000 |
of this money being printed to the system, you want to be able to get a lot of money 00:23:29.000 |
out of it. And you know, you're going to have to be able to get a lot of money out of it. 00:23:29.000 |
So you had the participation of a bunch of stonk traders, you know, in that whole movement, 00:23:36.000 |
buying up meme stocks or others, we had the price sales ratio of zoom, in other words, 00:23:43.160 |
the value of the enterprise versus their actual sales was at 123. It's now at 14.7. Peloton 00:23:49.000 |
was another one of those at 23. Now down to three x, down 87% Coinbase Square also, it 00:23:58.100 |
But you can also we looked at the peak price to sales and how much larger it is then and 00:24:05.920 |
so some of these are now off eight x four x and then it drops off to two x one x. But 00:24:12.560 |
it quite a I don't know if you guys are looking at the numbers or if you have any thoughts 00:24:15.780 |
on this, but we're reap it seems like there was a mispricing of certain equities. 00:24:20.860 |
And it wasn't a mispricing the Federal Reserve forced a lot of institutional investors to be out of the system. 00:24:23.140 |
And it wasn't a mispricing the Federal Reserve forced a lot of institutional investors to be out of the system. 00:24:24.140 |
And it wasn't a mispricing the Federal Reserve forced a lot of institutional investors to be out of the system. 00:24:25.140 |
And it wasn't a mispricing the Federal Reserve forced a lot of institutional investors to be out of the system. 00:24:26.140 |
institutional investors to be out as long dated as possible in buying earnings? 00:24:33.480 |
You have to remember, it's not just that real rates were effectively zero, but if you wanted 00:24:38.940 |
to own inflation protected securities, it was actually a negative yield, so we were 00:24:45.380 |
There are a lot of institutions, well not individuals, institutions that must own some 00:24:50.500 |
of these inflation protected assets so we were already in a negative yield environment. 00:24:55.300 |
What are those folks supposed to do if they have to fund an 8% return a year to pay the 00:25:00.400 |
pensions of good people, firefighters, teachers, you name it, policemen, etc., right? 00:25:08.080 |
They were forced to invest in the kinds of funds that would then go out further and further 00:25:14.820 |
out into the future to buy the promise of future cash flows. 00:25:20.220 |
And when all of a sudden, a whole bunch of other assets that they have, they're going 00:25:24.460 |
to go out and buy, they're going to go out and buy, they're going to go out and buy, they're