무역전쟁이 불러올 다음 대폭락, 당신의 투자는 안전한가?

So Josh, Steve is also in on Mob Land, so get involved.

 I am two episodes deep and I stopped.

 I don't know why.

 Get back.

 No, I will.

 I love Tom Hardy.

 Admittedly, the first two, but like Well, if you like Tom Hardy, you got to see Peiquey Blinders cuz of course Peaky Blinders.

 He's insane.

 I'm going to tell you a deep cut.

 Um Tom Hardy.

 It's I think it's on Is it on Netflix now? Havoc.

 I watch I think that was that good.

 It's the weirdest thing I've ever seen.

 So strange.

 But the cast is so out of control good.

 Yes.

 Forest Whitaker.

 They have Yeah, but it's like they they went to waste.

 Who else? Forest Whitaker is excellent on the on the show on um MGM Plus called Godfather of Harlem.

 I watched the whole thing, which is great.

 I'm obsessed.

 Um and a lot of that's like true stories.

 Bumpy Johnson was a real person, historical figure.

 American gangster.

 No.

 Yes.

 The the guy that dies at the beginning of American Gangster is Bumpy Johnson, right? Um, but also in Havoc is uh Timothy Olifant is probably one of the best TV actors.

 Justified.

 Justified.

 Unbelievable.

 They they use him in like 10 scenes.

 He should have been He should have been in every scene in the movie.

 He's a great actor.

 I have to watch Justified.

 Justified is superb.

 Um, can I get some juice? Thank you.

 All right, hold on.

 I have like pings going off here.

 We will sign.

 All right, Steve.

 This is gonna this is going to be awesome.

 We are so thrilled to have you and uh this is going to be uh this is going to be such a treat.

 I've been excited about this for two weeks now.

 So only two.

 Yeah, I was that's not that that's I can only think in increments of a week or two these days.

 So all right.

 Uh what are you asking for for father? Do you ask for a father's day gift? I never ask for any gifts.

 Do you get father's day gifts? Basically not.

 Do you? You don't anymore? No.

 Are you kids in their 20s or 30s? They're getting one of my one of my daughters is getting married in less than a month.

 All right.

 So, I have a 19-year-old and a 16-year-old.

 Okay.

 I'm way past you.

 The 16-year-old will You have Torus? Give me a hug.

 You have Torus? Yeah.

 That's all you have.

 Yeah.

 Uh I I want to ask for something.

 I feel like Why? What do you need? I don't We just did my kids I just got new golf club.

 What else could I want out of life? We just did my kids 16th birthday.

 Like that's my wife's boyfriend.

 The The little boy.

 The boy.

 Oh, yeah.

 Of course.

 big time.

 He got uh air airpods max like the big headphones.

 He got a workout bench.

 He got the adjustable dumbbell like the weight adjustable weight dumbbells.

 He got all these gift cards.

 And uh I'm happy to My son's last birthday.

 I bought him a sword that he actually uses.

 What does he use it for? So my son got crazy.

 So my son used to be like a powerlifter.

 Okay.

 He built like a brick house.

 Yeah.

 And then he got into um ta not uh Brazilian jiu-jitsu.

 Okay.

 And then he moved on from Brazil Brazilian jiu-jitsu called long sword competitions.

 So he's a samurai.

 So he longs sword competitions are they use swords that are faximiles of swords that were used in Europe in the early 1600s.

 And he's completely padded and basically they whack the out of each other.

 Come on.

 And I have videos.

 My son, he could kill you.

 I mean, he is so fast in this thing.

 I'll show you later.

 I'm serious.

 And he he So, there are 10,000 people who compete on planet Earth in this thing.

 Okay.

 And my son is ranked 250.

 Come on.

 Wow.

 Wow.

 He's unbelievable.

 Is it It's so It's global.

 It's a Europe and the US.

 So, is it a lot of like uh British and Japanese? Because No, Japanese.

 It's It's like Euront continental Europe, Germany, Scandinavia, France, and the US.

 But they're but they're not in like costume.

 No, they're in they're in basically they look like um the way fencers are dressed.

 Yeah.

 Okay.

 Have you ever seen role models? Yeah.

 Um so what is he a sword? Wait.

 So it's called long sword competitions.

 So what does he do to what does he do to train for this? It's like like he's got other people.

 He works out all the time.

 He swords.

 What don't you get? When they with all this padding and stuff when he's fighting he's sweating like crazy cuz it's it's huge.

 Now what do you do after that fighting dragons? Like what's the next what's the next I said to him.

 David, you know what we should do is we should send you back in time to Eastern Europe.

 You could help the Jewish people because they could use some defense.

 Absolutely.

 He'd be helpful.

 Maybe we could use him.

 That I don't know if I don't know if one swordsman would have been enough.

 That would it could hurt.

 How far back in time you want to send them? That's all right.

 That's interesting.

 How did uh And you have how how many kids do you have? Three.

 Three.

 Okay.

 And they're all grown.

 They're all grown.

 So uh I'm two years away from my both my kids being in college, right? I really don't know what I'm going to do with myself.

 Oh, there's lots of things to do.

 I'm sure, but I haven't hit it hit hit upon it yet.

 Oh, my golf game has improved enormously.

 Yeah, that's probably My tennis game has gotten better.

 I still play squash.

 I'm probably going to I'll probably be I'll probably be golfing and tennis, too.

 Do you golf in New York or just Florida? Uh, both.

 Where? In Westchester.

 Uh, we have a house that we rent in East Marian all the way out on Long Island.

 All right.

 You You have the same accent as me.

 Are you from Long Island? No.

 Bite your tongue.

 Okay.

 Queens.

 I told him we're from America.

 He didn't from the I'm from the upper east side of Manhattan.

 I'm very high class.

 You grew up Upper East Side? Yes.

 Okay.

 We're from the Lower East Side of the Southshore.

 I can tell.

 I live I lived up east side for for a while.

 I've always lived upper east side.

 I lived in uh Rupert Towers.

 Okay.

 Um Third Avenue.

 Yeah.

 So that was the thes decade.

 I lived uh like basically until the crisis and then uh I had no money and we were having kids and it was like we got to get out of here.

 We're in a one-bedroom and uh So where'd you move to? Back to Long Island.

 Long Island, of course.

 We're on Long Island.

 Uh so we moved back to the town we grew up.

 My wife is my high school sweetheart.

 So we moved back to the town we grew up in.

 And the added bonus was her parents still live there.

 So they had bedrooms set up for the kids.

 It's one of the smartest decisions I ever made.

 So what town? in in Merrick.

 Merrick.

 Oh, you're also Merrick.

 Merrick.

 No, we're both from the same.

 Merrick.

 We're We're almost stops What are the stops in Long Island's railroad from? I'll help you.

 We're in between five towns and Masipiqua.

 Masipiqua.

 Masipiqua Park.

 Babylon.

 Aalon London.

 It actually it it actually goes It actually goes uh Lindbrook.

 Uh wait, what? It goes Lindbrook Center.

 No, Merrick Merrick wants Belmore.

 Belmore.

 We miss Belmore.

 Belmore.

 So my parents had a house in Atlantic Beach.

 So I grew up there in the summers.

 I love Atlantic.

 We're Catalina members.

 Oh, I'm there.

 Yeah, there you go.

 If it's nice out, I'm I'm probably there on Saturday.

 I met my wife on the boardwalk in Atlantic Beach.

 Me, too.

 Sunny Atlantic.

 There we go.

 See, we're not so different, you and I.

 Uh I think we're very different.

 Well, that's fun.

 I would go there.

 Sorry, go ahead.

 Let's get this going.

 All right, let's start the show.

 Coming in.

 Very exciting.

 Compound episode 1.

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 All right, ladies and gentlemen, welcome to episode 196 of the best financial podcast on the planet.

 You are now rocking with Michael Batnik, myself, Downtown Josh Brown.

 First- time listeners, we apologize in advance.

 Longtime listeners, we love you.

 Thank you for being here.

 We uh we have an extremely special first time guest.

 I've been excited about this, as I said, for a fortnight.

 Um Steve Eisman is an investor and financial analyst best known for his bet against the US housing market prior to the 2008 financial crisis.

 a story chronicled in Michael Lewis's The Big Short.

 He was portrayed by Steve Carell in the film adaptation.

 And Steve has held senior roles at Oppenheimer and Co.

 Frontpoint Partners, and he currently hosts his very own podcast called The Real Eyes Playbook.

 Steve Eisman, welcome to the show.

 Thank you.

 Good to be here.

 All right.

 Uh, I want to give you I want to give you some credit for something that I don't know if other people say to you.

 being known for getting the financial crisis right.

 There's like a list of 10 people that we all know the names, okay? Most of them persisted in their bearishness or doubled down on it.

 And some of them to this day, they're waiting for the next 2008 every time you hear them open their mouths.

 You are one of the few people to have made the turn.

 You you sort of like came to prominence as a result of this incredible call that you made.

 And not just call, but actually money behind it.

 And um that's amazing, but you also transcended that group of people because you didn't become a perma bear forever.

 Um constantly denying the obviously incredible comeback we've had over the last 15 years.

 So I wanted to give you credit for that.

 Do other people give you credit for that? Not too frequently.

 Okay.

 But it's like a notable thing, right? Because the easiest thing to have done was to lean into the the character, the persona, and like, "All right, here's going to be the next crisis.

 she was going to be the next crisis.

 And we saw a lot of those guys do that.

 I I don't look at it that way.

 I mean, I, you know, two 2007 for me was fun.

 Yeah.

 Because I was short all the subprime paper.

 I couldn't stand what Wall Street was doing to planet Earth.

 And so it was a zero sum bet.

 If I was making money, the other side was losing money.

 So I was making money off of Wall Street.

 That was fun.

 Yeah.

 2008, I don't think was fun for anybody.

 You know, I sort of viewed it as uh gonna go back to my Jewish day school roots.

 It's kind of like Noah in the ark.

 Okay.

 You know, so Noah builds the ark, his family's inside, but people outside are screaming.

 Yeah.

 Dying, you know.

 I don't think Noah's happy in the ark.

 I mean, he's happy he's alive and his family's alive, but he's not happy that the planet Earth's getting wiped out.

 Did it get worse than you initially had thought it would? I don't think it got worse than I thought it was going to get.

 What I was shocked by in 2008 was this was where I made actually made an intellectual error I thought and my my partners and I all thought that surely the people of the United States government and the Fed know what we know.

 Okay.

 Because and if they know what we know, they're getting prepared to bail out the system any second, right? And it turned out that they didn't know.

 Yeah.

 They had no idea.

 When when did you first realize that? I probably realized that sometime in the summer of 2008.

 Okay.

 You know, I think they took over Fanny May around that time.

 Yeah.

 Um or maybe that was 07.

 I can't remember.

 Some When you say they didn't know who specifically Fed Treasury, I mean, I'll give you an example of of how how it's very clear that they didn't know.

 You know, if you read um Andrew Sorcin's book, uh Too Big to Read Too That's That's a short book for me.

 Literally, I mean, I I think I read too too big to what was it called? They probably read it about two hours.

 It's a good book.

 It is a good book.

 But he has a scene in there where it's just after Leman and so that's September already.

 That's September.

 So, it's not like September 14th, September 15th, and they're all having a big meeting and somebody walks into the room and says, "Oh my god, AIG is in trouble.

" And I was like, "Really? Really? Yeah.

 This is a surprise to you? Like, don't you read the research?" And it was obviously I didn't read the research.

 I had no clue.

 So, I wanted to uh I wanted to just kind of agree agree with you like that they had no clue.

 There's an apocryphal story where there's only one Bloomberg terminal in the entire Federal Reserve at that time.

 That's possible.

 That seems inconceivable now, right? But yeah, that was what that that was what it was.

 Jim Kramer knew what was going on.

 He was shouting on TV.

 The bloggers all seemed to the econ bloggers all seem to know what was going on.

 and my partner Barry Red Holtz being one of the people writing about the h the the coming housing crash.

 But like these are not people in a position of power.

 Uh I mean I remember there was an amusing moment where I remember we were sitting in our offices TV was on and backto back both Bernani and Pollson came on and said the subprime crisis is contained.

 Yeah.

 And I remember I turned to Danny Moses I said yeah it's contained.

 All right.

 It's contained the planet earth.

 Uh contained.

 It was that the new version of contain was the inflation crisis where it was transitory like it's like the same that was the original that was the that was the original contained planet earth is amazing.

 Um I want to read something.

 So Steve Carell famously portrayed you and uh I thought I thought this was sort of I thought this was sort of interesting.

 This is what he said about meeting you.

 Um he's very clearly he's clearly a very intelligent guy.

 somewhat brash, outspoken, but honest.

 When he walks in, there's no pretense.

 It's not like he's hiding anything about himself or trying to be anything other than what he is.

 I didn't have to like sift through layers of effect to get to who he was.

 There was something very true about him as a person.

 And uh I guess you met him, he met your kids, like you hung out with him for a day or two.

 Okay.

 I met him at um three guys the diner back then Madison Avenue in like 88th Street and he wore he wore a baseball hat but pulled it over his eyes so nobody would recognize it.

 We had breakfast for like an hour.

 We talked I then walked him over to our apartment.

 He met my wife and kids and that was the last time I ever had a long conversation with Steve.

 Correct.

 You had to correct him on a very pivotal scene in the movie.

 Oh yes.

 Okay.

 So, um, this is him when they go to the convention in Vegas and he, meaning the the character he's playing, you finds out how corrupt the co market is.

 I was playing this one part a little brooding and Steve said, "Oh, I'd be much happier at this point than you are.

" At this point, I was joyful because we had these guys on the ropes and this was just going to be fun for me.

 So, that's that's Well, that's not where I corrected him.

 I I actually um my contribution to the movie literally can be confined to one word.

 Okay.

 And the uh the word no.

 Okay.

 Not even close.

 Not even close.

 Not even close.

 All right.

 And uh the word is there's a scene pretty much near the beginning of the movie where Steve Carell is walking.

 He's walking on House Street and he's talking to his wife, my wife, Marissa Toé.

 It never gets old by the way.

 Of course.

 And by the way, my my wife looks like, you could say my my wife looks like she's Marissa to my sister.

 They look a lot alike.

 All right.

 Very well done.

 I don't know where you were going with that.

 I got, you know, had to get that out there.

 And um and uh so he's walking on the streets of New York and he's talking to her and he's talking he's talking and he's about to hang up and he hails a cab.

 So they have a cab pull up on House and Street and as he's about to climb into the cab, they have this guy who's an extra like try to brush past him to steal the cab.

 And the way it was originally filmed, Steve Carell turns to the guy, confronts him, and says, "Hey, that's my cab, asshole.

" Yeah.

 Cut.

 So, we were invited to watch this scene.

 So, it's me, my wife Valerie, and my three kids.

 My kids were much younger.

 It must have been surreal.

 It was surreal.

 And uh so, Steve Carell walks over to Adam McKay, who's the director, and author of the script, and they're watching the scene on a little camera.

 Yeah.

 And I turn to my wife and I go, "I got to say something.

" And she says, "Don't say anything.

" And I go, "No.

" She said, "No, I got to say something.

" She says, "I'm begging you not to say anything.

" I said, "No, I'm going to say something.

" And I walk over and I say to them, "Hey guys, if it were me, I'd have said schmuck.

" Yeah.

 And schmucks in the movie.

 Okay.

 And that's my only contribution.

 That's a big contribution.

 Pivotal.

 They did not give me They didn't even give me uh a credit.

 It's very It's very New York.

 Pots would have worked, too.

 Is perfect.

 Do you think he did? Do you think he did a good job? So, funny you should ask that.

 You know, when when the movie came out, people who know me really well, who I grew up with, said, "God, he really got you so well.

" And my my feeling originally was, "Yeah, incredible portrayal.

 It's an incredible movie, but I I don't think I was quite that angry.

" So, the movie came out in beginning of 2015.

 And in April of 2015, the Financial Crisis Commission, which was that commission that President Obama created, did like a data dump.

 They whatever any piece of paper they had, they made it public.

 And one of the pieces of paper was the interview that they did with me in 2010.

 You testified before Congress.

 It wasn't I did not testify before Congress.

 This was a meeting that was at Front Point where they came in.

 They had a stenographer and and and they interviewed me about what my thoughts.

 It lasted like two hours.

 Okay.

 And um this was like a transcript got it of the interview and I so I hadn't thought about this in five years and so I you could if you type Steve Eisman Financial Crisis Commission it would pop up and um so I read this for the first time when I was finished reading I go no he was right I was that angry.

 You were that angry that you didn't realize it at the time until you reread the that was going on.

 Yes.

 What what I said what I was like I was I was raving during that interview.

 Um, I think it was I mean it was it was a valid thing to be raving about the we were still living with some of the consequences from from it's 15 years later and for some people things were never the same ever again.

 Which part made you so angry particularly? So I mean I when I was on the sell side at Oppenheimer uh one of the industries that I covered was actually the original subprime mortgage industry.

 So I knew this industry cold and over the years I figured out some of the terrible shenanigans that they were doing to make loans and how bad the loans beca eventually became.

 Yeah.

 Destined to fail and worse than that and and the fact that Wall Street was involved egging these guys on and buying all their paper.

 It just disgusted me.

 So worse than that? What do you mean? How how is it worse? Well, the original loan, the loan that was made back then was a teaser.

 That would be a teaser for two to three years.

 A very low rate to start with.

 Back then it was incredibly low.

 Was 3%.

 Yeah.

 And then you would get adjusted basically to nine, right? Like overnight.

 And after two or three years, whatever the document said, boom.

 No.

 But I'm saying it didn't ratchet.

 Did not ratchet.

 Right.

 And um the industry, as I like to say back then, underwrote the loan to the teaser rate, right? Which means that they knew you could only pay three.

 You couldn't pay nine, right? Right.

 So, the obvious question was, why would you write a 30-year loan where the customer is only going to be able to play for the first pay for the first three years? And the answer was actually very simple in that, you know, if you took out a subprime mortgage loan, you got charged you got charged three to five points for the privilege.

 When you refinanced, you got charged the same three to five points again.

 So, after three years, you'd get a phone call saying, "Hey, you got want to refinance?" Of course, you'd want to refinance because you don't want to pay 9%.

 Yeah.

 So, you got charged another 3 to five points which got rolled into the loan.

 So, nobody's principal ever got paid down.

 It was like being, you know, a rat in a maze.

 You can't get out of this thing and then it's I'll be gone, you'll be gone.

 So, whoever owns the loan today, right? Too bad.

 You know, you got refinance problem.

 So, but everybody, you know, everybody in the chain from the originators to Wall Street, they all got paid on volume.

 Yeah.

 So, you know, it's one of my lines is that incentives trump ethics almost every time.

 Uh, last thing on the movie, you can pause on that.

 That's a really good line.

 Say it again.

 Incentives trump ethics almost every time.

 Yeah.

 So, there's a similar version of that from that that I learned from reading Charlie Munger and that's basically my life philosophy.

 Show me how people are getting paid and I'll tell you why they're doing what they're doing or vice versa.

 Same thing.

 Yeah, I 100% agree with that.

 And I think if you're armed with that going into any meeting, going into any encounter with anyone in the business world or even outside of the business world, if you just start with that rubric as like your frame of like what is this about? It almost solves every question that might come up subsequently.

 So I very much agree with that.

 Last thing on the movie I want to ask you, um, when you found out it was Steve Carell playing you, were you like, "Wait, also Brad Pitts in this movie also?" No, it's different.

 Okay.

 So sometime in like 2014 I think I got a phone call from uh Michael Lewis to say hey you know Brad Pitt's company bought the movie rights they had a script he was nobody liked it but uh this guy Adam Mccay I never heard of him at that time just rewrote the script and everybody loves it so he's going to direct and then making the movie.

 I'm like okay okay Michael sure nice talking to you right because it's been years.

 Yeah.

 Um, so then sure enough, Adam Mccay calls me and the conversation he says, you know, he says that we're we're making the movie and he said, "There's a real possibility that Brad Pitt's going to play you.

" Oh my god.

 And I said to him, this is the record.

 I said, Brad Pitt, Brad Pitt, I mean, come on.

 The only thing Brad Pitt and I have in common is we both have really good hair.

 That's it.

 So then it turned out Brad Pitt for scheduling reasons couldn't play the role.

 So Steve Carell.

 So it was like a comedown, actually.

 So he really was going to play the Mark Bound character.

 Originally, it was going to be Brad Pitt was going to play me.

 That's incredible.

 That's amazing.

 Um, what why do they change the name of the character for the movie? That's a long personal story.

 We don't have to get together.

 Anyway, before we get to say, I just I want to ask you, what was the period like for you as an investor from say, I don't know, '09 to 13 or whatever as we were eventually coming out and and the QE and the QE2 and all that sort of stuff.

 What was that like for you personally? people like dying to send you money would be the No, they were not dying to send me money.

 Really? It's a very weird thing.

 First of all, at the end of '08, so I had a great year in '07.

 I had a decent year in '08, and at the end of '08, I lost onethird of my assets.

 Why? The reason why I lost onethird of my assets is because everybody else gated.

 Oh.

 So, they couldn't get So, they had to get it from me.

 So, they took one third.

 I never and I never recovered from that.

 They were So, they were How mad were you? I was so pissed off.

 It's like I I just made you people a fortune.

 You you reward me by by by those guys who gated you.

 You're going to stick with them.

 How come you think that didn't happen to like Paulson and Pel Greeny and and those guys? I just know we got we I lost a third of my assets overnight.

 Right.

 Because in other words, the other funds that they were in had all this real estate schllock and and they were gated.

 They could get out.

 But as we were recovering, did you see the recovery turning? Did you say the worst was behind us? Like how did you how did you invest in the 09 to13 period? you know, we got pretty bullish.

 We, you know, we got long a whole bunch of stuff.

 The problem was that we were still mostly a financials only fund and the last great year for financials was 2010.

 I thought it was 2009.

 After 2009, the industry has basically done nothing except go sideways for the next 15 years.

 Well, that was your focus because you were a financials analyst, right? So we were we were it was the Frontpoint Financial Services Fund and the Frontpoint Financial Horizons Fund.

 So you weren't buying I wasn't buying Apple.

 Right.

 Right.

 Got it.

 Even though we wanted to, but that was not our mandate.

 Yeah.

 And the truth is financial stocks did not recover with the market.

 They came off the bottom.

 They came off the bottom.

 They had a great 09.

 Yeah.

 And that was the end.

 That was it.

 That was the end.

 And and the problem that they had was after um after DoddFrank got passed.

 Right.

 So um Daniel Turillo became the vice chair of financial supervision which is you know fancy term for chief bank regulator of the United States.

 He he is the first chief bank regulator of the United States in the history of the United States.

 Think about how insane that is.

 Yeah.

 And so he went to town.

 He he forced the industry to massively delever and to derisk.

 So just to give you an idea between when he stepped in let's say beginning of 11 and when he left April 2016 Group's leverage went from 35 to1 to 10.

 Now I don't care how good you are.

 When your leverage as a financial company goes from 35 to 1 to 10 your return on equity is going down.

 Also they couldn't merge with each other.

 They couldn't do anything.

 They couldn't do anything.

 So why would you why would you own City or Morgan Stanley or G when you could own Apple? Yeah.

 And they had a double dip uh crash because in 2010 2011 the European thing, right, people worried about wrecking financial stocks in the United States.

 Exactly.

 I remember Bank of America printed eight bucks a share at some point.

 Like I I think some of the Warren Buffett stuff happened in 2010 and 2011 like after the crisis, some of those convertibles that he did because those stocks were panc.

 So it's a tough it's a tough area of focus I guess for a long time coming out of the crisis.

 Years.

 Yeah.

 Um, all right.

 Let's talk about another tough area of focus.

 We wanted to start out with your opinion on one of the bigger stories of the spring.

 Um, the deficit is back in focus.

 There was a really No, it's not.

 Okay.

 It's not.

 That's the That's the nonsense.

 You can shoot it down.

 It's out of nonsense.

 Tell me why.

 Take a look at a chart at the 10-year Treasury yield.

 It's been in the same range for the last two years.

 30-year broke above 5% for the first time in almost 20 years.

 Big deal.

 Okay, who cares? I like to hear that.

 5%.

 Look, let's do a thought experiment.

 Okay, let's go back in time.

 Let's say it's 1999 and we're going to have two backto-back guests on CNBC, which we we all know and love.

 Yeah.

 Pete Peterson.

 Yeah.

 And Steve Eisman.

 Okay.

 A much younger version.

 Okay.

 And Pete Peterson gets on and says, "Oi, the deficit.

" That's he's he's the original king of the oy the deficit.

 Black Blackstone co-founder.

 He was a He was a founder of He was a founder of KK co-ounder of KKR.

 KKR.

 Okay.

 Okay.

 And oh, the deficit.

 It's so terrible.

 It's growing.

 It's going to get worse.

 It's going to it's going to crowd out investment in the private sector.

 The dollar is going to lose it.

 It's lose its reserve status.

 Interest rates are going to go up because people are going to not want our bonds.

 Cats and dogs are going to lie down together.

 It's the end of the world.

 Yeah.

 Okay.

 And that's his interview.

 And then Steve Eisman comes on much younger brusher version.

 You could almost say Brad Pittesque, right? Well, my hair had no gray back then.

 Okay.

 And Steve Eisman says, "I completely disagree with Pete Peterson.

 I love the deficit.

 I want more of the deficit because because we are the reserve currency of the world and the entire financial system runs on treasuries.

 We can have afford to have a much bigger deficit.

 And this business about crowding out is nonsense.

 There's going to be no crowding out.

 interest rates are going to go down and the US economy in 20 years from now will be the most dynamic it's ever been probably in our history.

 And that's my speech.

 And then six months later the market crashes and then leave that aside.

 I'm just saying and and Pete and everybody thinks Pete Peterson, oh h he's the man cuz he's the sage and Steve's an idiot.

 Who was right? You were right.

 I'd have been right.

 Still right.

 And and the way I think about the deficit is the deficit is Wall Street's version of virtue signaling.

 People get on TV and they're like they try to one up each other.

 I am against the deficit.

 And then the next guy says, "Oh, he's not against.

 I'm so much more against deficit than I hate it most.

 I hate it more than him.

 He's nobody.

" Okay.

 and and the nobody ever asks the question given all the uh the aida about around the deficit why have none of these predictions ever even come close to happening.

 Yeah.

 And I think what they all miss is that the entire like I hinted at before the entire financial system of planet earth runs on treasuries.

 You've got a multi-t trillion dollar repo market where banks lend to each other overnight.

 What is it? What's the currency? Treasuries.

 You're you're a sovereign wealth fund in Norway and you need to park your money in some medium-term notes.

 What are you buying? You ain't buying Chinese bonds.

 You're buying treasuries.

 So, the only way people should really start to worry about the dollar losing its reserve status or and our interest rates going up because of the deficit is if there's an alternative to treasuries.

 Until there's an alternative to treasuries, this is all just purchasing.

 There is stable coins.

 Uh we we learned that last.

 We'll talk about that.

 We learned that last week with circle.

 Yeah.

 Uh well, so is there no limit then? Why not so why not propose? Why not propose a a 10% annual budget deficit.

 I I I it's not that I think that having such a big deficit is a great thing.

 I just don't sit there and worry about it all that much.

 Um what about the dollar being down 11% year to date? Concerning or normalization or what? Whatever.

 Whatever.

 Okay.

 It's refreshing.

 Almost nobody will say that.

 No, nobody will.

 And you really think, like I said, everybody wants to be virtuous.

 But you really don't think I'm not interested in being so virtuous.

 You don't think there's legitimate concern? You really think it's all just I think it's all nonsense.

 Let me come out against the deficit so people look at me as responsible.

 All the things being equal, should would it be a good thing to cut the growth rate of the deficit over time? Sure.

 Right.

 You know, that's that that's a very very long-term problem.

 Um, you know, when people get on on TV and start, you know, complaining about the deficit and saying, "What all the I just laugh.

 I think it's a ridiculous.

" So when you when people say the last time we had a surplus was 2001, you say, "Who cares?" Who cares? Right.

 So what? Yeah.

 was 2001.

 Let me ask you a question.

 Is is the US economy more dynamic today a little bit than 2001? I'd say just a touch.

 Can I make my uh can can I give you my my uh insight as limited as it is on deficits? It's your it's your show.

 Okay.

 If you if you just look at deficit, if you just look at a chart of deficits versus um stock market bubbles, yeah, you realize very quickly there have only been two times in history where we were in budget surplus.

 They both came as a consequence of massive stock market bubbles which led to tons of tax receipts in the following years.

 So 2001, 2002, that's people paying their taxes from the dot bubble.

 Um, and then in the late 60s when we had, you know, Nifty50, uh, yeah, the runup like, uh, the runup of the stock market, Nifty50 kind of peaks in the early 70s.

 I guess we had this little moment there where where, uh, we had a budget surplus.

 Other than that, you're never in surplus.

 So, if you want to have if you actually want to tackle the deficit, maybe need more stock market bubbles.

 I don't know.

 Why do you think the average person gets mad about this? Gets they confuse it with household finances.

 When you say the average person, who's the average person? I'm talking about I'm not talking about the star fund manager.

 I'm talking about just the average citizen who is hemming and hawing about our I think I think Josh is right.

 They misunderstand the financial implications.

 I think we're a household that we're Oh, you would never spend more than you take in.

 We're not a household.

 Folksy politicians, they they're like, "You wouldn't run your household financially like that.

 We're not a household.

" Households can't print their own money.

 By the way, for the record, we're with you.

 We are not the type of people that spend any second thinking about the deficit for the most part.

 I mean, I just find it funny at this point.

 I mean, put it this way.

 You know, one criticism of me as an investor, if it would be that I can at times be too early.

 Yeah.

 And as we all know in our business, if you're too early and during that time, you're wrong.

 Remember the Remember the Simpson Bulls uh deficit? Was that about that was about the deficit, right? Those two guys were doing like a national tour.

 Okay.

 All right.

 But um I know been 40 years too early.

 I mean, this this debate about the devil has been going on for 40, you know, when when you make a prediction for 30 to 40 years and you've been wrong for 30 to 40 years, you know, you just be a little quiet about humility.

 So, you're not worried that it's 1937? That's ridiculous.

 Well, wait a minute.

 Wait a minute.

 One thing that's true is we haven't run a deficit like this outside of a recession.

 So, okay.

 Oh, that's a factual statement.

 So, what So, in other words, god forbid we have one, which is very possible.

 I'm not going to say probable, but possible.

 The the fiscal policy response to that may be constrained by the fact that we're going into a recession with record uh deficit.

 Well, because there is I would say most people would say you should not make this worse.

 That's why you might be constrained.

 Oh, not make the deficit worse.

 No, make the economy worse by by by spending money.

 make the fiscal situation overall worse by uh listen I'm not I'm not saying they said that in 1937 and they they cut the they cut the the deficit back then and we went back into depression that was a good decision there's this nonsensical narrative that foreign holders are going to or are dumping our our bonds John turn on please look so the Wall Street Journal just did a great piece on this and they show foreign holders has gone sideways not down not collapsing not anything like that since 2020 it's going sideways okay I'm yeah where they going where are they going? They're not going to China.

 Can we can we go back a couple of charts? One of the things that we have been just pointing out casually about this topic is that um we are the holders of the debt and it's kind of an asset for if you're if you're the holder of this debt, there's two sides to it and it's an asset.

 The wealth management space um we're loaded with treasuries.

 Everybody's got treasuries.

 like it's somebody's getting paid as a result of this and it is in some way contributing to the economy.

 So it's not uh it's not a situation where China owns 100% of the debt.

 Josh made the case a couple years ago that higher rates are actually stimulative because of all the cash coming in.

 Yeah, people did not like that.

 People did not like that hearing that rich Jeff Gunlock did not like that.

 The higher Yeah, Jeff the higher rates has hurt the housing market.

 That's the housing market.

 But people that own a lot of treasuries, um, I would argue got a wealth effect.

 They got a stock market wealth effect and then they got a cash wealth effect.

 Like, holy my bank account is literally spewing money.

 When was the last time you saw that in risk-free assets? It's been 18 years.

 Put this uh size of debt held by the public up.

 Nothing to see here.

 It's a dollar number, right? Yeah.

 Yeah.

 So, uh, no, it's 100% of GDP.

 Japan is a 240.

 Yeah.

 So, who's got lower rates, right? Okay.

 All right.

 Um, all I think is this is a lot more complicated than uh Sure.

 Of course.

 Armageddon happening.

 Generally, it is generally a waste of time.

 It's mental masturbation, I think.

 Well, let's waste time on one more.

 Well, they get me on Yeah.

 They put me on CNBC all the time because I'm the only person who comes out and says, "I'm not worried about this.

 This is the federal deficit as a percent of GDP.

" Okay.

 Nothing to see here.

 Okay.

 No, I'm glad you're clearing I'm glad you're clearing this up for us.

 It's just a number, you know.

 Okay.

 Like I said, when has the US economy ever been more dynamic in our lifetimes? Never.

 Uh here's China.

 Just this is the other thing that they scare people with that um we're in hawk to China and they're going to dump all their treasuries.

 And where are they going to go? Nowhere.

 Their FX reserves demand that they hold treasuries.

 They might hold less.

 Um this they could buy maybe they'll buy maybe they'll buy stable coins.

 Six and seven.

 Seven.

 So put up six.

 So this is the grad very gradual decline of China holdings of US Treasury securities.

 And the next one is um their recent selling.

 Okay.

 Okay.

 We could all we could live with it.

 Let's do uh can we talk about the labor market? It's your show.

 Okay.

 Do you have thoughts on the labor market? How do you how do you feel? cuz uh we got a we got a we got a continuing claims number that is now starting to take off.

 I mean I I'm don't think so much about the labor market.

 I think much more about you know what President Trump is doing about tariffs and will there'll be a trade war.

 Okay, that's that is the only thing that's important right now.

 That's the thing that will impact this.

 If there's if there's no trade war will be growing for years.

 Yeah.

 And if there is a trade war there'll be a global recession.

 and and and it's binary and I don't know how to handicap that.

 So, weekly claims for unemployment benefits are now at their highest level since November 2021.

 Okay.

 Um let's put this up really quickly.

 The blue line is continuing claims, which is breaking out.

 The green is a little bit elevated.

 That's initial claims looking like probably a breakout.

 I think the the salient point here is it has never been harder to get rehired once getting laid off.

 um as it is right now in the post-pandemic period.

 I don't know you you don't feel as though anything has materially and I don't know how much of this is tariffs, how much is AI to be honest, but it's harder to get it's AI at this point at all.

 Not yet.

 It's too way too early.

 Okay.

 So, where are you with the tariff situation? You know, there's a great show on on Amazon called Reacher.

 I love that show.

 And Reacher has this line where he says, "In any investigation, the details matter.

" Yeah.

 And that equally applies to trade negotiations.

 The details really matter.

 Okay.

 You know, on the one hand, the US has a big advantage over everybody in that of all developed countries, we have the lowest percentage of GDP coming from exports.

 It's only 11%.

 Everybody else in the developed world, including China's is 30 plus.

 They have to sell to others.

 And they need to sell to us.

 Yeah.

 So, well, I'll come to Europe in a second.

 So, we have a big advantage over China, but China has controls all those rare earth l medals.

 Yeah, that's their card.

 I I don't know how to handicap that.

 I really don't.

 Well, I think we fixed that part.

 I don't think we fixed anything.

 The sons and daughters of the Chinese Communist Party can go to Harvard and we get the rare earths.

 That's what they just said.

 And that and that's where we were before all these negotiations.

 That's not That's not what President Trump wants.

 Okay.

 So, you know, like I said, they just started negotiating.

 All they did all they agreed to this week is to continue negotiating.

 Yes.

 It was somewhere agreement.

 Keep talking.

 Landmark agreement.

 Let's keep talking.

 Okay.

 keep talking.

 And so I I have no idea how to handicap US versus China.

 I think US versus Europe in some ways is more complicated than US versus China because the the EU commission has authority over tariffs.

 And they actually offered before April 2nd to cut all tariffs to zero.

 And President Trump told them to go take a hike because that's not the issue.

 The issue is everything else.

 protectionism, VA industries, all these all these regulations, etc.

, etc.

 And what I've learned is that each country in Europe over issues that they care deeply about has an effective veto.

 So let's say we wanted to get more agricultural products into France.

 France says no.

 That's the end of the conversation.

 Yeah.

 So negotiating with Europe's like hurting cats.

 Yeah.

 So I I don't know how that's going to go.

 I you know I just think these negotiations are much more complicated than people want to believe.

 We'll see.

 Maybe it'll maybe it'll all come out.

 So in other words, in each of these countries in the EU, so the EU, so Ursula Vanladen or whatever can can say whatever she wants, but then Germany really cares about its auto industry.

 The Italians really care about I I would assume products, agricultural products and cars and and if they say no, it's no, right? So then you have a deal with the EU but you but at the country level there's no deal with the EU if you get vetos from all these countries.

 You know what you know what I learned during this whole thing that I thought was crazy? The in Canada the provinces tariff each other.

 Did you know that? I didn't know that.

 It's insane.

 Like you like if you're trying to sell something from Nova Scotia in Vancouver there are tariffs.

 Oh, I had no idea.

 And so one of the one of the politicians said like how do we fight back against the United States? Well, one answer might be to stop fighting amongst each other.

 Yeah.

 Go.

 Steve, are you surprised that given that there is still uncertainty with tariffs that the S&P is just less than 2% from all time highs? It seems to be not.

 I'm surprised and yet not surprised.

 I mean, it's been my experience that, you know, when something new happens, the street will price in the ultimate result immediately.

 And that's what happened by April 8th.

 And look, the US economy is incredibly resilient.

 The economy wasn't going to roll over unless there actually is trade war.

 So all these companies reported results were okay and a lot of people pulled guidance but okay who cares and so they're not market's not going to go down unless is an actual trade.

 15% of S&P companies pulled guidance, which was way less than I would have expect.

 I would have expected way more.

 And it turns out that companies just kind of bluff their way through April and May.

 Didn't say much.

 But look, it's having an impact.

 I mean, I know we had data that showed that uh imports from China down 35%.

 Yeah.

 Orders were down 65%.

 Um, you know, that's going to start impacting things probably when the back to school starts.

 Uh this is Donald Trump yesterday.

 Our deal with China is done.

 Subject to final approval with President Xi and me.

 Full magnets and any necessary rare earths will be supplied upfront by China.

 Likewise, we will provide China what was agreed to, including Chinese students using our colleges and universities.

 Which has always been good with me exclamation point and and parenthesis.

 We are getting a total of 55% tariffs.

 China is getting 10%.

 Relationship is excellent.

 Thank you for your attention to this matter.

 That's the president.

 So he thinks it's done.

 I I mean done is we just that we have 55% tariffs if they want if they want to actually have a real deal to get tariffs below that.

 Okay.

 Did you read the oped in the Wall Street Journal? Um I generally don't read the opeds in the Wall Street Journal.

 Go ahead.

 Tell me what they said.

 For good reason.

 They said China, they said Trump has no strategy and basically China had more leverage than we did and uh I think that's an overstatement.

 Yeah.

 Um you think this is going to continue for months and months and quarters and quarters? I think it's going to continue easily through the summer.

 Does the uncertainty linger or it's really now just about the actual cost of goods? I I you know what I don't know.

 I I can't make that kind of prediction.

 So this is good timing.

 Torson Slack had a a deck about China and this surprised me.

 He has a chart showing the share of Chinese exports to the US, EU, and Japan and uh versus Japan, excuse me.

 So, US, I'm sorry, US versus EU and Japan.

 And the share of exports um are going down to the US, EU, and Japan versus the rest of the world.

 So, China is less reliant on us buying their versus the rest of the world, which surprised me.

 That is surprising.

 You know, that's an overstatement because some of that stuff is shipping stuff to Vietnam and Cambodia, which then comes to us.

 So, you know, officially China's the percentage of Chinese GDP from exports is 19%.

 It's a lot, but my guess is if you add in all the other stuff that they ship outside the country that eventually ends up here, it's probably 30.

 So, here's the results of the first earnings season during um the trade war.

 Put the chart up for us, John.

 It has not been a trade war yet.

 Okay.

 Um the opening trade info, right? Right.

 Uh this is the earning surprises, the Mac 7 literally off the charts, right? Um, but the S&P 500 overall, a lot of earnings surprise, but then when you actually go to the S&P 493, the surprises are actually coming down relative to what they were, the upside surprises.

 Um, the Bravco Leo uh Lakos put out just a rundown of the earnings season.

 I'll share this with you.

 An earnings surprise of 7.

6% versus only 4% for the prior four quarters.

 So, this is a pretty good season for upside surprises.

 earnings per share for Q1 revised higher up to 12%.

 Um on forward guidance, so this is the part that I think is important.

 57% of companies reiterated, 25% raised their guidance, probably all software companies, and 15% cut guidance.

 The share of companies cutting guidance in Q1 was actually the lowest in 5 years.

 That's shocking.

 Only 1% of companies withdrew guidance completely.

 I was totally shocked by that data.

 I won't second guess it.

 I'll assume it's true.

 Um, massive.

 It doesn't matter.

 It doesn't.

 Why? Because if there's a trade war, we'll have a recession.

 If there's no trade war, we'll be fine.

 So, you we're back to where we started.

 So, if you knew the outcome, it's that binary.

 There's no binary.

 There's no degrees of trade war.

 So, if you knew the outcome, you would nail the trade.

 I mean, look, I'm long only.

 I'm not fully invested, but I'm pretty invested.

 Um, I think long-term you can own stocks and we'll be fine regardless.

 But am I pounding the table? Not pounding the table.

 I don't know how to handicap this.

 It's not It's not Look, nobody does, right? You know what? Read books on World War I.

 Nobody wanted World War I.

 There was not a single country in Europe that said, "Yo, we got we got to we got to go to war.

" But because of all the reciprocal treaties that they had, they eventually sort of fell into it.

 Yeah.

 It dragged and then it was a disaster, right? So that something like that could happen here.

 Is that the biggest risk? That's the only risk.

 It's the only risk.

 That's what I think right now.

 What else you I mean besides the usual geopolitics Well, the other stuff people talk about is a deficit, which we get back to that.

 I don't worry about that.

 And and the trade war, but I don't worry about the deficit.

 I worry about the trade for You know what's the good news? We're only up 2% on the year on the S&P 500.

 Um but with blistering earnings growth, at least in Q1, the bears would say it's pull forward and wait till you see Q2 and maybe they'll be right.

 I don't think it was pull forward.

 Okay.

 So if it's not, then we should be able Yeah.

 Well, but if there's a trade, well, we we won't be.

 So like he's not gonna do it, though.

 How do you know? It doesn't matter.

 Things like this can get out of your control.

 Just like like that's why I brought up the World War I analogy.

 Nobody wants a trade war.

 But if if China plays hard ball and Europe plays hard ball, we could end up there.

 Even if even if it's mutual mutual destruction for everyone's world.

 Yeah.

 All right.

 So that's the big that So that's the big one.

 Read read the Guns of August by Barbara Tuckman.

 It's an old classic.

 I actually did read that.

 Yeah, of course you did.

 You're you're almost educated.

 Almost close.

 Um I her I read uh uh Through a Distant Mirror.

 Through Distant Mirror.

 And then I said, "What else has she read?" That's exactly my experience.

 I actually just reread it.

 Okay.

 Um Jim Chenos told me about uh that book.

 Through a Distant Mirror, actually.

 Yeah, it was a good book.

 All right.

 Do you know what sneakflation is? Sneakflation.

 Sneakflation.

 Can I give you something else to worry about? Yeah, please.

 SC, I I really I'm really upset.

 This might be your next big short.

 Uhhuh.

 Uh this is Bank of America today.

 Yesterday's May CPI report was remarkably benign.

 The effects of tariffs were evident in a few components like household furnishing, whatever, no big deal.

 Um but there's another way the tariff impact on inflation could play out.

 We call it sneakflation.

 The idea is that instead of raising prices immediately, firms might sneak in larger than usual annual price increases next year to account for the tariffs and these price hikes might be spread across a variety of products rather than just the ones that are affected by tariffs.

 Meaning, all right, we can't go all the way on the price hike for this cuz everyone's going to know.

 Let's raise prices on other and kind of balance out the scales.

 So, in other words, if there's a trade war and there are high tariffs, it's a problem.

 We're back to the original question.

 Okay.

 Uh, you're just refraraming the question, but it's the same question.

 All right.

 Apple, that's a problem.

 Okay.

 I agree with you, but I don't know the extent to which I I'm going to show.

 So, I'm going to brag about my podcast a little bit.

 So, I interviewed uh I read a lot.

 So, I read this book recently by uh the guy, his name is Patrick McGee.

 He was or he still is technically the uh the Apple reporter for the FT.

 Okay.

 And he just published a book and it's called Apple in China and I interviewed him on my podcast a couple of weeks ago and it was the book is great.

 I'd recommend everybody read it.

 Where do people find your podcast? What's it called? It's called The Real Eyesman Playbook.

 Thank you for asking.

 You're welcome.

 And um basically what he said is that the interesting thing was that Apple there was never a moment where there was like a meeting at Apple where somebody had a deck and they had this whole meeting and they all sat down and they said, "Oh, we should we should manufacture in China.

" That's not how it happened.

 It evolved over time and gradually their their independent contractors moved to China and then they woke up one day around 2010 and 11 they realized wow we're we're doing everything in China right Apple manufactures almost 100% of its products in China when they say that they manufactur in India it's nonsense everything is is built in China and then some stuff is shipped to India and they reassemble it yeah so Apple is in China So, forget about Apple losing share in China.

 We could talk about that.

 But the biggest problem is Apple's completely beholden to China.

 Foxcon like they right.

 If if something bad happens between the US and China, the first casualty is Apple.

 Yeah.

 And it reacted that way.

 The stock did during the trade war talk.

 Yeah.

 Of it should.

 It's the second worst performer of the Mag 7 after Tesla year to date.

 arguably it should be like like everyone would agree.

 Um it's a pretty acute thing to have to thread that needle.

 They need to sell a lot of product in China and they make all of their product in China.

 And by the way, the Chinese are making better phones than them now.

 Yeah.

 It's one thing he pointed out.

 He said that that Huawei now makes a what do he call it? A triplefolding phone.

 Oh yeah, I've seen it.

 And so you un you unfold it and then you unfold it again and it's as big as an iPad.

 Yeah.

 And Apple is not coming out with a just a folding phone until 2026.

 Yeah.

 Instead, they created this thing that makes the the icons on your phone look like they're liquid glass.

 That was Apple's big revelation that at WWTC.

 That's nice.

 Um why is the stock selling at 35 times earnings? Can you for the life of you figure out uh why? I'm not sure why.

 cuz I own it.

 Okay.

 But like seriously, what what is the investor class seeing that? I think people see this as like the global staple.

 Yeah.

 That you have to own your consumer staple.

 It used to be Proctor and Gamble.

 Yeah.

 You don't want to own Proctor and Gamble.

 You want to own something that you can rely on.

 I mean, look, we all use iPhones.

 The service business keeps growing.

 If they ever get their the AI thing working, it'll be better.

 But uh I think it's fair to say that they have they've really not innovated much.

 Berkshire Hathaway uh sold I think twothirds of their stake and looks like they're going even lower.

 Oh, I didn't know that.

 Yeah.

 Um almost at the top.

 People don't talk about Warren Buffett pulling off like a greatest trade ever, but I think this qualifies.

 Pretty good one.

 He bought at the bottom, sold at the top is pretty damn good.

 Um do you think that Tim Cook has what it takes to get through this trade war, China, US? It's not up to him.

 Yeah.

 You know, there sometimes you're when you play chess, you have no moves, right? They're 100% in China.

 They're entire ecosystem, manufacturing ecosystem, which is brilliant, is in China.

 Yeah.

 It would take 5 to 10 years to build an ecosystem someplace else.

 Whether that's the US or India, I don't care.

 That's how long it would take.

 Until then, they're stuck.

 They have no ability to maneuver between the US and China.

 They're completely beholden to that.

 Apple makes Apple only makes one product in the United States of note in Houston.

 They make the Mac Pro, not the Mac Pro.

 And in the book, they described how they were having such troubles building the Mac Pro in Houston in Houston that they had to bring guys from Foxcon into Houston to help them build it.

 Okay.

 So, you think this is problematic for the market or just for Apple shareholders? I think it's problematic for Apple shareholders.

 Okay.

 But it doesn't go beyond that.

 It's an Apple specific story.

 It's an Apple very Apple specific story.

 How do you think it ends? Tell me how the trade war goes.

 I'll tell you how it ends.

 So it's that it's that binary.

 It's that binary.

 Okay.

 Can we talk about banks? We could talk about anything you want.

 It's your show.

 I'm long uh JP Morgan.

 Okay.

 Um very very very long-term shareholder.

 Long Bergkshire Hathaway, not a bank, but used to have big stakes in all the banks.

 I don't really follow the others very closely.

 Most people don't.

 Okay.

 And and it's not because I don't think there's opportunity.

 I just I feel like if I own JP Morgan, why do I need to own um City or US Bank? You don't.

 You don't.

 Right.

 You don't.

 Okay.

 Why are these stocks doing so well? Why are the financial services sector doing so well this year? And are you are you overall like are you bullish? I mean, I have two theories about financials right now.

 I mean on the large cap side you know if there's no trade war you're you got a president who's very has a very deregulatory bent so therefore the you know the IPO market should come back the M&A market will come back and own Goldman own JP Morgan own Morgan Stanley that that's how you play that okay and that's it um you know if you want to own something in payments own Visa or Mastercard and you still like those names yeah and and ignore the others Ignore just ignore everything else Okay.

 But um I think there's a potential for a regional bank story which is this nobody's bullish on this.

 Nobody.

 Okay.

 And uh and I don't own any at this point because it it a lot needs to happen.

 But I think there's a there's a potential story here which is that there hasn't been an M&A wave of banks in the United States literally since the 90s and it's been very much discouraged post DoddFrank.

 So you've had very very little lemonade.

 But I actually think as a country we need one.

 And the reason why I say that is here's an interesting statistic.

 In 2007 JP Morgan's share of deposits in the United States was 7%.

 Today it's close to 14.

 Right now there are a couple of reasons for that.

 Number one is the cost of regulation is very very high and they can bear that more easily.

 But number two, which is probably even more important, is the cost of technology has exploded and you need to be really big so you can pay for it.

 Yeah.

 So if we do nothing and we keep the current policies and there's no M&A wave, what's going to happen is JP Morgan, Wells Fargo, and a handful of others will will continue to take market share.

 The other regional banks are going to wither on the vine and what you'll have less is a couple of very very large banks and some community banks.

 Why is that bad? Because I I would like more.

 I don't want to be Canada where it's a umartel it's basically a cartel of the and so therefore they those banks get to charge a lot more to customers they run they run the government effect they run their own regulation effect there so effectively so I I want to wait let me let me finish so what I think needs to happen is you need to have companies like America and US Bank Corb and we could tr whatever list you want merge because otherwise they're not going to have enough money to they can't compete yeah so I want to show you a chart that doesn't quite counter what you're saying but I thought was was interesting surprised me if again from Torson slot you could you could comment on this small bank small banks account for about 30% of total deposits in the banking sector and the share has been rising since 0 small bank but I think you put up like the midcap banks it'd be down okay so re regionals as opposed to thrifts there's a there's no there no thrifts anymore there's community banks yeah the community banks like a thousand of those tickers they're all like in the Russell 2000 they have no market cap no coverage they see it really seems feudal And now you have these NEO banks.

 So today we had an IPO go up 80% or something.

 Chime Chime's target demographic is the sub $100,000 income person.

 Not sure why people are so bullish on this.

 They're going to charge people interchange fees.

 That's their that's their business model, right? Um but that's that's a hot stock.

 Then you've got um then you've got like the Venmos and you know PayPal and and all of the shopping cart payment systems.

 You want to stay at my view.

 Yeah, you want to stay away from everything in payments except Visa, Mastercard.

 Everybody's eating each other's lunch.

 Yeah, they're all going after each other's space.

 Block, Toast, they're all Apple Pay is in there.

 Shopify shop.

 To be able to make It's so complicated that to be able to make a decision as to whether you'd want to buy Block or Toast, you literally need to be able to like write a dissertation.

 It's just that complicated.

 Or you could just say, "I'll own Visa Mastercard.

 I own toast and yeah okay the the bull case is inertia you get to a certain critical amass of restaurants these people don't rip out payment systems that's possible but you know Visa and Mastercard keep growing because I mean the joke I always have about Visa and Mastercard we could talk about stable coins is since they went public in 2001 I'd say every three to four years bunch of companies go public and they come in and they say we are going to disenfranchise Visa Mastercard yeah every time I've been to this meeting a thousand times I care, name the company.

 I've been to that meeting.

 It's like a terminal.

 And then like two years later, they come back and they go, "Not going to happen.

 We're working with them.

" So, you know, stable coin is the latest in that.

 There's a role for stable coin, but I I I just don't believe you're going to be able to disenfranchise.

 Um I want can we do like a mini financials lightning round? Well, yeah.

 Let me let me This is actually good a good segue to this.

 So, one of the areas that I don't want to say people are calling it the next big picture.

 That's a bit absurd.

 But an area that is getting attention is is private credit.

 So chart 19 John please uh again from Torsing Slock he shows lending to corporates as flat for both small and large banks to which I would say well yes private credit right you have any thoughts on that space because that is getting a hell of a lot of attention especially from wealth managers I mean I don't have a strong feeling about it only because I have no data okay you know so when I was short subprime paper you know I subscribed to the Moody's database and every month in the beginning in the middle of the month over a two-day period there was a massive data dump every securization reported all its credit statistics.

 So you could see you know is is is it getting worse is it getting better and every month it got worse so I felt better.

 Um here I I I know the theory.

 What what is the theory that is too many lenders too many lenders lack standards unregulated it's going to blow up? Well and and it's I I can't say that there's an element of that there's an element of that syndication idea here.

 What's happening is that the risk is being borne by now wealth management average millionaires right who are being put into these funds.

 They are now taking the risk that banks aren't allowed to take and that the fund sponsors, right? So, could that could that blow up? Possible.

 Yeah.

 But I don't have any data to have an opinion.

 You know what's so funny? This whole growth of private credit is the direct mo one of the most obvious direct consequences of um DoddFrank and and that's right.

 We did that like we decided anyone we want our banks to have that much risk.

 anyone in but our bank should be lending money and well that's what you get.

 So um I want to ask you about what do you think of Goldman and Morgan Stanley these days? Specifically Goldman retrenched completely from this mainstream consumer push that they were making during the pandemic.

 Um they got away from the credit card with Apple.

 They shut down the online a lot of the online banking stuff that they wanted to do.

 The stock price recovered incredibly well.

 Um the guy running it seems like he's back on top.

 David Solomon appears to be back on top.

 Um what do you think of Goldman's place in this new world? Morgan Stanley's place.

 These stocks have done really well off off of the lows.

 I mean Goldman is back in terms of its business model back to where it was before it started this whole process.

 Yeah.

 So, you know, if if I just think of it as a vehicle, you want to play, you know, trading volume, M&A, IPOs, Yeah.

 you buy Goldman.

 I think Morgan Stanley has a more durable business model, much more diversified, has higher ROE.

 Yeah.

 Um, you know, if you look at Goldman, despite the power of the earnings, the ROE is not very high.

 Yeah.

 It's like 12% or something like that.

 I don't think I I could be wrong.

 I just don't think the RO is that high.

 Morgan salings is considerably JP Morgan 17 18%.

 Yeah.

 So, you know, I think I I think of Goldman is more of a trading vehicle to you want to play those themes, but I I don't think of it as a long-term investment.

 Wells Fargo just got out of the doghouse out of Yeah.

 So, do you know what is? No.

 Uh, no.

 It's a great Yiddish word.

 It means basically you were excommunicated from the community.

 Yeah.

 So, they they had a growth limit put on them, right? They got limit.

 They were capped.

 They had I didn't know you could do that to a bank.

 Well, they they had an asset cap put on them.

 They were not allowed to grow their balance sheet by a single dollar.

 Yeah.

 So, that was penance for the fake account scandal, which is already hard to believe it's 10 years ago.

 Wow.

 Or five years ago.

 By the way, one of one of the greatest things I ever saw ever was when during the scandal, uh John Stump, who was the chairman of Wells Fargo at the time, testified in front of the Senate.

 Yeah.

 And Elizabeth Warren, oh my god, she oblit she obliterated him and he had to resign afterwards.

 Yeah.

 Well, back to what you said originally about incentives.

 That's that's the case study.

 Here's a situation where we're going to pay people for how many accounts get opened, right? Well, what what the you think is going to happen? There's going to be a lot of accounts open.

 All right.

 So, there So, you like the stock? You're constructive on it? I think so.

 It's not bad.

 The guy the guy running it is Shar.

 He's a J a former JP JP Diamond acolyte.

 Former JP Morgan and then he also was head of Visa for a while.

 Okay.

 So So you're you're bullish or you not sure? You know, I don't I don't know.

 Steve, any opinion on on on Ally? Speaking of subprime, they service a lot of the subprime auto borrowers who have been having a tough time lately.

 The stock seems to be like, you know, sort of in no man's land, but any opinion there? I don't think anybody really cares about stocks like that anymore.

 I really don't.

 other than specialists.

 Great great question.

 Specialist myself.

 I don't think people care.

 Maybe maybe you own it, but I'll circle the seventh largest IPO since 1980.

 Okay.

 Uh I didn't know that.

 I had to double check it.

 This was a very big deal last week for some reason.

 I don't quite understand why everyone's so excited about it.

 I do I do.

 Okay.

 So, I do understand this part of it.

 There is a need for foreign investors who don't want to be in the dollar system but like the stability of the value of the dollar and this is the product for them.

 The other aspect of this is about okay the other aspect of this is circle is the house stable coin inside of Coinbase which is the biggest brokerage exchange.

 Okay.

 The biggest stable coin is Tether.

 Um by yes not at Coinbase but yes overall.

 But the problem with Tether is that Tether, I think, is based like in El Salvador or something.

 Yeah.

 And so, as most great institutions are.

 Exactly.

 Right.

 And so, you know, what's what's supposed to happen when you do a st buy a stable coin is you you you buy a stable coin from whoever you're buying it from and they take that money and they put it in, let's say, overnight treasuries, dollar for dollar.

 So, it's it's worth a dollar.

 Yeah.

 So, with respect to um Tether Circle.

 Oh, circle.

 Circle, they're based in the US.

 They're regulated here.

 Their custody banks can be trusted.

 So I believe that Circle Dollar is a dollar, right? Do would I stake my life on Tether doing the right thing all the time or maybe taking a little They won't tell people.

 They won't tell anybody.

 So how would I know? So that's part of the problem with stable coins right now.

 So that could be something.

 So their their balance sheet could be as innocuous as like commercial paper and maybe longer dated treasuries or They could be investing in Russian rubles for all I know.

 So that's the popularity of circle is that the alternative is so much worse.

 Yes.

 But the issue is how big can stable coin become in the payment system.

 And here's where I actually had a podcast with this about about someone who's kind of an expert in this.

 We had we had a real give and take about it.

 Um what I said to him was look let's start with the just the consumer.

 You know, in the old days, if you wanted to pay somebody with Venmo, that person needed to have Venmo.

 Yeah.

 But today, because of Visa Plus, I have Venmo, you have Cash Plus.

 Don't matter.

 You can pay.

 So, that's seamless.

 And then Visa has something called Visa Direct.

 So, if one company is paying another company, you're you're already using the Visa Rails.

 They're all over the freaking planet Earth.

 Yeah.

 So, you want to pay somebody, use Visa Direct, bada bing, boom.

 Okay.

 So, do I think at the that it's likely that stable coin is going to disenfranchise Visa and Mastercard like will that be used for traditional finance payments payments? I doubt it.

 Okay.

 But what my guest pointed out um Rul Jindel of of Autonomous was that this could be a big business for remittances.

 You want to send your money from here to India cross border, you know, you don't need to use Wells Fargo.

 You could use stable coins.

 I could see that.

 So, we're going to disrupt Western Union.

 Sure.

 Okay.

 Okay.

 It's a big business.

 Circle's market cap is a third the size of Coinbase right out of the gate.

 Well, what So, but I guess they have earnings.

 Circle.

 They have earnings, but it's like it's a money market fund.

 Like, in other words, how much could you possibly make? Even if you get a trillion dollars in Circle 4% 4% on I guess.

 Yeah, that's a high that's a high fee.

 No, I'm saying that they're not pay interest.

 They don't pay interest.

 What's their business model? It's not interest.

 Well, you're Yeah, but you're also paying them in uh if you if you're buying a a circle um stable coin, you're paying them in circles uh in some in some crypto.

 No, you're foregoing the interest.

 Oh, you're forgoing the interest.

 That's what you're doing.

 And you're doing that so that you don't have to take a taxable gain in crypto.

 Okay.

 So, it's a little bit of tax arbitrage, a little bit of international.

 This is not tax advice.

 I don't know if that's true.

 Josh money market fund.

 Yeah.

 Do not do not take this as tax advice.

 Uh, all right.

 But you're not you're not um you're not overly you're not overly skeptical or negative about it.

 You're just you're just not you're just not in I just have a question about how big is this really going to get.

 Yeah.

 Okay.

 Um, what do you think about the comeback of IPOs overall? I I sort of feel like this is really hopeful.

 People are like into IPOs again.

 Coreweave was a great deal.

 If there's a trade war, there you go.

 That'll stop.

 That'll stop it overnight.

 Okay.

 It seemed like a good sign though.

 It's not bad that people want to take risk again in in new companies.

 You know what stocks at and altim high are about? Uh my internet's not loading very well.

 NASDAQ.

 Yeah.

 The stock.

 I saw people bought the um all of the exchanges.

 They generally buy them when when things get tough and the volatility is very high because trading volumes go up a lot.

 Yeah.

 CME had a really good first half because they thrive on volatility and trading.

 All right.

 So your so your overall big picture idea is things will be okay if there's no trade war, right? There's a trade war.

 Forget everything because everything cuz all of a sudden there's just way too much uncertainty and we'll see another uncertainty.

 I think that'd be the recession damage recession.

 Yeah.

 Okay.

 If you had to sort to sum up, if you had to handicap if you had to put a probability on either case, what do you think? Where do you think you're at? I I I don't even try and handicap it.

 I I just I don't even know how to to You think it's 50/50, though? I don't know.

 I don't know.

 Okay.

 I don't either.

 I don't either.

 Did you have fun on the show today? Yeah.

 It's fun.

 All right.

 We We were so thrilled to have you and thank you so much for uh taking all our questions and uh even the ones that were meaningless, we wanted to get your There are never any meaningless questions.

 We wanted to get your take.

 So, we always end I don't know how you end your podcast.

 We we always end our podcast asking people what they're most looking forward to.

 Um, and it could be anything, professional, personal, uh, whatever, whatever's on your whatever's on your mind.

 What are you looking forward to? Thing I'm most looking forward to is that my daughter is getting one of my daughters is getting married next month.

 Good answer.

 Good for you.

 Uh, you like the guy? I do.

 All right.

 Awesome.

 The wedding be in New York.

 If I didn't, they didn't like the guy.

 I would be looking forward to the wedding.

 Well, sometimes we have a choice, sometimes we don't.

 Uh, that's great news.

 And, uh, it's in New York.

 Yes, it is.

 Okay.

 And they're going to live here.

 They're going to stay stay local.

 here is all my kids are local.

 Good for you.

 Is that the first of your kids to get married? That is the first.

 Okay.

 You got others on on the runway? Not on the runway.

 Not.

 Okay.

 All right.

 This is great, man.

 Congratulations.

 That's awesome.

 Um I am going down to Florida.

 I'm looking forward to this weekend.

 I'm going to go set up my daughter's sophomore college apartment.

 She's at Miami.

 My what? The daughter who's getting married went to you Miami.

 Is that right? Yeah.

 Okay.

 So, you know, there's no housing for sophomore girls.

 There's no sarity houses.

 So, um, we got to set them up in an apartment building.

 It's Manhattan prices, basically.

 It's the most insane thing I've ever heard.

 I can't believe all these other kids' parents are just going along with this, but I guess what are you what are you going to do? Right.

 So, it's a great school, but I'm looking I'm looking forward to helping out and doing dad stuff uh this weekend.

 Michael, what are you looking forward to? I'm looking forward to my last meal at Pig and Cow on the Lower East Side.

 They're closing up shop, which is disappointing.

 But, you ever been there? Pig and Pig and Cow.

 No.

 They have an upper west side location and a piggyback in the Midtown.

 No, that's all it's all closing.

 No, no, no, no, no, no.

 Are you sure about 100,000% sure? Oh, and I am looking forward to the new Superman movie.

 That's going to be sick.

 I think it looks good.

 He's uh he's an incredible filmmaker.

 James Gunn.

 Yeah.

 And uh they gave me Well, he's had errors, too.

 You know, like I would say the um the third uh Guardians of the Galaxy movie they did.

 I almost walked out five times.

 I thought it was so boring I could die.

 You didn't like how they finished it.

 Listen, I and you'd understand something about me.

 I'm unlike you.

 I'm actually entitled to an opinion on this subject cuz I own one of the largest digital comic book collections on planet Earth.

 I have a comic book collection.

 It's not digital.

 What's digital? What does that mean? Literal reads on my iPad.

 Dude, it's like a it's like a uh it's like it's like your Kindle Kindle books.

 The company is owned by Amazon.

 Part of my boxes of comic books.

 Yeah.

 How many comics do you think you have? Thousands.

 I have my digital comic book collection as of yesterday 11,300 comics.

 These are the These are NFTs.

 They're not NFTTS.

 It's like reading a book.

 It's like having on your iPad your book that you can read in your library in plastic with cardboard.

 I know.

 So, I'm one of the world leading experts on comic books.

 So, when I give you an opinion about a comic book movie going to be dog I don't know.

 I very Why can't they crack that code? I don't know.

 because because it wasn't a good comic book.

 Wasn't a bad comic book, but just not great.

 It's not great.

 The ones that are good comic books are good mo are good movies.

 But I would say that the problem with the all the Marvel movies is they don't have a story.

 Well, now they're doing this the the time time hopping.

 And the Red Hulk The Red Hulk was horrendous.

 Awful.

 Oh my god.

 And I'm actually not a big fan of uh the multiverse as everyone hates it story.

 What's the aside from Endgame and Infinity War? What's the best comic book movie you think? Iron Man.

 Any era.

 The best comic book show ever is The Boys.

 Oh, I like that.

 I agree with that.

 What's your favorite movie? Comic book movie.

 My favorite comic or Batman Begins.

 Dark Knight.

 I like the Dark Knight trilogy.

 It's probably the right answer.

 Oh, that's probably the right answer.

 Yeah.

 Uh, so do you think that um DC is going to go on this crazy run now? I don't know.

 I hope so.

 Okay.

 Cuz they have the right guy.

 They probably have the right.

 The problem is it's at Warner Brothers and that's in disarray, dude.

 Comic book movies, it's it's not it's not hot anymore.

 It's enough.

 They got to try.

 They got to make it hot again.

 We'll see.

 Let's see how the super movie does.

 All right, Steve Eisman, thank you so much for doing this.

 I'm going to tell people to go to the Real Eyesman Playbook on your podcast feed of choice.

 Make sure you're subscribing to that.

 Um, do you use social media or not? Really? We do.

 What do you So, what what are your handles? Let's tell people where they can follow you.

 Uh, I think it's at the real Eisman playbook.

 Oh, at the Real Eisman playbook.

 Okay.

 I think so.

 All right.

 Are you tweeting or a little bit? A little here and there.

 Okay.

 Ladies and gentlemen, to build that.

 Steve Eisman, great job this week.

 John, Duncan, Nicole, Rob, Chart Kid, Matt, Sean, Daniel, Travis, everybody who contributes to uh the channel.

 We appreciate you.

 The audience, please leave us a rating and review and we'll talk to you soon.

 Thank you.

 Good night.

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