Markets turn Trump, Long rates spike, Election home stretch, Influencer mania, Saving Starbucks

Speaker 1 Jason, do you want to go up to the bedroom, knock on the door, and wake Shamath up?

Speaker 2 Where is he?

Speaker 3 You're in his house. Go get him.

Speaker 3 He's at the office. He went to the office.

Speaker 2 He's not here. Oh, he went to the office.

Speaker 3 We're trying to find Jamath at the moment.

Speaker 4 Oh, here's Shamath. Okay.

Speaker 2 Are you wearing my goddamn sweater? What is what is?

Speaker 2 Is that my

Speaker 2 house?

Speaker 2 No, I am so tilted. Where is my wife? What the f?

Speaker 2 Don't worry about your wife. No, oh my god.

Speaker 1 Amore.

Speaker 2 At this point, it is great. Where is Matt? Hold on, I'm calling Matt.
Matt.

Speaker 2 Take off my

Speaker 2 mom. Don't touch my wife.
Oh, my God.

Speaker 2 Oh, my Lord. She fainted.

Speaker 2 So tilted. I'm like, she's tainted.
Amore.

Speaker 3 Don't you worry, Amore. You know your cashmere sweater.
It's so, so take my sweater off.

Speaker 2 It's crazy. This is so tilted.
Get out of my house. Take my sweater.

Speaker 3 But we'll be done at one o'clock, so I'll see you then. Please let me know if you have.

Speaker 4 Should we have lunch in the garden?

Speaker 2 Yes, please.

Speaker 3 Lunch in the garden. Wear something simple.

Speaker 2 Don't get off. Something simple simple is great.

Speaker 5 Is that the cashmere sweater with the rhino horn buttons?

Speaker 3 It is. You know what, though? I did some shopping while I was here.
I did a little shopping.

Speaker 2 So I just filled up.

Speaker 3 You know, I've just, these

Speaker 3 ASOPs are great because I don't have these at my house. I have ivory soap.

Speaker 2 So I got a couple of these from the restroom.

Speaker 2 But you know what?

Speaker 3 I agree. This sweater is not so great.

Speaker 2 I think I'm going to be able to do it. Oh, my God.
Don't touch that sweater, Jason.

Speaker 4 This one's incredible. I cannot.

Speaker 2 I actually told him, JKL. He's actually

Speaker 2 put it on, please. All right, I won't put it on, I won't put it on, but you know what?

Speaker 3 This port, I'm not so sure.

Speaker 2 Sean,

Speaker 3 Sean, yes.

Speaker 2 Um,

Speaker 3 that's great, but um, any other options?

Speaker 4 We do have a delicious ice wine for you. Come around here, let's present.

Speaker 2 Let's present

Speaker 2 it. So, what do we have? You're not on camera.
Why

Speaker 2 chef? Sean,

Speaker 3 yeah, Sean.

Speaker 2 Um,

Speaker 3 so this is it, looks like a deep pull, 1986 1986 Chateau Teta Sack. What do you? I mean, this looks like it's worth opening.
I mean, it was in the rock that said don't open, right, Sean?

Speaker 4 Yes, sir.

Speaker 3 All right, so it's no good just don't out. And I'll, yeah, let's just, but you know what?

Speaker 2 Pour half out because I like the bottom half, the texture.

Speaker 3 So just pour half into the garden, hear the

Speaker 3 spinach, and then I'll take the bottom half. Thank you.

Speaker 2 Please take off my sweater. Oh my god, this is so brutal.

Speaker 2 Let your winner dried.

Speaker 1 Did you have a good night's sleep at Tamas House? How did you sleep last night?

Speaker 3 I slept so good. Let me tell you something.

Speaker 3 I will compare my sleep here tonight. The lady of Saks Manor just texted me and she would like me to stay there tonight.

Speaker 1 So, you know, when I'm in the valley, I get a lot of different invites.

Speaker 3 I have to spread the wealth. So I'll be dining with the Saxes tonight, and I may be staying at Saxes to the next one.

Speaker 2 That will Silverwood World Trade Sax.

Speaker 1 Hide the Aesop soap from the bathroom.

Speaker 3 I'm hoping he doesn't have Aesop. I'm hoping he has something.

Speaker 5 This is like when he stole the Pappy Van Winkle from my plane.

Speaker 2 Remember that?

Speaker 2 No, that was good.

Speaker 3 Yeah, that, I mean, it was three-quarters of a bottle.

Speaker 4 It's just sitting there. I mean, when are you going to drink it?

Speaker 1 Sax, how do you prepare for JCal coming over to your house to visit and spend the night?

Speaker 2 I mean, what do you do?

Speaker 5 Anything that's not bolted down is basically

Speaker 2 like a gift. It's like a freebie.

Speaker 3 How do you think I got that love seat in my kitchen? I got that love seat off the kitchen. That came from Sachs's designer.

Speaker 2 Yeah. Yeah.
I just had two guys.

Speaker 3 My brother Josh came. We took it out the back.

Speaker 2 It was fun. We took it out the back.

Speaker 3 If I'm a guest, I'm leaving with something.

Speaker 1 Why don't you want to moderate today? You're on fire.

Speaker 2 Just moderate the show.

Speaker 3 Well, no, I was just, I was going to be traveling and I wanted to do a good job.

Speaker 4 And, you know, I thought maybe you

Speaker 3 would love to get your chance at moderation. So lead us off here, fearless J Free Burke.

Speaker 2 Okay, moderate.

Speaker 1 So that is the announcement to start the show. Jason taking a week off for moderating.
Yes. Gonna be a bestie guestie, gonna be a participant on the panel this week as we kick this off.

Speaker 1 So I'll be moderating this week. We're gonna do a couple housekeeping points.
First off,

Speaker 1 very excited to announce that we are doing another live event after the success of the summit during September.

Speaker 1 We had great content, we had great parties, everyone had a great time, but a lot of people said they wish they could have been a part of it. So we are going to try and do more live events.

Speaker 1 So we have pulled one together, very last minute, but we are going to make it incredible.

Speaker 1 Saturday, December 7th

Speaker 1 in San Francisco around 5 p.m., we are going to do the all-in holiday spectacular at the Palace of Fine Arts in San Francisco. It's going to be incredible.

Speaker 1 Tickets are going on sale today at allin.com/slash events.

Speaker 1 Not going to want to miss it. There's going to be a really fun show on stage with us and some guests, followed by open bar, food trucks, DJ, casino party.

Speaker 1 It should be a really great time, a real fun Winter Wonderland after party, after the stage show. And so we're really excited to have folks come and join us at the Palace of Fine Arts on December 7th.

Speaker 1 It's going to be awesome. You guys excited?

Speaker 2 Yeah.

Speaker 2 It's really exciting. Yeah.

Speaker 5 All right. So I have a question.

Speaker 2 Yeah.

Speaker 5 Is our attendance required at this thing?

Speaker 3 I knew that was coming.

Speaker 2 I have no desire to participate in this. You don't want to be at what's called a party.
Sax.

Speaker 3 Everybody in the world wants to do something except Sax.

Speaker 5 I thought I was signing up for a podcast. I don't know why I need to do all these events.

Speaker 1 This is literally a two-minute drive from your house in San Francisco. We are going to load you in a van.

Speaker 1 JKL and his brothers are going to come and grab you, throw you in the back, drag you down there.

Speaker 1 We're going to prop you up on stage for a couple hours, and then we'll put you back in the van and you can go home.

Speaker 2 The good news is we might drink some tequila, Sachs.

Speaker 2 We We might have some tequila, so you got something to look forward to. And you get to see your friends, you get to see your friends.
That's worth it, right?

Speaker 2 Say yes, David.

Speaker 1 Now, this is where you say yes, no comment.

Speaker 5 He says, No comment for those of you listening, I'm happy seeing you guys through Zoom. You know, we don't

Speaker 5 minimize it.

Speaker 2 Pandemic was his favorite holiday of all time.

Speaker 2 What's your favorite holiday, Sax? Pandemic. Can we have that back?

Speaker 2 Pandemic. He's celebrating the pandemic for six months every year.

Speaker 2 It's part of his new ritual to not see anybody for six months. Bring back the pandemic.
Sox, are you serving Wagyu tonight?

Speaker 5 I mean, that's possible. I'm going to tell him not to do anything that nice, though, for Jay Cal.

Speaker 2 Keep it simple.

Speaker 3 Burgers and dots.

Speaker 1 J.Cow, what did you put your order in?

Speaker 3 Well, you know,

Speaker 3 I talked to Chef, and he said Morel's not in season, but we are on the tail end of Black Truffle, so we have that locked in, but we're too early for morels, obviously. That's a spring.
Okay, Jason.

Speaker 3 We're going to miss white truffles.

Speaker 2 Let's give feedback about last night's dinner, Sean's.

Speaker 3 I mean, let's be honest. Picana is an underrated cut of meat.

Speaker 3 It's a very, people say it's like a serviceable meat, but when cooked properly, with proper technique, it will stand right up there with a ribeye or a New York strip.

Speaker 2 It's the best. But people don't believe that.
Picanya. I've never even heard of that.
Picana's shoulder.

Speaker 2 But it's like, it's like, it's the Brazilian word for it, but it's like a specific cut of meat. Sean did it last night.

Speaker 2 Honestly, David, I'm telling you, it's better than any other cut of meat you could get if it's properly made.

Speaker 4 Sean crushed it yesterday, but it is bananas, it's so good.

Speaker 2 I think it's just so

Speaker 2 rump steak.

Speaker 2 I like it more than ribeye. Yeah, I like it more than ribeye, 100%.
I like it more than the New York strip. That's terrible.
Filet, terrible. No fat.

Speaker 3 It's it's um, it's got a fat cap on it, which

Speaker 3 can sometimes be a little overwhelming for people. But Sean did a great job of kind of meeting us halfway.
So it wasn't so fatty, just a nice layer of fat, crisp perfectly, cooked to perfection.

Speaker 3 Carrots were great.

Speaker 2 Everything was great.

Speaker 3 I had no notes. I talked to Sean after I had no notes.

Speaker 2 What at the Apple Start was ridiculous, too?

Speaker 2 Oh, my God. I only like that.
Bruce.

Speaker 2 Burnt sugar apple tart.

Speaker 3 What? You're a New York steak guy?

Speaker 5 I'm a New York steak guy. Well done.
Yeah.

Speaker 2 What?

Speaker 2 Oh, let's disgust our savages.

Speaker 3 I think you just lost like, I think you just lost three swing stakes.

Speaker 2 I swear you won't be able to do it.

Speaker 2 If you're going to do something au poivre, I would go to the New York. I'm fine to deal with the New York in an au poivre, but well done, David Sachs.
That is unacceptable.

Speaker 3 Shout out to Rauls and Balthazar, two best steak au poives in Manhattan, in my estimation.

Speaker 2 Okay, everybody.

Speaker 1 Let's get started.

Speaker 2 Welcome to it.

Speaker 3 Why don't we call an audible tonight and go for steak au Poiv? Yeah. Just throw out the Misokot and the Wagu and let's just redo it.

Speaker 1 Boys, welcome to the All in Pod. This is episode 201,

Speaker 1 and we're going to kick it off by talking about what's going on in markets, which is one of the kind of most interesting, challenging enigmas of the day. Or maybe it's not, maybe it's pretty simple.

Speaker 1 But there seems to be a diversion in assets that is pretty unusual, that hasn't been seen in some time.

Speaker 1 And a lot of market commentators, analysts, economists are kind of trying to figure out what's going on and why. The first is that bonds are falling.
So U.S.

Speaker 1 Treasury yields, as a result of bonds declining in price, have spiked up. We nearly hit the 10-year yield dropping as low as 3.5

Speaker 1 in September, obviously leading up to the big 50-bit rate cut.

Speaker 1 And as of this morning, we're seeing the 10-year yield over four and a quarter. At the same time, we're seeing gold prices spike.
So gold is typically a safe asset.

Speaker 1 And gold has moved considerably, as you all can see here from the start of the year, where it's around 2,000 an ounce up to 2,750 an ounce.

Speaker 1 An incredible run-up, one of the best performing assets of the year. And then finally, in a market like this, you would typically see pain in equities.
But we've seen the opposite.

Speaker 1 The SP 500 is up considerably, has been on this endless run-up, all-time highs, closing at all-time highs.

Speaker 4 Where's your Bitcoin chart?

Speaker 1 And let's pull up Bitcoin.

Speaker 2 Well, I mean,

Speaker 2 if nobody cares about gold, show Bitcoin.

Speaker 1 Well, there's a lot more assets that have moved into gold than Bitcoin, but here's Bitcoin at

Speaker 2 today, this morning, 68,000. Who picked that at the beginning of the year?

Speaker 2 So is it? Hold on one second.

Speaker 2 Well, Jamaic, give us your read on what's going on.

Speaker 6 There's another couple of nuances here that I think are important.

Speaker 6 The U.S. dollar complex

Speaker 6 is thriving, which means like the US dollar is strong.

Speaker 6 Back-end yields are rising.

Speaker 6 And then another thing that I look at is this thing called put-call skew. So basically, like on balance, how are people hedging in the short term?

Speaker 6 And in the bond market, they own a lot more puts than they do calls.

Speaker 6 I think that this is the entire financial infrastructure of the world

Speaker 6 repositioning itself from what was a toss-up election to a Trump win.

Speaker 6 And when you look at why,

Speaker 6 it's because when you forget the candidates themselves for a second, but if you think about the actual policies and where the spending will occur,

Speaker 6 I think that there has been a very clear decision that the Trump economic plan will drive better growth than the Harris plan.

Speaker 6 And if you think that there is more growth coming, typically what will

Speaker 6 come with that is a little bit more inflation.

Speaker 6 The risk premium that you're going to need in a high-growth environment is higher. What is risk premium? That is

Speaker 6 how much do I want to invest for a risky asset versus a safe asset.

Speaker 6 And so all of these things are coalescing. So I think that the short-term takeaway that I have just looking at all of this data is that in the

Speaker 6 economic distribution of outcomes, this is now tilted overwhelmingly to a Trump win.

Speaker 6 And this is not an emotional statement or what I want to happen, but this is just an observation how tens of trillions of dollars of

Speaker 6 self-interested financial actors have now repositioned their risk. And if Trump wins, which it looks like he's increasingly going to do,

Speaker 6 and if he wins by the margins that it looks like it's going to do, you're going to see a lot of these things exacerbate. Gold's going to go up more, probably.

Speaker 6 Bitcoin will probably go up.

Speaker 6 The short-term economic upside for the economy will probably get reflected in higher equity prices. But it'll also push out long-term rates.
The inflation picture becomes a little bit murkier.

Speaker 6 But I think that that's what's happening. I think that the financial markets are pricing in a Trump win.

Speaker 1 Sorry, just to understand better, why does gold go up in a Trump win?

Speaker 6 I think in the short term, what happens is that you see more economic growth, but in the medium term, inflation goes up, and so you want to hedge. Right.

Speaker 6 So it's more about a durational balance of assets. So in the short term, you'll be long the things that will generate earnings, but in the medium to long term, you want to hedge yourself.

Speaker 6 So Bitcoin and gold, I think, will trade that way.

Speaker 1 Well, let's pull up the video clip from Paul Tudor-Jones, Nick.

Speaker 7 Given all of the things you're saying, are you off buying gold and Bitcoin and humanities?

Speaker 8 I think all roads lead to inflation. We're going to end up...

Speaker 7 But does all roads lead to inflation, therefore gold is a good investment? Is Bitcoin a good investment to you?

Speaker 8 I'm long gold. I'm long Bitcoin.
I think commodities are so ridiculously underowned. So I'm long commodities.
I think most young people find their inflation hedges via the NASDAQ.

Speaker 8 That's also been great. It's probably some combination.
I probably have some basket of gold, Bitcoin, commodities, and NASDAQ, something like that, and I would own zero fixed income.

Speaker 8 If I had my cash, it'd be very short-term.

Speaker 4 Sachs?

Speaker 5 Well, I think, as you heard right there, the key line that Paul Tudor-Jones said was all rows lead to inflation.

Speaker 5 I mean, that's what's basically happening right now is that the market is afraid that inflation is not whipped.

Speaker 5 and is going to resurface and the Fed may have to pivot from the pivot and raise interest rates. That's why he doesn't want to own any treasuries.

Speaker 5 Separately, another financial legend, Stan Druckenmiller, gave an interview where he has something like a 20% short position, meaning 20% of his holdings are short U.S. Treasuries right now.

Speaker 5 So he's betting that there are long-term inflation pressures and that rates are going to have to rise. And

Speaker 5 you're seeing again that since the Fed cut rates on September 18th by 50 basis points, that the 10-year T-bills yield has risen by 60 basis points.

Speaker 5 So I think my interpretation is that this is less about the election and more about the markets not liking the Fed's rate cut on September 18th. I think that in hindsight, it was too big.

Speaker 5 We discussed it on the show, and I pointed out that the 50-base point cut was contradictory in the sense that the only two times in recent history where the Fed began a rate cutting cycle with a 50 basis point cut was in 2001 and 2008, which were on the verge of pretty big recessions.

Speaker 5 And so the Fed felt like it needed to cut dramatically in order to help stave off those recessions.

Speaker 5 But that was not Powell's rhetoric. What Powell said is the economy was doing very well.

Speaker 5 So what I said a month ago was if the economy is doing really well, why won't you just tiptoe into the rate cutting cycle with say a 25 base point cut and then see how the market absorbs it and get another month's inflation data.

Speaker 5 Well, we've gotten another month of inflation data and it's showing that these are not huge moves, but it's showing that inflation in was it core CPI was just a little bit higher than expected.

Speaker 5 So again, the market is concerned that inflation is not whipped, that the Fed may have been overly precipitous in how it cut rates.

Speaker 5 And then the other thing is they just do not like the long-term fiscal picture of the U.S. One other chart we should bring up is interest on the national debt.

Speaker 5 What you can see here is that it has gone absolutely parabolic in the last couple of years. Our interest on the debt is something, what, like $1.3, $1.4 trillion.

Speaker 1 $1.3, $5 trillion run rate.

Speaker 3 Yep. $3,500 per American.

Speaker 5 And it's something like 20 to 25% of federal revenue now is going to debt service. And this continues to increase.

Speaker 5 Now, I think there was an expectation that we'd be able to get this line to go back down once we had rate cuts, right?

Speaker 5 Because if inflation is licked and the Fed can lower interest rates again and we can get back to a 2%

Speaker 5 10-year bond, which is where we were a few years ago, then all of a sudden that national debt service becomes a little bit more reasonable, right? I mean,

Speaker 5 you could service that debt at half the cost. But now it looks like that may not happen.
So just to wrap this up, I just think that the market doesn't like these fundamentals of the U.S.

Speaker 5 fiscal picture. You've got rapidly increasing debt service costs.
You've got an inflation picture that is murky and may not be going away.

Speaker 5 And the bond markets are starting to price in higher interest rates for longer. And this is why Paul Teter-Jones is saying all rows lead to inflation.
And this is why Druck Miller is shorting U.S.

Speaker 5 treasuries.

Speaker 1 Jake Hal, do you think either party or either candidate in this presidential election is going to drive a different outcome in terms of federal spending and the long-term impact on deficit and as a result rates?

Speaker 3 Well, if we look at previous performance as an indicator of future success, the answer is no, they're not going to cut spending.

Speaker 3 Most of the reports out say they're going to spend another $10 trillion in the next administration, independent of who you vote for.

Speaker 3 And I think that's actually what you have to think about here is where does all that money money wind up, right? It's certainly not going to trickle down.

Speaker 3 And what's probably going to happen is it's going to find its way into equities.

Speaker 3 And that's why these equities are so high is because people are recognizing correctly that if we do spend another 10 trillion and go another 10 trillion into debt, that money winds up somewhere.

Speaker 3 Where does it wind up?

Speaker 3 Government salaries, contracts. And if we get a tax cut as well, that's going to goose.
And I think one party will do a tax cut and spend $8, $9, $10 trillion.

Speaker 3 The other party will spend $10 trillion and maybe raise taxes a little bit. It's going to net net into the same place.
And then I think what we'll see on top of that is

Speaker 3 what I think could be cataclysmic contraction in white-collar employment in the United States over the next four to 10 years, next to administrations.

Speaker 3 And that's going to exacerbate this problem and create, I think, some social tension because we've had record low unemployment.

Speaker 3 And so even though people feel bad about the economy generally, and some of that is related to which parties, you know, which party you're part of and how you perceive the economy and all this data, but just brass tacks, you know, we have the lowest unemployment of our lifetime for the past five, 10 years.

Speaker 3 And it's been absolutely fabulous. And salaries have gone up.
And this is going to result in, I think, a little bit of austerity measures coming at some point.

Speaker 3 Probably won't come in this next administration, but certainly the one after that, is is going to have to do some bell tightening.

Speaker 3 And we're going to have to address this issue because spending, you know, everybody in America having to pay their share of that interest alone is $3,500. I mean, let that sink in.

Speaker 3 You're going to spend for every member of your family $3,500 a year in interest. That's your part of it.
Take the $1.3 trillion. It's just a lot of money.
And if that is the case,

Speaker 3 it's going to create a massive bubble in equities again.

Speaker 3 And then if you look inside of the big companies, three or four years ago, Uber, Airbnb, Google, and Facebook had more employees or the same number of employees they have now while growing.

Speaker 3 Those companies are all growing 20% year over year. So the earnings and the top line of these companies continue to grow while they have a static team size.

Speaker 3 This is like an extraordinary thing we haven't seen. So the two pieces here that we haven't seen before is what happens when you put another, I don't know, $20 trillion of debt into the U.S.

Speaker 3 economy And what happens when companies, the big ones, stop hiring and they just become wildly efficient and become wildly profitable? And this will be a renter's

Speaker 3 rentiers

Speaker 3 story where people who have equities and people who own property are going to do fabulous over the next five to 10 years.

Speaker 3 And then the 40%, 50% of people who don't are going to really be feeling a pinch.

Speaker 1 Well, it does depend also on how levered they are. So just to give you guys a sense, total U.S.
household, corporate, and government debt, which includes state and local and federal.

Speaker 1 So, household debt in the U.S. about $18 trillion.
Corporate debt is about $11 trillion. State and local government debt is $3 trillion.
Obviously, the federal debt, $36 trillion.

Speaker 1 That adds up to a whopping $68 trillion of total debt across the U.S.

Speaker 1 which if you assume a 6% average interest rate, you know, you got corporate debt and household debt, so it's a little more risky, so it carries a higher rate.

Speaker 1 That means we're spending about $4 trillion a year

Speaker 1 of an economy that's only $29 trillion a year to service the debt, just to pay the interest on the debt.

Speaker 1 So 15% of every dollar that trades hands is going towards interest payments on existing leverage, on existing debt. It's a highly levered system.

Speaker 1 And if you look around the world, this problem is not just a U.S. challenge.
Global leverage is a problem that's now becoming a crisis for countries everywhere.

Speaker 1 The UK is waiting on a big budget proposal this week. Higher taxes is what's going to be in there to make up for a budget deficit, which is currently 4.4%

Speaker 1 of GDP. The UK economy is only growing at 0.9% a year.
France has a major budget crisis underway right now. They're struggling to reduce their deficit from 6% down to 5% of GDP.

Speaker 1 And they've got skyrocketing bankruptcies. 74% of people that can work in that country are working.

Speaker 1 And they have, and that's because of large social programs that support the balance, 7.3% technical unemployment.

Speaker 1 And they're raising taxes on 440 firms, 440 companies in the country that make a billion or more in revenue with a, quote, temporary tax.

Speaker 1 There's a 4% surcharge on income over 500K that's going into effect, second home real estate taxes, and so on.

Speaker 1 France is struggling to figure out a way to generate revenue to make up for the shortfall. In Brazil, there's a major budget crisis.
States owe $130 billion to the federal government there.

Speaker 1 Inflation is accelerating at 4.6%.

Speaker 1 Rates are going to go higher and longer, complicating other economic growth opportunities in the country.

Speaker 1 So this is becoming kind of a global leverage problem, which might explain the flight to safety in assets like gold and Bitcoin, and is going to present a lot of real struggles for every global economy.

Speaker 1 Now, the question is, does the U.S. dollar maintain its reserve status? Because ultimately, I think it is inevitable that the Federal Reserve in the United States is going to need to buy the debt.

Speaker 1 They're going to need to monetize the debt, which means printing money. There is no one else to buy the debt.
So pull up the China chart, Nick.

Speaker 1 China's historically been the biggest buyer and owner of U.S. Treasuries, but here's what's happened in the last couple of years.
It peaked at about $1.3 trillion about 10 years ago.

Speaker 1 And then recently, particularly starting around COVID, they began selling down and have been selling down at an accelerated pace.

Speaker 1 Today, China is back to the level they were at nearly 15 years ago in terms of their treasury holdings. And they have publicly declared that they are selling off U.S.

Speaker 1 Treasuries and buying gold instead. So the biggest buyer of U.S.
Treasuries has kind of left the market or is leaving the market.

Speaker 2 Who does that leave?

Speaker 1 Well, at the end of the day, the Federal Reserve has been the kind of buyer of last resort.

Speaker 1 And if they end up buying treasuries, that's where we have a problem with too many dollars and inflation kicking up.

Speaker 1 And so it feels like a lot of the trades in assets are what's going to benefit from the inflation. And it's going to be gold.
It's going to be Bitcoin.

Speaker 1 And in some cases, because you're pumping more money in the system, it's going to be equities. And that might explain why equities are moving up as well.
Where do you guys invest here?

Speaker 1 I mean, Chamath, like,

Speaker 1 do you care about how the market's position or how you're positioned in this election right now? And based on how we're seeing markets trade and what these kind of macro indicators are telling us?

Speaker 1 Or are you just business as usual, heads down, invest and build as you always have?

Speaker 4 Yeah, I think that you can't trade these things.

Speaker 4 And any attempt to do it is probably a level of false precision where you're going to lose more money money and there's a lot of slippage in even just trying to execute it.

Speaker 4 I mean, at the beginning of the year, I said the breakout asset

Speaker 4 was going to be Bitcoin.

Speaker 4 I think it looks like it's going to be the resounding inflation hedge asset for the next 50 or 100 years.

Speaker 4 So that die has been cast. I think you're seeing the last vestiges of people using gold as a rational economic insurance policy, but I think the future is specifically Bitcoin on that dimension.

Speaker 4 So, I guess you could trade that. You could speculate on that.

Speaker 4 I think the question that I've been grappling with is, in my scenarios, what happens if Kamala Harris wins? What do the markets do?

Speaker 4 And I actually think it would reverse a lot of these trends over the last month and a half.

Speaker 4 Like I said, I really do think that there's a repositioning, rebalance component to everything that's happening right now.

Speaker 4 So I don't think there's much to do unless you have a very specific

Speaker 4 bet that you want to make.

Speaker 4 I would just keep my head down and keep building.

Speaker 1 Are you in the same place, Sax? Are you JKL? Are you guys trading at all?

Speaker 3 I mean, I think trading is a mistake. Time in market is better than trying to time the market.
And as I said before, where is all this money going to flow, all this spending?

Speaker 1 I mean, that's the key question, right? Like, do you change what assets you own?

Speaker 3 I don't think so. And

Speaker 3 I do think there's another thing that's worth sort of unpacking here, because when you do see people feel like the economy is working against them, all kinds of interesting movements start, cultural movements, et cetera.

Speaker 3 And I think that's what we're seeing in this election: people who believe in capitalism and free markets, and people who don't, people who believe in free speech, people who don't,

Speaker 3 people who see themselves as

Speaker 3 victims, and then other people who see them as creators. And

Speaker 3 I really study a lot of like what young people are doing. And I don't know if you guys are watching sort of the anti-war movement or the fire movement, which is financial independence retire early.

Speaker 3 A lot of young people now are looking at financial markets, whether it's Robinhood or Coinbase or PrizePicks, whatever market it is, young men especially, and they're saying, I need to control my destiny.

Speaker 3 I need to, this capitalism is not working for me. I need to own equities.
I need to make trades. And I need to retire early and have experiences because the capitalist system is broken to some extent.

Speaker 3 And then there's another group of people who are just anti-work. And there was this term back in the day called neat, not employed, not being educated and not in training.

Speaker 3 Basically, the people who are called the unproductives.

Speaker 3 And if you look at the peak engagement and employment in our country, and Japan has similar trends, although they are probably 10 years ahead of us in the UK.

Speaker 4 Sounds anything but neat.

Speaker 2 Yeah, it's not neat.

Speaker 3 But we peaked at 68, 69% labor participation, and we're 10% off that, maybe more. Maybe we're at 61 or 62.

Speaker 3 I think a lot of people are going to give up because the debt is going to be so crushing that the logical thing to do, if you don't think you can get out from under it, might be to move in with your parents or two or three other people, tighten your belts and enjoy life and go skiing and

Speaker 3 go have experiences. And a lot of young people are electing to do that.
In other words, they're opting out of the American dream.

Speaker 4 Sorry, to your point, the one thing that I realized with a lot of young men that,

Speaker 4 Jason, I think you're really hitting the nail on the head is a lot of them now do do not view the job that they do

Speaker 4 as their only path to economic independence. And if anything, they may do a job, but then they're actively trading on the side

Speaker 4 something, crypto, options, whatever. They're on Robinhood.

Speaker 4 They're using Coinbase because it's almost like they've separated in their mind that the job they do will never give them the financial independence they want.

Speaker 4 And so instead, they're going to do that job because they like it.

Speaker 4 Hopefully they love it. But then separately, they're going to go and speculate to try to make money.

Speaker 4 It's a really interesting thing because I had always been taught you earn your wealth through the job you have.

Speaker 4 And so if you wanted to make more money, you have to ladder up and do something different. Yeah,

Speaker 4 but that's not true. That idea has been sort of decoupled now.
That's a really interesting change in how people approach work.

Speaker 3 I call them gen bet. Like they're the generation that believes on, there's this like subset of them.
It's not all of them.

Speaker 3 A number of them are just quiet quitting and they just don't believe in capitalism. And then there's this other group which are like trying to get control.

Speaker 3 I call them gen bet because they just want to bet on themselves. And, you know,

Speaker 4 if they don't get wrecked by the financial markets, trading options, you know, and doing that, sorry, the other, the other thing I'll say just in recruiting a bunch of people at 80, 90 over the last three or four months is there is an enormous difference that I have seen psychologically in the people that are 25 and older versus the people that are 25 and under.

Speaker 4 And I'm calling 25 as a rough number, but there are kids that are 18, 19, 20, 21 years old that are off the charts good. They're motivated.
They're hungry. They're like, let's get after it.

Speaker 4 And they are honestly different in the way they approach their job than folks that are in their late 20s and early 30s.

Speaker 2 These people are not.

Speaker 3 Folks are the first generation who didn't go into debt in college and didn't buy into that. Like, so they might, the millennials ahead of them might have like taken the bullets, you know?

Speaker 4 Yeah, the folks that are in their late 20s, early 30s, and I'm not trying to generalize or disparage, but they lack a level of motivation, again, generally speaking, that the youngest folks in the workforce have, and that also that people in our generation sort of have.

Speaker 4 So they're sort of sandwiched in between a very different way of approaching work. And as a result, they stand out, and I don't think they're standing out for all the right reasons.

Speaker 1 Well, the majority now of young people,

Speaker 1 the number I believe, and Nick, if you could pull this up, 57% of Gen Zers

Speaker 1 want to be influencers as their primary career now.

Speaker 1 That the idea of working a job is almost like a secondary option. The primary option that everyone would strive for

Speaker 1 is to be an influencer. And this number has...
grown considerably, continues to grow. And in fact, if you look at the rest of this report, this was out of a moving.

Speaker 3 Did you say 50% of Gen Zers aspire to be influencers?

Speaker 2 Correct.

Speaker 1 Okay. 57%.

Speaker 3 As their career, or just they want to be influential and build a brand around themselves. I wonder.

Speaker 1 That's what they want to do for a living. That's what they would like.

Speaker 3 That's what they want their paycheck to be. Interesting.
That's what they're doing.

Speaker 2 Well,

Speaker 3 they want to be independent. And I don't think

Speaker 3 the system's rigged against them. And why wouldn't you think the system's rigged against you if you went 150 or 250K in debt and you couldn't get a good job?

Speaker 1 Sax, as a successful influencer how would you advise the youth on their career choices

Speaker 5 i'll play it yeah look i think that believing you're going to be an influencer is like believing that you're going to be like a rock star or movie actor or something like that pro athlete yeah pro athlete yeah it's like a one in a million shot

Speaker 5 it's just not a great thing to want to design your career around because it's just very unlikely to happen.

Speaker 5 So I think you're better off finding a career that you're passionate about, but where you're actually adding value. The world doesn't need 50-something percent of the population to become influencers.

Speaker 5 That's kind of crazy.

Speaker 5 It reminds me of a line from Fight Club where Tyler Durden says, We've all been raised on television to believe that one day we'd all be millionaires and movie gods and rock stars, but we won't.

Speaker 5 And we're slowly learning that fact, and we're very, very pissed off.

Speaker 2 And that was Gen X.

Speaker 5 That was Gen X. Yeah, so that was

Speaker 5 a Fight Club-like realization about this.

Speaker 1 Sax, how do you advise a young person on

Speaker 1 there's this temptation to go and spend all this time making content and pursue that as your career, and that's a life opportunity for you now.

Speaker 1 It's more free and open, they would think, than perhaps being a movie star or a basketball player used to be.

Speaker 5 So I think it's just important to recognize that if we ourselves are influencers, the reason why we're not being hypocritical is that none of us here, with the possible exception of J Cal, ever set out to be influencers, right?

Speaker 2 We did something different.

Speaker 5 We actually had a career and we did something interesting. And then as a result of that, maybe people want to listen to our pod.

Speaker 5 The idea that you can just go be an influencer without having actually done anything interesting, what's your credential for that?

Speaker 5 So what I would advise is just people should go do something productive. And then, you know, if it leads to other people wanting to hear from them, then that's good.

Speaker 5 But setting out to be someone that other people should listen to without having any experience or having done anything productive in your life, it's like, why should we listen to you?

Speaker 3 One thing I did build and sell two out of my three businesses over the years,

Speaker 3 but there are tens of millions of people making money in the long tail as a content creator, and it's low thousands of dollars in some cases per month.

Speaker 3 But if you combine that with people who are gig economy workers and they don't believe in the system because They worked really hard, they got this job at Google, they went to the office, then they got laid off and nobody cares about them.

Speaker 3 Now they're getting dragged back into the office. They still have these payments.
And then they look at this other system where, hey, they started to get 10,000 followers.

Speaker 3 They started to make $1,000 a month and $3,000 a month. They actually see a path to being independent of a system that has no loyalty to me.
And that's what I hear from folks.

Speaker 3 And I think it's great if we're not going to be loyal as like corporations to individuals. Those individuals are now responding.

Speaker 3 And the antidote to that poison of just being laid off randomly or being dragged back to the office after you told you to work from home, all that stuff.

Speaker 3 They now believe, hey, I can be independent, and then you have to fight to get my services. And I think that's what this is about.
If, and

Speaker 3 we're going to talk about Starbucks later, and I think that's a big part of the Starbucks problem.

Speaker 3 Having a side hustle makes you anti-fragile, you have other sources of income, and you can tell your boss to F off. And that's what young people are doing.
I've seen it.

Speaker 3 I've seen people just quit jobs and just say, you know what, I've I've got other ways to make money and I don't have a big burn rate. And so that's smart for young people to do that.

Speaker 3 And I think my advice would be to build your brand, be as independent as possible and to make things in the world and show people what you made. That's the best thing you can do.

Speaker 4 Can I give you the other side of this before we go back to macro? Yeah.

Speaker 4 Imagine that Tom Brady,

Speaker 4 who really respected Bill Belichick, but I wouldn't say is

Speaker 4 super fond of him. They're not super close.
But imagine that Tom Brady had a side hustle.

Speaker 4 And let's just say he drove an Uber and he made enough money where when things got hard and he didn't get enough playing time, he opted out. Would that have made Brady the person he was?

Speaker 4 I think the answer is no.

Speaker 4 I think there are a lot of people who started companies after being in very difficult and challenging environments that stretched and pushed them beyond their comfort zone.

Speaker 4 And they lived in that world for years before they started something.

Speaker 4 If all of a sudden the answer is, let me have an escape hatch so that I can egress off whenever things get hard, I don't think you're going to accomplish much of anything because I'm not sure that that is

Speaker 4 the kind of boundary conditions that push greatness upon people. So I would just keep that in mind as well.
I'm not sure the side hustle solves anything.

Speaker 4 It may actually allow you to quit before you actually get to the other side of something and realize what you're capable of.

Speaker 5 Yeah, I think that's a great point. You kind of have to mentally burn the boats when you do a startup.

Speaker 4 It's Cortez. You got to burn the boats.

Speaker 2 Yeah, I agree with that.

Speaker 4 Your life needs to be like Cortez. You got to burn the boats.

Speaker 4 If you keep the safety net with you as you move through life all the time and you never put yourself at risk, you're never going to figure out what you're capable of.

Speaker 4 And then you're going to look back at some point and the odds that you're going to be disappointed are higher than if you actually just tried and lived it and just said, okay, you know what?

Speaker 4 I'm really glad I'm betting on myself here.

Speaker 1 To wrap up the conversation about where markets are headed, Sachs, I think we were going to just do a quick round of the horn.

Speaker 1 Anything that you've repositioned in your portfolio around investing or asset classes that you shift as we face kind of looming budget crises, the election cycle,

Speaker 4 every single SaaS startup I have in secondary markets. And you know how many bids there are for these SaaS companies? Negative one bid.

Speaker 3 That's interesting. I had a couple of my startups get

Speaker 3 get offers. I've had three or four secondary offers in the last two weeks I've had to deeply consider, and they weren't like 75%.

Speaker 1 What kind of companies?

Speaker 3 Let's see, two were SAS, and then one I can't say because it would be too easy to guess. But the bottom feeders went from offering like an 80% discount to now a 25% discount.

Speaker 1 So you know you're not allowed to girl your shares and all in, right?

Speaker 3 I'm trying. I'm trying.
Brad Grossner's bought 7% so far. So

Speaker 2 I'm quickly offloading to Gerston as much as I can.

Speaker 4 You just super tilted Freeberg there. Look at me.
He's laughing, but inside, he's just laughing.

Speaker 2 You're going to have to have the fifth festival here.

Speaker 3 He's going to own 7%. He gets 16 minutes per year.

Speaker 2 You know what? If he'll moderate, I'll have him.

Speaker 3 I mean, is his moderation going, okay, or should I jump in and save the show?

Speaker 4 He should write all in a get-fit memo.

Speaker 5 Just on the question of, you know, how do you reposition? So, first of all, the easy one to avoid is treasuries, right? I mean, do you really want to accept a 4.2% yield for 10 years to own a U.S.

Speaker 5 bond? and with the looming inflation that is still out there or the looming debt crisis that might be out there. So that's probably the easy one.

Speaker 5 I think the hard one is around equities because equities are at an all-time high.

Speaker 5 Part of the reason why they're at an all-time high is because the Fed telegraphed that we'd have big rate cuts this year.

Speaker 5 Remember at the beginning of this year, they said there would be seven rate cuts.

Speaker 5 Those expectations have kept coming down. I think we had one, I guess we had a double rate cut last month, and we were supposed to have one more 50-bit rate cut this year.

Speaker 5 I have to wonder if that's still going to happen. And more to the point, if you believe Druck and Miller and Paul Tudor-Jones, we might be in for a extended period of higher interest rates for longer.

Speaker 5 And that will be bad for equities. Equities normally are inflation protected in the sense that those companies can just raise prices over time to keep up with inflation.

Speaker 5 And so equities are generally a pretty good thing to own in the face of inflation. But if we're in for a period of high interest rates longer than anyone thinks, that's going to be bad for equities.

Speaker 1 Well, I would just argue one thing, which is except in the scenario where you believe the only inevitable path is for the central banks to monetize the debt, meaning the central banks step in to buy the outstanding treasuries that need to be issued, which both supports inflation, but also introduces capital into the system.

Speaker 1 And that's where both equities, that's where you could see a scenario where equities and gold go up while fixed income goes down to have higher rates.

Speaker 1 So it's effectively a money printing indicator or signal.

Speaker 1 Now, my personal position on this going into this new era, if it manifests as the markets are telling us it will, is kind of where Paul Tudor-Jones is.

Speaker 1 I think that commodities have, and you know, gold is a commodity.

Speaker 1 Everyone talks about it as being the safe haven asset, but there are other commodities out there that are much more fungible and used in production cycles to make food, to make energy, to make goods.

Speaker 1 And a commodity linked businesses, meaning businesses whose revenue or profit grows with the underlying commodity price growing, will outperform other businesses.

Speaker 1 They're going to struggle to raise prices or struggle to pay higher labor costs or struggle to deal with higher COGs. Whereas commodity-linked businesses that effectively just make a margin on the

Speaker 2 example,

Speaker 1 a mining business. So businesses that do mining of natural resources, businesses that trade agricultural commodities.

Speaker 1 So those businesses usually make kind of a fixed margin on the underlying commodity price and

Speaker 1 they do well in these cycles. So anyway, I think that Paul Twitter-Jones, because if you own a commodity, it's not a productive asset.
It's not generating yield for you.

Speaker 1 But if you own a business, it's making a profit.

Speaker 4 Just seems like it's easier to own Bitcoin.

Speaker 1 That's one asset, but Bitcoin isn't a productive asset, right? I mean, so that's one way to kind of build a portfolio.

Speaker 1 But I personally like owning businesses where they're doing something and making value. And in the process, they earn a profit, especially if the profit grows with an underlying inflationary pressure.

Speaker 4 On Sachs's point about the equity markets, there is this thing that people look at called the Buffett indicator, which is the total value of the Wilshire 5,000 divided by GDP.

Speaker 4 He mentioned it in 2000 and said it's probably the most reliable measure of where equities are and where they're about to go. And

Speaker 4 there is this long-run mean when you calculate it going back 50, 60 years.

Speaker 4 And every time it's had a short-term high there's been a pretty meaningful retrade so in 2000 in the dot-com bubble in 2007 during the great financial crisis

Speaker 4 during covid and now we've actually set an absolute new high in this thing which again to the extent that you believe in indicators like this would kind of tell you that at some point here equities are probably

Speaker 4 going to be cheaper before they're going to get more expensive.

Speaker 3 Aaron Powell, this is definitely the the high end of normal. Nick, if you pull up the PE chart, this is the obvious one to look at: you know, not just

Speaker 3 how dramatic the stock market peaks are, but the price to earnings ratio. And it's at the high end of normal at like, I don't know if we're at 25

Speaker 4 PE ratio on average.

Speaker 4 David's right. How can you get 4.25%

Speaker 4 when you have all of these risks looming over the next 10 years? Because, you know, Howard Marks, his letter,

Speaker 4 he had an investment letter letter that he published this week.

Speaker 4 And it was so great because it was so elegant in its simplicity, which is investing in an equity and investing in a bond are just completely opposite to each other, even though they're treated and spoken as if they're the same thing.

Speaker 4 And his concept is like people need to understand exactly what the terms fixed income means. It means that you will get something reliably over a long period of time.

Speaker 4 And so the question is: whether, is that fair knowing everything you know today? And I mean, all of you guys have said this now for it feels like years. And when you show these charts of like

Speaker 4 ballooning debts and deficits, is it reasonable that the market clearing price for government issued debt over the next decade is 4%? I mean, my gosh, it could easily be 6%.

Speaker 4 It could easily be 7% or 8%. That is very scary.
Totally.

Speaker 5 The big difference between a bond and a stock is that the bond provides you with, like you said, fixed income payments, and those would be horribly debased if you have high inflation.

Speaker 5 A stock gives you earnings, and a company can always raise its prices. And so, in theory, it should be hedged against inflation.

Speaker 5 But both a stock and a bond are similar in the sense that they're both hurt badly by rising interest rates, right? Because the discount rate is higher.

Speaker 5 So, this is where I'm just not sure about equities is if we do head into a new regime of higher rates longer, does that hurt equities, even though equities normally are pretty good inflation hedge?

Speaker 5 So I just don't know the answer to that. I do think we're headed for a period of constraints.

Speaker 5 I think that since 2008, we basically were living in a sort of a consequence-free environment where the Fed could keep interest rates at or near zero.

Speaker 5 The federal government could spend as much as it wanted.

Speaker 5 We sort of normalized emergency conditions. First, we had a trillion dollar deficits as a result of the 2008 GFC, and then those got normalized.

Speaker 5 Then we had $2 trillion deficits as a result of COVID, and those got normalized. And then the Fed was also doing QE, which means that it's buying the U.S.
government's own bonds, thereby propping up

Speaker 5 U.S. bonds and the bond market.

Speaker 1 So now that's normalized. That's normalized.

Speaker 5 Yeah, keeping interest rates lower than they otherwise would need to be to attract those bondholders so for about 15 years we kind of normalized emergency conditions and consequence free spending by the u.s government i think now we're we may be entering an era of consequences and what that means is that you can't push on one aspect of the federal government's balance sheet without giving up on something else so in other words if you're going to allow higher inflation basically monetizing the debt, the bond markets are going to make the government pay higher interest rates on its debt, right?

Speaker 5 Because they're not dumb. So we're going to be in a world of higher interest rates, which means that equities get clobbered, real estate gets clobbered, the value of people's homes gets clobbered.

Speaker 5 So there's real consequences from that. Or you can tackle inflation, you know, which means that the Fed's going to have to tighten.

Speaker 5 But then I think what that means is the federal government is going to have to get religion around spending. They're not going to be able to spend all of this money.

Speaker 3 We've seen this. Austerity measures in Europe, right? We're pretty hard for for people in Greece and Spain to get their heads around.
I think Americans are going to have to get used to.

Speaker 3 We can't just spend and give handouts constantly.

Speaker 3 On the equity side, though, there's also the concept, Sachs, that you can cut spending and increase earnings, and that that's well within your control as a CEO and board.

Speaker 3 And that's exactly what we've seen coming out of COVID. And I said it here a couple of years ago.

Speaker 3 I think the earnings are going to do well because people have this other lever and they can just turn the dial and reduce spending and increase earnings.

Speaker 3 And it's like, oh, that's painful, but it's not so painful that it's not worth doing. And so corporations have gotten religion around cost cutting and austerity and increasing earnings.

Speaker 3 The question is, and individuals have to. So they're pushing out buying new cars and spending on travel.

Speaker 2 So then what happens?

Speaker 3 When does the government get that austerity that companies and individuals are forced to do?

Speaker 3 And that's the problem you keep talking about, Freeberg, is, you know, this entire election cycle is about who can give more free free shit. Enough with the free shit.

Speaker 3 Like, somebody's got to be an adult in the room and say, we don't have any more free shit left.

Speaker 1 I think this is what the market is saying: is that regardless of who gets elected here, they've both kind of shown that the deficit will increase, not decrease under their presidency.

Speaker 1 And look, maybe that is positioning to get elected. And maybe there is a kind of more rational underlying economic advisory group that is counseling a different path than what they are presenting.

Speaker 1 And I hope to whoever is listening that that is the case for both candidates.

Speaker 1 Very deeply hope. If you look at what happened in Argentina, so we've talked a lot about Javier Millet.

Speaker 1 He came in as president and his austerity measures by absolutely slashing government spending has reduced monthly inflation from 25% to around 3.5%.

Speaker 1 So he's really kind of brought inflation under control. But the consequence of that is that the economy has now shrunk because the government is spending less.

Speaker 1 That means there's less revenue for certain businesses. There's less income for individuals.
So they spend less. So the economy has shrunk by 1.7% in the last quarter.
And unemployment has spiked.

Speaker 1 So now unemployment is at 8% in Argentina and it's rising fast. So for the US to actually execute this policy when we have a fundamental mandate for the Federal Reserve to keep unemployment low,

Speaker 1 means that something is going to have to break. You can't keep unemployment low and inflation low if federal spending gets too high and federal debt gets too high.

Speaker 1 So we are in a condition now where federal debt is too high. And if we cut federal spending too fast, we end up seeing unemployment spike.
And if we don't, we're going to have inflation spike.

Speaker 1 Those are the two paths we could walk.

Speaker 4 Just one thing to

Speaker 4 challenge what you say, because I actually disagree with it, is that I don't think that people view the spending packages of both candidates the same because the dollar is not created equal.

Speaker 4 So there are certain programs that the Republicans have proposed that are markedly different than the programs that the Democrats have proposed, even if the numbers look the same.

Speaker 4 And so this is why I think you have to look at how the short-term markets, when they thought Kamala was winning, behaved versus now the short-term markets. Short-term means how do you hedge this risk?

Speaker 4 And that has completely changed. And this is why I mean, over the last 30 days, you've had

Speaker 4 a complete and absolute repositioning of the front end of the yield curve in terms of risk and who's making the bets. And I think why is because the Trump package,

Speaker 4 whether we agree with him or not, is viewed as more stimulative to long-term economic growth, which is why the inflation risk is being hedged out, versus the Kamala risk, which is they're just going to spend money.

Speaker 4 Now, on top of that, what I would say is

Speaker 4 this may be where

Speaker 4 Elon Musk being able to

Speaker 4 streamline the government could be an incredible gift for us as well as our children and our children's children. And why is that?

Speaker 4 It's because if there's this sort of Damocles hanging over us constantly of billions and trillions of dollars of wasteful spending,

Speaker 4 he is probably in a position to show us that we have spent decades spending more and getting less.

Speaker 4 And now we can run the A-B test where we spend meaningfully, meaningfully less, cut regulation. And if we actually get more, you will have the proof.

Speaker 4 And that could set us on a long-term path of being more judicious in how we spend money. And I think that we deserve to run that experiment somehow.

Speaker 5 To just go back to your definition of GDP, it's true that if you cut government, that might cut GDP because GDP includes government spending.

Speaker 5 However, one could argue that, although technically that is how the definitions work, that by cutting government, you actually unlock resources that could be used by the private sector.

Speaker 5 And that ultimately

Speaker 5 it would lead to more efficiency, but also stimulate the private sector. And I think that argument is particularly true when you've got an economy running of full employment.

Speaker 5 So, you know, if we had lots of unemployment, then cutting all these government workers would be very painful.

Speaker 5 But if you've got an economy that's doing quite well and there's a lot of job creation going on, then it's a good time to actually cut government because the private sector can reabsorb these people.

Speaker 5 We should use the fact that we still have that, we have a good employment picture, to make these painful cuts now, as opposed to waiting until it would be far more difficult.

Speaker 1 Best point I've heard in a long time. That's a great point, Sachs.
Give us the election update. What's going on? Are we going to get

Speaker 1 your guy in office? Is it going to be Vice President Harris? What's the sense of what the polls are telling you,

Speaker 1 of what the markets are telling us? What's your read on where we're at?

Speaker 5 All the data is basically pointing one direction, which is a Trump victory. And by data, I mean the polling, I mean the prediction markets, and then the early voting numbers.

Speaker 5 So if you look at the polls, there were two new polls by mainstream media. One, the Wall Street Journal yesterday said that Trump was up three nationally.

Speaker 5 And I think CNBC had a poll this morning saying that Trump was up two nationally.

Speaker 5 That's very good because that's the popular vote. That's the popular vote.
So if Trump is winning the popular vote, it's a landslide.

Speaker 5 Most prognosticators say that because the Republicans have a slight electoral college advantage, that Harris would need to win the popular vote by more than 2%

Speaker 5 to have a chance at winning the Electoral College. So if Trump is winning the popular vote, then it's a landslide.

Speaker 5 The second area is if you look at the state-by-state polling, Trump has been advancing pretty much in every battleground state for the last couple of weeks.

Speaker 5 If you use RCP, Trump is now ahead slightly in every battleground state, and the momentum is all towards Trump.

Speaker 5 And then the final data point is around early voting in states where they have this early voting and put out the numbers. The Republicans are tracking well ahead of where they were in 2020.

Speaker 5 Now, there's still a question of,

Speaker 5 you know, does this mean that Republicans are just shifting their votes to voting earlier and then they'll do less well on election day? There's always that chance.

Speaker 5 But right now, if you're a Republican, it's what you want to see. And if you're a Democrat, it's definitely not what you want to see.

Speaker 1 Yeah. And the essay that Nate Silver wrote that was published by the New York Times yesterday said it's a 50-50 toss-up.
Either candidate could win, but my gut tells me it's going to be Trump.

Speaker 1 He's kind of indicated that's where, you know, as a guy who's obviously been a big prognosticator says the market's headed. JKL, do you think Sachs is right on this?

Speaker 1 Anything you're thinking about for that?

Speaker 5 Sachs mentioned prediction markets. Prediction markets have moved very, very sharply in favor of Trump.
It's almost two-thirds, one-third now in favor of Trump.

Speaker 5 So there's been a huge move among bettors that Trump is going to win.

Speaker 2 On polymarket.

Speaker 5 Yeah, Polymarket and then Calci as well.

Speaker 1 Do you think it's over, JKal?

Speaker 3 I'll go with Nate. I mean, I think Nate's probably the best thinker on this who I think puts a lot of effort into it.

Speaker 3 And if he says it's 50-50 with a slight advantage to Trump, I think I would go with his gut.

Speaker 3 But he's saying don't trust anybody. I don't trust the prediction markets.

Speaker 3 And I think the prediction markets are closing that gap as we get closer because they are easily manipulated. Polymarket is only offshore, right? The U.S.

Speaker 3 market is not allowed to participate in polymarkets. So it's all foreign investors.
Now, of course, Americans could be putting money overseas somehow and using foreign accounts to place these bets.

Speaker 3 I'm guessing if you are sharp and you really want to make money, that's what you would do. So I don't know what percentage of the money.

Speaker 1 It was reported this morning that a French trader has bet $45 million on Trump on polymarket, that he is the whale. He's a French national with quote extensive trading experience.

Speaker 1 He's not quote manipulating the market. He just really is trying to build a big position.
So he sounds like he's a pretty active trader that has made the big move.

Speaker 3 It's a crypto-based site. So you get the benefit of like you can track some amount of this on blockchains and then eventually find the person.

Speaker 3 But because it's crypto as well, you can also hide yourself pretty well with Tumblr and other systems. So I would discount polymarket a bit.

Speaker 3 It's probably not as extreme as it seems, but it does seem like

Speaker 3 Kamala has not helped herself with the interviews. They haven't been great.
And,

Speaker 3 you know,

Speaker 3 it is a toss-up. And so it's

Speaker 2 any surprise?

Speaker 1 Any October surprise still coming? I mean, there have been a few attempts the last couple of days.

Speaker 3 I mean, it seems like the rhetoric for the last 24 hours, there have been some really gnarly ones that we shouldn't give. I don't think we should give any credence to, but

Speaker 3 some Republicans have been coming out talking about like a really gnarly one about the Republican side.

Speaker 1 And

Speaker 3 I mean, it's not much more gnarly than other things that have been said about Trump already and judgments that Trump is against him already for $100 million. So it's in that vein.

Speaker 3 But I do think that that looks to me like it's cap. And I think there's going to be a lot of fake news, maybe even deep fakes that come out, you know, in the last week or two.

Speaker 3 So I think people should not trust anything they see on social media. Be very careful with that information.

Speaker 1 I'll tell you guys, my

Speaker 1 kind of view is like things seem to be getting more inflammatory leading up to the election here. It's like we've got 12 days left or whatever it is.
And

Speaker 1 the rhetoric and the tonality of the stuff that's being said is getting so nasty on both sides. And I just worry more about the reconciliation, reconstruction phase that needs to happen in America

Speaker 2 on both sides?

Speaker 4 Is it equal on both sides, you think?

Speaker 4 That's your observation?

Speaker 1 Like, you know, I think like Trump leaning out the window of McDonald's, and it was, I mean, I laughed pretty hard when he was like, someone said to him, when they interviewed Trump when he was serving French fries,

Speaker 1 and he said something like, I've now worked in McDonald's 15 minutes longer than Kamala has. And then one of the reporters said, well, why do you think she would lie lie about that?

Speaker 1 And he leans out the window. He says, because she's lying, Kamala.
And, you know, it's a funny joke. That's his quip.
He makes fun of everyone.

Speaker 1 But I think the whole thing about making fun of everyone, it's such a different tone and a different rhetoric than I think what's going to be needed. Because imagine if she wins.

Speaker 1 And, you know, he's painted her as being, you know, a liar and.

Speaker 2 crooked and deep state. I mean, look, I'm not going to try.

Speaker 5 I'm not going to possibly compare that to what the Democrats are saying right now, which is that Trump is literally Hitler.

Speaker 2 Literally.

Speaker 5 She called him a fascist.

Speaker 1 She said it's democracy's on the line.

Speaker 1 And obviously, when you say something like that, when you say that the fundamental system of the electoral process is on the line, it implies that if he wins, we've ended democracy that will inevitably lead people to feel like we are in a place of

Speaker 1 civil chaos. And I don't think that anyone's going to feel good coming out of this.
How do you guys think we kind of

Speaker 1 deal with like the election outcome here, one side or the other?

Speaker 1 I mean, half the country is going to hate the president and half the country is going to hate where we are and how we sit as a country and half the country is going to think that democracy is over.

Speaker 1 I mean, one half is going to feel like this is the end.

Speaker 1 And is it just a temporary thing and everyone reconciles and we all like get back to work and the election's over and whoever wins wins?

Speaker 5 I think unfortunately, the mainstream media is responsible for giving roughly half the country a psychosis about Trump because they are pushing out this rhetoric nonstop that he's a fascist, that he's Hitler.

Speaker 5 They keep putting out all these fake stories. And they are basically training people or indoctrinating them that he's this like threat to democracy.

Speaker 5 I was having dinner last night with someone who's a Democrat who pretty much gets all their information from mainstream media and she's like terrified of this. It's just not who Donald Trump is.

Speaker 5 It's ridiculous hyperbole. But if you're locked in that media ecosystem and that's all you hear, you really are frightened by this.

Speaker 5 So I think that the media, the media's irresponsibility, the way that they don't report honestly and that they gin up these threats has really terrified half the country.

Speaker 1 Do you think that the Trump Trump is Hitler rhetoric indicates that the Democrats feel

Speaker 2 like you're losing the homes? Like, you know, that's like a fear of lying.

Speaker 5 I mean, that's like pretty par for the course. What's so horrible about that? I mean, you could make the argument that she's lied about a lot of things.

Speaker 5 As Anderson Cooper interrogated her quite well just yesterday on that town hall, he pointed out that she had said 50 times that Trump's wall was a stupid idea, and now she appears to be in favor of it.

Speaker 5 So I think think that accusing your opponent of lying is pretty par for the course for a politician. What's not par for the course is saying that your opponent is literally Hitler and a fascist.

Speaker 5 That's just going to a whole different level of rhetoric.

Speaker 2 Okay.

Speaker 1 Tamath, do you think we're in a nasty state and we're going to be able to get out of it after the election?

Speaker 4 I think we're going to be fine. Okay.

Speaker 5 I'm actually pretty optimistic because I actually don't think it's going to be that close. I mean, right now it's looking like maybe landslide is too strong a word, but a solid victory for Trump.

Speaker 5 That's what the polls are showing. That's what the prediction markets are showing.
That's what the early voting is showing.

Speaker 5 And if you look at all the other data points right now, it's showing Trump winning pretty handily.

Speaker 5 The other data point that we haven't talked about is just how these campaigns are acting in the final stretch. If you look at the Trump campaign, it's pretty much steady as she goes.

Speaker 5 You look at the Kamala campaign, and they're in this throwing spaghetti against the wall mode.

Speaker 5 They're back to kind of the dark Brandon type messaging, where the reason to vote for us is Trump's a fascist.

Speaker 5 This is very different than their messaging when they made the switcheroo from Biden to Kamala, right?

Speaker 5 When they first made that switch, they said, okay, let's get away from this dark Brandon threat to democracy type messaging. It doesn't seem to be working.

Speaker 5 Let's emphasize Kamala Harris as a change agent, as a transformational candidate, as a candidate of joy and positive vibes. And they did get a big bounce in the polls because of that.

Speaker 5 The problem is that over the last couple of months, that sort of bounce in the polls has worn off.

Speaker 5 As Harris has not been able to explain what she would change, she keeps getting asked in all these interviews, what would you do differently than Joe Biden?

Speaker 5 Anderson Cooper just asked her that yesterday for like the 19th time. And she still does not have an answer to that question.

Speaker 5 And so the problem she has is that this sort of veneer they gave her as this change agent has kind of worn off and she's seen as a continuation of Biden.

Speaker 5 And the public does not want a a continuation of Biden. And so now it feels like they're frantically trying to figure out how to reposition.
They're back to

Speaker 5 the anti-Trump sort of hysterical messaging, which didn't work. It wasn't working three months ago when they made the switcheroo.

Speaker 5 So I tend to think that if you look at the behavior of these campaigns, it's pretty easy to see which one feels confident and

Speaker 5 which one is in a panic.

Speaker 1 Okay, JK, if you could go back in time and you were Kamala's advisor when she became the nominee.

Speaker 1 What would you have advised her to do differently than she has done in this campaign to date?

Speaker 3 I would have had a speed word primary and I would have let democracy play out. That was the big mistake.

Speaker 3 If the Democrats lose, I think they'll look better. Everyone would say, you know, 100%.

Speaker 3 And then in terms of thinking about

Speaker 3 why people believe that Trump is an existential threat to democracy, I encourage everybody who's a fan of this podcast to go back to episode 16 of the all-in podcast.

Speaker 3 And that's the episode where we all reacted the week of January 6th.

Speaker 3 And we all had great consensus amongst us that we thought this was one of the most disgusting, horrific days in the history of the country and that Trump

Speaker 3 was trying to overthrow the election results and that he was doing so in a non-democratic fashion.

Speaker 3 Now, I know some people have re-underwrited or changed their positions, but I encourage you all to pause this episode and go back and listen to our very thoughtful discussion on episode 16 of the all-in-possession.

Speaker 3 Because we were scared as well.

Speaker 4 I think that things happen in a moment, and you have to have enough compassion to say you react in a moment,

Speaker 4 but then you also have to have the intellect to separate yourself from the things that happen, learn more, and possibly and potentially change your mind.

Speaker 4 I don't want to be defined by a thing that I said in a moment. And I won't do that to other people.
In that moment, I thought what happened was really terrible.

Speaker 4 And then since since then, I've got to know the person, and I don't think that he actually incited much of anything.

Speaker 4 That's my belief.

Speaker 3 Yeah, and that's fine. That's your belief.
But I do think there's another group of people.

Speaker 2 Oh, what I'm saying with your original assessment.

Speaker 4 Well, I think that those people need to also re-underwrite the way I did because I'm not really one to flip for random reasons. But that's not the point.

Speaker 4 The point is, I think that if you still believe what you believe then, then you should tell people to listen to what you said.

Speaker 2 Yeah, there are a lot of other.

Speaker 2 Okay.

Speaker 3 But there are. And listen to what Sach said and listen to what Freeberg said.
I thought we had a very productive discussion when it happened.

Speaker 4 I think people have memory-holed it. What you're trying to say, which I partially disagree with, is those beliefs have changed over time.

Speaker 4 And I think it's more balanced for you to say that that's a point in time.

Speaker 4 And if you believe that that point in time still exists, that's fine for you to say that. But I think that's the way that you should say it.

Speaker 4 The other thing that I would like to say about this election, which I find really interesting, is we are in the part of the cycle now where the side that's losing is going to panic.

Speaker 4 And I think it's happened a couple of times, but I would just remind everybody: we have run the A-B test.

Speaker 4 We know what the presidency is going to look like under Trump, except you get the real vice president plus RFK plus Elon Musk, whether you like them or not.

Speaker 4 But my point is, I think you need to consider that you're getting four for the price of one.

Speaker 4 And

Speaker 4 if the other side, if Harris wins, you mostly know

Speaker 4 what the trend will be because you've seen the trend under four years of Biden.

Speaker 4 The second thing is,

Speaker 4 I think it's interesting to see that when you get into the home stretch, the losing side tends to turn on itself because they start to play protectionism for their own careers.

Speaker 4 And there's a lot of stuff that I think you can consume that starts to show that. And I think that's just an interesting observation.

Speaker 4 A lot of the tried and true, most reliable media sources that I think we're trying to navigate as much as possible for a pro-Harris presidency are starting to push back in a way that I find a little surprising.

Speaker 4 I think the CNN town hall yesterday was one of those moments for me where even people like David Axelrod, a little bit throwing Kamala Harris under the bus, I didn't expect that at all.

Speaker 4 So I think it's just important to observe that these things are happening.

Speaker 2 I would agree with that. We're going to make it through whatever.

Speaker 3 Hold on, let me just give one thing to your point, Jamap, since

Speaker 3 I am challenging you with that episode 16 call out.

Speaker 3 I do hope that whoever wins, we all support that person to do the best they can for all Americans. And that's always been my commitment.
And I did it the last two times. And we will survive this one.

Speaker 3 I don't think we'll survive two or three of these cycles if we spend $10 trillion each time.

Speaker 5 Just to add, you know, since Jake Howe you're referencing an episode that I participated in and said things.

Speaker 5 I mean, look, I think that the goal of the mainstream media has been to try and keep us in the heat of that moment for four years.

Speaker 5 I mean, if you've watched MSNBC for the last four years, it's like J6 is occurring every single day. I mean, this is all that they talk about.

Speaker 5 But I think, like Jamas said, we have learned a lot of things since that day.

Speaker 5 I didn't know, for example, that Twitter had censored President Trump's tweets telling all of these people to go home, that basically he said to protest peacefully.

Speaker 5 And then when they rioted, that he actually published tweets to try and tell them to go home. So that was new information.

Speaker 5 And what that came out, remember at the beginning of the whole primary cycle, Trump did that town hall on CNN with Caitlin Collins, where he dramatically pulled the piece of paper out of his pocket with the tweets and started reading them.

Speaker 5 That was a lot of new information for people. And I think that gave him a different picture.

Speaker 5 And then I think one other point that I think is important is that imagine if the press had tried to keep us in the heat of the moment of the summer of 2020 riots, the George Floyd riots, then we'd have a very different perception of which party was in favor of riots, because Tim Waltz was the governor of Minnesota when those riots occurred.

Speaker 5 He did not want to send in the National Guard. Trump did.
And then Kamala Harris tried to raise money.

Speaker 5 for bail for an organization that was bailing out some of these protesters and rioters out of prison.

Speaker 5 So if the media was so inclined, they could portray portray Kamala Harris and Tim Waltz as the party of the riots of the summer of 2020.

Speaker 5 I think at the end of the day, that both those takes are propagandistic and they happened four years ago.

Speaker 5 And it's certainly a piece of information that voters can take into account, but it's only one piece of information. And there's a whole lot of other issues and policies in this election.

Speaker 5 And I think at this point, everything that happened four years ago is kind of priced into the stock. And what voters want to know about now is

Speaker 5 what would you do on the issues?

Speaker 2 What would you do about immigration?

Speaker 5 What would you do about inflation? What would you do about the economy? And when you look at the polling on those issues that voters say matter to them, Trump has a decisive advantage.

Speaker 5 And Kamala Harris cannot explain what she would do differently than Joe Biden.

Speaker 4 David Axelrod word salad city. That's what he said last night, which was very shocking that he would say that.

Speaker 5 Totally. That is throwing her under the bus, but it's also just preserving his own credibility because it's hard to look.

Speaker 4 But this is my point. Anderson Cooper now has to preserve his own credibility.
You can only prop up a candidate so long, and then at some point, you have to prioritize your own media career.

Speaker 4 And I think Anderson Cooper last night had to start to push back.

Speaker 2 That's what I was saying. Because when everyone turned on Biden.
Yeah, it's like whenever that one night when everyone turned on Biden after the debate,

Speaker 1 all the journalists who had been covering Biden for so long that it was obvious in their face the whole time, they suddenly have to be like, okay, I guess we got to admit now he's not really there.

Speaker 5 I think in one important way, Kamala Harris has been set up to fail here because on the one hand, she wants to distance herself from Joe Biden's record, but on the other hand, she won't say what she would do differently.

Speaker 5 So she's in this kind of like never, never land, this limbo.

Speaker 4 Yeah, that's right. But that's also not her fault.
That's the position the Democratic Party put her in. And this goes back to what Jake said.
We should have run a primary.

Speaker 5 They should have run a primary for sure. I think they could have had a better candidate.
But also, I think to go back to Freeberg's question, this is a little bit of a pre-mortem.

Speaker 5 What should they have done differently? I think you either defend Joe Biden's record or say what you would do differently. You can't be in this limbo state.

Speaker 5 And, you know, Joe Biden's got to be in the White House there and gritting his teeth, like wanting to get out on the campaign trail and defending his record.

Speaker 5 Because I think Joe Biden thinks he has a good record. And there are things you could say in favor of that record.

Speaker 5 I mean, I personally don't think it's great, but you could talk about the full employment picture. You could talk about the fact that, yes, we had 9% inflation, but now it's down to 3%.

Speaker 5 I mean, there are things you could say. I mean, he did sign

Speaker 2 up. Equity markets are an all-time high.

Speaker 5 I mean, he signed a lot of legislation that he obviously believed in. So the Democrats do have a record to run on.

Speaker 5 It's not a record that I personally believe in, but it's certainly one that I think you could make an effort to defend. And I think Biden, if he was the candidate, would be defending that record.

Speaker 5 And it's very awkward to have a candidate who was part of this administration.

Speaker 5 who will not defend that record, who distances herself from that record, but won't really say with any detail or conviction what she would do differently. That is just a losing proposition.

Speaker 5 And I think Anderson Cooper exposed it more than Brett Baer last night because Anderson Cooper had the time. Brett Baer only had 26 minutes, and Brett Baer was seen as adversarial.

Speaker 5 Whereas Anderson Cooper is fundamentally a friendly interviewer. And when she can't answer those questions for Anderson Cooper, that's when you know you're done.

Speaker 4 By the way, we've said this now consistently,

Speaker 4 almost monotonously now for about two or three months. She has to go into these swing states and answer about four or five critical questions.

Speaker 4 And I would just say,

Speaker 4 this is still the problem. So if she wants to try to close this gap in the next 12 days and have a legitimate chance of winning,

Speaker 4 I think there's still 12 days.

Speaker 3 I mean, it's a very simple way to do it. Number one, the border got out of control.
We've shut it down already, and we're going to tighten it even more.

Speaker 3 Number two, the stock market's at a record for a reason. Number three, the employment is at the lowest it's ever been in our lifetimes.
This is as good as it gets, folks.

Speaker 2 And if you go with the other guy, honestly, Jay, look at what you did manager.

Speaker 4 Well, you're a better campaign manager than the person that's running the campaign right now. They're not

Speaker 4 look, they're not doing a good job. And I think that Sachs is right.
They're afraid of their own shadow, and they're going to walk into a

Speaker 4 meaningful reset of the Democratic Party.

Speaker 2 Let me even finish it.

Speaker 3 Number four, this person overturned Roe v. Wade.

Speaker 2 That's what they're doing.

Speaker 3 And his VP candidate has said he wanted a national ban. They walked that back.
But if you're a woman, you shouldn't trust them. And number five, obviously, you saw what happened on January 6th.

Speaker 3 He'll do it again.

Speaker 4 And

Speaker 3 she just said that over and over. And listen, I'm not Biden.
Biden obviously needs to retire. He was a great president.
He was a great vice president. We thank him for his service.

Speaker 3 I'm completely different. I have a different approach to all of this.
And Trump is a wild card that this country doesn't need at this time. The end.

Speaker 3 They would win, but I don't know who's advising her it's the same thing with trump i think trump could have just gone right to the middle and when he was trump 2.0 he should be up 20 points on her the fact that he's not up 20 points or 15 points on kamala and that this is a dead heat i think is crazy trump's the easiest candidate to beat kamala's the easiest candidate to beat i i wonder who's running both of these campaigns well it's it's hard to be up 20 points when the entire mainstream media is against you that is only reporting positive things about the other candidates, only reporting negative things about you, and you have a three-to-one money disadvantage.

Speaker 5 One thing you could say for Kamala Harris is that she has been a good fundraiser. There's plenty of billionaires who are funding her campaign.

Speaker 5 They literally have three times more money than the Trump campaign. And even in California, which is a safe state for them, you're seeing Kamala campaign ads everywhere.

Speaker 5 That just tells you they're so flush with cash that they can afford to spread the money around, even in California. So, look, the reality is that Trump has the entire establishment against him.

Speaker 5 And I think for him to be ahead in the polls and the prediction markets and the early voting fairly decisively is an extraordinary achievement.

Speaker 5 I think he's probably the only candidate who could have done that.

Speaker 5 In any event, and I do think, Jay Cow, that Kamala has tried to make some of the arguments that you just said, not very crisply, but she's trying to walk back on the border.

Speaker 5 The problem is they have no credibility on that because the Democrats for the last eight years have fought Trump on the border wall. It's his signature issue.

Speaker 5 And if you don't think Republicans should be believed on abortion, there's absolutely no reason to believe Democrats on the border. They fought Trump's wall.

Speaker 3 Yeah, I think that's fair.

Speaker 5 I think that's fair. She sold parts of it all for scrap metal.
She was supposed to be the border czar. Didn't even visit the border, which shows that she never thought it was important.

Speaker 5 Now she wants to pretend that she's Trump on the border.

Speaker 3 Public's not buying it. To handle the border is just so simple.
She could just say, what worked then is not going to work now.

Speaker 3 We've filled up. And we just, Trudeau just did a tweet.
Hey, we're taking a pause for two years. That's all she's got to do.
We're taking a pause for two years on the border.

Speaker 3 We obviously, it got out of control.

Speaker 1 the end we move on to the next issue all right if the harris campaign is listening jake how's advice is out there you you may come on the pod you're always welcome everyone that's running for president is welcome did you guys hear this rumor that bars she's not my candidate by the way she's not my candidate did you guys hear this rumor that barstool sports was asked if they would interview her and they turned her down is that is this rumor true Apparently, I don't know.

Speaker 3 Why wouldn't they take it? No, they would take the interview.

Speaker 1 So Portnoy claims that the Harris campaign reached out and asked to be on two or three of their shows, and Barstool declined having her on,

Speaker 1 which is pretty unbelievable.

Speaker 5 Well, they just waited way too late. I mean, there's no question that last month they radically pivoted their media strategy.
She became the candidate roughly three months ago.

Speaker 5 For the first two months, they didn't let her do any press interviews. Then they realized that their internals were bad.
They're behind in the polls.

Speaker 5 So now they're having her go out and do a lot of media. And like I said, a couple of weeks ago, that started to create a doom loop because she is not a great media performer.

Speaker 5 So her polls started getting even worse. So then they got to put her out on more media to try and, you know, rebut that.

Speaker 3 Your doom loop was a good call. I'll give you credit.

Speaker 5 If the Commodore campaign were to start, we'd be saying it's in a death spiral right now.

Speaker 2 Okay, got it. You got your line.
It's a dead heat.

Speaker 3 It's a dead heat.

Speaker 1 We got it. Let's go.
So we're going to wrap up with Starbies, what I think is a pretty yeah, Starbies, super interesting topic because it's a real question around traditional shifting to digital.

Speaker 1 Is that why Starbucks is having challenges? Or is it just maturity? Or is it what happens when a brand that's successful as a luxury brand gets too big and the kind of

Speaker 1 premium experience commoditizes? So as you guys know, we covered the Starbucks CEO, Brian Nicol, joining a few months ago. This was after the prior CEO had been in the office for just 16 months.

Speaker 1 And there were a lot of problems that were plaguing Starbucks.

Speaker 1 But just this Tuesday, Brian Nicol came on and said that we're suspending guidance for 2025 after reporting preliminary earnings that showed another drop in sales at Starbucks.

Speaker 1 Same store sales, which is the key metric in the QSR or

Speaker 1 food and beverage retail business. It tracks what your revenue is year over year.
Same store sales declined 7% year over year. Earnings per share dropped 25%

Speaker 1 year over year. So, Nicholas said, we're getting the bad news out of the way.

Speaker 1 Now we're going to this back to Starbucks plan, focus on experience, improve the throughput experience and quality, make baristas choose Starbucks as a career. And then he went through a whole plan.

Speaker 1 He put out a six, seven-minute video on this whole thing. So clearly, customers are frustrated with the Starbucks product, the Starbucks experience.
The employees are frustrated working there.

Speaker 1 And a lot of the system seems to be breaking down. I guess I wanted to kind of talk about what is the core driver.

Speaker 1 And is there a business lesson in all of this about premium brands or about scale and maturity and markets to be learned from the Starbucks story.

Speaker 1 So I don't know if any of you guys have gone through this earnings report or looked at the Nicholas video.

Speaker 3 I go to Starbucks on the regular and I think this really is just a case of founder versus bean counter.

Speaker 3 It reminds me of Boeing or, you know, even Apple with their inability to produce new products post the Steve Jobs pipeline of products.

Speaker 3 And if you have anybody read Pour Your Heart Into It, Schultz's biography, it's absolutely fantastic.

Speaker 3 And he really had an obsession with user experience, like writing people's names on the cups was a Starbucks innovation, remembering people's names, empowering the green aprons was like a big part of this.

Speaker 3 And then once he was out of it, the bean counters came in and they just got all about efficiency. The much smaller number of baristas at the store.

Speaker 3 ordering your drink through the app and just trying to make these grind it efficiency decisions as opposed to the experienced ones.

Speaker 3 And I think the Starbucks experience starts and begins with the baristas and that's the main problem.

Speaker 3 If you've gone to a Starbucks over the last couple of years, sometimes you go in and there are literally 50 drinks from the, like, I'm not kidding, like 50 drinks on the pickup counter and then this huge line if you come in person.

Speaker 3 And it's the most impersonal thing. And the stores are a wreck.
They're disgusting. They look like a truck stop.

Speaker 3 And the whole point of Starbucks was to create this third space, this beautiful place that was welcoming with gorgeous lighting.

Speaker 3 And the baristas was supposed to make you hang out and enjoy yourself there. And they lost that.
And all you have to do is read Schultz's book and do exactly what he did.

Speaker 3 Now, there are a lot of other issues there around the competition for Starbucks employees that I think are super important.

Speaker 1 Do you think that's really true, JCL? Because like Nicol came on and he said, we're going back to the core. Flat whites, espresso,

Speaker 1 nice espresso, delicious coffee.

Speaker 1 But the reality is, in order for them to have grown revenue over the last 20 years, Starbucks has expanded their menu, as Chamoth has pointed out, to becoming a seller of sugar.

Speaker 1 They've become a seller of milkshakes and flavored beverages and high-sugar cocktails, mocktails that people run into the store to buy two, three times a day.

Speaker 1 That's how they were able to get the pickup, not selling what they started out doing, which was fine Italian roasted espresso. It's now become a very different product and a very different experience.

Speaker 1 And so can you really go back to the core and not lose all the customers that I would say aren't looking for a flat white and an espresso? They're looking for a milkshake in the middle of it.

Speaker 3 I think you want to maintain the core is the key. You don't want to give up the core.
And the core was having a great in-store experience. And I think that is not what you get when you go there.

Speaker 3 Putting the sugar aside, it is, I think, like going for ice cream for kids. So my kids will pick if they want to go for ice cream or Starbucks.

Speaker 3 And to your point about the sugar, Chamath, it's basically the same profile.

Speaker 3 And it's a great place to get breakfast. I'll tell you that.
You You know, the egg bites and the scope.

Speaker 1 Let's watch Nichols' clip and then Chamoff, you can give us your take on this. This is a 30-second clip from Nichols' six minutes that he put out on Twitter.

Speaker 9 To succeed, we need to address staffing in our stores, remove bottlenecks, and simplify things for our baristas. We need to refine mobile order and pay so it doesn't overwhelm the cafe experience.

Speaker 9 We're fundamentally changing our marketing. We've been focusing on Starbucks rewards customers rather than talking to all our customers.
And we're changing that quickly.

Speaker 9 We will simplify our overly complex menu, fix our pricing architecture, and ensure that every customer feels Starbucks is worth it every single time they visit.

Speaker 9 We must reestablish ourselves as the community coffeehouse.

Speaker 1 By the way, this is one of the things that Nichols did at Taco Bell when he was the CEO there. You guys remember the Taco Bell menu?

Speaker 1 There was always like really interesting hidden things on that menu. He simplified the menu, made it very small.
did the same at Chipotle.

Speaker 1 He takes this approach of finding the best product, simplifying the experience, simplifying the operations, and giving the customers fewer choices that ultimately leads to faster turnaround, better experience.

Speaker 1 But the trade-off is you have less

Speaker 1 variety that people have come to know and love.

Speaker 1 And at Starbucks, in particular, where there is just so much variety to choose from now, if your favorite beverage got pulled off the menu, are you going to start to go there less frequently?

Speaker 1 You know, Jamath, I don't know if you have a take on what's going on at Starbucks and whether it tells you something about the maturity about one of the most iconic consumer brands in America.

Speaker 4 This business is in trouble.

Speaker 4 Nick, please show the chart. This is Eli Lilly versus Starbucks.
If you look at it over a year, you could look at it over

Speaker 4 the year to date. You could look at it over two years.

Speaker 1 Five years.

Speaker 4 Five years.

Speaker 4 But what does this show? This shows

Speaker 4 sugar versus anti-sugar.

Speaker 4 And anti-sugar is winning. Say it differently.
GLP1s

Speaker 4 versus things that cause you to need GLP-1s.

Speaker 4 GLP-1s are winning.

Speaker 4 And so I think this existential issue for Starbucks is about resetting to a much smaller footprint and a different product portfolio that tries to see where the puck is going.

Speaker 4 Where the puck is going is where a large percentage of the people

Speaker 4 that probably were buying Starbucks products and were very loyal Starbucks customers will have very different consumption habits as they more

Speaker 4 pervasively use these GLP ones.

Speaker 4 And this, in a nutshell, is not something that Starbucks can fix with their current product mix.

Speaker 4 And so I think that they're fighting into a headwind. And these other companies are deeply incentivized to get American taste buds to be different.

Speaker 4 And so, Jason, the things that you talked about are exactly the things that I think start to fall off the menu or just don't sell as much.

Speaker 4 Because whatever the population of Americans are that are on GLP1s, let's say it's single digits, the real question is what percentage of Starbucks customers are on these things?

Speaker 4 And I think it's probably much more than single digits. And this is why I think you see the continuous decline in same-store sales.

Speaker 4 And I think if you start to graph, the adoption of GLP1s pervasively in America to the drop in same-store sales, I think as GLP1 adoption goes up, same-store sales will continue to go down.

Speaker 3 But it doesn't it argue towards the original business, Freeberg, that going there and having a cup of coffee and hanging out leisurely with your friends and having a conversation and it being a third space is the core value prop.

Speaker 3 And maybe the sugary drinks maybe will fall out of fashion.

Speaker 1 So it may be true, but I think that the

Speaker 2 core

Speaker 1 objective of any corporation is to maximize shareholder value driven by growing profits over time. So growing profits over time requires increasing your revenue.

Speaker 1 And there are three levers for doing this. Maximize brand, which is to get more customers.
And I don't know if you can get the brand to be any more maximal than Starbucks.

Speaker 1 Maximize coverage, which is how many products can you get those customers to buy, whether it's on a daily basis, weekly basis, or monthly basis, how much of their meals and wallet share are you getting?

Speaker 1 And I don't know how many more times you can get people to go back into Starbucks each week than they've done with their rewards rewards program, with their digital, with their high-throughput tools that they've built over the last decade and so on.

Speaker 1 And then finally, maximize price. There's a limit to how much you can charge people.

Speaker 1 When you put those three together, you got more customers, you're selling them more stuff at the highest price possible. At some point, you reach a revenue maximum.
That has happened also at Apple.

Speaker 1 I think that Apple has faced a similar dilemma in the last couple of years, which is how do we get more customers? It's the most recognized brand on earth. You can only buy so many Apple products now.

Speaker 1 You know, they tried to launch the Vision Pro. It didn't go well.
Today they announced that they're this week they announced they're discontinuing production or reducing production on the Vision Pro.

Speaker 1 And you can only charge so much for these products.

Speaker 1 And I would argue that Starbucks is a victim of the same maximization effect, that at some point, you get all the customers, you get them to come in and spend and buy as many products from you as they can, and you charge them the highest price possible.

Speaker 1 And then you reach this kind of maximum point on the business. And I think Starbucks has just reached that point of maturity.
So to your point, it doesn't mean that it's a bad business at all.

Speaker 1 It could be a great business, a nicely profitable business, but the growth ahead of it is limited.

Speaker 1 It cannot keep growing same store sales as it has historically because they've maximized all three of those levers.

Speaker 1 So fewer costs might be a way to drive more profits, you know, more efficient operations. I think that's the natural next state for nickel to step up at this company.

Speaker 4 The sad thing for Starbucks is that the only road that they have is to actually double down on sugar.

Speaker 4 And the reason is because the ARPUs are meaningfully higher than traditional coffee.

Speaker 4 And so the economic pressure that shareholders will put on it is to actually stay in the business that they're in and try to do it as long as possible.

Speaker 4 As you say, Freeberg, and just strip out as much cash as possible.

Speaker 1 And then you just, you grow profit by reducing costs and getting more efficient versus trying to add more product to get more customers.

Speaker 3 Which degrades the experience.

Speaker 4 But the structural problem is Starbucks should be probably a $20 billion asset.

Speaker 1 Yeah. And so what happens when a company gets to this level of maturity, much like has happened with Apple, is the multiples compressed.

Speaker 4 No, the difference is, though, that Apple has not had the competitive pressure that Starbucks has because Starbucks competes on a level playing field with the Dunkin' Donuts of the world or the Pete's coffees of the world, but they compete in a completely orthogonal plane with GLP1s.

Speaker 4 And I think that is not something that Apple deals with. So Apple can still be at the point that you described earlier, which is let me just maximize free cash flow generation, which is what they do.

Speaker 4 And then let me allocate that back to shareholders via buybacks, which is also what they do.

Speaker 4 So there could be another decade or so where Apple can continue to run this play with very little impact to them or to the company.

Speaker 4 Now, I'll say something else about Apple, though, which is I actually upgraded my phone. I think this was three years in and I finally did it.
My gosh, this phone is sucks.

Speaker 3 iOS 18 software is janky.

Speaker 4 iOS 18 is just terrible. I'll show you one example of just like terrible design where if an if a designer that worked on my team showed me this, I would have fired them.
Look at this.

Speaker 4 Can you see this? Is it possible to understand why you have two images for the do not disturb thing, one above the other?

Speaker 2 This is just a level of,

Speaker 4 no, but it's a level of sloppiness and not taking care, which just shows you that it's like, we make so much money, it just doesn't matter anymore. That's what I feel like they're telling me.

Speaker 4 And then I'm like, well, wait a minute. Why did I just spend $1,200 of my hard-earned money to upgrade to this thing if you don't care?

Speaker 3 How much was it to upgrade?

Speaker 4 I think it was like $1,200 for this new phone. The other thing is that

Speaker 4 the actual upgrade itself, and I'm not exactly sure why because I didn't take the time to unpack it, it took four hours.

Speaker 4 The actual migration of like from an old phone to a new phone. And I thought, my gosh, this is such monopolistic behavior, right? So if it takes you an entire day

Speaker 4 to basically upgrade your phone, at some point you're just going to stay with the platform you're on and never upgrade, or you're just going to stay on the exact same device because it's just too complicated.

Speaker 4 Imagine going from an Apple to an Android.

Speaker 3 In some ways, both of these businesses are victims of their own success. They reach like market saturation.

Speaker 3 They reach their natural audience and then some, and they've just got to figure out what to do next. And the adjacencies are hard to find.

Speaker 2 Also, vision photos are hard adjacencies. Also, photos.
Oh, no, they destroyed the interface. It's terrible.

Speaker 3 It's terrible. Stop changing the interface, Apple.

Speaker 4 This is basically a camera, and you made it terrible. It was good.
Why did you do that?

Speaker 3 I think they're trying to change things for ChangeSync. One of the things Amazon's gotten correct and other services like eBay and Craigslist is when you have an interface that works and

Speaker 3 billions of people rely on it, you have to be very, very subtle in making changes to it. And they made a wholesale change to the Photos app and it did not work.

Speaker 2 It didn't work. It is garbage.

Speaker 4 How do I get rid of the second silent thing on my thing?

Speaker 4 How can I just go back to the old thing?

Speaker 2 Totally.

Speaker 3 That's when you know you failed as a product manager when people want the old thing.

Speaker 4 But isn't this just so lazy?

Speaker 3 Something's not right.

Speaker 2 Yeah.

Speaker 2 I know there's a lot of Apple people.

Speaker 4 This is, come on, guys. Can you just take a look at the...

Speaker 2 The control center is what he's showing.

Speaker 3 And the control center is massively confusing. It's like changing where the lights are in your bedroom.

Speaker 3 Okay. Yeah.
All right. Troubleshooting.

Speaker 1 Part of the all-in podcast is over. I really want to say thanks to Sachs for participating heavily in our Starbucks discussion.

Speaker 1 Sax, anything you want to say on the maturity of Starbucks or other mature tech businesses or value luxury businesses as they get big? Too big, too big to keep growing. Anything else?

Speaker 2 I mean,

Speaker 5 I'm just not an expert on Starbucks. I mean, I do like their product, but

Speaker 2 what do you get? What's your order?

Speaker 3 Tell us your order. Yeah, what's your order?

Speaker 5 I just get an Americano with a splash of oat milk.

Speaker 2 Oh, it's like my order, Sachs. Oat milk? That's a great order.

Speaker 1 Yeah, that's great. Good for you.

Speaker 3 How about I just send you some specialty chemicals that you can just pour down your throat some xantham junk is oat milk bath some cargean don't listen to dan and say you put in heavy cream you're going to get kicked out of maga this is you cannot be ordering oat milk and be maga they don't have nut milks at mar-a-lago i'm going to find out in a couple weeks i'll let you know don't put that stuff in your body dad i bet they do You should take that sweater that you just took from Chamoth and wear that to Mar-a-Lago when you go.

Speaker 1 It's like a perfect sweater for your Mar-a-Lago visit.

Speaker 2 Oh, yeah. Oh, my God.
Don't touch it. Stop touching it.
The pink pig. I'm still mad at Nat.

Speaker 4 I'm going to talk to her about this.

Speaker 3 I'll talk to her at lunch. I'll talk to her at lunch.
She's putting a sundress on. I'm not having lunch.

Speaker 2 Before you came on,

Speaker 1 she was actually, she was just sitting on his lap and they were just chatting. And I'm like, what is going on here?

Speaker 2 Outrageous. I'm more outrageous.

Speaker 3 What do you want for lunch? I said, what do I want for lunch? Your company. That's what I told her.

Speaker 2 Oh, sweetheart. That's what I said.

Speaker 3 She said, oh, you're born.

Speaker 2 She's like, you speak to me so much more kindly than Jamath does.

Speaker 2 Amazing.

Speaker 1 All right.

Speaker 1 This has been another amazing episode of the all in pod as a team player i have been here to pinch it for j cal he did not want to moderate this week so i stepped in to fill the the shoes i'll come back next week

Speaker 3 solid job solid job one of this show's greatest moderators

Speaker 1 for your sultan of science for the rain man for the chairman dictator and for the world's most absentee moderator

Speaker 2 um i want to thank you all and living a great life right now

Speaker 2 time.

Speaker 5 He's stealing anything that's not nailed down.

Speaker 2 I'm the world's greatest house guest.

Speaker 5 He's putting together his own gift back.

Speaker 1 Love you, Besties. Love you, boys.

Speaker 2 Bye-bye. Bye-bye.
I'll be there in a couple of hours, Sachs.

Speaker 2 We'll let your winners ride.

Speaker 2 Rainman David Sachs.

Speaker 2 And it says we open source it to the fans, and they've just gone crazy with it. Love you, Besties.
I'm queen of Kinawa.

Speaker 2 Besties are balls.

Speaker 2 That is funny.

Speaker 2 Oh, man. My habitasher will meet me at Quinns.
We should all just get a room and just have one big huge orchief because they're all just useless.

Speaker 2 It's like this sexual tension that we just need to release somehow.

Speaker 2 We need to get murdered. Besties are back.

Speaker 2 I'm going all in.