Swimming With The Stream

Greetings and welcome to Inside Baseball with Old Chestnut. I'm Liam Allen with my friend Morris Sachs. How you doing, MB? I'm doing great. It's great to see you. Yeah, likewise. It's good to see. Did you see the breaking news as we went to to air here? No, I did not. Go on. Bill Ackman is supporting Donald Trump. Dude, he had the longest tweet ever in the history of tweets. Tweet? Ten thousand words. Like I have a thirty-three point missive. Bill. Well let's not wait.

on this. Like we'll go back to it. I don't have enough time today for that. I I didn't want to dissect it. I just thought it was worth bringing up. I it's totally it's totally worth dissecting too because it's a fascinating glimpse into a per a person that purportedly manages billions of dollars worth of money um and has his head on head screwed on right.

The dichotomy between that and the online Bill Ackman is is fascinating and warrants like a college course. Okay. Um it could be I'm sure he he would fund it. Oh yeah. What I do take great pride in, and I will just because I know the look I'm going to get, but I will tread lightly on this. It's no surprise to the listeners that that at least old chestnut's not been a big fan of Barack Obama. Right. All of a sudden, many of his uh followers are taking to the cesspool known as Twitter.

In saying some things that if I said, I wouldn't be safe to walk down the streets of Greenwich. Let's leave that for the end too, because we have because half of our audience is loyal Democrats. That foams at the mouth. when you talk about this stuff, okay? But I did get a kick out of the of of of Barack going to a predominantly black male audience and saying something about like the brothers like it's because of the brothers and Yeah, what would happen if I called them the brothers?

We be banned. Oh, stop, please. Okay. I'd like to talk about the bond market, please. Oh, something I know a little bit about. Please. I think Anthony Peters said it was like three times the size. I don't know what the number is. Good enough. But what I like about the bond market, what treated me well. over my career. And as somebody reminded me recently, I I at work one day said, you know, I haven't lost sight of the fact that

I was born with a special set of skills that at a certain point in time were worth some money. Yeah. Yep. Yeah. So I I mean, you know, this is all fortuitous, but I'll take it. Yeah. Um so uh what I like about the bond market is You get sort of a benchmark rate. Let's call it the Fed funds rate. And to be honest with you, I'm not even sure where it is right now. Let's call it seven and a quarter, seven and a half. I didn't really spend much time looking at the markets this week. My

Personal life coach Leslie Harris was on vacation, so I was afraid to do too much without having access to his advice. That fun training spot. Sorry? Fed's Fed Fed funds rate current current rate is five. Okay. Thank you. And you may recall last week's episode. I was not in favor of the Fed's move. And oddly enough, the yield curve steepened. I heard that sentiment echoed on Bloomberg after your afternoon.

show last Sunday. I heard that echo from many guests on the radio that that didn't use blunder. They used something else. But it was a blunder. Yeah, it's a big word, you know. And uh it'd be nice if Bloomberg paid their fair fair you know share of subscription, but uh I heard Mayor Mike I heard whispers of Mayor Mike

making a comeback this week. Have you talked to Mr. Bloomberg about that? No, a comeback for what? Mayor of the city? Mayor of the city. I heard there's I they want to double I don't know. I will go on record as Ibwok fully supports Mike Bloomberg. I would Mayor of New York. I'm in lockstep. This was not spoken to guests, audience. We we did not talk about this before the show. I heard whispers of Mayor Mike making the comeback this week, and I stood up and applauded the idea.

It's fantastic. You know, the last time I communicated with him. I sent him a note suggesting he run for president. So I don't know that he's looking for my political advice. But hey, I'll send him a note. See, you know, I'll send him some money. Not that he's got more money than

You know, but in in any event, I I the the fucking city ran when he was in charge. Like a Swiss watch, dude. That whole fucking stop and frisk thing that everyone lost their mind about. Well, guess what? When they stopped it. Yep. A hundred percent. So I by the way, I'm not done bashing on Chucklehead Obama. Okay, well we said we're gonna do that at the end. Can we do the bond market, please? Oh, okay, okay. The bond market. So

You talking about whispers. Apparently The Fed is expected to cut rates again? I think that's I think those hopes are fading. And I think if you pulled up the terminal, I think that those those might have vanished by Friday. Can I explain to you in simple English why I think the thought of them easing or them easing again is just beyond ignorant? So out of the last 26 payroll numbers, the street is 0 for 26, right? plus or minus. So so we're gonna target The f the economy based on the equipment.

on a lagging indicator that nobody can get right. Stale indicator that's been cooked by immigration that they haven't gotten right, dude. It my I my skin crawls. My skin crawls when you say that payroll number, the jobs number. It's been so wrong and so cooked. Dude, this is all we talked about this. Three years ago how we hate that number.

Well, apparently the guys at the helm seem to think it matters. I I don't notice anybody looking for work. Um you know, I don't have that deep a um a measure into the depth of the labor pool, but you know. Doesn't I don't see any help on it, Signs. So they they they cut rates by fifty basis points, and the ten year since that day has gone up fifty basis points. Yeah. Yeah. Palsier.

What does Powell what how does how does Powell how does that what does that say to Jay Powell when he sees I cut it fifty and the tenure went back up fifty? Is that him saying I talked to a uh former colleague listener who I respect. fellow fish fan. And he explained it, I think, pretty accurately, which is, you know, Paul is sitting in a seat where everyone's pounding on him to ease. And you know Yeah, I don't see him as being incredibly

that strongly backboned. I think he's done a good job and he's moved his way from A to B and the COVID and so I think that's all good. But You know, the dual mandate of inflation and payroll. This inflation thing is not fixed. And if you let the genie back out of the bottle, you y you're gonna regret it. And we're so close to closing that chapter. I don't know why we just don't lock it down, put a few more nails in the coffin. And if a couple of people are out of work.

There's enough government programs and and then you can ease. What do you think's a a w a a darker stain on his legacy? Do you think it would be not getting the inflation under control, or do you think it would be crashing the market? Which which do you think he wants to avoid more? 'Cause he's I hope I hope he I hope he wants to avoid the inflation because you go back and you look at what was Volcker's big thing. He broke in uh broke the back of inflation. You go to um

Arthur Burns. Arthur Burns, right? You know, the punch bowl kind of thing. You know, I I think inflation's the big deal because inflation is the way governments deflate their way out of debt. Right. So I if it were me, no one's asking. Um, although I've been spending enough time at home the last week. having Cheryl get on my case. I was actually thinking it would be easier to get a fucking job. Um

Yeah. Listeners, inside baseball cast at Gmail. Yeah, our work cheap. I was just gonna say send over an offer sheet. Yeah.

Although uh I did see some really, really good news, I think good news. Somehow on my Bloomberg newsfeed, I saw the name Peter McGary, a former colleague of mine, and they said he's become one of the highest paid traders in Europe. Why would we want to talk about that? We don't need Well I I felt like I might might have actually might have even given a five percent mentoring over my career. Um you know, now forgotten, rich and famous. Um, but uh

You know, he he's a good guy. I I guess in some local stuff he's gotten in a little bit of a uh uncomfortable spot. But we don't need to broach that subject. He's a rates traitor. So is he he would you consider him your your your protege? A uh a protege? I I don't think it'd be fair to say that, but I I I we've had some heart to hearts and I I I like to think I've had a positive influence on him. And uh as a little example, when things started to slide at 515 and we knew that

You know, based on the lack of volatility, we weren't putting up a high enough return and people were withdrawing money. Um Peter. is uh fair enough, decided to take a job at another hedge fund and he went to this place called Blue Crest. I don't know if you're familiar with that. That's a big name place. And there's a sort of a snob, Michael Platt was running it. So I I like Peter. I th I figure he's gonna be a success. So I call up Michael Platt.

And the first thing I did was congratulate him on hiring Peter. I th I thought he was a terrific guy, really tremendous hire. And I said Could I? invest money with just Peter and Michael Platt said, No, it doesn't work that way. You can put money in the whole fund. Like yeah um yeah I get an estimate. Um anyway, um Peter stepped on his dick and blew up. And uh, you know.

It all happens, but like most great people, he recovered and went on to be, as I just said, one of the highest paid rates traders in Europe. Yeah, far bigger and better things. It was a learning experience. Yeah. Yeah, people learn from their mistakes. Yeah, yeah. You know, tuition is expensive. It's true. Speaking of tuition, we had a couple of notes from our listeners asking.

of my opinion of Nancy Pelosi's trading, whether it was inside her trading, whether she should go to jail. Shockingly, uh I don't think she should go to jail. I don't think she insider traded. I think she raped and pillaged. The set of rules the people who now run the United States have set up to enrich themselves at the expense of others. So I you know, I'm kind of a believer of following the law.

Unlike many in Chicago. We're gonna talk about Chicago later. Later. I forget. Okay. Because there's a lot to talk about there. Much later. Oh, as in never? Anyway, um the the the long and the short is I don't want to see the Fed ease again. I think it's just going to make long-term rates go up. I, you know, I don't like to give trade ideas because that's not what we're about, but I don't own any long paper.

I'm itching because I've got everything sitting in treasury bills, but they're paying nine and the long paper pays six. You know, I I I think I'm gonna wait for for better levels on the long table paper because nine is not a bad number. Yeah. Especially when you're old like me and you know, oatmeal for breakfast and Well the big the big the big wealth increase was when the missus um was able to sign up for Medicare.

Holy shit. What a difference. Yeah. Thank you, kids. Yeah, exactly. You're welcome. You're welcome. You know, I I just got my tax return and there's all sorts of frickin' Medicare taxes on there. I thought Yeah. I thought I was done with that. No, no, no, no, no. Welcome. Welcome to the system. Now you're now you're part of it.

Yeah, that's great. I was hoping to be part of the solution. Yeah. Let's talk about your because we we're not done with the bond market because people have just, you know, everyone's now a bond market expert. in the last three months. Well, the the bond market, you know, why I was started to explain to you why I like it. Okay. So we've established a Fed funds rate. But you will recall I would walk in in the morning and ask the trader where'd the funds go out. He'd say, hang on, let me find out.

And then I would start to build out in my mind. Where should everything be from there? So if if the Fed funds rate is what'd you say, five? Four eight. Four eight. Okay. So let's say you like two year notes two hundred over the Fed funds rate. That means that how do you get to that? Let's start with that step. How do you get it? So in the old days we would sort of

see what environment we were in. Is the Fed easing? Is the Fed tightening? If the Fed's easing, the two-year note should be at or through the Fed funds rate. If they're tightening, the two year notes should be cheap to the Fed funds rate. So going back to my, you know, July or or December and just figure out and that's where you decide where you want to buy and sell to your note.

It's not quite that mechanical, but it's you can spit to it from there. And so if you do that with two year notes, you can say, Well, if two year notes are here. Where do you think the five-year notes should be? And I would start to build out a curve. And then you could see if something was higher in yield than my expected curve, we would look to buy it. And if it was rich.

We would look to sell it and was the curve ever inverted when you were when you were hitting grand. Curve was inverted back to when I was in graduate school and they were trying to teach us The notion that the longer you loan somebody money, the riskier it is and the higher rate was and and then but the curve was inverted. I'm like, this makes no fucking sense, right? Back to the Ivory Tower. Yeah, reconcile reconcile that, you know? Yeah.

Well, you know, in the Ivory Tower, you don't have to really meet reality. Um but so back to the bond market, that's what I liked about it. You could find reasonable ways to value things. the rate of the easing that may give you inflection. Then as a lot of people know, the further out the curve you go, the more volatile the prices are. That price volatility is convex.

which changes the rate of change. The rate of change implies an option. That option has a value. Once you know the value of the option, you can put a price on it and then determine is the curve fair for those sorts of things. And then there's other more sophisticated things like the spread between general collateral and LIBOR and Some sort of financing nuances that we were quite adroit at understanding and uh taking advantage of. Once again, that's part of how we were able to extract.

such great profits was because the competition for the most part didn't have that nuanced an understanding of the dynamicism. Is that a word? Yes. Between things like Euro futures, Fed Funds futures, LIBOR futures, and um our willingness to merchandise those things. Just to put it in simple English, you know, if Fed Funds futures were a hedge we needed.

And we thought they were expensive to Eurodollar futures, we'd sell them and buy Euros. And you know, the uh using Seth Klarman's margin of safety, we wouldn't do it if they were a half a basis point out of line and wait for it to be a nickel. Or a dime or whatever. Because you know, somebody like Pimco comes and decides he wants to crap on the red euro.

You know, we'll take advantage of it. Interesting. Was it all math or was there art to it too? Is it or is it just strict Well, I gotta say there's art to make myself more talented, but it was the culmination of the math and having the feeling about Is it enough? Does that make it worth the uh worth the effort? You need an economist. You need an economist to figure that stuff out or no? Or is it all traders?

Oh that's traders because that gets to my favorite thing about trading, which is those relationships are entirely supply and demand. So you know if this repo trader who I phrased way too highly lately will come over and said, you know, Streets flush with collateral quarter end is gonna be a nightmare.

Uh you know, we could monetize that. And was it terribly sophisticated? Well, enough so that most people didn't figure it out. Um So uh and again, our returns, I know they're in dispute, but it's my show, so I'll cry if I want to. But our returns on what was supposedly a perfectly risk-free ARB were well in excess of those returns. And it's because it's like any of these things.

How much you think Ken Griffin's taking every time he somebody puts a market order in on something? You know, a couple of cents. Yep. You multiply that by fifty million and and then You got it, you got a yeah, yeah, called Sal Val or whatever. Yeah, yeah, yeah, yeah. Um so uh that that really suited my personality because I like to have reasons for doing things. You know, generally

Like I tell traders, you know, don't sit and fucking speck with 10 locks because you're just wasting your time. You know, I uh this gave me a mathematical reason to do things. Keep me entertained. Guys like to trade. So, you know, and so guys got to bank shit back and forth all day, picking up a basis point here, a basis point there. So one basis point on a million dollars. for a year's twenty five dollars. So multiply that, you know, if we had ten thousand

You know, it's twenty-five thousand dollars a tick. We're getting twenty percent of that. Mm-hmm. All of a sudden it makes it a little bit more interesting. Mm-hmm. Yeah, absolutely. Yeah. Um

So how much more do you want to talk about the bond market? I just don't understand like you just you were consumed by that curve. The curve, the yield curve, and the two the two of the five of these. Well, so I mentioned it last week about why everybody likes a steep yield curve. Okay. It's the equivalent a swimming with The stream, right? So again, simply the street is typically long collateral or product.

And there's a new product that you mentioned we should discuss called the T-Bill iBox. Mm-hmm. Spoiler alert. Chump trap. We'll get to that after Chicago. Yes. Just keep me in keep me. Okay. So um Uh the swimming with swimming with the stream. Yeah. So if the funds rate is five and the two-year note is six. You're picking up a hundred basis points every day. Every day. So it's a hundred times twenty five dollars times however many million you got times. Okay.

Not only that, if the curve is steep, every day that goes by. the product you own is a little shorter maturity. And if the 30-year bond is much higher in yield than the two-year note, you can see that the 30-year bond is going to go lower in yield. So you got the carry and you got the roll. Don't get me wrong, you know, we've had those many times on and you know. Uh from time to time it turns out to be like a Hamas beeper. Sorry. But uh, you know.

There's no free lunch, right? Yeah. Yeah. Because every other cloud. What would wreck that? Well give me an example of one that got wrecked by something, a a surprise where you came in. Surprise tightening. Yeah. Uh a credit event would typically um cause chaos. Um so that's why we would leave and I get this question recently about, you know, how big would you be, you know?

That's a great question because if you take every trade you have to worst case scenario, you'll never be able to put a trade on. Because the ex the moves are so extreme. So we try to run a combination of hedges. to protect in a exogenous event like nine eleven or long term capital. And then um Well what did you use to prepare before before long term and nine eleven? You used eighty seven? That was really easy. The um the front end of the market.

uh euro dollars Fed funds. Um they were they were relatively cheap and the options on them because guys you know, I'd say disciples of Kevin Muir. and um his friend Cubby or Chubby or whatever, they like can't help themselves. They love sell involved. Pimco can't can't sell in a valve. And so I literally bought options for one tick.

That when the Fed eased, I couldn't sell them fast enough. It was nauseating w how badly I fucked up that position. I think they closed well over a hundred basis points in the money. Yeah, another victory snatched from the jaws of defeat. Um But we had a lot of that stuff. Because when chaos happens. People move to liquidity, which is the front end. And people are implicitly short volatility. Virtually any trade you show me somebody has on. I can show you.

It's like pick a word. I can tell you how its origin is in Greek. I can show you almost any trait how it's a short volatility trait. And so when something bad happens, people run. To the liquid or on the run issues.

They run to buy the curve. They run to buy Val. Yeah. So we would you know, I I I got laughed at a lot because there was a time when you could buy a put on the Hong Kong dollar. where they were b it was ostensibly it was it was ludicrous how cheap these things were. In fact, I laughed because one day Billy Ackman went on one of those Wall Street weeks And he makes out how he discovered this great new trade about the Hong Kong peg. Meanwhile, E. G. would tell you.

I'd have so much of this shit and I'd get out the HPL HP twelve C and I go, ah, if if they devalue by 12%, I'm gonna make 400 billion dollars. And you know like, nope, never gonna happen. But just in case you were you were you prepared. So I got a big chuckle. When Bill started touting the Yeah. Ed and I Ed and I did too because when I put it on I told Ed about it and he put it on and uh Bill was Billy's Billy's.

Billy's just figured out the scam and the Hong Kong dollar. That is fun. That's a good time. Yeah, yeah, yeah. I wonder I wonder why. The bulk of these podcasts is me talking about stuff I fucked up. I I don't get How did I be quite honest? That's the entertainment. I mean, w this is an entertainment show. This is an investment advantage. Entertainment. And that is the highest form of entertainment is you stubbing your toe. Okay. Oh man. It I'd say ya it it got so bad.

For me, I'd go through losing streaks. I've told people this, you this. I'd get up, I'd just walk up the avenue and I'd just go shop until I spent five grand, until I I got to the point. I had a rack and my closet full of clothes with labels still on them. You know, it just it was the it just didn't know what to do.

Um when you were on bad runs, dude. How long would these runs last? And like what weeks. I was gonna say, so you're you're in a you'd be in a hole and like Oh, it is misery. You know, you e is a trader generically we tend to be superstitious. So for instance, I never allowed a red pen on the desk at any time. Red ink, felt, this and no red. A little crazy, okay. My life coach will attest to this. Um, we used to change parking spots if we got on a bad roll. Yeah.

Yeah. But you know, when I was ten and played little league, if we were on a winning streak, I didn't let my mother wash my blue jeans. I mean, yeah. Of course. That's just perfectly normal behavior for the unormal.

So um there was one thing besides Peter McGuary that caught my eye. I saw a picture. And it's available, I think, on Getty images. It was, it's the iconic picture of the Solomon Brothers trading room. Lower Manhattan. I'll post it on Twitter. And I want to explain to you why to me this is such a big deal. It's because in my day, when I was in Chicago and then moved to New York.

That was Yankee Stadium. Like Solomon Brothers was the bond market. The auctions came where Solomon said they were going to come. And if you behaved They were good to deal with. And I desperately wanted a job there because that was, you know, that was the big leagues. And because Lansston was so profoundly good at the front end, there was an open dialogue between the Salmon traders and the Lansden traders. So being a, you know

a young kid wanting to move up in the world. I I tried to monetize their relationship. I'd go out to dinner with Neil DuBrow, who was the most hated to you know trader on Wall Street. Joel Cases who was the long bound trader. He used to scream at people like there was no tomorrow. Got it. And then Tom Murphy, who was the babe roof of the intermediate market. And so any chance I got to go out to dinner with these guys, I went. And then I'd call.

a couple days later just to try and chit-chat or whatever. And so over time I got to know him a tiny bit. Okay. And I was out at uh dinner one night at the Manhattan Ocean Club. And which was on Second Avenue. And the Solomon guys used to go there. And it was not far from where I was living. So I'd pop in there for a drink. Because in those days you everything was free. And uh Craig Coates was standing there. And I walked up and introduced myself.

And he was very pleasant. And you know, I called him up the next day because there was a bill auction, just so he'd hear my name again. And at that point, Not long after that point, they were on the lookout for five-year no trader. And so I was talking to Murphy. And I said, hey, could I put my hand up for that? Mm-hmm. And he's like, well, let me talk to Craig. He's like, Yeah, can you come by Thursday? And so I I'm like

Yeah, I can come by whenever. And uh I go over to I think it was two hundred West Street, maybe all the way at the bottom of Manhattan, that black building. It's still there. Okay. And um you know i go up and They take my code and I get to put it in the partner's coat room. And and so I sit down with Murph and he starts interviewing me. It's very pleasant. We said, how many tickets do you write a day? And I'm thinking, I don't know.

Four, but I know that that dog ain't got on. So I I said, I don't know, thirty. How many do you write? He goes, I don't know, a lot. And I go, Yeah, that's what I write a lot. Anyway, um Fortunately. They filled the role internally with a guy named Chris Fitzmorris. Why fortunately? Because Chris went on to be the one holding the bag along with Murphy during the Treasury Auction scandal. So that if I had gotten that job

Uh yeah. How many years later? How long ago did he have how long was he was he at the desk before he got caught up in not not not long. So you would have been right there in the Oh yeah, it'd have been I'd have been collateral then. I mean collateral damage. And um Oddly enough, for those keeping track Tom Murphy, who I think is as honest as a day as long, great guy, great trader, great athlete, ultimately came to work for Granch Capital in the proprietary trading group.

So there was a moment where Babe Ruth actually reported to Old Chestnut. Incredible. And I and I say that as respectfully as possible. Yeah. It's not like yeah, you know, this was this domineering thing. He got in a bad way and was looking for work in Greenwich Capitol, realizing the talent, was able to craft a deal with the feds that Murphy wouldn't.

do any customer trading. Understood. So let's let's move'em over to proprietary trading where we know it's all, you know, rape and pillage. Um, but m Murph came under my purview and he's just a terrific guy, really smart. He spent a long tour Uh I forget the word. Of exile working at Bloomberg.

So he could make that thing sing. So he was a tremendous asset. But you know, I look at that picture of the room and there are business week articles I'm sure you can find that talk about the day of a treasury auction. And it's completely different now. Uh I don't know that it's Better or worse. They went to this Dutch auction thing, which I don't know. Again, I'm well, I like the old ways, mostly because You know People got what they needed. People didn't get screwed. So if the street conspired

to buy a lot of the issue, the taxpayers ultimately paid less interest tax because the rate was lower, right? Higher price, lower yield. But no, it was not to be. And so that was, you know. Altyazı M.K. You know, going to Yankee Stadium, that was that was a big deal for me. So No, the picture you the picture you were talking about is like you see the octagons. You can see uh it's you know.

It's not the it's not the other pi the famous picture that I that I imagine when you say the syllabus. There's the other one that's like a ballroom with like thirty foot high ceilings and it's all rows. Like maybe it was like analysts or something or it could be a couple of pictures. I mean, you know. So that's the room where John Goodfriend had this ginormous desk smoking.

a huge cigar. I did get to see that. You know, that was kinda neat. But, you know, they were Salmon that was where the big balls guys were and, you know, always one in the and push the envelope, that's who I tried to hang around with. And it was, you know, hey. Fortuitous that it worked out the way it did. Holy shit. Are you kidding me?

Yeah, I uh I was very lucky. You know, I had a lot of luck in my career, you know. Uh all things opened up at the right time, but it's still it's still to be trying to provide a lesson. The the big advantages came when I had the guts to stand up and say, hey, what about this?

Why didn't you hire me? You know, are you looking for somebody? You know, can I try that? Yeah, yeah. You know, and and I tell that to my kids all the time and I they've gotten to be very good at it, especially the middle daughter who's starting her own business, which I told her like. If it wouldn't fuck the whole thing up, I would buy this business for a million bucks. And uh it's just to watch somebody figure out their niche and start to craft it into something is is incredibly.

Heartwarming as a parent. Yeah. Yeah. You know? So uh anyway, uh I'd like to get her settled down and married. You know? I had a discussion with her. We discussed it. We're on the same page. We pr we'll we'll continue. Okay. Okay. Well, you know, I I tend to stay away from those things. I get most of my information from Cheryl. Who's you know, information live total vault. Yeah, yeah. Like nothing ever gets out of that vault. Oh, that's good. That's good. Um

All right, well that's no that's funny'cause like you know, everyone's a bond market expert. Everyone has an opinion and everyone, you know, everyone wants to put their two cents in on on the rate hike or the rate cut and what's coming. Um

And it's just interesting to me. And I think I sent you that text message once when Powell was speaking where he he's he's mentioned his legacy. I don't think he mentioned his legacy, but I think he says things like history will tell. And there was two lines in his last remarks that made me think He's still he's playing the long game and he doesn't want to be remembered as Either letting get letting inflation get away, you know, and i and he's concerned about his legacy in the

I don't know how much of that drives his opinions, but you hear Well, he's he's fucking it up because, you know, and I say this hopefully in a polite way. Big fan, big friend Dave Zervo. What's the first thing he does is, oh, the the POL puts back spoos and blues. You're not curtailing inflation when you're incentivizing people with a shotgun and levered money.

Telling them hey rates are going lower. Yeah. They're I'll tell you what they're going to do. They're going to pick up the blue pen and the blue pad. Which signifies buy and they're just start buying risk. Yeah. And people are gonna see because you saw that note about from Dr. Slock, the consumer is doing okay. No, if the consumer looks at the value of his home. And we'll talk about the homes in a second. And if they look at their 401k.

They're gonna feel pretty good about that. And the Ivy Tower guys will tell you about rational expectation theory. Meaning you base your consumption on what you can rationally expect to have as income. So if you're seeing your house go from a hundred to two hundred grand, that ain't gonna curtail your spending. The second thing I I meant to I don't remember whether I said it last week.

or not. But I I still think it it's true. I've been reading a lot about change in society and Which is a difficult topic, especially these days, because household formation, childbirth, parenting, You'd look at any studies and they're all very highly correlated. And If people are looking to throw you in the bucket of being a racist, if you refer to these studies, they'll just in so going back to the problem with the houses, okay. I think I mentioned this to you.

People young people can't afford houses. Young people uh are having trouble making rent payments. This is the stuff. That causes revolutions. And I'm not talking about arguing over whether the election was this or that. I'm talking about. You know, you know where I live. If a band of merry men come up here with torches and pitchforks, You think the Greenwich police are gonna get up here quick enough or have enough ammo?

to make a difference? No. And and I'm gonna I'm gonna violate your protocol here a little bit. If you don't think this can happen, go and look at what a Bunch of guys did in Chicago, they robbed a freight train. That's like You know, Wild West stuff. There's a bunch of people, they stopped a freight train, they broke open one of the cars, and they're having a food fight over flat screen TVs. TVs were on sale 35 minutes later on the internet, on TikTok.

Wow. Yeah. So that you'll see my house for sale on TikTok. Greenwich Estate, four acres that country. cash yet dude that's how you get rid of these people here they come when they when they come prop cash movie cash it looks like it looks like oh here take I have a hundred a hundred thousand yeah hello how about prop gold It's all it's a thing, dude. By the way, taking it down to the prop fucking safe. Here you go, dude. Just uh just talk about the serpent's tooth.

How do you think it felt the other day when one of the kids looked across the breakfast dinner table and asked, hey dad, where'd you sell your gold again? No fell left a mark. Yeah, I know. I know. Um Yeah, prop cash. Prop cash is your solution. Forget about like, you know, your you know, your home security or anything. You just you have to appease it's a supply and demand. They're done. So we hit a pellet. Just a pallet. What about prop gold? It's heavier. They have to

It's lead, you get the lead, you get your favorite lead. These aren't bright people we're dealing with, dude. You give them like one, they're like, okay, it's worth it. Like it's a million a bar's like a million bucks right now. Here, you can have the gold, you can have the diamonds.

Please, you know, if you want to take the wall. Yeah, take the wallet, just leave me my driver's license. Yeah, exactly. Do you think there's that rational discourse of that point of contact? When you put that much cash in front of them, yes. Cash ma cash does amazing things to people when you wave it in front of their face. It's a it's a powerful motivator. Um yeah. I think you're fine. I have I think no concerns whatsoever. Um Yeah.

You know, you can't rent an apartment in New York. We have really good friends who sold their house in Greenwich, moved to Florida. Oh, by the way, kudos to Kathy Wood. If that woman died. And but that woman bought a funeral home and people would stop dying. She moved to Florida. It's the epicenter of anarchy. She bought like a she bought two hundred thousand shares of Tesla Friday morning down seven percent on the day. Dude, she

She got four she got a CNBC spot, she got a Bloomberg spot, and she got a whatever the other. Let's call it Fox Business. They're still putting her on T V. I don't get it, dude. You know, we had an old saying at CBS, if it bleeds, it leads. Oh, yeah. Nope. Well, yeah. So I don't know. It it's it's stunning to me.

How you know, it's that story as old as time, as you like to say. The Emperor has no clothes. I'm wondering when the first lawsuit happens when uh a shareholder said, you know, she's front running our trade. You know, she's lost money, she's underperformed, but yet she takes the fees. All right. If you're gonna do that, then you're gonna have to you're then I'm gonna have to talk about Elon. And his fucking robot and his driverless car and the van that looks like a toast driver.

Dude, all right. So his competitor, I believe, what was it? No it wasn't Nokia. It was Trevor Milton or whoever the guy was at at the other electric car, and he rolled a truck down a hill. Yeah. That's a neat scam. Yeah, and c clever, clever, you know. And I think he went to jail for that, you know. But like now Elon has come out with like Exactly. Some people are more equal than others. Thingo, dude. It is a it is in it's incredible that he did essentially the same thing. Like I saw

The Morgan Stanley an analyst said that the robots were actually humans controlling them. They weren't really robot. It's a charade. The car they did even JP Morgan came out and bashed. JP Morgan came out and said it was vague and let's let's ask Maxine Waters. poster child for ignorance where all the money came from, right? I mean it's just not you got Bill Clinton flying to Pito Island, right?

He was raving about his anniversary on on Twitter this week. The two it's a anniversary is the sixteen year old, the twelve year old? Exactly. phonies, dude. And like, like, why would you do that? Like why would you two? Who do you what do you this is so mind boggling that people still don't understand Twitter. Like Bill. What what where's the the win for you on Twitter? Where is the win for you? Why like you what you've

How is that anything good? So you and I, even though different religious backgrounds, I think we had the same thing beaten into us, which is guilt, right? Wasn't it? Okay. So my most Jewish mothers are are at military psyop level of guilt, right? Guilt is the only thing that ever kept me in line. Yeah. And in your case, probably not every time, but a little bit, right? These people have no shame. So when you get the guys running around wilding.

When they see Bill Clinton hopping on a plane or Nancy Pelosi having a hundred million dollars or Maxime Waters having a zillion dollars.

You know, why why should they follow the rule of law? I'm afraid we're gonna have to cut now to Chicago, where Sources believed to be reliable, but the Chicago school system spends three. thousand dollars a year per student. Not one student from any of the recognized schools was able to complete a math proficiency exam. Not one. 3,000 bucks a kid. Most powerful union in the country, I believe. Yeah. But but let's spend thirty billion on a presidential library that he is never gonna go see.

Dude, the uh people who live there can't go to it's the may is your your mayor, your mayor, your mayor, okay, is Current? Yeah, you're you I believe his name Brandon Johnson. I but I believe the current mayor of Chicago is pr is is currently dumping eighty grand into renovating the first lady's office down at the at the cultural center, okay? So he's got eighty grand for his wife's office.

But the kids in school can't read. I know, dude, it's what do you want to do? It's a it's it's a tale as old as time. Really what do I wanna do Chicago revoke uh the Obama's membership from the Martha's Vineyard. Martha's Vineyard, yeah, exactly. Yeah. The problem is it'll upset the vineyard's diversity policy of hiring minorities. By the way, again, I love this. You see all these memes about Barak ditchinization?

Ditching his ma his guys? No, I did not. Okay. Well, I'm telling you, you and I w you and I would not be allowed to use those words. There's some good ones out there? Yeah, no, I know. Yeah I don't know. Um, let me just say this since you brought it up. Um, from what I from from the rumors in the woods this morning, I went and rode my bike. Morning. Um, the rumor in the woods this morning is that Donald Trump is gonna be the next president. You can lock it up. Okay, they said that.

All hopes of of a democratic victory have vanished in the past week. That was the uh that was the subterfuge. That's the brain trust. That was the subterfuge in the woods of Greenwich this morning, okay? So I'm just telling you. Were you guys looking to build a shelter? Plenty safe in there, okay? Get right on the merit. Um Dude, there was a lot of uh I don't wanna the stuff. But yeah, we're getting close. We're getting close. But you know I I I will say one thing.

Dude, all that don't trade a political market and global uncertainty. What a bunch of bullshit that is. Cause here I am looking at the SPY clocking an all-time high up. Not only knows how many, almost 50% since Robbie Wall tick checked us off at 350 or 3500, you know. Here we are at 5800. So please tell me more and urge more caution and tell me, okay?

So they came up with this security Which is a Treasury bill let's get it right. I box, right? Is that the ticker? Or was it I think it's close enough. Okay, okay, okay. Yeah. So there's a it's a yes, go ahead. So the gimmick here is If you buy this ETF. EOXX. B-O-X-X, you're correct. It mimics. a treasury bill, but the income they use subterfuge and trade and create it as a long-term capital gain.

Now, I saw this and I saw it from a couple of spots, frankly, which, you know, when I get pinged on the same thing right away, I figure I better take a look, right? So Uh right away, old chestnut says Nishkit. Now I know that's the first thing I always say. It's because it's usually the right thing to say. But what these people have done is convinced. People that if you buy this You're gonna have TBO returns. And it's gonna be taxed at

um long-term capital gain rate. But upon some review, and I'm a little more comfortable talking about this than normal because I'm not advocating anybody buy it. So I don't know that I can get sued for telling people not to buy it. No. But anyway, that's part of our new marketing approach, by the way. Get sued, get a lot of free public publicity. Although I can't imagine I could possibly say anything at this point that No.

Um, so here's the gimmick. They go and they take the money and I I didn't do a deep dive because I saw enough to know, but they go and they buy. A total return swap on a treasury bill index. So every day they do a calculation and see what did the price change on the Treasury Bill. Part of that's going to be capital appreciation. Part of it's going to be interest income. The problem I have with this thing is

A number of things. One is on the description page on Bloomberg, they say it's not leveraged. That's a lie. They're using a total return swap. I don't know how much more leverage you can get than that. Okay. You know, people want to pick a five of me on that one. Fair enough. But uh, you know, game on. Then You know, the internal revenue has its own court. And I've seen them take things where people have manifested structures to avoid paying tax.

And the courts rule that they're ostensibly the same thing. So you're gonna own something, so you're taking credit risk. on this ETF. I don't know what they do with the cash. I mean, I assume they buy treasury bills with it, because that's how they pay themselves their five basis point fees. Yep. Yep. Another fee.

Cash like returns without the tax bill. Yeah, and without the liquidity. And so what happens is remember we've had this thing, we talked Warren Buffett and Charlie Munger talked about a bit about Cash is like cash and T bills. Anything else is not cash. So you're gonna get a bunch of nice people, you know, keeping their costs down. They're gonna buy this thing. And one of those problems I've talked about happening is gonna happen. And there's gonna be a race to sell this thing.

Because people are gonna want their fucking money because they're getting called on other stuff. So I'm retired, living on a small pension, but If I had energy, any energy whatsoever. I would find a way to short the fuck out of this thing. Cause when this thing goes south, you're going to hear a boom. And it's going to be heads exploding. And I'm telling you. It's like these three times ETFs. Like I remember the first time seeing this, and I'm saying.

This is a flawed product. And I had my top guy, Dr. Amir Sadr, take a look at it. So you know it's right. You hold that thing long enough, it goes to zero. It mathematically has to go to zero. I don't know, dude that Nvidia, the triple Nvidia. You tell talk talk it to that kid in sixth grade that's got the triple leverage.

the video, okay. The kid the kid's a millionaire in sixth grade because he Hey, you know what? It's like winning the lottery. He'll just end up fucked up. That's that's the downside of it too right. He didn't earn it. He's just getting rich on options. But yeah. Yeah, that the triple leverage, yeah, there's triple leverage, um there's triple Do you do you want the reader's digest version on why it won't work? Yeah, please. So it's supposed to give you the triple the leverage.

Every day they re-hedge. So if it goes up, at the end of the day, they're going to buy more. So they're buying at the high. And then the next day, because markets. Oscillate, as you've seen in your tenure as producer of Inside Baseball with all Hub Chestnut sponsored by Colece. Um Every time they go up and down, you're re-hedging. You're buying at the high, you're selling at the low. That no work.

I mean you can try and make it up in volume, but trust me, it it doesn't work. And so um we looked at just shortening all of them and going away. Yeah.

You know, that wasn't happening at that time. So but um you know Reagan had a comment about the greatest lies, I'm here from the government, I'm here to help. How about I got a great structured product for you? Yeah, exactly. Product. You gotta Yeah. I'll go find the products that I need. Okay. I don't need anyone selling me. Yeah, I can go shopping on Bloomberg on my own. Exactly. Exactly. You know?

All I have to do is gotta go find Carvana and just buy some Carvana. I don't need any products. I'll just go buy Carvana and another fucking ten percent on Friday. It's at seven percent for the week. 40% for the month. If there's any listeners out there that haven't fucking bought some Carvana because of me, you are a fool. Okay. It's up forty-three percent this month. Let's do a six-month 139%. Let's just

Let's just see if you wanted to beat the uh the the S P five hundred for the year, two hundred and sixty-three percent year to date. Were I don't remember, were you a fan of Carvana? Oh dude, I needed it I I told I w I was wanted it to go to zero. It was a fraud, okay? You and I sat at the J House in Greenwich and Ed elbowed me in the ribs and was like, how about Carvana, huh? Because it had gone from four to eight that day.

Okay, eight dollars. Today it's close of business Friday, one ninety two. Okay. Have you ever seen like when I'm in Arizona, go to the airport, they have one of those it's like a jukebox thing. It's fun to look at. There it's a curiosity. Yeah, there's one of the first time I saw it on the side of I ninety five I

I was driving with my daughter to Florida. I thought there's the fucking Carvana car elevator. I was two years ago. I was still mad about that thing. Here we are. 192 fucking dollars. Yeah. 400% in the past year. 400%. Four hundred percent. But yeah, marketing stocks are doing okay. JP Morgan, please, JP like who argues with JP Morgan or Costco? The banks are killing it. In a in a in a cutting in a rate cut environment, I got JP Morgan cranking all-time high.

Yeah. Does that make sense? That's not what the textbook does the textbook well well it depends which textbook. My textbook says When the stock market does well, credit conditions improve. So loan values should improve. Banks make loans. Yeah. Okay. Yeah. Um. All right. Um Yeah, we'll see if bank make make loans. I'm in the market for a loan on the office building. Oh really? Yeah. Fingers crossed. We got a tenant.

So the the the predictions about the death of the New York office market premature. You got an A. You have an A bill. Oh yeah, full. Yeah, but you're not going to be able to do that. here for the breakfast young man was commenting on the office space at the on the West Side project. The Vornado thing that people let they said it's ripping. Really? Yeah. Now if you own a former

Robin Tug in Midtown, Class C office building. No, not good. Not good. Not good. You got some brand spanky new and shiny? Yeah. That's what ple people want. Vernado's up sixteen percent in the mass month. All we have to do is talk about something on the show and it just goes up into the road. Shocking, isn't it? You know, I

I keep debating whether we're supposed to monetize the brand. And and this person who mentioned to me about You know, the the office space said one of the things he likes about the podcast is we're not hawking anything. And that was I remember one of our tenants was, you know, we're just gonna call'em as we see him. We don't have any obligation. Um

to a sponsor. Mm-hmm. But I'm just thinking of the millions of dollars really that we could be raking in. I don't thank you. Just somebody email inside baseball cast the Gmail would be like, Hey, I picked up some Carvana six months ago and now I'm a billionaire. That'd be nice.

Nice. Instead I get instead I get That's all right Telmore instead I I get tell Morris we don't wanna hear about Israel or Obama or Yeah. And that's what I get. I get emails about that, which I just promptly delete. Yeah. So You don't wanna hear about Obama, sorry. I don't wanna hear about it either. So I'm pretty proud of myself. You sent me that email um about uh

Uh who Hezbollah lobbing more rockets on Friday. Um you know, you're trying to give me the the classic Friday urge caution, you know, you got a big focus the weekend. And all I wrote back was it's already priced in. Okay. Like Yeah, I I was so proud of you because that's the pro answer. It's priced in. Yeah, I give that to everybody. Everybody everybody hates that. And nobody likes that answer.

Okay. I know you're gonna say no, but I was part of a focus group coming up with new slogans for Hamas cause they're running out of people. Say they be our guy. Yeah. The um the slogan is the work is easy, ninety percent of success is just blowing up. I like that one. Not bad. So Cheryl uh went to the High Holidays to represent our clan. Uh I used to go, not so much now. Um and uh she noted

A complete covering of the area by Greenwich Police with lights flashing. She also mentioned, and I'm not gonna promise I get this number right, but you can spit to it. The temple we belong to spends$500 a week. for supplemental security guards. Five hundred bucks a week. You imagine? Yeah. That's real fucking money. Yeah. This is supposed to be America. You need a squad car out front. Yeah, they w they want they want a uniformed Greenwich PD cop out front. I don't blame them.

I don't blame him either. What what does it come to that you have to do that? Every school in Westchester and Fairfield's got this school. Like I mean the school's got a car in front of it. Every you can't get on a Yeah, this is this is what it this is what it is now. Um yeah. But let's not talk about Chicago because that's shits and giggles there.

Who thinks about robbing uh train? You gotta go back to Butch Cassidy and the Sundance Kid. Yeah, no, I didn't understand why it's uh like the headline I also saw is Union Pacific wasn't gonna prosecute him. Union Pacific didn't call the cops, they were like, ah Let'em take the stuff and then insurance company. Yeah. Yeah, the insurance company buys him a new car. What a nightmare. Um

So anyway, that's our that's our deal. So we're gonna an all time high. All right, you just it's just uh another week goes by that uh So dude, you can't argue with Zervos. Zervos, like at the end of the day, when it boils down to is it all you gotta do is read the Zervos? No. You can't argue with Zervos because he doesn't have a stop. That's true. But no I love him to death. But he's been right! He's been right!

Yeah. Did I tell ya I tried to read the uh the Ray Dalio book? Yeah, you said well yeah, yeah. Yeah, I couldn't stop throwing up. Yeah, yeah, yeah, F. Yeah. He's big China guy. He's been shilling China lately. So um surprisingly, a number of people have complimented me on my book choices. So I have two I thought I would recommend. One is a book called The Checklift. Checklist Manifesto Manifesto by Atul Gawande. Okay. Now, don't be put off by the name. Okay. This is a fabulous book.

that talks about how to reduce failure and complicated systems. The second book I've mentioned. And I mentioned especially because we have a very devoted British listener. uh and famed newsletter writer, uh, Anthony Peters. And he talks a lot about the Brits and all that. And you know, I spent a lot of time working there. And uh you know, uh would you say they have just generically come off

is having a little bit of an arrogance about them. Yeah, of course. Okay. So I would invite, because this was a fantastic book. It's called The partition, the great partition, it's when they separated India. Okay. And um Pakistan. Pakistan. Dude, it's basically the Holocaust for non-Jews. And I was, you know, I was educated in a public school in Illinois. So m you know, my education's poor. Um, but I had no idea what

The Brit did to these poor people. And you can't go. I challenge you to go to a small British hamlet where there isn't a delicious curry shop. Yeah. The national I know, yeah, you told me the same thing in Ireland, yeah. Fish and ships. Yeah, I know. You ever been to ever been to Wales? No. No, I Well I got dragged there. So you know how they have those big red phone boxes?

Yeah, of course. Well when you're in England, those red boxes have the crown is nicely pointed painted in gold. Not in Wales. They took the big brush with the red and just swiped right over the crown. Makes sense, yeah.

So yeah. Yeah. Well we should you know, w we're here as Americans we should uh celebrate Columbus Day tomorrow where, you know, Columbus sailed the seas fourteen ninety two. The ocean blue. Well, uh wasn't it supposed to be indigenous species day, indigenous people day? Where the American people. Destroyed the Indian tribe? I prefer the classic Italian contractor story, okay, because he was subbed out by the Spanish, right?

He was right, you know, he wasn't really sailing for Italy. He was sailing for Spain. Americo Guspucci? No, I think Columbus. I think Columbus sailed for Spain. Um, so he was a subcontractor, you know, like his like his descendants went on to go work in concrete. All right. So you want to hear one little little ball market story you might get amused by. So I spent a good part of my career at Deutsche Bank.

Which worked out for me very nicely. I got to meet von Ribbentrap, who was one of Hitler's aides. His son. Well, Ribbentrop, yeah. His kid. You got it you met his kid. Yeah. Did he look like did he look the part? You know, I was afraid to look at him, frankly. I think I was staring at his shoes. I get it. I get it. So anyway It took me years, but I finally got an off a job offer at Crunch Capital, which I immediately took. And two of the guys I was working with

immediately took over my book of the five-year note because I was making most of the money. I won't say all, but I was making most of the money. And as so often happens, whenever I would leave a place, People who were left behind would grab my shit and then complain, Morris took all the good trades. That's why he made all the money. Oddly how I would leave and the money might not in E.G.'s case, but in a lot okay.

So anyway, one of these guys I worked with at Deutsche Bank invited me out to dinner. Like, yeah. He goes, I'll take the train up. Whatever. I'm like, okay, why not? So I go to this is before your time, but there was a dive bar called Casey's Sundown Saloon. So we meet, we meet there at in the back booth and He was working with this other former colleague from Deutsche Bank, and the day before a buyer in the cash market came in and bought.

100 million, 500 million is some issue. And I sold it. So I went to buy the futures contract. And this guy I'm having dinner with starts telling me, Yeah, Raj and I saw that and we went in and we started racing the futures on that, making me pay a fucking higher price. And um Thinking, what the fuck? Is Leslie would say it was Bartzini all along. Yeah, yeah, yeah. Yeah. And then

The guy called later another time for dinner. I think I didn't return the call. And then I started hearing through the grapevine, why is Morris mad at me? Well, Morris is mad as me because you fucked him. Yeah. And then I do not forget. Why would why what was the why was he telling you that he was doing that? I don't I I don't know, but I never forgot it. And yeah, it's too bad he

I think her name was like Gigi Gigi something. Okay. And but who does that? That's bizarre. Yeah. Don't get me wrong. I took great pride on anal raping long term when they were being unwound. Yeah, you said that you took great joy in picking their carcass. Yeah. Yeah.'Cause they that's what they did to everybody else. But you know, we're having dinner. Yeah.

Bizarre. Bizarre. Yeah. All right. All right. Well, the Great Partition. The Great Partition. All right. Yeah. What was the other one? I don't know how about the autobiography of Maxine Waters. Have you ever met a stupider woman in your life? Checklist yeah, Kathy Wood. Checklist manifesto Checklist manifesto. All right. And the the uh and the great partition for some uh Columbus Day week Yeah, both available on Amazon. There, we'll sell some boxes.

And let's see if that iBox gets uh that box ETF gets any action on Monday if uh let's see what happens in the options on that. Okay. Knuckle that thing around on Tuesday. Um all right, good. Thank you very much for your uh It's nice to see you. I I'm glad we were able to get together. Yeah, thank you. Um it's always nice to talk to a real bond market expert, unlike the other digital Shoot their mouth off. We're we're available. We do bar mitzvahs, weddings.

Yeah. Tell Mayor Mike tell Mayor Mike that I've that he has our full support and that we will spearhead his reelection for mayor campaign. Maybe just send him a nice note and be like, Hey, we heard some whispers. You wanna you wanna comment on it? We have support. May I mayor as soon as I log on to my Bloomberg, I will send him a note. All right, thank you. All right. Thank you very much. I'll see you next weekend. Okay, take care.