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Hello and welcome to another episode of the All Thoughts Podcast. I'm Tracy Alloway.
And I'm Joe. Why isn't thal Joe?
It is the holiday season. I am very much looking forward to it. One reason I'm looking forward to it is because we always do an annual ask Us Anything show.
Yeah, you know, I think I liked it in the podcast. You know, it's true not about us. I mean, the show is about what we're interested in, but it really is about the perfect guests. But every once in a while, I suppose it's nice to sort of have the microphone turned in the other direction, so to speak. Yeah.
The other thing I would say is we're already pretty accessible, Like there's a whole All Thoughts discord that we're on. There's Twitter, obviously, there's instant messages on ib and mostly we respond depending on how busy we are, so feel free to contact us there too. But we did get some pretty interesting questions from a bunch of listeners.
Yeah, and I like the fact that we can put in many cases listeners voices on the air bring back some of the old time radio call in shows, the likes of which I used to listen to when I was a young kid writing in the car.
With my dad.
Colin shows are Lindy.
The Colin shows are definitely Lindy. All right, shall we start, Yeah, let's take a listen to some.
John sorrow A sixty three, Berkeley, California. Sometimes when you finish recording an episode, do you look at each other and say this doesn't meet our standards and kill the episode or is it more like skiing? Once you commit to writing the chair lift, you commit to skiing down the mountain.
Well, I can't ski. I'm the only Austrian in the world possibly who cannot ski. So I'm we have killed episode in the past. In fact, there's kind of a funny story where we did an episode it really wasn't going very well. The guests seem very nervous and just sort of like not at his top performance. And in the end, after we recorded, we told him, you know, we're just going to kill this episode, and he was actually really happy about that because he felt he hadn't
done his best work either. And then the other thing I would say is I actually think journalists should kill a lot more stories. We should be more selective and if you think about the German word for reductor, reductor, it sounds a lot like redact, right, which gives you, you know, some sense of what editors are supposed to be doing, which is taking away as opposed to adding.
Yeah, it is very rare we have. I mean, the number of episodes that we've fully recorded that we actually did not release. I think it's less than you could on one hand, Right, it's not that many, but there have been a few just for whatever reason I guess was not on their game or whatever, it didn't work. And I agree. I agree with Tracy. I think we should do more in general. I mean, I think journalists
as a whole should do more. It's like, just release the good stuff, you know, just released ones you're you're genuinely proud of. I don't want to release anything anywhere when I can't say I'm really proud of this work. And normally we are proud, but occasionally it's like, no, this is this is not awesome. All right, let's go on to the next one.
Thanks Joe, Thanks Tracy. I was really inspired by Joe's tweets on Moby Dick, so this question is for him. What did you read after Moby Dick. Thanks guys, thanks for listening.
That's a very easy one. Because I was such in such a mood to keep after reading Moby Dick, I didn't want to read anything besides Moby Dick. I sort of just thought about rereading it again, and I probably will sometime the next year or two. But because I was in that mood, I read a book by the historian writer CLR. James, who wrote a book about Moby Dick.
Is a book called Mirrorer's Renegades and Castaways by CLR. James, and it basically made the argument that Herman Melville, with the Ahab character, specifically anticipated many of the pathologies of the twentieth century, the rise of fascism, dictators, and so forth, all of the crises of sort of Western civilization that we experienced in the twentieth century. Fantastic book, almost as good as Moby Dick itself.
Also, I've been recommending two books to you. One of them is The Heart of the Sea, which is about the whale ship Essex, which is the ship that mobi that actually inspired Moby Dick. And then there's another one I'm reading just now called A Marriage at Sea, and it's about a couple who are out, you know, sailing around the world, and their ship gets destroyed by a whale and they have to survive on like a little raft. I actually don't know if they survive yet, so I guess we'll find out.
I promise I will read both of those.
Both of them are excellent.
I promise I'll read both. Let's hear the next question.
Hi Yang, longtime listener here. My name is Sturm. I'm thirty two and I live in Puerto Rico, and I have a question for Joe. I know you're an efficient markets guy, but if EMH is true, how have portfolio managers accumulated such vast wealth.
There's a really good question. I wonder about why the financial system overall exists. Why are people putting targets on prices, and why are their pundits on TV? And why is their financial TV? And why is their trading and so forth. I still don't really know why the answer of why
anyone has made any money. But my guess is that there are other services that people on finance provide other than high quality security selection that whether it's like okay, I don't really know how to manage risk or whatever it is, or I'm anxious about the thought of investing all kinds of things. I guess, you know, there probably are people who are able to obtain information that maybe counts as alpha probably exists. I don't know. I remain unsatisfied.
I've asked this question myself. I don't fully know the answer, but my guests, my best guess, intuitively is that within this world that we call finance, there are things that produce value other than sort of you know, making good trades and so forth, that maybe are harder to articulate and so forth, and thus they are providing a valuable service at that front.
But imling your customers.
You're counseling something.
I don't know, but I mean, I would just add on to that, like it it seems just on the EMH stuff, it seems on a simplistic level, if EMH was real, you would never get.
A bubble, right, this is what?
Yeah.
And in fact, one of my favorite moments on the podcast was when we interviewed Eugene Fama, the father of the EMH I and I think I got him to say that like bubbles exist, right, which I was surprised.
Yeah, I know, they hate like they really wrestle with it, like this is there one thing they hate this phenomenon, so they come up with all this stuff. But yeah, we will continue asking the question of why why do we exist? Why does financial media and coverage in pundits and all this stuff exist. We will continue answering this question. In twenty twenty six, maybe we'll have an answer.
Only the big questions why are we here?
Why are we here?
All right, let's listen to the next question.
Hi, I'm Max Niederman. I'm nineteen and I live in San Francisco. Supposing that AI does end up being as transformative as people claim, where do you think the value that that creates will accrue? From their valuations and how people talk about it, At least in SF, it seems people expect the labs to capture a massive chunk of
that value. On the other hand, the have never been profitable, and even then, hardware companies like Navidia and TSMC seem to trade at lower multiples despite being near monopolies with very good margins. So my question is this, when all things are sudden done, which parts of the supply chain will be commoditized and which will capture all the value.
Yeah, I think that's a very fair question. And I think, you know, it's difficult to predict if tech at some point is going to produce the or invent the proverbial AI god, like this thing that solves all of our problems. I would be a little bit skeptical of that. It seems to me like it's going to be a productivity improvement, kind of at the margin for now. So maybe you use it instead of Google Search. You can use it to explain certain terms much more quickly. Some industries are
probably going to use it to design new products. I know there's a lot of excitement around medicine, but where the value will accrue. I mean, some of the big tech companies are so expensive right now in the US. I keep describing this as the coffee pod theory of AI, which is, some tech companies are choosing to basically produce the world's most expensive, sophisticated cappuccino machine, and they're saying that, you know, it produces the best coffee that you've ever had.
And crucially, what they're doing is targeting a market for this machine. Let's say it costs like two thousand dollars. That's basically the entire world, and I'm not sure that approach works. And then you know, some other companies are taking a very different strategy, and they're producing something that's relatively cheap and standardized, sort of like a coffee pod coffee maker, and it's much cheaper and again targeting the
total market of the world. And you know, if you think about it that way, I kind of have a sense of where it's going.
I really have no idea, you know. The one thing I'll say is, I think there is this view that okay Ai can replace human labor, and therefore lots of workers are very vulnerable, and therefore there is gonna be this tremendous like it'll be this very a force of inequality, so to speak. Right, So it's gonna be there's gonna
be the model makers. And I think in this vision that you're asking about these model makers and they're gonna make a fortune and the rest of us are going to have to get by on Ubi or whatever because they've put us all the models have put us all out of work, and look, I think that's possible. The one thing I'll say, though, is that like the tech is a force for like financial inequality, that's already been the story. We don't even need to talk about AI.
With the existing tech giants that we've seen that have built over the last fifteen twenty years out of San Francisco, we've already seen this incredible rush of sort of wealth and income, et cetera to this fairly like small, you know, this one industry. This is very like, you know, very small, fairly small concentration of software engineers and executives and vcs
and so forth. And as such, I do wonder, like, could it be that somehow it's like totally the opposite, that it goes in the other trajectory, and that really it's sort of like a force free quality or something, and that it ends up being a situation in which people were like, capital itself is not as valuable as
it used to be. I don't know. I just think we should possibly consider the idea that what people are predicting that will happen with AI is that what is literally just an extension of what we've already seen, and that to the extent that AI is something new, maybe that'll put us on a new trajector. All right, let's take another question.
Hi, Tracy and Joe, this is Jennifer thirty calling from Seattle, long time, first time. This question is for Joe. Joe, what drew you to your interest in Chinese history, particularly it's modern era. Have you ever considered going more back in time? I asked, because I'm Chinese American with parents who said very little about their lives during the Cultural Revolution and the eighties when the country started opening up. So I often learned through Joe's tweets and book recommendations.
But I had also noticed in my last trip to China that the one historical figure cities pay the most homage to is not Mao or Dungchowping, but actually Sonyette Sen, who was a precursor to these leaders. Thanks love the show as.
Always, so obviously we do a lot of contemporary China episodes, and it sort of seemed like, you know, I should probably understand a little bit more about the history. I started with the ancient stuff. I was like, oh, I'm just going to I'm just going to go back and I'm going to read about the old dynasties and then I'll get to the present. And I sort of like, I found it a little bit hard. It wasn't grabbing my attention to ancient stuff. But then I remembered a
couple of years ago. We did an episode with Adam Posen at the Peterson Institute a couple of years ago at Jackson Hall, and he had just sort of mentioned offhand that he had read asra Vogel's biography of Don Chopeg, and I was like, oh, maybe I'll just start there. That seems like more recent and tractable and I could sort of slot that into my head into something. And I read that and I found it very very compelling, as Adam suggested, and I think that sort of set
off like it. I think reading twentieth century Chinese history helps me to some extent understand the present day. I've never read a Sunyatsen biography, but I'm very interested in him. One of the rare figures who sort of revered in both Taiwan and Mainland, and so therefore someone who is an inspiration to both the nationalists and the communists, which is kind of weird. And he was like sort of a for you know, a an early pioneer of land
reform and so forth. So I think maybe that'll be another thing I aim to read in twenty twenty six A good signette symbiography.
I really like the older Chinese history. I read a really good book. I can't remember the title now, but it was all about the Chinese bureaucracy and government system how it used to be, and you know, one of the most rigorous systems in the world. Arguably you had to take this insane test to get the position. And I remember I also did a bunch of research around the sort of late eighteen hundred's, early nineteen hundreds, the fall of the Imperial family and what it means for
debt markets. That was a really fun story.
Yeah, I should go back and read read the ancient stuff as well. I'm going to add that to the twenty twenty six list.
Okay, let's take another question.
I joined Tracy. My name is Danny Bessov. I'm twenty six years old and currently based in New York where I'm doing my masses at Columbian Financial Economics. I'm a huge fan of the pot and Spotify told me in the last year I was in the top half percent of listeners and maybe now the first time caller as well. My question is this, you have such a wide range of guests with very different backgrounds, and you cover an
enormous amount of information. How much of that are you able to retain and not really call back in everyday conversations or when you do follow up episodes? And how much do you rely on not taking or revisiting past episodes to connect your ideas over time?
This is a really good question. This is a sort of journalistic process question. By the way, thank you for being in the top top percentage of Odd Lots listeners. We appreciate that.
It's good coffee sometime.
But going back to the question, you know it kind of this is obvious, but it kind of depends on the guest, and if the guest says something memorable or something that you really think is insightful. I think we do retain some of that information. I used to retain a lot more when we were editing our own transcripts and publishing them. I really value transcripts, but it was just so much work and took forever, so we stopped doing it. We're hoping to come up with some sort
of solution soon. And the biggest compliment I can pay a guest is saying that, like, I'm going to go back and read the transcript because there's so much knowledge, there, so much information. I just have to absorb all of it.
It was funny. I was a dinner the other night with someone and I said to them, have you ever actually learned anything from listening to a podcast? Because I do sometimes wonder if I ever remember anything. No, that's not totally true. I do, but I also sometimes wonder setting a side podcasts and recall the specific facts. I also have the same thing with books. You know, we
were just talking about that Dunk Show Pang biography. And if someone's like, oh, Joe, you just spent three weeks of your life reading a biography of Dunk Shopang, what did you learn? And I'd be like, uh, he sort of opened up and for a while he was sent down to work on a tractor factory, and then he opened up, and I would be like, you know, there's like I was like, oh, did I really need to spend three weeks of my life to be able to
recall four basic facts. I suppose that there are things that I don't know that I remember, and like my deep storage part of my memory that would be you know, that would come out in a conversation. But I do going back to questions of like why are we all here and so forth. I do sometimes have these thoughts of like do you know how much? How much do we really learn and internalize? And how much is it just fun to have these conversations.
Sometimes we surprise ourselves, yeah, right, Like sometimes we come up with some random fact that's kind of interesting that we learned from somewhere. Just on the note taking part of the question. We generally don't take notes in the interview. We might jot down like a word or two just to remember to come back and ask a follow up question. But yeah, it's a genuine conversation between three people, and we try to keep it as natural as possible.
Hey, Joe and Tracy aj Toss here. I'm thirty seven years old and I'm from Lafayette, Louisiana.
Go Cajun's.
I have a question for you about bitcoin. You guys have spoken about how the narrative around bitcoin changes every cycle, and so I'd actually like to ask you to make a prediction whether you think there will be another cycle for bitcoin where it way out performs everything else, and assuming that it does, what would the narrative be this time?
Thanks guys.
That is a really good question. So the narrative theory of bitcoin is this idea that because bitcoin is essentially nothing, it is able to transform itself into anything. So we've seen it go through these various cycles of transformation, reinventing itself. You know, in the beginning, it was supposed to be just a digital payment system. And there's the famous incident of the guy that bought a pizza and lost a
lot of money that he otherwise would have gained. And then it kind of, you know, it turned into an inflation hedge. More recently, it's turned into a Trump vehicle. I actually had it. I had an idea for a narrative that comes next. But I'm blanking out on it totally. I feel really bad.
You'll tweet it if yeah, I'll tweet it.
It was like two days ago, oh man, and I had this idea and sorry, I'm very tired.
It'll come back to it.
It's the end of a busy season.
It's it's been a busy season, busy year. Look, I have no you know. I was like, oh, now I'm going to give the official odd lots for Bitcoin price target for twenty twenty six. No, I really have no idea. I don't have any idea of it'll outperform again. You know, of course it has been pronounced dead several times many times over the years, so perhaps that's always the reason to disc out the idea of okay, this time is dead.
That being said, you know, look like the I thought one of the most compelling arguments that had of the various narratives over time, I thought one of the most compelling ones had been that it would be sort of this you know, post sovereign money and therefore kind of like a digital gold safe haven. It has not been behaving like one in twenty twenty five. I mean, this is one of the most volatile years on memory. From
like a de globalization and geopolitical standpoint. If you'd think there'd be one year where it's like, okay, people want some sort of money that is disconnected from governments, maybe this would be the year. Maybe they do, but they're choosing for gold. They're choosing the actual safe haven. Bitcoin meanwhile, has underperformed US treasuries. So the US treasuries yet another safe haven that is outperforming Bitcoin in twenty twenty five.
So I really don't know, but I do think that the poor performance in twenty twenty five should be something of a certain Again, people have always said, oh, it's a tech stock hitch well, techtocks have had or a textdoc proxy textocks have done great this year, So it
hasn't even it hasn't even satisfied that requirement. And then the last thing I'll say is that there's a lot of I think legitimate enthusiasm about crypto, particularly in the realm of stable coins, getting back to maybe the original idea, as Tracy mentioned, of a payments platform, but all that is happening on other chains besides Bitcoin, and so even if crypto becomes more of a thing in the financial system, it's not obvious possible, but it's certainly not obvious that
Bitcoin would see any benefit from it.
I do think, though, we shouldn't underestimate bitcoin's ability to reinvent itself. And this actually took me a long time to realize. And you know, he mentioned the obituaries for crypto. I wrote some of those, like I think in twenty twelve, I wrote one.
Yea, so we've all learned our list.
May I kulpa on that. We'll see what happens.
All right, let's take another question.
Hello, Joan Tracy. This is Cynthia from Vancouver, Canada. What is something that Marqua seems really confident about that you think deserves more questioning or more nuanced discussion.
You know, first of all, thanks Cynthia for calling in. The first thing that comes to my mind is I have been I wrote about this recently in the Odd Lots newsletter. I am kind of surprised about how well anchored market based expectations for inflation have been, because there is I think pretty legitimate. There's two things going on. One is, you know, the FED hasn't missed its inflation target for years, and so there's perhaps reasons to think that just already that the FED hasn't been as serious
about two percent as it had been before. But then also I do think there are good reasons to think that in the future the FED will not have the same capacity to target stable prices the way it used to due to politicization, due to the general sort of like populist trend in politics, which is not something distinct
to the Trump administration. That certainly I think the Trump administration has accelerated that process with a lot of the criticism of the chairman and so forth, and so like, I am a bit surprised that if you look at various market based measures of future inflation, five year, five year break events, and so forth, that it has been pretty stable, because that feels disconnected from the way that we basically talk about this topic.
Mine is also related to inflation. I think far more people need to figure out how the CPI official numbers for inflation are actually calculated and produced. And you know, ultimately a lot of it is a series of numbers that are estimated. Those are called imputed numbers, and a lot of them are actual observations of prices which Bureau
of Labor Services people go out and collect. It's actually a really labor intensive thing to do, and most people, you know, they treat them like as a simplistic number, and I think it's much more important to look at
the different components. And actually we're recording this on December eighteenth, and we're seeing a really good example of why it's important to know how CPI is actually calculated, because you know, the number just came out much lower than expected, and it's interesting if you start to break it down to see what assumptions were made and what's actually moving all.
Right, for the next question. This one was just written as a post on audio note, but it's a really fun one where Tracy and I kind of see the world a little bit different, so we have a chance to get into that. This question comes from Diego Aguilar Cannibell. He has where did my intellectual beef with the idea of the term premium start? And look, so this is something that's come up. People talk about the term premium in the in the yield curve, and I'm always like,
what exactly does that mean? So you know the way, like I guess, Tracy, let's tart with you. What is the term premium? Don't ask me, I'm not gonna define it. How do you What is the term premium?
It is basically the extra compensation or premium that investors demand to hold debt, you know, out longer term.
Okay, so here's what I don't get. Why do they deserve extra compensation? Why don't they just deserve the appropriate compensation? Like I buy stocks?
Do I?
Oh, I deserve extra compensation because they're risky. No, I deserve appropriate compensation. I deserve to be compensated, I suppose, But I hate this idea of like extra compensation. We always want extra compensation. But then also, I guess my other issue is that, like I think, if you knew, if you if you had a crystal ball and you knew for sure what the FED was going to do in every policy meeting, it would make for the next
ten years. You know, there's eighty years, so the next eighty meetings, if you knew what that was going to be, I think you would know the exact price that ten year yields should treat it. And so I don't really understand why we can't just say that the yield curve is the market's expectation of overnight rates for the next ten years.
Well, it's it's in comparison, so the extra premium is in comparison to shorter term bonds, and there are some calculations that go into that. I think it's it's, you know, not the be all and end hall of the market, but it's certainly an interesting thing to look at. And when we get big moments in the term premium's movement, you know, if it flips from positive to negative, it kind of tells you a lot about where the market's going.
Okay, on this point, though, let's just press further there. I think there's really key, which is so they're right, everyone admits these are unobservable, right, these are models. There's are models that indicate what this notional term premium is.
The fact that it can flip to negative and it was negative for much of the twenty tens suggests to me like that's another reason, Like I don't understand how this idea that there is holders of long term debt per se need extra because of extra protection or whatever, because apparently they were actually going to a discount on it if we go by the model, what the model said in the twenty tens. So I just find the whole thing. I just find it all very unsatisfying.
I would also say the term premium beef. We play it up a little bit for the show.
So let up for the show.
We hope you enjoy. All right, this is going to be our final question.
Again.
This one was written in rather than a voice note, so here we go. It is from Michael Kahn. He asks a non markets question, more specifically for me to see what was your favorite magic the gathering card and what critical function did it serve in your deck? Bonus question, if you and Joe were a magic card, which ones would you be? That's a very fun question. Okay, so
my favorite was probably my Chevon Dragon. I like the idea of dragons, and it had really nice art and at the time it was a really valuable and powerful card. By the way, I don't know if I'm pronouncing Chavon right, whether it's Chavon or Chyvon. Like, we didn't have a lot of pronunciation guides when I was in middle school. And I also just don't remember how people were saying
these things. It was like thirty years ago. And I say that just because someone someone on Twitter or read it was criticizing me for not knowing that a card that Joe mentioned was an actual card. Yeah, I didn't know that. I thought you were making it up. I mean sounds like, oh, you know, an obvious magic card.
I know nothing at all about magic. I've never played it. I really, I just I don't know how the game works, et cetera. All I only remember one fact, which is that one of my good friend's brother younger brother in high school had a call called Wall of Brambles. Actually, this gets to like the question about memorization. Who the heck knows how that random fact got stuck in my head or what. But this is I hear magic and I just remember this card. I just looked it up.
It looks like this card would cost somewhere between twenty five and thirty cents, so I'm certainly not memorizing it because there's a particularly valuable or important card.
And then what role did the dragon play in my deck? I think I said this on the podcast. I really enjoyed the collecting side of magic, the gathering, more than I enjoyed actually playing it. You know, there's some gender imbalance at the time, and it like sometimes felt weird to, you know, go to war with a bunch of guys. But I really enjoyed putting together the decks and sort of strategizing, and I guess I didn't enjoy testing them out that much. What would we be if we were a card?
Tra you got to you gotta answer this then.
If all thoughts or if us It says if you and Joe were a magic card, So give me a second. Okay, full disclosure. I just asked chat GPT because this seems like a kind of fun question, and the AI generated answer is we would be a blue red legendary creature that rewards drawing cards, talking about weird market mechanics, and turning every small data point into a big compounding advantage.
I'm not sure how you would incorporate discussions about markets into a Magic the Gathering game, but you know, it's nice to hear we could be a dragon. I would say, like,
maybe we would be a Vesuven Doppelganger. And I say that partly because I'm sort of biased to the older cards, the ice age cards that came out in the mid nineties for obvious reasons, and I think the doppelganger, you know, they obviously compliment each other, and their actual power in the game from what I remember, is they can take on the characteristics of any creature that's actually in play, or most of the characteristics, And I think that's you know,
that's kind of what we do. We try to adapt that's right to every conversation to get the best result.
That's right. I also asked you a gpetitas. I didn't really understand. I don't I don't even understand it's results. But then it said why this works to Joe generates flow motion liquidity, and Tracy imposes structure, friction and narrative discipline, which I think many listeners would actually sort of agree with it sort of. Yeah, it doesn't off, so.
That's not bad. But it's not a Magic the Gathering.
No, no, no, I didn't even understand like all this stuff. I can't even I don't know too you are legend. I don't know what any of this stuff is.
Oh.
I do have some good news, which is remember I said that I had lost all my Magic the Gathering cards and I didn't know where they were. My mom actually found them in her basement. They were sort of hidden away. The bad news is I really don't have any valuable ones. I still have the Shaffon Dragon, and I have one that was signed by the artist, but that's about it.
I'm surprised there's not one in there, Like, is there like an antiques road show style show for Magic the Gathering Cards? Like maybe we could do an episode like it's some guy and hear some dealer and like talk through the cards or something like that. I would do that.
Yeah, that would be really So this is the end of the AMA. Thank you everyone for sending in all these great questions. We had a lot of fun answering them.
Yeah, and thank you everyone, just for an end of your crazy year, great year, So really thank you to everyone who everyone who's listened.
And yeah, we definitely hope you listen in twenty twenty six because we have some excellent episodes coming up. So shall we leave it there.
Let's leave it there.
This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and.
I'm Jill Wisenthal. You can follow me at the Stalwart. Definitely follow our producers Carmen Rodriguez at Carman Arman dash Ol Bennett at Dashbot and kill Brooks at Kilbrooks. For more Odd Laws content, gode Bloomberg dot com, slash odd Lots were a daily newsletter and all of our episodes, and you can chat about all of these topics twenty four to seven in our discord Discord dot gg slash out Lots.
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