The Big Risk for Risk Parity

to raise interest rates and shrink its balance sheet. What does it mean for markets? We'll get into it with the chief investment officer of a firm that focuses on artificial intelligence. But first, the two things I have to tell you, um. First of all, my crazy thing this week is custom made for you, so I okay, I expect big things from you on this Secondly, condolences UH to you and Jeffrey Gunlock and all the other Buffalo

Bills fans out there. I know this is this is a bad week, so bad that it's Veldona's turn to hide under a blanket during the podcast this week. And Vildonna, I think if there were like a pure play company that makes folding tables, I would assorted them this week. What do you think? Uh, yeah, it's it's a bad time for Buffalo Bills fans for all of Western New York. I was depressed on Sunday on Monday. I'm depressed today. I don't know how I'm going to get through this answer,

but thank you. I appreciate it. At least at least everybody watched the game was like record numbers of people who watched it. And now everybody's discussing overtime rules for the NFL, which is which is kind of cool. Yeah, but by everyone, you mean that the team that lost, the fans of the team that lost because of the Hey I saw, I saw Larry David was talking about it too. It is they've already amended it once. So we'll see. We'll see. One can hope maybe they'll they'll

let them play that game over. But I'm excited about this guest. Uh this week. We haven't talked to him in a while. He's got a new firm he's involved with. Tell us about him. Bring him into the show here, let's get this going. Yeah, it's Max Kachman. He's the chief investment officer at Alpha. Trey, and Max, I want to welcome you back to the show. Thanks so much for having me. It's awesome to be back. Max. It's it's been a while, and I don't think i've talked

to you since you've started this new gig. And I'm gonna I'm gonna confess something here. Max. Whenever I hear someone talk about artificial investing or part of me artificial intelligence in the investing world, you know what I do is I kind of nod my head and I stroked my chin as if I know what's going on. But just between us, don't let this get out. I really have no idea what they're talking about. I'm hoping you can give us all your takes on the market in

the show. But but first let's get into that notion. What are you guys up to. What is sort of um going on with AI focused investing at the moment, What are the applications and where do you see it going uh in the future? And if you don't mind the for dummies version, I think it would probably be best for at least for me. I don't know about Baldonna. Sure, well, I'm sure. I'm sure e Donna would understand the intricacies of things like recursive neural networks and you know, transformers.

But Mike, for you, I'll dumb it down. Yeah, thank you. I appreciate that. So, first of all, it's really important to differentiate artificial intelligence from the broader quant ecosystem because a lot of folks know about quant fund Systematic funds have trillions of dollars um you know, a stematic strategies have trillions of dollars under management. AI as in true artificial intelligence is very rare, and in fact, that's why I left a pretty strong position to to join this

plucky startup to lead the new frontier. True artificial intelligence is really based on the concept of a neural network, and a neural network is kind of what it sounds like. It consists of neurons, just like your brain, and those neurons fire in different ways to process information, kind of the way human mind process it, but very differently from

how a traditional systematic strategy process it. The best way to think about it is your typical quantitative strategy, even if it uses machine learning, which is kind of part of that AI phrase geology, but it's not quite what we consider authentic AI. It has a formula, and that formulas designed to systematize a way of thinking or an

economic theory. And then that formula has you know, a bunch of factors, and those factors have coefficients, and basically the machine learning part will at a high level kind of adjust to coefficient so that we think that value is going to do well, it will be a positive coefficient. We think value is going to do not so well, that could be in that g of coefficient, right, but you're still basically making a decision. In that example of that we go longer short value factor. A unsupervised deep

learning matterwork can actually create its own features. It can create its own view on what a factor is. It does not have to be this preconceived notion of value, large, momentum, quality, etcetera. And so that's a key thing about true AI strategies is they can adapt on their own without human intervention. They're also going to be unbiased. And and this is something that I think a lot of times when people think about quant funds, they say, well, quant funds don't

have bias, and that's not quite true. They don't have emotion as in a formula. As a formula, it doesn't really care if the markets down fifty or up, you know, but it will have a bias because it's based on again systematizing a way of thinking. That thinking is inherently biased. As as I said, it was created by a human. An AI model actually does not have that bias in

it if it's an authentic a A model. And that's something that I think is going to be even more important as we get into these markets, which will of course discuss where things are changing quite rapidly and we're going to see patterns emerge that we haven't seen before. You're gonna need something that can adapt on its own and adapt quite quickly, and that is to me a

key hallmark of authentic artificial intelligence. So before we get to talk about the market, Max, I really like always talking with you because you're up for talking about lots of different things, including cryptocurrencies, and I believe you guys are working on an AI program for a crypto fund if you can tell us a little bit about that. Yeah, So this is currently kind of our cutting edge R

and D efforts that we are working on. We're we think that AI and digital assets and I want to go beyond just saying cryptocurrency, because I think that actually is a arroware universe. So and I know you like things like pudgy penguins, um, you know, and n f t s. So those are all tradeable assets within the digital asset ecosystem, and we think that AI is a natural way to analyze those assets and trade them, in part because it's a brand new asset class. This is

something that a lot of folks don't realize. I've seen a lot of traders who were good in currencies, are good in cross asset kind of jump into the crypto world. But they bring in those same concepts and they don't necessarily work in crypto space. Like, for instance, a lot of resistance and support bands in the currency markets are based on actually gentle bank purchasers or you know, companies that are hedging their their cost of goods. That doesn't

exist in in crypto. So when you see our supported resistance level, it's actually driven by different factors. When we think about AI as as well, it really feeds on data of course, Like that's that's a something pbably should have said earlier, right, aies source of brain food is data. The higher quality of a data a smarter b AI will be able to be and data on the blockchain is very clean and therefore highly nutritious to an artificial

intelligence engine. And addition to that, you have really low efficiencies in the market, so high quality data, low efficiency, and then sprinkling top about a really high volatility that is kind of the most fertile you know, a sybal if you will, for for AI to drive alpha from UM. In addition to that, you've got really unique parts within the crypto space, such as the actual code basis that UM.

A lot of these protocols are developed in and those are things where you know, one bit of code, reading another bit of code and making a decision on it and analyzing it is actually something that opens up even more doors. So we think there's a lot of really amazing up tunities. I can't talk about too much on the specifics, but next time I'm on I hopefully we'll be able to share a lot more. But we do think that AI and digital assets are a perfect marriage. Max.

Let's bring it into the present tense a little bit with what we saw this week in the markets, and I'm curious how AI would work with sort of an event risk type of situation like we saw this week with the fit. I mean, I know there's been a lot of work done on sort of natural language processing and try to you know, have computers listen or or read text and and and make a decision based on that. Where is that in in sort of the big scheme of things with with Aiyes, it's still you know, is

that still a little too tricky to to do? Is it something that they need sort of the uh, you know, the the organic intelligence of a guy like you to handle that end of it. I mean, you know, can a I listened to Jerome palell and and pick up the nuances and and that or is it just you know, a matter of reacting to the market signals as he's speaking. It's a great question. There's going to be different answers

depending on who you talk to. I know, on on one end, there's one fund that thinks they can actually train a camera. Well, they basically put a camera on Powell live and they try to to construct the nuance of his physical body language and the nu once of his speech inflections to figure out what he's doing. Yeah, now, I they when I asked him how well about work? They kind of got quiet, so I'll just leave it

at that. Well, if Pal's got a pretty good poker face, so he might not be the best, he's he's gotten better since let's let's let's let's let's let's put it there. I think I think Marrio track he might have been a better test case so that you know a little more out of me, Yeah, a little more. You know

his Italian. So there's there's that. But I do think when it comes to things like n LP, it's a question of the decay and what I mean by decays between when the word is uttered and transcripted to when the market reacts. What's the lag and can you actually

capture that? A lot of times the answer is no, So we actually haven't found a lot of utility and kind of real time n LP because a real trader, who is you know, able to hit buy or sell as soon as they here even like half of the word is going to be a little bit quicker than

you know a program will be. It's fascinating area of research because I feel like, you know, you could read the text of a speech and think one thing where you could see someone recite the same speech with different inflection and sort of different emotions and and come away

with something something different. So it's a it's a fascinating area of recent I think, yeah, and and I think there's a lot of words that especially central bankers use were almost dead of vocabulary is not a normal person's vocabulary.

And as FED watchers, like as economists, we kind of know what they mean when they say words um, like you know, we're gonna be humble um, or we're gonna be um, you know, like persistent for for instance, like different contexts that could be very hawkish are very dubbish. And a traditional n LP model is just gonna say this is positive or negative sentiment. It's not gonna be quite as good unless you train And this is this

is actually where we get into some interesting stuff. And I have seen this work where you train a model on a specific person. You can do that of central bankers. I actually had this idea originally back in I think, and at the time it wasn't able to really figure out how to do that. But I actually wasn't going to train a model back then on Bernanky and uh and and draggy and say okay, can we figure out based on ner specific vocabulary they're specific mannerisms if they're

you know, being hawkish or dubbish. But back then it definitely didn't work. Perhaps in the future, as compute increases, we can you know, really isolate that and and that will be a very interesting situation where you have actually algorithms making those split second decisions. But we're not quite

there yet. So speaking about this week, I was hoping you could sort of just go over briefly and very quickly your takeaways from the FED meeting, and I wanted to ask you if you think the market is correctly interpreting what happened with Paul this week. I think the market is been having a really hard time get getting its sea legs this January, right. I mean, just look at the action we experienced kind of right after the meeting, we had the really big drop, then overnight we started

dropping further and then came back up. I don't think Powell said anything really dramatically new. In fact, you and I were talking to about that um right right after the meeting. To me, it seemed like just the hope is gone, right, that was the initial reaction, like, okay, but the Powell put is out of the money. It may be completely off the table. And that was that Initially like oh crap, like we're the training wheels are

off uh situation for for investors. But then overnight, all of a sudden, you know, we got some some I guess newfound hope or newfound um confidence that the markets can do well on their own. So if you think of like again with the training wheels example, it almost seemed like you know, you can take your your kid.

You kind of sent them down the hill and they start really wobbly and they think they're going to fall, and then they eventually they start peddling and they're like, oh, look at me, I'm going But at no point that pow will say anything to me. That was different. That was you know, unexpected. They've done a really good jap

of telegraphing what they were going to do. And the thing that I always watched for is kind of the speed speakers score on the fringes either the most hawkish or the most ubblish, and see if do they start changing their tune, And they did the most dubbish. Fet speakers UM and FMC members got a lot more hawkish in the you know kind of weeks coming up to this meeting, So it shouldn't have been a surprise that the Fed said, Yep, we're gonna hike in March, we're

gonna end QE, and we're gonna look at tightening. That's pretty much what I think everyone should have expected. Yeah, and maybe that's you know, maybe they did, and that's why we saw such such altility before the meeting, even

you know, kind of priced it in. But Maxell, well, how are you thinking about the rest of the year now, um, especially in context of well, if if treasuries and stocks are selling off together, you know, uh, that's sixty forty portfolio maybe is not as diversified as it once was. You know, I think this is a issue with people have been talking about for a year, year or more now, but it certainly seems to be an urgent topic now,

you know. Or is it possible we'll see sort of assimule tenious weakness in both the bond and the stock market And how do you how do you play that? Yeah, So, first of all, the answer is yes, I think that's likely. That's actually my base cases that we will see weakness in stocks for at least some part of this year. I do think we'll um, eventually be a little bit higher than where we started, but we will likely see a bowl correction and we'll also see rates go up.

And you know, the last time when rates were in a secular uptrend, I think Bill, Donna and I weren't even born yet. So Mike, Mike had been around for you for decades. But full disclosure, I was asked to uh to give Mike some some singers before this show started. I'll try to get him in where where I can. I remember putting my money in the bank and earning something on it that was for the Those were the days. What what's such bank? Is that like like like a

physical ethereum wallet. I would I would roll up the quarters and nickels and dimes in the little paper wrappers from my paper routing and ride my bike down and on a little paper to deposit slip and the interest was good. Those were the days. Bring back bring back those you know, five percent savings deposit accounts. Max's he's talking about the early Yeah, I I think it's kind of turn up the sanctuary, you know, yeah, novel there

that that Mike was was spinning a little little Oliver twist. Yeah, artificial intelligence back then was like if you got the cheap code to Donkey Kong. You know that that was that was about as far as it went. I I do think with that you may be careful what you wish for, because I think we could get those five percent interest rates, but that also, you know, I believe came with like a twelve percent mortgage. That's fair, so you know, fair point. Those of us who locked in

you know, low mortgages are are pretty happy. Probably at this point, I do think we are going to see this secular rising rate environment come back, and that really posts the challenge not only for sixty forty, but the thing that kind of supplanted sixty four for a lot of institutional portfolis, which is risk parity. And while you know risk parity folks will tell you about it's very sophisticated.

Um having run risparity strategies before, I can tell you that generally speaking, it still relies on the crucial concept of bonds go up when stocks go down, and duration risk diversifies equity risk. If that no longer is the case, you need to create something different. I think it's gonna be really important to be more dynamic. It's gonna be what I mean about its dynamic in terms of asset classes. So the concept of a balanced portfolio is really important.

I think if we break it down to its really building blocks, it's a risk asset that can go up and produce capital gains, and then a diversifying outset that maybe produces a little bit of income and steady returns, but primarily is there to hedge the risky asset. So what those two components are. I think that's gonna be more dynamic going forward, and the new old Weather strategies are going to be playing with those concepts. So they

may hold equities and bonds like current strategies do. They may also hold some amount of um commodities like some resperity strategies, but they may at various points hold totally different things. They may actually hold some amount of crypto and some amount of you know, loans, and some amount of stocks, and those assequences will have to keep varying. It's gonna be a bit of a musical chair strategy.

And I know it sounds a lot more complex than it is, but the unfortunate byproduct of our reality is things do get more complex with time, and if you stick to you know your traditional approaches, I think you're more liable to actually suffer long term and not achieve your objectives as an institutional investor. Do you do, uh, commodities play a role in in diversification these days, there's that chip already say out of it, you already missed that boat. I I think they do. But again it's tricky.

You know. I think a lot of times people say, oh, commodities are a good inflation hedge, and in my research I found that commodities are good as a hedge against inflation shocks, but there not necessarily a hedge against steady rising inflation. And there's a lot of factors that figure into commodities, especially once you started actively trading around them, that are very idiosyncratic. So you know, OPEC doesn't necessarily care about your inflation hedge, your your income story when

they decide, however, to raise or lower supplies. And you know, when people in OPEC cheat and actually ignore the supply constraints, then you know, it creates a whole different situation. And you know, then we have things like, well, if we get the infrastructure bill pass, that will certainly send some commodities up higher. But if Conversely, people stops, you know, spending as much on restaurants, that will send other commodities down.

So so it's a more complex ecosystem, and I think looking at it at a very high level, like as just a single as a class, is not a good idea. I think commodities are pretty idiosyncratic. So talking about the high level, I wanted to ask you about some maybe positive catalysts for the stock market, because the idea is, UH, sort of the Powell and the FED can move sooner and quicker in terms of hikes this year because the

economic backgroup backdrop is strong, right. And then the second part of this is, and I've heard Gina Martin Adams talking about this on different interviews that she was giving this week, is earnings and how that might sort of help support stocks at least in the near term. Yeah, I think that the FED starting earlier is good. There's obviously some folks who think that OFF is starting late,

and I I personally don't think they're starting late. I think they're starting at the right time, and I think they're signaling like signaling it well, So kudos to UH to share Powell on I think navigating this about as well as possible. I do think that earnings are also going to be a very important catalyst, and it's a question of not so much what the street expects, but what investors expected. We've seen a bit of a divergence there.

So if we look at the most recent kind of you know, Q four earnings that have been released so far, I think um generally speaking, beats were punished a little bit and losses were punished severely. And that's an important concept, right. So that means even the beats on average or not quite what investors expected. And that was my fear going into this reporting season, is that the actual investor expectations

were higher than what we were going to see. So then the question is, as we go further and as we get into you know, like April, are Q one expectations going to be more in line. That's gonna be again using that training Wovels analogy, the market has to peddle on its own. Now the fat is not going to come in. I also think it's important to note that fate works both ways, and I'm talking about the

flexible inflation targeting. So just as the fat was comfortable with inflation running over the two percent line for a while there will be actually be comfortable with inflation running below that. So Powell made it very clear when he spoke this week that he cares about the labor market and not as surprises, asset prices inflating upwards a byproduct of the stimulus that needed to be done to help

the labor market. And I think investors need to really internalize that because because I don't think that's a blood all right, Max, you know, Valdanna has a blanket on her head for this podcast. I'm gonna put my tinfoil hat on my head for a minute and uh and tell me what you think of this, uh conspiracy theory of mine. Actually it's not really a conspiracy theory. I don't really believe this is a conspiracy, but I could see sort of the monetary and political outcomes uh coming

out like this, and that is Um. Jerome pal comes out this week. He's very hawkish. Um. We've obviously had this correction in the stock market. The year goes on, we get into the summer, we start lapping the comparisons to last year, and we see that maybe inflation has cooled off, at least come off the boil off the seven percent. That allows pal to get a little more dubbish, you know, a little less hawkish perhaps. Uh. In the

summer early fall, markets rallying again. Uh. By the time the mid term election comes around, everyone's forgotten about this ugly spell in the markets, and politically it's beneficial to Biden and the Democrats. In theory. Again, I don't really believe that's a conspiracy theory, but I could see it playing out along those lines. But I'm just curious, you know, what do you think of that scenario, and what do you think about the mid terms in general? I know

they're traditionally uh, kind of a weak year for equities. Um, you know, is that going to be the case this year? Is there is there political risk that we're gonna have to deal with later in the year or what? Well, I think the second part of your question is the easiest. Yes, well, you will have to deal with political risk with midterms around.

They are very important mid terms. I don't want to be that guy who comes on you know every time versus elections, save this it's the most important election of our time, because you know, it's always easy to make that comment. I don't think this is this is the most important midterm election of our time. I do think it's an interesting one as a someone you know who's a bit of a political wonk and also market participant

who trades on that political information. I think there's some unique features which are well known, which is one, you obviously have a very tight margin and that margin needs

to be maintained by the Democrats. And I think with that you also have these you know, two outliers in the Senate who need to come in line at some point, and I think they will because I think at the end of the day, there are going to choose their party and they're gonna want to keep that majority because they know if they don't have friends on the other side, even though they've skewed pretty close to it, and so you know, I think Mansion and Cinema are going to

eventually support build Back Better, and I think the timing of that is going to be important. We know that in Washington a lot of times the theatrics are geared towards giving you that like last minute conclusion. I think that's probably what's gonna happen. And I actually still think build Back Better passes that does, by the way, create a little bit of a fist put in the markets that I don't think it's totally priced in yet, but just how much that gives us is a bit of

an open question. I think there we do want to be careful, you know, I wouldn't start overweighing on industrials and materials and financials just yet, but I do think those are v sectors that can do better from from that, and and beyond that, you know, there will be other related midterm theatrics that are are going to start happening.

I think there we're going to start seeing that more towards you know, kind of early third quarter UM is when things will really start kind of getting interesting from a political standpoint, the drama builds, the drama bills. Max. I wanted to ask you about some geopolitical risks that you're thinking about, because obviously we have a bunch of stuff going around Russia and Ukraine, and so how should investors be thinking about that. Do you think that some

of those risks are properly priced in? And what potentially would would an escalation mean for the price of oil and inflation and so on. Sure, So, so, one thing that we know about Russias, they tend to be the most aggressive in winter times because they control the heating power for Europe and when Putin goes on, and you know, this is one one area where it's nice to have been born and raised in the country because I can actually listen to Putin in Russian speak to Russian Russian public,

and he uses very colorful language. Let me just put it that way. One that I I'm not going to say on the podcast, but but he does talk about how he can basically freeze all of the people in Europe, and there's some truth about it. That's why you never see very meaningful sanctions come out. Now. The biggest concern for Putin, of course, is that Ukraine somehow becomes part of NATO. So that's the that's really the gamble and

the risk. I do think that a conflict there is likely, unfortunately in terms of a kinetic conflict, because you just have this powder keg on both sides, and even though it's cold, it's very dry, and in the sense that anything could spark it off. I think for the markets that's not going to be as big of a risk as what's going on further out east um and there I'm really thinking about China and Taiwan. So last time China flew their jets times over Taiwanese airspace definitely a

very strong signal. I do think Taiwan has perhaps the best defense forces of any small nation, and that defense force is called t SMC. Taiwanese Semiconductor Company. Is probably the best deterrent because it is so vital to all other nations around the world that no one can actually afford to risk China taking over t SMC. And for that reason, you know, even as there kind of saber rattling gets louder, I still think it's a big tail risk, but it is also a tail risk that I don't

think we can fully discounts. So that to me is kind of the biggest geopolitical risk. But to take your question and look at it a little higher level, but I think is driving a lot of geopolitical risk. And the last i'd say, like five years or so is de globalization. And that's a trend that's been pretty secular. We've seen a lot of businesses move from just in case inventor sorry, from just in time inventory to just

in case inventory. And what I mean by that is it used to be that um, you could realize much better margins if you just ordered whatever you needed. You had want typically one plant, usually in China or you know, another kind of low labor cost country that you'd get all of your goods from, and that made for good margins and it made for quick um inventory is talking,

so you didn't need to build up a lot. Well, now, since tradewards really began and this deglobalization movement began, you've to just in case inventory where you have a factory in China, for instance, and then maybe a second factory in Vietnam that's able to take on additional capacity necessary. So that means companies are no longer as dependent on a specific country. And while that can sound good, it also lends a political or a politicians more leeway to

create more strenuous ties with those countries. And that's where you know, trade wars as they progress can actually um exacerbate because companies have created hedges, if you will, against those situations. And and that to me is a more concerning secular trend. Fascinating stuff, Max, you know, I it's such a great point about Taiwan semiconductor, especially given the state of the chip supply chain these days. And also I didn't realize Pewton, you know, said they said the

quiet stuff out loud like that. I thought, you know, I know, it's always assumed he could freeze everyone out if he wanted to. I didn't realize he actually talked about that. That's pretty that's such Tiden up your straight jackets. It's time for the craziest things we saw in markets this week. I think it's that time. It is that time. As I said, I've Telor made my craziest thing for the one in a evil Danta Hirich. But I want

to hear yours first. What's here. I appreciate that after my tough bill's loss, but I want to first say you and I never explained the blanket thing to our listeners. So I want to give a shout out to our producer Laura, who makes me and you hide under blankets sometimes for better sound quality. So that's that's what we're talking about here. I have a bunch of blankets over my head. Yeah sometimes I just tied under them. You know. Yeah, I know you did, because I'm feeling it, you know. Yeah,

that's that's fine, that's fine. I think that's okay. Well, okay, so first or I guess second. After my my little blanket thing, I want to give a second shout out to Ben Emmons of Medley Global Advisors. He's a frequent guest of the podcast, and he actually wrote something into me that I wanted to read out loud. It's not exactly markets related, but it's money related, so I'm gonna allow it. He sent a USA Today story in the headline is a woman finds out she won three million

dollar lottery prize after checking her email spam folder. So thank you Ben for sending that in. I love that, and I think it is markets related. I think lottery tickets are a fine investment choice, you know. Yeah, sure, it's kind of a tail risk fund. I'll all out, all out. Yeah. And so that's just a reminder that if anybody else has seen anything weird and wants us to know about it, you can give us a call

on the Crazy Things hotline. That's six four six three two four three nine zero, leave us a voicemail, hit us up on Twitter, and maybe we'll play or talk about your weird thing or crazy thing on the show. And then for mine, I have a story courtesy of

another pod friend. It's Crystal Kim. She was on a couple of weeks ago and she wrote about the FOMO E t F the Fear of missing out E t F. I don't know if you saw this story, but this fund buys meme names and other sort of popular high flying stocks except except right now, it has so many dull names in it. But its own manager said the strategy puts him to sleep. And the PHONEO et F right now is almost in cash. It's the biggest holding

is Chevron. It has Campbell Soup in there. And then I was checking it out and I look for Game Stop in AMC and neither one are part of this fund anymore. That is pretty fascinating. Well, they're they're not. No fear of missing out on the drops in those stocks. I guess that's that's pretty good. Yeah, fear of missing out on capital preservation, I guess is the theme this week. All right, Max, that's pretty good. What do you got first?

Have you seen anything crazy? I mean, so whenever I look for something crazy on on short notice, I tend to go to the metaverse. Now and uh, you know, you'll you'll never stopped short of kind of fun figures. So I'll start, I'll sort of that and then I'll drill down to the actual thing that I thought was crazy. They just released the data for the fourth quarter of virtual land sales in metaverse three million dollars. So that

was interesting. And you know, we we we know about how seeing inflation has been going on in the real world. But Sandbox virtual real estate one last month, two lands in the center land went for over two point three million dollars. So um, I I don't know if that means and that's just for the land or you you build on them, and if you have to hire like virtual developers to you know, come in and build stuff.

But it seems expensive to me. But but but the thing that really got me was someone bought a yacht in Sandbox. So it's not land, it's just really a virtual yacht that guess you can sail around this virtual world. You guys have any guests for how much they paid for his virtual yacht? Oh? Well, I think I saw this. I want to say half a billion. Well, if if that's Mike's guests, I'll go with that too, because I did not see this story, and I'm notoriously about at

guessing did you say half a billion. Yeah, it was well that that that would be a lot um No, it was half a half a million. It would be closer six or so. Yeah, that's by a few zeros there. Yeah, so pretty affordable then, uh you know, I guess and yeah, and that's like a bargain now actually cheaper than I guess a real yacht. So relative to you know, buying two point four million dollars for a plot of land, maybe that's what's that's what we should be doing now,

is buying U n F T yachts in uh the metaverse? Max? Are you locking in low rates in the metaverse? Buying purchasing land over there? I don't know. I mean, I I kind of feel like someone does need to do. But I'm going to train the AI to figure out how to arbitrage different land plots and maybe we can become just a virtual landlord, you know. Um, I don't know. Didn't someone pay up, pay up big to be like Snoop Dogg's neighbor or something like that? There was there

was a couple of stories about that last year. Um so so yeah, and you know it's funny to me. So when I was just starting out like writing code. It was one of this thing around this is this will now date me, Mike, so I'll join you the old guy camp. There's a thing called vermal or virtual reality markup language. It was. It was kind of started like in the mid nineties, and it looked a lot like the metaverse. It never took off. No one cared

about it. It was kind of silly, but you could create these three dimensional virtual worlds by just writing like kind of very basic code. Well, I mean, maybe you know that should have been something I pursued further. I don't know, but yeah, yeah, I get that dust off those old ploppy disks. I guess. I see kids in the in the coffee shops now and they're all wearing like nineties clothes, and I feel like, hey, that's my generation.

You can't wear rape jeans like that and band shirts that you know weren't around, uh or haven't been around for like twenty years. That's pretty good. Well, the only coating I ever did was as a kid. It was basic, and it would be like line ten print Mike is cool, and then line twenty go to ten and it would just scroll rout and then I'd save it on too literally a cassette tape on my there's a radio shack. I think computer ride. Anyway, I've really dated myself there, boy.

All right, as loyal listeners will know you're you're what's known as a potter Head, not a pothead. I do know some potheads, but a potter Head. I love Harry Potter. A big fan of Harry Potter. So J. K. Rowling's first book, Harry Potter and the Philosopher's Stone, is heading to auction. It's a very special edition, one of just five hardbacks printed in so it's are you rare gem In fact, her name is listed, I believe is Joanne Rolands, not even j K. So that's going up for sale.

Now I want to put you two to the test. There's something else going up for sale or went up for sale, actually, and that is the hat Milannia Trump wore to her first state dinner when her in President Trump had the macrons from France over for dinner. That sold at auction. Unfortunately, it's sold in soul the Salona blockchain currency that that's not doing so well. So so

here's the prices right for you. Vill Donna, which had a higher value the expected value of the Harry Potter hard back hardcover or Milannia Trump's big floppy hat that she wore to a state dinner UH with with the leaders of France UH and his wife. Give me a value on each. Okay, you know I told you I've been I've been watching Antiques Brow Show recently because I'm so bad at guessing this, so it's like preparation for me.

And they see all the things that come up on the show, and I try to guess and I'm always way off. Anyway, I'm going with Harry Potter. I have to I know what the hat was supposed to go for. I believe I think it was something like five hundred thousand dollars. I honestly could be misremembering that, but it was part of an n f T collection, which you forgot to mention. It was like all a big package, I believe. But I'm going with Harry Potter. Okay, I'm

gonna I'm gonna keep a poker face here. Max. As a a student of political culture, what do you think Philosopher's stone or Melani's hat? Great question, Um, so you're gonna get some AI. I want an AI model on this stuff. If you can get an AI model on my alternative assets, then we're going to be billionaires. There is a way to do that again when when you guys have me on next time, I might be able to share a few more insights. So I'll just leave it as a foreshouting with for now. I'll keep my

you know, human brain working. So I think that if we're not hedging for the fact that it was sold on Soul, then I would echo what val Donna said and go with Harry Potter. I would think that you can get seven figures. There's enough Potter heads out there who've done well, and I think they could build that up. Conversely, despite how successful Trump's spack was initially, I don't think there's as many folks who would want the hat and also not on n F T S. Yeah, it's it's tricky.

You have to sort of uh, you know, engauge the enthusiasm of Harry Potter fans versus fans of the Trump both very enthusiastic fan basis. I would say, um, so I will say that Milania's hat was was a disappointment. She wanted to think in Soul. Of course, Soul crashed. She only got a hundred and seventy thousand dollars for the hat, but the Harry Potter book is only expected to sell for thirty thousand pounds, so about forty dollars. So so, but I kind of agree with both of you.

I think the Potter heads uh will show up in force. And that's just you know, the hat already sold, the book has not sold so very well. Could be could be a push, but us as far as expected value, L I think you should bid on that one, uh and see how it goes. Yeah, it's time for me too. Yep. All right with that said, I think that is all the time we have. Max. Always a pleasure to catch up with you, and good luck with the new venture.

We definitely are gonna have to catch up again and have you back on and see how all how it's all going. Thanks so much, guys. Always great to catch up with you as well. Thank you, Max. What Goes Up will be back next week. Until then, you can find us on the Bloomberg Terminal website and app or

wherever you get your podcasts. We'd love it if you took the time to rate and review the show on Apple Podcasts so more listeners can find us and you can find us on Twitter, follow me at Reaganonymous, Wildonta Hirich is at Wildonta. Hirich also followed Bloomberg Podcasts at Podcasts and thank you to Charlie Pelletta. Bloomberg Radio What Goes Up is produced by Laura Carlson. The head of Bloomberg Podcast is francesco Leavie. Thanks for listening, See you next time, um,