The Case for a 22% Drop in S&P 500

for those who aren't familiar with their sixteenth century English saints. Well, May's only a couple of weeks away, and the stock market has gotten off to a rip roaring start this year, So is this a good year to follow that old advice in the cliche? We'll talk to a market strategist who says, hey, don't wait, sell now. He'll explain why he's expecting a drop of as much as about twenty two percent from current level in the SMP five hundred. But first, Phil though, I have to ask ask away.

You know it's going to be a strange one. When have you ever owned a pair of Air Jordan's? No, no, but they're very trendy now, even if you don't play hoops. No. I used to buy him when I when I was still a basketball just because the idea is, like you, they'll make you a better player. Well they're good, yeah, they're good basketball sneakers. No, but they're trending now just as a fashion item and in fact, shout out to Mario DeAngelo. Frequent listener Penn Palavars who pointed out a

crazy thing for this week. It's not my crazy thing. Oh good, because I saw it. You did, Yeah, I know. That's why. It's not because I knew you knew the press because he sent it to me to a pair of they well it's this is a BBC story, So they called him trainers. I'd have never heard Air Jordan's referred to as trainers except in the BBC, but pair of trainers once worn by basketball legend Michael Jordan himself.

So Aired Jordan's worn in a game by Air Jordan's himself sold for two point two million at auction, which sounds like a lot, but it's actually less than what they were expecting, which I think is a bearish signal. Oh signal. Wow? Maybe. Well we've been waiting for this, right like it's always some obnoxious number every time we are thinking about like auctions, they were expected to go as high as four million two point two. So I think that's a good segue to our guest, who's a

little bit in the bearish camp, even though it is. Yeah, I think our first guest ever to join us from Honolulu, So yeah, I think he might be. I'm so jealous of him. Hard to be too pessimistic in Honolulu and he's there for a conference, Like, do you think Bloomberg would send us to Honolulu? It's maybe you probably not, Yeah, yeah, bye, but I do want to bring him in. It's Troy Gayesky,

chief market strategist at FEST Investment. Troy, I've been wanting to get you on the podcast for forever, So thank you so much for joining us. Yeah, it's great to be on. Looking forward to it. Yeah, I'm so happy to have you on. So maybe just to start, you

can tell us about FS Investments. Yeah. So, FS Investments was really founded by Michael Foreman with the mission to democratize alternative investments and you know, bring strategies that had only been available to the ultra altar, high net worth individuals or you know mega institutions like CalPERS, or Yale's endowment, and then take those strategies and package them in a way that was readily accessible with much lower standards in terms of size, in terms of liquidity, in terms of fees,

and so over time we've evolved from being mainly focused on middle market corporate lending package through BDCs, some of which are listed, to a broad suite of solutions that range from daily liquid multi strategy funds packaged in a mutual fund wrapper. We run the largest public non traded senior security commercial real estate lending rate. We've recently combined with Portfolio Advisors to bring private equity secondaries to individuals in a user friendly way, so the mission of the

firm remains the same democketizing alternatives. We're just pleased and feel very fortunate that, you know, these strategies are so timely in an environment like we're going now, and you know, when when we think of last year, they're really five alternative strategies that did well from credit reads, multi strts, equity reads, perpetual BDCs, and managed future CTAs, and two of them have a richer opportunities set in twenty three than twenty two, and those happen to be two of

our flagship alternative solutions. So we're somewhat fortunate, somewhat lucky, but we think the business model has served our clients and ourselves. Well, well try, let's talk about that idea that the market is sort of due for a come up. And so you sent us some notes before the podcast in so you see a scenario where the SMP could drop as low as thirty two hundred twenty something percent dropped from here, is the selling may work this year?

I guess? Is the question? Yeah, it be incredibly stunning if if selling in May, or selling prior to May, like I said, note, there's there's no reason to wait. You know, it's not like you're gonna leave ten percent off side on the table. Doesn't work out. And if you think about, first of all, the strongest rallies have always been in bear markets, right, Bear marker rallies are

nothing new. They happen all the time. Usually they're driven by technical factors, and then there's a narrative that's put together to justify it. The more recent one was that, yeah, like inflation is going to slow enough that the Fed won't have to hike anymore, and then we're gonna have a recession and somehow that's going to cause the FED to cut rapidly. But recessions aren't bad for revenue or earnings,

and it really makes very little sense. So ultimately, if you think of where we are, you know, multiples compressed last year significantly, we got down to fifteen point seven five times forward earnings. We've popped back up to let's call it eighteen point four to eighteen point six. Let's go at the rosiest sum that we've bottomed in terms

of multiples, because multiples tend to bottom before earnings. And if you look forward and just take eighteen point six down to call it sixteen or seventeen times trough earnings at two hundred, that gets you to that thirty two

to thirty four hundred. And that makes a lot of sense to us, just from a historical analysis perspective, when we've always thought that this bear market would be meaningfully worse than the twenty eighteen correction or some of those shocks we had in the post GFC period, but not as bad as we had from two thousand oh two and also the financial crisis, and so we always thought thirty to forty percent was a rational range Obviously that

math on sixteen to seventy times trough earnings. The two hundred takes us down about twenty nine to thirty three from the peak in the beginning of twenty twenty two before things got really ugly. And so bottom line is, if you're an investor today and you have still elevated level abate in your portfolio, you haven't gotten the message yet that bear markets occur, they don't end magically overnight.

This is a golden opportunity to use this bear market rally to de risk in advance of potentially very painful

losses over the next six, nine to twelve months. And you know, this is a side topic, but it completely stuns me still at how much inertia there is an acid allocation, and how even when faced with clear evidence that the risk reward of equities is poor, there's very little capital that flows out into strategies that actually have a fighting chance to make you five to eight percent instead of potentially losing you know, fifteen to twenty five.

So I think if I were to take sort of the side of the bulls out there today, they would say, well, you know, inflation is coming down. I think the CPI print this week was what five percent versus six percent last month something like that, And that FED reaction function to Silicon Valley Bank and Signature Bank was so lightning quick. They created that term lending facility, the discount windows open wide. They're sort of reintroducing liquidity, expending their balance sheet again.

You know, I think they boils down to the kids on Twitter would say the money printers going bar again, you know, which is a very obviously an oversimplified reason to be bullish for stocks. But nonetheless, there's a lot of believers in that that notion that the you know, maybe we get one or two more rate hikes from the Fed, but that balance sheet is open for business again. How do you sort of respond to that bullish take

these days? Yeah. Look, so we've always said throughout this period that, you know, the probability of the FED cutting significantly or reprinting money was exceptionally low until they broke things right and real things, and so obviously you had some poorly managed banks in terms of asset liability, mismatch in terms of duration, and they did respond. And that's why, quite frankly, up until last week's data came out on

the FED reshrinking their balance sheet. We kind of moved from a narrative of all right, it's clear that money supplies contracting at the fastest pace in history, balance sheets being drained. Fed's got, you know, at least two hikes at that point, maybe three to four left in him. Everything's going down. And then for a brief window of time you moved to like, is the FED doing QE while they're doing qt can you hike at the front end while expanding the balance sheet? What does this mean

for money supply? What does this mean for the four trajectory of multiples? But then, of course, now that we have more data, you've seen that the balance sheet just started to shrink again, which obviously has negative ramifications for money supply. The FED will more than like the only hike one to two more times. But advocating that the Fed is going to come to the rescue prior to having more downside pain in the economy and markets, we think is very naive at this stretch of the game.

And you do have to give the Fed, FDIC and Treasury a lot of credit. Obviously missed the problem, but they addressed it very rapidly, and it does look like they've so far ring fenced the problem in a number of problematic banks but kept the system rather safe. So, you know, I think we've really for two or three weeks it was very confusing. You had conflicting narratives, you

had conflicting data on how this would play out. But now it's back to the same path of shrinking balance sheet several more, you know, one of the two more hikes, and that just means multiples are way way too high. And by the way, just to go from a historical perspective, you know, when you go back to you know, let's look and assume we bottomed at fifteen and a half to sixteen times for earnings. Remember the multiple bottom in the GFC was nine, right, so that's nowhere near the

pain that we saw then. And the multiple bottom coming out of twenty two was fifteen. Right. We went from twenty five times to fifteen. So in some ways, like our board view, we don't even consider barish, We just consider it like realistic, right, and arguing that in eighteen or nineteen multiple is rational in this type of environment makes very very little sense to us. I'm wondering what you make We had the FED minutes come out this week,

and one of the headlines was the Fed. FED staff is projecting a mild recession starting later in twenty twenty three. Aren't we not supposed to hear from the FEDS saying that they're expecting any type of downturn after some of their missteps on describing inflation and as transitory. I give them a lot of credit for being fairly honest and straightforward that the end game here is a recession, right,

That's how you break inflation. There's really no other way to get through this cycle and bring inflation down to two or three percent, which is you know, their target probably should be three now instead of two, but they're still stuck on two. So that's where we're headed. And you know, the way we describe that to investors is we've really been mired in this ugly environment for quite some time. And by ugly we mean, you know, inflation, simmering,

spreading to services and labor. FED has to hike a lot, shrink the balance sheet, everything's going down. You know. The good news is that we were certainly always going to get out of that and not stay have a seventy style stagflationary outcome. If for an other reason that money supply was already shrinking and the FED was behind the curve but caught up fast. But the bad news is, as we leave the ugly, the next stop is almost certainly what we call the bad which is a classic

old school recession. And you know, when you think of what's kept this out of it so far, it's been the remarkable resilience of the labor market and the US consumer, which is basically single handedly kept the global economy afloat here.

And you know, as the labor market cracks, and we're starting to see signs of that, particularly in withholding tax data and layoffs move from you know, very high paying tech jobs and to lesser extent financial services to the broader economy, there just won't be enough support from consumption to keep us out of recessions. So you know, that is the next stop. You know, at this point, the soonest we could see that is really late Q two,

early Q three of this year. The latest is Q one of twenty four and then you know, kind of circling back to the question on the bullish argument, in some ways you could justify holding onto assets in a meaningful way that have twenty percent downside if you thought coming out of that, you know, hey, the next three years,

you're going to make eight. But remember, the next FED cutting cycle is going to look a lot like the mirror image of the last hiking cycle, where they hiked very, very gingerly from fifteen to eighteen, and they did that to make sure that they'd slayed the disinflation and deflation demon. And this time again barring an apocalyptic economic ALcom or

market calamity, they're going to cut very very slowly. So you're not going to see the multiple expansion from say, you know, later this year early twenty four over the next five six years that we saw from O nine to twenty one. It'll be much more like the O two to seven bull market, where he came into that bull market at fifteen times borderings. You ended that bull market at fifteen times sport. What is behind the rally

right now? Is it just that people are thinking about, you know, the FED potentially pausing and or cutting rates down the line, and how we square that with why they'd be cutting rates to begin with, like something would

be bad happening with the economy right at the same time. Yeah, So that again that it's been really stunning that you've had folks articulated narrative that the FED will cut and cut aggressively because we're going to have a recession and that's somehow good for revenue and earnings, right, I mean, like I just don't understand that for life of me. And and I think this gets back to another point of where you know, bear market rallies are typically driven

by technicals. Right, there's short covering starts, there's DAMA hedging by options trading desks. Then you have systematic trend followers or traders hop on, you know, the bear market rally drives it higher. And then the industry And by industry, I mean you know, strategists, CIOs, analysts try to figure out a way to justify it. And sometimes that justification

makes no sense at all. And did you guys know that you know, typically you know, recessions cause at least the twenty percent drop and earnings all all we did with our our math before was say ten percent drop, which is a lot less than twenty So it certainly could be could be worse. But yeah, the the idea that a recession and a FED that's four to pivot because of it late, we will drive a positive outcome for equity markets is just borderline bizarre, you know. True.

I think one shoe that everyone seems to be waiting to drop next is in the credit markets, and you know, the supply of credit, and it's kind of a hard thing to really gauge in real time. You know, the FED reports, the H eight report and things like that are usually a week or two old. The Senior Loan Officer Survey. I think the next one's not till the middle of May or something like that. How do you look at sort of the conditions in the credit market

to determine whether they're tightening up in real time? And is there any evidence yet that it's come. I mean, obviously we've had all these rate hikes and the failure of a few banks clearly must be making loan officers nervous. You know, where are you? Is there any where you can point to now and say it started or is it still just kind of bracing for that to happen. Yeah, So look, I think it really depends on the market.

I would go back to when you think about when high yield and i G spreads started widen in like Q one Q two of last year, It took until May of last year for senior commercial estate lending spreads start widening. Then it took until say August for middle market corporate private loan spreads to start widening. And then obviously in this risk on period, you've had spreads tightened

back in liquid markets. That hasn't happened yet in private markets we don't expect it to, but more directly, and this gets back to that confusing kind of narrative around what was going on. For a three period. You saw obviously the stresses in the banks during a time where loan officers were already constraining credit creation, so credit standards were already tightening, and then you got this pop up in actually commercial bank lending, a really quick pop up,

and it's like, well, like, what the heck's going on here? Oh, I get it. Everybody's drawn down revolvers, like grabbing cash while they can, while they can, And then you know, of course we expected that to roll over, and that's exactly what's happened. Now that the past two weeks you're directly seeing evidence of the banking situation in regional community banks impacting broader commercial lending. So the big banks are doing more but the smaller banks are doing far less.

And then you know, also from a mortgage availability standpoint, you'd already seen agency rmbs spreads wide and dramatically because the QT, which was further constraining funding to the housing market. That's actually one of our we have a really unique exposure in our multi strategy fund to take advantage of

that that we can maybe talk about later. But you're certainly seeing now ample evidence right that credit conditions are tightening, which further reinforces the concept of how in the world can we possibly avoid recession the next six, nine, twelve months. It's really mission impossible. You know, we always stop the probability, the FED magically threading the needle and guiding us to you know, a five or five and a half percent unemployment without a recession was at tops was a ten

percent probability. Now it just looks, you know, virtually zero. If we wanted to get a read through of the what's happening in the wake of the turmoil with the banks in the stock market, do you think the small cap space would be the place to look, with the idea being that maybe smaller companies have less access to banks and potentially maybe would also be a place where we'd start to see some layoffs as a result of

the credit crunch. It's interesting you say that, because you know, smid cap or small cap factor exposures, we're already really cheap coming into the year relative to large omega, and we actually had that factor trade on. But as soon as the banking crisis started, it's like, all right, like you know, cheap things can get cheaper, or relationships can

get more out of whack. We blew out of that really quick, and ultimately what it does is it delays any compression of that that spread, right, And that's again when you think about just locally more, what's happened to the Nasdaq or you know, Apple and Microsoft in particular, you know, the last remaining you know, fangs that are still performing as as you'd expect as growth companies that aren't grossly overvalued. You know, a lot of that gets back to the fact that you know, those have more

pristine balance sheets. And when you think about smaller cap companies that are clearly more exposed to the domestic economy, that are clearly more reliant upon you know, local small bank financing, um, it's it's unlikely that death situation improves, and you know, I would say one cross current to that which is fascinating to us, uh, just given our footprint and private credit, both in commercial real estate and middle market corporate loans, is you know, the the window

now for private lenders to take market share from banks at wider spreads. It has expanded far more than again we would have imagined six weeks ago, right, and that we expected banks to retrench they had been. We expected better opportunities to service the needs of those that had to roll loans. We'd already seen many companies doing what I politely call bankruptcy prevention DIP loans to reduce the risk of going bankrupt in the event of a recession.

And now that's just even escalating more. So you think about like commercial real estate lending, there's about one point eight trillion loans that are going to roll this year in the next three years, and there's just less financing options for those borrowers, and so that creates a better opportunity if you have dry powder to lend into a mini liquidity vacuum. And it's really the best time to be a lender that we've seen since the global financial crisis.

And you know, fortunately that's one of the three silver line things of this environment. We expect a recession. Obviously the weakest links in the financial system were cracked, but the system is still strong. I'd like to get into that the idea of commercial real estate a little bit.

You know, you mentioned, uh you guys manage a real estate investment trust, especially the property sector roets of or the office rates h have I really just been annihilated this year to the point where you know, it's gotten so ugly that it starts looking pretty I think to a lot of investors. You know, these yields are pretty eye popping? Are there riets and commercial real estate investments in general? Where there's you know, babies being thrown out

with the bathwater right now? Are there are certain sectors, certain areas that that are attractive to well? So I think it really depends right for for our franchise word senior lenders. So the markets coming to us, you had this long period of time where you had the head wind of uh, you know, front and rates were extremely

low and what we floating rate loans. So when the Fed never hikes and then they hike a little, and then they cut again and they cut back to zero, you obviously don't have that same degree of income you'd expected. And then in a world where you had money supply ballooning. In general, spreads in every credit strategy we're tight relative

to a normalized environment. And obviously that's changed significantly. So the opportunities to lend, particularly in multifamily or industrial where the fundamentals look really good, it's just you know, spreads were too tight or LTVs were higher than we would

have liked. You know, LTVs are dropping have dropped materially, and spreads and wide and you know when you when you think about you know, office specifically, So there's obviously a big difference between small footprint secondary tertiary you know cities and in u in the Sun Belt or in the Smile States and major metro you know, office in

New York, San Francisco, Chicago. The way we see that playing out, and we've been articulated this for about eighteen months, is it's going to be a repeat of the slow motion train wreck that we had in Bricks and Water retail. All right, So Brisonmwatar Retail was a real credit concern, a real owner operator concern for for years and you know, ultimately that cured itself with a surprisingly low amount of losses.

But major metro office, as you know, it's very difficult to repurpose major towers into multi family giving the footprints, and there's just going to be a submistantial amount of

wealth destroyed by owner operators. I'd say we'd be cautious on trying to play any short term bounce in any equity read that's listed as we're going into a session, but clearly as that happens, yields will go even higher, and at some point, you know, two to three years from now, we'll start to see real estate broadly rebound

at least stabilize at a lower valuation. So we're always ones to say, in an environment like this, what you really want to do is focus on strategies that have a bright opportunity that happened to have gotten at least slightly better because of what's going on in the banking system and financial markets, as opposed to trying to be a hero in time of bottom in any particular security or asset class that could have meaningfully more downside from here.

That's interesting, So you think it could be another two to three years before we really see the bottom in office rates, especially, I asked, because we had a headline out today JP Morgan orders all managing directors back into the office five days a week. Is it not return to work alone is not enough to solve the issue with office rates in the short term, I guess, well, again,

I don't want to speak specifically about any anyone security. Yeah, yeah, But bottom line is, the trends of outward migration from certain areas of the country had been in place for quite some time. That was obviously amplified by the pandemic in you know, return to work for certain mega institutions alone won't necessarily cause any particular rebound evaluations that you

can point to with a great deal of specificity. I would say, though, again, if you think of real estate broadly, and we have this term called galactic meter version, where you know, after years of outrageous asset out performance versus the real economy and the labor market, you know, we started to go through again, not another lost decade or in nineteen sixty four to nineteen eighty two, but a period where financial assets would would perform poorly and labor

market would be surprisingly resilient and that's actually played out even better than we thought. But it wasn't just about you know, financial assets. Real estate also had a hockey stick like move. You know, Residential real estate you know, up thirty five to forty two percent. Commercial you know, not quite as much upside. And so naturally, when when financing rates go up and borrowing costs go up, you're

going to have some degree of giveback. You know. Whenever an asset class has a hockey stick like move, you know, obviously you give back some of those gains. And and so for broader real estate, whether it's rezzi or commercial, all we're going through is a healthy correction, right, you're

taking out the access and valuations. The difference with major metro office is that that's that's a sustained secular problem, right, That's not like, hey, I probably overpaid for a multi family property at the peak, and I'm gonna my IRR is gonna be a lot lower the next seven years, and I hope risk of default does not existent. I'm

just gonna make less money owning the property. Um, those are areas where they will be realized losses to owner operators that in some cases we'll bleed through into the banking system. So in your notes you said tim your equity exposure and embrace democratized alt because the time for the right alts is still now. I'm wondering then what you would put on that list of the right alts. So there's really three silver lines of this environment. One

seventy style outcome was always a credibly low probability. It's not existing now to repeat of a GFC, given how strong underwriting standards have been. You know where the excess liquidity is still in the banking system, not in every bank, and in the banking system, you know stuff over three trillion of excess slash total reserves versus forty to fifty billion coming into GFC. But the third is that alternatives

have been democratized. Right, You didn't have fixed income to protect the last year like you did in two thousand and two or even the GFC, but you had a series of democratized alternative strategies that actually performed really well last year relative to markets. And you know those five categories supplicitly not all inclusive, were credit reads, multi strategy funds, equity reads, fully invested perpetual BDCs, and CTA's managed future.

So last year, those five groups all performed very well relative to what was going on in fixed income and equity markets, where it was a horror show, as you know. So the difference this year and why we evolved the message from the time for alts is now to the time for the right alts is still now. Is of those five strategies too, have we believe maturely better opportunities to have a darker outlook. And the fifth it's not

necessarily that you're guaranteed to lose money. It's just the history of client allocations to CTAs or trend following strategies is people buy tops and sell bottoms, rinch, repeat, do it again. Very very difficult to time. So you know, multi strates at least we know have higher income now

than they did coming into twenty twenty two. So all things being equal, if you can generate the same amount of alpha, again it's an if not a guarantee, you're starting with much higher cash flower carry, which should lead to a higher toll return. In the case of credit reats, you know you're lending it wider spreads earning higher yields

at lower LTVs. However, so those are the two that we believe have a more positive outlook, and again we think we're very fortunate as a firm to have two of those as our flagship strategies right now, and then to the two that have a darker outlook, at least for the time being. Our equity reads where you know, that was a story of income, small amounts of income, but still reasonable income plus massive NAV appreciation that was then goosed by some of the post pandemic measures by

the Fed and the fiscal stimulus. That's evolved to paltry income with now NAB depreciation or to be mathematically correct, less income plus NAB depreciation at least for the next several years as the real estate market continues to decline and then perpetual BDCs. The good news is income has gone up more than you thought. The bad news is you're going to have more marked market markdowns on owns

and also more realized loss. So again, not not the end of the world, but not as rosy of an outlook in twenty three and twenty four then he had coming into twenty two. So you know, two of the five we think look materially better, Two of the five

look at least modestly darker. In the fifth, it's just more about client timing and investment in seeing so many times people allocate to cincinac trend followers at the precise wrong time, lose money, don't make money for a while, redeem and then rinse, repeat And by the way, like like a lot of the that's you could actually say that just about every asset class, right, Like we're actually looking at at private equity flows trying to get a

handle on how big the private equity secondary opportunity could be. And it's just amazing that like seventy seventy seventy five percent capital ever allocated to private equity was from eighteen to twenty two, you know, when you had much higher evaluations, much lower borrowing costs. Yeah. Have there been a lot of inflows into your managed features strategy? No? So so managed futures we do not. We have a very tiny

strategy that focuses on that. But the flows that had come into managed futures as an industry were very robust last year because the performance was very was very strong, And I wonder are the are the trends just not as well defined to this year and easy to follow? Do you think? Yes? So the master thesis coming into twenty three was it would be very difficult for markets to replicate the degree of trending that you had in

twenty two. Right. It was just like you go through O eight in early oh nine and then you get into twenty ten to twenty twelve and you have more range mound choppy, sloppy markets. So we thought from a return expectation standpoint, you have to lower your return expectations. That being said, we certainly didn't see them getting hit

to degree they have so far this year. The more problematic issue is that you know it was setting up for an exact repeat of what we've seen historically, where you know you have great performance, you have the non and eagle be correlated return profile. Everyone weaks up and says, oh, we should allocate to this, and then they allocate. Yeah, yeah, yeah, Well Troy Gaki, chief market strategists at FS Investments in Honolulu, vill Donna Jealous meet Try and Honolulu to do the

he should have told us before. Come on, Trey next time. Sorry about that. We can't let you go just yet. However, we do have a tradition here on what goes up where we're gonna have to hear about everyone's craziest thing of the week. Holda, why don't you get it started? I think this is the first time we're talking about this. You and I are working on a new project. Yes, and for that new project, the producers had to interview our family members. Did that happen too too? They called

my sister they did. Yeah, so I want to give a shout out to my sister Marilla who your sister Marilla who? Since they interview her, she had to go back and listen to a bunch of What Goes Up episodes And now she is a crazy Craziest Things finder, Like, I mean, the stuff she sends me is amazing, but she always sends it like after the episode air, so it's always too late. So I'm just gonna list a few of the line A right, okay, Tesla made a beer with cyber hoops, gigab beer b I er. Then

she sent me do you know the sore Aldi. Yeah, they have like a clothing line now really yeah, it looks kind of funky. Then she sent me Coca Cola bottles with yellow caps because it denotes that they weren't made with corn syrup, so that they're passover friendly. Okay, she's just send me so much stuff, So I just might have a new Crazy Things Chef correspondent. I think we do. I mean she even went to Aldi and took pictures of the stuff. Listeners can't see it, but anyway,

mine is New York City rats Are. The rats are New York City rats Are. Is earning one hundred and fifty five thousand dollars to lead the road in fight not enough. I would double that. I mean, I'm interested to see what happens. Like, he's got to get rid of all the rats. She she she's got to get rid of them. So that's is that a new possession

or is that a standing? No. Remember, they announced the position a while ago, and they just hired this woman who used to be the Department of Educations rat reduction. She spearheaded a Department of Education rat reduction efforts. She's got her work cut out for her. I don't know. She might be a good podcast guest on that. Yeah, I don't know, Trey, that's pretty good. I don't know. It's nothing to do with markets, but well, it's a salary.

I was going to make a joke that it's like one of the Jolts, you know, figures that had to because they hired her. You know, the rat one hundred and fifty grand not enough, not enough to handle all the rats in New York City, couldn't pay you enough, Trey. How about you? You You say anything crazy this week? Well, I'll tell you I think the craziest thing has happened.

You know that was actionable recently. It's just, you know, we already had these ridiculous levels of industry volatility, you know, with an expectation that you know, at some point we'd have a recession in you know, when you think about what's been going on in the housing market, it's obviously

a downturn. And if you had asked me six weeks ago, when I thought in versaios which I won't get into all the complex description, but bottom line is they benefit from a steeper eel curve and slower refinance activity would start to perform even a shadow of what they did from really O eight through twenty twelve. I never would have guessed at But then it had the mini banking crisis, obviously,

the Ford curb reprices. Suddenly these securities that had very little no cash flow have the potential to cash flow pretty significantly. And so the massive levels of industry volatility combined with a potential shift in FED direction, even a mild one, just caused the value of those two to go up dramatically. And it was just something we never

saw coming, you know, even six weeks ago. So it was one of the few negatively chord expressions that really showed up in terms of performance a lot faster than we would have dreamed of. Interesting, I have to look those up. Look those up on the terminal. All right, you like alternative assets, tree, I got this is I specialize in very very alternative assets. So here to hear it, vil Dona. Are you familiar with the song Hot for

Teacher by Van Helen? No? No, no, really, no I am it is, And I know we've seen the video very It's a very good video. A lot of production value in the video. I'll leave it at that, But um, the guitar Eddie Van Helen was playing in that video, it's like the red guitar with the white stripes across it going up for sale at Southby. The Hot for Teacher guitar. It's a Kramer guitar. It was made and I think eight nineteen eighty two at the Kramer green

Grove Plant in Neptune, New Jersey. Wow, right near Asbury Park. Interesting, which is something I did not know. It's gone up for sale at Sotheby's. So it's time to play. The prices precise, the prices precise, right, Tree, bad news, You're now a game show contestant on our show. The prices precise, I guess I'll phrase it this way. But this hasn't gone up for sale, so we're dealing with the what Sotheby's expects it to finish. So we'll go with the

high end. Okay, So the first question is do you think more or less than those air Jordan's for two point two million. I've never heard of this. I never heard of Oh my god, no, got it bad? Got it bad? No, come on, no, very famous song. My guess is going to be so bad. What do you guess? High end estimate for that Cramer guitar seventy five thousand dollars seventy five thousand dollars, Tree, I'm going I'm gonna go Tree, think of all those those heavy metal head

fans of ours. He's telling you to go higher. Yeah, but hey, heavy metal guys, they have a lot of money. I don't know, I don't know. Yeah, it's it's a narrow market, right, yeah, it is. It is. You'll go higher, You'll go seventy five thousand and one dollar. Yes, go high. They're saying a three million million, Oh my god, two to three million. Put it this way. The opening bid

is one point eight million dollars. So wow, just saying, Valdonna, you know, if you're looking, I don't understand why present for me for my next birthday? Your birthday just passed. Your next birthday isn't for another year. All right, Well, if it's still for sale, you don't want to get me. Oh my gosh, I'll look this up. Sparash. He's only going seventy five, but he won. So how for teacher gets her? It's a lot of liquidity out there. Talk

about asset inflation. Yeah, anyway, try great to hear your thoughts. He told us to sell may Maybe we'll bring you back on Saint Ledger's Day to see how it went. Let me think it goes. Yeah. Well, hey you guys, great to be on. Thanks so much. Enjoy the rest of your day, and I'm looking forward to get a little surfing in while out here. Yeah, where that sound screening? I will thank you Troy What Goes Up. We'll be

back next week. Until then, you can find us on the Bloomberg Terminal website and app, or wherever you get your podcast. We'd love it if you took the time to rate and interview the show so more listeners can find us. You can find us on Twitter, follow me at Bildonna Hire. Mike Reagan is at Reaganonymous. You can also follow Bloomer Podcasts at podcasts. What Goes Up is produced by Stacy Wong, and our head of podcasts is Sage Falman. Thanks so much for listening, and we'll see you next week.