Will Wall Street Ruin Bitcoin? Featuring Ben Hunt and Alex Gladstein

As traditional financial institutions line up to get into bitcoin, a debate on whether it can stay permissionless and censorship resistant.

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple PodcastsSpotifyPocketcastsGoogle PodcastsCastboxStitcherRadioPublicaiHeartRadio or RSS.

This episode is sponsored by Crypto.com and Nexo.io.

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Ben Hunt is the founder of Second Foundation Partners and lead author of Epsilon Theory. Alex Gladstein is the chief strategy officer at the Human Rights Foundation.

In this conversation, they discuss one of the most important burgeoning topics of the year: In a world where bitcoin (BTC, +4.91%) goes mainstream with traditional financial institutions, can it keep its more renegade spirit? More important, can it keep its more renegade features such as permissionless access and censorship resistance?

Ben and Alex join for a good faith, spirited discussion of whether the bitcoin we know today will be preserved or whether it is doomed to be co-opted by the financial powers that be.

See also: SEC Commissioner Hester Peirce on a Bitcoin ETF, Custody Rules and What’s Next for the SEC

Creating Communities of Distributed Trust

39:04
up the down escalator no III think I
39:07
think there are real possibilities of
39:09
creating communities of distributed
39:14
trust right which is which is at the
39:17
core of the to in my mind the whole
39:19
effort right have now how do you create
39:22
a community of distributed trust and and
39:27
and what I’d like to see is that that
39:29
distributed trust is applied to areas
39:32
that are not so fiercely guarded by the
39:38
you know the the powerful you know
39:42
states governments and and and
39:45
businesses right because again it when I
39:48
think about how to play the long game
39:49
here I think that is possible to carve
39:53
out
39:55
areas of got resistance but what I
39:58
really mean is areas of sovereignty self
40:00
sovereignty over issues again they’re
40:02
not so fiercely guarded as money yes
40:04
about the state and and so again this is
40:07
an issue of tactics or other than
40:09
strategy right and and and so that I
40:11
would pursue a different tactical
40:14
approach to the I think the goal we all
40:17
or most of your listeners share with you
40:20
and I for sure it it does seem to me and
40:27
I want to bring this back to the run of
40:29
iris now right which is that everything
40:34
you’re describing whether it’s whether
40:36
it’s your tactical approach my tactical
40:39
approach I
40:42
I think it’s tempting to think oh the
40:44
instability that the virus brings is
40:47
going to be an advantage in fighting
40:51
this long game right I actually think
40:54
it’s it’s it’s it’s a very much
40:57
disadvantageous to both of us right the
41:00
both of our tactical approaches here and
41:02
and I don’t think you have to look much
41:04
farther than what happened in Hungary
41:07
right over the last two days where the
41:09
the Hungarian Parliament and this has
41:12
been building for a while right and
41:14
event but Hungarian Parliament in
41:17
response to the throne of iris emergency
41:21
and it is an emergency gave really
41:26
dictatorial powers to to Viktor Orban
41:29
the the Prime Minister where he now has
41:32
the ability ability to rule by decree
41:34
right don’t have to pass the law doesn’t
41:37
have to go to Parliament whatever the
41:40
executive says is law there’s no time
41:43
limit on this now in hunger there’s a
41:47
new law that if you spread false
41:49
information I think and use as the
41:53
executive describes this what at stake
41:54
or not you’re in prison for five years
41:56
and if you try to leave the areas of
41:59
confinement quarantine that they’ve set
42:01
up that’s in the this this is what
42:04
happens I think in weaker states
42:07
go back to some you know idyllic state
42:09
of nature where you know you can set up
42:13
your you know Kingdom of Wakanda you
42:15
know alright what happens is they’re
42:17
taken over by thugs they’re taking them
42:19
by warlords and by thugs and and you
42:23
know in Hungary is uh it’s a member of
42:26
the yeah I mean I mean it’s a core
42:28
member of Europe so when I when I think
42:31
about what’s going to happen in the next
42:33
year and a half in Indonesia what’s
42:36
gonna happen the next year and a half in
42:38
Egypt it’s going to happen in today
42:40
what’s happening right now in Iran for
42:42
God’s sakes I I don’t think it works to
42:46
our advantage
42:47
III think that the impetus in every
42:50
country and particularly in the weaker
42:52
States is going to be for reclaiming of
42:55
the physical of the violence of the gun
42:59
and so this is why I think it’s more
43:03
important than ever that we identify
43:06
each other in our communities of empathy
43:09
in our communities of our pack right so
43:14
that we can fight this long game this
43:18
long war and so we can support each
43:19
other so anyway that’s not I’m just
43:23
trying to bring it back to what’s
43:25
happening today and and how we should
43:28
think about this unfortunately I don’t
43:29
think it’s a great opportunity but I
43:32
think it’s something that we all need to
43:35
come together even more around so that
43:38
we can can stray stay strong or the the
43:42
dark times that are ahead and I do think
43:44
they’re dark times well never one to
43:48
mince words and and and I certainly
43:50
appreciate the perspective on I’m
43:52
slightly more optimistic for the reasons
43:56
that I outlined you know in the physical
43:57
realm but in the digital realm right is
44:00
the internet still a bastion of freedom
44:02
and can you ultimately get people to act
44:05
freely outside of you know some of the
44:08
more restrictive social media platforms
44:11
for instance but just any type of
44:12
peer-to-peer communication system
44:14
peer-to-peer digital realms would seem
44:17
if you’re more conducive for the silent
44:20
distance the quiet resistance yes and
44:22
that individual thesis but how exactly
44:26
we get there not not debating that it
44:29
could get ugly I want to change gears
44:32
for the the last a little bit that we
44:34
have and just talk about your
44:37
understanding of the investment you know
44:40
as I guess for this generation of
44:45
investors because one of your more
44:47
popular posts this is water and yeah
44:51
it’s still water it kind of talked about
44:53
this shifting mindset where deflation
44:56
expectations that were driven by
44:58
technology are now inflation
44:59
expectations there’s and this isn’t
45:02
necessarily new but I like the way they
45:04
laid it out the the globalism that had
45:09
permeated the the macroeconomy for so
45:12
long is now becoming more nationalistic
45:13
now in some respects that’s not a bad
45:16
thing because now you might have
45:18
countries that are more resilient in the
45:21
face of issues like pandemics when when
45:24
today you know we’re seeing just how
45:26
levered we are via global supply chains
45:31
you talked about the kind of shifting
45:33
from you know capital markets into you
45:36
know true market mechanisms just
45:38
political utilities and um and then just
45:41
overall how financialization is kind of
45:43
exacerbated you know all of those trends
45:46
what what’s what’s the what’s the next
45:49
step in in financial markets right yeah
45:51
if if you run out of the capacity to
45:53
print if you run out of the capacity to
45:55
spend let’s not even talk about the u.s.
45:58
let’s talk about some some country like
46:00
like Hungary they don’t necessarily
46:02
control their own currency it’s a small
46:05
but usually functioning democracy what
46:09
does a market system look like in a
46:11
situation like hungry and then how do
46:13
you ever get back to normalcy or how do
46:18
you set the reset button so that the
46:24
short answer is that for in a I’ll go
46:30
back to
46:32
I’m gonna go back 2,500 years yeah this
46:37
is the academic in me right I can’t I
46:38
can’t I can’t give you a straight answer
46:39
right what you’re asking has all
46:43
happened before like it’s all happened
46:46
before right so Peloponnesian War you’ve
46:52
got a thens and Sparta the big countries
46:56
you know fighting each other and then
46:59
the question is well what happens to the
47:00
little countries what happens to ya
47:05
you know magar you know all these these
47:07
these little city-states and the the
47:11
Athenians they’re trying to get their
47:13
their allies together in one of the the
47:18
little allies is saying well you know
47:20
but you know you’re asking us to
47:22
sacrifice everything is all for you I
47:24
mean this this sounds this justice out a
47:28
great deal and the Athenian ambassador
47:31
says you know it was ever thus the
47:33
strong do as they will the weak do as
47:36
they must strong do as they will the
47:39
weak do this they must
47:40
and nothing has changed in 2500 freaking
47:44
years when it comes to the ability of
47:49
countries to chart their own course to
47:55
deal with the exigencies of power hungry
48:02
will do as they must even weaker
48:07
countries than hungry will definitely do
48:08
is they must and the strong do as they
48:10
will so what they will when it comes to
48:15
Europe when it comes to the United
48:16
States when it comes to Japan which
48:17
comes to to China is that there are no
48:20
limits on you know printer Gober right
48:24
there are no limits on you know we we
48:29
haven’t even really touched yet modern
48:33
monetary theory in the notion that well
48:35
there’s not even a relationship between
48:37
spending and taxing right
48:38
you can run deficits as much as you want
48:40
go on go for it we’re just getting
48:43
started man
48:45
getting started hey we’re not at the end
48:48
game of this where yeah it’s like it’s
48:52
like this is halftime hey this this
48:55
isn’t the last few minutes of the fourth
48:56
quarter
48:57
with how governments are going to
48:59
transform capital markets and the fourth
49:01
key utilities with how they’re going to
49:03
you know transform the meaning of money
49:06
into what supports political power yeah
49:09
this is just half time so I I think we
49:14
really do have to take that long-term
49:16
perspective that the printer can go burr
49:20
for a lot longer and it doesn’t matter
49:25
who gets elected you know you know it’s
49:27
it’s it it’s all the same that the last
49:30
10 years have been the greatest transfer
49:32
of wealth – I call it the managerial
49:35
class then I really think anything in
49:40
history it has come through stock
49:42
buybacks through stock sales through
49:44
stock based compensation it’s all
49:46
happened in the last 10 years and it’s a
49:48
transfer of hundreds of billions of
49:50
dollars of wealth to managers not
49:55
entrepreneurs not founders not Shinya to
49:59
managers managers and when that much
50:04
wealth is transferred to that number of
50:06
people in such a short period of time
50:08
it doesn’t reverse itself yeah you know
50:11
you know people don’t the the cheese may
50:14
move but people still want their cheese
50:16
yeah and and and I just I just think
50:20
it’s so important to remember that we
50:24
really are playing that long game to
50:26
remember that the strong do is they will
50:28
and the weak – as they must and to have
50:32
in mind a set that that we’re just half
50:34
time right now and that we need to play
50:39
the game accordingly because what you
50:42
don’t want to do is you don’t want to
50:46
yeah you don’t want to storm an
50:48
entrenched machine-gun nest you know
50:50
with you know huzzah now is our time you
50:53
know then you you really do I think want
50:57
to play the long game
50:58
I think there
50:59
a real power of conviction and belief
51:03
that allows us to play a long game
51:06
mm-hmm and to keep it all together
51:11
of course people like you doing your
51:13
podcast it requires people like me doing
51:15
our writing and most of it all it it
51:18
requires a critical mass of people who
51:22
whose greatest regret would be to give
51:26
up and to be co-opted by the powers that
51:30
be rather than play the long game and
51:32
fight the long fight I can’t think of a
51:36
better way to wrap up this conversation
51:39
than calling for conviction and long
51:42
term ISM and a market remedies panicked
51:45
and and you know short termism generally
51:48
drills the day then where can people
51:51
find you on twitter I’m easy it’s it’s
51:54
it’s all epsilon Theory all the time so
51:56
at epsilon theory and epsilon Theory
51:59
comm it’s for you to read and love to
52:03
love to have you on board it’s a it’s an
52:06
excellent read always I’ve been
52:08
following you for years now and and
52:10
definitely appreciate your commentary
52:11
and watching it at all even as we get
52:14
into a slightly darker period and you
52:16
can tell for those that are tuning in if
52:19
you can hear the background noise that
52:20
naptime just ended so we we just wrapped
52:23
up with the most perfect time because I
52:25
just I just heard my kids wake up and
52:27
surprise that they haven’t run in here
52:28
already thank you for having me Ryan’s
52:32
really a pleasure anytime Thank You Ben
52:35
and stay safe
52:36
YouTube take care

Epsilon Theory Podcast: Bitcoin: Is That All There Is?

In this kick-off Epsilon Theory webcast, I’m joined by renowned cryptocurrency miner and trader @notsofast for a wide-ranging conversation on Bitcoin and crypto.

To put it in crypto and Epsilon Theory lingo, we talk about talk about DeFi, the “Saylorization” of Bitcoin, and brainstorm about how to keep the animal control officers focused on the huckster raccoons rather than us too-clever-by-half coyotes.

To put it more simply, we’re talking about this:

Can Bitcoin preserve its revolutionary potential after a Wall Street bear hug?
I’m highly skeptical, but @notsofast has some ideas on how to make this work. The end result of this conversation is a challenge and a research project for both of us … and for you!

Ben Hunt: Direct Personal Action: Covid-19 Masks: (Front Line Heroes)

54:26
Eric it’s not gonna stop then at some
54:29
point in this crisis I know things kind
54:31
of something snapped for you because we
54:34
got to the point where the government’s
54:35
basically not doing anything terribly
54:38
productive I know at one point I was
54:40
actually following a story where there
54:42
were paramedics in New York City
54:45
dumpster diving behind the hospital
54:47
looking for n95 masks because nobody had
54:51
their act together they weren’t able to
54:53
order the right ones at some point
54:55
something snapped for you and you just
54:56
heard about this stuff and you said I’m
54:58
gonna take personal action to get n95
55:01
masks into the hands of the people in
55:04
the front line who need them
55:05
tell us what is front line heroes but
55:08
more importantly how did it come about
55:09
and what was your experience I mean
55:12
you’re you’re a very comfortable finance
55:14
guy with a great career great reputation
55:15
I’m sure you never imagined yourself
55:17
starting a charity before this all
55:20
happened something happen for you and
55:22
all of a sudden everything changed tell
55:23
us what that was like you know what what
55:25
clicked for me Eric is that
55:28
I’ve been railing about our our trickle
55:30
down economy for so long right where
55:34
where the the policy fiscal policy
55:37
monetary policy particularly it’s really
55:40
designed to support what I like to call
55:44
the the naked sinews of power and it
55:48
really comes to a head in a crisis where
55:51
you reveal that this Pleasant skin of
55:53
democracy and capitalism that that we
55:56
all believe in and and once so
55:59
desperately for ourselves and our
56:01
children it’s it’s just a skin right and
56:04
then underneath it are all these
56:06
policies which are designed to prop up
56:08
and bail out and support the status quo
56:12
wealth and an economy of the of the very
56:16
wealthy and the very politically
56:17
connected and what really clicked for me
56:20
in this this come in nineteen crisis was
56:22
it’s the same thing with medical
56:27
supplies its trickle down its trickle
56:30
down Eric where the very well-connected
56:33
the very politically connected the crony
56:36
capitalism that we see in in our economy
56:40
it’s the same thing in our health care
56:42
where you know supposedly we have these
56:45
millions of n95 masks that are
56:48
stockpiled and unavailable and yet like
56:51
you there are there are horror stories
56:56
of doctors and nurses and EMTs and in
57:00
firemen and policemen and first
57:01
responders who are forced to put not
57:06
only their own lives but when you talk
57:08
to the to these these heroes right what
57:11
they’re really concerned about is
57:13
bringing this risk home to their
57:14
families and that’s what they are forced
57:18
to do in this trickle-down system we
57:21
have not just for wealth but for medical
57:25
supplies for protecting again we call
57:28
them frontline heroes the the doctors
57:30
the nurses the EMTs the firemen who are
57:34
who are responding who are fighting this
57:36
war for us so that that’s what clicked
57:40
you know what
57:41
snapped in me Eric was was to to find a
57:45
way not to compete with the federal
57:49
government and FEMA and the state
57:52
management authorities right not to try
57:55
to buy a million in 95 masks and drive
58:01
up the price and you know do all that
58:04
which is a real problem but I’ll be
58:06
damned if I was gonna wait for FEMA and
58:09
these state emergency authorities to
58:12
find the time to trickle down masks to
58:16
the to the people who need them so
58:18
desperately so that was that that was
58:21
the I say the inspiration for for our
58:24
effort and I’m gonna I want to plug it
58:27
right now right it’s frontline heroes
58:31
usa.org all one word frontline heroes
58:36
usa.org and though the way it came about
58:39
was this is the the crazy world we live
58:43
in right Eric we’re where social media
58:45
is both horrible but he’s so many ways
58:48
but it’s also wonderful at connecting so
58:51
many people I got a Twitter DM from an
58:55
epsilon Theory reader who works for
58:57
Intel and he said you know look we’ve
59:00
got we’ve got a ton of employees intel
59:03
does over in China and I reached out to
59:07
a couple of my friends over there you
59:09
know they can they can buy these these
59:11
in 95 equivalent masks they’re they’re
59:14
pretty they’re plentiful over there in
59:16
China you know they’re not that
59:18
expensive and so I’ve had a couple of
59:20
buddies to go online order some in 95
59:24
masks ship him over here to me and you
59:28
know a bag of a DHL bag of like a
59:30
hundred masks and then I’m giving them
59:34
to a local hospital or clinic that that
59:36
really desperately needs them he was
59:39
calling from he reached out from
59:41
Portland Oregon where you know obviously
59:43
the in the early days there was a lot of
59:46
need for the for this equipment
59:48
okay so listeners who want to help get
59:51
personal protective equipment in the
59:53
hands of our frontline heroes
59:55
by going to frontline heroes usa.org
59:58
they can make a donation on the website
60:00
that directly results in effectively I
60:03
don’t want to say this too bluntly but I
60:05
want to anyway bypassing FEMA and all
60:08
the of the federal government
60:10
and actually getting the stuff to the
60:12
people who need it right now that’s what
60:14
we’ve done Eric we’ve we’ve created an
60:16
end-to-end distribution system where we
60:19
are not only able to buy and source
60:22
these masks where they are plentiful and
60:25
where they are cheap which is typically
60:27
over in China we’re getting them in
60:29
small quantities we like to call it like
60:32
an underground railroad of PPE we get it
60:35
over here to the States we get it tested
60:38
at a at a Medical Center to make sure
60:41
we’re getting quality merchandise and
60:44
then we are getting it directly into the
60:48
hands of the individual doctors and
60:51
nurses and EMTs who then distribute it
60:54
to their teams we can’t get ten thousand
60:58
or a hundred thousand masks to a
61:01
hospital system that’s not what we’re
61:04
about
61:04
what we’re about is getting a hundred
61:06
masks 200 masks to a clinic in
61:11
Indianapolis to a hospital in New
61:14
Orleans all around the country we’ve
61:17
been able to make these direct
61:19
connections with these frontline heroes
61:22
who are in actual urgent need of this
61:25
equipment to date we’ve raised over
61:27
seven hundred thousand dollars
61:29
we have bought and distributed over
61:33
60,000 in 95 equivalent masks to more
61:37
than six hundred individual clinics
61:41
hospitals EMT departments you name it
61:46
all across the country and I gotta tell
61:49
you Eric we’re just getting started man
61:52
we’ve got a lot of entrepreneurs and
61:54
business people in our audience I hope
61:57
that your actions will inspire some of
61:59
them to think about what kind of charity
62:02
they could create what what words of
62:04
either motivation or advice would you
62:05
have to someone who’s considering doing
62:07
something like
62:09
maybe they’ve figured out a different
62:10
way that they’d like to help our
62:12
healthcare heroes or someone else
62:14
through this crisis well the the first
62:17
recommendation I have is just do it just
62:20
do it right if you’re waiting for
62:22
someone to organize you if you’re
62:24
waiting for someone to give you
62:25
permission you know that’s that’s what
62:30
we’ve been so ingrained and in custom to
62:33
that that’s what that’s what government
62:36
in big corporations that’s what they do
62:37
to you they make you think you you can’t
62:40
act unless you are being led or
62:44
organized by them and so my the first
62:47
thing and the most important thing I’d
62:48
say is that’s a crock you just get up
62:52
and you just do it you just do now when
62:55
it comes to actually raising money right
62:57
and it is important I think to operate
63:00
under the the 501c3 framework both to to
63:05
take in donations and and have it you
63:08
know enjoy that that tax advantaged
63:11
properties of it which is really
63:12
important but even more so it really
63:15
enforces and requires an element of
63:18
oversight and documentation that that is
63:22
so important when when money’s involved
63:26
now to establish a 501c3 from scratch is
63:30
pretty hard takes a lot of it’s not hard
63:32
it takes time what we were able to do
63:35
and I think what what many of your
63:37
listeners will be able to do to to
63:40
really I’ll say formalize this and to
63:43
get it started as a as a registered 501
63:47
C 3 is to find an existing 501 C 3
63:51
charity and in your community your
63:53
organization and partner with them to be
63:57
a program or initiative of that existing
64:01
501 C 3 organization so somebody who’s
64:05
already got the IRS letter designating
64:07
them as a 501 C 3 piggyback on them
64:10
partner with them and use their IRS
64:12
letter correct that’s that’s exactly
64:15
what we did and I think it’s a way to
64:18
get these programs up and moving more
64:22
quickly than
64:23
the delays in the red tape from from
64:25
getting your own 501 C 3 designation I
64:28
think it’s important to have that
64:31
designation and to have the oversight
64:33
and controls that that requires but I
64:36
also think that you can move more
64:38
quickly if you find an organization in
64:42
your community an existing 501 C 3 that
64:45
you can work with man I can’t thank you
64:47
enough for a terrific interview before
64:48
we let you go your epsilon theory
64:52
newsletter is one of the most popular
64:54
and one of the most fascinating in the
64:56
industry tell us briefly about that and
64:58
where’s the website and Twitter handle
65:00
so people can find out more sure well
65:03
it’s easy to find it’s epsilon Theory
65:06
comm and on Twitter it’s at epsilon
65:09
Theory you know it comes from the old
65:13
investment equation of alpha and beta
65:16
there’s a third term on there called
65:18
epsilon and usually you know epsilon is
65:22
efore error but honestly Eric that’s
65:25
that’s where all of the behavioral
65:27
economics lives that’s where all of I
65:30
think narrative lives we call it the
65:33
error term but I think there’s a lot of
65:35
information there so that’s epsilon
65:37
theory calm and at epsilon theory on
65:40
Twitter I thought you were gonna tell me
65:43
the e is for extraordinary monetary
65:45
policy and fiscal balance sheet
65:47
expansion a fantastic reading though and
65:50
in great insights so I highly recommend
65:52
it to our listeners we’re gonna leave it
65:54
there
65:54
Patrick’s our resna and I will be back
65:56
as macro voices continues right here at
65:58
macro voices calm
66:07
macro voices is a listener driven
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66:12
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66:30
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66:34
townsend and Patricks resna eric goes
66:38
great to have been back on the show what
66:40
did you take away from the interview
66:41
well I thought the most important thing
66:44
that he said which echoes something I’ve
66:45
said before is the one thing that you
66:48
really almost have to get at least
66:51
mostly right in investing is you’ve got
66:54
to have a view on whether we’ve got a
66:57
backdrop which is deflationary or
66:59
inflationary or maybe it’s in between
67:02
and and you have a moderate view but you
67:05
got to have some kind of view because
67:06
the investments and the way you
67:08
structure your portfolio is either gonna
67:10
work or not going to work based on that
67:12
and I think we’re headed for a secular
67:15
shift that I don’t know Ben doesn’t know
67:18
none of our guests have been willing to
67:20
really you know put a stake in the
67:22
ground and lay out here’s what’s gonna
67:23
happen
67:24
because I don’t think anybody knows
67:25
what’s gonna happen but all the
67:26
ingredients are there over the next few
67:29
years for deflation to eventually end
67:31
and give way to inflation and I think
67:35
that the politics are gonna play a big
67:37
role in this we’re seeing all of the
67:39
different political parties seeming to
67:42
favor more what effectively is
67:45
monetization and you know it’s it’s
67:47
interesting how each of our guests have
67:49
different views on this we got a few
67:51
emails about dr. Lacey hunt making such
67:54
a big deal saying look the Fed doesn’t
67:57
have the ability to spend money all that
67:59
they can do is to loan money and provide
68:03
liquidity into the market and that’s all
68:05
based on this idea Patrick that when the
68:07
government engages in deficit spending
68:10
the Fed is not directly buying that debt
68:14
instead
68:15
it’s being sent and there’s you know
68:17
free market price discovery occurring
68:20
because a private sector party is buying
68:23
that debt from the government and that
68:25
allows the interest rate to be set at
68:28
market rates and the Fed is not allowed
68:30
to buy that debt directly from the
68:33
government well if that’s the whole
68:36
intention of the Federal Reserve Act but
68:39
in practice the way it works is that
68:41
debt has to get sold to a private sector
68:45
banker who is going to turn it around
68:48
two days later and sell it to the Fed at
68:51
a markup that that’s not you know
68:53
private-sector market price discovery
68:55
that’s just a sham that allows the
68:58
primary dealers to mark up what they’re
69:00
buying and sell it back to a guaranteed
69:03
buyer of the Fed who’s effectively
69:05
monetizing I don’t really agree with dr.
69:07
hunt and other people who say that the
69:10
Fed can’t spend money there they’re
69:12
indirectly doing so by working around
69:14
the intention of the Federal Reserve Act
69:17
and I think they’re already doing that
69:18
to a large extent anyway let’s get to
69:21
the postgame chart book Patrick you put
69:23
together another terrific chart Dec
69:25
listeners you’ll find the download link
69:27
in your research roundup email now if
69:30
you don’t have a research roundup email
69:31
that means you haven’t yet or registered
69:33
your free account at macro voices.com
69:35
shame on you you can remedy that by just
69:38
going to macro voices.com and looking
69:40
for the red button on the homepage that
69:42
says looking for the downloads Patrick
69:45
let’s go ahead and dive in here on page
69:47
two this looks like a chart of the S&P
69:51
but you got a bunch of other secondary
69:54
studies around the S&P what’s going on
69:57
here right so what we had was the sp500
70:00
we’ve been drawing on analog of what a
70:02
bear market would look like and going
70:04
through all sorts of storylines over the
70:06
last month but what what I really wanted
70:09
to touch on was what’s a growing thing
70:11
in the market is that everyone’s
70:13
focusing on the big behemoth stocks that
70:15
have been running like Amazon fresh new
70:17
highs and all these other mega cap
70:19
stocks that have been running and it’s
70:21
been driving the Nasdaq and when you
70:23
look at the Nasdaq which is the black
70:24
line on there we can see that it we
70:27
almost approach
70:28
the pre bear market high and really the
70:32
bigger question to ask is how did the
70:34
Nasdaq pull this off and what’s really
70:37
amazing is is that it’s just a handful
70:39
of stocks so when you look at the five
70:41
mega cap stocks the largest market
70:43
capital I stocks in the NASDAQ and the
70:46
S&P 500 and they just have a monstrous
70:50
weighting into the indices so in the
70:53
sp500 those five stocks make up 20% of
70:57
the weighting so that means the other
70:59
495 stocks in that index make up the
71:02
other 80% and therefore as go those
71:06
stocks goes the whole market and what’s
71:08
interesting is that when you look at the
71:10
indices that don’t have the market cap
71:13
weighting of those five stocks it paints
71:15
a much different picture so what I have
71:17
here is the Dow Jones which is price
71:20
weighted then you have the London
71:23
footsie in yellow you have the emerging
71:25
markets you have the Euro Stock 50 as
71:29
well as the Russell which is the small
71:31
cap indices and what you can identify
71:33
here is that once you take out those
71:36
five mega cap stocks the indices look
71:40
incredibly weak everywhere in the world
71:42
and this is what I continue to believe
71:45
is giving us the evidence that this is
71:47
still truly a bear market and a bear
71:49
market rally just because you have
71:51
enough market participants willing to
71:54
crowd into a few of these mega stocks
71:56
and drive their prices higher is not
71:59
really reflective of the underpinning
72:02
conditions from a breadth perspective
72:04
that of a very deteriorated equity
72:06
market once you leave those five stocks
72:08
and so to me it’s still a bear market
72:10
rally and it’s still rolling over
72:12
we’ll see certainly next week once we
72:14
get past the option expiration gamma
72:16
pins whether or not another round of
72:18
selling may be coming into June moving
72:21
on to page three Patrick looking at the
72:23
euro versus the dollar
72:26
boy this charts looking a little bearish
72:28
I guess you could call this either a
72:29
descending triangle or a wedge depending
72:31
on how you draw around that that late
72:33
march bottom there what do you make of
72:36
this well really you turn this chart
72:38
upside down and you got the dollar index
72:40
right and what’s amazing
72:42
a dollar index still has such a huge
72:44
waiting into the euro of 57% waiting and
72:48
so really as goes the Euro goes the
72:51
dollar index and so what we can
72:53
continuously see here over the last
72:55
month and a half every attempt the euro
72:59
has had to rally and make it stick it’s
73:02
lasted no more than a week and almost
73:05
immediately the selling comes back down
73:07
and and brings it right to the bottom of
73:09
the range and it’s just such a weak
73:11
price action now all you need is it’s
73:14
like a the euros at the edge of a cliff
73:16
and all it needs is someone to give it a
73:18
push and if it loses its footing here we
73:20
could be seeing a euro move down to 105
73:23
or 103 which would certainly be the
73:26
underpinning catalyst that will drive
73:28
the Dixie up towards that 104 target
73:31
that you’ve often referenced and so this
73:33
is a the must watch chart in my mind and
73:35
it has so many global macro implications
73:38
if it gives out so this is probably a
73:40
single big the most important chart to
73:42
watch in my opinion but I really don’t
73:44
want to highlight further if we go to
73:47
page 4 when we look at the dollar index
73:49
it really feels like the dollars been
73:52
doing nothing but really once you leave
73:55
the euro and you go and start looking at
73:58
the rest of the currencies around the
74:00
world and particularly when you move
74:02
into the emerging market currencies you
74:04
can see just how incredibly weak all
74:07
those currencies have been relative to
74:09
the dollar whether you go to Mexico
74:10
Brazil Argentina and the Russian ruble
74:13
here you have the South African Rand and
74:16
the Turkish lira all just so incredibly
74:20
weak and that just continues to support
74:22
that there is a fundamental US dollar
74:24
bull market underway and it’s being
74:26
disguised by the fact that the euro has
74:28
been pinned which makes the dollar index
74:30
look like it’s far more range bound but
74:32
I actually think the US dollar is in
74:35
full bull trend and in it’s just a
74:37
matter of time before the Euro gives out
74:39
and succumbs to that predominant trend
74:41
Patrick let’s move on to page 5 one of
74:44
my favorite charts of course is gold and
74:46
boy look at that breakout we’ve seen
74:48
just in the last couple of days all for
74:50
sure and and you were talking about it
74:52
and this is the big question right when
74:54
everybody is so convinced gold
74:56
going higher usually whenever you have
74:58
that kind of a strong sentiment usually
75:01
it means that the trade is crowded in a
75:03
backfills and so that and that storyline
75:06
makes sense but but you know when you
75:08
really look at the conditions around the
75:10
world and the size of the gold market is
75:13
it possible that it just keeps you know
75:15
punching higher and and making fresh new
75:18
highs I mean we’re right now only a
75:20
hundred or two hundred dollars away from
75:23
those 2011 highs it’s it will be really
75:26
interesting whether or not gold makes
75:28
the next push higher first before that
75:30
much awaited consolidation kicks in well
75:34
and that’s something I’ve been thinking
75:35
about a lot is maybe that’s the next
75:38
move is up to 1922 I think was the the
75:42
2011 that’s from memory so don’t don’t
75:44
hate me if I got it wrong folks we get
75:47
back to the the 2011 high and that’s
75:50
where we have a significant technical
75:53
correction maybe back down to 1500 or
75:56
1400 or something from there the
75:59
problems with this you know look that
76:00
you couldn’t ask for better long-term
76:03
fundamentals you know that the
76:05
politicians are gonna debase fiat
76:07
currency you know they’re gonna keep on
76:09
printing money to deal with the
76:11
coronavirus crisis and the next thing
76:14
after the coronavirus crisis is going to
76:16
be universal basic income in the various
76:18
social programs that some parts of the
76:21
the political economy would like to see
76:23
in place there’s got so many reasons to
76:25
be bullish but the problem is everybody
76:28
knows that and what propels a bull
76:31
market higher is when something causes
76:35
people to make new purchases and a lot
76:39
of them what could be the policy impetus
76:42
Patrick that causes everybody to say
76:44
okay this situation it’s more bullish
76:46
than we thought we got to double down on
76:48
our gold bets right here at this price I
76:50
mean look at what the Fed has already
76:52
done Patrick literally unlimited
76:55
monetary policy accommodation to the
76:58
tune of half a trillion dollars a week
77:00
or at least it feels that way and you
77:02
know for a while we were going a couple
77:04
trillion dollars a week in new fiscal
77:07
spending bills that Congress is talking
77:09
about push
77:10
you know that they’re going to debase
77:13
the value of paper money and it’s got to
77:15
be good for gold but how do you top all
77:18
of that how do you come up with the next
77:20
news report that makes the case even
77:23
more compelling it’s already priced in I
77:26
think that’s what got us up here so what
77:28
happens Patrick if the Fed actually were
77:30
to show some restraint and maybe
77:33
moderate the amount of policy
77:35
accommodation and what if we stopped
77:37
having two trillion dollar spending
77:39
announcements from the government every
77:41
week or two then maybe we get you know
77:44
the set up so we’ve come on awfully long
77:46
ways we’re overdue for a technical
77:48
correction I still feel like it has to
77:50
come at some point but boy this chart
77:52
still looks awfully strong the this
77:54
descending triangle if it had resolved
77:56
to the downside was the setup for maybe
77:59
a really significant correction and it
78:01
looks like it’s not happening we’re
78:02
resolving to the upside instead well you
78:05
know the one thing I’ll add to that
78:06
those I mean you took a very American
78:09
approach to that which is like looking
78:11
at what the Fed itself is doing in the
78:12
US dollar obviously is the world reserve
78:14
currency but the whole world is in an
78:17
incredibly deep recession and there’s
78:19
going to be a lot of currency debasement
78:21
in in almost every country in the world
78:24
and so why you know even if there might
78:27
be a catalyst that may not have that
78:29
gold demand from the US you have to
78:31
still think that that the the safe haven
78:34
element of gold will be incredibly
78:36
popular especially in a lot of those
78:37
other cross currencies anyway let’s move
78:40
on to page six where I just wanted to
78:43
touch on uranium we don’t talk uranium
78:45
too often and rightfully so riga rana
78:48
has been a stuck in a bear market for
78:50
many many years
78:51
and what is interesting is one of the
78:54
reasons behind that has been because
78:56
there was an oversupply and they needed
78:58
to work that through that oversupply
79:00
uranium that has caused it to trade
79:03
below its actual production cost and so
79:07
what what this co vid has done though is
79:09
is that it actually shut down a number
79:12
of mines and now the catalyst for that
79:14
supply to be worked off is actually
79:17
there and so we saw a pretty bullish
79:19
breakout in uranium and they’ll be
79:21
really interesting to see whether the
79:23
bull
79:23
can not only hold this or whether this
79:26
actually is the beginning of a new bull
79:27
market in uranium so it’s certainly
79:29
something we’re watching and folks don’t
79:32
forget Patrick does webinars with charts
79:34
like this almost every single day you
79:36
can get a free trial the information is
79:38
on page 7 to sign up for Patrick’s
79:41
trading advisory service now Eric before
79:43
we wrap up the show though why don’t you
79:45
give us a quick update on what’s going
79:47
on with the kovat 19 you know I don’t
79:49
have that much new to add this week as I
79:52
continue to learn and read more about
79:54
this there’s no you know huge
79:57
earth-shaking headline or anything but I
80:00
just see more and more evidence that all
80:02
piles up to me to say this is gonna take
80:04
longer than markets are discounting I
80:07
don’t mean the economy is gonna stay
80:09
shut down but the expectations so many
80:11
people have about a v-shaped recovery
80:13
and we’re back to normal like pre virus
80:15
normal you know three or four months
80:17
from now I just don’t see it happening
80:19
there’s no good reason to assume that
80:21
there’s going to be a vaccine for this
80:24
and there’s so many different variations
80:26
and mutations of the virus already that
80:29
if we did have a vaccine it might not
80:31
cover all the different versions of it
80:33
it could take many years before we get
80:35
completely back to normal and of course
80:37
we’re going to restart the economy what
80:40
we’re gonna get is close to normal as we
80:42
can but it remains to be seen how much
80:45
of a drag this creates and I I really
80:47
love to to get Stan Druckenmiller on the
80:49
program to go into more detail on what
80:52
causes him to say that maybe this
80:54
central bank enabled credit bubble is
80:57
finally going to pop and this would be
80:58
the catalyst to do it that would really
81:01
change everything and we could be
81:02
looking at an outright depression so I
81:05
don’t think it’s nearly as simple as
81:07
v-shaped recovery and folks we’re gonna
81:09
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81:52
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81:55
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81:56
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81:58
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81:59
discussed in the postgame there’s also a
82:01
link of the David Tepper interview and
82:04
where he discusses that this is the
82:05
second most overvalued stock market he
82:08
has ever seen as well as a link to an
82:10
ECB article on negative interest rates
82:13
and the transmission of monetary policy
82:15
so you’ll find this and so much more in
82:17
this week’s research roundup so that
82:19
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82:20
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eric s townsend and myself at patrick’s
82:55
resna on behalf of Eric Thompson and
82:57
myself thank you for listening and we’ll
82:59
see you all next week
83:10
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you

THE MONEY GAME, CHEATERS EDITION

The coronavirus has thrown us into truly unprecedented times. Most countries have enforced a lockdown, and global travel has ground to a halt, and this, in turn, has had an enormous impact on the economy.

Stock markets all over the world experienced huge volatility. Wall Street suffered its worst day since ‘Black Monday’, oil prices went negative for the first time in history and governments all over the world have been implementing extreme fiscal and monetary policies.

Many analysts have suggested that rather than coronavirus being the cause of this economic downturn, instead, it was merely the pin that popped the bubble and the enormous debts that have been amounting since long before the 2008 global financial crisis was a disaster waiting to happen.

So, how do we get out of this mess? Who stands to benefit from government money printing? Who has to pay this money back? And, why the fuck is Steve Mnuchin, the Secretary of the Treasury?

To answer these questions and more, I am joined by leading finance experts: Andrea Ferrero, Andreas M. Antonopoulos, Caitlin Long, Ben Hunt & Raoul Pal. We look at the corruption and mismanagement of the economy by central banks and governments.

A Truth That’s Told With Bad Intent

That’s Isaac Newton in William Blake’s painting, one of the major villains in Blake’s philosophy. Why? Because Newton was a modeler, a proponent of Science with a capital S, the most repressive force in the modern age.

I think Blake was absolutely right.


Our narratives of COVID-19 are all lies.

They are lies of a particular sort, political narratives that have a nugget of truth within them, but are told with bad intent. They are told this way because it works. Because the nugget of truth hides a deeper, unpleasant truth. And a Big Lie.

Some are narratives of the political left. Some are narratives of the political right.

They are all narratives of betrayal, meaning that they seek to excuse or promote policies designed for institutional advantage rather than the common good.

Clockwise from Donald Trump, that’s Fox’s Sean Hannity, the CDC’s Robert Redfield, Surgeon General Jerome Adams, Speaker of the House Nancy Pelosi, Harvard President Larry Bacow, the White House’s Larry Kudlow, and Vox co-founder Ezra Klein. They all get their moment of shame in our magnum opus on the ubiquitous institutional betrayals here in the early days of the pandemic age – First the People.

How do you recognize a political narrative of betrayal?

It’s always based on a model.

A political narrative of betrayal is always a top-down application of social abstraction, where a behavioral model is treated as the thing unto itself, falsely elevated as the subject and object of policy, rather than relegated to the analytical toolbox where it belongs. A political narrative of betrayal will always use “model” as a noun rather than “model” as a verb. A political narrative of betrayal always BEGINS with a prescriptive model of mass behavior – a model that by the most amazing coincidence serves the institutional advantage of the narrative creator – and ENDS with a forced fit to the individual citizen.

All political narratives of betrayal start like this, with a disembodied, modeled abstraction like

  • “the American way of life” or
  • “the economy” or
  • “the market” or
  • “public health” or
  • “national security”.

An abstraction that is then defined for you in such a way as to logically require the willing abdication of your individual rights, first as an American and ultimately as a human being.

A political lie always starts by establishing a disembodied, modeled abstraction like “the economy”. From there, the political lie will then start talking about the “sacrifices” that we citizens need to make for this disembodied, modeled abstraction.

Nothing makes me angrier.

Nothing makes me angrier than a politician like Chris Christie, a man whose idea of personal sacrifice is a regular order of fries, shaking his finger at us and telling us how reopening the local Arby’s is just like fighting Nazi Germany, how OUR deaths then and now are a “necessary sacrifice” in order to  “stand up for the American way of life.”

The American Way of Life™ does not exist. It’s not a thing.

What exists is the way of life of Americans.

Start with the individual American. Start with their political rights. Start with the citizens themselvesThis is how a legitimate government acts in both words and deeds.

The government’s job – its ONE JOB – is to protect our individual rights in ways that we cannot do ourselves. That’s not an easy job. At all. There are trade-offs and gray areas, and clear-eyed/full-hearted people can disagree on how to accomplish that job. But it is the job.

Its job is NOT to create “alternative” facts like modeled seasonal flu deaths or modeled herd immunity or modeled COVID-19 deaths in nudging service to institutional goals. Its job is NOT to champion the rights of the politically-connected few and ignore the rights of the politically-unconnected many. Its job is NOT to deny the rights of any citizen in service to a politically convenient abstraction like “the American way of life” or “the economy” or “public health”.

When individual rights conflict in unavoidable ways or we are faced with an immediate and overwhelming threat to our system of individual rights, a legitimate government based on the consent of the governed may be forced to decide which citizens’ rights must be temporarily suspended. This is a legitimate government’s last resort.

Today it is our government’s first resort.

Today it is the first choice of our political leaders – White House and statehouse, Democrat and Republican – to decide which rights to prioritize and which rights to deny in service to THEIR conception of what society should look like. All wrapped up in a nugget of truth told with bad intent.

This is how an illegitimate government acts.

Like this:


Model-driven Narrative #1

Whatabout the Flu?

Dr. Sanjay “minor compared to the flu” Gupta 
Rush “it’s just the common cold, folks” Limbaugh
  • Political goal: COVID-19 threat minimization.
  • Truth nugget: The seasonal flu is a nasty (and mitigatable) disease.
  • Deep Truth nugget: We are shockingly blasé about all sorts of largely preventable deaths, and we warehouse our elderly parents in horrible places.
  • Big Lie:  This isn’t a big deal.
  • Policy prescription: Wash your hands, boys and girls!
  • Embedded model:   Laughably inaccurate models of seasonal flu deaths, designed to nudge popular adoption of annual vaccinations.

As the US death toll mounts, this narrative fades farther and farther into the background of our collective memory, but “Whatabout the Flu?” dominated the early weeks of American policy debates. And while it’s easy to find examples of this narrative from the political right, let’s not forget that CNN and Vox were beating this drum as hard as they could when Trump was shutting down some flights from China.

People don’t believe me when I tell them that we don’t actually count flu deaths, that the numbers thrown around by the Dr. Guptas and the Rush Limbaughs are taken from CDC models of pneumonia deaths. But it’s true. Basically we count pediatric flu deaths and hospitalized adult flu deaths, multiply by six, and intentionally generate an inflated flu death total. Why intentional? Because you need to be nudged into taking your annual flu vaccine.

If we compare, for instance, the number of people who died in the United States from COVID-19 in the second full week of April to the number of people who died from influenza during the worst week of the past seven flu seasons (as reported to dethe CDC), we find that the novel coronavirus killed between 9.5 and 44 times more people than seasonal flu. In other words, the coronavirus is not anything like the flu: It is much, much worse. – Scientific American (April 28, 2020)

On an apples-to-apples, counted deaths versus counted deaths basis, there is no comparison between COVID-19 and the flu. It’s pure narrative. Pure hokum. All based on a laughably inaccurate model. All geared towards the political lie of COVID-19 minimization.


Model-driven Narrative #2

Herd Immunity!

Anders “the death toll surprised us” Tegnell of Sweden 
Dan “more important things than living” Patrick of Texas
  • Political goal: Preservation of economic status quo.
  • Truth nugget: Massive unemployment is devastating.
  • Deep Truth nugget: Massive unemployment is particularly devastating to incumbent politicians.
  • Big Lie:  In the meantime, we can protect the olds and the sicks.
  • Policy prescription: Hey, you’ll probably be fine! I mean … probably.
  • Embedded model:   Laughably inaccurate models of COVID-19 infection spread and severity, designed to nudge fantasies of V-shaped recoveries in the stock market and commercial real estate prices.

Again, it’s easy to find examples of this narrative from the political right, but let’s not forget that the most prominent national example of “Herd Immunity!” policy is driven by the leftwing Social Democrats – Green Party coalition in Sweden. Again, the politicization of these narratives is not a left/right thing, it’s a power thing.

It’s a high-functioning sociopath thing.

What do I mean by sociopathy and division?

I mean the way our political and economic leaders beat the narrative drum about how this virus prefers to kill the old rather than the young, as if that matters for our policy choices, as if older Americans are lesser Americans, as if we should think of them differently – with less empathy – than Americans who are more like “us”.

I mean the way our political and economic leaders beat the narrative drum about how this virus prefers to kill those with “pre-existing conditions”, as if that matters for our policy choices, as if chronically ill Americans are lesser Americans, as if we should think of them differently – with less empathy – than Americans who are more like “us”.

I mean the way our political and economic leaders beat the narrative drum about how this virus hits certain “hotspot” regions, as if that matters for our policy choices, as if hotspot regions are lesser regions, as if we should think of Americans who live there differently – with less empathy – than Americans who are in “our” region.

And once you stop thinking in terms of trade offs, once you stop thinking in terms of probabilities and projected mortality rates and cost/benefit analysis and this expected utility model versus that expected utility model … once you start thinking in terms of empathy and Minimax Regret … everything will change for you. – Once In A Lifetime


Model-driven Narrative #3

Flatten the Curve!

Gov. Andrew “we need 40,000 ventilators” Cuomo  
Dr. Deborah “Trump is so attentive to the data” Birx
  • Political goal: COVID-19 threat maximization.
  • Truth nugget: Lockdowns prevent a surge in cases which can overwhelm the healthcare system.
  • Deep Truth nugget: When we’ve got everyone freaked out about staying alive, there’s no end to the crazy authoritarian stuff we can get away with.
  • Big Lie:  We can get R-0 down to zero.
  • Policy prescription: You’ll find these ankle monitors to be surprisingly light and comfortable to wear!
  • Embedded model:   Laughably inaccurate models of COVID-19 deaths, malleable enough to serve the political aspirations of both the White House and their opponents.

Of the three politicized narratives, “Flatten the Curve!” has morphed the most from its original form, as its early success in convincing even Donald Trump that lockdowns were necessary to prevent a healthcare system meltdown gave both its White House missionaries and its state house missionaries free rein to use this narrative to fill a wide range of policy vacuums.

The original goals of “Flatten the Curve!” – to prevent a surge in COVID-19 cases with the potential to overwhelm the healthcare system – were achieved. The flood in New York City crested … and fell. Other cities that seemed as if they might follow in NYC’s footsteps … did not. Mission accomplished! But in the grand tradition of other initially successful emergency government interventions (“Quantitative Easing!”, anyone?) “Flatten the Curve!” is well on its way to becoming a permanent government program.

Today, “Flatten the Curve!” has become the narrative rationale for a range of extraordinary executive actions – on both the left AND the right – that would make Lincoln blush. This is the narrative that will propel the Surveillance State into a permanent feature of American life. This is the narrative that will propel the final transformation of capital markets into a political utility. This is the narrative that will propel us into a war with China. If we let it.


If we let it.

Okay, Ben, how do we stop it? How do we turn this misbegotten process of political lying on its head? How do we reject top-down, model-derived policies and their narratives? How do we BEGIN with the biology of this virus and the rights of individual citizens and build a policy framework from THAT?

This virus is 2-6x more contagious/infectious than the seasonal flu (depending on environment), and 10-20x more deadly/debilitating (depending on whether or not your local healthcare system is overwhelmed). It hits men harder than women, and the old harder than the young. Those are the facts. They’ve been the facts since January when we first studied this virus. The facts have not changed.

Knowing these biological facts, what social policies would you design around THAT?

As a 56 year-old man in just ok physical condition, I figure I have a 1% chance of death or disability if I catch COVID-19 when my local healthcare system is in good shape, maybe 4% if my healthcare system is overwhelmed. Both of those odds are completely unacceptable. To me. Other 56 year-old citizens may feel differently. Other 25 year-old citizens may feel the same. Each of us has a right to life, liberty and the pursuit of happiness, and the legitimacy of our government is predicated on preserving those rights for each of us. Liberty and justice for ALL … imagine that.

Knowing these foundational rights, what social policies would you design around THAT?

If you’ve read notes like Inception and The Long Now: Make, Protect, Teach and Things Fall Apart: Politics, you know that I am a full-hearted believer in acting from the bottom-up, in bypassing and ignoring the high-functioning sociopaths who dominate our top-down hierarchies of markets and politics. I still believe that.

But it doesn’t work with COVID-19.

The core problem with any rights-based approach to public policy is dealing with questions of competing rights. Under what circumstances could your right to liberty and the pursuit of happiness come into conflict with my right to life? Under most circumstances, neither of us is forced to compromise our rights, because we have the choice to NOT interact with each other. If my laundromat requires you to wear a mask to enter, but you think wearing a mask is an affront to your liberty, then the solution is easy: go wash your clothes somewhere else. And vice versa if I think your restaurant does a poor job of enforcing social distancing and food safety: I’ll take my business elsewhere.

Let me put this a bit more bluntly. I think that COVID-19 deniers and truthers are idiots. I think that people who minimize or otherwise ignore the clear and present danger that the biology of this virus presents to themselves and their families are fools. And there’s no perfect way to insulate their idiocy and foolishness from the rest of us. But if these idiots and fools want to take stupid risks alongside other idiots and fools, if their vision of liberty and the pursuit of happiness is to revel in some death cult, but in a way that largely allows us non-death cultists to opt out … well, I believe it is wrong for a government to stop them. Yes, there are exceptions. No, this isn’t applicable on all issues, all the time. But I believe with all my heart that if we are to take individual rights seriously, then we must take individual responsibility and agency just as seriously. Even self-destructive agency. Even in the age of COVID-19. Especially in the age of COVID-19.

There are three common and important circumstances, however, where this choice to NOT interact doesn’t exist, where the rights of yes, even idiots, to liberty and the pursuit of happiness as they understand it will inexorably come into conflict with the right to life of those who understand all too well the highly contagious and dangerous biology of this virus.

Only government can provide the necessary resources and the necessary coordination to resolve these conflicts of rights peacefully and without trampling the rights of one set of citizens or another.

You have no idea how much it pains me to say that.

It pains me because I think there’s a snowball’s chance in hell that our government will do that.

Here’s how a legitimate government would deal with the three inevitable and irreconcilable conflicts of rights in the age of COVID-19:

Healthcare workers and first responders have no choice but to risk their right to life in caring for all citizens who are sick, regardless of the agency or lack thereof behind that sickness.

How does a legitimate government resolve this conflict?

By mobilizing on a war-time basis to provide personal protective equipment (PPE) to ALL healthcare workers and social workers and first responders and public safety officers and anyone else who must serve the sick.

Workers who believe that their employer does not provide sufficient protection against this virus have no choice but to risk their right to life in their return to work, as unemployment insurance typically is unavailable for people who “voluntarily” quit their job.

How does a legitimate government resolve this conflict?

By providing a Federal safe harbor to unemployment claims based on COVID-19 safety concerns, AND by maintaining unemployment benefits at the current (higher) CARES Act level throughout the crisis.

All citizens who use public transit or use public facilities have no choice but to trust that their fellow citizens share a common respect for the rights of others, even if they may differ in their risk tolerance and private beliefs regarding the biology of the virus.

How does a legitimate government resolve this conflict?

By mobilizing on a war-time basis to provide ubiquitous rapid testing in and around all public spaces, starting today with symptom testing (temperature checks) and required masking to limit asymptomatic spread, and implementing over time near-instant antigen tests as they are developed.

It’s just not that hard.

But it is impossible. Politically impossible.

So what do we do?

“I have no idea what’s awaiting me, or what will happen when this all ends. For the moment I know this: there are sick people and they need curing.”

— Albert Camus, The Plague (1947)

We do what we can. We howl our discontent. We resist. We help our neighbors. We make. We protect. We teach. We keep the small-l liberal virtues and the small-c conservative virtues alive in our hearts and our minds.

So what do we do?

For the moment I know this: there are sick people and they need curing.

Ben Hunt on the Role of Narrative

27:24
point you can go back to I think is the
1930s so that that’s why I really focus
on what I would describe as the role of
narrative it used to be I would call it
a you know I’ll use these kind of
academic terms I used to be a a weak
form narrative aesthetic that you know
oh yeah narrative and you know what
happens on CNBC and what the what they
you know what a politician says on
Bloomberg yeah that may be important in
a very short term but you know very
quickly the real world and earnings and
you know macro events that’s what’ll
will make the difference in markets and
I went from being I’ll call it that
again this week formed era to Vista to
what I’ll call is a semi strong
narrative this meeting well actually
these narratives can can overwhelm
reality for a for you know pretty long
time but ultimately reality will will
win out I gotta tell you Keith I’ve
become a strong form there to this today
the impact of air ative Xand forward
guidance for example with monetary
policy the CNBC talking heads are get up
there and they shake their finger at you
and they tell you how to think about the
world the the power of this now
augmented with as you’re describing
social media augmented by the 24/7
nature of financial news and political
news
I now think this can go on for a long
long time

29:01
which gets back I think to your original
29:03
question of well you know what is the
29:05
timing of these massive shifts and
29:07
markets and how long do we have to play
29:09
this game of capital markets being a
29:13
political utility my answer is pry for
29:17
quite a bit longer yet yeah well I mean
29:19
a lot of people on you know whether I
29:20
like that or not that is the game that
29:23
we’re in and that’s the game that I’m
29:24
playing but still there’s like I said
29:26
there’s a lot of I find that there it’s
29:28
it’s it’s it’s weird to say but I
29:31
actually think it’s easier to make money
29:32
and markets like this with a lot of
29:35
noise than any other kind of market I
29:37
mean volatility to me is a good thing
29:39
and it sounds like that’s why you guys
29:41
did well in o8 as well I mean oh wait to
29:43
be up in o8 well done by the way means
29:46
that you have to be able to embrace the
29:47
non-linearity of volatility and
29:49
understand that you don’t even have to
29:51
be grossly exposed to the market to pick
29:54
the right parts of it in the right
29:55
companies and there’s an anti fragility
29:57
to of the 1930s that I think is
29:58
interesting that’s developing here not
30:00
only at the human level but obviously on
30:03
the things that they create like the
30:04
companies and that like how much how
30:06
much of that do you think about not to
30:08
use you know to borrow to Lebs word
30:10
obviously on antifragility but you’re
30:12
seeing that’s what’s developed the
30:14
fragile and the levered which are one in
30:16
the same thing and the anti fragile and
30:19
those are flushed with cash that are
30:20
actually growing in this period well so
30:23
I’m I’m a big fan of talib the writer
30:26
you know of course he’s blocked me on
30:28
Twitter so on a personal level you know
30:33
tell em can be but nothing that the
30:35
easiest guy to get along with but there
30:37
are teeth they’re actually showing in
30:40
this conversation I think you’d be
30:41
scowling at me like you you know he’d be
30:44
using f-bombs he made it and it anyway
30:46
but even but his you know he’s comes up
30:47
with some good things with some good
30:49
well sure and and my field in
30:55
academia was statistics and you know
30:58
that statistical analysis and so Talib
31:02
comes from the same background and so we
31:04
are in violent agreement on everything
31:07
he writes about how we
31:08
assume these you know small tails on the
31:13
distributions and everything he writes
31:15
about fragility and and like swans and
31:18
the the overuse of modeling the right
31:20
I’m in violent agreement with ever it
31:22
with with everything that’s that’s your
31:23
problem that’s why you get blocked
31:25
there’s only way for once eleven to live
31:29
but but here’s what I would say though
31:31
though keep in terms of the fragility or
31:35
lack thereof in the system right which
31:37
is that there are so many aspects
31:39
particularly of our political systems
31:41
today that I think are are terribly
31:43
fragile right what and and in a in a
31:47
larger sense I think they’re similarly a
31:49
fragility when it comes to monetary
31:51
policy in in this country but but and
31:54
this is a such an important caveat I
31:56
think that that all of the policy
31:59
developments at the in in every central
32:03
bank right not just that the Fed but
32:05
really led by the Fed all of their
32:07
policy initiatives has been to build a
32:09
wall against deflationary shocks
32:12
mm-hmm because because that that was the
32:15
shock of 2008 going into 2009 with a
32:19
nationwide decline in home prices in the
32:22
United States and the ten trillion
32:25
dollars worth of financial products that
32:27
were built on on top of that of that
32:30
edifice you had an enormous deflationary
32:34
shock which which again to my word
32:36
stripped off that pleasant skin of
32:38
capitalism and democracy to reveal the
32:41
the naked sinews of power beneath and
32:44
and there was a real risk of those those
32:48
true powers you know not surviving right
32:52
so I think that what the system has
32:55
developed over the last decade is this
32:59
phenomenal array of whatever it takes
33:03
instruments to prevent deflationary
33:07
meaning financial asset price declines
33:11
of of a large nature right and and so I
33:16
even this sort of deflationary shock the
33:19
shock of a pandemic which I you know
33:21
outside of a Thurman
33:22
clear war I can’t imagine a greater
33:26
deflationary shock than worth the world
33:29
is experiencing today I I think I
33:34
believe that these the Arsenal that
33:38
central banks have developed against
33:39
these sort of deflationary shocks will
33:41
be successful on its own terms meaning
33:45
that it will and we’re seeing this today
33:47
be largely successful in preventing
33:49
financial asset price declines of a
33:54
system shaking nature where where I
33:58
think this this Arsenal is quite fragile
34:01
however is not for deflationary shocks
34:04
or I think it’s very strong but for
34:06
inflationary shocks and I know it seems
34:09
crazy to talk about inflationary shocks
34:12
when you have an unemployment rate
34:14
that’s gonna go to twenty plus percent I
34:16
know it seems crazy to talk about
34:19
inflationary shocks when you have a
34:22
decline in global trade as we’re serious
34:25
as we’re clearly experiencing with with
34:28
with this this pandemic and yet and yet
34:32
I absolutely believe with it with the
34:36
Alcala the unholy merger that we’re
34:39
seeing today between the Treasury the US
34:42
Treasury and the US Federal Reserve
34:44
where today you know I think today the
34:48
the Fed started its bond purchases right
34:50
yep where and this is I can’t you you
34:54
really could not have said this with a
34:55
straight face in 2008 the last time we
34:58
had prices but the Federal Reserve is
35:00
going to start taking credit risk of
35:02
corporations that the Treasury is always
35:06
said on on these muni bond purchases
35:08
that the that the Fed is going to start
35:10
doing the Treasury saying oh we’re going
35:12
to take the first lost position on these
35:14
things I mean this is this is the
35:16
creation of a Bank of the United States
35:19
right back in going back to Hamiltonian
35:22
and Jacksonian days where the United
35:25
States government is now in the business
35:28
of printing money spending money taking
35:33
you know risk right taking economic risk
35:38
in the economy it’s it’s something we’ve
35:41
never seen before and my strong view
35:44
it’s not a 2020 event may not even be
35:48
2021 I think it may be 2021 but I think
35:52
that the inflationary shocks from this
35:54
are enormous undeniable and that the
36:01
system that we’ve established since 2008
36:04
is anti fragile is not I’m sorry is
36:08
quite fragile right it is incapable of
36:11
dealing with those sort of shocks and
36:14
and so that’s where you know to get
36:17
around to that question you’re asking
36:19
before when does the turning happen when
36:21
when does it all change I think that’s
36:24
when it all changes when the policies
36:26
that we’ve built up over the last you
36:29
know going on 11 years now proved
36:31
incapable of dealing with the political
36:33
changes that come from this marriage of
36:37
Treasury and Fed to create a true Bank
36:40
of the United States well I think even
36:42
the the MMT crowd themselves the
36:45
academics and otherwise would would
36:47
ultimately agree with your conclusion
36:48
there it’s all good you can merge you
36:51
can have this unholy marriage as Henry
36:52
the 8th type set up between the Treasury
36:55
and the Fed until you have a certain
36:56
level of inflation then then we’re gonna
36:58
change how we think about it or change
37:00
what we do whatever they say but the
37:02
whole point about inflation if you have
37:04
economic stagflation and inflation is
37:06
perpetuating that is of course the
37:08
people get pounded again and then they
37:10
get more and more pissed off so demand
37:12
falls corporate profits are falling yeah
37:14
the prices are rising but you don’t get
37:16
and again this kind of harkens back to
37:18
the to the very low multiples that
37:20
actually equities in credit get when you
37:21
get a chronic kind of a stagflation I
37:24
I’m one do you agree with that I mean
37:27
because there’s different you can have I
37:29
call it in my four quadrant model you
37:31
can have a beautiful inflation quad to
37:32
both growth real growth and inflation er
37:34
accelerating at the same time or you can
37:36
have quad 3 which is what I just said
37:39
with stagflation like what are you
37:41
saying it would be are you saying either
37:44
no I I am saying that I
37:47
the stag flayed look and this goes back
37:50
to to what we’re talking about at the
37:52
very beginning we are it’s important not
37:53
to let your feelings you know get it get
37:56
in the way of your analysis of this
37:57
stuff when you’re responsible for other
37:59
people’s money and yeah and I’d always
38:01
kind of relegated the the stagflation
38:03
aries scenario to oh that’s and that
38:06
that’s that’s just you being you know
38:09
pissed off at kind of this this
38:11
corruption of capital markets and you
38:15
know what are you talking about III at
38:18
this point now though Keith my this the
38:21
stagflation Airy scenario has gone from
38:24
my edge case something that okay there’s
38:28
a there’s kind of a trivial chance of
38:30
that happening but but but let’s not
38:32
let’s not go beyond that yeah that’s
38:36
frankly that’s now my base case that’s
38:38
now my base case scenario what what once
38:41
we have the 2021 either make America
38:45
great act if Trump is reelected with two
38:47
trillion dollars worth of you know
38:49
infrastructure spending that’s that this
38:52
monetized by the Fed or if it’s you know
38:55
Biden or the Democrat it’ll be the you
38:57
know the green act or the the no
38:59
malarkey act for all I know
39:01
itis but but in both cases is gonna be
39:04
the same and thing right it’s gonna be
39:06
two trillion dollars worth of you know
39:09
building ziggurats and you know filling
39:12
up potholes
39:12
that’ll that that that will be directly
39:15
monetized I think at least half of that
39:18
directly monetized by the Fed and and we
39:20
go down this this path where you can’t
39:23
unring these bells and and and so and my
39:28
strong belief then is that what you end
39:30
up with is that your your process your
39:34
nomenclature that quadrant three it’s a
39:37
we’re mediocre growth because you’ve
39:40
pulled forward growth now for decades
39:42
there’s just no you know investment in
39:45
actual productive activities you’ve
39:47
transformed your capital markets again
39:49
into a utility not not it not a way of
39:52
channeling capital into real productive
39:55
growth and at the same time you
39:59
you know of course the United States
40:01
will be the best house in a in a in a
40:03
terrible neighborhood you know we’re all
40:07
going down this mmt path and so what you
40:10
end up with is a global stagflation Area
40:12
environment which again as you say just
40:15
accentuates the wealth inequalities that
40:17
have been built and exacerbated yes over
40:20
the last 40 years but particularly over
40:22
the last decade that’s I mean that
40:24
points many good points within the point
40:27
though on on productive growth I mean
40:29
actually back to your Burnet the
40:31
down point you know anybody knows that
40:33
first you know if you burn something
40:35
down you do have an opportunity to
40:36
rebuild something new particularly if
40:38
it’s with new capital with new
40:40
leadership you know that whole part of
40:41
capitalism gets missed in this whole
40:43
maybe not missed but I mean it’s
40:45
certainly not the consensus they’re like
40:46
okay it’s fine we’ll just you know have
40:48
these like you said these utilities
40:49
where we never burn anything down
40:51
therefore you can’t grow anything new
40:52
and that’s that’s to me you know that
40:54
that’s obviously a major problem in the
40:57
loop that we’re in but like you said now
40:59
we’re into the I guess you know it
41:02
trillions are starting to add up so you
41:04
do three trillion here and now the next
41:06
bill Pelosi’s bill I think she’s gonna
41:08
have to try to go first one and a half
41:10
to two trillion there and then another
41:12
two trillion there after you know we see
41:15
who gets elected it’s it’s an incredible
41:17
amount on any historical measure amount
41:20
of deficit as a percentage of GDP or
41:22
debt as a percentage of GDP I was
41:24
showing a chart last night you know
41:26
we’re actually in the number two
41:28
position chasing the Japanese on that
41:30
front both on the deficit spending and
41:32
on the debt do how do you think about
41:34
that and is it just well
41:37
well here’s what here’s what I don’t
41:39
think he that you know I would I don’t
41:41
think is that there’s this aha moment
41:43
where you know suddenly some bell rings
41:46
and the in the heavens and the the bond
41:48
vigilantes of the world say oh my god
41:50
this is too much and we’re going to
41:53
require that you know interest rates and
41:57
the interest rates start to go up in the
42:00
United States right that that is not
42:02
what I’m saying at all right in the in
42:06
the absence of a political narrative to
42:09
say oh my god this is terrible our
42:11
interest rates are going to go up
42:13
that that that that doesn’t happen this
42:15
is what I again wanted me about being a
42:17
strong form there to this right so that
42:21
that’s that’s not at all what I’m saying
42:23
I I don’t think that that the the
42:25
catalyst here is oh my god interest
42:29
rates are going to go through the roof
42:31
because the world is going to say oh the
42:34
United States is a bad credit risk right
42:37
again the United States is the worst
42:39
house in a bad neighborhood where but
42:41
you know where’s your strong nutty or
42:44
sound money you know alternative you
42:46
know the ECB please are you kidding me
42:48
so it that’s not what I’m describing is
42:53
the path that this takes what I’m
42:55
describing is the path you are leading
42:57
to about the zombification of an economy
43:00
as you’ve seen in in in Japan as I think
43:04
we are increasingly seeing it’s the
43:05
United States it it’s not that all this
43:08
money that’s being pulled forward
43:10
creates some crisis in the bond market
43:13
like you might see I don’t know in
43:14
Argentina right
43:16
what what what it leads to is this long
43:18
gray slog where we aren’t experiencing
43:23
real growth we’re just not and what and
43:26
what real growth we are experiencing is
43:28
being sucked out by the 1/10 of 1% to to
43:33
lead us to a world of you know bread and
43:36
circuses and in a world where that
43:38
divide between the haves and the
43:41
have-nots just gets more and more
43:43
entrenched in and and onerous unite how
43:49
does that change well frankly it changes
43:52
when you have a real world event like a
43:56
pandemic mmm-hmm that that can change it
43:59
if it’s not that it’ll be something else
44:01
like that ultimately you know I I laugh
44:03
about being a strong form narrative
44:05
issed that’s my market view that’s my
44:08
view as an investor have you as a
44:09
citizen as a human being is that these
44:13
real-world events this is how the
44:15
chickens come home to roost
44:17
it always altima boils down to politics
44:19
that ultimately we we will change but it
44:24
comes from the bottom up not from the
44:26
down mm-hmm I love that point and also
44:29
the point on Japan a lot of people that
44:31
are again you know they can get scared
44:32
out of their minds on debts and deficits
44:34
but they they often equate it to oh my
44:36
god you know Treasury yields are gonna
44:37
explode to the upside and the dollars
44:39
gonna burn yeah that’s probably the
44:41
worst position you could have had this
44:42
year throughout this period but again
44:45
the Japanese have had economics you know
44:47
nothingness for a long long time some of
44:49
them call it economic harmony by the way
44:51
and the and and you’ve never been paid
44:54
on that short position in Japanese
44:55
government bonds I’m not saying that
44:57
we’re gonna own Treasuries forever I
44:58
mean in fact I short Treasuries when
45:00
you’re in quad – you know quad – is when
45:03
the economy is legitimately accelerating
45:06
real real yields are rising and that’s
45:08
you know that’s the that’s where you
45:10
would get rid of that type of thing but
45:12
I do get you mean a lot of people a lot
45:14
of people are like always I guess there
45:16
are a lot of newsletter writers that
45:17
still make a living on this is you know
45:19
even even the bond King himself has been
45:22
saying bindings are gonna go up you know
45:24
back to when they stopped going up in q4
45:26
2018 so there’s a lot of noise on that
45:28
well Keith ah and what I would say is
45:31
that on the way to quad 3 right
45:33
stagflation you will absolutely develop
45:36
a wall street narrative that we’re in
45:39
quad 2 right right that that you know oh
45:42
man you know we’re this is this is the
45:44
best of all possible worlds because
45:46
that’s what Wall Street does you develop
45:48
narratives and stories that get people
45:50
to buy right that so so you’ll you’ll
45:54
have your chance right on the you know
45:58
to do whatever you want to on the bombs
46:00
in the quad – I do think the reality is
46:03
that stagflation Airy world you know one
46:06
last point about Japan I don’t think
46:10
that what Japan is doing is in in terms
46:13
of the way it’s handled it’s it’s it’s
46:15
monetary policies fiscal policy look I
46:18
get it
46:19
Japan is a country that is literally
46:22
dying and I say that not pejoratively I
46:26
mean that from a demographic perspective
46:28
I I mean that and so the course that
46:33
Japan is taken and I I don’t think is
46:36
off-base for alcoholic kind of
46:40
end-of-life care right thinking in terms
46:43
of long periods of time for a country I
46:45
don’t think that’s the right policy for
46:47
the United States III have to believe
46:50
that real growth real productive growth
46:54
it’s still possible for the United
46:57
States I truly believe that in my heart
46:59
and that’s why I get so sad
47:02
when I see our policies following this
47:06
path that that puts us in a position
47:08
where real growth is is next to
47:14
impossible because we are pulling
47:15
forward so much of consumption and and
47:19
and everything else from the future real
47:21
economic growth from the future too to
47:24
try to plug the hole of this
47:25
deflationary gap today yeah all on we’re
47:29
gonna take some questions so please fire
47:31
them in the queue you they’re gonna get
47:32
voted on and I’ll ask them but on that
47:34
point before I take the first question
47:35
here Ben I think like what I heard too
47:37
was a father speaking because you know
47:40
when you have Millennials or kids that
47:42
are younger than that generation you
47:44
know you do think about the future we do
47:46
have a demographic curve in that cohort
47:48
that is upward sloping that is quite
47:51
unique in this world the UK has one you
47:53
know just by virtue of having an
47:55
immigration policy and it is okay but
47:58
again like if you are quite you know you
48:01
like you said you’re not saying
48:02
pejoratively I mean quite literally
48:03
dying like in Italy the compound
48:06
five-year kegger for the 35 to 54 year
48:10
olds in Italy is gonna be negative 2%
48:11
for sure for the next five five years
48:14
they’re dying right but if you’re
48:16
growing and you have to grow into a
48:18
world where there’s no way for you to
48:20
become who your parents were from a
48:22
capitalist perspective that is the worst
48:25
that’s the worst thing I could possibly
48:27
imagine for our kids I it kills me yeah
48:32
you’re so you’re so right you’re so
48:34
right Keith in and what I find in you
48:38
know there’s how to say this the the
48:42
audience I have with epsilon theory and
48:44
we’ve got about you know a hundred
48:45
thousand email subscribers and some
48:47
multiple of that you know on the website
48:49
thank you it’s skews young it does it’s
48:52
skews young you know it’s not the grumpy
48:54
grandpas is it’s not you know who are
48:57
who are saying kids right it it skews
49:01
young because what I find in my my own
49:04
children and and and what I find you
49:07
know this is why it’s so energizing to
49:11
me is that I find the Millennials and
49:15
the you know younger than that they get
49:20
it they really do get it and and and and
49:23
they’re not they’re not angry right I’m
49:25
the one who’s as burnt as the down
49:26
there they’re there saying no I don’t
49:27
wanna I want a chance to make a change
49:30
yeah and and and that’s why I think is
49:32
so important to provide new venues new
49:38
narratives new stories to to harness and
49:43
to try to not lead or organize that that
49:47
energy but to but to show a path to show
49:51
a path of real growth not this fake
49:54
growth and and that that we’ve we’ve
49:57
kind of trained ourselves to accept and
50:00
I’m very actually I know it doesn’t come
50:02
across that way in my writing and cuz I
50:04
do I am angry I am angry about a lot of
50:07
things but I’m also very hopeful I
50:09
really am very hopeful and it really is
50:11
that energy and that in that that
50:14
determination of the you know my
50:18
children in your children that I think
50:20
will get us through this yeah I mean
50:21
it’s anger is an important emotion if
50:24
you want to get to the other side I mean
50:25
to use people’s current vernacular on
50:27
narratives the other side you should
50:29
hear me yell at my dog yeah I’m angry
50:30
but I want that one thing I want the guy
50:32
to start to behave okay first first
50:34
question actually the one that’s got the
50:36
most votes here Ben we only have 10
50:38
minutes unfortunately I could talk to
50:39
you for hours but it’s not even a
50:41
question it’s actually no question just
50:43
a thanks to Ben for all of his work
50:44
providing PPE to frontline workers so a
50:49
girl well thank you and and I do want to
50:52
take a second on that because we we are
50:57
making I think a very successful effort
50:59
at getting
51:01
PPE personal protective equipment masks
51:05
particularly straight into the hands of
51:08
the doctors and the nurses and the EMTs
51:10
and the the firemen who need it so
51:13
desperately and you know to date we’ve
51:16
we’ve raised a lot of money we’ve we’ve
51:18
we’ve gotten more than 60-thousand in 95
51:21
masks to more than 600 clinics and
51:25
hospitals and fire departments all
51:27
across the country I mention this
51:30
because this is what I mean about
51:32
bottom-up action we can all do this
51:35
right we we don’t need to wait for
51:37
somebody to organize this we don’t need
51:39
to wait for some politician to tell us
51:42
oh you know do this and don’t do that we
51:44
don’t need any permission we know it
51:47
needs to be done and we can all make a
51:49
difference in this respect so so thanks
51:51
to the the the person who wrote in as an
51:54
opportunity to encourage everyone to do
51:58
mmm do that’s John Boyd 101 by the way
52:03
I’m the mad major in Oh Duluth start
52:06
with doing you know so that’s that’s
52:07
important here’s a here’s a there’s a
52:09
long question this is a I want to know
52:11
the answer to this selfishly Keith sees
52:14
the world through a mathematical lens
52:15
Ben can you talk about Epsilon theories
52:18
natural language processing and how
52:20
you’re framing narrative mathematically
52:22
how could narrative machine work in
52:24
concert with a quantitative signal like
52:26
Keith’s a great great question that I’d
52:30
love to explore that with you key at
52:32
some point yeah so you know that again
52:36
my background is statistics and math and
52:38
and and the like the the world we live
52:42
in as we know is you can apply those
52:45
math and those techniques to the data
52:47
that you collect in the world and you
52:50
know it’s it’s like the old story of the
52:52
guy looking for a lost quarter and he’s
52:55
looking for it underneath the street
52:56
lamp and the prison says well is that
52:58
where you lost the quarter he says no I
52:59
lost it over there but the lights good
53:01
over here
53:02
and and and so we we we have these very
53:06
advanced mathematical techniques and you
53:09
know statistical approaches but it all
53:12
boils down to what are you applying it
53:14
on what’s the
53:15
you’re applying it on and so what we’ve
53:18
done for hundreds of years is we’ve
53:19
applied it to structured data we’ve
53:22
applied it to the things that we can
53:23
count in the world right – what we can
53:26
put on a spreadsheet yeah I’m old enough
53:28
to remember Lotus 1-2-3 right where’s oh
53:30
my god we got it spreadsheet now this is
53:32
fantastic so you know everything you get
53:35
off of Bloomberg it’s in the form of
53:37
structured data yep
53:39
what what what I’m trying to do in our
53:41
research program is trying to apply
53:43
these same old math techniques that have
53:47
been around for four decades right but
53:49
to apply it to things that are a little
53:51
harder to count in to measure it’s it’s
53:54
what we refer to as unstructured data
53:56
it’s all the it’s all the words that we
53:59
hear on CNBC at a given date you can
54:01
imagine that right is all the words and
54:04
articles that are published and you know
54:06
reuters and Dow Jones and the Journal
54:09
and Bloomberg on a daily basis it’s a
54:12
it’s a big data problem but today and
54:17
this has really been the the revolution
54:19
for my research over the last three or
54:21
four years because these are techniques
54:23
that I was trying to apply 30 years ago
54:25
and my doctoral dissertation but today
54:28
we can plug in to AWS Amazon we can plug
54:32
into Azure from Microsoft and I can get
54:35
as much computing processing power as I
54:38
want it’s like plugging and playing the
54:39
wall and getting electricity so the the
54:42
calculations we’re making the math we’re
54:45
applying it’s not complicated what’s
54:48
different today is our ability to have
54:52
all the words write all the words are
54:56
available in a data feed from my Dow
54:58
Jones or LexisNexis and then the just
55:01
the processing power to do the
55:03
calculations on it it’s all there at
55:06
your fingertips so again this is why I’m
55:08
hopeful that we can we can turn these
55:10
the tools of technology and science to
55:14
understanding our world better and to
55:17
see how narratives our form is it’s like
55:22
having a microscope and putting a you
55:24
know in the 1700s and saying oh I wonder
55:27
what this
55:28
you know drop of dirty Tim’s river water
55:32
looks like if I put it under this new
55:34
machine I built the microscope yeah and
55:36
you look at the microscope you go oh my
55:38
god there’s a whole world alive in there
55:40
mmm I think that’s that’s the research
55:42
I’m trying to do and I think it’s a
55:44
great marriage with the sort of
55:46
structured data analysis that I that I
55:48
did I know you do Keith yeah I think
55:49
there I mean that is the kind of citing
55:51
a book this morning called the the
55:53
future happens faster than you might
55:55
think
55:56
these are the guys that wrote or at
55:58
least that give out the X Prize every
55:59
year but you know everywhere you look
56:02
we’re on the edge of things like that a
56:03
friend of mine dr. Richard Peterson
56:05
wrote inside the investor’s brain he’s
56:07
really focused on memes word threads you
56:10
know using you know predictive tracking
56:12
algorithms to drag that out I think
56:13
there’s a great collaboration there so
56:15
you know I will talk to you I will take
56:17
you up on that by the way well I have
56:18
time for one more question here that’s
56:20
and I knew is we’re gonna get this
56:22
question because we haven’t really
56:24
addressed it but this is from Eric what
56:27
specifically will it take for the dollar
56:28
to be toppled and from being and from no
56:31
longer being the world’s reserve
56:32
currency
56:35
it’ll take a world war that the United
56:37
States loses and I mean I can’t say it
56:39
any stronger than that right I that
56:41
that’s the answer that I’ve ever been
56:43
able to hear on now and I like that I’m
56:45
gonna use that there there you go man I
56:49
mean the the dollar is is is part and
56:53
parcel of the United States military
56:58
might in the world I don’t know you know
57:01
a better way to say it than that
57:03
you know is it still saying you know
57:05
that governments today are insurance
57:08
companies with an army attached to them
57:11
I mean and that’s that’s what the United
57:13
States has become an insurance company
57:15
with an army attached to it and it’s
57:18
scrip right is the US dollar so you got
57:21
a you got either knock out the insurance
57:23
company you got to knock out the army
57:25
yeah on that script value on that like I
57:28
have a follow-up question I mean another
57:29
book I just recently finished which is a
57:31
history book called the splendid in the
57:33
vial and it’s a great book about you
57:36
know that moment in that particular
57:38
moment of risk in time and London
57:40
against Berlin and I was
57:41
to make the analogy between Washington
57:43
and Beijing a lot of people you know
57:45
we’ve had the through Citadis trap which
57:48
is another book about rising powers
57:49
attacking existing powers a lot of
57:52
people are getting a little closer on
57:53
this and and this might be a big last
57:55
question to ask you on on this ultimate
57:58
rising power China you know again
58:00
because that would be a sensibly the
58:02
night of status but again that would be
58:04
the potential threat there if you were
58:07
to have a World War is to have the
58:08
Chinese currency and the Chinese
58:09
themselves beat up on the US well so I I
58:15
can give you some examples of power
58:17
transitions as we call them that either
58:20
don’t happen like you know if you’d gone
58:22
back 40 years you’d be talking about
58:24
Japan Inc and Japan going to you know
58:28
past the United States as the largest
58:30
economy and the most important economy
58:31
in the world that didn’t happen the you
58:34
know Ashley Japan fell back and and so
58:37
there wasn’t that sort of power
58:38
transition there was really wasn’t a
58:40
risk of it being violent in any respect
58:42
you talk about the power transition
58:44
between the the United States overtaking
58:47
Great Britain right around the really
58:51
after the u.s. Civil War call it the
58:52
1890s like the 19th through the first
58:55
world war where you saw the United
58:56
States really come into its own as the
58:58
global superpower okay so I’m giving
59:01
examples of peaceful transitions
59:03
transitions that that don’t happen
59:06
they’re possible that they’re still
59:08
peaceful but to your point I can also
59:10
give you examples of transitions or near
59:13
transitions that that end up in war what
59:16
what I would say right and again it’s
59:19
it’s similar to you know you’re talking
59:22
about the fourth turning and India how’s
59:24
work absolutely there are cycles in
59:26
history absolutely there’s a recurring
59:29
pattern of what we call hegemonic powers
59:32
super powers and the countries that rise
59:35
in power to try to challenge them it’s
59:37
not preordained it’s not certain right
59:40
that that ends up in war and in military
59:43
conflict right that can absolutely
59:44
happen but it’s not preordained it
59:47
matters how we act right it matters the
59:52
stories we tell ourselves the narratives
59:54
we have
59:55
have the leaders we elect as to how this
59:58
all plays out and the last thing I’ll
60:00
say about this is let’s remember that
60:02
the problem with the the Peloponnesian
60:05
War if we put ourselves in the position
60:07
of Athens right the good guys they lost
60:11
that war they lost that war and it was
60:13
because of their overweening pride their
60:16
sending of expeditionary forces out in
60:19
this case to Syracuse they’re
60:21
overextension of themselves and their
60:23
hubris and thinking that they could
60:25
control the world I think that’s the
60:28
lesson we need to learn from the front
60:31
acidities and the Peloponnesian War is
60:34
to avoid that overweening pride that
60:37
hubris that of course where the natural
60:39
winners and anything that I mean for
60:43
those of you this hasn’t kind of come
60:45
across to you yet or not you know given
60:48
his wealth of knowledge you at some
60:50
points that it’s not been hunt I thought
60:52
it was like Benjamin Franklin you have
60:54
that look kind of look a little bit like
60:56
the guy you’re on you have your own farm
60:58
I think you have a 45 acre farm you live
61:00
on yeah yeah you’re a good guy too
61:03
I mean I think that that’s another thing
61:05
that we need more of on Wall Street is
61:06
people that can actually translate or at
61:10
least go across the bridge between like
61:12
okay here’s what I want to do in the
61:13
market but here’s what I want to do is a
61:15
human being and and those can be you
61:17
know some different things obviously at
61:18
certain points along that bridge so you
61:21
know uh awesome having a conversation
61:23
with you man i I’ve been looking forward
61:25
to this Keith thank you thank you very
61:26
much for having me on
61:27
well I I genuinely appreciate it and I
61:29
know that the audience does too I wish
61:31
we I wish we had more time but I promise
61:33
to stop myself up good stop myself up
61:36
because I rant too at an hour so thanks
61:39
thanks for your time we appreciate it
61:40
thank you
61:44
you
61:49
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