The secret lives of the super rich
Billionaire’s Row Documentary
Transcript00:00the Joe Rogan experience no well it you00:05get compared to him a lot and one in one00:09way I really saw that comparison was00:11your brilliant coverage of the financial00:13crisis and what was the the mechanisms00:16behind the scene of the financial crisis00:18and that I became a really big fan of00:20your work reading that because the that00:23I I think you covered that as well if00:25not better than anybody00:26oh well thanks yeah I mean so I I knew00:31nothing about any I couldn’t even00:32balance my checkbook when they assign me00:34to that story and and I had to start00:38basically from square one and I was00:41calling people and saying things like00:44can you tell me something about00:45something that I’ll understand you know00:47it’s real cold calling investment banks00:49and literally saying that and I finally00:51got a guy to have lunch with me and he00:56said your problem is that you’re trying00:59to understand this as an economic story01:01once you look at it as a crime story01:04you’ll get it and and from that point01:08forward I I totally I felt like like I01:11started to understand the whole01:13mechanism in the subprime mortgage scam01:16it really was a scam it’s really it’s01:18really just a massive corporatized01:21version of like selling oregano as weed01:26basically they they took stuff that01:30these is incredibly worthless highly01:33risky mortgage loans right you know they01:36would give out loans to everybody with a01:38pulse you know whether you had a job or01:41not whether you were a citizen or not01:43didn’t matter poor thing was to get the01:45loan immediately sell it off chop it up01:48turn it into securities and then they01:50used this highly advanced sort of01:54mathematical trick to turn all that sort01:58of mortgage hamburger into triple-a02:00rated securities so you’d have like a02:02you know a junk rated mortgage like the02:05riskiest loan in existence something02:10that was so toxic that02:12country companies like country or I02:14wouldn’t want to hold on to it for more02:15than a week because they were afraid it02:17would that the stuff would blow up and02:18then they would sell it off to like a02:21pension fund or you know an insurance02:24company in the form of a triple-a rated02:27security which you know is as safe as a02:31US Treasury bond so it was a scam McGann02:35and the the the the metaphor of you know02:39baby power taking baby powder and02:42selling it as coke or whatever that02:44that’s exactly what it was they just02:45took worthless shit and sold it as02:47something that was that was gold and02:49they got they did it for years and years02:52and years and years and they they knew02:54that this gigantic huge bubble of risk02:58and disaster was just accumulating and03:02that someday it was going to all explode03:04and cascade and and and ruin the economy03:07but everybody was trying to time it03:10right and and bet on when that would03:14happen and make their money before that03:16that Judgment Day came and it was it was03:20fascinating what’s it once I started to03:22learn about it it was just such a an03:23amazingly disgusting fascinating story03:27that it was just hard not to not to get03:30into it a crime story yeah think of it03:33as a crime story yeah no absolutely I03:36even got one guy gave me a book it was03:42called famous famous con artists in03:45history right it was like this little03:47tome it’s smaller than like the smallest03:49paperback and it was the biography of03:53this guy Victor Lustig was his name he03:56was famous because he sold the Eiffel03:58Tower twice alright and he he had this04:05this scam that he called I think it was04:09called the the the Hungarian box I’ll04:14have to go back and look but basically04:15what he would do is he would get on a04:18boat in New York and he had this sort of04:24beautiful mahogany box with04:25ranked on it that had two holes in it04:27and he would show all the guests that he04:30would put a blank piece of paper in one04:32and turn a crank and $100 bill would04:35come out the other end and he convinced04:39them all that it was a machine that made04:41money and everybody would offer him an04:45increasing amount of money for this04:47invention and he wouldn’t sell it until04:51the last day when he would sell it for a04:54you know forty or fifty thousand dollars04:55and then he would disappear and jump off04:56the boat and in France and never be seen04:58again people would yeah there it is05:00what’s it called yeah but but that’s05:08exactly what the Mortons picture let me05:10see his face05:13look at that fucking creep05:15[Laughter]05:16Wow let me see that box again Wow that05:22is crazy05:23so there yes so it was obviously fake05:26and and and but that’s what the mortgage05:28scam was they they they were taking05:32basically blank paper these these05:35subprime loans that belong to jander’s05:38who were gonna foreclose within ten05:41minutes all right and they were telling05:45people that oh we have this new05:47mathematical process that allows that05:49actually makes this stuff really safe05:51and you can put it in your in your05:56College endowment you can put in your05:58pension fund and so all these people you06:01know whose retirement monies were based06:04on securities we’re buying all this shit06:08that they thought was was triple-a rated06:11and that’s that’s how they woke up and06:12you know and in 2008-2009 and they found06:14their 401ks or were you know wiped out06:19by 40 percent or whatever it was my06:20neighbor really did I happen to him my06:23neighbor bought this plot of land and06:24had this dream to build his dream house06:27and he would go buy the plot of land and06:30he was always cleaning up and getting06:31ready and I was talking to him and then06:33boom 2008 happened he lost everything06:37and he would still go buy that plot06:40and cleanup and he and I would talk06:42about it and they just told me lost06:44everything06:45yeah so it’s never gonna happen huh yeah06:47no I think he I think he died he06:51eventually got really sick and they took06:53him out of his house and brought him06:55somewhere but I think he’s dead now but06:57yeah his his story was awful awful to07:01hear this guy who was in his 60s who had07:04got this piece of land with a nice view07:06and it’s like this is where I’m gonna07:07build my dream house and he had all this07:10money prepared for it all this money07:11saved away and he was ready to rock and07:14roll and then boom mmm it all went out07:17they just drained out somebody put a07:19hole in the bottom of the boat and07:20everything everything went to the bottom07:23of the ocean yeah and then he’d probably07:25got ripped off twice because his tax07:26dollars went to go bail out the guys who07:28you know you know who because some of07:31the some of the banks got stuck holding07:32some of this shit and rather than eat07:35the losses like your your friend did07:37they got the Federal Reserve to buy it07:40from them ya know and and you know or or07:44the Treasury how the fuck did they get07:47away with giving the CEOs bonuses during07:51that time yeah a giant bonuses during07:53the time where they they had to be07:55bailed out by the taxpayers yeah that07:57was another scam like so they were if08:01you looked at the fine print of all the08:02bailouts it’s basically said that you08:05had to repay the money by us by X time08:08before you could start paying people08:10exorbitant amounts of money again but a08:14lot of those a lot of those conditions08:16were never really followed and you know08:19the the conditions of repayment were08:22kind of glossed over and the the the08:27companies that they were supposed to be08:28able to pass these things called stress08:30tests which demonstrated that they were08:33back on solid footing again before they08:35paid people bonuses but the stress tests08:39were all fledged and you know I mean the08:41there were there was crime and08:44corruption a legality basically in every08:46direction during that whole period and08:48and08:49not just in the government but in in all08:52these companies as well geez yeah but08:55fascinating to follow yeah what was it08:58like covering that I mean how long did09:00you spend working on that seven years09:03probably yeah yeah well because one of09:06the things that I thought no that was09:07really interesting was I did my first09:13story about this and I got this09:16incredible reaction because it turns out09:19that the financial press there is nobody09:21in the financial press who writes for09:23ordinary people like it’s basically what09:26I was doing was a translation job I was09:27trying to basically take what had09:30happened and explain it in a way that a09:33person who knew nothing about finance09:35would be able to understand and it turns09:38out that nobody is doing that so all09:42these people who had questions about it09:44who who wanted to know what had happened09:46to their money or why don’t why didn’t09:49my house get foreclosed on or what it09:50you know what’s what’s a subprime09:52mortgage or anything you know there was09:57nobody else doing that work so I had09:59lots of it to do and it was really10:01interesting and I just kept doing it10:04that had to be depressing yeah oh yeah10:07of course10:07of course I mean most most investigative10:10reporting is depressing particularly10:14that because you mean a lot of it was10:16old people that oh my god old people10:19minorities I mean I did one story about10:22a bank in Maryland well it’s a National10:29Bank it’s it’s a bank that you know I10:31wouldn’t be surprised that a lot of10:34people listening how have their accounts10:35at this Bank they had to pay settlement10:39to the government because they were10:42intentionally targeting elderly black10:45people to sell subprime mortgages to and10:50they called the mud people10:51and there were all these these like10:53toxic emails going back and forth about10:55how stupid they were and how they’ll buy10:57anything etc etc the emails they call11:00them mud pee11:01yeah yeah and so they had to pay a11:03settlement to the government and but you11:06know the racial component of the of that11:08crash was something that I didn’t really11:10clue into until late but that was a big11:12part of it too11:13it was you know a lot of it involved11:18these mortgage lenders going into11:22particularly like lower middle-class11:24black neighborhoods and knocking on11:27doors where there’d be like an elderly11:29person at home and saying hey would you11:31like to refi your mortgage and you’ll11:34have a little bit of extra spending11:35money this month right and the person11:40won’t know anything about finance and11:42they’ll still sign this refinance deal11:44that allows them to save a little bit of11:46money each month not knowing that they11:49had just converted their fixed mortgage11:51into a floating mortgage and that is11:53seeing the interest rates changed you11:56know you’d have people who went from11:58paying $900 a month to paying $7,000 a12:02month right and suddenly they’re out in12:04the street and and you know the the12:08company that sold them the loan is long12:10gone by then they they’re not holding it12:12they as soon as they got her name on the12:15dotted line they sold it off to a bank12:17in New York who in turn again chopped it12:20up into hamburger and sold it probably12:21to you our pension fund or who or12:23whatever so there’s nobody she’d give a12:25complain to and you know yeah that stuff12:27was really depressing what was a feeling12:29like of having very little understanding12:31about finance and then immersing12:33yourself in it and now is vac sizing12:36that this is the underlying structure12:38that our society is Rhon that our money12:41is established through like this is this12:43is how we we sell houses and loans and12:47this is what we’re doing yes yeah no it12:50was it was fascinating I because before12:52that I was mostly covering like12:56elections right and again if you cover12:58elections it’s incredibly boring and you13:01never hear anything of substance and13:03it’s not terribly complicated and you13:05know one one the the Democrat says that13:08you know we want to help the middle13:10class and the Republican says we want to13:11protect America Family Values and that’s13:13pretty much the extent of the end13:15a challenge in terms of covering that13:17stuff and I always thought to myself you13:20know politics in America must be a lot13:22more complicated than this right there13:23must be some other hidden thing where13:28it’s incredibly complex and diabolical13:30and and you know the the real match13:33additions of power must be visible13:35somewhere and I think that you find that13:40when you when you start looking into howWall Street works how money works howcentral banking works how you know howthe concentration of wealth worksI mean basically the subprime scheme wasan effort to pull the remaining savingsout of the population right it justwasn’t you know in the old daysinvestment banks made their money bylending money to companies who wouldbuild factories and they would makestuff and sell it around the world andeverybody would make money and never youknow even even the population wouldwould would benefit from it but thatmanufacturing economy it’s all gone it’sso four C’s so you have thisfinancialized the economy and they haveno normal beneficial way to make moneyand all that all they can really do islook to see where is their money and howcan we get it and most people had moneyin their houses right like the the14:42accumulated savings of most people14:43whatever was left after the internet14:46crash in the 90s was in real estate and14:50that this was the scam by which they14:54took the wealth that was left in the14:58pockets of ordinary people and14:59transferred it to you know nine people15:03in Manhattan basically I mean that’s why15:05you have you know we told them when we15:07talk about wealth inequality now right15:10being a huge factor that you know the15:13top 95 I’m sorry the top 1% of the15:19population owns ninety percent of the15:21wealth in the country whatever it is15:23that’s a consequence of schemes like15:25this where they’re just there15:28they’re finding out where people have a15:30little bit of money and they’re15:32systematically coming up with scams to15:34move it from there to here with no15:37consequence no with no consequence and15:39that was the other part of the story15:40that I ended up having to cover later15:42which was you know the last time they15:45tried something like this like during15:47the SNL crisis which was also sort of a15:51giant fraud scheme also that involved15:53real estate lending and you know but15:56that the government after that actually15:58you know indicted 1800 people they put16:01800 people in jail they put a lot of you16:04know serious influential people on the16:06dock after that nobody nobody went to16:11jail after the stuff and there was and16:13people think that well they didn’t do16:16anything that was technically illegal no16:17bullshit there there was lots of stuff16:19that was that was brazenly criminally16:23illegal I mean they they committed fraud16:25on a broad scale but some of these16:27companies were into the things that wereeven worse than that I mean you takeHSBC HSBC admitted to laundering 850million dollars for a pair of Centraland South American drug cartelsincluding the Sinaloa cartel right whichis suspected in thousands of murderslike and you know they they admitted tothis activity they agreed to a deferredprosecution agreement with thegovernment where nobody did a day injail no individual had to pull out adime out of their own pockets to pay theshareholders pointed up 1.9 milliondollars but some of that was taxdeductible which means we paid some ofthat fine and and the only realpunishment with any teeth is that someof the executives had to partially defertheir bonuses for five years solaundering 850 million dollars for narcoterrorists gets you a total walk youknow that tells you basically everythingyou need to know about do we prosecutewhite-collar crime in this countrybasically no you know I mean that’s theanswerultimately that you find out and therewas paperwork that showed they knew itwas from the cartels oh yeah they if youif you look at the the agreement and youcan watch the thirst there’s there’s avideo of of Loretta Lynch and lanny18:00breuer because this is before laura18:02Loretta Lynch was Attorney General but18:03she was she was basically the head of18:07this deal they talked about the fact18:10that the HSBC branches because most of18:13this was done in Mexico hmx which was18:17the subsidiary company they had special18:20teller windows built to fit cash boxes18:24that the drug cartels were bringing into18:26the bank so basically you’ve seen the18:29scene the scene in Scarface where the18:31guys come in with duffel bags of cash to18:33the bank right and you know that’s like18:35a montage you know there’s that that18:37song I forget what song it is in the18:38background same thing these guys would18:40come into the the bank they would slide18:44in these boxes of cash one after the18:46other and that’s admitted activity the18:49banks signed off on this they’d you know18:50it’s not like they’re contesting it18:52they’re not saying we neither admitted18:53nor denied it’s it’s part of the deal so18:57and in they agreed to the amount18:59everything so yeah it was a one point19:04nine billion dollar settlement but you19:06know it’s not like it came out of the19:07pockets of the people who did it and19:09it’s not like any of the people who did19:11it are in jail it’s just you know a19:13thing that happened and you know that’s19:16five weeks of profit for the bank so19:18what what the fuck they don’t care right19:21did you see the documentary an inside19:24job yeah yep we’ve covered a lot of the19:27same territory yeah yeah that was a19:29sobering documentary where they’re19:31talking to the very people that caused19:33the financial crisis mm-hm and and19:35realizing that these people were19:37economics professors that eventually got19:39these jobs really lucrative jobs with19:42banks and how they finagled this system19:45and made it so it looked like these19:47things were appropriate ya know I talked19:50to the19:50some of the some of the things that they19:53invented that made this the crash19:54possible sounded like good ideas like19:58they they came up with this thing called20:00the credit default swap all right and I20:02won’t bore you with what that is exactly20:05but basically it’s a kind of insurance20:08where it’s it’s basically a bet it’s20:12hard to explain but it’s a way of quasi20:19insuring a product without having to20:22pony up a lot of money and the it’s it’s20:27called the derivative right and these20:31instruments are completely unregulated20:35can I put the secret default swap is20:37like you and I betting on whether or not20:43a third person’s house is going to burn20:48in a fire right like the old-school20:50insurance said that it had to be your20:53house in order for you to get insurance20:55on it this new form of quasi insurance21:00said that two totally disinterested21:01parties could have an interest in a21:03third thing that happens so it’s21:06basically gambling and on the one hand21:11it allowed people to create a whole lot21:15of capital which allowed them to lend21:16more money which theoretically allowed21:18people to buy more houses but in reality21:21it just created the system where all21:23these people had bets that were back and21:25forth on on all these properties that’s21:27one of the reasons why the when the21:30crash happened when when all those21:31mortgages started to fail it wasn’t just21:34the failures of those properties it was21:36all these people who were betting on21:37whether or not these people could could21:39pay their mortgages they started to lose21:42money and then there were people who had21:43bets on that who started to lose money21:45and it’s like this cascading whirlpool21:47of shit that happened and again it just21:51it started out as an idea to just create21:53more money to lend to lend and it turned21:56into this nightmare mechanical scenario22:00that just that created losses22:03you know in this almost apocalyptic22:05fashion and a lot of them had no idea22:08but that that was going to be the22:10eventualities22:14yeah it’s great it’s definitely crazy22:17stuff as a person who didn’t really22:19follow finance before how much does that22:21affected your life now like the way you22:24look at things I definitely pay a lot22:26more attention to the fine print when I22:30enter into any financial contract I22:34think about where I do my banking but22:38the reality is you just don’t have a22:40whole lot of choice in this country22:41anyway I mean it’s like everything else22:43there’s only a few companies left so22:47almost every bank that’s out there where22:51you can have a bank account in a22:52mortgage is is a bank that I’ve written22:55about some massive scandal before so22:58that that’s that’s a problem but yeah I23:03worry about it all the time I mean I23:04have friends in finance who call me and23:07they they tell me that you know that the23:11things that are incredibly unsafe and23:13that this that and the other could could23:14could happen and so I have an anxiety23:17level about things that I never had23:18before but apart from that yeah I mean23:22that’s a natural consequence of having23:26to spend 7 years looking at all these23:29horror stories that’s great it’s crazy23:31you spent their lunch time on it do you23:34see any other bubbles coming up23:36yeah people talk about that all the time23:40there’s a lot of a lot of negative press23:45about subprime auto loans for instance23:48which is it’s not exactly the same but23:52it’s it’s a similar thing I mean the23:53same basic scam of taking loans chopping24:00them up and then repackaging them as24:02something that’s more valuable than the24:04original loan you can do that with24:06anything any kind of credit you can do24:08it with credit cards you can do it with24:09aircraft loans you can do it with with24:11car loans you can do it with with home24:13mortgages24:15and so the the mechanism of taking24:18things that are are toxic and risky and24:22making them look like triple-a is still24:25is still part of the economy and it’s24:30everywhere the plus side of that is that24:33there’s more credit available you know24:36almost anybody can get a credit card or24:38even if you’ve had screwed up credit you24:39can get a car you know I mean there’s24:42this put us on this like endless cycle24:44of build-up bubble collapse build-up24:46bubble collapse rebounding collapse24:49again absolutely I mean I think that’s24:51that’s that’s why I can’t you have to be24:55nervous about the you know the24:57skyrocketing stock exchange because we25:01verified yeah I mean you should be right25:03do you are you heavily invested in and25:05I’ve got some in there I just did when25:07when the whole you know when Trump was25:09saying the economy has never been better25:10look at the stock market stock market’s25:12killing it always do and then it’ll have25:14a bad day and okay well I thought we’re25:16doing great like what’s going on with25:18this bad day can you not control these25:19bad days right like what’s happening25:21here right if you’re if you’re in25:23control the good days you’re also in25:24control the bad days right yeah of25:26course of course it just it seems it25:29seems super suspicious yeah and and in25:32the old days you’d have a lot of25:34confidence that well the stock market25:37always eventually goes up so yeah25:40there’s gonna be bad days but it’ll go25:42back but the problem is the underlying25:43economy in America it just isn’t all25:46that hot you know like we’re like what25:48do we really make in this country what25:50what we’re where’s the floor right like25:53we have we have some industries that25:55sort of perform well but if you know25:58periodically we go through these bubbles26:00that are based on nothing more than26:01enthusiasm you know in the 90s it was26:04the the tech bubble right where people26:08like Alan Greenspan would say things26:10like well we have a new paradigm in26:11economics right so it doesn’t matter26:15whether a company hasn’t shown any26:17ability to make money or26:21you know has no reasonable profit and26:25loss statements it’s just if it’s a good26:27idea that the stock is sound and26:30everybody should invest in it and the26:32stock market is going to continually go26:34go up so don’t worry about it of course26:37that doesn’t happen everybody but it26:39blows up everybody loses their shirt but26:41what what do they do the Fed lowers26:44interest rates basically allows Wall26:46Street to recapitalize drink itself26:49sober and they plunge into the next the26:52next madness which is mortgages and once26:55again you have Alan Greenspan saying hey26:58you know real estate is a great bet it’s27:01you know it’s going to continually27:02ascend people should use their homes as27:05ATM machines you know you should you27:08should consider refinancing your house27:10so that you can get a little bit of27:11extra cash and and this is this was27:14actually the message they sent to27:15America and again it creates as27:17artificial mania27:19where the economy is stoked artificially27:23to gigantic dimensions but it’s not27:27based on anything and so when when it27:30crashes when you finally get like any27:33Ponzi scheme it you know it depends it27:36depends on more new investors coming in27:38than old investors leaving right so27:40there’s always going to be that moment27:42when suddenly we don’t have as many new27:45ones as old ones and the instant that27:47happens it all goes kaboom right and27:50that’s what happened with with the27:53subprime market there was a moment in27:55time where they they just couldn’t keep27:58it going anymore they couldn’t find any28:00more new suckers though to get to sell28:03mortgages to and the mania ended and all28:06went splat and then it was amplified by28:08the fact that we have this system now of28:11people betting on credit that is legal28:16which creates more losses out of thin28:19air so yeah I’m terrified every time I28:22see this the stock market go up what’s28:25it based on is it based on our economy28:27actually doing well I don’t know I don’t28:29think so28:30you know I’m sorry I’m look like I’m28:33scaring you a little bit you’re28:34definitely scaring but I think that’s28:36good I think I need to be scared I tend28:39to take these things and just you know I28:41have financial advisors I let them28:43handle money right when I hear things28:45like this I just got Jesus well I I get28:48terrified when I hear about really smart28:49people getting scammed like yesterday we28:52were talking about theranos do you know28:54that a blood testing company that turned28:57out to be total horseshit no I didn’t28:59hear about this oh it’s great story it’s29:01it’s a story of one of those things29:03where you you find someone who you hope29:06exists and you build them up there was29:08this woman she looked like Steve Jobs29:11she wore a black turtleneck in every29:13photo and she was the richest ever29:18self-made woman she was worth four29:21billion dollars she had built this29:23company called theranos right out of29:25college she was like 19 when she started29:28the company it was a blood-testing29:30company that just required a small prick29:32of your blood to do complicated blood29:34analysis for diseases and things along29:36those lines29:36turns out it didn’t work at all mmm and29:38they faked a bunch of shit I’d spread29:42fraud a lot of people got their blood29:44tested it turned out to be you know they29:46were at risk for all these diseases and29:48warren buffett invested a hundred29:51million dollars I think 125 Betsy DeVos29:54more than 100 million dollars like all29:56these super wealthy people got scammed29:59Wow yeah when you find out that really30:01wealthy people write that do this for a30:04living30:05yeah Buffett does that for a living30:07right that he can get scammed out of a30:09hundred and twenty five million dollars30:12right right yeah and and Warren Buffett30:15his his mantra is supposed to be picking30:20the the absolute long term investment30:25right so it’s not he’s not like a stevie30:28colon type who just looks at the tape30:30and tries to time it just right so you30:32know you can you can make an investment30:35for ten seconds and come out with it30:37with a you know30:38if he if he’s investing in a company and30:40a and even he can be fooled that’s30:43that’s pretty terrible but look at Enron30:45I mean Enron was was another example of30:47the world’s best financial analysts30:49we’re looking at this company for a30:51decade and the the results were30:56completely ridiculous like it should30:58have been obvious to any layperson that31:00that these profit numbers couldn’t31:03possibly be real and it wasn’t until one31:08of those guys I think it was Jim Chanos31:11it was sort of a famous short seller I31:13mean I sort of said hey wait a minute31:15that there’s something up here but31:19people continually invested in these31:21companies and there’s just not a whole31:22lot of oversight that goes on with with31:27Wall Street and I think that’s that’s a31:29major lesson of you know the last 2031:33years is that is that there’s just not a31:36lot of eyes on on crime and in this area31:39another example is I’m sorry the the31:43who’s the guy scammed all the rich31:44people really made up Bernie Madoff yeah31:46I was gonna bring him up yes the most31:47egregious example right yeah yeah I mean31:49there are other there are other people31:51who did similar things but this guy31:54didn’t even make investments right you31:56know what I mean31:57like he he was literally just sort of31:59taking money and you know when someone32:01cashed out he would you know it was like32:04who’s that little girl throwing he had a32:09big you know pile of cash and you know32:11he would who take some man and throw32:13some out but if the SEC it had at any32:16time just looked at his books and said32:19what are you invested in it all would32:23have you know that whole house of cards32:25would have fallen and invest in anything32:27no and he wasn’t he wasn’t making trades32:29he wasn’t doing anything you know and32:32and there are a bunch of stories like32:35this there’s a great book called the32:38octopus which is about as somebody who32:39did a Madoff like scam another hedge32:42fund where same thing they weren’t32:45really making trades they were just sort32:46of creating phony profit and loss32:48statements and32:50and and creating records that look like32:53trades they could they could tell their32:55investors about but they weren’t32:56actually doing anything so if anybody32:58any expert at any time had just poke33:03their nose in into this person’s books33:06they would have seen it in ten seconds33:07that’s the mean that’s the amazing thing33:09about this you know not not to get back33:12to you know my my drug-dealing book but33:15this is one of the things that he says33:16which is that you know you can be in a33:20you know in a poor black neighborhood33:22and a couple of kids will be on a cell33:25phone and talking about selling ten33:27dollars worth of weed and they’ll be33:29picked up by cops you know within 2033:33minutes or something like that33:34meanwhile you know somebody like you33:37know Bernie Madoff can commit 10033:41million dollar frauds year after year33:43after year and not even do any to take33:46any effort to try to cover it up all33:48that well and get away with it well33:50Bernie’s big crime was that he ripped33:52off rich people yeah absolutely33:54if he had done the exact same thing to33:56poor people but he did was just it was33:58just too easy to call what he did a34:00crime versus what you were talking about34:02with these financial institutions right34:05yeah yeah if he if he had long if he34:07laundered it through a slightly more34:09legitimate process he he would have34:11gotten out flattened but the one of the34:13things that a lot of these guys these34:15scam artists get into it thinking that34:18they’re actually gonna be real hedge34:20funds and that they they have some stock34:23picking system that’s actually going to34:25make all their clients money and one of34:27the things they find out is that a they34:29suck they they they’re not outperforming34:31the market and they’re not that smart34:33but be that their clients can’t tell if34:36they just make up the numbers so there34:39there are a number of cases of people34:41who start out trying to be legitimate34:43and trying to be really real investment34:46advisors but they just end up turning it34:49to Bernie Madoff types because it’s just34:52easy there’s no there aren’t that many34:54people watching for it and34:56you know that that’s kind of scary too34:58well it seems like there’s so many35:01people doing it how could there be35:04enough people watching it right about35:06how many investment firms there are and35:08how many different people that are35:09involved in trading how could anybody be35:12watching all of it right yeah no there35:15but even even so even if you take that35:20into consideration then the number of35:22eyes that are that are on this world is35:24is ridiculously low electic take AIG all35:28right AIG was one of the world’s largest35:31companies at before before it crashed it35:35had like a hundred eighty thousand35:36employees it was it took advantage of35:41this weird loophole that allows35:42financial companies to essentially35:45choose their own regulator so because35:48because AIG had a thrift or Savings and35:53Loan that’s basically the same thing35:54they chose to be regulated by the OTS35:59which is the office of Thrift36:01Supervision36:02which is this tiny tiny little you know36:07office in Washington that oversees36:10basically Savings and Loan operations36:12and in in the OTS this is this is36:16actually true the they had exactly one36:19insurance expert on staff so essentially36:22with the world’s largest insurance36:23company was being regulated by a36:27government office that only had one36:29person who really understood insurance36:31and and even and even that person36:33wouldn’t have understood the the part of36:37the company that blew up which was36:39essentially an investment bank within36:42the insurance company that was creating36:44these sort of highly advanced sort of36:46derivative operations that know that36:50they just would not have been able to36:51understand that stuff so there the36:55government just does not place a lot of36:58resources into you know keeping an eye37:01on even the most basic things and when37:04you compare that to law enforcement in37:06other areas you know37:08is how many how many people do we have37:11you know worrying about back bank37:13robberies in this country or drugs right37:16or you know how many people are being37:19watched because their marijuana dealers37:21in other states I mean it dwarfs the37:24number of people who are watching for37:25economic crimes yeah one person yeah I37:30just love the the name of it office of37:33Thrift Supervision yeah sure it exists37:36anymore I think it was it was merged37:39into some other because there used to be37:42the OCC the officer of the Comptroller37:44of the currency and I think they created37:47a new regulator at out of all that after37:49the crash but but yeah and I chose its37:53regulator and its regulator you know was37:56totally overmatched didn’t couldn’t37:58understand shit and that’s one of the38:00reasons why the company blew up the38:02company also blew up because it was run38:04by insurance people who didn’t38:07understand the idea was basically Wall38:11Street’s bookie all these people were38:12betting all these investment banks were38:14betting on whether or not mortgages were38:16gonna fail or not and AIG was selling38:19the product that they could use to make38:23those bets essentially or they were38:24taking on insurance on packets of38:27mortgages so if they exploded you would38:30get a payout right it was it’s like it’s38:33like buying an insurance policy on your38:35neighbor’s house if it goes up in flames38:37you get paid on it you got paid AIG was38:39selling a product that allowed banks38:41essentially to buy insurance on on38:44houses on mortgages and if the if people38:48foreclosed if the mortgage has failed or38:52pools of mortgages failed if you if you38:56bought that kind of insurance you got38:57these huge payouts so people were38:59betting against mortgages basically and39:02AIG was taking all this book and but the39:06the heads of the company were oldschool39:08insurance executives who just didn’t39:10understand this sort of newfangled39:15complicated form of insurance and so39:18they would look at the numbers they were39:20being given and even they didn’t get it39:21didn’t they didn’t understand how how39:24exposed they were and so and all the39:27bets started going the wrong way39:28suddenly they’re being asked to pay out39:30billions of dollars and they’re like39:33wait where is this coming from so even39:36the companies were kind of clueless39:38about the shit that was going on it39:40turns out39:46[Applause]
Billionaire real estate investor Jeff Greene built his fortune with a lifetime of hustle and no partners. In this interview with Raoul Pal, Greene explains how he transformed himself from a traveling circus ticket salesman to an investment titan putting on billion-dollar credit default swap trades. What began as a hedge turned into the trade of a lifetime when Greene astutely observed that shorting mortgage backed securities was a no-doubter in his first foray with derivatives. Greene also touches on his unique career path, his market outlook for a handful of asset classes, and the philanthropic endeavors that now dominate his focus. Filmed on January 23, in West Palm Beach, Florida.
RAOUL PAL: Jeff, it’s great to be here in Palm Beach and to get you onto Real Vision.
Just chatting off camera, we’ve got a lot of friends in common we didn’t.
You’ve got a fascinating story and I think people would love to hear the story of how
you start your career, how you got into real estate, but even starting before then, you
as a student, going to university.
Talk us through a bit about that.
JEFF GREENE: Well, I don’t know where to begin.
I grew up, I was born in Worcester, Massachusetts, which is a city about 40 miles from Boston.
My dad was a textile machinery dealer, which meant you sold these giant machines that were
longer than this room, they could be 100 feet long, to mills and parts of that also and
they did it very well.
We’re a middle class family in like cute little house with a backyard and my mom was pretty
much a stay at home mom.
Then in the late ’60s, all the textile mills got unionized in New England and they moved
to the south.
My dad lost his livelihood because he didn’t have mills to call and that’s all he’d done.
He had all this money in this business.
He had a warehouse with parts and materials.
My parents picked up and moved to West Palm Beach, actually.
My dad bought a small rubber stamp business.
He never really got on his feet again.
For me, I was just a junior in high school when they moved here, but I was really still
in junior high school and when our financial fortunes went the wrong way.
I had to work my way through college, and I had some financial struggles, which probably
made me hungrier than ever to do well.
RAOUL PAL: How did you pay your way through university?
There’s a bit of a story about that, because you went to Harvard, didn’t you?
JEFF GREENE: Well, I went to college at Johns Hopkins University in Baltimore.
I applied for scholarships, and I got scholarships and student loans.
That paid some of my costs and then also, I had been an exchange student in Israel in
I learned to speak Hebrew fluently.
I taught Hebrew school three days a week.
I had to ride the bus in Baltimore and I had to change three changes.
Three bus rides to go out there to teach Hebrew school on Tuesday and Thursday.
Then I rode out with another Hopkins student on Sunday.
Then I had another job where I checked IDs outside the gym, it was called work study.
It was a government funded program where you get paid a buck 50 an hour when you’re supposed
to be able to do your studying while you check the IDs, which you do.
Then I also, when I came down here to visit my parents, I worked with the Breakers Hotel
here in Palm Beach.
I was a busboy, and then a waiter in the main dining room, and I just slogged along and
made it through college.
I finished Johns Hopkins in two and a half years, not because I was such a genius.
I think it was because it was working so hard.
It wasn’t really a fun college one.
RAOUL PAL: Then after that, where did your career go?
JEFF GREENE: Well, so then what happened is I was down here one summer in West Palm Beach.
I was working at the Breakers, not making any money because who’s here in the summer?
Nobody, so no tips.
I signed out of the local papers, had telephone sales and I went to [indiscernible], it was
to sell circus tickets for the local Riviera Beach Fraternal Order of Police which is a
nonprofit Police Organization and it’s at $2.50 an hour or commission.
Well, minimum wage was a $1.60 in 1972.
$2.50 an hour, you can make 100 bucks a week.
Tuition at Johns Hopkins in those days was 2700 a year so if I work for 12 weeks, I’ll
make 1200 bucks.
Not so bad.
High stress on these tickets.
I’ve noticed that I’m selling more than everyone else, if I feel like I’m selling more than
everyone else in the room so I said to the guy at the end of the day, how much would
I’ve made on commission?
He said $93.
I’ll take commission.
Instead of making $20, I made 93.
Anyway, I ended up doing this all through college.
Wherever I had a break, I then would go on the road and run a telemarketing office for
After I finished at Hopkins, I went on the road to run these telemarketing operations
for fundraising circus from Sarasota, Florida, and I would roll into little towns all around
the country like Bluefield, West Virginia, tangy, you never would have heard of.
[Indiscernible] 20,000, 30,000.
Then I had a Pontiac Grand Am.
I had my clothes on a bar across the backseat, loaded with laundry detergent in the trunk
to go to the laundromat.
I would roll into town, check into the Motel 6 or Days-in or whatever it was.
I set up an office, sell the circus tickets, hire local people.
I did this.
It was a lonely life.
I finished college before I turned 20 so I was just 20 years old, 21, 22 all by myself
like a traveling salesman in these little towns.
Forget having a girlfriend, you couldn’t even have friends because you’re always seeing
You’re always on the move.
I did this and I saved up and I worked so hard.
I saved up $100,000 in the mid-70s.
It was just from working, I worked nonstop.
I lived on nothing.
I saved every penny because I was determined after what I’d been through going through
working my way through college, never to be broke again.
My dad, actually, it’s worse than not losing his livelihood, he actually lost his life.
When I finished Harvard Business School in 1979, in May, my dad didn’t make it to graduation
because he was having heart issues.
He died two months later with a massive heart attack at the age of 51.
I really believe it was because of the stress of not just losing his life, losing his dignity
and his sense of worth.
It puts me in touch today very much and that’s probably one of the reasons I’ve gotten involved
so much in philanthropically, and politically because I’ve really saw firsthand how somebody
can get broken when there are economic reality changes.
Anyway, so I saved up all this money, go back Harvard Business School, I had $100,000 in
Never had bought any real estate because how could I?
I was in a different city every two weeks.
RAOUL PAL: Living out of the car.
JEFF GREENE: Sorry?
RAOUL PAL: Living out of the car.
JEFF GREENE: More or less.
I did have stuff stored.
I’d never had an apartment.
I had stuff stored at my parents’ house, my aunt’s house.
I was living out of my car more.
When people say that you think I wasn’t sleeping in my car, but that was my base.
My Pontiac Grand Am.
Now, a lot of people I knew had invested in real estate.
I got into Harvard Business School.
I didn’t get into the good housing complex, so just field apartments because there was
a waiting list.
A friend of mine from Hopkins said, who would have started off with those first so I said
what do I do?
He said, well, what you can do is why don’t you go buy one of these three-deckers?
It’s like a three family house built in the late 1800s.
You can live in one, rent out the other two and at the end of the time, you think you’re
probably going to sell and get your money back and live rent free and I said that’s
I was set by to discuss– a friend who was broker, also been to the business school and
who I still know actually.
I bought a three-decker, and lived in one and the market was so undervalued in 1977
when I bought this, I could see I was saying, I bought it for $37,000, 7000 down, so that
would happen as I got approved for the housing.
I said, what’ll it make me if I rent all three, how does this investment work and by every
measure I looked at, I was going to end up after my mortgage payment, making $2200 a
year on my separate thousand dollar investment.
If that’s a 30% return, I said I got to get more of these.
While I’m at Harvard Business School, I accumulated 18 properties.
I bought them.
RAOUL PAL: You were just buying them out of the cashflow of each property?
JEFF GREENE: No, I had my hundred thousand.
RAOUL PAL: Out of school.
JEFF GREENE: For the first one I wanted when that was perfect, so I’m saying I can’t be
like dealing with repairs when I’m at Harvard Business School.
Who’s going to do this work?
Then I started getting comfortable doing remodeling and for the time I was done, I was buying
junkie buildings, fixing them up and anyway, that became the beginning of my real estate
As it turns out, the market was so undervalued.
That property I bought for 37,000, I sold three years later for 185,000.
Another property bought for 38,000, right near the Cambridge line, and somewhat sold
it for 3380, 330 to 380.
RAOUL PAL: Is that when interest rates started coming down that suddenly the price of property
Around ’81, ’82?
JEFF GREENE: I think you’re right.
That’s when Reagan was just– RAOUL PAL: Yeah, that’s right.
Reagan just cut in, there’s the Reagan-Thatcher years, interest rate just peaked and just
started to come by– JEFF GREENE: The late ’70s, so yeah, so before whatever it was,
the market just exploded and my 100,000– by the time I finished Harvard Business School,
I had a million dollar net worth.
Then I was off to the races.
It’s interesting because people often– RAOUL PAL: You didn’t use your Harvard education
JEFF GREENE: I always use my Harvard education.
RAOUL PAL: You leave Harvard, you’ve made a million bucks and I guess you decided real
estate’s the business you want to be in.
JEFF GREENE: I fell into it.
What happened is I decided to move to California.
I had a great aunt and some cousins there so I moved to LA after I finished at the business
school and thought I’d do real estate but the prices in LA were very different than
they were in Boston.
Boston was– it was before the tech booms and the biotech booms and Boston was a little
bit sleepy in the early ’80s.
Even after things had started to appreciate, you could still put down when you buy an apartment
building, you put down 20%, 30% you’d make a nice return on your cashflow 5%, 10%.
I go to LA and you buy a building, it’s okay, here’s what you do.
You put 30% down and you’ll lose cashflow.
Because basically in LA, you are buying the futures because everything was perceived to
be going like that, and I just didn’t get it.
I did some other things.
I bought actually 50% of a clothing manufacturing company, did that for 14 months.
RAOUL PAL: Why?
JEFF GREENE: I just finished Harvard Business School, I had to do something for my career.
I looked at buildings, they all just seemed outrageously expensive, didn’t fit the format.
I was used to cashflow real estate.
I just couldn’t figure it out.
I think, to tell you the truth, I’d taken a class, a business school by small businesses.
The way you find a small business is you do business brokers, go talk to local accountants.
What my cousin had was a textile salesman.
I said, let me go see your accountant.
Well, the only companies the accountant knows is textile and garment companies.
He said, well, I got this guy who has half of– he has a company, he’s just fired his
partner, he’s looking for someone like you to come in and help run the business.
I bought half of this company, and it was very successful 14 months.
I hated every minute of it.
It wasn’t my cup of tea.
I was thrilled and I’m showing up in my– at the time, Brooks Brothers suits and buttoned
down shirts and ties and these guys who were working there, gold chains around their necks
and they were in these spray on printed shirts that just it was aggressive, tough screaming
It wasn’t what I was planning on doing with my newly minted Harvard MBA.
Anyway, I got out, made some money and then I started doing real estate deals and started
I figured out the LA market, started buying properties and had a nice run up till early
’90s when I participated in the crash like most developers and investors.
RAOUL PAL: When you said you figured out LA property markets, does that mean you just
went into the momentum trade and realize it was all about price gains and not about–
JEFF GREENE: Yeah, I realized that you’re not going to make your cashflow in year one,
you’ll get your cash flow in year three or four and that’s how it was priced and just
I started doing things that way and sure enough, you bought one or two so I bought like an
eight-unit building, a seven-unit building.
Then you’re seeing there, as the rents go up and I started saying, now, I get this.
By the time I get to a– that was the starting like in ’82-’83 and by ’91, ’92, ’93, I had
about 100 million dollar real estate portfolio.
I never had investors or partners, but I had a lot of debt.
That’s how I built it.
I probably had debt on at maybe, I don’t know, 65 million, which is 35% equity, had been
refinanced and did grow aggressively, and then the market dropped and all the sudden,
somebody– ’92, ’93, ’94.
By ’94, my $35 million net worth was like minus $15 million.
RAOUL PAL: Did that terrify you?
How did you think about debt from then?
JEFF GREENE: It was tough, because basically, from my papers and snow shoveling jobs, my
whole life in business had been straight up.
The truth is let’s finish Harvard Business School at 24.
I have a million dollars.
I’m thinking I’m a genius.
I’m bored, and people call you, you must be– you’re really boy wonder, you think I’m really
a smart guy here and basically, I had never been– had not been married.
I had girlfriends, but I had been single, all I really had was my career, to tell you
the truth, to hang my hat on.
In 1994, I was just turning 40 years old and basically, everything I had worked for was
all of a sudden that and it was traumatic.
It was a tough few years.
It was a tough few years, because I’m thinking like I could actually very easily be liquidated
out back to zero and have nothing at all to show flow for what I’ve been doing in my whole
I got good education, but what would it have gotten me?
RAOUL PAL: How did that affect you psychologically at the time?
JEFF GREENE: It’s tough.
It’s interesting, I still– RAOUL PAL: You can’t take risk so easily when you’re thinking
JEFF GREENE: It’s interesting.
I’ve always been a fundamental– believe in the fundamentals like the way I invest, where
I do everything and I try to focus on long term and not let noise bother me.
I knew why that market had happened.
I understood it very clearly.
It’s a longer story, but the government empowered savings and loans and then try to allow them
to make crazy loans.
Basically, because what happened and if you will remember back, interest rates started
going up, SNL is having their books, all these fixed rate loans, and they were all in trouble
so the government said, okay, you want to be able to pay 8% for CDs, we’ll let you do
People were buying McDonald’s franchise with the SNL funds and they will make 100% construction
Of course, you’re going to have this crazy froth in the market.
I didn’t really feel I would like that.
Then nothing that I had done, it was the government that did it, and it happened and so when it’s
so good, I plotted through it.
I kept renegotiating with lenders.
Lucky for me, I had one main lender, called Glendale Federal Savings, they were the sixth
largest SNL in the country and believe it or not– RAOUL PAL: They stayed solvent?
JEFF GREENE: Barely.
They had $200 million in capital.
I owed them like 69 or 59, give or take.
RAOUL PAL: Okay, so you were too big to fail.
JEFF GREENE: It’s crazy because they were like, it’s almost a $20 billion SNL, my little
thing was enough to push them over the hump so they kept working with me and I was– look,
I was very persistent.
I’d give them a building, they would cut loans in other buildings.
We just work together and kept restructuring a few times, then eventually by probably ’95-’96,
my net worth was zero again, like all my loans equaled my values.
Then I got lucky and I said, look, I sold one property.
I had a property on Sunset Boulevard, a nice house at a very nice part of LA, 40-unit building.
It probably was worth $4 million.
The loan was for $4 million, but the Getty Museum needed housing for the new faculty.
They were just finishing the new Getty Museum.
They had looked at some other land I had, I called them up and I said, how about this
I sold it for $6 million, so I get 2 million bucks cash.
Now, most people having been through what I was, they would have taken that 2 million.
I said, I’m not going to risk this ever again, but I didn’t.
I went I bought three new buildings immediately.
I bought them from the RTC.
I bought an office building for $30 and cents– RAOUL PAL: I just want to get back a little
How do you– the psychology of doing that.
Taking a loss or getting close to having to realize a big loss is actually quite hard
thing to do.
Trading, investing and I run a hedge fund.
I know what that’s like, how did you distance yourself from that?
Let’s do it again.
You thought you had nothing to lose anyway?
JEFF GREENE: No, no, I just felt that– I really felt that I understood why this had
I felt that this was a crisis that was brought on by the savings loan excesses and that the
RTC and the government had it very badly.
I don’t know if you remember it, the Resolution Trust Corporation.
They just took everything and liquidated and they caused a lot more havoc than would have
otherwise been in the market.
I could see that’s why my properties were dropping in value to those levels, not because
people were leaving LA or didn’t want to live there anymore.
I have a chance now to buy these properties at barely pennies on the dollar.
I snapped up an office building at 30 bucks a foot, that was like eight years old, it
was what it costs $200 a foot to build then.
Then I bought another 65-unit apartment building for 2.7 million.
All townhouses and I’m thinking there’s no way you can lose money on these deals.
Sure enough, they all like tripled in value.
Then I was able to get those stabilizes, or refinanced.
I just started going and buying and honestly, I’d say that my recovery in the late ’90s
was really relationship oriented.
I’ve always been very relationship oriented.
I had one bank that I worked with a lot.
I figured out what they needed, they figured out what they need to do with me, and they
were my lender, and I started buying properties very aggressively at very cheap prices.
RAOUL PAL: All in LA?
JEFF GREENE: All in LA.
I was buying apartment buildings, because what you had was you had in this SNL period,
you had people who had built all these new buildings.
Hundreds and hundreds, if you drive to LA today, you’d still see these late ’80s, they’re
That’s the zoning over two levels of parking.
Wood frame, stucco.
They all look the same.
Basically, these buildings, what happened is moms and pops would have them or people
would not own them.
They were shell shocked because they went through rents– because they have a building.
They may be got it in say, and I’m just guessing they built it maybe in, I don’t know, 1987,
That’s when the big build– now, this RTC gets the building next door and cuts the rents
by 40% so now, you cut your rents by 40%.
By the time you get to ’96, you’re just so happy to have tenants.
No one’s raising rents, rents are way below market.
You go into buildings, you just buy them, we clean them up a little bit.
Change the entire rent roll to market and then refinance and buy more and so I got this
going again through great broker relationships, lending relationships, and I got up to 8000
units by 2005.
RAOUL PAL: 8000 units?
JEFF GREENE: Yeah, and over a billion dollars’ worth of real estate.
RAOUL PAL: All in LA.
JEFF GREENE: All in LA.
RAOUL PAL: Talk me through the next phase then.
2005, you’ve now got half of LA, it sounds like.
JEFF GREENE: It was a great run.
I’m freaking out, and my debt was probably I’m guessing 500 million.
I’ve said I’ve gone from minus 15 million to positive 500 million net worth, but I know
that stuff can happen and even things that you have nothing to do with like the SNL crisis.
I’m thinking what had happened was the value’s gotten so high because after the dot-com bust,
interest rates were cut to the lowest since World War II.
As a result, cap rates on apartment buildings got very low and I’m thinking like, this may
not be sustainable.
What can I do?
As this is happening in like ’04, ’05, I’d go and I’d sell five or six buildings, get
some cash, then I think, yeah, I’d do an exchange and buy more buildings.
I’m thinking there’s got to be some hedge because I’m reading about all this stuff on
RAOUL PAL: Which year are we talking about now?
JEFF GREENE: This is ’06.
There’s got to be some way rather than just selling buildings and paying and getting nervous
then buying new ones.
There’s got to be some way to get a hedge so if the value of the buildings drop, I won’t
lose as much money.
I go to talk to Goldman Sachs, JP Morgan, they said, well, you can short the SNL stock
because if the market collapses, those will drop.
Then I think, well, if you do that, what happens if the one that you short gets taken over
Then I went to see a very old friend of mine, John Paulson, who was a very close friend.
I called him up, and I said any ideas on this, he said, come see me and work on something
you may like, so I went to his office and he showed me how– he said, I’m shorting subprime.
What does that mean?
Well, I’m using derivatives.
What’s a derivative?
Well, you use credit deposit?
What’s a credit deposit?
Then he shows me some slides.
I get the idea.
Housing prices are not going to go up, are going to drop and people won’t be able to
pay the mortgages and the bonds will default, but these are very complicated instruments.
I didn’t really know exactly how you get from giving your money to this up to putting your
money up to you make a profit because the way these bonds work, they were very complex.
I remember saying, I said JP, can I do this on my own because now, we’re friends and I
may be– and he said, no, you won’t be able to because you have to sign this.
It’s an institutional trade.
His fund wasn’t ready for several months, anyway.
This is like in March or April of ’06.
I went back to LA and went to Berlin.
Then I called up all my bankers, and they told me, absolutely not, you can’t do this.
I hustled SIP, and I’ve pushed them in then I got approved to do this trade.
Initially, I went short $650 million worth of subprime mortgage backed securities with
JP Morgan and Merrill Lynch.
RAOUL PAL: You then sit it out for a bit, because nothing happens.
It gets marks against everybody.
JEFF GREENE: Yeah, a little bit.
It went down a little bit, and then I went to JP, sent me his fund, finally said, I’d
like to go in your fund now.
I told him, I’d done every email, I told him my I’d done some trades, and he got upset
that I’d done the trades.
RAOUL PAL: Without him?
JEFF GREENE: Yeah, but I still wanted to go to his fund.
We’re still friends now.
I think it was I should have probably told him I was doing it when I did it.
I’d say, I just did it.
I figured he’s running up, at the time, he had $5 or $6 billion in a matter I think,
he’s got a big business and I’m just doing a relatively small amount of this in the overall
scheme of things but, and I’d said I should have told him and I couldn’t, I think it caused
a problem between us for a while, but nevertheless, I ended up doing that.
The fund dropped in the summer a little bit and then so I was down.
Then it went up and then it went down again the next January for some reason.
RAOUL PAL: Have the housing prices have a tipping over at this point?
JEFF GREENE: Housing prices with– all the fundamentals of housing were going like this,
the punt’s going like that by January, it made no sense.
I said I want to do more of this.
I caught up and I was able to do another 400 million of the short and so I had 1,000,000,050
on at that point.
I was going to do more truthfully but by the time I got approved for more at one of the
two banks, it already started to deteriorate, the prices already dropped against.
I had this in them.
Then I just gradually started closing out that trade in, I’d say, 2008 and it was a
very profitable trade.
It turns it wasn’t a hedge at all.
That’s the craziest thing and I knew when I went and started, the more time I spent
on this trade, it’s faster I realized that this is not a hedge because apartment buildings
values were a function of rents and interest rates, lower interest rates provide low cap
rates and high and stable rent markets, people want to buy buildings with stable rental markets,
but I looked at it, I knew it was an incredible trade because I’m thinking this doesn’t make
There’s no way that these bonds are getting repaid.
That’s why I stepped right up and I did over a billion dollars in this stuff.
RAOUL PAL: That was a hell of an initiation to the world of derivatives.
JEFF GREENE: Yeah, pretty lucky.
It could have gone wrong.
RAOUL PAL: It could have gone wrong.
There again, in the end, they’re not very expensive trade.
The good thing is they were relatively cheap to put on but the punt was so ridiculous if
you get them right.
JEFF GREENE: Yeah.
Well, I think I had to put up I think to 5% which made sense because basically I was doing
it 1.3 over.
Here’s the problem.
The problem with this trade is I was very lonely doing this trade.
I’d never been on– I’m going up against the biggest banks on Wall Street effectively.
I don’t know anything about the stuff.
I’m thinking about– am I missing something?
Just seems all seemed too good to be true.
I would talk to my smart friends, like my close friends from Harvard Business School
and some other friends who are on Wall Street.
I’d say, what do you think of this?
They would go talk to their advisors.
Interestingly enough, a lot of very smart people would come back and said, the problem
is just really stupid that you’re basically agreeing to pay the spread for 30 years on
If no one pays off the loans, you’ll pay for 30, but that’s completely nonsensical, because
even normal loans get refinanced and as an average duration of any bond, any pool of
In this case, I focused every– I don’t know if you have seen how these loans business
is like, so basically, there was one type of loan, it was called a 2/28 loan.
I would try to find bonds at 80% of this.
What that meant was for two years, the rate’s fixed at some very low rate, maybe it might
have been at, in those days, at 6% for a subprime loan, and then in month 25, it can go up to
300 basis points, then 100 basis points every six months till it peaks at 600 basis point
It means after three and a half years, it’s a good chance that these loans are going up
6% to 12%.
On top of that, a number of the loans of the pools that I shorted went from interest only
Imagine you have a 6% interest rate loan, three and a half years later, you’re amortizing
it at 12%.
Of course, nobody can afford.
The only way out is if housing prices keep getting higher and you can refinance, but
when I did this trade, only 11% of buyers in California could qualify for the median
priced home loan, means 89% couldn’t qualify.
Who is going to possibly push prizes for a lift?
That’s exactly what happened.
RAOUL PAL: You get through the housing crisis pretty well, and the value of your real estate
portfolio didn’t really suffer?
I guess single family homes got really killed in that.
JEFF GREENE: Yeah, everything dropped, I’d say, but apartment rents dropped 15%, 20%
in LA and the value’s the same.
The thing about LA, it’s a very supply constrained market.
Even in the worst crash, it never really that bad.
It was bad in the early ’90s.
There was such an enormous overbuilding, there wasn’t any overbuilding going into 2000 into
There was no overbuilding at all of apartment buildings.
It was a very tight market.
Of course, people, the economy get bad so rents dropped a little bit.
It was no big deal, then they came back immediately.
RAOUL PAL: Then after that housing crisis, and that was the financial crisis, what opportunities
did you see?
Because a guy like you sounds like you would have been looking for opportunities in there.
JEFF GREENE: Well, it’s interesting.
What happened was I’d never been married.
I met my wife in the summer of ’06.
’06 had a pretty good, spring, summer when I did subprime short in April, I met my wife
That’s a pretty good period and I’d never been married.
RAOUL PAL: Mike Tyson’s party, is it?
JEFF GREENE: Mike was actually on a boat I owned in Sag Harbor for his 40th birthday.
I’m like a guy who likes to really figure things out and really plan things out, that
are going to happen, I don’t know, like depend on random circumstances.
I don’t go to Vegas and place bets on things.
I’m really pretty mathematical serious.
Meanwhile, how do I met my wife?
I’m having a crazy party for Mike’s 40th birthday.
Friends of mine go get a DJ.
DJ says, can I bring a few hot chicks?
Walked in with the DJ.
It ended up that’s the mother of my three children, go figure it out.
You know the plans you have, they sometimes are funny.
Anyway, so what happened is, so I met my wife that summer, summer ’06, and then we ended
up getting married in September of ’07, and she’d been living on the East Coast and in
truth, I knew I was cashing out the subprime debt anyway and I was thinking, you know what,
I’m going to have 100– I could save 100 million dollars in state income tax if I live in Florida
The point is I was only in LA three or four months a year, because I was on my boat a
lot, traveling, so it wasn’t like I was– had kids in school.
I was only there part time, so I said, and I was already in Florida a month and a half
a year because I had my boat or something and I went, let’s spend a couple more months
in Florida, one month in LA and I’ll save 100 million dollars and I’m not doing anything
illegal, everybody gets that’s the law.
We end up moving to Florida, getting a place in Miami and this is in early ’08.
At that point, everything was a mess.
RAOUL PAL: Miami got murdered in that.
JEFF GREENE: Interesting enough, well, you couldn’t get anything in Miami because what
happened is I’d be driving around and I’m giving up, I’ve got like, I’m a real estate
guy, who truthfully never had any money.
You don’t go from zero to eight to a billion dollars with a real estate with no investors,
and no partners and have cash in the bank.
You do that by you refinance a building, 15 minutes later, that build money is due to
buy another building.
It’s like literally you got enough money to pay for lunch but not much else.
I’m cash poor, asset rich my whole life because I was always moving around.
Now all of a sudden, I’m sitting with either a million dollars of cash and the real estate
market has collapsed and everything’s– I’m thinking like, wow, this could really be a
lot of fun for me, instead of being like all my peers, struggling, I’m just the guy with
What a great reversal that was.
RAOUL PAL: Somebody told me once very early my career, he said, listen, there’s one piece
He who has cashed in the recession is king, and it’s so true because then you’ve got the
opportunity that nobody else has got.
JEFF GREENE: Anyone else– it’s not saying that like I didn’t need to make more money.
It’s really more that also, it’s just so much more relaxing years I have in liquidity.
Just in general, even forgetting opportunity, just not having– it’s nice to build a business
and grow, and not have partners or investors to worry about, but it’s stressful constantly
trying to move things around and depending on loans and refis.
It was certainly like I saw in Miami, I’m there and I’m driving around like some– I’m
a deal junkie and I’m a serial entrepreneur, I’m looking around and I see all these big
buildings with all these low lights on and I see all these empty lots next to the big
I think, how do I get some of these and nothing’s available because it’s early ’08, and they’re
in the bank portfolios, nobody’s sure what’s happening.
Then, but we moved here in December of ’09 to Palm Beach.
By the time we moved here, it was just the time I’d say like 2010 when the property started
getting sorted out, the lender started getting control of them and they were starting to
I started buying here very aggressively.
I bought this hotel.
I bought the note here and foreclosed on it.
This hotel, I think it cost the former owner, it was over 100 million dollars, I bought
the note for 41 million from UBS and all kinds of fractured condos and land and it was really,
there’s a lot of opportunities in this market.
Originally, I was coming here just thinking, okay, I’m living here in Palm Beach, I’ll
do a few things to make some money.
I thought they’ve really great values.
I didn’t really necessarily think it was a great place to do deals, that it was a good
place to do deals.
Then the more time I spent here, realize this is just a great place to live, a great place
to invest, a great place to develop.
I was able to snap up all these great opportunities.
RAOUL PAL: Then the whole hedge fund industry moves here.
The whole of Greenwich turns up here, and that’s going to help you, the hotel, and of
the neo taxes and the big move here.
JEFF GREENE: I don’t think it’s as big as people think.
As soon as you talk to people in business, first of all, hedge fund people, how many
do they employ?
First of all, the kinds of hedge funds that come here, the little ones are on office,
they have a satellite office.
RAOUL PAL: Yeah, because people like Paul come here and it’s just him, he stays in his
office and he didn’t bring any employees then.
JEFF GREENE: No, of course not, because everyone says us, from these big business developments
had said, we’ve got all these hedge funds to move.
People and hedge funds, first of all, if you have a hedge fund in New York City, you’ve
got mature, serious people, have wives and parents living there and kids in school and
They’re not just going to, hey, guys, let’s all moved to Palm Beach, okay, we’ll all just
RAOUL PAL: It’s only the founders and the owners who come down here.
JEFF GREENE: Of course.
It’s hard to come here because they still have to keep their presence because people,
it’s not that that people don’t like, it’s a great quality of life but people have commitments,
not everybody don’t just going to pick up and moved and uproot themselves.
You really haven’t seen that.
On top of that, those aren’t the kinds of companies that employ large numbers of people
like LA, you got like Snapchat, they open an office, and they employ– they have 200
people, rent 100,000 a year in one office.
Google, when those kinds of companies come into New York where I’m building a building
and about two blocks away, Google’s building a saying jobs terminal, you’re talking about
6500 jobs and I read the average pay is over $100,000.
That’s what moves as an economy here.
We haven’t really seen that.
RAOUL PAL: Talk to me about the New York real estate market, because I’ve been talking to
a few people.
Just the Real Vision offices are in New York and I’m there every two weeks, and there has
been one of the largest buildups of New York real estate, I think in history, has gone
in the last four years.
What do you about all of that?
What’s in your radar?
JEFF GREENE: I wish I had another deal I do.
I’ve just finished a 25-story building.
It’s when I started doing this, it seemed like a great idea.
The problem with real estate developers is one developer has a successful building.
It does really well and then there’s no regulation how many others can do it.
Then 15 other developers are hired to do the same building and everyone thinks, well, I’ve
got a better architect, I’ve got a better view.
I’m a smarter developer.
Then you end up with 20 buildings, and there really were enough buyers for just the first
I think in New York, that’s what have happened.
For me, look, I don’t use construction loans.
I don’t have investors.
I don’t have EB-5 money.
I don’t have limited partners.
I try to just do enough, that kind of development that I can afford to pay for with my own cashflow
and I’ll make it through this cycle.
I think it could be a long cycle.
The good thing about the building I’m building, lucky for me, is it’s in an area called Hudson
Square, which is a little– not Hudson Yards, but Hudson Square, which is a tiny pocket,
just below the West Village, above Tribeca, between Soho and the river so it’s really
a five-minute walk to West Village, Tribeca, Soho or the river and that was great because
you’re in the middle of everything.
What’s even greater is ABC Disney just in that is building right now.
The whole operation one block from my building on the same street, it’ll be ready in a few
years and then Google’s building St. John’s Terminal two blocks away.
We’re going to have 15,000 new jobs within two blocks.
That’s very lucky.
I think that I have to figure out how I’m going to make it till when we’re done in about
six months till three years from now when the neighborhood really comes into it, but
New York’s– you know what, you can’t bet against New York because isn’t even as bad
as it is.
Just those two projects in my neighborhood are going to have 15,000 jobs and I realized
the ABC people were working up in the Upper West Side, but those buildings solve a steam
bottom and they’re going to rebuild them into something.
New York is like it’s the greatest city in the world.
It’s our biggest city.
If you want to do certain things, you want the talent and the resource.
You want the infrastructure, that’s where you’re going to go.
Eventually, we’ll figure out a way to get past this cycle, I’m sure and all this real
estate, they will just– RAOUL PAL: How are you thinking of the real estate market overall
I know you’re mainly focused here in Florida, I guess, for most of your investments and
some in New York, what are you thinking now?
What’s your senses?
Because you had amazing timing in 2006-’07.
JEFF GREENE: Look, I think there’s different kinds of real estate obviously.
Right now, I’m building a 300,000 industrial building here in West Palm Beach.
I feel very positive about that, because the movement is clearly towards more industrial
because everybody’s ordering on their computers and getting it delivered by Walmart or Amazon
so there’s tremendous demand for industrial space.
It depends on the category, I would say that the values of things like apartment buildings
that are in the three to four cap rates, and based on rents which have already gone up
for the most part a lot, seem pretty high.
It feels like we’re in an asset bubble in almost every category to be honest with you
and I think stocks are at an all-time high, bonds low, interest rates are low.
Those are all close to a high.
Real estate’s close to a high, and it’s interesting, everyone just seems to be very optimistic.
I just had lunch with someone today from Merrill Lynch, he was telling me how he thinks all
the smart people, they were just going to be fine because rates are low.
When everybody thinks things are going to be fine, that means everybody’s already in
and you’re not going to be so fine.
RAOUL PAL: That’s one of the things that struck me about Nome Goldsman, who we talked about
Nome, he’s had to say he’s had had a sense of some of this.
His whole, he went over the hedge fund business and a lot of real estate and he ends up buying
fast food, businesses and frozen food.
He bought a huge chain of Burger King.
He built the largest frozen foods business in Europe, just looking for that anticyclical,
It feels like it’s the time to be cautious when nobody else is.
JEFF GREENE: Yeah, but interesting enough, look, the other side of this, everybody’s
been saying that now for a long time.
RAOUL PAL: Yeah.
It’s been going on.
JEFF GREENE: People are sitting on a lot of liquidity, stay in the loop of liquidity,
though is coming from this– you’ve had a rigged economy for 10 years, where basically
with artificial– you have the central bank balance sheets adding, I don’t know what,
$15 trillion globally to their balance sheets, and you have rates held artificially at zero
for almost for a decade and now, again, very low and negative in Europe.
It obviously cause distortions in the market now.
I think everyone’s used to the distortions and figures the distortions will keep on going,
so everything will be just fine.
I don’t know if that’s going to– RAOUL PAL: What about the community here?
There’s a lot of hedge fund managers, a lot of people, entrepreneurs who’ve made a lot
of wealth, is their sense starting to shift?
Because some people I know are sensing shift and others are saying, no, still full on,
aggressive risk taking mode.
What do you think the mood is here?
JEFF GREENE: Everybody talks, everybody says you got to be cautious, but I think everybody
is also thinking I can’t– cash is trash.
We got to buy things.
Look, one of my biggest holdings is Apple.
It’s sitting at 1.3 trillion market cap, I get it.
It’s no longer a device company.
It’s now a platform that everyone’s on.
It’s now the telephone company when I was a kid, everybody has to have one and we’ll
keep getting them and buying these services.
The question is, what’s the value of that?
Is the value, is it more than 1.3 trillion?
If it’s less than 1.3 trillion, stabilize them, we’re all going to lose money in today’s
I don’t really, obviously, if you could show me that earnings are going to keep growing
from today’s levels at that company and they’re going to be making– I guess they’re going
to have to make 100 billion dollars a year to trade at 13 times earnings, which is what
you’d want to be at some point, maybe not today.
It’s a lot of money to make, even a global company with the monopolistic platform like
Who knows where these things are going?
That’s been real estate to me.
It definitely feels that a lot of good news are already out there.
Rents have gone up a lot.
Unemployment rate’s very low.
Just to be– I guess the question is how real is this global economy and how much of is
That’s the question.
If it’s real, and it can get a snide, you can do, we can rig things, but then the rig
timing can lead to real– RAOUL PAL: Well, the question is does rigging last?
What fragility is it building?
It’s like you talked about the SNL crisis.
That was a rigged situation where the SNLs were just because of the government irresponsible
of what they’re doing.
We’re seeing the central bank’s irresponsible with how money’s being thrown around the economy.
JEFF GREENE: Well, yeah, so no.
Look, if that’s the issue, like who knows?
The reality is, I can tell you this, up until two or three years ago, if we had employees
who in any way, were a substandard, giving us a hard time you’d said, bye-bye.
There’s another one waiting right now, starting about two years ago probably when Trump became
president, not because of Trump, I’m saying but at that time in the cycle, the way labor
market changed dramatically, all of a sudden, carpenters who are making 35 an hour are making
50 an hour and you can’t even get them.
All of a sudden, in hotel, workers that were making 10 an hour, make 15 an hour and wage
didn’t go up 3%, they went up 20%, 30%, 40%.
Pilots, I have a plane and my pilot salaries went up 30%, 40%, just like that.
What’s happened is all that liquidity has now led to increased wages.
Now if that’s just starting to happen, maybe we are more mid-cycle and then maybe we’re
not late cycle because it– RAOUL PAL: If it filters through that is, because people
can raise prices in the hotel or whatever.
JEFF GREENE: It is filtering through because everyone’s making more money and Donald Trump,
lucky for him, gets to take credit for it.
Whoever the president at the time, he’s the custodian of the economy.
That’s what seems to be happening.
Now, I can’t tell you like it does– what’s the consumer debt levels, I don’t know that
they’re necessarily overextended.
A lot of people are refinancing their homes no with lower rates, their 401ks were on all-time
high, they’re going to spend money, it’s going to keep this economy moving.
What is an economy anyway?
An economy is it’s a perception and so that’s why people are so confused, because you look
at the reality of all this funding money voodoo stuff going on, and you think, is it real,
but then you think at the end of the day, if everybody believes it’s real and they’re
out spending money, it becomes real.
RAOUL PAL: Outside of Apple and real estate, what do you invest in?
Do you have gold, do you think about gold?
JEFF GREENE: I don’t really, I don’t own gold.
Because we have a lot of real estate, which is a hard asset, we have a nice art collection,
which is a hard asset.
I’ve other, Alibaba is a big possession of mine, Google’s a big position of mine.
I tend to lay down to one of those tech stocks.
I have to own the banks and others, too.
I have a lot of liquidity right now to me, honestly.
A big chunk of money sitting in a lot of them in these bank prefers that I know are going
to get taken out because they’re about to roll into very high spread preferreds.
I’m sitting on a lot of money making 1.7% to 2%.
I’m happy with it.
I’m thinking like you know what, when things that move– I often look at a time in the
cycle, I’d say is morally, if you had to make one bet, it’s two choices.
Things are going to be 20% higher than today or 20% lower than today a year from now, two
years from now.
I think most smart people would say the better chance, they’ll be 20% lower because of where
I’m happy to sit in market, plenty of liquidity.
Look, everyone’s different.
If I were 25 years old, maybe I’d filter.
I’m 65 years old, I’m not assuming and if I have any trouble, I’d be worried but I’ve
already had that.
I’m basically just being cautious and I’m ready to have the liquidity available.
If there’s great opportunities, fine, if not, then I can live fine on my assets and make
RAOUL PAL: Talk to me about your other interests, the institute you set up.
JEFF GREENE: That was set up because five or six years ago, I could see that a country
that was solving its inner world, that was solving its problems only with monetary policy,
was going to leave behind a lot of people and I could see it happening.
You could see that those were the assets– RAOUL PAL: Is this when you were involved
in politics as well at the time, or?
JEFF GREENE: No, I’ve been involved in politics a few times, I actually have lost.
It’s funny, people say that you learn a lot more from your mistakes than in your successes
so I must be an expert on politics then because I’ve lost three, three out of three.
Obviously, I must really be smart in that space.
I think that you could just see because I could see that wages– I could see as owning
businesses that wages were not going up at all.
All of this with assets, saw our value’s going up, because with low interest rates, real
estate prices go up, stock prices go up, bond prices go up, those were the assets who’re
getting richer, those with labor were not getting richer, were struggling.
I said, this is unsustainable.
On top of that, with what was happening with technology and AI and machine learning and
how that was driving people out of the worst workforce and would cause some big disruptions.
We started a nonprofit and we’ve had some really stimulating conferences, in which we
brought together some very smart people with Ray Kurzweil, a Tom Friedman, and Larry Summers
and Tony Blair, and David Cameron’s been here and they’ve all come right to this hotel and
we’ve had some talk in the old education.
The list goes on, super smart people convening together to really talk about the future of
Again, as I said earlier in this interview, I have a personal experience with what can
happen to somebody when their work life changes because of my dad.
I’m very sensitive to that.
I have friends, honestly, who were highly educated, who have been marginalized and lost
their jobs and never gotten jobs again.
If you lose your job and you’re in your 60s, you really got to go get retrained to become
Of course, you can’t do that.
I really think that we are going to have a lot of disruptions and we have a lot of work
We talked about that.
We talked about education.
I don’t know if you know that we started a school in West Palm Beach.
We basically were– I have three young boys and we were frustrated with the private and
public school options so we started the Green School.
If you ever hear and want to see it, we have to take you by, it’s up to just under 130
kids, pre-K to eighth grade.
That school really embodies what I’m talking about and that we want our children to develop
a love of learning because we realized that kids today were going to going to graduate
15 years now or five years from now may have five, six, seven,10 career changes and they
may have to constantly learn and relearn, they can’t hate learning, they have to love
learning because they may have to learn new skill sets throughout their lives.
We’ve also have a focus on getting kids digitally influenced.
They start doing coding in kindergarten like kid coding exercises all the way to building
robots in the fifth and sixth grade.
We have enough emphasis teaching the whole child so we have met mindfulness and yoga
and dance and art.
We’ve really tried to create– and it’s a nonprofit school.
My wife and I funded it 100% ourselves.
We give financial aid so kids pay what they can’t afford what the computer says they can’t
afford to pay.
It’s 30%, 40% get financial aid and it’s been very fulfilling for us, as you can probably
see from our [indiscernible].
RAOUL PAL: Yeah.
How do you think we’re going to resolve this rich/poor divide?
Because it is not getting better.
Yes, there’s some marginal wage growth, late cycle wage growth that we talked about, but
at a structural level, we’ve still got a huge problem.
The Fed injecting more liquidity and stock prices exploding higher and your Apple shares
JEFF GREENE: Apple’s doubled in the last year.
RAOUL PAL: Yeah, doesn’t help the average guy.
How do you see that resolving?
You’re getting all these people together, they’re talking about it.
Are they talking about it?
Is somebody thinking, because you’ve got Trump on one side, you got Bernie Sanders on the
That’s how split this is becoming.
Someone’s got to find a solution somewhere.
Because if not– JEFF GREENE: We know that the Bernie Sanders socialism doesn’t work.
As they say, certainly in socialism, the poor will be richer, but you’re not going to make
the poor richer by making the rich poorer.
Basically, to me, I think the first thing is education.
That’s like the absolute no brainer.
Right now in this country, 14% of Americans are illiterate.
Now, if you’re illiterate, it’s not an issue.
It’s not about an income gap.
It’s about a possibility of you moving forward, it’s virtually impossible.
We’ve really failed in our education in this country.
I think that’s the first thing.
I think that– because you can’t even be as happy if you’re not educated.
Even if we created a society that people talk about where you have this, you have unlimited
resources, people only have to work 20 hours a week because you figure out a way to make
your food more efficiently and your housing, your 3D printing houses don’t need people
to do stuff.
If you’re not educated, how are you going to spend your life?
You can only have opiates, so you’re going to do drugs and drink?
I think being educated gives you the opportunity and I’m like to do better but to enjoy and
to thrive in your life.
I think that there are great examples of successful educational improvements in American.
States like Massachusetts and New Jersey actually has gone from 35 to three in the country in
public education by doing a few simple things.
Two years of pre-K for every child, because like in a lot of the states in the country,
these kids don’t even get any preschool education at all hardly.
Then they show up at kindergarten and they have a multi-million word vocabulary deficit.
You start behind, you stay behind, and I think we’re really failing our children in this
That’s the first order of visit.
If I was president of states, that would be my number one priority.
Get our kids educated competitively, because if they’re educated then at least we can compete
with whatever there is in the world.
Then how do you deal with solving the issue of jobs where we want people to feel good
about their upward mobility?
A lot of that, to me is a function of where we are in our cycle.
People don’t talk about this much, but my grandparents, like most people my age came
from Eastern Europe or another country.
Most definitely they were poor, everyone was poor.
Nobody came with any money.
They came with a shirt on their back and a dream.
The only dream my grandparents has probably that my parents will be able to have on their
table, nothing more than that.
There’s more than they had when they were in Eastern Europe and maybe a place to sleep
that was safe and clean.
Then what did my parents want for their kids?
They wanted their kids to be able to have every opportunity to follow the other Americans
who’ve been in for generations.
They fought hard and worked hard so we can go to good schools, and we had great public
schools as kids and great, great colleges.
What do we want for our kids and as it goes forward what?
The level expectation keeps getting higher and higher, and no one talks about that, but
from my grandparents’ generation to my kids’ generation, their level of expectation is
much, much greater for the kids.
Meanwhile, what’s happened is when my grandparents, after two world wars, we destroyed the industrial
complex of our competitors.
We were this global superpower with unlimited numbers of jobs and opportunities when people’s
expectations were here.
Now, we’re in a very globally competitive economy where we have to fight with much hungrier
countries around the world and their explanations are here.
You say, well, how do you fulfill their expectations?
It’s a lot harder.
I think the first thing is get our kids educated so they can be competitive globally.
Then just try to figure this all out, but it’s going to be a tough challenge.
I think it’s something– it’s the issue of our time.
The issue of our time.
RAOUL PAL: Yeah, I think it is.
I think politics remain pretty volatile until we figure out some of this stuff.
I think that seems to be a part of our future that we’re dealing with and it’s across all
the Western world and a lot of it is transition of the baby boomers, your typical, the baby
boomer, generation of the baby boomers.
That generation and the impossibility for the younger people to better afford even the
JEFF GREENE: I really believe we’ll figure it out.
Whenever I get pessimistic, I always think of our friend, Warren Buffett.
Warren Buffett, we’ve got to know, he’s members of the Giving Pledge, and we’re sitting around
a table with them in recent June and, or in late May, we’re talking and somebody said,
Warren, has it ever been this bad?
The antagonism and the divisiveness, and he said, these are two things that I have lived
through for 15 presidents, 14 I invested with.
He said, seven Republicans, seven Democrats, and there’s no place in America.
The whole world wants to come here.
Don’t bet against America.
Then he said something else, he said, I’m 88 years old, three of my lifetimes, which
is 264 years, in three of my lifetimes ago, there was nothing here.
It was dirt roads, and Indians and cowboys driving around and riding around the horses.
Look at what this system has done here.
Look what we’ve built.
In the same, you could say the same for the European countries and the whole Western world,
and so in the end of the day.
RAOUL PAL: It’ll figure itself out.
JEFF GREENE: Yeah, the ship will start to drift a little bit, but we always ride it
and I think we’ll figure out these issues and this system works.
If we just stay with our system, there’ll always be people like me who are aggressive
entrepreneurs, are trying to create and build things.
There’ll be other people who are more mellow and just want to make a living.
There’ll be other people who are creative and artists, and they’ll be like you who are
trying to build your journalism, your media business.
I think we’ll get through this just fine.
That’s my view.
I don’t know.
RAOUL PAL: Jeff, that’s a perfect way to end.
Thank you ever so much for giving an optimistic ending amongst all that.
JEFF GREENE: I really believe it.
RAOUL PAL: Thank you.
In 1752 Washington made his first land purchase, 1,459 acres along Bullskin Creek in Frederick County, Virginia. This act inaugurated the second and more profitable phase of his cartographic career, in which he assumed the role of land speculator. Over the next half century Washington would continue to seek out, purchase, patent, and eventually settle numerous properties. His will, executed in 1800, lists 52,194 acres to be sold or distributed in Virginia, Pennsylvania, Maryland, New York, Kentucky, and the Ohio Valley. In addition to these properties, Washington also held title to lots in the Virginia cities of Winchester, Bath (now Berkeley Springs, West Virginia), and Alexandria, and in the newly formed City of Washington.
In 1758 Washington left military service and returned to civilian life and in January 1759 married Martha Custis, a wealthy widow. No sooner had the couple settled at Mount Vernon, which had become Washington’s home, than he begin to expand the estate. In 1760 a neighbor, William Clifton, approached Washington with an offer to sell a 1,806-acre tract on the northern border of the estate, and the two men settled on a price of £1,150 sterling. Shortly afterwards, however, Clifton agreed to sell the same tract of land to another neighbor, Thomson Mason, for a slightly higher price. Despite Clifton’s original agreement and a series of angry letters, Washington eventually paid £1,250 sterling to secure the land for himself.11 The area became the Washingtons’ River Farm.
Western Lands and the Bounty of War
Washington’s lifelong interest in land speculation is illustrated in the fight over bounty lands promised to the veterans of the Virginia Regiment who fought with him in the French and Indian War. In this episode Washington acted on behalf of his fellow veterans as well as vigorously, sometimes aggressively, in staking out his own land claims.
In 1754, Lieutenant Governor Dinwiddie issued a proclamation designed to encourage enlistment in the local militia for the war against the French. In addition to their pay, those who enlisted in Lieutenant Colonel George Washington’s fledgling Virginia Regiment were offered a share in two hundred thousand acres west of the Ohio River. Unfortunately for the men who fought under Washington in the Braddock and Forbes expeditions against the enemy at Fort Duquesne, they were not to see these bounty lands until more than twenty years had passed, during which time Washington led the struggle to secure their title.
At first, the formal conclusion in 1763 of the worldwide war between Britain and France, of which the French and Indian War had been a part, aroused hope that the land would be quickly granted. These expectations were overshadowed by the Royal Proclamation of 1763 which (among other provisions) forbade colonial governors from issuing land grants west of the Allegheny Mountains. Yet Washington chose to forge ahead, as evinced by a September 1767 letter to William Crawford, a Pennsylvania surveyor:
. . . I can never look upon the Proclamation in any other light (but this I say between ourselves) than as a temporary expedient to quiet the minds of the Indians. It must fall, of course, in a few years, especially when those Indians consent to our occupying those lands. Any person who neglects hunting out good lands, and in some measure marking and distinguishing them for his own, in order to keep others from settling them will never regain it. If you will be at the trouble of seeking out the lands, I will take upon me the part of securing them, as soon as there is a possibility of doing it and will, moreover, be at all the cost and charges surveying and patenting the same . . . . By this time it be easy for you to discover that my plan is to secure a good deal of land. You will consequently come in for a handsome quantity.12
Washington was clearly willing to take considerable risks in seeking out choice land for himself. In the same letter, however, he warned Crawford “to keep the whole matter a secret, rather than give the alarm to others or allow himself to be censured for the opinion I have given in respect to the King’s Proclamation.” He concluded by offering Crawford an alibi should his behavior be called into question. “All of this can be carried on by silent management and can be carried out by you under the guise of hunting game, which you may, I presume, effectually do, at the same time you are in pursuit of land. When this is fully discovered advise me of it, and if there appears a possibility of succeeding, I will have the land surveyed to keep others off and leave the rest to time and my own assiduity.” In fact, the letter marked the beginning of a very profitable fifteen-year partnership. Less than two weeks after he had received it, Crawford informed Washington about several tracts in the vicinity of Fort Pitt, and the two men continued to collaborate until Crawford’s death in 1782.
Andrea Bernstein is a senior editor at WNYC and co-host of the “Trump, Inc.” podcast. A Peabody and duPont-Columbia award-winning journalist, Bernstein’s new work is an exposé on two families at the pinnacle of American power. American Oligarchs: The Kushners, the Trumps, and the Marriage of Money and Power, is Bernstein’s investigative journey into two emblematic American families—the Kushners and the Trumps.
Jared Kushner and Ivanka Trump enjoy limitless access to the Oval Office, but beyond their marriage, little about the families’ relationship is public knowledge. Throughout American Oligarchs, Bernstein reveals their campaign into the White House by tracing history stretching from the Gilded Age to WWII to the 21st century. Bernstein draws on private interviews, never-before-seen documents and forgotten files in order to expose the families’ accumulated wealth through real estate, manipulation and crime.
Bernstein’s American Oligarchs is a serious examination of the half-truths, secrecy and media manipulation weaponized by the Trumps and the Kushners. Join us as she discusses the Trumps, Kushners, and the marriage of money and power.
Adam Neumann was flying high. Literally.
His office-rental giant WeWork was months away from being valued at $47 billion. Revenue was doubling annually. And Mr. Neumann was zipping across the Atlantic Ocean in a Gulfstream G650 private jet with friends last summer, smoking marijuana.
After the group landed in Israel and left the plane, the flight crew found a sizable chunk of the drug stuffed in a cereal box for the return flight, according to people familiar with the incident. The jet’s owner, upset and fearing repercussions of trans-border marijuana transport, recalled the plane, leaving Mr. Neumann to find his own way back to New York, these people said.
Since Mr. Neumann co-founded WeWork—recently renamed We Co.—with Miguel McKelvey nine years ago, he has led with unusual exuberance and excess. His combination of entrepreneurial vision, personal charisma and brash risk-taking helped the company surpass $2 billion in annual revenue, and made it the country’s most valuable startup.
Now many of the same qualities that helped fuel his company’s breakneck growth in the private market are piling up as potential liabilities as the company prepares to go public—helmed by a CEO who looks little like a typical public-company chief.
Mr. Neumann muses about the implausible:
- becoming leader of the world,
- living forever,
- amassing more than $1 trillion in wealth.
Partying has long been a feature of his work life, heavy on the tequila.
Public investors are increasingly skeptical of the formula that has worked for Mr. Neumann so far: his pitch that We is far more than a real-estate company. With its rapid growth and use of technology, he argued, the company deserves rich valuations normally reserved for tech companies.
Instead, many potential investors now see a fast-growing office subleasing company with losses of more than $1.6 billion last year.
Since We filed the prospectus for its initial public offering last month, it has been besieged with criticism over its governance, business model and ability to turn a profit. It is now expecting an IPO valuation as low as a third of the $47 billion sticker price it garnered in a January funding round—a drop without recent precedent. This week, We postponed the offering until October at the earliest.
Wall Street and Silicon Valley investors have been dismayed by the number of potential conflicts of interest disclosed in the “S-1” IPO prospectus, including Mr. Neumann leasing properties he owns back to the company and borrowing heavily against his stock. Even some of We’s private investors said they were angered to learn that an entity Mr. Neumann controls sold the rights to the word “We” to the company for almost $6 million—before public pressure led him to unwind the deal.
“This is not the way everybody behaves,” said Dick Costolo, former CEO of Twitter Inc., who led the company through one of the larger tech IPOs of the past decade. “The degree of self-dealing in the S-1 is so egregious, and it comes at a time when you’ve got regulators and politicians and folks across the country looking out at Silicon Valley and wondering if there’s the appropriate level of self-awareness.”
Given the prominence of the IPO, he added, “that is a big problem.”
Mr. Neumann, 40, declined to comment through a spokesman, who cited rules surrounding the planned IPO. Mr. Neumann told We employees Tuesday the process had been humbling and he would learn from it, say people who heard him. We executives have previously said he is strongly devoted to the company, and many of his personal transactions were made with the company’s best interests at heart.
This account is based on interviews with current and former employees, investors and friends who interacted with Mr. Neumann as he built We.
For startup investors, the 6-foot-5 Mr. Neumann has always had the qualities they crave in Silicon Valley founders, despite being based in New York. He is intensely ambitious and a masterful storyteller with a magnetic personality who can inspire and sell.
Raised in Israel on a kibbutz, Mr. Neumann moved to the U.S. when he was 22, where he attended Baruch College and tried to start businesses. One was a collapsible heel on women’s shoes that didn’t get off the ground. Working out of his Tribeca apartment, he started Krawlers, which sought to make baby clothes with knee pads to make crawling more comfortable. The slogan, he has said: “Just because they don’t tell you, doesn’t mean they don’t hurt.” It never gained traction.
He and Mr. McKelvey started a small co-working space on the side during the recession that followed the financial crisis and were amazed by the demand.
By 2010, they had started WeWork, with essentially the same core business model that exists today: They lease an office long-term, renovate it to make it hip and inviting, and sublease smaller desks and offices short-term.
Shannon McConaghy of Horseman Capital paints a dour picture of the Japanese banking system. He reveals the accounting tricks that have allowed these banks to survive in a predominantly negative-interest-rate world, and discusses why credit costs are finally rising. Shannon warns of a potential meltdown that could have far-reaching ramifications, in this conversation with Real Vision’s Roger Hirst. Filmed on July 11, 2019 in London.
Real Vision™ is the destination for the world’s most successful investors to share their thoughts about what’s happening in today’s markets. Think: TED Talks for Finance. On Real Vision™ you get exclusive access to watch the most successful investors, hedge fund managers and traders who share their frank and in-depth investment insights with no agenda, hype or bias. Make smart investment decisions and grow your portfolio with original content brought to you by the biggest names in finance, who get to say what they really think on Real Vision™.