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#FinanceDaily: Tiger Global firesale!! Housing UP, Pharma v Medicare
Recorded: June 20, 2023 Duration: 1:34:38Space Recording
Short Summary
The crypto industry is experiencing significant shifts with major financial institutions like Deutsche Bank and BlackRock entering the space, signaling a trend towards institutional adoption and control. Strategic partnerships, such as BlackRock's collaboration with Coinbase for Bitcoin ETF custody, exemplify the growing integration of traditional finance with crypto. These developments indicate a broader trend of mainstream acceptance and regulatory evolution in the industry.
Full Transcription
All right, just give us a few minutes.
I've got a lot to share.
Good morning, everyone.
Good morning.
Cody, you ready for Tiger Global?
I'm excited, man.
This is interesting times we're in.
That's right.
Just give me a few minutes.
We're just waiting for a few more folks to show up.
How's my audio?
Beautiful as always.
Oh, thank you.
Tech sounds good, but can you fix the voice?
No, no.
Can't do that.
By the way, who the fuck let Justin up here?
Just kidding.
I'm sorry.
Go ahead.
I'm a sneaky hacker in my part-time job.
Exactly.
Guys, just give us like one more, one or two more minutes.
We're just waiting for a bunch of people to show up.
So give us a few more minutes.
Thank you.
Truthfully, it's a voice for podcasting and radio, Dr. Danish.
So congratulations on having a great voice.
All right.
Let me bring Jeff up.
Did everybody have a good Juneteenth?
Yes? There you go. So for Juneteenth, I spent my time literally doing nothing, which was a really weird experience for me. But it was definitely a good weekend.
All right. Just give me one more second. I'm just inviting a few more people and then. Nobody taught crypto today. I'm serious. I'm relaxed. I don't need to hear about how
We've got somehow the government has handed over the entire crypto industry to the same financial institutions that it was supposed to fight.
Jesus, what a crazy few weeks.
But we're not going to talk about it.
I just get to make my comments and move on.
All right.
One more second.
We're waiting on one or two more.
Also, for people that are listening, we're going to be covering the housing data live.
And then we're also going to be going into, oh, talk about crypto.
Here we go.
Can't help it.
I was just,
Scott,
I was just mentioning like,
how hilarious and ironic is it?
That after all the work that you all put in the crypto industry,
the financial institution is going to walk right in and get everything.
I mean, that was always the plan.
I've been tweeting about that literally for years.
And after FTX, I was pretty aggressive about it.
But yeah, this isn't kill crypto.
This is kill the incumbent crypto industry and make way for the quote-unquote trusted
institutions that are obviously a revolving door with the government.
I don't think there's any surprises here, but I think what they're not going to expect is that
that's going to be irrelevant in the rest of the world, right?
I mean, it's not like people in Europe are going to be trading on EDX markets or whatever
these institutional exchanges are.
And also, these exchanges are only for, A, they're not going to be custodians like EDX, but B,
They're also just for institutions and not for retail.
So, like, there's nothing here for retail.
And frankly, a BlackRock ETF is probably a good thing, right?
I hate the fact of the thing.
Oh, yeah.
I mean, they might be trying to kill everything else to make way for a Black Rock ETF,
but a Black Rock ETF will lead to approvals for Ethereum ETFs and for some of the others who are in line.
And maybe Black Rock isn't first.
I mean, there's a lot of conjecture, but...
but really not much facts surrounding that.
So, I mean, it's funny.
You guys might know Mark Yusko from Morgan Creek.
He literally for years kept coming on my show,
and I would bring him on,
and we would talk about will Van Nek get approved,
will Valkyry get approved,
will BITWise get approved for their ETF?
And he would say,
nobody's getting approved for an ETS until BlackRock applies for what?
said it for years and here we are.
So we had him on yesterday and he was like,
you told you.
I didn't have a crystal ball, but
it's pretty obvious, right?
So I'd be more interested to see now
with all this happening, you know,
there's sort of these reports that Gensler
and Yellen could be shaken up and shaken
out because they've
overstepped their bounds. So I
would be really interested to see if now
because Gensler has taken such an aggressive
stance against the industry, but the
Wall Street is here that maybe it backfires for him.
I mean, I think what's going to be really interesting is how people react to all of this overall.
Because there's a lot of stuff going on for people that are not aware in terms of there's this building anti-establishment narrative.
It is...
palpable. We're seeing it obviously on Twitter, which has always been slightly anti-establishment,
but some of the topics we're going to talk about today, including pharmaceutical companies.
The reason I wanted to talk about pharmaceutical companies is because I wanted to call them out
on this really big issue. And a lot of people can go to mainstream media to hear about
drug A and drug B and how it's going to affect the markets. But this is a fundamental issue
that I wanted to start with.
And for people that know, I tend to be pretty...
pretty, as
Trump would call me, milk toast.
You know, I'm pretty down the middle.
I don't consider myself to be
any, like, sort of big, you know,
anti-establishment, personality
or anything like that.
But I'm actually going to tweet this out
for a second. Just give me one second.
And then I'm going to tweet it out so everybody knows
what the hell I'm talking about.
Because it's...
This is...
This is a big story, in my opinion.
There's a few really big ones this morning, actually.
And the question really that I want to ask is, you know,
Hold on with drug companies.
The question I really want to ask is, who can defend the other side on this?
That's going to be my big question.
And if anybody feels like there's a defense, the defense is, I just posted it up in the nest.
There you go.
Okay.
So today, Mark Bristol-Myers Quibb
And the U.S. Chamber of Commerce that is supposedly, that is supposed to represent companies, you know, unveil their lawsuit against the Biden administration over Medicare's new drug pricing negotiations.
Now, this has been ongoing for some time, but it's going to the Supreme Court.
And I wanted to bring this up because if you listen to most of the mainstream media, a lot of people are saying, well, you know, when the, so for people that don't know what happened, in the inflation reduction act, right, one of the only anti-inflation, only inflation reducing measures that they actually passed.
was that they gave Medicare the power,
Medicare for the people that are not in the U.S.
is a government subsidized program that provides free,
primarily subsidized health care,
but mainly essentially free health care for people that are older.
And so people of the age of 65.
And this...
In the Inflation Reduction Act, again, one of the only inflation reducing measures was that they gave Medicare the power to negotiate prices with drug companies for the first time in its 60-year history.
By the way, this is one of the most popular measures politically ever.
I don't think there's a single person that can fight against that.
Except there are a bunch of people that are fighting against it because it affects money.
So right now, there's a high likelihood, and I'm letting you guys know, there's a high likelihood that the Supreme Court shuts this down.
Just so people are aware.
So today, because of this new act that was passed,
which had a bunch of different pork in it, a bunch of different crap in it,
but the one or two good things that it had was the fact that Medicare for the first time
could negotiate with drug companies.
Now using now the Chamber of Commerce, which is the most interesting one, in my opinion,
plus Bristol-Myers Quibb plus Merck are suing them and is going to the Supreme Court.
What is the thought process here?
Cody, I know you come from medical industry.
So I wanted you to weigh in on this lawsuit.
And I'm happy to go through the merits of the lawsuit and what they're actually going after.
But can you explain to people how this was a watershed moment in healthcare?
Because people don't realize what a big impact this was having.
Sure. Yeah, I think there's the most important thing here, right, is that we live in a democracy with free market capitalism.
And the government is not allowed or isn't supposed to be allowed to inhibit price controls.
In this country, you have the right to free speech. You have the right to an attorney.
But you do not have the right to health care currently.
And this is the broader issue that's being debated.
It'll be really interesting to see how the Supreme Court decides to rule on this.
I agree with you.
I think that they will probably fall in favor of...
the healthcare companies, pharmaceutical industry,
and the insurance industry.
But this will be heavily litigated
on the political side by our leaders,
and it'll be really interesting to see
what happens and what plays out over time.
The Federal Reserve of St. Louis published a study in 2019
stating that 10,000 people every single day will turn 65 over the next 25 years.
And so the voting base that's participating in this is an active voting base and an active constituent in this issue.
So I would expect massive political headwinds to come out of this.
So, Dakota, if, just for the sake of argument, I'm not actually advocating for this,
but if Medicare were privatized, then there would be no issue.
Is that what you're saying?
And I'm not advocating for that position.
I'm just curious on how to...
Medicare is actually...
A lot of Medicare is advertised.
So about 50% of Medicare is provided by Medicare Advantage plans, which are like United Healthcare
and all of these other plans.
The underlying challenge here is that Medicare as a whole...
cannot negotiate drug prices directly as a block.
So when we talk about free market, free market has, you know, you guys remember when
we talk about supply and demand curve, right?
So when you're talking about purchase, you know, when you're talking about purchasing an asset,
when a large organization purchases an asset, there are supply side economies of scale,
so you should be able to get drugs for cheaper, but Medicare is not allowed to do so.
Now, you've got to ask yourself, hold on, why is that?
Well, didn't Dakota say that's because the government's not allowed to negotiate against private companies.
So that's why I asked if they're private, does that change that?
Well, so what's really interesting, and this is pretty well established, is that Medicare Advantage companies,
so the ones when Medicare privatizes its function to a private company, the costs have actually gone up.
which is this really weird issue.
And at the core of it, again, you see, like, I'm willing to call both sides out, right?
And clearly, this is being supported by one side of the aisle.
But, you know, when you think about Obamacare,
which was the other side of yaha,
Obamacare actually has made so many mistakes in the way that they set up their system
because they capped profits at 15%.
Now, that sounds good.
Insurance companies shouldn't make more than 15% in margins.
Okay, you know, if you think about level one effects, it makes sense.
Okay, cool.
So if they make $100, they get to keep $15, and it keeps their...
their investors happy everybody's okay and it puts a cap on how much how much extract extraction they can have in the system
that's actually not what happened your investors need to see growth year over year that quarter over quarter you've got
quarterly calls you got to show that revenues are growing how are you going to do that if they cap your profits
So what they did instead is they said, hold on, if I can get 15% of $100 and make $15, I wonder what happens when I get $15% of $200.
Oh, I make $30. Oh, that sounds like a good idea.
So they literally stopped all cost containment and it just started skyrocketing.
Everybody became in cahoots.
right the pharmaceutical industry had no problems with it because remember that if a if a medicine
costs a thousand dollars guess what the insurance company can keep right if the doctor if the
health system start charging more money guess how much the insurance company so there was no
cost controls which is why since 1999 year over year over year right we're seeing uh and if you
actually like you know people always talk about like what happened in 1971
people in medicine always talk about what happened in the early 2000s.
Like suddenly we started seeing costs of healthcare just like start to really skyrocket and accelerate.
And so that's kind of what's happening in the industry and they're all in cahoots.
So, you know, when I hear someone and I'm, you know, I don't want to get too political, but when I hear someone like,
RFK Jr. or some of these other people who are very anti-farmac, anti-medical industrial complex,
talk while I disagree with him vehemently on vaccines.
I think he's right about his general premise about this complex and how it's working.
And again, I will remind you, I will remind you that the Chamber of Commerce, by the way,
and I'll give you the reason why this is so crazy.
The Chamber of Commerce represents businesses in general, okay?
So small, large businesses all over the country.
Who is paying for the bill of all of this increase in health care?
40% of Americans actually get their health care from their employers.
Okay.
Now employers are paying more and more and more every year.
In the U.S., that's a large part of how health care is delivered.
What do you think employers are benchmark?
What do you think payers or insurance companies are benchmarking costs to?
They literally say, oh, your health care is coming up to about 150% of Medicare or 200% of Medicare.
So as Medicare increases, the employers are paying more and more and more.
The cost of benefits is crazy right now for employees.
So what are employers doing?
They're going to start firing people.
Here is there's something inherently wrong with the system.
And I have to call it out that the Chamber of Commerce that is supposed to be representing businesses in America is literally doing the complete opposite.
That's honestly where we are.
So I still, I guess, because I don't understand the...
I'm going to actually I'm going to hold on this and rephrase my question better so I don't confuse like half the room.
So I'm going to have to ask for sure.
So the underlying problem here for people that are listening, like why are we even talking about this from a financial perspective?
From a financial, well, one, I'm a doctor.
So I have a very strong opinion on this.
And you all have to listen or you can leave.
But just kidding.
Sorry.
But the other side of this is that this is a fundamental problem that we're going to continue to see across industries.
This is the fundamental problem.
So the Republicans across the board, across, you know, across, I mean, pretty much all Republicans are saying, oh, no, no, no, this is a bad thing.
We shouldn't actually have government set prices.
And the Democrats across the board are saying, no, no, no, this is affecting regular people.
It's affecting their pocketbook and health care is the right.
So health care is a right.
It's like a utility.
Utilities always set prices.
So then it's like, okay, well, which one is?
It wouldn't, it wouldn't be, it basically wouldn't be necessary.
This kind of step, whether it's constitutional or not, right?
Whether it's lawful or not that the Supreme Court will decide.
It's, we've kicked the can so far down the road on this one that, like, there is no good solution at this point, right?
I disagree completely.
There's a solution that's already been passed by Congress.
Then I want to, okay, I want to hear what you think is a good solution.
That's interesting to me.
The solution is very straightforward.
One, we need to have the U.S. government, like every other civilized government in the world,
negotiate with drug companies as a block.
It's a very simple solution.
There's no reason why that's not.
And so the real argument, the argument behind the argument that they're making, by the way,
is that if America doesn't foot the bill,
then there will be no new drugs.
People won't put money into building new drugs.
That is actually like what people actually say.
And this is something that I think is like the most ridiculous comment.
So the whole world, Europe, China, all of these other countries,
the whole world is paying, you know, one third of what we're paying
because they can negotiate as a block, but we have to pay.
the full price or double the price?
How does this make any sense?
I was in, as I told you, I was in a different country last week, and someone was saying, well, we have free health care in our country.
It was actually Belize, but it was, they're like, we have free health care in our country.
And even every year, an organization called Doctors Without Borders comes here and they help us.
So, you know, we're much, you know, we have way better stuff than the USA.
But what I kind of wanted to say is,
Well, you know, speaking of the entire health care industry, a lot of Americans are like paying for the world's health care and for all these drug prices.
We're paying full price.
Well, I like what you said actually.
You said we're paying double or triple the price.
Every other country is getting these, you know, sweet deals off our citizens tax money, out of our citizens tax money.
I mean, it's very interesting.
I'd love to hear from other people on this before we move on,
because I do want to, you know, Simon often talks about the Ponzi scheme
that is the American financial system or the global financial system.
Simon, there is no bigger Ponzi scheme than the medical industrial complex.
There is nothing worse than that.
Mike drop. That's like a truth bond right there.
Yeah, this is a one Ponzi scheme I'm not too familiar with.
So I'll...
No, no, I get that.
I'm curious about the comment you just said,
that the world, that the US is paying for everybody else's healthcare.
What's the thinking behind that?
Because I thought US is exporting their inflation across the world as the world
reserve currency.
So I'll give you an example.
Currently,
Mark has a cancer therapy called Ketruda.
Okay?
Ketruda is a game changer.
When I say it's a game changer and I don't have any money in Mark,
I don't invest in pharmaceutical companies by principle, actually.
It's just a, maybe it's just because I'm dumb.
Because, by the way, they're a great investment.
But Ketruda...
One drug for Merck, one of the largest companies in the world, one drug represents 35% of their revenue in 2022.
By the way, there's no way that there's enough people with cancer that get Krikuda that it can justify that much of revenue.
It's just because the pricing is so crazy.
The company also has Genuvia, which generates $2.8 billion in revenue.
Okay, so there's these two drugs that generate a crap done of revenue.
80% of that revenue is coming from the U.S. market because in the U.S.,
Ketruda, is six times more expensive than it is in the second most expensive country.
So what's happening is that we are supporting...
innovation in pharmaceutical industry because everybody knows that America is the cash cow.
If there is no America and America can behave like every other country, like the NHS and like
every other country that has one negotiating block that negotiates on behalf of the country,
guess what happens? All of their profits start to go down. All of their systems are
You know, they can't justify the valuations that they have because all of their projections go down.
And so this is the underlying, one of the biggest, most important part that this is the, that the pharmaceutical companies and the pharmaceutical lobby, which is PHRMA, they are saying, hey, look, we need America to pay a higher price so that everybody can get access to these drugs.
And so then it's like, okay, well, why doesn't everybody else pay them?
Why do we have to pay for everybody else?
That is my point.
Or maybe we should just negotiate as a block and they figure this out.
There's a way to do this.
Donish, so there are, um, oh, sorry, is someone else speaking or is that?
Oh, sorry, go ahead.
Sorry, man.
Yeah, I think it's really important to point out as well.
Like the legislation that they're trying to push is really more about a lot of the generic
drugs that are out there.
and fighting for the pricing pressures there, right?
Most of the drugs that are consumed in this country
and that we export to other countries are generic drugs.
It's a massive percentage of them.
The R&D that's happening in new and innovative drugs,
you know, we have to, or we should keep that R&D infrastructure in place
so that we can be a leading, you know, economy and drug creation.
Sure. There are other ways. If we truly believe that this is something that we should be supporting, then let them come and ask for money directly as grants from the government. Let's let them ask for other approaches towards it. Why is the average patient paying for it out of their own pocket? That is a crazy approach that we're taking to quote unquote free market approaches to health care.
I mean, like, this is the freaking problem.
Healthcare is not free market.
When you have cancer, you will do and your family will do whatever it takes.
It's an inelastic good.
That is the actual problem.
So when you're in the ICU or your dad or your mom or your loved one is in the ICU and someone
says, hey, there's this billion dollar drug, but it can actually save them, would you say no?
Or would you say, you know what?
I'll figure it out.
Right? Like, that's the actual underlying issue that the pharmaceutical companies are doing.
This conversation is exactly what I'm talking. This is the complexity of this discussion, right?
Like, it is a very complex discussion. A lot of people like to talk about how bad the United States health care system is.
In reality, it's not. It's easily one of the best. But, yeah, you know, it's a very complex discussion on how to...
integrate free markets into the healthcare system, but also provide access to the people that
truly needed. To Donch's point, the, yeah, the U.S. health care market is anything but free market.
There was a, I'll tell you a very short story. One of my clients was developing a, well, had
developed a wireless vital sign monitoring technology. It started out with like the U.S. Navy SEALs
and then they were going to roll it into...
U.S. health care. A lot of paramedics use it. Anyway, it's a pretty big, bulky device, and I saw a new schematic, a new little design in their workshop, their little lab. And I was like, hey, this is really cool. Why don't you roll this out? And they're like, well, we do like it, but
we don't have the money to file through the FDA.
I'm like, well, what's that whole process cost?
And he said about $2.5 million to refile through the FDA.
And so I think a lot of people don't understand that regulations,
while good in nature, can sometimes limit innovators from entering these spaces.
And big pharmaceutical companies and big medical companies do know this.
So they do lobby Congress to make tighter regulations and laws to keep those innovators out.
And so I had a conversation with a,
Congressman John Delaney when he was running for president on my show.
And I was like, dude, can't we just like roll back certain regulations and cut the red tape
for non-invasive technologies?
And his response was absolutely yes.
He's like, yeah, we should do that.
But it's really, really tough to get that done.
I have the recording somewhere.
But that, I think, is one of the core problems.
I had another client who actually developed technology for amputees.
and he wanted to give it away for free and make it super cheap.
And then with insurance, it would be like a dollar.
And regulation actually told him to, there were some regulating laws.
I don't know the nuance here, so I apologize, but basically he had to raise his prices to get it covered under the law's designation of insurance.
Like his technology was in a certain block, and the law determined that he had to be in this certain space,
and so he had to charge more money.
So his solution was, fine, I'll charge that.
And then on my website, I'll just give it for free for anybody who wants it, which legally he found a way to do that.
So a lot of people don't know regulations are, you know.
But talking about the regulation side of the things, so we have a lot of issues.
But one of the biggest issues is the fact that people that are in the CMS come from industry.
People that are in the FDA come from industry.
So people don't know this, but the head of the FDA comes from pharmaceutical industry.
This is crazy. Think about how nuts that is. The people that are regulating this industry are from the industry. And so we have like a, and by the way, as soon as they finish, they can go back to industry. That is the other big thing. If it, you know, some people could make the argument like, look, who better to regulate than people that know the ins and outs of the industry? I understand that that argument, but then don't allow them to go back and work as a consultant like the next year later.
Like, maybe we should just stop them from doing that.
Just like what we do with defense, you know, what we're supposed to do with defense and with other, you know, industrial complexes.
But hey, guys, data just came in.
I want to let you guys know.
Sorry, we're going to move on.
I know there's probably people are quite upset at me, especially pharmaceutical companies.
But, you know, you can find me on Twitter.
So, but what I was going to say is the housing starts data just got in.
Oh, interesting. Interesting.
So U.S. housing starts number actual was 1.631 million or 1.6 plus million.
The forecast was 1.4 million.
Interesting. U.S. housing starts change month over month. Actual was 21.7%. The forecast was negative 0.1%. That can't be right. Is that 2.17? Can someone double check that on the back end? U.S. building permits number actual was 1.49.
million forecast was 1.42 million US building permits change month over a month was actual
5.2% holy cow forecast was points uh forecast was point 6% I mean Amy this is very different than expected
so housing starts are way higher than forecasted what are your thoughts on this I mean it's it's
kind of bucking the narrative
Oh, my goodness. You know, the whole time you guys were having this conversation about the pharmaceutical industry not being a free market, I think you know the parallels to the housing market because, again, we've got so many regulations in red tape to building affordable housing. And the way that the housing market is structured, it is similar where you get these runaway prices and...
There is, it's just so complicated with the Federal Reserve, since the Federal Reserve stepped in in 2008 and put the mortgage back securities on the balance sheet and sort of made the housing market in some ways so much more centralized with the government that it's hard to say this is a completely 100% free market.
And what we're seeing in this data is actually, I went back to data from 2007.
and was looking and was trying to figure out, you know, what was going on back then?
Because home prices were starting to fall in a lot of the country back then.
But the bomb of the banking system hadn't dropped yet.
Prices hadn't collapsed.
And we sort of had...
something similar to what we see now, where there's back and forth narratives, depending on what region of the country you're in, you would be saying, oh my gosh, this looks kind of bad versus it looks okay where I'm at kind of mentality.
And also, there was a lot of division just amongst the analysts and the banks and the industry at the time as to what was going to happen to housing prices in the future.
There were people who were pretty bullish saying the market's going to bottom.
in 2007 or 2008.
And there were other people who were saying, no, I think there's a lot of bad stuff under the surface.
And this could be more protracted and going a lot longer than that.
And what we're seeing now is sort of this similar, the data that's coming in and the data that came in today are showing that we're seeing a stabilization.
Whether or not this is a stabilization that is going to be something that we launch off of again into what price is going up.
versus whether this is just a stabilizing lag until some external factor in the economy bumps into it and knocks things off course.
You know, that's kind of the argument that we're going to be seen now.
And I think you could make the argument either way.
I think there are going to be people that are going to be arguing, you know, housing already bottomed.
This is it where we're starting.
This is the launch of the recovery.
And I think there's other people who are, you know, looking more at everything else that's going on in the economy, looking at the strength of the consumer, looking at the credit markets, looking at,
what's happening in commercial real estate.
And they're just like, no, you know, there's a storm brewing.
I don't know how long it's going to take.
I don't know what the factor is going to be that is the tipping point.
But something in this economy is going to break.
And when it does, it's going to take housing along with it.
It's not, I do not believe that it's going to be residential housing is going to be the thing this time, like it was in 2008.
But I do think there are other strong things in our economy that are strong enough that if they were taken down,
they could have massive implications for residential housing.
This is crazy.
So for people, so by the way, Amy, those numbers were correct.
Holy cow.
Just so people are realizing why this is a big deal.
U.S. housing starts change month over month was forecasted at negative.
Previously it was at 2.2%.
This month, new build, increased by 21.7%.
I'm not sure what to make of this.
I mean, are we, are we like, Cody, I know, I know.
Go ahead.
Why don't you share with us why you were right?
Go ahead.
You can take your flowers once, Cody.
He's been talking a lot of smack for the last few.
Why is it going up?
I don't need to know why you were right.
But why is it actually going up?
Why are people building more right now with interest rates being this high?
It's so paradoxical.
Yeah, I'm not going to say that I was right.
There's still a lot to happen over the next few years here, sure.
No, no, this is not how you take your flowers.
The way you enter is you say, well, you know what?
A few weeks ago, I was on this space, and everybody, including Amy and Donish,
we're talking about the death of real estate.
I'm teaching you how to be provocative.
It gets the people going.
You know, so, so, so, so, so, so, so, you just, you just got, you got to, you got to, you got to call specific people out.
You've got to say, you know what, Donish, like you think you're so smart, but you don't know anything about real estate like I do.
I'm, I told you that people were building, and here's the data to prove it.
That's so, Cody, I'm going to give you another shot of going after me.
Go ahead.
Yeah, you know, I think that in a lot of markets, you know, this inventory crisis thing is real.
Again, I keep going back to this data on the amount of retirees that are entering the market.
These people are going to live longer.
Millennials are the largest working class jobs.
cohort the globe has ever seen. There's 75 million strong. We can expect their wages to start
climbing over the next decade here. And they're going to continue to buy houses. You know,
I think it's like some 40% of millennials currently own homes.
Where is this inventory going to come from?
Is it going to come from Airbnb, arbitrager's starting to sell off the inventory?
Sure.
But the true fact is that we're still seeing some shortage there.
And the demand is proving that, right?
There are some plumbing.
There's some plumbing in the markets that is altering some of this purchasing power, too,
that I think is really important to note.
You know, Amy's noted on this multiple times where the home builders are starting to subsidize some of the mortgage rates.
Hey, Cody, your audio is crap.
I apologize.
Walking into the capital here.
No, it's all good.
So, you know, what I was going to say is it sounds like Dakota's point is that we have an inventory problem.
Builders are noting this inventory problem.
And I guess there's been a lull in interest rates, mortgage, you know, in interest rates a little bit.
But with this, with this.
Well, this must have been before that.
I was going to say that with this skip, maybe it's encouraging builders to build earlier.
I don't know.
I'm very, I still don't get.
This inventory problem has been around.
Like, it's not like it's not been around.
Why is this suddenly going up by 20%?
Now, month over month is also a little bit difficult because your base, your denominator really matters.
But Amy, this goes completely against what you and I have been talking about.
How do we defend our point of view?
I mean, 21.7% is like not just a beat.
It's a smashing.
So, you know, is this just like...
the markets being irrational right now. I mean, I mean, it is possible for the markets to be
irrational. You know, I don't know if you all have heard, but real estate markets have been
irrational for a while. You know, what are your thoughts, Amy? What is what do you think? If you were
to surmise what is going on, why are we seeing housing starts go up by 21.7% month over month?
How can that even make sense in the current environment?
I mean, honestly, because in the current environment, you have to remember, like, they're just looking at the data that we have on the ground.
They're not looking at all the macro pieces.
They're literally just looking at, like, we have a shortage of inventory.
We have in some areas of the country people trying to make multiple offers on homes still.
And it appears, I mean, again, you can't know, but it appears like interest rates have stabilized where they're at.
The Fed just...
skipped or paused or whatever we wanted to call that.
So from the standpoint of the housing sector,
they can look at this and say it looks like in terms of the interest rates
hammering at the economy. The worst could be over.
And if that is true, then I think they're going to just build
go forth and build because that's what they do that's what home builders do i mean they're not
going to survive if they don't have a product to sell if they don't build anything um and again like
um and cody mentioned this they've been able to sort of skirt around the interest rate issue with
offering all these incentives of i mean they've been selling most of their homes at five percent
rates regardless of whether or not the federal reserve or the mortgage or the mortgage market
said the rate is supposed to be 6.9 percent right now
Now, builders were offering buying them down and offering them at five.
So they were able to sort of just keep perpetuating the market by doing that.
This is their job.
This is their business.
They need to build a product and sell it.
If they don't, they don't make any money.
They don't have a business.
And they're not going to sit there and say, well, you know, X, Y, Z bad thing could be out there.
So I'm going to just sit on my laurels and build nothing.
I think they're building, you know, the way the economy in America always works,
they're building optimistically with the best case scenario in mind, maybe hoping that we get
this, quote, soft landing, maybe hoping that the market is right and that the worst of this is over.
And this is just going to be sort of a plateau where we're at for a while and then we're
going to build up again from here.
It is not irrational for them to do that.
I think it's just...
It's just the way business in our country works.
I mean, you've got to keep going whether or not they could get smacked in the face with something,
but I don't think they're going to just do nothing and wait for that because they could be missing opportunities.
Interesting.
Mickle.
Yeah, I was just going to say as someone on the ground, I mean, I've been looking to purchase a home for a while.
An inventory and talking to multiple real estate agents, inventory is still extremely short.
And if you see a single house that seems like it's priced reasonably, it has 10 cash offers within a day.
So it seems like regardless of...
what's going on and what could be brewing on the back end.
Right now in the current moment, the houses being built are being sold.
I know that specifically is really happening in the Northeast.
I'm not sure in the rest of the country, but I would assume it's pretty similar.
Interesting.
So we're now, see how narratives build, by the way.
This is the narrative that inventory is low is now taking shape.
Amy, I'm getting a little bit of feedback on yours.
I'm going to have to meet you.
But, you know...
There you go.
I think I keep trying to meet you while you try to meet you as well.
There you go.
So, by the way, I know that there are people there trying to come up.
I'm going to bring one of you up.
And remember that as we're talking, if we're missing something, I want you all to go to the bottom right.
And I want you, oh, Matt, why don't you go?
But I was going to say, I want you to go to the bottom, go on the bottom right and put in a comment.
The way I run the show is if your comment appears to be smart and thoughtful, we'll bring it up.
And we might even bring you up.
But Matt, go ahead.
And then we'll go to Shane.
Go ahead, Matt.
Yeah.
I was just to say one of the things, and kind of to echoing me a little bit,
these builders, you have to remember depending on what segment they're in,
they're having to look out three, six, nine, or 12 months.
There's carrying costs to the land that they've acquired.
And really importantly, this is an area where they really, really want to hold on to good employees,
good craftsmen and women.
And I don't think we can undercount.
how important that is.
I've got some clients who are in this space
and they're outbuilding saying,
I know I can break even.
I know I can subsidize rates.
We've done a little bit of hedging in the past.
and I need to keep my employees and I need to keep them working.
I don't know that that can last forever.
So if we do continue to see credit tighten, you know, things may change.
But I think right now they've got the capital and they're trying to keep their employees working,
number one and number two, they're realizing they can still find some ways to make some profit there.
I think Matt, did Matt, I guess a question for the experts, right?
But did Matt just hit it?
Because I think we were talking about, boy, last month that all the benefits,
the extended COVID benefits ran out.
So our people, do all these builders have access to workers now?
So they're catching up on this whole COVID pandemic where people were out of the workforce.
Is that the story behind the numbers?
I wonder. Shane, I wanted to bring you in. I see that you're a real estate entrepreneur and investor.
You know, since you come from the space like Cody, would love to get your thoughts as well.
Yeah, thanks. Great conversation, guys. I've actually spent a ton of time on this. We run a group called Dream Team where we have top producers, agents, developers, and builders around the country. And through sociality, we've been able to get a lot of interesting perspective. One thing I'll say is that
You know, when you look at this, you want to realize that the buyer psychology had to adjust to the sticker shock of their new payment, right?
Because interest rates were moving up. They had their expectation. And once that happened, then we kind of saw who could buy what they wanted to and who didn't.
You also have to remember there was a massive shift of equity, rich capital. So if you're coming from Boston and Denver and you're going to freaking Florida or Texas, you're getting a lot of property no matter what happens.
So you look at that as some sort of like...
housing lottery math that just works in your favor. I think that solvency, affordability,
and financing are still in the way of a second wave of momentum for realistic real estate value,
but that's trending in the right direction because that pipeline had a really meaningful
understanding of what they could buy, where they could buy it, and what they could afford now
with new interest rates. And that didn't stop our supply and demand narrative, but our affordability
narrative is really getting in the way. But I look at Denver and I really thought,
that a lot of the cranes in like places like rhino where we had eight nine, ten cranes
we're going to pull back and they just haven't.
I think they're too committed to the projects, but I also think they're solvent.
Unlike of the global financial crisis, you know, they have a lot of solvency that they didn't
have in the past.
So, you know, I spend a lot of time meaningfully on this app with people that I trust and respect
to kind of get that narrative of supply chain, narrative of energy.
But when you look at the housing sector, yeah, all these factors that were kind of
constraining us are kind of getting out of our way with the exception of interest rates.
So we're, you know, we have a meaningful, we have a pipeline that's now meaningfully able to buy a little bit of what they want.
But I think the big thing is that there's still a lot of problems that are hindering out there.
You have to when someone, the one thing I want to say real quick is that someone said something about the Northeast,
Think of the United States as kind of six different markets right now, right?
You've got negative growth, no growth, slow growth, okay, good, and strong growth markets.
So you've got to realize that not everybody's performing the same because historically,
they've had a lot of problems to deal with.
And now we're coming, you know, we place capital in probably about actively 17 MSAs,
and we're looking at doing another 20 or 30 just because we can't keep getting what we need in certain MSAs.
And we don't scale, like, massive institutions.
Like most of my people want to buy two to 20 properties over a period of like,
18 to 36 months.
But as I look at those different MSAs,
I can tell you that they're definitely moving
at all kinds of different paces.
And based upon those paces and the grades of those neighborhoods,
you're seeing a lot of supply out there.
Or you're seeing things come down dramatically in price.
It's just that people don't necessarily have a desire for that.
Investors might, but not all consumers do.
So the way to get fence side of it has more demand than everything else.
Shane, one question that I have is,
look, we're seeing housing starts go up.
With inventory in the markets, I am predicting, I have been predicting, and I'm not a real estate investor.
I'm just a dude on Twitter.
But I have been predicting by looking at everything that as inventory enters, that there will be a point at which regular used home inventory is going to enter the market.
And they will enter all at once.
We've seen this in specific MSAs, which is like metro areas for people that are following.
But, you know, specific areas, specific regions of the country, especially in California and the Bay Area.
We've seen it in New York.
Some people are attributing it to layoffs.
I think there's a lot.
It's much more complicated than that.
But we're, and also, you know, we're seeing a lot of inventory enter in Austin and other markets.
You know, one of my questions is, are you going to, are we expecting this housing starts data seems bullish on real estate, but is it actually going to end up putting pricing pressure on the market?
And are we going to see housing prices still come down even though people are building more homes?
Well, I guess the easiest way to answer this question is I think instinctively a lot of what you're saying is right.
And I'll tell you why.
If you look at Austin, Tampa, if you look at a lot of these places that had very, very strong runs where really what happened in a period of, say, two years is what happened in, say, five or ten years because of what was going on with Corona, equity, rich capital moving downhill, so on and so forth.
I kept telling everybody that were my investors,
and a lot of people that I was having conversations with,
think of things as a strike mark.
So if that price started $300,000,
and it went up to $380 or $400,000, a lot of that was artificial.
It needs to come back down because those best and final offers were really kind of getting
in the way of what was really that true value point.
So we see a lot of that like in Austin pulling back right now.
And we see, believe it or not, Denver's been a very, very strong growth market, but we
see a lot of neighborhoods in Denver correcting there from 10 to 20 percent.
And I said it could be as much as 10 to 30 percent.
coming into this market.
So we're already two-thirds of the way there because not all markets are even and not all markets are solvent.
So the last thing I'll say to kind of prove this point is when you think of LTV, like you get your basic house, you put 20% down, think of a neighborhood literally having solvency.
how much equity is in that neighborhood.
That's going to really navigate the value going forward.
And we saw that in the global financial crisis.
Some neighborhoods only pull back 5 or 10% value.
Other neighborhoods were crushed 50, 60, 70 cents on the dollar.
So those fundamentals are going to be the underlying backdrop for what you're saying,
and that's going to be important.
Okay.
So, sorry, some breaking news.
This is not completely financial.
I do wonder what this does to the markets in general.
But,
Trump classified documents trial set for August 14th.
God damn it.
That's going to be a crazy time.
Good luck to everybody.
Good luck to all those who celebrate, I guess.
And congratulations to our media friends who will finally get more ratings.
That's right.
That's going to be great.
And then I saw that Scott posted this and it's pretty big news.
Scott, another bank piles in.
I guess you're going to be talking about this today.
I'm assuming Deutsche Bank applies for digital asset license.
Yeah, I mean, it's all happening in the words of the movie,
almost famous, but it was so obvious and it's been so obvious for quite a while that Wall Street,
like I said, they're not killing the crypto industry.
They're just handing it over to the people that they want to have the power over it.
And that's clearly the case here.
But now, I think now that there's blood in the water with Black Rock,
we're going to see every major financial institution finally,
I wouldn't say make plans for crypto, but admit to and come public with their already existing plans for the industry.
But...
We're going to have every single, obviously, major bank and institution.
We already knew that was going to be the case.
I mean, EDX markets, which they're saying is going to business today, which is a exchange created by Citadel, Fidelity, and Schwab.
You know, that was news last year.
It's just breaking news now because nobody paid attention last year and they're actually starting to operate.
But, you know.
We have every single major financial institution on the planet now talking about this industry and coming in.
And it's very clear that when that's happening at the exact same time as the SEC is pushing against the people who built it in this country specifically, but also beyond, you can see what's happening.
It doesn't take Tin Hat to figure out that narrative.
What I find most interesting, though, is that the SEC is going so aggressively against Coinbase.
But BlackRock's custodian for their ETF is going to be Coinbase.
And BlackRock already works with Coinbase to allow Bitcoin purchases for their high net worth clients.
So it's going to be really interesting where Gary Gensler and friends fall.
We're seeing a lot of pushback potential.
that the SEC has overreached.
I think we all know that,
but now we're actually starting to see it reported
that there's news that they could be in violation
of the major questions doctrine,
which will also be discussing
with the former Gensler advisor who broke that,
and that there's a potential shakeup
in the Biden administration to potentially toss
Yellen and Gary Gensler because they're so unfavorable
and they're going to need to look good on the economy.
So there's a lot happening here.
I see Amy and others are laughing, but that's actually breaking news.
I'm not making it up.
This is being widely reported.
So I think Gensler's way out over his skis.
He might take the bullet here, I would hope.
And unfortunately, I think we're going to see Wall Street come in and take over this industry.
in the United States.
So, Simon, does this make it...
I'm sorry, one question before I go to you, Simon.
Simon, is crypto now part of the Ponzi scheme?
Or is it separate?
I'm a little...
I just want to make sure I...
There are parallel Ponzi schemes traveling on tracks next.
They converge every once in a while at the switchboard.
Yeah.
Yeah, I mean, most crypto is...
Donner, did you just turn this into a cage match with Simon?
Is there going to be a cage match?
And by the way, we're going to move on
because I have this big bombshell that I've been holding
this whole time about Tiger Global.
But go ahead, Simon. I'll let you jump in.
Yeah, I was going to say the other aspect to it.
And yeah, if they allow for re-hypropocation
and fractional reserve crypto,
like they did with FTX and Celsius and all the other scams,
then it would just be the world's largest regulator Ponzi scheme
in crypto on a blockchain. And I've always said that when in 2014, the banks tried to take over the Bitcoin narrative.
So just as they are with crypto right now and Bitcoin's looking like the, you know, the God in all of this that is untouchable,
they tried to do the same with Bitcoin in 2014 and they tried to corrupt the words and use the word blockchain and get rid of the word Bitcoin.
And I said back then that if all we get out of this industry is a way for banks to commit crime transparently on a blockchain and with a transparent Ponzi scheme, then that may be what we end up with if we push the blockchain sides.
But one other aspect to think about with what Scott was saying.
is when the SEC, because they obviously they don't want Binance,
because Binance is where all the volume is outside the US
and they want everything within their jurisdiction.
But when they're coming off to Coinbase,
where probably they simultaneously approve them as custodian
to the ETF of BlackRock,
but simultaneously sue them as an unregistered securities exchange,
It's probably the SEC saying get back to your Bitcoin routes.
There's a massive amount of custody that you can have here.
And there is a massive business here.
And you are part of the clique if Black Rock's letting you in and the other and Fidelity and all the others are going to be letting you in.
This is your chance to get rid of all the crypto securities.
and treat them as securities.
And by the way, securities I've always said,
it doesn't mean you're getting rid of crypto.
It means that you have disclosure and suitability on top of it
and market manipulation and insider trading
and all those things that are prevalent in the crypto space.
So it might just be, you might just want to interpret it as get back to your Bitcoin routes and we might give you an Ethereum business.
You've got the securities licenses, start treating them as securities or just we'll let you have the big Bitcoin business and welcome to the club.
By the way, I love, I didn't realize I was actually muted.
But I love...
that tweet from
Z from Binance just
shrugging. That was so funny.
It's just like, it's so true.
Can you imagine? Can you just imagine
how CZ and the rest
and Brian Armstrong and everybody else
is feeling right now? Like
Hold on, what?
Like, I thought this was an existential crisis against crypto bros.
And now suddenly they just brought into suits.
It's fascinating.
Simon might be right that it's an existential crisis still against crypto bros,
but just not against Bitcoin and potentially Ethereum.
You know, because if you even looked at the EDX markets news,
which is the Fidelity Schwab and Citadel exchange that I mentioned,
they're talking about...
The four that even Gensler in his early speeches said were clearly commodities and not securities,
I believe was Bitcoin, Ethereum, Bitcoin Cash, which is like literally the most irrelevant
cryptocurrency you can find, and light coin.
So they are going to be focusing on the ones that are clearly on the commodity and non-security side,
and that may be the ship that we sort of see in the United States, and then all of the rest of it
is traded elsewhere.
Fascinating.
Patrick, I wanted you go into the charts.
I saw that you posted something up in the nest.
Yeah.
Wanted to get your thoughts.
Hey guys.
Yeah, look, this, it's not to confound with the usage of Bitcoin or what it is or whatever
you guys like looking at, but look, some people say BlackRock, it's a positive.
People always see, oh, Black Rock, more money's going to come in, buy, buy, buy.
Price goes up and limited supply, but it doesn't quite work that way because if you look at what I posted,
way before this Black Rock thing, I overlaid the Bitcoin and Black Rock chart and I have other examples.
they are tracking both the same capital flows.
And you've heard me say this, right?
This is the capital flows between growth versus value.
So whatever's driving Bitcoin and whatever is driving the actual black rock,
their chart, they're practically the same.
Adding an ETF, guys, to Bitcoin, for me, is just more financialization of an instrument.
But it doesn't change much more of the price.
Because I'll give you an example.
So much says, well, Patrick, how did GLD?
Remember, guys, in 2004, there was a GLD ETF created.
And people said, oh, it's going to drive the price up.
It's going to do whatever.
Well, look, gold was already tracking the purchasing power.
So the DXY adjusted for inflation way before 2004.
And.
And you have to take a zoom out because in 2004, gold had just broken out versus SPX.
Gold was in a bull run.
And price was already going up.
So you got to be careful.
Oh, GLD, the price of gold goes up.
Guys.
Yeah.
Gold was already breaking out versus SPX because you could have had an ETF added to an instrument in the bear market.
And the price, the momentum was already going down.
It's not going to change much, guys.
It's just more financialization.
So you got to see the whole big picture.
You see the buy side.
Well, there's also a sell side.
And those are guided by those macro capital flows.
Yeah, that's right.
Yeah.
I don't think you're wrong and unfortunately I have to run.
I did look at your tweet, but I think there's a bit of a, there's a bit of different ways to look at this.
I think from a charting perspective and capital flow perspective, you're correct.
But you also, people have to remember how small relative to every other asset class Bitcoin really is.
We were talking about something that's a couple hundred billion dollars, the entire asset class just north of a trillion.
The argument here is not about the chart of the capital flows.
It's that if...
there is a wall of money that's looking to enter this space, which you can debate or not,
and gets access through the Bitcoin ETFs through BlackRock,
then it will just be a massive, massive inflow against a shortening supply into this asset class that's so small.
So even a 20, 30% increase in demand as a result of this would push price massively
and sort of violate the idea that you're discussing.
Unfortunately, guys, I'm literally laid back to.
Well, Judge, sorry you have to leave, but for other people left, but also, guys, remember, remove your bias.
It also does it for the sell side.
So if ever there's a macro environment where people have to liquidate, whatever, their growth stocks to buy something else to hedge against inflation or whatever,
it's on the cell side is going to impact it the same way.
That's why it's like a zero-sum game.
People see the buy the buy side, but also on the sell side, when they sell all that huge amount.
Yeah, that's a bias, first, Patrick.
The sell side's irrelevant if people haven't bought the ETF yet.
Well, it's in the chart.
If ever the Bitcoin chart starts behaving differently than other the growth stocks, then we
could say it's doing something.
But until there, we have to consider it happened yet.
This ETF might not even get approved.
So people are talking about theoretically if the ETF gets approved, what would happen?
So yes.
I agree with you 100%.
We can't talk about it now because it literally doesn't exist.
We need time.
We need time.
Hey, who put their thumbs down?
I saw somebody put their thumbs down.
How dare you, Tommy?
All right, guys.
Go ahead, Michael.
Yeah, I think Scott made an important point there.
I mean, essentially, as I see it, this is one of the few industries, the cryptocurrency industry, where essentially retail really front-ran the institutions.
And regardless of what you think about the underlying technology, right?
When you see an asset manager like BlackRock come in and offer a product like that to retail,
I really do think Scott was on the money with that wall of money being allowed to enter this asset class.
And I will say when you listen to a lot of these bank CEOs, especially the CEO of Fidelity,
she is extremely bullish on the prospects of cryptocurrencies going forward, specifically in tokenization.
And I know Simon was on earlier saying that,
it's only going to be Bitcoin and Ethereum.
I think we're at a very early stage in this industry,
and the United States is still trying to figure out
exactly how they want to set up this industry.
But I think...
Right now we're seeing a lot of political battles.
We're seeing a lot of turmoil.
We're seeing a lot of weeding out of the sketchy companies.
But ultimately, I do think there's going to be pathways for a lot of these different projects to become compliant.
And the technology that's actually looking to update the rails of our outdated financial system are going to be allowed to prosper in the United States.
We're going to have to win some court battles,
but ultimately I don't think it's just gonna be
some kind of Bitcoin and Ethereum show.
That's not the way the internet worked.
I don't think that's gonna be the way
this new web infrastructure works.
Yeah, I mean, and for people that are building in this space,
I will tell you that IBC actually incubates and accelerates Web3 companies, but also AI companies,
that part VCs and funds to work with their portfolio companies in return for equity in zero cash.
If you're interested, DM Mario and his team.
and they'll get a call organized.
They're also doing some pitches.
Come on in, you know, share what you're building.
But to do that, you have to be Mario and his team.
And, yeah, everybody here just wanted to get that out of the way.
I feel like it's getting too natural.
I could be more ridiculous the way I go into these.
But it, you know, I could be so seamless until I just got awkward and made it worse.
Yeah.
It's going to force you to cover crypto at some point.
That's actually like the problem.
Like literally the only way I can do this is if I'm forced to cover crypto.
But wanted to.
kind of pivot the conversation a little bit.
Jeff, I'll let you jump in real quick with the news out of India.
And then we're going to go to our big final show now that we have, you know,
four and a half thousand people listening.
But go ahead, Jeff.
Jeff, tell us why this is such a big news.
It's such a big news.
Elon must meet with India's prime minister.
Go ahead.
Yeah, Tesla has been reportedly meeting with Indian officials for the last, you know, several months.
and they've been working on you know when you set up manufacturing in india if they're going to do
this you have to work on kind of the supply chain design all the import uh licenses and and duty
rates and so forth and basically the rumor has been that you know india's really hot to get like
the ev market started they want to lead her in there helping them kind of like show the way
And even giving a lot of different kind of relaxation to their normal requirements around supply chain, the full supply chain being set up in the country.
Well, long story short, this looks like it's culminating in a meeting with Modi, who's coming to the U.S. and Elon and Modi are set the meet over the next couple of days.
And that's usually a pretty good sign when two heads of state.
are meeting.
And a gigafactory in India obviously would be huge on both on the auto side,
the energy side,
and you have a 1.5 billion population population.
And again, essentially, India closes their car market off unless you set up, you know, manufacturing, you know, inside of India.
So this would, you know, finally these two, they've been talking for a number of years.
I think Tesla has gained a lot of leverage as they've grown in volume.
And now they're, you know, the two sides are getting to a point where they can, you know, come to an agreement on setting up a factory.
Again, nothing's been officially announced, but.
There's been a lot of discussions at multiple levels of the supply chain about doing this.
So beyond Tesla, the reason why this is very interesting is because we have seen this pullback from China.
and this push towards India as a secondary source for manufacturing and production.
I know that this is different.
The gigafactories are really more set up for manufacturing and distribution in that market.
Right.
Like that's been the strategy that, you know, essentially the idea is,
that instead of building in one country and shipping it,
shipping a bunch over to another country,
if you build in that country,
shipping costs go down, it's worthwhile,
it makes the economics work better.
But beyond that, with this whole move,
with Apple moving production to India,
Tesla potentially moving production to India,
India now starts emerging, and I am very curious to see how China responds to this, right?
Like China and India have like an interesting relationship.
They share a border.
You know, China did align with the former prime minister of Pakistan.
You know, there's been tensions at the border between India and China.
China has been sputtering out of.
zero COVID policy. I'm very interested to see whether, and then Blinken was just in China and it,
you know, got to meet President Xi, which was really interesting. I'm just wondering if China is now
going to be, you know, people, people were worried about China in general and how that would affect
the global economy. This does not bode well for China. I mean, more talent, more opportunities in
India does not bode well for China. There's, in my mind, there's no doubt about that.
So it's a very interesting position right now.
Yeah, just quick.
I mean, Tesla's expanding in China.
So Musk was just there, you know, two weeks ago,
he met with all the major,
finance and regulator and regulator ministers of China like basically she's second you know kind of
his staff and work through I think a number of issues both on expansion as well as full self
driving and like what's that path to approval you know in country so Tesla is going to expand
in China I think they wanted to get that out
out of the way, make sure he, Elon showed face in China doing that.
And then now this is all kind of like a proper order of events.
And there's a similar thing happening right now with Europe and potentially in the next
manufacturing sites with Europe with the means with Macron last week and in Italy and in Spain
and so forth.
So there's a, there's a, I think there's a number of announcements potentially coming.
Yeah, it's fascinating. So I wanted to go to the big bombshell for the day. It's very rare that we have such a huge bit of news to talk about. And it's incredibly ridiculous, by the way, that no one's talking about this. So except for in the startup industry. So Tiger Global, I just put it up in the nest.
has told select secondary investors that they can actually bit on any of the private companies,
not just the 30 that were initially talked about, after a lead buyer did not emerge for its portfolio assets.
So they were doing a strip sale. About a month ago, it came out, they were going to do a strip sale
of some of their portfolio assets. As people may remember, Tiger Global was one of the most prolific investors in the bull run.
They invested in a ton of crypto companies that are all dead now.
They invested in a bunch of tech-enabled services companies that are all dead now.
They had to mark down their portfolio about 30% in 2022.
And then they went and they tried to go even further.
And they offered a strip sale or a fire sale.
Some people would say a strip sale is worse than a fire sale.
You can imagine why.
And so they were literally selling their assets at pennies on the dollar, right?
Like we're talking about like 60, 70 cents on the dollar.
And they couldn't even find a buyer.
And that sounds really, really, if it sounds bad to you, that nobody's willing to buy these assets after significant markdowns, you're right.
That's a pretty big deal.
This is a huge deal, right?
So they weren't able to find an actual buyer.
And now they took, just so you know, Tiger Global is in every big company that you know.
Any consumer app that you use, Tiger Global is somehow involved as an investor,
either as a limited partner in the funds that invested or as a direct investor.
Tiger Global was everywhere.
Any company that was big in 2021, 2022, Tiger Global had a position.
And all of those stocks are now available to the general public.
I had a conversation yesterday with one of the founders of one of the largest companies that Tiger Global has ever invested in.
Not the largest.
So now you can't just know that, but one of the largest.
And the point that was made to me by them, and I'm not going to give it away.
So the point that was made to me by them.
was that this is leading to a crap ton of turmoil in the entire startup industry.
You know how everybody has been saying, well, startup valuations are going back up?
This inhibits all of that.
This changes everything.
I can't stress this enough.
For anybody that knows how startups get valued, you get valued on multiples of revenue.
Often because startups are spending all their money in growth
instead of focusing on profitability
because you need to grow because you're a startup and it's a zero to one game.
And we literally are seeing multiples of revenue
and I know this is going to be crazy.
Now, these are the exact numbers that I got yesterday,
ranging from 4x of revenue
to six X of revenue.
It's a very tight range right now across the Tiger Global portfolio companies.
For some context, that means for every dollar in revenue these companies have,
their valuation is $4 to $4 to $6.
For context, yeah, Cody knows what that means.
That's crazy.
For context, companies at those stages are often valued 10 to 30X of revenue.
This is a huge haircut, like a crazy haircut for a variety of reasons.
Dakota, I know you do a lot of startup investments.
Wanted to get your thoughts on this.
I mean, this literally will, is setting, I'm telling you right now, don't be surprised
if you see a lot of the companies that you know in the industry, call it quits in the next few weeks.
A lot of, and sorry, one last thing I didn't mention, every single company at Series B and Series C
So that's later stage companies, sign anti-dilution clauses.
This is a really, really big deal.
Okay?
So an anti-dilution clause means any further sales of the company's assets cannot happen.
If they happen at a price that is lower than before, it comes out, effectively it comes out of the founder's money.
You're going to see founders quitting across the board.
You're going to start seeing people saying, hey, it's not even worth it anymore.
Imagine building a billion-dollar company and walking away with a few measly million.
It is, this is so crazy.
And the shockwaves that are coming are insane that I can't even, you know, as a founder, I can't even tell you how crazy this whole thing is going to be.
And we're going to see a bunch of companies just call it quits because the employees can't make money.
The founders can't make money.
The investors can't make money.
These markdowns are insane.
Cody?
Yeah.
Yeah, I think this is probably the precipice of that mass extinction event that everybody's kind of been talking about, right?
You know, when we're venture investing or angel investing, you know, I like to think of it
like playing football.
You're very strategic.
You trust the coach.
You trust the players on the field.
Sometimes you throw Hail Mary passes and, you know, they don't always land.
I think that in times when you have high liquidity, you're, you're, you're
your appetite for risk is is greater and right now the consensus across the investor board
is return of capital and return on capital so if you know we've been telling the companies
that we've been invested in you know for almost three years now to dial back and to work towards profitability
in an effort to maintain their valuations.
you know, and the companies that didn't prepare for this or weren't properly advised for this
are going to get smashed.
You're going to see that everywhere.
The entire global event, you know, you said open to the public market.
It is a secondary pool that they're opening it up to.
It's for accredited investors, obviously.
And it's a limited pool, but, you know, this is going to be a big revaluation of the entire sector.
It's like they're crowdfunding for these portfolio companies.
Yeah, exactly.
I mean, keep going, Cody, sorry.
No, I was just going to say, you know, this will be a rebidding process.
And it's important.
It's important for the industry and it's important for the founders because this is,
This is the path of growth, right?
The next decade is going to be very focused on a lot of capital investments, infrastructure, build out.
And the players that are going to make those things more efficient in our economy are going to be the companies that win.
The companies that have their head in the clouds and have dream companies that may not ever be profitable,
they don't have a profitability plan in place.
you'll start to see those companies fizzle out.
And I think we're seeing that.
And, you know, in November of 21, that was our consensus across the board.
It's been a little bit slower to play out.
But here we are, I think, in that rebidding process.
But if Tiger sells the secondaries...
At pennies on the dollar, what is the point of pivoting to profitability if you can't get a, you know, if your share of the company is dropping precipitously?
Cal, walk me through...
how this affects the industry.
Thank you.
And for people that don't know, Cal was not only at Best Buy,
as a CEO, Best Buy Asia.
He was also one of the partners at vantage points.
So, Cal, walk us through late stage mechanics,
in your opinion,
and how this Tiger News affects late stage startups,
especially from a valuation and comp perspective,
but also all of the stuff that happens at late stage
that people don't talk about.
Yeah, I mean, I'm not going to cover it all the,
you have a lot of,
smart people here. I, the angle I'll tell you is just, I have a good sense of like how the
corporate investors are going to deal with it. So the corporate funds, so we had a relatively
small Best Buy corporate venture fund, which I started at Best Buy in order to try and make some
bets in some new spaces to kind of drive innovation faster.
And then as a result of that, that's how I got to know VantagePoint,
because VantagePoint was partnering with a whole bunch of clean tech players
or players in that industry, utilities and other people.
And so BP, for example, which still has a massive venture fund and others.
So what's interesting in late stage is...
If they haven't gone public, late stage financing tends to be the, the Tiger Globe has been in the last few years, Tiger Global, Sequoia, all the ones you guys know about. But
These guys are out of the business.
Basically, they're going to find it very, very hard because of the new regime.
It's not, it's not, you know, it's just the public companies are not valued at the same level.
Therefore, it's not going to be worth it for them to get in at a late stage with large amounts of capital that they go up for zero interest rate.
and do kind of easy deals where they can just, you know, make a 20, 30% kicker and maybe hold on to it.
Some of them have been restructuring to hold on to those shares.
That's not going to happen anymore.
It's just not going to happen.
The dynamics are not going to return.
So I can see why these guys are doing this.
But the thing that I think maybe nobody else is looking at here is that in that late stage, they all look at that.
I mean, it just hasn't been mentioned explicitly is...
That late stage, you do have to involve, especially when you've got a complicated venture infrastructure or you do need to get the venture, the corporates really involved and investing as well.
Either they're investing directly with cash or they're making deals.
Obviously, in the AI world, the deals are use of infrastructure, AWS resources, as well as cash, right?
Right.
those what I'm finding now and I'm actually directly involved in some of this just in some other stuff I'm doing
those large companies know how to cut down innovation they know how to cut down experimentation
that's the reason why they become large companies and sometimes actually die right because they can get dumb
pretty quickly and so they're getting pretty dumb pretty quickly again and they're basically
cutting down and I think smart in some ways
because they're cutting out, they're reining in their venture arms,
they're raining in their off-balance sheet kind of experiments and financing.
So that's not going to be an easy source for the late stage companies to get the round together.
So, you know, quite often they have a round to put together and they say,
oh, we're going to get, this is in pharma too.
You get farmer better than me.
I, you know,
I'm in on a deal,
angel,
I'm an angel,
like I just invest my own money.
So right now,
so in Oxford,
there are two or three,
very early stage,
relatively smart entrepreneurs
that are invested in
that, you know,
have partnerships with big farmers,
right?
And they're doing clinical trials
and all that kind of stuff.
You know how the,
the rig goes.
Now,
the partnerships generally were easy to make, right, even in that industry over the last four or five years.
But now they're kind of raining in too.
They're kind of going, hang on a second.
We don't have that extra capital sitting around.
We might have to give it back to shareholders.
And so that is hitting that late stage as well.
So anyway, very interesting environment now.
Yeah, so for people that kind of, now let's talk about how complete, so just so people know, late stage investment has plummeted.
It's like it's jumped off a cliff.
There's very little late stage investment happening.
Remember in 2021 and 2022, if you open the news every single day there was a startup that was raising hundreds of millions of dollars.
Yeah, if people remember those days, if they're intact, they may remember like, it's like, oh, this company raised money, this company raised money, this company raised money, this company raised money.
And people were like, huh, interesting.
This is a really interesting time.
Well, all those companies are like screwed right now.
because they raised at the top.
And it's funny because you would think like,
hey, keep your money, be happy, move on with your life.
And it's like, no, no, no, no, no.
You actually are raising money
and you have to actually make it to the next round
because you're going to be burning so much cash
because the growth expectations are so crazy.
And all the VCs were saying grow, grow, grow, grow, grow, grow, grow.
And now suddenly one day you go into your board meeting
and they're like, why are you growing so fast?
you got to pivot to profitability what are you doing and you're like hold on hold on what i
thought we were supposed to grow the very same people the very same people it's the very same
people you know i mean it's kind of it's kind of sad for some entrepreneurs who who are naive or
who are you know i really admire you know some biologists here that you know is running an interesting
company has got to you know round b not quite that that late stage but you know
the late stage amounts that have become quite large, right? They're building facilities,
infrastructure, and then they go and build this infrastructure, and they've got all these plans
to kind of get this infrastructure to serve three or four cities. And suddenly now all the rest
of the VCs, as an angel, I can sit around and like, you know, take a loss and play around
is my own money. But these VCs have LPs to answer to, right? So they're coming in and just
suddenly, like it's almost schizo, right? They're coming in and
And these poor entrepreneurs, like poor or not, depends how you want to think about it.
But it's real.
This stuff is real right now on the ground.
So let's talk through what happens at late stage.
So when you are a pension fund, right, you might be risk averse.
And so you might say, hey, I'm not going to do startup investments.
That's crazy.
Like I'm a pension fund.
But if you as a pension fund know that Uber has hundreds of millions of users or a billion users and you're like, oh, I'll put money before Uber went public, I'll put money in Uber.
They're about to go public in a year.
It's going to be great.
But the IPO market is closed, right? And so now, like, you've made this, you've made this investment in a late stage company, which will not really pay dividends. And so now I'm going to talk about the impact on the ecosystem. So the way venture capital works is,
is that you have limited partners or LPs.
These are pension funds, institutions, banks,
you know, even some private equity or larger hedge funds.
Tiger Global is actually a hedge fund that invested in startups.
So, you know, again, you see in CO2 and others.
And so, you know, you see this like broad,
base, you may not know that some of your money or your dad or your mom's pension may be tied to some of the stuff that we're talking about right now. I am not kidding. This is crazy. This is like real. This is affecting real people because we allowed these pension funds. By the way, Yale.
and Penn and Washu and other places,
their endowments have been investing in these VC funds
for a very long time.
And they've made a ton of money.
So now you literally have endowments,
you have pension funds,
you have institutions that have put money in these startups,
indirectly through venture capital.
Now, these venture capital companies require downstream investors,
either when the company goes retail or public,
or through the Cotus and the Tiger Globals and others and Sequoias,
especially with their Evergreen Fund,
to pay a higher premium than what they put in, right?
But if literally the value of that stock is going down by 50, 60, 7th,
That means that money is no longer in the pension fund to pay pensions.
That money is gone.
And...
This is incredibly scary because what happens when pension funds become insolvent?
This has happened before, by the way, just so you guys know.
Look up like the pension fund crisis in the 80s.
This was like a real problem that occurred, which is why a lot of people moved away from pensions.
The early 90s and late 80s were like awful for pension funds.
And so we've, this has sort of happened before, but it happened in the public equity markets.
But now we have a shadow banking system which has allowed people to put money in real estate.
It's allowed people to put money in.
And by the way, your banks can do it too.
Oh, this is amazing, by the way, that one of the laws that was passed during the last administration
allowed banks to actually invest their money directly in startups that had never been
actually allowed before then.
If you guys want to Google that, it's crazy.
It's like the craziest thing that they allowed that.
In the bull run, they allowed them to invest in startups.
Frickin crazy.
And invest in venture capital.
It's unreal.
Okay.
Donish, I don't know, just a very quick comment.
I don't know, like, I just don't know what systemic impact it would have on the overall pension fund.
But I 100% know that it will change their behavior like,
And that will affect the ecosystem, you know, of entrepreneurs and all the things we all know that people have got used to over the last 10 years and have seen nothing else.
Because basically these LPs, as they were, right, they were investing X amount into alternative assets, maybe 5, 6%, 10%.
I don't know, depending on the fund.
And, you know, Calpers was like, you know, I don't know what it was, five, six percent.
And I remember when we're at vantage point, we used to go to them.
They used to always open up a certain amount, you know, X percent into VC.
Now, they're going to reduce those, be really, really, like, cautious about that.
And that changes everything down the funnel, right?
Now, the one thing that people go around saying is that they have dry powder.
I have to just say,
really, really like question a VC that's coming up and saying,
you know what, we'll still invest in you.
We still have dry powder.
We're still going in conferences.
They're still sponsoring conferences.
They're still going out there, you know, using the 2% that they're earning,
doing all this, telling everyone that they have dry powder.
dry powder can be pulled back.
I just pull back a little bit of money from, you know,
small amounts of money that I put in an, you know,
very small LP in a venture.
I said, I'm not, like, I don't trust you guys investing this thing.
I'm not going to any calls that come up.
You know, you're going to have to like, you know,
I'm challenging that, right?
And that's just one little guy, me.
I'm like looking at this thing, listening to you guys,
looking at the world, right?
This is happening, right?
So that dry powder is not dry powder.
It's like, I don't care what they say.
I don't care what the All-In-Port says.
In fact, I think Chamath on the All-In-Port is being more honest than the others.
I think Friedberg on there, if you guys listen to that, because it's kind of like the standard view now.
But if you look at Friedberg, he's, we got this dry powder.
Nobody says dry powder in biotech, right?
They're going to pull it back.
Anyway.
Okay.
It's kind of...
And by the way,
just to make sure
that everybody understands
because, you know,
we do this.
We do have the smartest
and best-looking listeners
on spaces,
but at the same time,
I want to make sure
that they actually understand
when we're talking about dry powder,
so the way that the...
industry works is that you have LPs, limited partners or institutions or ultra high net worth
individuals, people that invest as investors in venture capital, the people that invest in that
industry, that give money to a firm to invest, those people are called LPs. So the way it works
is they sign an agreement. The agreement says, hey, I promise.
that I will commit this much money to this venture capital firm over this timeline.
That is how it works.
Okay.
So they're not actually giving the whole money to the VC firm.
They're committing to allocating amount over time.
So as the VC firm starts really doing an awful job, people like Cal and Cal isn't, you know, I'm going to say ultra high net worth individual, but I'm saying like he's an individual that's an accredited investor that works with venture capital firms, you know, but you.
You can imagine if Cal's doing this, like he said,
the institutions are definitely doing this.
They're going to start saying, well, I know I committed, you know,
250 to 500K or 500K, but you know what?
I don't trust you anymore.
I'm pulling out.
You have breached your fiduciary responsibility.
Right.
You are doing a bad job, I'm pulling out.
You have promised these returns.
By the way, that's the other big thing.
There were DPI promises, so return promises or TVPI promises.
There's many different ways, total value for investment, distribution per investment.
These are all different metrics that are used.
And often in the LP documents that they sign, they say, hey, they put in a provision saying,
if you don't hit these, I'm out.
Any good LP does that, by the way.
I would say like any very sophisticated.
I'm talking about since they have the leverage to do it.
They say, hey, if you don't hit these metrics,
if your internal rate of return or the return of,
is not good enough.
I'm taking my money out and I'm not,
and it's because you've breached the contract.
And by the way, they were so complacent,
Donish, that they put all these clauses
in. They didn't care. They thought they were going to get the returns
anyway. Like they were just believing
their own BS. Seriously. That's
so true. They just took all the clauses.
They didn't do proper like, oh gosh, you know.
It's very interesting so they can pull the money back.
There was no downside risk protection at all.
And so this happened in the industry.
So now we talked about the investments.
Cody, I'll come to you next, but we talked about the investments.
We talked about the impact to you as an individual because of the pension funds and other things that, you know, your bank, your company, your hedge fund, your investors, you know, whatever vehicle you keep money in, it connects to the shadow banking system somehow.
And it's just the way it is.
It sucks percent of global assets are owned by the shadow banking system that's completely unregulated.
That's from IMF data.
So, which is great.
Good, good for all of us.
We're so freaking screwed.
All right.
So then we know that the LPs are being affected.
And then on the downstream, because valuations are plummeting at the later stage,
if you're a company and you say, hey, I'm the next Uber.
What do you think they're going to do first?
They're going to look at what Uber's valuation.
Again, Uber before they went public, their valuation is.
And they'll say, huh, well, Uber's valuation is great.
Do I really want to invest in you at this valuation?
No, no, no.
I want to get at least a 50, 100 X return on my money.
So you got to go to your 100x below the other one, which then causes multiple contraction,
which means your revenue multiple.
The valuation divided by the revenue is called the revenue multiple.
And that revenue multiple goes down.
I know I'm going pretty deep, but it's important because we keep, for the last few years, everybody's been an expert.
And yet nobody understands how the industry is structured.
Cody, go ahead.
Yeah.
First off, I'm not the best looking nor the smartest on stage.
And then Mario is now.
Some risk areas change to becoming the best looking.
I thought he was an AI bot for a while, but here he is.
But he's definitely not the most intelligent.
But go ahead, Cody.
So, Kyle and Donish, make really good points.
Donish, I do want to push back on you a little bit.
I think that the narrative of the economy has been embedded into investor's decision patterns.
Right.
And I also think that AI has become embedded in investors' decision patterns.
And this adversely affects late-stage companies more than it does the early-stage companies.
Because what a lot of investors and institutions are doing right now is saying,
is your company to get eaten alive by some AI software that's going to become a platform?
And how do you embed or how do you integrate?
And it's...
people don't exactly know how to digest this yet.
Investors don't know how to digest it.
Unless you're one of the small minority
that are building these software platforms
and can explain it to the investor panels,
there's a lot of uncertainty there.
So you have market skepticism, you have...
a new rollover skepticism, and that's going to cause pause, especially on the late stage companies.
So I do think there's some valuation multiples that can climb for early stage companies that do have products or building products that can seemingly eat some of these larger late stage or legacy companies that exist in the marketplace.
So I don't want to be completely bearish on the whole market.
And I think that encouraging entrepreneurs and keep building and innovating is vastly important.
And there's some liquidity there, right?
The dry powder will find its way to companies that will exploit market inefficiencies.
And there's definitely plenty of them.
Yeah.
You know, on that more positive note, maybe even overly optimistic note, you know,
I'm going to call it a day because I have a day job.
And I appreciate you all again, as a reminder, we're up here every day at 8 a.m. Eastern.
Thank you, everybody, for joining us.
And we'll see you tomorrow morning at 8 a.m. Eastern.
Thanks, everybody.
Bye.
