Grant Williams: A Sober Investor's Guide For A World Gone Completely Mad

[Music] hi i'm keith mccall and welcome back the one and only grant williams this now now there are gentlemen in this business and then there's grant williams welcome mate hi it's uh great to be here it was good to chat you keith you know if i could only be well maybe i will be maybe that's a goal you know as i go further down the path you know if i could have a little bit more gravitas and be a little bit more polite you know i think i can find my way to be a little bit more like you uh thanks again for making the time you're actually teed up by uh by mike green you know he was complimenting your podcast congratulations on on how well that's gone we get a lot of people you know hegi nation or people following us on twitter that that are constantly saying hey have you heard about this guy i'm like i i heard about this guy this is the second time we were going to have him at the investing summit so welcome well it's very kind thanks for having me but it's uh i mean not there's much to talk about but i'm sure we'll find somewhere to bumble through the next 45 minutes or so well let's start with something that may be an irish canadian and uh i guess you're born in the uk right yeah displaced half brit half aussie yeah yeah there you go well so uh it's maybe a topic we'll be criticized for for for broaching which is the american exceptionalism and where we are you know currently i've often described this year as uniquely american problems in terms of portfolio manager positioning fomo there's a whole host of issues that are uniquely american that you don't quite find if you're analyzing all of global macro particularly even equity markets um the the the the it's an american thing and and and when i was reading uh some of your notes i was like wow this guy uh i think at least partly agrees with that in fact you might might have a a more well-rounded uh you know thought process on what's actually going on out there well it's funny yeah for me personally you know i grew up in a time when america was still very much that that shining city on a hill and as a young kid in england i was fascinated by america i i was just absolutely in all of the place and i first came here to the united states when i was about i guess 11 years old and i went to detroit of all places because my father was working for a company that had a um like an annual general meeting there and so there i was this little kid standing at the bottom of these enormous skyscrapers and it was just it was looked like the set of blade runner to me and i from that day to this i've been i've been in love with the place and so you know i i it's it's incredibly sad for me to see what's happening in the united states and i don't mean a knock on the us in particular because i think we're seeing the same kind of fracturing everywhere it just so happens that the united states is so important for has been so important for the tone of the world and so when that tone has been positive as it was you know for much of the last 50 years it's an incredible tailwind but when you start to see the kind of toxicity levels rising in the us that becomes a headwind for the rest of the world which is kind of a lot of places to take their cue from that so yeah i when i look at it that the big thing that's lost um has been the ability to have civil disagreement civil discourse and i i just think without that it becomes very difficult to come together and discuss problems and and find solutions in a in a bipartisan way and and right now the solutions so the problems that the world face are transcend politics by some distance and so unless we find a way back to the middle and i think social media has a lot to answer to in terms of creating these these echo chambers which just amplify the the bad feeling on both sides unless we can find a way to to come together and discuss things that we're not comfortable with and we don't necessarily agree with in a respectful way in a search of answers and you know accept that there are differences of opinions out there and this this woke cancel culture unfortunately well intentioned though it may be amplifies that and we've we've we've reached this point where if you disagree with the the masses you are ostracized and cancelled and cast out and that's just an incredibly dangerous environment i think to to be kind of fermenting yeah that that that's an understatement i mean and thanks for sharing that story uh that that personal you know journey i had the same thing and i i that resonates with me i mean i came here in the mid 1990s i i landed in new in new haven connecticut and i thought that that was the industrial mecca of the world like because i'm coming from a small town in northern ontario and canada and i i quite literally i'm serious about that and and i and when i was able to get an internship in on wall street in the late 90s it was so exciting and it was all about american capitalism and and and i really you know having now uh raised a firm and a family here i mean i really do worry and um i work i try to take it in a constructive way like try to be the change but it is increasingly hard to even say that i'm an irish catholic i mean it's crazy um so i don't know i mean i guess i guess kind of putting it into the market you know into the into how a theme or a topic like this and you can't quite put your finger on it like you know on it precisely civil discourse is a good one um yet it's found its way into the most precious part or the heart of american capitalism which is the stock market has it not look it absolutely has um and i would argue that that perhaps the best place to to really look at this and get a microcosm of the broader world is is bitcoin now this is somewhere that um both sides of that particular argument are are absolutists right the either bitcoin is the solution to all the world's problems your bitcoin fixes this that everything else or it's a total share and a ponzi scheme and it's going to zero and while either of those may still be true because we just don't know that the likelihood is that somewhere in the middle lies the truth and yet you know when you try and engage both sides on the argument it's a really difficult thing to do it and i've tried you know mike green talking of which um very kindly came on my podcast and we managed to actually have a very civilized debate with a young guy called nick carter who's you know a very very impressive young man um you know until the bitcoin thing blew up i wasn't aware of nick but he like many others in that space have impressed me with the quality of their thinking and the quality of their uh you know talking about that subject and we did manage to have a respectful discourse now i don't think we changed anybody's mind and i didn't think we were going to change anybody's mind unfortunately but there's this enormous chasm in bitcoin that that this is it's the no man's land and there's no point really venturing in there you know i i've just shied away from it because i realize that that both sides hold on to their opinions so strongly and if you come down anywhere other than on that side you're written off and so i i think if you're not going to enter somewhere to have a discussion and and people are going to listen to you and engage and help you test your theories you know have fun staying poor is not an answer to genuine concerns about the viability of bitcoin unfortunately um so yeah while i try and understand it better and get more comfortable with with the problems i see with it i find it increasingly hard to do unless you can do it away from the glare in private conversations with people where you can kind of do away with this toxicity that immediately springs up the second anyone talks about it you know and mike look mike god bless him as has and mike as you know is a very very deep thinker mike doesn't shoot from the hip he doesn't come out with half-baked ideas and he's raised legitimate concerns which he voiced very articulately in that conversation in a great back and forth with nick but instantly afterwards you know the the twitter streams are filled with you know mike this mic there and loser and all this kind of stuff and i just think it's a great shame because that side of the argument is is missing the opportunity to hear one of the great thinkers of his generation explain to them why he thinks they ought to reconsider and if they listen to him stress test his arguments and decide that he's wrong it's a gift he's given them you know giving them the the ideas that might test their thesis but no it's it's just uh it's just a it's just a pylon and i just i just think it's it's become a waste of time to do that in public yeah i i agree with you i mean and and going back to what i love and still love to this day about america and and particularly the capital markets and wall street specifically it said it never is about what mike taylor has said on on multiple hedge investing summits and i'm sure he'll say it again when we have them on in an upcoming conversation it's don't be right make money and being right politically philosophically evangelically whatever it is like for someone like me i'm not a republican or democrat i want to talk to you about that i don't give a about what you think because i don't care like i don't feel anything about that anyway like what i really want to do is figure out if what i'm investing in here whether it be bitcoin or you know cattle futures you know whether whether i can trust that you know and and i think that you know not having a balanced conversation about anything where i am investing money to make money save and make money it can have a it can't have that it can't have anything other than an objective conversation and i wonder like you've spent a lot of time on wall street you've observed a lot of people in their ecosystem which is unique right you know dirty little traders like me or whoever you know there's so many different ways you can make money on wall street without ever really being a philosopher or evangelist this is the story of this is the story of the game that we're in so what do you think about that well look again you know i keep coming back to the profound change that social media has had because it you're absolutely right but it used to be that you would make money quietly right you'd sit there and you'd do your thing and you you'd have your positions on and you'd make the bets and you you know you hedge your risk you do all the things that you do now but you did them privately and and what happens when you when you build this enormous public edifice around every decision every pronouncement that people make about things you you instantly create the ability for people to misjudge what they've done on a timeline that may be completely at odds with the timeline that that person is necessarily investing so when you talk about making money absolutely right but you talk about making money when you tell you the final scores and most people's final scores are very different um and so i think now if you're if you're investing with a longer term horizon and that is very much out of fashion these days you know because of the immediacy of the world around us it's all about making money today and this week and in the last hour and when you do that it creates a very dangerous dynamic because you give yourself so many more opportunities to be wrong and and that plays havoc both on your psyche if you're if you're wrong often um and it also gives people the chance to tell you you're wrong which they will do with with great delight um and so i think i think understanding your own time frame is is the most important thing to do and once you do that if you want to be public about what you do if you want to make big bets and make sure everybody knows about them that's fine but make sure they understand your time frame too because it will help you mentally manage just your own uh you know psyche as things may go against you in the short term you know i recently spent some time um helping a family make some really long-term decisions about some wealth um and we were talking in terms of of how we'd invest that money for a hundred years and when you have a conversation like that this is this is you know multi-generational wealth that they want to make sure is protected and preserved for generations to come when you sit down and talk in those terms it becomes very easy on paper and in theory at least to say well okay let's say let's say arguments that inflation is the next real big problem we're gonna face when you go onto twitter and you talk in in the general population if you if you call inflation and we get bond yields going down next week you are wrong about inflation whereas if you're managing money for 100 years and you think you know over the next 10 to 20 years i think inflation is going to be the problem we face you can then go about trying to establish a portfolio that will that will help insulate you against that knowing that you know if we're wrong for the next year in a hundred year timeframe it doesn't matter as long as we get the trend right then over that 100 year period we're going to perform well so i think everybody has to understand the time frame they're looking at and realize that the shorter that time frame is the more chance you have to be wrong and the more public you are about that short time frame the more chance you have for outside agents to really interfere with your own mindset because that we're all human and we all we're all fallible to that kind of input from outside agencies so it takes a very very single-minded um mindset to to to get through that and be able to ignore all the slings and arrows and just focus on what they're doing if they do it in a public way so i think understanding your own stuff and and maybe being very judicious with the amount of limelight that that you kind of or sunlight that you apply to your own investment technique it makes sense for a lot of people well i mean it the limelight in many regards or the sunlight or the the darkness that can be twitter um if you're a one-way marketer of an asset class like there are many on i've had some unfortunate engagements uh across you know it just happens i'm currently i'm in in in this with gold bugs because i'm not a gold bug i just want to risk manage my gold accurately i mean you know the best thing i think people can do to get better than bad at this which a lot of people are is to be wrong like i i prefer to be publicly wrong and and frequently wrong because it forces me to explain my decision making process my explain my process in the entirety of in the singularity of my process and improve my process so that i don't make the same mistake twice like when you coach anybody i coach you know 13 year old kids 10 year old kids the uncoachable kid is the one with the parent who can't handle the one mistake and moreover makes the same one over and over again so again there's a wonderful opportunity to teach in markets using these channels that it's you're going to be wrong and we want you to be wrong but i guess in essence taking this you know all the way around to where we started if you're starting from a place that i can only have one position forever long bitcoin or it's going away you're really not able to have that discussion and you can't be wrong because if you're wrong you're really wrong like i see people on the dollar for example something some person's got some theory and it's like oh the dollar goes up and it goes down like if you get the cycle right you're gonna get the dollar right that's that's that's where we need to go here you don't need to be permanently bearish on the dollar or permanently bullish i mean it's not perma is not a position yeah yeah it's it look is that old i think it's bob farrell rosie's always reminding us it's such a great thing do you want to be right or do you want to make money yeah and and unfortunately today um because of the the amount of public attention that everything gets everybody wants both and and unfortunately because of because of ego because of humor is because of whatever it may be if you gave them the choice most of them would say i want to make money but when it comes down to it they want to be publicly right first because of that a the kudos that comes when you are yeah and be the avoidance of the shame that comes when you're not and and it is it's a huge problem yeah we're all we're all subject to the same emotions and some of us handle it but another some of us just shrug that stuff off which is fine but but i think you're absolutely right until you until you make mistakes and learn from them and i say this with my kids all the time you know there are things that i can't teach you that you have to learn and i will tell you this is going to happen don't do that all these things that you know as a parent i'll tell you this so many times but i know in my heart of hearts these are things that you can't be taught you have to learn them the hard way and it's the same with investing so listening to people talk about their mistakes which is something that i've always focused on you know during my time at real vision i was so interested in in people talking about their mistakes right and and what they got wrong and most importantly what they learned from them because that's as you to your point that's where the real value lies if you can if you can avoid making one costly mistake that someone else made just by hearing them talk about it recognizing it when it's about to happen to you and taking the other course of action that i would imagine at the time will go against every instinct that you have um then that's that's incredibly valuable and and those mistakes are all out there that the pavement is littered with them you're going to step in them every single day and avoiding stepping in as many of them as you can is will make such a difference in the long term to to your mindset and your performance yeah i think that culture of learning is certainly a path that some want to be on and and look there's a growing community of people that want that objective education that you know practitioners education and markets you know i see it in my audience the real vision audience has it as well you do with your podcast that's that's what people are tuning into they're not tuning into you know an evangelist on on a one-way marketing strategy for for for a for an asset management product um on on on on one thing that people have you know struggled with on bubbles this u.s stock market and i know that you um i think you've called it a market functioning bubble for me my lesson well first of all in the 21 years that i've done it we've seen two epic bubbles just using the aggregate u.s stock market bubbles collapse you know i've fortunately not been on the wrong side of those uh i don't want to make that two for three but right yeah but i have but i have learned um what i didn't do on the way up in in the late 1990s because i was a newbie on wall street and i had no freaking idea what i was doing um but what i didn't like what i didn't do is make enough all the way into that final third of the move like as paul tudor jones would would say that's the hardest place to make money is in the last in the last part of the move up or down and uh this one i've seen you know there's been a chorus of of bubble talk you know for a long time and yeah on my timeline we're getting closer to the end but the fact of the matter is that you know there if you knew it was a bubble why wouldn't you have been long it i guess jim bianco and i have talked about this recently i just want to get your thoughts on that well i think uh you made a great point though you know in major league baseball if your batting average dropped from a thousand to 666 you're still having a hell of a year right um but in investing if it does that that that will set you back decades yeah and so it's the one thing that you absolutely have to avoid and so with the bubbles when when the likes of paul tutor jones and druck and all these guys talk about that phase being the hardest make it is it's it's the easiest and the hardest to make when it's the it's the easiest to make it but it's the hardest to keep it yeah and and so i think for a lot of people it's a place where you you should leave it to the tudor jones and the druckermans to make money because while the potential rewards are enormous you do run the risk of slashing your batting average by a dramatic way like that and if you do that you know if the one thing you do in your entire investing career is avoid the big drawdown you'll do absolutely fine over time you will you will end up being very successful in your investing career but you have to avoid those big drawdowns and and the hardest thing to do is avoid them when you get into a phase like we're in now and and nobody um exhibits that better than that that great druckerman story uh that he told ken langone at the at the uh the lone pine tree club whatever it's called in in new york and for those who haven't heard it you you can build it online but i'll just give you the cliff notes on it you know then go and ask druckerman about this famous experience he had in in 2000 when he was running money for george soros and he watched all these young kids getting rich trading the tech bubble and he'd sent it out saying it was a bubble and in the end he just couldn't help it he just couldn't sit by and watch these guys making money day after day and he put a bunch of soros's money to her and he lost a billion dollars in very short order when he just caught the tail of the market in your collapse and this is stan druckenmiller for god's sake right and and ken lange asked him a great question he said you know what did you learn from that and dracamilla's answer to me is one of the best answers to any question i've ever heard in finance he looked him straight in the eye and he said nothing he said i learned nothing because i knew i shouldn't have done it and of course he learned a hell of a lot but but he was right he knew he shouldn't have got in there but he did and so he learned a bit about himself and he learned about human nature but that that kind of feels like where we are in the cycle now there's all and i'm in the middle of writing a piece about this now and there are all kinds of signs of this speculative froth that you really do get at the end and there's a lot of people myself included been talking warning about this bubble as it's blown and a blow off top was always a possibility but at every point along the way people are talking about well the bluff top comes next the blob top comes next at some point you realize with hindsight you were in the blow off top and we don't know where it is but i tell you what this feels an awful lot like that final phase in 2000 on steroids now because there are so many other asset classes getting swept up in this and so many signs of of speculative excess that we saw in pockets at the end of 2000 that we're seeing right across the investment spectrum and so i'm not saying don't be involved and don't try to make money but the important thing at this point is to be aware of where we are in the cycle aware of all the signs around you that this is a real speculative mania we have now uh and and we could point to any one of a dozen things that are real flashing warning signs and understand that and and also realize that not everybody who thinks they're standing by the exit and will just slip quietly out the door when the top comes is as close to the exit as they think and so thinking about that and understanding the damage over the long term that suffering a big drawdown will make you will cause you is is i think arguably the first lesson that you have to learn and if you can learn it the easy way then that's fantastic but if you have to learn it the hard way learn it while you're young yeah learn it while you're young i mean the the corollary to that if you're if you go both ways like i love to do uh and you go long and short is to be squeezed for that last part of the move and lose you know lose your lose your fund to lose your firm lose your friends um that the friends part is a joke but the fact of the matter is that you know we've seen some parts of and i i don't disagree uh whatsoever on the uh caricature of what's going on in capital markets obviously with everything that's been going on from uh bitcoin to stocks trading at 70 times revenues or whatever it is you know all the you know all the things uh are starting to appear but they have appeared in a certain order some people have said well the game what's happening stop is clearly a bubble but to me that's what happened after it went up you know yeah clearly when it's at 450 there's there's there's something going on there that is certainly uh not a non-bubble um but what it really where did it come from grant it came from a bubble of perceived intellect like how would you short of stock at three like again we had a full-blown model on this company we said hey look they're going to show what we call pod one or revenue acceleration earnings acceleration it's a highly shorted stock and it's really cheap on our numbers there was a fundamental case for that that you know that started at a much lower price but the real bubble was in a a significant amount of people in the hedge fund community that i'd say had a bubble in their perceived intellect and that had a price like so so to me in this day and age given the dynamics of the machine we know that things will go a lot higher a lot faster and a lot lower a lot faster to your point it's uh markets are often you know elevators on the way up and windows on the way out i get it but this one it wasn't born out of bubbliness it was born out of disdain high short interest stocks yeah that's that's true but it but it very quickly turned into and don't forget really when we talk about bubbles we're talking about a behavioral aspect that's really what they are their behavior in nature and so i agree with you the genesis of it was that but but it quickly turned into a you you could classify as a bubble just by the way it traded um i think you're absolutely right about the the kind of that that um that mismatch in in intellect i think it's absolutely the case but it comes back to disruption to me and and what happened there was was a real disruption of of the status quo now the status quo was we could do this we we know we know who all the enemies are we know where the potential problems are going to come from uh and we're comfortable that that's not the way things work on wall street and we can put these bets on even though you could make a very simple and let's face it a very simple case why it was a dumb thing to do to be short that that stock that's not how the way things work on wall street well enter a bunch of people who don't work the way things work on wall street they're doing their own thing and that was all it took to to to disrupt wall street and now not in the way that the narrative was painted that this was you know some kind of revolution and they were sticking it to the suits that unfortunately that wasn't what happened and the people who really got rich on wall street were the hedge funds you know there was a hedge fund called sendvest which which made 700 million dollars out of gamestop and they did and they sold out of their position the day elon musk tweeted game stock knowing full well the effect that that would have on all the retail traders just drive into a frenzy they'd run the stock up bingo were out um and so so there was real disruption there but but not uh it was a disruption of of the kind of the com cozy com confines of wall street that that people figured that's how it worked in our little club um i don't think it ultimately changes the way the game is skewed towards the professionals and and look let's let's i'm not defending wall street by any means that god knows i've been vociferous about their problems enough times in the past but whenever you try and play a game with professionals you start at a disadvantage because they they know how the rules are played and by the rules i don't mean the rules of the game i mean the rules of the game at that level um you know you you can game referees in the english premier league in a way you can't game them on a football field in the middle of nowhere on a sunday morning and so when you get on a pitch with the pros you have to understand not the rules of game but how they're applied and of course what we saw was wall street protecting its own in terms of some of the trading stops and the halts that were put in place and the bailouts that were given to the likes of melbourne capital so you do have a disadvantage if you want to go and mix it with the big boys you're going to get your wins like many people did but i think if we could if we could look at everybody who piled into gamestop i think you will find that way more retail investors lost a lot of money than made it and way more wall street firms made it as opposed to losing it despite the narrative and that's a great shame and again it comes back to the way the game is played the way the story is disseminated afterwards wall street's not going to give up this patch without a fight and wall street has been making hundreds of billions of dollars by being the boss of wall street for a hundred years silicon valley is now trying to disrupt that and this is what i wrote about in my last letter in february that i think the story people are missing here is the real battle for power is is silicon valley trying to disrupt wall street but what they really want is that they want to be the new wall street and be the place where the money flows through understanding full well that you want to really get rich keith you set yourself at the nexus of where money meets other money and you just take a clip of that and that i think is the real battle that's going on here yeah we're doing uh josh steiner's group our financials team uh bitcoin fully loaded we're we're endeavoring on a deep project there from a research perspective and and you've written about this topic too and this is again this you would not define this as a non-bubble uh the intersection let's just call it between who clearly doesn't want anything to do the establishment and certainly not wall street bitcoin or the maxis and elon musk and his stock which is now officially intersected uh can you walk through what you see there and what the risks are uh you've gotten right down to the balance sheet it's it's it's a kind of singularity i guess i think it was it was i think that moment when tesla bought bitcoin was to many people a convergence of of things that really did signify potentially a top and we saw that in the performance of tesla's stock over the next um you know two weeks or so it it fell 30 odd percent in the next couple of weeks and you can trace it back almost to the hour to that point in time where they've bought bitcoin so i think i think what that showed me was there were a lot of people institutional investors um or to be fair just non-retail investors who saw that recognized it as a sign of some kind of accessor and decided to dump their shares now since then the stock has has bounced back we've seen all kinds of horrendous stories out on tesla which um as as elon has become incredibly adept at doing have been hidden by um some masterful and you have to call it masterful seo targeting you know this this whole coins uh master of the coin and techno king stuff yesterday you know filed in an 8k which makes wall street kind of shudder uh but make the crypto sorry the tesla uh cultists just wet their pants laughing thinking how else is such a funny guy and he's got no reverence for authority and all this kind of stuff well there's real purpose in in that sort of stuff because what it didn't hide was you know another nhgsb investigation into autopilot it hid the fact that jerome guillen is out at tesla one of the last few senior guys there there were an awful lot of headlines underneath that that were swamped by the amount of coverage that the master of the coin and techno king got and look you have to hand it to him he's very very good at this stuff but if you look at the the number of sales that tesla have had um you know half a million cars i think volkswagen have sold 400 000 thousand exchange of their new uh electric evs in the first 90 days of sales so tesla as a business still has an awful lot of problems they've still got unanswered questions about the balance sheet there are all kinds of things that traditional investors would run a mile from and if we didn't have the kind of the kind of atmosphere in which news can be created and funneled and focused to the right audience that we had now the problems that tesla are facing would be receiving an awful lot more coverage but because of social media because of the way news dissemination works now it's very easy to target the kind of people who would be likely to invest in tesla with the kind of news that is wholly positive and and they wouldn't know about the fact that one of the most senior executives is mysteriously out of the company now with no real statement about it they wouldn't know about these nhgsb and ntsa um investigations going on you wouldn't know about the autopilot deaths which are kind of piling up these days and so again right you come back to this this this issue where the people who built this machine uh out in silicon valley are intersecting with real world businesses whether it be car manufacturing um or or whether it be banking and finance with the likes of chamath you know coming in and with sophie and yeah they had the hit job that elon and and chamoth did on vlad at robin hood when robin had as rather public problems over the over the gamestop fiasco was very obvious why they were doing it you know chemist just happens to about to be bringing public the biggest competitor to robinhood well guess what he's going to get on clubhouse and get on on cnbc and trash this guy and trash his platform and talk about how evil it is while he's about to roll out something which is identical essentially but but you know called social capital so it uh it's a lot more responsible a lot more green so i i think that the amount of power that's currently being concentrated in silicon valley's hands is becoming a huge problem and it's only going to get worse in in the short term and i think if you're an investor you have to understand the dynamics of that power nexus because it's it's going to infect it's going to affect the way you trade the way you invest and the performance you get if you get on the wrong side of it because you can be shaking your head at any single valuation you look at and if you look at tesla it's the perfect example you cannot find a single valuation that justifies the company's share price not one you can justify it by all kinds of rosy predictions which is what you know kathy wood and ark are doing about growth and the future and all this kind of stuff there is not one current metric about that stock that justifies it being anywhere near where it is now and so everything becomes about the future and if you can sell that dream to people that the future is all that matters the present doesn't it changes the way people think about investing it changes the way they think about your stock at the margin and that works great in the upcycle but if and when we do get to the period in time where things get rocky and we've seen it in short bursts over the last couple of years when markets have wobbled things get nasty very very quickly yeah and so again going back to your earlier point which is which is a well-made one you don't necessarily have to sit out this last phase but you have to understand the potential jeopardy of being in it five minutes too long and understand that that the people who can navigate those periods successfully are few and far between well you can uh you know there is a professional way of doing this of course is to short some things and not short everything i mean the fact of the matter is that the intelligentsia of the hedge fund community barsley uses the indexes and etfs as their hedge because they're scared of their shorts now and if you time it right you know to use the dirtiest two words that my wife uh never hears me say because she won't listen to me talk about markets thank god you know market timing if you get that right i mean i'd i've not been short tesla up until the most recent month and i'm sure i'm sure sheamuth through clover uh which is you know talk about being a recounter in a bubble i mean there's a bubble i mean we call a little company in new jersey but whether it's that or him being the chairman of the board of a company that he sold all the stock or you look at open door some of these business models we've analyzed these these are the bubbles within the bubbles right and you can be short those things without being short everything you know and that is how you remain solvent in a bubble i think you know chamoth you talk about emblems of the bubble and i'm not trying to be personal it's just he's an emblematic of uh somebody who thinks that everything else doesn't affect them and the behavior is amazing it's amazing look look how quickly that virgin galactic story got buried right it just it just went away i mean it's it's it was an extraordinary story and he didn't comment on it he didn't you know he put one tweet out which was ridiculed by many many people because it just it just didn't ring true and there were plenty of people digging into the records and showing why it wasn't necessarily an accurate reflection of what actually happened and then he just ignored it oh yeah and it went away it's it's um and and when you get down to the social the selling of a narrative and this gets back to the the evangelists the selling of the narrative that this is for the social good have you been to san francisco california lately downtown you know no not downtown when it's dark not good not good silicon valley czars of of social good not good not good at all it's it's it's it's actually dangerous and um you know this is this is the history of the world you know where you where you concentrate a certain amount of power both in terms of capital but the media and i think that they have basically made the cnbc's of the world hostage to having access to them and that's why these stories get buried i mean clover is a very simple story it just went from 17 to eight that's one way to be short a bubble you know and you know we're not going to talk about the clover quarter or what the guy did when he uh was posing with his shirt off you know on twitter or by his private jet we just don't let's just not highlight that today let's talk about something else yeah i think that's exactly right and i think you you bring up a great point that the the kind of co-option of traditional media is a very important part of this um you know i i i've lost count of how many times i've seen jim cramer tweeting out about tesla and how visionary is when kramer's background would suggest that he like anyone else who understands how to value companies must be looking at the things like everyone else who's who's been on wall street for that amount of time and going it's ridiculous he knows this is narrative trip and he knows that being pro tesla will get him an awful lot of viewers and a lot of kudos and all the right people he's doing it it's a very cynical thing to do i think um but that's where we are people are willing to be cynical in the pursuit of the ends we live in a very machiavellian world and that's that's something that we all have to factor into our decision making and our kind of handicapping of of the forces that we're arrayed against every single day and it's it's exhausting frankly well it's it's it's exhausting but it's worth the fight yeah absolutely and i want to get into the questions that people have for us um with the time that we have left but it's worth being in the fight like i want to i've always and i think this was the original and and i'm assuming uh the vision associated with real vision and certainly is with hedgehog the eye on the hedge eye transparency accountability and trust like i have to as an independent research person i i only care about finding the truth i don't care about your bloody narrative if it's if it's not true i'm going to tell you that and if it's if it's true then we're going to say that so i think it's worth the fight and i think that it's interesting to see going full circle on this discussion back to this uniquely american problem that this is really only in america you do not see we're long porsche um you know the best way to be long volkswagen which you mentioned which by the way has a lot of uh ev if that's what you really want yeah and there and they're really nice cars um you know so we own porsche it's it's up the world today because you know they of course it's a way to play it uh this stub but um you know that's this is not the story that wall street wants to talk about we want to talk about the tesla the chamath you know that thing and if you look around the rest of the world you know what's happening in the german stock market today has nothing to do with any of this uniquely american social media problem no it's it's it's it's a great point keith you know when i when i talked to friends in europe i had a long conversation with tony dean recently on my podcast and you know talking to tony about this stuff he's just bewildered by it because in in europe you just don't get the same kind of speculative friends yes you see it in pockets and and you see bits and pieces of it and you know the spat frenzy bleeds over and we we saw a similar kind of reddit phenomenon happen in the uk um you know and my fellow citizens of the uk are in vitro gamblers to a man so it's hardly surprising and i'm not saying it's not happening i'm just saying that whatever magnitude these are no but your point yeah i i absolutely agree with you it's not it's not the only thing that anyone cares about it's a peripheral story and in the middle of it all there are people investing in ideas and there are people investing in the in in the future but but they're doing it quite they're not investing in a future that's being decided and defined but for them by the people trying to build and sell them that future through their media arts and that's a that's a that's a very dangerous thing to kind of construct around ourselves is to have the media uh and the way we now consume our our news our information built and brought to us by people who are desperately trying to insert themselves into the the kind of the the the faucet of where the money comes out it's a really dangerous situation and and i suspect it's going to get a lot more dangerous before anything's done about it because of course that that same group are as keen to co-op politicians as they are the financial markets and nobody needs money as consistently or in such great amounts as a politician so you've got a fantastic group of people there who you know are always going to want to um you know have their faces in the trough so it's it's things are very very precarious right now in many many ways and i think as as long as markets are going up that's great but you really do need to be aware outside markets just how precarious things are because i think it's um it's it's worse than most people really understand oh and again if you want to see that get a plane ticket or drive there and go to san francisco california is turning into the armpit of america right now and that's where all the money is that's where all the power is uh incrementally i'm not saying all uh should i should stop using some of these words um one of the first questions we have has to do with maybe a way to answer this i know that you um have had long time had a relationship with neil howe um our demographer and this question actually found it's found its way as number one i didn't vote it up number one i think you know the people watching this did uh and and and and the question has to do with the four turn fourth turn and grant you've done extensive um and this question is from tony from seaside heights grant you've done extensive research on hedge eyes neil how and the thesis uh on the fourth turning do you do you see and believe that 2020 is simply the beginning of generational shifts or have we already weathered the storm look i i i'd love to think we'd weather the storm but i don't think we have it yeah would that be great um but but yeah but i think if you if you sit and think about what that generational storm encompasses it encompasses a transfer of power and it encompasses a transfer of wealth and while we may be starting to see that now um we're nowhere near the point where power or wealth have been transferred and that's that's really ultimately i think where this ends is in a transference of wealth and a transference of power now you can transfer the wealth in in a couple of ways you can you can take it from the people who have it and distribute it against the people who don't and you'd probably do that by all kinds of wealth taxes and one-off taxes and you know trying to level the playing field that way or you can make wealthy people much poorer and bring them down to the levels of the people who've been struggling because when that happens then the standard of living falls for everybody things have to get cheaper and more people can afford them in terms of power we're not seeing yet a raft of millennial politicians being elected in midterms now i would suspect that the next midterms in a couple of years time we will see that start to happen and that is the thing that i'm looking for if we start to get late 30s early 40s senators being elected in their droves then suddenly you have a mechanism by which the the disenfranchised generation the millennials who who are at a disadvantage in terms of the power construct can start to make a difference at a policy level and can start to challenge the boomers um who who obviously have a firm grip on the reigns of power gen x's like me are just caught in the middle and forgotten about as we have been in their entire lives um but but that i think is is going to be the real sign where the power shifts when when you start to see aoc not looking like an outlier on the hill but surrounded by people who look like her similar age similar demographics uh who are energized by similar issues and yet now they don't just have one vote they have 10 and they have 20 and they have 30. and when that happens i think you're going to start to see some some real change made and it's going to be very bad for boomers by design and it's going to be very good for millennials and that's i think where the power shifts now whether that happens peacefully at the ballot box or whether um the frustration and the on wii gets so bad between now and then that it happens on the streets is anyone's guess but whereas 10 years ago you could say the chance of happening on the streets was as close to zero as for you not to have to worry about it i don't think you can say that anymore i don't think you can say that that this generation will quietly wait until it's their turn for power because the disparity between the two is so egregious now that the anger is rising and the chance that that they won't wait for the ballot box and they will they will take things into the streets and there will be a miscalculation on on behalf of those in power trying to kind of squash any any violent protests can get out of hand very quickly as we saw you know last year with some other protests after the the tragic george floyd king yeah well anytime it gets down to you know again in that case black versus white or in this case over here evangelical view a or the non-view which is b you know you have that causal uh factoring to have something go wrong quickly um well the focus has been on on a horizontal divide you know left versus right that the truth is this is a vertical divide this is haves have nots this is rich and poor um this is old and young it's a very vertical divide and and if you think about what happens if you put a line down the middle of something on a horizontal scale you have a group of people on both sides that represent both sides in in a very dynamic and holistic way when you put a line in the middle and you have people above and below it it becomes a lot trickier because you don't have any checking factors across a spectrum that you have on a horizontal scale and that's what we have you know if you're old and you're wealthy and you're young and you're poor it doesn't matter if you're if you're from asia if you're from europe if you're from the us if you're an immigrant if you're a natural born citizen it doesn't matter you're poor and that that becomes a problem when you're looking at a bunch of rich people who look a lot different to you and have vastly more resources than you it's that's what worries me is that this is a this is a vertical struggle not a horizontal one yeah and it and it happens everywhere in between you know exactly right you know people it gets down to one basic uh human trait which is greed you have what i want and and i'm gonna do what i need to do to try to get that and well you know keith it's a great point and this is something that jeff gundlach said to me in an interview i did with him a few years ago and stuck with me ever since you know jeff pointed out greer agreed and fear but he said you know there's one thing that's more powerful than both and that's neat he said if you need to do something you don't have a choice right and that's where this kind of wealth divide is going it's not necessarily greed it's need it's i can't afford to live my life and your you know elon musk made another 100 billion dollars personally during lockdown well how about if we start asking elon to give 100 billion of that back and he's down to his last you know 100 billion that's the kind of thing that i suspect at some point we'll see and i think you can make a very easy case for why the people who have been tremendously enriched by this over the years should if they don't want to do it voluntarily be asked very politely to perhaps give a little bit more back i don't think i mean if you have that much you need to be asked that's that's just me uh yeah you should you shouldn't do i agree the um maybe one of the another uh question here actually just another topic that i haven't asked about uh not shockingly has to do with with gold uh rocky uh the questions from rocky where do you stand with gold in the short term uh can you contrast it to the other ideas of store of value that have emerged like crypto uh yeah it's a great question and and i'll i'll give rocky an answer that will probably annoy him but it's the genuine one that i've i've had the entire 20 years i've owned god i i'm not in gold in the short term i don't have a short-term view on gold i have a very long-term view on gold and that's why none of this stuff bothers me um you know i've had gold since the early 2000s and i've never worried about it i've never tried to time it i've never tried to to be cute with it i think if you if you are a trader of gold it's a nightmare it's just not something you really want to be trading because it it does trend but it tends to not trend in a very predictable way um if you're using it to diversify or using it as as a as a cash reserve or using it for all the things that i think of it as then it's not a short-term horizon and so yeah i look at all the commentary and i look at all the people confused about why gold's not doing x or y and why it's you know it's why it's falling why is it not at 2000 with all the money that's going on why is it i i i look at it and i'm i i'm interested in the opinions on it but for me personally it doesn't matter you know if if if it falls um and i've i've i've got more cash i'll buy some more gold just to to make sure that it preserves its purchasing power but i'm not looking to flip it at two thousand dollars i'm not looking to flip it at three thousand dollars i'm looking at some point in the future to exchange it for something i feel offers me greater value and so i i hate to disappoint you rocky and it's uh i'm not trying to dodge the question but i i genuinely don't have a short term of you because i'm not a gold trader i'm a gold holder yeah not a hodler i would say that's an important differentiation i mean as i've said many times i mean the physical gold that i've ever purchased i've never never sold whereas i i actually uh do think that you can risk manage paper gold which is gld efficiently if you're aware of the macroeconomic circumstances in other words if real interest rates are set to break out and nominal yields in kind that's not going to be good for gold so i'm going to short it in front of that uh similarly if if we come out of you know the third quarter of 2018 both growth and inflation are peaking real and nominal yields are peaking that's when you buy the out of it i mean both paper and physical so you know that's i think that's another way to maybe give rocky a little bit more like you know and again just define what you do you know everybody's got their own duration it's fine it's not these aren't evangelical points uh they're just points in in terms of defining our own duration um just last question and i think this is a really interesting one just i have no idea what the answer is um from olaf gustafson uh love your endgame podcast uh grant what would you say is the most unifying theme of all your guests uh i think there's two i think there's two really the first ones unifying themes like things that are common okay i think i think there's two two that have certainly jumped out at me over the course of these i think we've done 17 of these now bill and i um the first one is that is that nobody has a clue and i think that's important it's kind of funny but it is important and in fact mike green god bless him was our third guest and the very first thing he said was of course there isn't an end game and he's absolutely right there isn't there's a transition from the now to the what comes next and that's really what we're trying to figure out um and so nobody knows everyone's trying to figure this thing we're all trying to figure it out because i think it is a very important thing to try and at least take the time to try and work out not what you're certain is going to happen but the various paths this could take and then have a plan for the ones you think are either most likely to happen or the ones which would hurt you the most if they did happen i think that's really what what the goal should be but the second thing which is which is a little bit more um granular is inflation it's this inflation deflation debate and and whilst we've had incredibly smart people argue both sides of that argument incredibly eloquently it's clear to me that this is the one thing now that you have to think through you have to have a plan for and you have to understand what it does to your portfolio and i've talked about this at length a lot recently um just understanding that if if if we do have a return of inflation um and and after all the listing and all the thinking all the reading i've done my base case is that we will even though i understand the lacies and the roses of the world making incredible cases why they don't think it's a problem in our near future and steph bombay who's going to be on here tomorrow you know is also in the deflation camp and i get that but again it comes down to time frames so if we go back to this idea of investing over 100 years do i want to make a 10-year bet that inflation is going to be a problem in those 10 years and yes i do and and when you do that you realize that having had four decades now of inflation five decades of deflation sorry consistent deflationary pressure portfolios right across the world have naturally evolved to suit those characteristics exactly and so there are very few people in the world a year ago who had a portfolio that would give them any kind of protection let alone profit from an inflation recycle because they haven't needed that portfolio for half a century so if you if you think that there's even a chance inflation comes back then by definition you know that your portfolio is is not only not set up to profit from it it's arguably more than likely set up to be incredibly badly damaged by it and so for me thinking through okay how are the components of my portfolio going to fare in an inflation environment what's my time frame can i be wrong in the short term because i totally buy that we will have another deflationary gut punch coming out i totally get that and i think that's that's the likely course of action but do i want if i have a 10 year view do i want to time that and try and you know nip the ball off the turf at the very bottom of that deflationary gut punch or am i happy to start shifting the allocations in my portfolio to protect me against inflation and then maybe use any deflationary period to add to that and i think if you look at charts of commodities if you look at some of the value investing indices if you look at you know russell small cap value if you look at those things you'll see that i think around the margins there are people starting to position themselves for that kind of a long-term uh trend that they can ride and they happen to be given an entry point that is better in terms of commodities versus equities that it's been in a hundred years in terms of the ratio between the two so these things don't come along very often but again and this brings us perfectly around to one of the only things we talked about this idea of being wrong in the short term if you have a long-term plan it's okay you can be wrong you can be very wrong in the short term just don't if your long term plan is being proven to be wrong then you've got a problem and you need to change it but if you have a 10 year inflation view and you begin to put it on and we get a big deflationary spike in the next six months it doesn't mean you have to throw everything out you have to reassess it but it may just be a great opportunity to put your position on in better size at better levels that's all yeah that's a it's a good way to talk multi-duration because again the the theme number one is that nobody really knows so why pretend that in 10 years you know uh again operate on the edges of the uninformed volume you know sell high buy more back lower it's uh it's amazing that saying things like that and and there's in all humility i actually think it's beyond amazing actually at this point that in this day and age that buy low and and sell some high is a unique uh concept but uh it's not one at the very least i gotta i gotta keep going with it at least and um you know i also just like to uh thank you again for for making the time it was uh it was a nice way to spend the early part of the afternoon having a real conversation with you oh keith i've really enjoyed it thanks so much for having me on thank you and he's grant williams that's a wrap today a lot to think about there lots lots and lots and lots and we'll be right back at it tomorrow thanks for joining us [Music]

Channel: Hedgeye

Views: 25,122

Rating: 4.8680658 out of 5

Keywords: finance, wall street, markets, stocks, trading, macroeconomics, hedgeye, keith mccullough, bloomberg, options, day, grant williams, things that make you go hmmm

Id: nKs27aoj2ok

Length: 58min 20sec (3500 seconds)

Published: Tue Mar 30 2021