YouSaid · the spoken record

Le Shrub

lines on the record: 99
first: 2024-02-26
most recent: 2024-02-26
sittings or episodes: 1
sources: podcast

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“The one company that looks exactly like meta, well, sorry, I'm not going to say exactly like Meta, but similar setup to Meta today is like Alibaba. So Alibaba, you're like 200 billion market cap, half of it is cash trading at eight times earnings. And they're probably going to be the dominant company on AI in China. And if you can stomach owning anything in China, that excites me 10 times more than owning any Mac 7 stock right now. And I own Alibaba, by the way, but it's going to be a nerve-wracking trade, I think.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Because Yahoo wouldn't change. And now Google, I don't know. I would be concerned, like I use perplexity. I don't know if you've used perplexity.ai, but it's pretty impressive. And then you use your co-pilots. They're pretty impressive. So I probably use Google half of what I used to already. And I'm not really excited about buying Google at 20 times earnings. So that's what my older self would just say, you know, what stay away from a potential value trap. But, you know, if Amazon corrects, I'd rather buy Amazon, for example, Microsoft corrects, rather than buy Microsoft. But they're not at a valuation that I would have get excited. Like I got excited to buy Meta last year, one year ago, I got excited by that because it was 10 times earnings. So I bought it and I'm a joker because I sold it after 30%. But it is what it is. Yeah. And now, for example, I look at the same thing about.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Me neither. That's why I'm comfortable being short. Regarding the others, though, I think, look, the others, they're a bit expensive, but to me, it's not about the multiple, it's about realizing the realization of cannibalization. So, for example, Google, let's take Google, for example. Google trades at 20 times the my younger self would be like, this is a really cheap company. I'm going to buy Google. My older self remembers Yahoo, which is a really bad example because I actually love Google as a product. Yahoo in 2000, if you remember their interface, had the banners. I don't know if you remember the Yahoo interface. It had all these banners and they were selling you ads on the banners. And then out this came this company called Google. They had a very clean page and you would search and they would make money by getting the results on the front page and you would just pay to be at the top. Obviously Google ate Yahoo's lunch.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Car company well, okay, you got me there. Well, the car company, because it's quite specific and I actually do a lot of work on the battery metals, and I'm sure the car company not because of, I actually think the guy's a genius, don't get me wrong, but I think he has a problem of a, I think 2024 is going to be a transition year for the car company. So, you know, given what I said earlier, you had the hyperscalers growing 20% a year and trading at 20, 30 times P and the car company is growing 3% top line and it's trading at 60 times. Great company and all that, but 2024 is going to be a very tough year with intense competition from China and Europe. Marges are going to get hit. Margie is not collapsed to that of a car company. I think he's going to have a tough time and he will be safe probably by his robot at some point. But 2024, I think it's going to be a tough year for him.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I actually thought initially it's real. And I'm like, I better check this. So I Googled it and said it's fake. Whereas if I have the watermark, I can just check, okay, that's a fake photo. So to the point, it's an out of the box way to play AI for me. I'm actually kind of excited for it. It's not the end of the world for me if it doesn't work on the generative AI thing because I actually own it for recycling. But I think it's a theme that's really, really big and very, very important for what's coming because generative AI just came out and people are going to be confused. People will not know how to protect themselves. And, you know, making the technologies one thing, but safeguarding it and making it trustworthy, it's going to be another. And that's the best way I could think of playing it. And obviously caveat, it's a very risky place.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“So basically, I own the stock not for this reason, but suddenly this stock has a generative AI content. And this is important because in an election year, it actually becomes an election play, especially given the White House statement. It means that maybe they're working on something to make generative AI accountable and trustworthy, whereby you inserted digital watermark and people know where it came from and who made it. And if it's original. So for example, I saw a photo of Taylor Swift holding a vote Trump sign.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Interesting press release a few months ago whereby there was a statement from the White House about the safe and secure and trustworthy AI. And the reason why the White House panicked is because we're entering an election year and we're going to have a lot of deepfakes. So that statement to safeguard AI was signed by Microsoft, Adobe, Meta, and a little company called Digimark. And Digimark, they're trying to set the standard with a coalition of content prominence and authenticity is called C2PA, whereby they just entered this coalition where Microsoft Adobe and Old Lays are part. And they're chairing this committee on watermarking generative AI with Adobe.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“It can pick up what it is if it's like you can put the information on the watermark and say this is pet, this is PP, this is food packaging or whatever. So you can, it speeds up, it enables the recycling to take place. And I'm very excited about this part of Digimark because in Europe where I'm based, recycling will be a major piece and we have a lot of legislation also. We're going to have a plastics tax. So there's a big incentive for people to for this to work. And there is an alliance actually in Europe that the Holy Grail Alliance, and they will be rolling this out in France with Digimark at the centerpiece where you're going to have watermarks and recycling centers. Now, where does this fit in AI? As it so happens, digital watermarks can also be applied in generative AI. So there was a very”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“And I'll tell you what, I don't like investing. I'll say exactly the same thing I said two years ago. I don't like investing in non-profitable stocks, but I allow myself a 5% allocation or whatever to buy one non-profitable stock that could multibag. I bought this stock two years ago because I'm a big believer in recycling, as a massive future potential. And what these guys do is Digimark puts digital watermarks around packaging and they work very closely with Walmart. And the watermark basically is invisible and it's like a form of barcode in every piece of the package, which allows you, first of all, to scan it very easily at the checkout. But secondly, to recycle it very well because if you put a detector at your recycling conveyor belt, even if you shred the bloody...”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Messy to play with me and you, no offense. You kind of want to have that connectivity to be fast as well. And that's why optics is going to be a great place to invest in the AI side, because data centers are still growing. The other name that I have, I don't mind mentioning it because it's the first name I mentioned in the first podcast I did two years ago and I haven't sold it, so I'm not going to be accused of pumping. It's a company called Digimark.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, COL. Yeah, I mean, yeah, I own, for example, a coal stock that is a 3 billion market cap and it makes the same amount of free cash flow yield as ARM at 724 million. But ARM is 35 times bigger. So just to give you an example, how mispriced things are. But on the AI side, I'll tell you the two stocks that I have that are decent part of my portfolio is one is semiconductor stock that has a leverage to the optical side because let's put it this way is the king of the data center but how you're going to get that king to work faster is that you need to connect it with optics to make everything faster so one of my themes i invest in ai is actually on the optics side because the optics are going to drive things much much much faster in a data center if it makes sense you know because the gpu became so fast but everything that's connected to the gpu let's put this way it's like putting”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I agree 100%. I think you already see some companies that they're trading badly. I mean, arcs, okay, let's see where arc is, for example. So Arc is like the Bellwether that people should be tracking for Mac Stupid. And ARC is at 48 and the highest was 160. Arc hasn't done anything even since 2022. So that's a good bellwether to keep, you know, not being offensive to Kathy Wood and just saying, you know, her stocks are all unprofitable tech. So that should be the Bellwether to track for Max Stupid. So you can argue actually that the emperors, the Mac VII, the market is being rational driving them to the moon because they're actually making money, whereas Cathy stocks are not making money. And actually, at some point, they're going to run out of money at a time when money is very expensive.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Right. When you said Wall Street wants a piece of that venture capital action, they don't necessarily want to buy it, but they want to make money from underwriting the deals. And maybe for those companies to go public, speculation needs to increase. There's a tremendous appetite now for high quality growth companies such as MAC 7, but for speculative junkie companies, maybe that are some of these BC companies. I don't know if the market's ready for that. I mean, we'll see.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Being made by trading these things in the secondary market. So, for example, if I want to go and buy now a piece of SpaceX at $150 billion, $200 billion valuation, I'm going to pay some broker like an obscene amount of money, maybe 3,000 in fees to get that. So the broker makes a lot more money. Like if I did the same transaction in the public markets, I'd pay a few basis points. So there's a lot of money in the secondary trading and there's a lot of money. People are making a lot of money in the venture capital secondary space. So maybe that's one incentive to just keep it private. So the incentives are building up not to IPO and keep some Mac stupid away from the public markets.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Apart from ARM. So, where are the IPOs? And maybe, just maybe, they don't want to take the marks. Maybe that's why they're not IPOs even. Maybe we need to see the market much higher for them to dump stock because I have certain axioms that I say that Wall Street always finds a way to maximize profits, but also greed always takes over. And my other axiom, which is a classic one now, is like a monkey and his money are soon parted. If there's like money and venture capital that's trapped, Wall Street is going to be like, well, you know what? I want a piece of that. So you will see IPOs at some point if it stays here. To clarify, though, on the private markets, there is also an incentive not to IPO certain of these assets. Incentive number one, mark to market, the most important incentive. I mean, it's a beautiful thing not to have a mark to market on something super volatile with no earnings. The second incentive is that there's a lot of money.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Actually offloaded by venture capital, but they did it, you know, they did a bunch of more deals, and that's still stuck there. And they probably haven't taken the marks properly. And just as a casing point, the post-child of AI, OpenAI, they raised $100 billion. They raised at $100 billion valuation in the private markets. And you have a lot of unicorns still in the private markets that you put them in the public markets today, they wouldn't be trading at a third of where they're trading. So maybe just maybe there's a lot of Max Stupid still in the private markets that's like bagholders from 2021, 2022. And we still haven't seen that hitting the public markets. Maybe the max stupid is when we're going to see all that come in the market because we haven't seen any IPOs yet.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Whatever you put is it's okay. But having said that, let's think about one area where we had this max stupid. So, okay, so then as that we can say, you know what, 10% correction gets you to 20 times on micro. So if Microsoft is on 35 times, say goes down 20%, you're probably going to have a lot of buyers of Microsoft that 25 times earnings. But let's say, but here's one thing that maybe that's the reason why we haven't seen Mac stupid. And this is.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely, absolutely. So you still have it. So actually, if you look at the Nasdaq UPS progression, the Nasdaq EPS is an all-time high, growing. Whereas the EPS of the Russell is actually rolling over. And you can also make an argument that I think Gavin Baker, who's the CIO of a treatise, he said AI is a game of emperors. It's no longer a game of kings. So these companies, what P multiple do you want to put on an emperor? 20 or 30.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Absolutely look, I agree 100%, and let's take the hyperscalers, you know, the MAC seven. Meta, listen to the growth rates. Meta, 25% year on year revenue, top line growth. Microsoft, 18% top line growth. Google, 14%, Amazon 14%, Tesla 3%, Apple 2%. Okay, so as the two outliers. But the hyperscalers were actually growing top line by 20%. And they're on 20, 30 times P. They're expensive, but they're not ridiculous. If the majority of the NASDAQ is expensive but not ridiculous, that's really not how 2000 was. 2000 was kind of stupid. And also let's not even go to 2000. Let's do 2021. I mean, 2021, we saw some real junk. All that junk now, by the way, is now in the Russell.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Be narrative companies going public in 2021. I mean, I'm someone who was way too, you know, I was, I turned skeptical of the mark in 2021 way too early. I admit that. But we're nowhere close to there now. It's legitimate companies that have appreciated rapidly and maybe they're overvalued, but you're not seeing IPOs of any scale.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“2024, 1976 was also an election year. So I think we're going to have a similar environment as 1976 where inflation is still going to be kind of sticky, but the market is going to close up on the year. I don't think we're going to, I think the market will close up on the year. Let's put it this way.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“To the election, and actually I just found out actually it's an interesting chart. Let me just tell you because I see some similarities with the 70s here. So 1974, we had a CPI of 12% in the S&P was down 30%. 2022, we had a CPI of 7%, and the S&P was down 19%. Bear in mind both situations came up from an energy crisis and a stagflationary inflationary environment. Now in 1975, we had a CPI of seven and the S&P was up 32%. And in 2023, we had a CPI of 3% and an S&P of 24%. So there are some parallel images so far. 1976, we had a CPI of 5%, and the S&P was up 19%.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Because there were, you know, I saw some charts of the SP of today overlaid with the S&P of 1929. So I'm going to come out and say that it's just that we're talking about a five to ten percent correction. Because let's not forget, it's an election year. And it's an election year. And to be honest, I think in an election year, they're not going to let things break down. I don't want people to be bared up. I want to be optimistic that AI is like a game changer and we should be excited about a lot of things, but we should also just be aware We should also be cautious. Let's put it this way. Cautious because if you get a five to 10% correction, you kind of want to be able to buy into the run up into the election. So for example, if you take a typical election year, February to March, second half of February to March is actually the weakest part in an election year. So I'm a believer that I want to have chips to buy.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Not saying we're going to have a second wave of inflation, I'm just saying that it's sticky. So that's what's going to impact the market XAI, so the Russells and all that stuff. And on the other hand, the AI market will be impacted by some small disillusionment, realization of cannibalization, whatever you want to call it, all these red flags that maybe just shake it up a bit until we get the second wave upwards with more applications and all that.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Protect yourself one way or another, take some chips off the table. That's how I see it. And also, the reason why I split it between the CPI and the rest is important because the market, there's two markets right now. It's the market XAI and the AI market. So the market, because the guys that invest in AI, they don't really care about the inflation data. Let's be honest about it, right? They just want to buy AI. The market XAI is going to be impacted by inflation being sticky.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“And some stocks like Adobe were hit by 8%. So that's when I was thinking, you know, maybe the market is realizing there is some cannibalization from this. And the way I was picturing it was, well, you're not going to have a co-pilot. You're only going to pay for one co-pilot. You're not going to pay for 10 of them. So maybe there is a saturation with this co-pilot, the co-pilot theme. So it's like having a snaggy thing its own tail in some way. Like it's one profit pool and they're just eating each other, you know, they're cannibalizing each other. Just to be clear, I'm actually a really, really bullish AI and I have in my mid-cap portfolio, I actually have a few spokes that are very, you know, I think could be big winners from AI. But what I'm saying is this is a short-term call whereby you have the max stupid science and you have the red flags. So that's when your alarm bells have to go off and say,”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“The third warning sign I said was Sam Altman raising like 5 to 7 trillion was a warning sign by itself. But then guess who came back? Masa Ponzi san came back. Softbank came back and said, we're going to raise $100 billion for a semiconductor fund. He's like, well, there you go. That's a kind of Mac stupid I wanted to see. I wanted to see Softbank raising another fund for semiconductors. So they're back. And then another one that was a little bit of a trigger was something I called the realization of cannibalization. And then what was that? That was basically when Apple came out and said they have an AI tool that's ready to rival Microsoft's co-pilot. And then when Sora came out from OpenAI, which was this text-to-video program that was so amazing, I mean, the thing is so impressive. But then when these two things happen, you would expect the AI driven stocks to actually go up and they all went down.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, we had a hot inflation reading. And to me, once you get a hot inflation reading, we can talk about Temagochis and all that stuff later. It means that the Fed's job and the Treasury's job, their hands are tied. So that means you're not going to have the easing, they're not going to be able to ease as quickly as before. So that puts a spanner in their works for easing. That's red flag number one. Red flag number two is you had SMCI, the super micro, yeah, it had a gamma squeeze. It had a super micro gamma squeeze whereby the stock ripped and then it just, you know, once it crossed the thousand, because, you know, the monkeys in the market, they love big numbers, they hit the big number and said, hit the big number, stoke goes down to like now it's at 700. So that was when you see the reddit crowd blowing up on these things and you had a lot of reddit people saying, oh my God, SMCI is the best stock in the world. It's trading on 10 times P or whatever. So that kind of, that's when you start worrying about things. So that parabola broke. So that's a warning sign.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“The new God of Stocks had a stake in them. But in reality, like I was looking at the stocks, I was like, damn, I knew that NVIDIA had the stakes. It was public information for the last few years. But I don't know if it's the algos that picked it up or people that really just didn't pay any attention. But these stocks were at 50%. So then after all these max stupid things, we started seeing some red flags picking up. When I started observing all these max stupid things and we put them all together, we also started seeing red flags afterwards, which is what made me feel comfortable that we're getting pretty close to something. The first red flag we had was we had a halt CPI.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Like, yeah, I mean, okay, money has no purpose. Money has no value anymore. Then we had Lyft. They misreported their margin guidance by 10x in the post-market. The stock went up 65%. Then they said, oh, we're sorry. And then the stock was still up 20%. Then we had the UBS's media analyst. He came out and said, oh, the lead times for NVIDIA chips are dropping from 11 months to three months. But we think it's really bullish. It's like, no, it's never bullish. I've been doing Comoris all my life. When lead times come down this much, it's never bullish. Then you had Besil selling billions. And then my favorite one, well, actually, I have a lot of favorite ones. So then we had a bunch of NVIDIA cubs whereby NVIDIA filed a 13F or something and it showed the stakes in the companies that it owns. And the companies jumped 50% of the news that Nvidia, you know, the new.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“He did better than me. Okay, so let's be honest about this. But I remember that this guy in January 2022, he was cutting my hair and he was telling me about Shopify. So I was like, super nice guy, but he was always like telling me about tech in 2022 and then this time before he didn't tell me. So I was like, okay, that's triggered. That's when I started thinking about the Max Stupid. So here's the things that happened since I was starting to observe the Max Stupid things. We had a big short squeeze in ARM, which I think was the beginning of the end in some way because ARM was a kind of like a semi-orchestrated short squeeze because it was a low-flowed IPO by SoftBank. Then, like I said, I wanted to see SoftBank raising another vision fund. And what happened? Sam Altman comes and says, I want to raise $5 to $7 trillion for change in the semiconductor industry. And then the guy tweets as well, why not eight?”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, soft bank. Yeah. I want to see him in the news raising $100 billion. I want to see arc-like stocks going through the roof. And I want to see really, really stupid things. That's what I wanted to see to call the top. And as soon as I wrote that piece, I started seeing all these stupid things happening. So I'm just going to go through them with you because it's important to understand the reason why I do this is because I want to understand the zeitgeist and I understand how people feel. And I want to get the sentiment because once I get the sentiment right, I know when I can almost go against it because it's reached Max stupid. Because when it's Max Stupid, it's when everyone is in it. So to give you an idea, last week, this is a true story. I was talking with my barber. He's like, you must be having a great time, he said. And I was like, well, it's okay. The market's flying.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, absolutely. So I joke around that the market is run by monkeys. I'm one of them, to be honest, quite often. But I say it's run by monkeys in a nice and polite way because in reality, people in hedge funds are the smartest people I've met in my life, but we're forced to play a game that might be stupid. So I want to be observing. I'm observing what the game is and how it plays out. About a week ago when I was just thinking through about AI and the market and whether the market topped out, I was like, you know what? What we're missing from this market is we're missing the max. Like I want to call it top, but I can't because I want to see Max stupid. And I want to see what we saw in 2021. I want to see like Masa Chosi. I mean, I don't know if I should call him with his pet name, Masa Ponzison.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Small caps have that issue of if they were such a great company, they would be in the SP 500, although some of them started out as a tiny company, so now they've grown into small caps. And I also think that the deal quality was so low in 2021 in particular. I just look up today, there were over 1,000 IPOs in 2021. Over half of those were spac, but still you're talking about a thousand companies going public or close to it. And there were some really low quality companies and a lot of those are in the Russell now.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“It almost can't win because if it finds the next NVIDIA, say the SMCI is the next NVIDIA, it's not going to stay in the Russell. That's what makes the Russell a better hedge than going against the AI wave of the Nasdaq because we're really in the first wave of AI, you don't really want to be sure the Nasdaq, but it would have a CRE crisis and the spreads blow up. Well, you kind of want to be short the Russell. Just to make a caveat, everything I discuss is about my personal book. My book is actually a third is mid-caps. Like I focus on mid-caps. So for me, it suits me. Like if someone owns, if someone's portfolio is passive index long Nasdaq, it's like there's no point putting a Russell short, for example. You know, it's kind of have to be a little bit tailor-made as to what you own. Owning midcaps is a bit like Mazdochistic tendency in some way. But, you know, that's what I do and that's the corner that I feel.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Correct. So generally, I think it's a very bad idea to short an index like Nasdaq, for example, which has the best companies in the world. Even if you go down the, you know, I know people are quite bearish in some of the big caps, but in reality, these are making a lot of money and they're dominating a lot of parts of our life. The Russell, the reason why I mention it, why it's a bit different is that there was this correlation with the credit spreads and it suits And if you look at the components, they're actually pretty bad companies in reality. And even you have an SMCI. So SMCI, I say it's a great company game changer. It's a few percent of the index. And guess what's going to happen to it, I think, in one month. I think in one month it's going to transition to the S&P. So basically you had one good company. You're going to take it out of the Russell and you're going to be left with the other pile of crap. That's why the Russell is like.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“For that shrub, and I guess shorting an investment grade spread, the way to do that by yourself would be to short a basket of investment grade bonds and then go long treasuries with a similar duration on top of that, but that would consume a lot of balance sheets. So I assume if you're an institutional investor, you can basically get a bank to do that trade for you and they would charge you a little bit for it. For retail investors and non-institutional investors, that's a lot harder. So that's why you mentioned a similar thing on the Russell 2000, which is a basket of small cap stocks, which has unlike the S&P 500 dominated by Magnificent 7, Nvidia, and the like, is not at an all-time high or close to an all-time high. Tell me about that shrub, about a trade of seeking out a hedge of shorting an index, because I feel like if you're long individual securities and then you're short an index that is composed of a ton of individual securities, the only way it works out is if you're right that the stocks that you own are better than the index. If you're not a good stock picker.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Looking at NYCB, I was like, okay, this is the realization that we have to do that these problems are still here. We have to be aware of them. And this is, you know, they're going to take some time. I don't think we're anywhere near a 2008 scenario, by the way, just to be clear, because the banks are like starting with my original example of RBS. RBS had 1% equity to assets. Now the banks are really well capitalized. So we're talking about they're going to take a few hundred billion of write downs down the line, sure. Okay, fine. But it's not the end of the world for the banking system. It's more going to be like concentrated for a few regionals and a few multifamily CLOs and CLOs will take the hit, maybe some private vehicles will take hit. I don't think it's anywhere near the 2008 scenario. But if there is a sprinkle of a 2008 scenario, then the credit spreads will go much higher than 100 basis points. That's my point.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“The retail and the hedge funds are now very monthly focused, they forget and they move on to the next thing. And I think they forget that sometimes it takes a while for things to show up. So for example, it takes several years for asset quality problems in the commercial real estate market to deteriorate and to show. I went back to see how delinquencies played out in 2007, for example. And they only jumped to 30% by 2009. So think about that. It took two years, but actually if you were waiting for delinquencies to jump, you blew up because delinquencies were still low in 2008. The whole point was to actually realize that's the trend. This is what's happening. That's the hits that are going to be taken. And you kind of like front load the hits.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Because that's the beauty about the platform that we have with Twitter, with the podcast. We actually learned from a lot of people. And I don't think people are going to learn much from me, but I think I can laugh a little bit. So anyway, so go back to the CRE, the commercial real estate. It seems like people forget we had a crisis last year with Silicon Valley, Signature and all that stuff. And then this year, everyone forgot about it for various reasons. Our policymakers made it, provided a cushion, which was the right thing to do. But then you come to this year and it's like the zombies are out of the closet and the new signature bank is the old signature bank. So NYCB bought the signature bank assets and suddenly the crisis came back to haunt them. And then we had some multifamily issues as well. This is unfinished business from 2023. People, because the memory cycle of this current market is very short for various reasons is driven by”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Triple B's are like 135 basis points. The lawyers was at 100, but even high yield was like 375. This can easily go to 600 plus 1,000. Because, you know, just one point actually on this, because people see this tight spreads and they get confused. It's like, oh, everything is great, but let's go to the CRE example. So the CRE example.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“And the number two component is a micro strategy. So you have two micros. You have the super micro and the micro strategy carrying the russell and actually breaking down this correlation with credit spreads. But actually if you look further down the russell, 30% of the companies, they posted net losses in the last 12 months. So if you want to express this credit spreads blowing up trade in a more simple way, you can buy a put spread on the Russell, be done with it. So for example, in my case, because I have my portfolio has a model of mid-caps, it's more sensible for me to have a Russian.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“If you want to, going back to the AAAB example, 134 bits, you can short that, set it up properly. You short it, your downside is like 34 bits down to 100 to the lowest ever. But actually, if there is a CRE crisis, a banking crisis, a recession, that 134 is going to be 300 and you make a lot of money. It could be 500. That's the whole beauty of the trade. The whole beauty of the trade was that you set it up in a way that if it blows up, you make a lot of money. Now, there's a really tough trade to do unless you're an institutional investor. But I found something that was kind of interesting in a way. I plotted the Russell versus the credit spreads and there was actually a really, really strong correlation. That broke down the last few months. And I think it's because the Russell, the number one component in the Russell is SMCI, Super Micro.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“I mean, a less dumb way would be, for example, let me give you one trade that I was looking at that in my current setup is very difficult to do, but for someone who's a more sophisticated setup, this is the right way to do it. What is super tight right now? It's not people focus on duration, right? Like, oh, the 10 years should be at five or six or three or two. I say, who cares? The important thing to know here is the credit spreads. So the credit spreads now actually could offer a proper asymmetric trade with a very low downside risk. So the AAA BB versus the 10-year US Treasury is now at 134 basis points. In 2023, it was at 200. So the lowest ever was like 100 bips. Similarly, the high yield index, the Bartis high yield index versus the 10 years now 375 bip. And in March 2023 was 560. So basically”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“And we were funding this trade. So when the time came for the trade to work, we were actually up already on everything else. And we could carry this trade with us. Whereas I see the mistake that a lot of people are doing now is like they don't have that yield to fund their trade in some way. You know, like someone who's just shortened videos like, okay, dude, are you funding your shortened video, for example? I'm not saying that. I've never shortened video in my life. I'm just giving that as an example. It's like on one side you have a smart trade with no, you know what your downside is on the other side. You actually have a really stupid trade with unlimited downside. So that's the point I always try to get across. You know, structure your trade in a way that doesn't blow you up and actually in a way your portfolio in a way that actually makes you money. That's it.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“The trade was structured was in a way that you wouldn't lose money. So you would lose like one to make whatever. We had a portfolio that was yielding, say, we were making 10 to 20 percent a year on the special sit side and we were spending a little bit of premium to fund this trade. And this is a very important point that is I always try to make this point across to people because I see a lot of people on Twitter especially because I interact a lot with retail investors but also with hedge funds you know they're like oh I'm super bearish I'm super bullish it's like okay how are you expressing it oh you know I'm short NV It's like well no, that's kind of like a stupid bet. And also going back to the suffering crisis, I remember very well there were people shorting subprime in 2004. They blew up. 2005, they blew up. We started shorting it at 2006. And the whole point was that we were making money at everything else.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Knowledge that we didn't have back then, it's like, well, hold on, how can you have a bank with a 1% equity to assets? What if your assets only have to go down by 1% and the equity is wiped out? And in the end, what happened is, you know, that equity was wiped out five, six times. Something like that started from a special situation, actually, because back then they had bought ABN Amro. So when they bought ABN Amro, they actually didn't know what they were buying. They just bought a bunch of stuff, put on the balance sheet. didn't market properly, didn't understand what they were buying. And their equity was wiped out four or five times afterwards. So the first thing to take out of 2008 was, you know, we didn't have the burden of knowledge. But then the second thing is our portfolio manager and the person that was helping him was actually a genius in how they structured the trade and the way the trade was structured was his motto was always and that gives away who is but you know his motto was watch the downside and the upside will take care of itself and the way”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“A blank sheet of paper, and that kind of helps you get some clear perspective and you don't have the burden of knowledge almost. And the burden of knowledge is something that I've carried with me since in many situations. But back then, it was like very, very simple. I mean, just to give you an example, I remember analyzing Royal Back of Scotland back then, RBS, and they had a couple of trillion of assets on the balance sheet. And they had 25 billion of tangible equity. So it was like 1% tangible equity to assets. And you would call them up and they would tell you about the income statement. And then you would ask them about the balance sheet and you'd be like, they'd be like, no one asked us about the balance sheet. You know, I remember specifically also Deutsche Bank had an item on their balance sheet called other, and that was a 400 billion item. I remember asking the IR, what's in there? I was like, well, I don't know. I have to get back to you. So that's the thing about the burden of.”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT
“Different times. So, my career started in event driven investing, and I'm still an event driven investor at heart. Macro for me is like a sideshow or like you want to sprinkle or like a framework, but in reality, what we're trying to achieve is like make money from event-driven situations, special situations. And to be honest, everything is a special situation. The subprime crisis was a special situation. The CRE crisis today is a smaller special situation. Back then, I used to work at one of the hedge funds that was involved in the big short, one of the most famous guys that did extremely well out of it. I was a junior in doing special sits, and it was an amazing period at that time to learn. And one of the benefits, I think our fund had, and me personally as well, is that we weren't banks analyst or CDS specialists. So we just saw something from”
2024-02-26 · Forward Guidance · Overheated Stock Market To Correct Before Continuing Rally | Le Shrub on Le Shrub on AI, CRE, and China · IDENTIFIED FROM THE TRANSCRIPT