Latest / TFTC: A Bitcoin Podcast / #734: The Generational Wealth Heist with Nick Nemeth

Transcript

#734: The Generational Wealth Heist with Nick Nemeth · TFTC: A Bitcoin Podcast

• 0:00
  You've had a dynamic where money has become freer than free.
• 0:10
  We talk about a Fed just gone nuts.
• 0:13
  All the central banks going nuts.
• 0:16
  So it's all acting like safe haven.
• 0:18
  I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins.
• 0:25
  In the world of fiat currencies, Bitcoin is the victor.
• 0:28
  I mean, that's part of the bull case for Bitcoin.
• 0:31
  If you're not paying attention, you probably should be.
• 0:36
  McNameth, welcome to the show, sir.
• 0:38
  Thanks for having me on.
• 0:40
  Well, I'm pumped to have you on, like I was telling you.
• 0:43
  I love your energy.
• 0:45
  Binge your YouTube channel last night.
• 0:47
  Read one of your recent articles.
• 0:50
  And I think we should just jump into it.
• 0:52
  So you've been saying that 29 of the top 30 life insurance companies in America are technically insolvent if you strip out one accounting trick.
• 1:01
  So that means if you're out there, you're listening, you have a life insurance policy, an annuity, a pension, the money backing that claim might not actually exist.
• 1:09
  And I think just starting off there, how did you back into this claim?
• 1:13
  So the private credit or everyone's talking about,
• 1:18
  Bloomberg, Wall Street Journal quickly, quickly realized
• 1:21
  Athene is a big part of this.
• 1:24
  We kind of all knew that.
• 1:25
  So I'm looking into, wait a minute, how much is this actually levered?
• 1:30
  And they say in their consolidated equity, it's only
• 1:34
  they say if $13 billion of equity, they say it's
• 1:39
  my assets,
• 1:41
  I don't know, 20
• 1:43
  times levered, 24 times levered. But you're trusting Bermuda hold codes and you're trusting
• 1:50
  Bermuda courts. In reality, of what we control, it's 69 times levered. So I started diving into
• 1:57
  this. And then all of a sudden, Tom, forensic accountant, went on the Eisenman podcast.
• 2:05
  And I was like, holy shit, this is worse than I thought. So it took a fire and made it into an
• 2:11
  Inferno. And I start just really diving in because I got business. I got a bunch of stuff.
• 2:17
  And I'm like, okay, I'm going to focus on this. Make sure this gets out.
• 2:21
  Then Tom started saying, hey, I really appreciated what you wrote up in the letter to Johnson.
• 2:29
  And it's actually so much worse than he thought. And at that point, I was like, no, I can't do any
• 2:35
  worse. I can't do any worse, but we we've been diving into it and people have got to understand,
• 2:42
  uh, look up Tom. Um, uh, what's his Twitter? I don't think he has a Twitter.
• 2:51
  Last name's Gober though. G O B E R. Yeah. Yeah. Uh, Tom, Tom Gober, you can look him up online.
• 2:56
  He's got, um, journalists, uh, that have covered him, but journalists write everything like super
• 3:03
  Mel Potosti, you know, and I'm, I'm a sub stack author. I got no sponsor. I'm like, ah, this is
• 3:11
  driving me insane. I'm going to say exactly how I feel about it and then actually tone it down
• 3:16
  because what I really want to say, um, would probably get me sued. Well, I mean, I think to,
• 3:24
  uh, to like paint the clear picture for anybody listening out there. I mean, so I, I caught that
• 3:31
  episode between Steve Eisman and Tom Gober. So Tom Gober, as you mentioned, forensic accountant
• 3:37
  out of Mississippi. He's been cited many times, been part of FBI trials, doing forensic accountant,
• 3:44
  uncovering fraud. He was on Steve Eisman's podcast, Steve Eisman, the guy from
• 3:49
  The Great Financial Crisis. Steve Carell played him in the big short.
• 3:54
  And the thing that caught my attention in that episode and something that you've
• 3:58
  been saying what you alluded to in the open is that everybody's focused on private credit,
• 4:03
  looking at what's happening with Blue Owl, all these different funds, basically gating
• 4:08
  redemptions. And they're saying, oh, this is the big problem. But I think what Tom and Steve
• 4:15
  discuss and how you describe it is private credit is just the fuse. The big bomb
• 4:19
  is the insurance underlying it. And what Tom really highlighted on the Eisman podcast,
• 4:24
  and what you've been writing about is a lot of these private equity companies have acquired life
• 4:29
  insurance companies basically trying to replicate the warren buffett style of investing and they've
• 4:35
  been rolling a lot of those premiums into relatively risky illiquid investments that
• 4:41
  have put those policies in a bad position is that a correct characterization right that's a great
• 4:48
  start you know they took the warren buffett playbook makes sense you get an insurance balance
• 4:53
  sheet and you start taking a little bit of risk, you cannot get outsized returns. It can work well
• 4:57
  for policyholders and shareholders, Warren Buffett himself. Everyone's happy. They took the Warren
• 5:03
  Buffett playbook and said, let's make it evil. And so how did this happen? Because, and I think
• 5:11
  another important detail to mention, which you've covered at length is really the reason that I
• 5:18
  think you feel confident in your analysis and why Tom felt comfortable coming forward on Steve
• 5:24
  Eisman's podcast is because there was a mistake made in terms of disclosure of a shell company's
• 5:32
  financials by Brookfield, which is a large private equity company. Right. And, you know,
• 5:39
  anytime any of that has ever been gone into the courts, it takes a while for anyone to go into
• 5:46
  the courts about things, it's been found to be fraud. So they're creating an asset, an XOL asset.
• 5:53
  You could think of it as a put, right? A put against your assets because just to overview,
• 5:59
  annuity in life, their biggest risk is their balance sheet. They know the liabilities they're
• 6:04
  going to have to pay out. They do some crazy actuary math to make it look like it's less
• 6:08
  because they say people won't pay. They have huge assumptions built into the IRR.
• 6:14
  So they have a small reserve. I'm looking at Hanover Reinsurance. It's $60 billion against $1.1 trillion. So I don't know what their math is, but if it was a 30-year duration with no runoff, that's a 10% CAGR, a little bit over a 10% CAGR.
• 6:35
  So then you say, okay, we'll take some runoff or, you know, but, but the, the idea, it expands significantly. So I have a problem with it to begin with, and I want to question the actuary math.
• 6:50
  But then we look at Brooksfield that acquires this insurance company, puts an asset saying, this is the value of our put, and it's not the premium that they paid. It is the entire value of the contract.
• 7:03
  Right. So then Hanover is supposedly selling a naked put, not a cash secured put, but something that they put a little bit of reserve, a little bit of a margin requirement.
• 7:16
  They don't have all the money.
• 7:17
  When you look at what Brookfield through AEL, American Equity has done is they've actually made the strike of that put below zero because zero is when it goes into receivership.
• 7:34
  And the way we know that is because they posted it.
• 7:37
  They weren't supposed to.
• 7:38
  Their tech team, journalists have covered this, made a mistake.
• 7:43
  They didn't know that once you get a captive insurance, it's this gimmick. You don't need to talk about it anymore. There's a reason why that was legitimate to begin with. Reinsurance in general, the overarching view of it, spreading out risk is reasonable as a first principle.
• 8:03
  But then you go to Hanover, they have zero reserve, they expect to pay zero. So matching that,
• 8:12
  as Tom Gobert did, he found that this one contract is clearly invalid. That would take
• 8:20
  AEL one into negative equity by lots. We'd go from 75 million positive to 1.3 billion negative.
• 8:32
  There's three of those. And that is a window into what is happening in this reinsurance space so that they can book assets so they're not insolvent, take more risk. And it's a really dangerous thing, even more so because seven companies are backing up the 680.
• 8:57
  So reinsurance really is, again, you take risk and you're supposed to spread it out, but they're concentrating it in these seven companies.
• 9:06
  And over is only the third largest.
• 9:08
  mm-hmm and so taking a step back and trying to like really paint the picture for anybody who's
• 9:15
  not well versed on the interplay between just insurance companies reinsurance companies and
• 9:22
  then adding the private equity players to the equation and then on top of that these captive
• 9:28
  entities um and so just sort of defining the entity actors in this uh fraud as i i think um
• 9:40
  there are some of these instances may be fraud i think uh tom felt comfortable saying if you ever
• 9:46
  see something like this most likely is fraud but just for people who are hearing us say brooksfield
• 9:52
  Hanover, AEL, like how are these entities related and how do they play with each other?
• 9:59
  So Brookfield is a trillion dollar Canadian asset manager that tried to do a dance to get into the
• 10:05
  S&P 500 so they would get passive money. S&P said no, but they are an alternative asset manager.
• 10:12
  They do private equity. They do infrastructure, private equity. They have a huge section of
• 10:18
  infrastructure, which is probably their best business besides the green stuff, then they have
• 10:24
  private credit as well that they've been pushing into. They've recent also a lot of CRE and they
• 10:30
  keep on walking away from CRE deals. And that's, sorry, excuse me, commercial real estate. I hate
• 10:36
  using the acronyms and people are like, well, what is it? I hate that you have to learn it.
• 10:41
  And then all of a sudden you start using them and it's really obnoxious. Um, so the commercial
• 10:48
  real estate office space. So they have this massive balance sheet, trillion dollars,
• 10:55
  but they want more. All of these guys want more and more. So they'll buy an insurer that has a
• 11:02
  balance sheet and they immediately become the asset manager. Then they strip the insurance
• 11:07
  company as much as they can in order to maximize returns in every single which way.
• 11:14
  and really, you know, these guys are buying wealth advisor, like however they can get assets,
• 11:21
  they will get assets. And when it comes to the insurance company becoming their,
• 11:28
  their asset manager, essentially they'll buy an insurance company, an insurance company,
• 11:34
  just in its day-to-day operations, they have to match liabilities, long-term duration
• 11:39
  sort of products, whether it's fixed income, equities, whatever it may be.
• 11:45
  And they're buying the insurer saying, all right, your asset management strategy that you've had up
• 11:48
  to this point is done. We're going to take over. And then that, I would imagine, introduces some
• 11:55
  perverse incentives, moral hazard, where they're then able to push those funds that need to be
• 12:02
  managed into products that they already control. For sure. Yeah. They immediately become the asset
• 12:08
  manager, they immediately get the management fee. The management fee very quickly pays for
• 12:13
  the entire purchase. Obviously, the treasuries and investment grade corporate bonds and the
• 12:21
  mortgages that they used to be into, they don't get paid for that. So they start pushing them into
• 12:27
  private debt. And this is where things get hairy. Because at the end of the day,
• 12:38
  the pensioner, the individual couple buying whole life insurance policy or an annuity
• 12:44
  are none the wiser.
• 12:47
  You have people paying premiums on life insurance policies, on annuity policies, expecting that
• 12:53
  when they get to retire or, God forbid, pass away, that they'll be paid out in whole.
• 12:58
  But the way that this scheme has been devised and architected, it's becoming clear, going
• 13:04
  back to brooksfield's um fumble by showing the um the uh balance sheet of the uh i keep forgetting
• 13:12
  the name the uh the entity that they control the sub entity a american equity american equity um
• 13:20
  basically zeroed out and they were sending the assets on their balance sheet to a reinsurer
• 13:25
  or we're doing an XOL purchase with a reinsurer, basically saying we're diversifying our risk.
• 13:34
  And they're positioning it as a hedge on some of their other investments.
• 13:39
  But Hanover, basically, if you look at their balance sheet, it says they don't expect to pay anything back.
• 13:45
  Hanover has $775 million of capital in their U.S. entity.
• 13:51
  then they have, you know, it's a German reinsurer, but the German reinsure, we were only
• 13:58
  talking about the U S entity. We have no idea how much reinsurance they're doing in Europe.
• 14:04
  They're also big in shipping during the Iran war. Like these guys are just, you know, saying,
• 14:10
  Oh, we got all you guys. Don't worry about it. Don't worry about it. Meanwhile, you look at
• 14:14
  their balance sheet. And even if one of these contracts go under the 231 companies that they're
• 14:21
  supposedly backstopping go under. So no matter which way you look at this, there's so many ways
• 14:28
  for it to break that me as a guy that thinks the stock market goes up over time is really bullish
• 14:36
  on AI. I'm like, this is a bomb. We are lucky if the hole is just a trillion dollars, right?
• 14:50
  because there's more components that we'll get into, but you know, it's, it's scary. And, and,
• 14:56
  and, you know, I'm, I'm coming on here and I'm like, how do I communicate this effectively?
• 15:01
  You've seen me on YouTube. I'm like either just ranting and raving, or I go on, you know,
• 15:07
  Josh Brown's podcast and people are like, this guy's too expressive. And I'm like,
• 15:11
  how do I be expressive and serious at the same time? So people actually listen to me. I'm trying
• 15:16
  of think of the communication, you know, I'm writing furiously, I'm using, you know, throwing
• 15:23
  out these Excel spreadsheets and sending it to whoever's email I can think of, because it just
• 15:30
  takes a modicum of understanding before you go, well, this kid might be crazy, but I think we
• 15:38
  should probably look into this and the amount of complacency built up because, you know, the Fed
• 15:44
  always bails us out. It's like the annuity and life balance sheet is bigger than the Federal
• 15:50
  Reserves. Okay. That bailout is not something you just do like Silicon Valley bank and the world
• 15:58
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  20% off your order. That's BitKey.World, code TFTC20. It's massive. And I think, again, like I said,
• 17:59
  having consumed a ton of your content, both written in the YouTube videos that you've made
• 18:05
  over the last couple of weeks. I think pulling this out of you, let's highlight where the smoke
• 18:11
  is. Again, Brooksfield releasing that balance sheet of that captive entity, smoking gun number
• 18:18
  one. Regulators come into it, state regulators come into it. This is where Tom's bread and butter
• 18:23
  is, is working at the state level to do forensic accountants. There's something going on in Vermont
• 18:27
  in terms of what they're allowing these private equity funds to do
• 18:30
  in terms of the leverage they're taking within these insurance companies.
• 18:35
  And then I think the other area where smoke can be arising
• 18:39
  is the fact that you have these offshore entities,
• 18:41
  particularly in the Caymans and Bermuda.
• 18:44
  It's a lot of black box, and then there's also this legal wall
• 18:48
  between those entities in the U.S.
• 18:52
  Right. So it's sort of like a spider web.
• 18:57
  There's the captive insurers that are supposed to be invisible.
• 19:03
  Why are they supposed to be invisible?
• 19:05
  Because someone in Vermont said that it's supposed to be invisible even to subpoena.
• 19:10
  That is really I just want to pause for a second If there a court subpoena they don have to turn it over According to Vermont federal rules say that not allowed Vermont says you know what You can do it
• 19:25
  So every other commissioner, you know, there's a couple, a few states that do that, do that.
• 19:30
  But let's say of all provinces, there's 53 commissioners that are silent while other states do this.
• 19:35
  That is a huge, huge issue.
• 19:39
  If you just opened up that black box, I think it would all be over.
• 19:43
  Right.
• 19:44
  So maybe that's the angle that this all becomes unveiled. The captive insurer in Vermont then is going to find one of these seven reinsurers. But at the same time, you have Apollo going straight to Athene in offshore in the Bermudas.
• 20:04
  So then this all ends up offshore where supposedly there's $2 trillion back stopping everything.
• 20:10
  And what you see is every single thing we see, there's not enough capital to back this up.
• 20:17
  And then we're just supposed to trust when it's invisible in Bermuda that it's all there.
• 20:24
  And that's where it gets really scary because that's not under our jurisdiction.
• 20:30
  We are trusting the Bermuda and Bermudese courts to protect Americans while they get paid and their economy booms from all the premiums that are sent there.
• 20:46
  So, you know, there's there's also the angle of it once it goes there and it could be sent elsewhere, then it could be sent right back to the US.
• 20:54
  So it's a giant chain of people selling naked options, naked puts.
• 21:02
  And then once they buy the put, they'll put the full value of the put.
• 21:09
  And the premium goes.
• 21:10
  The next person will sell the premium, put the whole value of the put.
• 21:17
  And it's a chain where once we go to the end, I'm very confident saying it's going to be worse than TARP, which was $450 billion at the end of the day.
• 21:29
  Yeah.
• 21:30
  And so people are basically rehypothecating assets and marking them on their own balance sheets.
• 21:35
  It's like we've seen this before, right?
• 21:37
  Everyone's saying, oh, but this is different because it's not central to the collateralization and there's not CDO squared.
• 21:44
  And it's like, we might be talking in slightly different vehicles and slightly different
• 21:49
  mechanisms.
• 21:50
  The idea is exactly the same.
• 21:53
  The Dodd-Frank only took it out of the banking system.
• 21:56
  But if you have a credit event, that's going to end up affecting the banks, but it's not
• 22:01
  going to be primary, right?
• 22:03
  You're going to see all of these credit places as people look for liquidity.
• 22:08
  There's a lot of leverage built into the system.
• 22:10
  It's all going to come down with a bigger hole than the global financial crisis.
• 22:15
  And when that all happens, you know, I've heard really smart people say, like, listen, the deficit is $2 trillion.
• 22:26
  You know, $500 billion is one quarter of deficit.
• 22:28
  We can cover it.
• 22:29
  It's no big deal.
• 22:30
  But this is all built on trust.
• 22:33
  Right.
• 22:34
  The entire system is built on trust.
• 22:36
  We have treasuries that are rehypothecated that the Saudis are using to lever up into our equities through hedge funds.
• 22:45
  We have mortgages.
• 22:47
  The mortgages are still rehypothecated.
• 22:50
  We have ABLs.
• 22:51
  A lot of that is subprime loans.
• 22:53
  That's the scariest part there.
• 22:56
  We have commercial reels.
• 22:57
  All of this debt is based on an M2 of $22 trillion.
• 23:02
  dollars, but supposedly out there, we have $1,500 trillion of wealth. So people are doing the wrong
• 23:11
  math. They're like, the deficit is this. And that's just the hose. But it's not adequate to only...
• 23:21
  If you lose trust in a $1,500 trillion system, there's nothing the Fed can do.
• 23:26
  And that's where it gets really scary. Yeah. And again,
• 23:32
  I don't even think we have to go as far as to highlight and not say we're speculate,
• 23:36
  but I think the low-hanging fruit, thinking from first principles, understanding why this
• 23:45
  could end badly, just getting back to what is the collateral, what is underlying the
• 23:49
  potential payouts of these insurance policies if they're ever claimed in the future.
• 23:55
  And again, if you're a private equity company acquiring an insurer, becoming its asset manager,
• 24:00
  and then pumping it into relatively illiquid private equity deals,
• 24:05
  whether that's in commercial real estate or tech,
• 24:07
  it's becoming abundantly clear that both those sectors specifically are under stress.
• 24:12
  And the idea that the assets being held on the balance sheets of these insurers,
• 24:18
  if they're in these private credit or private equity vehicles,
• 24:23
  are going to be the cash flow, the fixed income of those collateral assets
• 24:30
  that are there to pay off payouts in the future when people claim their policies.
• 24:37
  That seems very obvious to me that that can be impaired right now.
• 24:41
  Yeah.
• 24:41
  Without any rehypocratification or anything.
• 24:44
  Right.
• 24:45
  I just mean to do that so that people don't just like write it off as like, you know,
• 24:50
  old news.
• 24:51
  It needs to be put in perspective of the entire system when it comes to what the trigger is.
• 24:57
  it's private credit, right? And the insurance companies will say, well, we only have 10%
• 25:03
  or 8% or Athene will say 15% exposure to this private debt. But the thing is that that is
• 25:12
  for Athene, you know, they have $4 billion of capital that is in reserve. So it's not,
• 25:22
  when you have assets and you have liability, the difference, you know, in accounting sense
• 25:25
  is equity or capital surplus. The percentage of private debt to completely wipe out the capital
• 25:34
  surplus, I mean, just on the average and some are way worse, as you can imagine, private equity guys
• 25:41
  have the incentive to do that. It's 8% versus 6.5%. And obviously, I don't know if people,
• 25:51
  your listeners understand what happened with Silicon Valley Bank.
• 25:58
  But these guys definitely have duration in treasuries and mortgages that they never
• 26:04
  acknowledged because they just hold to maturity. And they think that it's all fine because these
• 26:11
  are long duration assets. But once this starts being paid attention to, you're going to see people
• 26:17
  surrender their annuity, get their money back. So that could be, you know, everything's going
• 26:25
  to happen at the same time. You're going to have the assets need to go down. They will be forced
• 26:30
  to go down. Then people are going to get scared because they bought into security for their family
• 26:36
  and themselves in retirement. And they're going to get their money back. They're going to be like,
• 26:40
  I don't need that four and a half, 5% yield. I need the money. Right. And at the same time,
• 26:47
  because of the assets going down, you're going to have downgrades. And when you have a downgrade,
• 26:54
  your BBB rated stuff that everyone says that they have has $1.40 in reserve for every $100.
• 27:05
  That is, you can go 70 times levered on that, right? And BBB in private debt is what single
• 27:14
  be would be in the public markets. It wouldn't be investment grade, but they call it investment
• 27:21
  grade because they have these rating agencies that they just pay money to do that. So once
• 27:27
  that downgrade happens, you're going to see the regulators say, you need to post $5, $10, $15
• 27:34
  billion of capital, which they don't have. All of this is going to happen at the same time.
• 27:40
  People are going to get scared.
• 27:41
  Credit events don't happen in a silo.
• 27:44
  So then you're because we're not being proactive when because we're never proactive.
• 27:51
  The damage is going to be worse.
• 27:53
  So that's why I'm saying bring some attention.
• 27:58
  Regulators, what are you doing?
• 28:00
  Yeah.
• 28:01
  And there's there's another thing here, too, that I think it's important to touch on, explain to people, which is how a lot of these assets are marked.
• 28:08
  right it's not like they're they're not in public vehicles and so there's not quarterly
• 28:14
  filing requirements there's there's you're not being marked to market by people trading
• 28:20
  your um your securities on on um on a free-floating book uh the sort of managers of these private
• 28:29
  equity funds private credit funds get to mark their their investments pretty liberally
• 28:34
  yeah i mean in some cases there's literally a public market price and they just choose not to
• 28:42
  use it like you know the idea that this is all marked to model um because there's no market price
• 28:50
  sometimes they choose to ignore the market price and say nope my excel excel spreadsheet
• 28:56
  She says 99.7 cents.
• 28:59
  But what's an example of this?
• 29:02
  In Cliffwater, I found a few.
• 29:07
  Especially the broadly syndicated loans where you might have a public company in there.
• 29:14
  Right.
• 29:14
  So Blackstone does some broadly syndicated stuff.
• 29:17
  Dropbox.
• 29:18
  I think Dropbox is probably one of the better software companies in the public markets.
• 29:22
  But when they loan to Dropbox, you can see the Dropbox bonds trade pretty liquid.
• 29:30
  And yet they're not marking them down on par with that.
• 29:35
  So there's, I mean, we're talking about 400 businesses in B-Cred.
• 29:39
  We're talking about 2,700 little slices.
• 29:44
  And it's not so little slices, but in Cliffwater, CCLFX.
• 29:48
  but generally speaking, off the top of my head, there's this sleep doctor URL and Cliffwater's
• 29:59
  one of their loans. And Cliffwater marks 93% of their buck on par or within a cent of par.
• 30:08
  And I look at this one and I'm like, hmm, Cliffwater, you actually marked this one at 42
• 30:13
  cents. But then I'm taking Claude and I'm running five years of annual reports through,
• 30:19
  and I'm mapping out the price changes for any of these bonds. And of course, most of them are
• 30:23
  pinned towards par. This one goes down to 35 cents and up to 42 cents. And obviously I have
• 30:31
  to look into it. So I'm like, what is sleep doctor URL? Give me all the information you got on it,
• 30:37
  clod. And it is something that is completely eliminated by Google search. Just on Cliff
• 30:46
  Water's book, and remember, these are syndicated. Cliff Water doesn't own 100% of any bond,
• 30:50
  but there was $100 million of debt on this, on a URL, on a website that sent you... By the way,
• 30:57
  you need sleep number, you need magic mattress factory. There's no way that's worth 42 cents of
• 31:05
  whatever $400 million in debt that there was on it. So they actually marked it up from 35 to 42.
• 31:11
  And I'm like, this might be worth... This is probably worth zero after all the court costs.
• 31:18
  And I'm just like, oh my God. Okay. We always hear there's going to be some defaults. Of course,
• 31:27
  it's a large portfolio. It's diversified. There's going to be some. But I look at the worst marks
• 31:32
  and I'm like, how is this even still value?
• 31:36
  And what you have to understand is that 42 cents,
• 31:39
  that was a hundred million.
• 31:40
  Now it's 42 million.
• 31:41
  I don't know the actual,
• 31:42
  might've been 70 million to whatever,
• 31:45
  but they're collecting a management fee on that, right?
• 31:50
  They're not getting paid any cash.
• 31:52
  It's a clear default and they're still taking 1%.
• 31:55
  So they're eating into the principle of that essentially.
• 32:01
  So obviously the NAV is too high, but the NAV is getting more and more too high each year because of the fee, because they're taking cash for a management fee for a value that is insane.
• 32:17
  And that's just one loan, right?
• 32:18
  When you go through all of this, you see, you know, we'd be lucky if these things are only off 15 cents because they all use leverage, right?
• 32:30
  So that's the problems people seem to have a good grasp of.
• 32:35
  And I wrote my first piece called, These People Are Not Investors.
• 32:40
  They're dealmakers.
• 32:41
  They're trying to just allocate.
• 32:43
  They're trying to put money to work.
• 32:45
  They're allergic to cash drag because that hurts returns.
• 32:49
  And cash drag is just like, if you have any cash in there, it's only getting 4% while
• 32:54
  everything else is getting more.
• 32:56
  Cash is like your ability to have liquidity.
• 32:58
  you know, you should have a little bit, like you should have at least 5% for one quarter
• 33:04
  and then be able to like, but instead, not only do they have no cash, but they have billions and
• 33:11
  billions of dollars of contracts that they go, okay, we'll give you 150 or maybe $400 million.
• 33:20
  You can call it whenever you want, but you have to send us seven to $10 million right now.
• 33:25
  So then they use that $7 to $10 million to pretend like there's a little cash pile or potentially even go out and lend more loans.
• 33:33
  And they say they have liquidity.
• 33:35
  That's totally fine.
• 33:37
  So that picture is what starts this.
• 33:40
  And we already talked about where it ends.
• 33:43
  And people do not seem to have the ability to connect the two, right?
• 33:47
  because there's a trillion dollars of this private debt on insurance balance sheets.
• 33:56
  There's 670 in pension fund balance sheets. The rest is high net worth individuals nobody's going
• 34:02
  to cry about. But this is something that's going to affect everyone.
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• 36:12
  And what in your mind does the timeline look like?
• 36:16
  Because obviously Steve Eisemann and Tom did their podcast.
• 36:21
  I think you mentioned on one of your recent YouTube videos that Michael Berry is finally
• 36:25
  acknowledging that something like this is going on.
• 36:28
  A lot of people are comparing it to the mortgage-backed security crisis that existed in 2008.
• 36:35
  As we know, if you've read the big shorts and how that played out, many people, Steve, Michael Berry, others had this thesis for a long time, and it took longer than expected to play out.
• 36:47
  And the banks eventually noticed what was going on and made sure they got themselves on side before letting everything fall apart.
• 36:53
  Where do you see ourselves now if this is going to play out?
• 36:58
  Where are we in the story arc?
• 36:59
  uh mathematically within four quarters of bdcs and interval funds because these are pro cyclical
• 37:08
  redemptions are growing it's not going to stop there's only so much dry powder that's you know
• 37:13
  for me there could be um stealth bailouts of some sort there could be people trying you know like on
• 37:21
  the private side like let's just give cliff water some money because if we don't the jig is up
• 37:28
  I'm worried that people are loading up the silverware and getting on the lifeboats, right?
• 37:35
  So what's different between 2007 and today is social media. What every single person I've talked
• 37:41
  to says, this is going to take longer than you think. I've read the books. They live the experience,
• 37:48
  right? That it takes longer than you think. I'm acknowledging that's been every single person
• 37:54
  has told me that. However, we could rip the entire cover off of this by looking behind the
• 38:01
  rentals, right? If there was one single commission, we could limit damage by maybe 50%.
• 38:08
  So it's up to the populace to decide how unruly they will be about this issue.
• 38:17
  So that's the variable that would change the four quarters. As we're going into an election season,
• 38:26
  what I'm trying to think about is what is the competitive dynamic? Both parties are backed by
• 38:32
  lobbyists but both parties have people that want to win And at a certain point in time you can cover right You can cover So Democrats if you want to reach out happy to reach out
• 38:44
  Republicans, if you want to reach out, I'm happy to discuss this.
• 38:47
  This is completely too far from partisanship for me, right?
• 38:53
  So, you know, I hope to shorten that timeline and minimize the damage just by being incredibly
• 38:59
  loud.
• 39:02
  Mm-hmm.
• 39:03
  Bringing this back to the first place, we're talking about insurers, private equity funds, but like you said, if the dominoes begin to fall in the way in which you imagine they will and potentially can, 29 out of 30 of the largest life insurance companies could be in trouble.
• 39:24
  Just trying to help people grasp the gravity of this with some brand names they may recognize or understand, like, hey, I've got an annuity policy with them, a life insurance policy with them.
• 39:37
  Right.
• 39:38
  So if you have an annuity or life insurance policy, first of all, I want to speak to those people.
• 39:44
  It's better in a mutual than a publicly traded insurance company or a PE-backed insurance company.
• 39:52
  Let's give that playbook.
• 39:54
  Um, I have a lot of assumptions in my article, the whole, and what I try to do is say, let's look at
• 40:01
  this scenario. Let's look at this scenario. Let's look at this scenario. The entire thing is backed
• 40:07
  up by reinsurance that we cannot just trust. You don't have to agree with everything that I'm saying,
• 40:13
  but I think everyone should agree that there should be transparency. And my opinion is that
• 40:20
  once we look into it, it's all going to be extremely obvious. Anyone that opposes looking
• 40:28
  into it has gravy in the train, right? There's no reason we shouldn't at least look at this,
• 40:36
  right? So you have Apollo, they might be the worst, but then you have Prudential,
• 40:41
  you have MetLife, right? These are, Lincoln National is a big company. These are,
• 40:47
  the MetLife building in New York, I think, is going to change its name.
• 40:51
  Sorry, I was on mute. I was going to say, really? Because that's iconic right there.
• 40:55
  Right. People can't imagine. And people can't imagine Lehman Brothers going down.
• 41:00
  They couldn't imagine AIG having any issues. They couldn't imagine Solomon Brothers going down.
• 41:05
  Right. These are iconic names.
• 41:10
  So let's steal madness, right? Because this is like consuming your content and watching others
• 41:16
  talk about this problem, it's hard for me to believe that people
• 41:21
  in the seats that are deploying the capital in this way cannot see
• 41:25
  this freight train coming or cannot foresee these problems
• 41:29
  arising when they're taking bets like this. What do you think the
• 41:33
  mindset of these insurers and these private equity fund managers
• 41:37
  is? Just AUM at all costs, fees at all costs,
• 41:42
  everybody else be damned? Or do you think there's
• 41:45
  a feigning for legitimacy. I estimate that there's a trillion dollars in fees extracted
• 41:52
  from the system every single year between private equity, private credit, and the insurance.
• 41:58
  And we're not just talking about management fees and incentive fees. We're talking about
• 42:01
  this is the highest margin in businesses for banks, the lawyers, the auditors, the ratings
• 42:07
  agencies, the actuaries. It is enormous, right? So people want to pretend like there's nothing
• 42:15
  the issue. You know, people like I've been getting a lot of references for, for the movie
• 42:20
  margin call. Right. And it just, this, this happens all the time. They, there, there's a
• 42:28
  specific scene in there where he's going through all the times that this has happened. And it's
• 42:34
  just like, we just react, you know? And I think that there would be, the industry would, would go
• 42:40
  back and they would say, you know, like, this is dramatic and he's pointing to Hollywood movies
• 42:47
  and this and that. But I tried to see him in the article in there. Do you want to pull it up?
• 42:54
  This is a long read, by the way. I know. I got to leave it there. And then I try to make it bite
• 42:58
  size. And, you know, if people listen to all of this podcast, I think that they'll be, you know,
• 43:05
  they have the attention. They pass the test. The first one, the actual asset, they're going to be
• 43:10
  like the puts legitimate. And what I would say is one, what is the strike? Is it negative $5?
• 43:17
  Because then that's not legitimate. By the way, this fails the NAIC zone test. It cannot be
• 43:22
  contingent on that. So just in an accounting sense, it's invalid. But then when you go to
• 43:29
  the reinsurers, where's the capital? Okay. You got $5.3 billion reliant there. Where's the capital?
• 43:38
  They have 775 million in surplus.
• 43:42
  So then what are you saying?
• 43:44
  They're going to sell their balance sheet assets in order to pay for this?
• 43:47
  Okay.
• 43:48
  How many times can they do that?
• 43:52
  It's not a liability on there for Hanover.
• 43:57
  And you can just think about it this way.
• 43:59
  It's like, why would Hanover take all of the risk of the balance sheet for 70.7% of the value of the contract?
• 44:10
  Because the premium is so low, you know it's just pay to pretend.
• 44:17
  So really, I would say hammer in on the reinsurance there.
• 44:22
  The second steel man is captives are adequately supervised by Vermont.
• 44:29
  or Iowa. And in reality, they can't even see what's in the Bermudas, right? So it doesn't
• 44:40
  make any sense. It's like, okay, they look at a reinsurance contract. They can't see what's
• 44:46
  backing it up. They've made it impossible to do so. And I like this line, the best defense for
• 44:55
  moving a trillion dollars offshore is that you did not want to pay taxes on it.
• 45:01
  Right.
• 45:02
  If that's why you say tax optimization and the industry says tax optimization, well,
• 45:11
  that's your best reason.
• 45:13
  Right.
• 45:16
  Well, is there not nothing?
• 45:19
  Again, steel mailing this further.
• 45:20
  Like there's nothing these insurers and reinsurers can do when interacting with Bermuda to like on the diligence process to like check their books to get confidence that they'll be backed up sufficiently.
• 45:34
  They give you an eight page document versus a themes that they actually show in Iowa is 9,600 pages.
• 45:43
  So.
• 45:45
  Essentially, no, they can't actually see.
• 45:47
  they can see the asset liability equity consolidated they can't see yeah it's a trust
• 45:57
  me bro yeah yeah it's like i'm gonna write down a number on a piece of paper and uh bermuda signed
• 46:03
  off on it and trust me bro lovely um and then third affiliate reinsurance is disclosed on schedule s
• 46:14
  regulators can see it.
• 46:17
  So you converted this to Bitcoin?
• 46:20
  Oh, I have a, yeah, I've mind coded an extension that converts everything to Bitcoin.
• 46:25
  The first time I saw that, I was like, I just didn't mentally process that. I love that.
• 46:31
  Yeah. So what we can see is hardly, if not completely not backed by assets.
• 46:38
  everything we see
• 46:42
  liabilities are greater than assets
• 46:43
  so I don't like it
• 46:47
  like let's just
• 46:47
  you know
• 46:48
  the fact that it's disclosed
• 46:51
  the Hanover has the contract
• 46:53
  does not make me confident
• 46:54
  yeah
• 46:57
  and there's
• 46:59
  I forget who it was
• 47:00
  I forget it was KKR or Apollo
• 47:02
  used as an example
• 47:03
  but
• 47:03
  the way these captives work
• 47:06
  the people buying policies from these captives, I don't know how it works exactly, but long story
• 47:14
  short, people are led to believe that the parent company is backstopping one of these entities,
• 47:21
  and then they will pull from their balance sheet if the captive entity ever finds a hole.
• 47:26
  But if you dig into the legal lease of the parent company, that doesn't exist. Is that correct?
• 47:31
  Right. Right. Exactly. So when Apollo is pushing for the Athene acquisition to be completely
• 47:38
  captive, they're saying we're responsible for this. There's a Financial Times article about this.
• 47:43
  That's why it's aligned interests. It's not a moral hazard or anything like that.
• 47:49
  But then when you actually go into the docs, it says it's non-recourse. And when they go to
• 47:53
  investors, they say, guys, guys, nothing's going to happen. There's no issue. You don't need to
• 48:00
  worry about anything. And by the way, it's not even
• 48:01
  a resource. What are you talking about?
• 48:04
  We have an 11 forward PE buyer
• 48:06
  stock.
• 48:11
  So you think
• 48:11
  these large PE firms are about to be
• 48:14
  humbled?
• 48:15
  Do you think they'll be humbled?
• 48:16
  Do you think they'll be humbled? Are we going to get fucked again?
• 48:25
  Yes.
• 48:27
  Yeah.
• 48:28
  They're about to find out.
• 48:30
  how recourse or not recourse it is.
• 48:33
  And they're either going to pay a healthy fine just to be like, stop.
• 48:40
  Or they are potentially going to be, you know, all those bonds, all that equity completely wiped.
• 48:47
  And they're so powerful that I would think it's pay a fine route, but they're not central.
• 48:54
  So again, this is Lehman, Bear Stearns.
• 48:57
  It's like, you can't imagine Apollo going away.
• 49:00
  Right. But it's, you know, who's going to cry for Leon Black's equity in Apollo, right?
• 49:07
  So then the question is, do they have Apollo take the charge?
• 49:10
  What about KKR? What about, you know, all of these companies?
• 49:15
  And in reality, some are going to survive and some are going to fail.
• 49:20
  The idea that you just buy them because they're at a, you know, 11 forward PE,
• 49:26
  investors are about to learn. They're about to learn a tough lesson.
• 49:30
  You know, they got their golden parachutes ready set up.
• 49:33
  If you're buying those stocks right now, we'll see.
• 49:40
  And what's going to happen to the pensioner, the person holding these policies?
• 49:48
  I don't care too much about the pensions, to be honest, because the pensions don't care about the next generation.
• 49:55
  They only care about the people that they got.
• 49:56
  But having said that, they're going to have funding issues. They've crept up payments. They've crept up benefits in the assumption that these private market games are going to play out forever. It's the same allocations that happened in 2007. And they're going to have to take a loss. And maybe we bail them out. Maybe we don't.
• 50:19
  I'm full in front of the narratives that we have to, or it's an existential issue for middle America.
• 50:27
  This is a game played by the rich 100% to benefit the rich to the tune of a trillion dollars in extraction per year.
• 50:38
  Yeah.
• 50:41
  And it's, I mean, does this go back to Glass-Steagall, do you think?
• 50:44
  Because the way I remember Glass-Steagall, I mean, well, what was it?
• 50:47
  the act that abolished Glass-Steagall between City and Travelers Corp.
• 50:53
  There was a delineation between insurance and commercial banking and funds
• 50:58
  that Clinton took away in the early 2000s or late 1990s.
• 51:05
  And it seems like more of the same.
• 51:06
  Like, that's the other thing.
• 51:07
  Like, where are the risk managers inside the insurance companies
• 51:11
  that should understand like, hey, even though we've been acquired
• 51:14
  by this private equity fund, the way they're managing our assets is completely
• 51:19
  irresponsible. It will lead to a blow up at some point. Like, is there any,
• 51:25
  is there any, where are the good men in insurance standing up against this?
• 51:31
  They are. They're in my DMs. The ones you're talking about, private school is 75 grand a year
• 51:38
  these days. They got into the right private school. They got into the country clubs.
• 51:48
  The pill that they give, right, without too much looking into, without reading the footnotes,
• 51:57
  without reading the 9,600-page filings, without being Tom Gober, you can say, okay.
• 52:04
  but they're not doing their job.
• 52:09
  Fiduciary is irresponsibility
• 52:11
  and the most favorable way to say it.
• 52:18
  What are the first signs that you're looking for
• 52:23
  to have more confidence that this is underway?
• 52:28
  Obviously, you have private equity funds
• 52:29
  gating redemptions right now across the board.
• 52:33
  Is that the first sign?
• 52:35
  Is there a bigger dominant fall?
• 52:38
  That's the most obvious.
• 52:39
  And then, you know, that, yeah.
• 52:43
  Redemptions, downgrades, but also which politician is going to say anything?
• 52:48
  Because once you see that, it's like, okay, maybe they're losing control.
• 52:55
  Do you think the politicians will say anything?
• 52:57
  again, midterms. So you think it'll be likely expedient to hop on this early and beat the door?
• 53:07
  For the Trump administration to fall on the sword, I think it's hard to imagine
• 53:11
  going into the midterms unless they just throw in the towel. The problem is that all those
• 53:16
  billionaires are right behind the Trump administration. And I voted for Trump.
• 53:20
  OK, much as, you know, put my, you know, going into this bias out there.
• 53:27
  The Democrats have higher hope for because I'm like, wait a minute.
• 53:32
  We're going to win the House, maybe the Senate.
• 53:35
  Let's put this issue so we can be the saviors.
• 53:39
  Now, they're also backed by lobbyists.
• 53:41
  But if you see Elizabeth Warren all of a sudden start talking about it or whoever, maybe it's somebody young.
• 53:49
  Hopefully it's somebody that starts talking about this. I think that is a narrative that people are going to write off as it's just another politician. But I think that's a huge indicator.
• 54:04
  Yeah. So you view this as a generational battle?
• 54:08
  100%. That's why I title everything is no, no more boomer communism, because the, the, the
• 54:15
  extraction, you know, is complete and it's going to, it's going to continue. That's not going into
• 54:22
  the hands of, you know, the 30 year old who just got a girlfriend because he hasn't been able to
• 54:28
  date. And, you know, he's trying to buy a house. He can't buy a house. He's trying to start a
• 54:32
  family, can't start a family. That's who I care about. So you're going to see a lot of pensioners,
• 54:42
  the people close to retirement say, we got to hold up the market. We got to do this. We got to
• 54:47
  bail out the system when it happens. And I'm going to be sitting there saying, well, all that money
• 54:53
  you have is fake. All of that wealth you have is fake. Okay. How about we let you realize that for
• 54:59
  a little bit. Yeah.
• 55:03
  No, it's, I mean, as
• 55:05
  I know where I fall. I was born in 91.
• 55:09
  Mid-30s now, I guess, officially.
• 55:11
  You're a millennial. I know I'm a millennial. I don't know if I'm a younger millennial or
• 55:15
  middle of the road millennial. No, that's, I mean, that's
• 55:19
  what radicalized me. I was a senior in high school when I had happened.
• 55:23
  9-11 when I was 10. Forever Wars.
• 55:26
  Bullshit with COVID.
• 55:29
  I think guys our age, it is this weird inflection point we find ourselves in where the prospects are not good at all for most people, particularly if you're younger.
• 55:42
  And then you have this refusal of a generational passing of the baton from the boomers to the millennials who are in our prime earning years.
• 55:54
  We're supposed to be starting families.
• 55:55
  we're supposed to be building the next generation of Americans.
• 56:00
  And that's been completely railroaded by what seems to be.
• 56:06
  And again, there's many boomers that listen to the show.
• 56:09
  There are many well-intended boomers out there.
• 56:15
  But I think collectively, just societally, in that generation,
• 56:20
  I think it's objective in just the way markets operate
• 56:24
  and all these perverse incentives who've been describing here.
• 56:27
  Like it is leaving the world in a worse spot than it was when they got it handed to them.
• 56:35
  And my whole perspective is like, just pass the baton.
• 56:39
  Let us try and pick up the pieces.
• 56:40
  That's why I focus on Bitcoin.
• 56:41
  I think Bitcoin is a way to sort of route around the system that's been erected around us.
• 56:48
  But yeah, it is.
• 56:50
  And I worry about the blowback too.
• 56:51
  I don't think many people in the older generations, I think they have a bit of cognitive dissonance when it comes to understanding just how pissed off younger millennials and more, I think, aggressively Gen Z is right now.
• 57:08
  Yeah. Are you a fascist or a communist?
• 57:13
  Probably.
• 57:15
  No.
• 57:15
  Okay. If you're not, you should be scared, right? Because those are the only two excited parties
• 57:23
  about what's happening with the political charge right now. Okay. This is the amount of
• 57:33
  disaster in the system, bullish for Bitcoin. Let me tell you, I would sacrifice Bitcoin in a second
• 57:41
  to have a financial system that's even remotely functioning at a level where there's class
• 57:47
  mobility and there's ability to start families.
• 57:52
  So I don think Yeah I think there a lot of cognitive dissonance I mean obviously you know I joke I racist against boomers You know I boomers are my mentors you know
• 58:03
  a lot of them, but at a certain point in time, it's like, you guys have blocked out Gen X.
• 58:10
  They're never going to get a president, right? We're getting to the time where, you know,
• 58:16
  we're not being excluded from the adult table anymore. This is, this is ridiculous, right?
• 58:22
  You know, the experience, the wisdom, the pejorative nature of a lot of these conversations where you need to be 45 in order to be able to say anything.
• 58:33
  You know, everyone's already made it or not by 45.
• 58:37
  And if you haven't made it, nobody can listen to you because you didn't make enough money.
• 58:41
  And if you did make it, you're already in the country club.
• 58:44
  Right.
• 58:46
  Like, it just doesn't make any sense.
• 58:48
  And I think people think the things, the ways, the way it's gone for the past 40 years is the way it's always going to go.
• 58:56
  And quite frankly, you know, I think you just have to open up a history book.
• 59:00
  Like this, this is not the way it's always going to be.
• 59:05
  And that's scary or that's, you know, exciting.
• 59:08
  And what I hope for is that people are excited, not because they're a fascist or a communist, but because the narrative, the weakness in the structure is so apparent.
• 59:21
  But it's going to take some logic and reason, you know, in order to fix this.
• 59:26
  And like you said, you know, I was six years old when 9-11 happened.
• 59:29
  I remember seeing the towers go down.
• 59:31
  I was living in New York City, turning on Nickelodeon, turning on cartoon networks.
• 59:35
  And it's just the towers, the towers, the towers.
• 59:37
  every single channel. And I'm like, what is this? I'm six. Okay. And then by the time I'm,
• 59:44
  you know, um, eight years old, I'm like, go Bush, go get them. You know, I was the most pro-war
• 59:50
  eight-year-old of all time. Right. And it's, it's, it's an experience that boomers cannot relate to
• 59:58
  because sure they might've had the Vietnam war, but they walked into the best infrastructure,
• 1:00:02
  the best economy as a large generation with the baton being handed to them, like go have fun kids.
• 1:00:09
  Right. And now the Overton window of conversation has gotten so tight and so small
• 1:00:15
  on country club, club, you know, boundaries for finance. And also as they've grown up in society,
• 1:00:25
  we've noticed that we have to grow up with them. Right. It almost seems like because they're such
• 1:00:30
  a big generation and they have so much power, we have to speak like we're 65 years old.
• 1:00:36
  Right.
• 1:00:37
  And, you know, I think that's very soon to taking as, you know, vigorous individuals
• 1:00:44
  have more rapidly firing neurons.
• 1:00:47
  And quite frankly, you know, the narrative is tired.
• 1:00:50
  It's kind of like the need to cancel culture, you know, the aspects of that.
• 1:00:55
  The reason we got that was because boomers were behaving inappropriately.
• 1:01:00
  if we're honest, not all boomers, but then all of a sudden that's hurting the millennials.
• 1:01:06
  And it's like, what, what is going on? I can't be a man. Right. So as, as, as the testosterone
• 1:01:13
  has gone down for the boomers, testosterone has been demonized and it's like, okay, these guys
• 1:01:20
  are not, not prepared. You know, markets are a contact sport. Let's get back to that. Let's talk
• 1:01:25
  ideas. Yeah. I mean, on that note, like, what do you, uh,
• 1:01:30
  What would your hope be for the other side of a crisis if it manifests?
• 1:01:36
  And what would an orderly handing of the baton look like?
• 1:01:42
  What interests you?
• 1:01:44
  How do you think we used the technologies at our fingertips and the knowledge that we have to build a better system?
• 1:01:53
  We need to wipe the wealth.
• 1:01:56
  We need to let it go back down to reality.
• 1:01:59
  Again, the total M2 in the world, China actually has a lot, but it's somewhere in the neighborhood of $90 trillion.
• 1:02:06
  There's so much debt that needs to deliver through just debt being written off.
• 1:02:14
  And that needs to happen across sectors.
• 1:02:17
  Equity prices, because of earnings and multiple compression, need to go down 40%, 50% at least.
• 1:02:24
  And then we build from the ashes.
• 1:02:28
  Like that's, that's, that's what, that's what I'm hoping for because when 55 and up own 74% of the wealth in the country and it's similar elsewhere in the world and Europe as well, they have this issue and they're angry as well.
• 1:02:41
  Now, I would say if you're less than 10 years from retirement, we can take a couple of bad years.
• 1:02:50
  We can do it. You might lose your job. But at the same time, when you get a new job,
• 1:02:55
  you're going to be buying blue-chip companies for 11, 12 times earnings that are growing and
• 1:03:00
  spectacular. You're going to be able to get a home for at least 25% less in over two years when it's
• 1:03:06
  typically been going up 4%, 5% per year. Like the economics needs to change because then we can
• 1:03:15
  have actual capitalism again and not this boomer communism. Yeah. And that's the one thing I think
• 1:03:21
  the whole boogeyman of a, of a true market correction is just that a boogeyman. I mean,
• 1:03:27
  it is, can be fear inducing for people and say like, Oh, I can't take a 40 to 50% haircut on
• 1:03:33
  in my portfolio. I'll never recover, but I think you need this sort of controlled burn
• 1:03:40
  cleansing mechanism. People are very... Let the boomers sell, right? When they get scared,
• 1:03:48
  it's going to hurt us. But just imagine how much more it would hurt if you're in retirement and
• 1:03:53
  you've been over levered to equities, even though every sort of financial intelligence would say you
• 1:04:01
  shouldn't have that much in retirement when all these boomers have 2.5 million homes right let
• 1:04:07
  that come down let them sell they have to move to florida okay you sell 1.4 and you buy you know
• 1:04:13
  trailer park sorry well i've been a big uh big proponent multi-generational housing you know
• 1:04:23
  if you're a millennial can buy a house you know maybe get an extra room invite your boomer parents
• 1:04:28
  and to take care of the kids for you.
• 1:04:31
  Yeah, seriously.
• 1:04:32
  You want a retirement home?
• 1:04:37
  Okay, you take care of the kids now.
• 1:04:40
  And then additionally,
• 1:04:42
  we got to change the tax system and do all that.
• 1:04:46
  If we can clear the deck of a lot of these policies
• 1:04:48
  that have been put in and they're just incredible,
• 1:04:52
  we got AI, we got so many things,
• 1:04:55
  we could have new leadership,
• 1:04:57
  We have social media where ideas can actually be battled as long as the power isn't too tight.
• 1:05:04
  And then, you know, for the boomers listening to this, as well as, you know, the super influential,
• 1:05:09
  you know, very rich, you know, already made it like you guys are fine, right? You guys won't be
• 1:05:17
  fine if you continue to pretend like you can do this, right? If you guys hate me, okay, there's a
• 1:05:24
  a hundred times worse version of me. Right. That's, that's what you should be worried about.
• 1:05:30
  Right. Yeah. How did, um, how'd you come to be this way for lack of a better, uh,
• 1:05:37
  phrase phrasing there? Yeah. Yeah. A lot of rejection. I mean, from eight, 10 years old,
• 1:05:47
  I always wanted to like talk about stocks and, you know, for, for a really long while,
• 1:05:53
  was a lot of learning. It was like, okay, by the time I'm 16, I'm like, you know, kid analyst,
• 1:06:00
  you know, like I have ideas and I want to be listened to. Then all of a sudden, like I'm,
• 1:06:05
  I'm getting, I'm growing up, growing up and I'm not being listened to anymore,
• 1:06:10
  even though I've acquired more, you know, knowledge and insight. And, you know, I'm in
• 1:06:15
  college, Trump gets elected. I'm like, oh my God, what is this? You know, I'm just like continuing
• 1:06:21
  to go and acquire, you know, more and more knowledge. And it's partially personality type.
• 1:06:27
  I also was drinking a lot. I'm not sober. Like there's definitely parts on me, but there's,
• 1:06:32
  you know, there's been this rejection of what I feel like. And it's sort of this,
• 1:06:39
  you know, nobody is listening to me. I don't see an entrance to utilize all of this knowledge that,
• 1:06:45
  you know, quite frankly, if you're a pianist and you're 10 years old and you got talent,
• 1:06:50
  you recognized. But it just felt like to me, in the 80s, you had to show up on Wall Street
• 1:06:57
  with a good attitude and you became a millionaire. You had to show up with a good attitude,
• 1:07:04
  become a millionaire. They knew nothing walking into those stores.
• 1:07:08
  And then in my 20s, I'm interviewing, everyone says that they want somebody who thinks outside
• 1:07:14
  their box, whatever. And I don't get the job. I don't get the job. I don't get the job.
• 1:07:20
  And I'm seeing the people that do get the job and they're like copy paste.
• 1:07:25
  Right.
• 1:07:26
  So that's that's been, you know, probably the driving driving force for me where it's like.
• 1:07:31
  You know, finally, I have success and people listen and it's it's it's all great.
• 1:07:36
  But listen, those years did not not shape me, you know, and from when I when I wrote the entire letter to Besant.
• 1:07:48
  We're all human.
• 1:07:49
  You know, these guys inside the system, why are they doing it? Because that's what the system expects from them. And because they are shaped, they're shaped by the institutions that they're inside of. I am shaped by the institutions I've been outside of. Right. There's, there's not, I'm not trying to demonize people, but I need to tell them when they're stupid. That's sort of my perspective.
• 1:08:14
  Yeah.
• 1:08:16
  I mean, since you mentioned it, what exactly did you say to Secretary Besant?
• 1:08:20
  A letter to Secretary Besant?
• 1:08:23
  I'm talking about the incentive structure.
• 1:08:25
  I'm talking about, you know, I go high level, why this is happening, how this is similar, how this entire industry marks the market.
• 1:08:32
  Then give sort of micro-specific examples, talking about Cliffwater, better Sharpe ratio than Bernie Madoff, who chose his Sharpe ratio, right?
• 1:08:42
  Like Bernie Madoff could have chosen any sharp ratio.
• 1:08:46
  He chose 3.5.
• 1:08:48
  Cliff water is 3.75.
• 1:08:50
  You know, and then I'm talking about the individual loans, the sleep number, and then bringing it home with ask, which is just basically like address the mark to a model risk.
• 1:09:03
  You know, he's already said comments like, you know, we don't want this to end up the junk to end up on 401k's balance sheet.
• 1:09:08
  But, you know, launch an investigation, oversee the regulators, you know, pay attention to this.
• 1:09:14
  And I went to Johnson on insurance.
• 1:09:15
  And then the whole with Tom Grober being a forensic accountant, like what, what, how surgical can we get on the issue here and allow people to go where they want on what is the biggest issue that they want?
• 1:09:31
  but takeaway holy shit we've got to look at this because if this kid is even 10 right
• 1:09:38
  we have a major problem yeah it was just another another problem on a heap of problems that we have
• 1:09:45
  right now which is that it's like my observation again i've been following markets since i was in
• 1:09:52
  high school and uh and it just feels like the gravity and the the pace of which things
• 1:09:59
  you have like hiccups in the system are increasing like 08 european banking crisis and you have spasm
• 1:10:06
  of 2019 obviously all the stimulus during the covet era the new banking crisis is 2023 and here we
• 1:10:13
  are three years later another liquidity spasm this time in private equity private credit
• 1:10:20
  just feels like the system is altering and collapsing in on its own weight right and
• 1:10:27
  every time that there's a spasm and there's a mini panic and it's not 08, people get more and
• 1:10:34
  more confident in the power of the federal reserve. And the only reason I'm trying to compare things
• 1:10:40
  is like, they, they will blast bazooka wealth at the margin. Do you know who also did that?
• 1:10:47
  the bank of japan and they had a lost decade two lost decades right so what we're seeing is
• 1:10:57
  so much money and no velocity of money that's why they have to do more and more and more and what
• 1:11:03
  it's doing is just jacking up asset prices and we're seeing the top 10 do so well and spending
• 1:11:08
  goes up and gp numbers go up that is not health that is absolutely not health and um
• 1:11:16
  yeah you're it's like a crisis every year you know we get a six sigma event every year and
• 1:11:21
  people still want to talk about value at risk you know and it's like all these shit guys
• 1:11:27
  what uh what's your recommendation for anybody our our age or your age and my age listening to this
• 1:11:36
  go whatever article you like you know you want to look into insurance
• 1:11:43
  the private markets, take AI and say, fact check this. AI is going to come back.
• 1:11:50
  I might have some commentary on my takeaways, but the facts are the facts. And then send it around.
• 1:11:57
  Be like, this seems scary. You might be an expert. You might be like, I know exactly what
• 1:12:03
  this kid is talking about. And I need to take this to this person. I know exactly who it is.
• 1:12:08
  but if you don't, don't believe that your voice doesn't matter as much as people will try to
• 1:12:14
  punch you and say that you could even, you know, quote tweet and be like, I don't even really
• 1:12:21
  understand all of this, but it seems scary. And then 10 more people, you know, like that's what
• 1:12:27
  social media is an asset for. Yeah. It's powerful. And the, uh, the players involved with this don't
• 1:12:35
  like you're talking about it, which is another signal.
• 1:12:37
  Oh, no, they don't.
• 1:12:40
  They're sending their publicists.
• 1:12:41
  And, you know, we got guys our age flying F-15s, you know, dropping out of helicopters
• 1:12:52
  in the Middle East.
• 1:12:54
  Like, we could at least make sure that something gets fixed by the time they come back.
• 1:12:59
  Yeah.
• 1:13:00
  I agree with that, brother.
• 1:13:02
  I agree with that.
• 1:13:03
  this has been great.
• 1:13:06
  Like I said, I love your energy.
• 1:13:09
  And I think there's something here.
• 1:13:11
  I mean, it seems,
• 1:13:14
  I think you'd be naive to think that
• 1:13:16
  these types of actors are post-2008,
• 1:13:21
  post-2019, 2020,
• 1:13:25
  got their act together
• 1:13:25
  and are acting as upright citizens,
• 1:13:28
  trying to do good by their shareholders
• 1:13:30
  and the pensioners
• 1:13:32
  and the owners of these insurance policies at the end of the day.
• 1:13:36
  But I've touched a stove too many times in my life to know that greed does get in the way.
• 1:13:43
  Incentives do matter.
• 1:13:44
  The incentives seem out of whack here.
• 1:13:47
  Right.
• 1:13:47
  I think the most dangerous thing is to think that there's no way to change anything.
• 1:13:52
  It's always going to end up the same way.
• 1:13:54
  Don't waste your energy.
• 1:13:56
  And also don't protect yourself.
• 1:13:58
  Right.
• 1:13:58
  Because nothing ever happens.
• 1:14:00
  you know, Peter Lynch says, don't time the market, you know, and it's like, listen, guys,
• 1:14:07
  cash is not a security. So I can say cash is good. Okay. Bitcoin's not a security. So I would say,
• 1:14:16
  you know, CYA on what the potential bailout could be. At the same time, don't just 100%
• 1:14:25
  buy Bitcoin and gold and then all of a sudden be rooting for the world to end, you know,
• 1:14:31
  rooting for the death of the U.S. dollar.
• 1:14:33
  That's that's that's not the world.
• 1:14:35
  You you're going to be rich on the beach and miserable, you know.
• 1:14:39
  So, yeah.
• 1:14:43
  And don't be so scared of, you know, stock prices going down because we got earnings
• 1:14:47
  power, don't we?
• 1:14:49
  No.
• 1:14:51
  Use the AI tools.
• 1:14:53
  Use them if you're not already.
• 1:14:54
  freaks for sure get it yeah get it in your terminal command center for mac its terminal
• 1:15:00
  takes a little bit to set up use claude in browser any error messages you say how to any
• 1:15:07
  error messages copy it back there and then crunch some data right it's pretty it's pretty sweet
• 1:15:13
  yeah it's very sweet nick it's been great hopefully we can do it again um
• 1:15:19
  because i think uh i don't think the story's going away i think you're making enough
• 1:15:23
  noise, yourself, Tom
• 1:15:25
  Gober are definitely
• 1:15:28
  piquing the interest
• 1:15:30
  of many people and
• 1:15:32
  just looking
• 1:15:33
  externally to your analysis at all the
• 1:15:36
  redemption gating that's going on
• 1:15:37
  in private credit and private equity.
• 1:15:40
  It seems like something's happening
• 1:15:41
  and
• 1:15:42
  for everybody who's thinking
• 1:15:46
  this could be isolated too, private credit,
• 1:15:48
  private equity, I think
• 1:15:49
  understanding their
• 1:15:50
  the exposure that life insurance and annuities have to that industry is important to understand
• 1:15:57
  too. So thank you for doing the work that you've done and expressing it the way that you have and
• 1:16:03
  articulating it the way that you have. May not tickle everybody's fancy, but I love the energy
• 1:16:09
  and I'm picking up what you're putting down. I appreciate that. Thanks for having me on.
• 1:16:14
  All right. Peace to love, freaks. Thank you for listening to this episode of TFTC.
• 1:16:18
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• 1:16:22
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• 1:16:28
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• 1:17:16
  Thank you.