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from two days ago in New York City with Kevin O'Leary to yesterday with Gary black today we are visiting who could potentially be the most famous bear on CNBC and Twitter I think it is going to be so enlightening to have a discussion with you and uh I am so excited to introduce Gordon Johnson you have a research firm g l j research and uh tell the world why are you such a bear yeah thanks thanks for coming uh it's a pleasure to meet you um so essentially we're bearish right now we're not structural Bears I hate that we got that that moniker but unfortunately that's what we have the reason why we're bearish right now is because we can get into this and we talk about some of the other topics but you know we've had essentially since 2009 we've had um you know over a decade of artificially low interest rates um and we've had significant since covid and even before covid quantitative easing and we believe those macro factors are shifting and we believe they have to shift because what's happened is inflation has now surged to a 40-year high so the FED is kind of against their back is against the wall and they have to act to fight inflation because as Charlie Munger said outside of nuclear war inflation is the worst thing that can happen so I think that the FED has to act to fight that and I think that's going to pull liquidity out of the market I think that's going to be bad for stocks that's the kind of overall view why we're a bit more negative which makes sense which is also why it looks like uh you hit on Nick T this morning that's the famous sort of fed mouthpiece uh he seems to get the text messages from Jerome Powell hey leak this or whatever drone Powell seems to be really interested in these moving averages of what inflation is doing and Nick T this morning mentioned that on a 12-month annualized basis while 12 month year over year we're at 4.6 inflation which I know you have some comments on because you tweeted it but what I did think was interesting to your point is that six-month annualized we're at four two but three month where at four nine which feels like we're seeing some acceleration especially in that more sticky travel Hospitality people basically spending money on restaurants right is is this going to become unsustainable and is the Fed even able or equipped to fight that kind of inflation they're definitely equipped to fight it and this is a great question great setup um so with respect to Nick T he does great work I told him that I think the issue is he's using seasonally a seasonally adjusted index to make observations on annualized numbers and if you talk to the Bureau of Labor Statistics they'll tell you you have to use non-seasonally adjusted numbers because you don't want those adjustments and when you look at the non-seasonally adjusted numbers specifically the index not non-seasonally adjusted CPI over the past roughly three months you've seen literally it shoot up and in fact inflation shoot up and in fact in 2021 if you look at the trend from about 1980 to 2020 it was a straight Trend and there's a couple of periods 2000 2001 2007 and 2008 where kind of hockey stick them in the moment right we went back down sure it's hockey sticking again that started in 2021 and I think again the issue is all the stimulus money that was printed so the problem is for uh the deflation crowd is we're seeing a Resurgence in inflation um and in fact it's really resonating in Services inflation which represents about 70 70 of CPI Services inflation when this in the CPI number uh was 7.1 percent in the most recent reading it was down from 7.3 percent but I think over the past uh roughly uh four readings it's been above 77 we haven't seen that since 1983.
Services is the sticky inflation that's really hard to get under control so when you consider that you consider that gas prices are going back up right um Energy prices are going back up what happens with inflation is as we learned in the 70s it rotates you know you see it in Services you see it in uh car prices then it rotates the energy then it rotates somewhere else and when you let that Genie out of the bottle as the FED did I think you know know people say the fed's going to make a mistake they already made a mistake right the mistake is 40-year high inflation right so when you let that Genie out of the bottle it's really hard to put back into the bottle and you know I'm really concerned and and again Nick does good work Nick T um but he's using seasonally adjusted numbers when he should be using non-seasonally adjusted numbers when you look at the NSA numbers the inflation looks actually worse yeah that's interesting because otherwise you're comparing how seasonal adjustments have changed so now then the question becomes the you know we have all this mixed data I mean diesel prices are plummeting because of the freight recession but gasoline prices are rising like you mentioned it almost feels like what you've described is this cancer of inflation that it's here now it's gone from there oh but now it's popping up over here right it's like metastasizing and showing up in different parts of the body but my concern is with Services as you've mentioned isn't there this potential that the FED raises rates but the people who are actually really driving the services spending the average American they don't necessarily care about higher rates now maybe that'll affect affect your credit cards but if you're already in credit card debt and you're already paying twenty percent on your credit card who cares if it's now 25 that really doesn't marginally affect your ability to spend or go on vacation because people are living paycheck to paycheck yeah good point so let's use history right yeah we it's hard to predict the future in fact it's impossible but our job is to try you you're not sure so the issue is every single time historically that CPI inflation has gone above five percent it didn't come back down again without until not every session but until the fed's funds rate went above CPI inflation sure CPI inflation right now is sitting at five percent right core CPI inflation 5.6 the fat funds rate is about 4 4.75 Powell had that prank call yesterday and he said he's going to raise rates two more times so theoretically we're going to get to 5.25 but the problem is you don't just need the FED funds rate historically using history to go to where CPI is you needed to go above CPI we're not there yet so I think that his historically when the FED raises rates it has allowed inflation to come back down and let's be honest really what the FED needs is they need a recession um and that's not that's not they don't want to admit that they and he said that in the prank call yesterday but they need growth to actually decline they need jobs to be lost so you don't have all this strength strong economic growth I want to go to my notes Here sure you know uh consumer spending so consumer spending data came out recently um it accounts for 70 of GDP uh 1q23 um it's surged by 3.7 percent that was the biggest increase since 2021 during the stimulus money bench um and then you had government spending uh uh which surged 4.7 that's a new record high so consumers are spending like drunken Sailors yeah despite the inflation we're seeing and that is very bad data if you're the FED um and if you're somebody who is trying to fight this inflation you know trying to make it by a normal person you know we a lot of us talk about the stock market but the statistics suggests roughly 80 percent of Americans are agnostic to what stocks are doing right exactly so the problem is the people who run things the people who make decisions are so focused on the stock market whereas the bulk of Americans aren't I think that's why I keep going back to this but I think it's a great quote by Charlie Munger the only thing worse than nuclear war is um inflation and I think the reason is because once that inflation gets to a certain level we can look at you know periods in history like the weirmware Republic you know the collapse of Rome the collapse of Greece all inflation driven yeah um you know you start basically people can't afford food and they start to um you know uh basically push back and when that happens you have the fall of Empire so that's why we're so focused on this topic on Twitter and why we're so focused on it in our analysis yeah now what's interesting is the this consumer spend explosion seems to be driven by you had mentioned consumer spend for the first quarter up 3.7 seems to be driven by what last year was a decline in people's personal savings they were starting to go through the excess savings they accrued during the pandemic which gave them around maybe on average two and a half times as much cash as they previously had but that had started declining in 2022 but now in q1 it started Rising again right so this this idea that oh eventually people are going to run out of money what when does that actually happening great Point great point so I think there's a dynamic happening and I don't think a lot of people thought about this think about this right so for the past since Obama right the FED has been artificially repressing interest rates right I think a lot of people will agree that they kept rates too low for too long so think about this you know you put your money at Chase and they're giving you point five percent on your money right you buy a 10-year bond the 10-year bond was yielding less than one percent for a long time now all of a sudden you're getting four percent on your savings right every American not not just the rich um you know you you buy a 10-year bond um you're getting five percent uh or now it's 3.5 but not sure it was up to four but you buy a one year bond you understand it's way higher now the point is there's a new source of income for everyone that they haven't had for a decade and that is interest rates being higher higher rates are bad for people like you and me who are investing in the stock who are long stocks but I know it's great for the average American because now you actually get paid on your savings so I think the reason why you're seeing this strong consumer spending is because interest rates have went up to the point where people feel more wealthy the problem is again the FED needs to take interest rates above CPI inflation so they're they're fighting it but they're not fighting it enough and as a result people are outspending more I think that's why banks have been strong so that potentially could explain why we're starting at least in these latest U of M surveys on inflation expectations right it seems like some of those expectations are starting to rise we used to be at a one-year expectation of around three six two weeks ago and it just came out this morning too I think it was four is above four six so two weeks ago we were at four six and it was a shocker that's the preliminary read the final just came out 23 minutes ago and four six yeah so it reiterates this this potential de anchoring of inflation expectations which suggests the FED has a lot more to do right how high um I I don't know but I think that you know if I want to talk about this the FED can we can we talk about this absolutely just real quick so look this may this may incense a lot of people but I think this is the most Reckless fed we've ever seen oh wow let me explain so over the first 100 Years of the U.S Federal Reserve Bank in the United States their balance sheet grew by roughly 1 billion I'm sorry one trillion dollars it was about 974 billion that's that's the first 100 years right so when covid hit initially their response was a two trillion dollar monetary stimulus and you know what we were looking at a black hole right so I understand what they were doing but then when covet hit and we did 2 trillion six months into covet retail sales were 15 above Trend yeah when the growth when we had the global financial crisis it took retail sales I think eight years to get back to Trent yeah um uh the the the the uh the 2001 collapse I think it took 12 years to get back to Trent covid that recession it took only six months and we fit 15 above trade in addition we had vaccine confirmation so after we were back to 15 above retail sales Trend and we had vaccine confirmation they continued to stimulate they did another two trillion dollars that's 200 years of stimulus they did in like two months that is completely Reckless right and then they said you know we're not going to forecast when they were doing all the stimulus and then as me and a lot of other you know people who were historians of the market were saying we got the crazy inflation right and what's crazy is they were essentially making a like 30 to one bet on this right they were trying to get so inflation you had CPI inflation at 1.7 percent right they were just trying to get to two percent and to do that they were doing this crazy stimulus now the problem is if they lost on that bet it wasn't them who lost right it's poor people it's I think the stock market for the next 10 years I think is going to be stagnated so wow my point is these guys have proven to be Reckless and be wrong with the transitory comments Etc but then with svb and I want to talk about yeah hopefully we can get it to the bank crisis but with SBB right you had a a bank doing very bad things um clearly other Banks had you know in 2022 had you know uh adjusted their uh you know risk assets and duration to match what the FED Fed was hinting they were going to raise rates so you know and and instead of letting them fail the FED comes in in over two weeks that's 400 billion dollars of not QE we think it's QE but so you know that's like you know that's like 50 you know what was that like 50 years of balance sheet expansion in two weeks so you know this isn't a an instance of you know courage from Jerome Powell so I'm concerned and we could talk about gold because I'm concerned that when things get tough he's not going to have um the courage to stay the course on fighting inflation and that could be quite concerning oh wow I mean this is a lot to unpack there I'm really really insightful because you're right rates we were printing over this last decade before covid because as you said inflation was running below Trend we were at one seven uh and they were trying to get us to two percent there was even talk about lowering the inflation Target which sounds insane today but lowering the two percent Target to 1.75 because they just couldn't get it up right which makes the question then that comes from that is is that because of this 40-year disinflationary trend of technology or why did we see why were we able to print so much money then and not see inflation right uh and then of course we can talk about the mistake of now that is a great question I'm sorry I keep saying that yeah so the issue is there were two types of inflation right you have inflation of the monetary type and you have inflation of the fiscal type right so with Obama and through you know essentially until we got to covid really what you had was monetary inflation and that's the FED essentially doing quantitative easing right we we we did the you know the the MBS bailouts we were supposed to bail out the the housing market then they just continued to do it so you say we didn't see inflation but you did the problem is you saw it in stocks and homes house prices right that cancer analogy somewhere else not to be insensitive obviously you saw it in stocks and houses right home prices have went from I think an average of like 200 000 to like 400 000 now they're coming back down but you know over that same time frame minimum wage hasn't moved so you've essentially priced an entire generation you look very young you're probably in that generation even you price an entire generation out of the ability to buy homes normal people right the bulk of America it's not not the the well-off um so with covid right Congress got into the mix and the Fed was extremely Reckless they were doing all this stimulus but Jerome Powell urged Congress to join in sure so and keep in mind right the U.S government can't do stimulus without the FED printing so people are blaming the US government and they should but they can't do it unless power prints that money out of thin air so what you had is you had the fiscal stimulus right you had literally uh helicopter money being dropped with people checks and so that's when you had the inflation and everything else right you just give people checks they're going to go out and buy so that's when you had the outside of homes and stocks you started to see inflation everywhere else and again once you let that Genie out the bottle we've seen historically it's extremely hard to put back in the bottle so that's why I say and we can talk about this more this is the most Reckless fed we've ever seen wow I mean that's fascinating because really you're suggesting we've always had this inflation during the QE regimes it's just shown up in asset prices rather than in nominal inflation for your groceries or normal Services whereas now we've had this massive acceleration in in money printing during the covet era which I I agree with you I mean looking back if we had the vaccines approved what five days after the election or so November 9th of 2020 right around there 7th 9th um why did we print until March of 2022 right when inflation was already six or seven percent we were screaming um via Twitter and however we could we don't have the exposure you do that we can't believe what the FED is doing and you know people say well you're just trying to support your short position I care about America sure the issue is if you look at any major crash of whether it's it's an Empire or major crash in the US economy it follows a bubble and the FED has built via unnecessary you know measures the biggest bubble in essentially everything people have referred to it as the everything buggle bubble we've ever seen and you know what a lot of bulls would say well what's different right they've been doing this since you know 2009 what's different here's what's different right again I think the people say the fed's gonna blow something up I think they already did blow something up and that is prices 40 year high inflation so the problem is they've blown this bubble and you know the fed's core goal is to keep prices steady right that's essentially why the Fed was created it's not even really jobs the Fed was created central banks were created to keep prices steady clearly prices aren't steady so the problem is they've blown these massive Bubbles and now that we have 40-year high inflation they have to fight it and so as those bubbles Burst when bubbles burst you have you know essentially recession slash depressions and that's kind of why I think people should be concerned less scared yeah you refer a few times now to almost comparing America to potentially the Weimar Republic or Empires collapsing is it going to be that bad I hope not um I don't think we're too far past uh the pill but it really concerns me um that what the FED did with svb doing the 400 billion dollars of balance sheet growth in two weeks uh because that showed a lack of Courage um a lack of willingness to fight inflation um so the concern I have is when the going gets tough and the stock market drops two percent I'm joking but yeah you know you understand when anything happens negative and I want to talk about svb because those guys should have been let to fill as in the depositors would have been fine but when anything bad happens I'm concerned this fed's going to come in and do um you know just massive stimulus again and that that could lead to an even bigger collapse later let's talk about that let's talk about the banking crisis on stimulus because I have to say I was uh really um I found this picture very exciting that you put on uh Twitter okay this uh this right here your caption is uh in medieval Spain Bankers who became bankrupt were publicly disgraced by Town authorities and given nothing nothing but bread and water to eat until the creditors were paid off right after a year if the bankers fail to pay them they would be beheaded and their property and assets would be sold off yeah I don't want to say I think Bankers should be beheaded but I do think that you know if you're able to make a lot of money a lot of money doing bad things you should also be able to be allowed to fail let me let me talk about essentially what happened um do you mind if everything um so so essentially what you had with the failure of svb Signature Bank Credit Suisse and any others it's the fault of the FED for doing 14 years of interest rate repression quantitative easing and essentially turning the Banker's brains into mush um and what I mean by that is and you also had Bank management for not taking the fed's advice and preparing for higher rates instead operating recklessly in order to get you know higher bonuses moving their stock prices higher versus Brazil and Mexico by the way who hiked rates sharply in December 2021.
the Fed was telling you we're about to start hiking rates what did Brazil and Mexico do they hiked rates significantly to prepare for that um in December 2021 or the right thing to do so you had svb signature your bank credit Suites and others and who engaged in stock pumping schemes to boost their Equity prices which resulted in very nefarious and likely illegal activities keep in mind the at svb what they were doing is offering below market rate loans to startups who weren't making any money right no earnings and the quid pro quo was those startups had to keep their cash at svb that's a bad business practice right that's just that's just nefarious business activity so when when you when you get caught out there with you you know when the tide goes out we see who has a who's not wearing shorts that's a Warren Buffett quote Yeah right the tide went out they should have been allowed to fail and keep in mind you know everybody was talking about oh my God the depositors these and we found out later right it was like you know guys who had billions of dollars so these weren't you know small businesses but also keep in mind um that you know these depositors you know would have been made whole right the depositors that that next it happened over the weekend that Monday they would have been made whole 90 90 cents on the dollar right so this idea that all these you know know small businesses were going to lose money was always wrong and when you when you bail these guys out right when you allow these guys to engage in nefarious and um alleged credibly alleged illegal activity um you basically encourage moral hazard so when you do that you essentially encourage other Banks to do the same thing so I think what Yellen did and what what Powell did um I think was bad and I think you know it's all funded by the taxpayers you know FDIC treasury et cetera the government is funded by the taxpayers so that's why I put that quote up because you're not holding these people to account and these people did extremely very various things and we have we have we have examples of banks who took the fed's advice and raised rates you know they they they change the duration of their asset mismatch not just not just Mexico and Brazil but also banks in the U.S JP Morgan Bank of America et cetera when these Banks didn't and and so these Banks should be held to account I think this is so fascinating because really what you've suggested is that uh Jerome Powell was weak in 2020 when we had the vaccines we had retail sales above Trend we had already won why continue to spend money and now he's acting tough oh we're going to stay higher for longer but as soon as one thing goes wrong that's it 100 bailout of the banks essentially right which was taxpayer backed uh ultimately I think FDIC will end up Distributing the 20 billion 22 billion dollars of loss to other Banks right really corporate socialism to some extent which I think you've referred to as well on Twitter so the question then is if he was weak in 2020 if he's weak now during the banking crisis it sounds like you're thinking it's going to be weak again and we're going to see printing again and stimulus again which potentially means inflation again can you speak to that yeah so I I think you you phrased it perfectly which is why you know again everybody positions us as bears but if you don't have faith in your own power you don't have faith in Joe Biden from a fiscal responsibility perspective and they're going to basically print which is going to decrease the value of the dollar what you want to do is you want to own gold right if the dollar Falls in value gold is going to increase not just gold but other precious metals and potentially other Commodities so that's why we're bullish gold we own gold we like gold um and I think it's because you have a Fed chair and a U.S president who are willing to spend hundreds of billions of dollars in the face of 40-year higher inflation which is extremely scary if you love this country because again you know every it's it's like every time I talk about inflation these these guys on Twitter who say you're just you know talking up your Tesla position no study economic history I went to school you know I studied economic history um you know I major in finance minor in economics Morehouse College um you know if you study economic history inflation is extremely scary I think Munger at over 90 years old he knows what he's talking about so do you think we're going to return to stimulus checks then or how is that inflation going to come back where's this where's the weakness going to manifest like how are we going to see it right it's it's hard because if you look at the history of inflation you know the last time we had inflation like this was in the 70s and what you've seen with CPI it's like this right so you'll think you got it under control then it rears its ugly head you think you got it under control it rears its ugly head and you know everybody credits Paul volcker rightfully so uh but if you remember initially you know he didn't raise rates enough at inflation 1980 and then you had to come up again and then he had you know at one point you had mortgage rates at 15 you were able to invest in a bond and get like you know 13 um so I don't know where we're headed but I think that what is being done now is not enough and I think that again you know because rates were zero for so long and now they're you know on certain bonds you know one year you know six month Bond you have near five percent rates I think that's why you're seeing an increase in spending because people have more money on their savings and they feel like they have our money and they do but I don't think they're doing enough and you can see that evidence by the strong economic activity the strong leg of Labor Market the CPI data today the data we talk about the non-season adjusted data which is now spiking back higher um so I I don't know what we need to do but it's definitely more than what they're doing and you know they have not been a um a a a image of Courage if you will um uh with respect to some of these issues we've had do you think the depositor should have taken that 10 haircut you mentioned a agent a absolutely absolutely I mean they would have gotten that that day and then they would have been made whole later um but we now know that I think I think it was like 10 depositors that had billions of dollars so initially you know like Circle was one of them I think they had three billion dollars but the point is it wasn't small you know businesses that you know we're going to see massive labor Cuts these were like Silicon Valley billionaires who had you know who essentially bailed out and these were guys who knew what they were doing like when you when you look at some of these VCS on Twitter who talked about some of the deals they got from svb I mean it's crazy you know they were getting below Market rates they were getting like you know sweetheart deals on mortgages Etc these are guys who not who should not be bailed out and all of a sudden it's the VCS and potentially like the Gavin newsoms of the world who were also a big voice in forcing this essential backstop right right potential conflict of interest it was just it's it's infuriating when you think about it if you understand what's going on I think it's fascinating that you uh are you you criticized Paul volcker generally people don't go there uh people seem to honor Paul volcker but you mentioned that I mean he got in at 79 he had a recession in 80 because they didn't raise rates even enough right and that didn't tame the inflation that they needed to raise rates again for starting I think in October of 80.
all the way through 82 right to actually get inflation under control so everybody holds them up on a pedestal but even he was not certain with what to do well no I do hold him on a pedestal he he he did something amazing he and keep in mind at the time I think Carter was behind him but there were a lot of pundits out there and Congress both the house and the Senate and you know TV pundits Etc who positioned him as the devil when he held his ground he is a man to be revered he had the courage the courage he had the courage so no I I I just what I meant to say is initially he didn't do it but he did it and he stuck with it and he's a man that should be revered because I think he saved America from years of stress and if you look at what this fed has done I mean think about let me finish that thought if you look what this fed has done it's the opposite that think about this right think about this think about it so Janet Yellen right so in 2000 in 2021 2020 2021 right when the 10-year bond was below one percent instead of issuing debt to fund the U.S she was running down the TGA now the problem is when you run down the TGA not the problem the benefit is if you're long stocks that's like QE yeah um what we look at a lot of people talk about the FED balance sheet but you also have to look at the treasury general account balance and the reverse repo account balance when she run down run down to TGA that's a way to effectively stimulate the economy you know the problem is she could have issued that 10-year debt at below one percent that was just Reckless it was Reckless not to issue debt at those numbers was Reckless enough it was Reckless and you know so so so the last time she ran down the TGA and then she had to run it back up it was um I think it was December 2021 to May of 2022 right she ran down to TGA she had to refill it now keep in mind when she refills the TGA what that means is she has to issue debt into the market so she's pulling liquidity out of the market guess what happened December 2021 to May of 2022 s p down 17 and a half percent right so now we're at a point where right the TGA got all the way below 100 billion right tax season we're now at I think we're like 270 billion she's doing about 50 billion of rundown a week so that means she has about maybe four or five weeks left before she runs out of money so over the next month she's gonna run out of money the debt ceiling is going to be compromised and then she's going to have to refill the TGA right treasury general account balance she's going to pull liquidity out of the market where at the same time the FED is doing QE last time she did that s p fell 17 18 right right uh correct yeah they're doing QT games sorry correct sorry uh the FED is doing quantitative tightening not quite but the last time she did that right the Fed was doing QE right the Fed was you know pushing money to the market stock market still fell 17.5 now she's gonna have to do it and the fed's doing QT right they're pulling money out of the market so I don't know how much the Market's going to fall but it's things like this that I think some of our sell side peers aren't focused on yeah and I understand it but you have to be focused on the macro in this environment oh yeah absolutely yeah I think that's so interesting the idea of refinancing or having refinanced the debt lower reminds me of I believe it was Donald Trump who was saying we should take out 100 year treasury bonds now because we could do it for next to nothing right I mean now in hindsight that would have looked like a brilliant idea right he wasn't all bad I don't want to get political at all but um one thing I would say though is he was pushing Powell to cut rates and I think it was 2019 pal cut rates three times with unemployment at a 50-year low that was a huge mistake um you don't do that when things are going well you do that when things are going bad so again another issue another instance of him not having the courage to do what's necessary the the right Futures market right now seems to be convinced that we're going to get around two percentage points of cuts by December January after maybe hitting that peak of that 5.25 do you think that's realistic or are we going to sit at that flat line for a year yeah I wanted to bet you a beer that's not going to happen I'm joking but no no absolutely a Bud Light or like a like a Stella I don't want to go there but um what I'll say is you know you just look at where inflation is you look at the trends in inflation going up you look at the strength in the jobs Market you look at the strength in consumer spending that we talked about the idea that the FED is going to cut rates I think is ludicrous um and I think the rate Market will have to adjust accordingly what Val said when with the prank from zelinsk the faith zielinski which we now know was real he said we're going to raise rates two more times and keep them there for a long time look believe what he's saying like I was a guy who fought pal right don't fight the FED I fought him for a year and I lost tremendously um look at Tesla in 2020 um in 2021 I I fought them and I lost so for guys who are saying we're gonna have rate Cuts you're fighting what he's telling you and I I don't think that's smart I think you should believe what he's saying and if you believe what he's saying you know rates are going higher is it possible and they're going to stay there that the reason maybe people are fighting that is the idea that the FED can't today say that they're going to cut rates in December because then people will pull out dead and go right back to spending and they'll reanimate inflation and we truly won't get there whereas if he pretends to have this hard face uh we're gonna you know hire for longer hire for longer and then we get to December all right we're gonna you know is is it an expectations game is he playing with us because you actually tweeted about how Jerome Powell seems to be more transparent in this prankster call right than he is with the American people is he playing us I don't think he's playing us I think but in the prankster call he said what he's told us right he said we're going to raise rates he said in one minute what takes probably 20 press conferences I agree I agree I think they should stop with these speeches but he but he kept with what he's been telling us right he's saying I'm going to raise rates and keep them there he said that in the prankster call so I don't think he's trying to play us I think he's being honest and let me tell you why so it's the data if you look at Services inflation you know uh Services inflation sitting at um hold on let me see here so we got uh uh let's see um core Services inflation right the number that just came out core Services inflation without Energy Services jumped 7.1 percent from a year ago in the most recent reading um that's CPI okay the core Services CPI I um and that was 7.3 in February so this was the fourth month in a row of seven percent plus core Services inflation it's the highest we've seen since 1982.
that has to be scary to the fed you look at um Energy prices which are going back up you look at um uh core CPI which is sitting at 5.6 percent right their target is two that's their measuring state so the reason why I think he's serious is because the numbers are too high the numbers are sticky and they're not coming lower so if he's serious about fighting inflation which I think he is then he has to do what he said he's going to do and again he reiterated that with the fake zielinski and that's the hire for longer okay now uh PC this morning uh those numbers I I want to say I want to pull the the services uh figures here it seemed like Services came in at expectation core services and we know pce runs lower just the way they measure it right uh is it possible that we really did peak in June of 2022 and that yeah maybe it'll take longer to get these numbers down whether it's CPI or PC but in a year from now are we going to be at two percent inflation are we going to get it down I I hope so but the data just doesn't support that right now um again this Services inflation is sticky you know core Services inflation minus energy sticky at seven percent you know that's a that's that's a that's that's roughly 70 of CPI services and it's not falling um and you also have now Energy prices going back up right Biden ran down the spr right strategic Pro strategic petroleum Reserve um so what happens when we have to refill that what happens if OPEC continues to cut right we're going into driving season oil prices but more importantly gas prices which are have a a hugely High correlation to the energy component of CPI we did the math I think it's around like 85 percent if you look at just retail gas prices oh wow uh against the um energy component of CPI that the r squared correlation going back multiple years is it's like 85 percent so as gas prices go up that component in CPI is going to go up and that's been a key driver of the downtick right that's a way of saying you could sort of see a leading indicator of what CPI is going to be just by looking at gas prices which have been coming up right not to be confused with diesel prices coming down but gas prices for normal Americans going up if if any of your viewers want to just do this analysis it's very simple look at the energy component of CPI on a monthly basis go back about 10 years and then track that against retail gas prices which we get daily and you'll see that the r squared correlation is nearly perfect so the fact that those prices are going back up has to be scary to the FED if they're looking at this data I'm sure they are so the idea that he's going to quote unquote pivot I think is it's it's it's I don't know a better word than ridiculous I think it's it's just not going to happen what about this d dollarization uh you know we've lost some clout in the Middle East potentially a lot a lot of talk about now uh Saudi Arabia and Iran partnering and they used to be mortal enemies now with deals negotiated by China right uh are we losing uh the the strength that we once had the soft power strength that we had and our people respecting America less and trying to move away to different Alternatives or is this just the same story we've heard before yeah that's that's a great topic and currencies is one of the hardest things to predict um I I'm definitely not better than anyone else out there but what I'll say is I think there's two different things to focus on here number one dollar deal you know the idea that we're going to move to some of the reserve currency I think is ridiculous um still I think roughly 60 of the world's reserves are in US Dollars uh the United States despite all its problems is the most stable democracy in the world um you look at you know China where you have a dictator who's running you know labor camps and slaves and you know look at what happened to Jack ma it's not a real democracy you look at Russia I don't think I even need to talk about that they invaded a Sovereign Nation um you think about some of these others so I don't think there's risk of us moving to another Reserve currency anytime soon what I will say though is if pow is reckless which scares me um I think the value of the dollar could decline significantly um and if that happens you're going to have inflation in the United States that brings a lot of people to their knees if they're not already there so wow I don't think there's risk I I think that people are just playing this is something we've heard for years oh we're moving away from a dollar just like the numbers right reserves again US Dollars 60 our democracy is the strongest you don't have people you know um getting in boats in the U.S trying to get into China you do have people getting in boats in China going through Mexico trying to get into the U.S we're still the best and I I'm a patriot so you know add that to this but we we're still the strongest in the best country in the world and that that has that that psychology has a lot to do with the strength of the dollar so I don't think there's any risk of us moving but I do think there's risk of you know them printing a lot of money and devaluing the dollar and if that happens I think you will have a lot of people here that are brought to their knees and then it's true by the way you're getting an awful lot of an increase of Chinese Nationals coming in through the Mexican border right very interesting okay now we have to talk about Tesla so when when are you going long test do you own a Tesla I do not have you ever driven it I'll show you the cars I own okay I have I've driven one uh I actually drove the man this is a great story you won't believe this okay so this was like 2000 I think it was nine or ten okay um and I remember I forget the guy the IR guy's name at Tesla but I was out doing like um I remember I so I was out doing like some solar meetings in California and the guy said you got to come to our plant and he let me drive the Roadster and it was like driving like a electric go-kart oh yeah yeah it was really fast and I went to their plant no there were no cars being made and I was going to initiate on the company with a buy I swear this was that it was when it was 35 and you know 15 split ago yeah and a couple of my clients were like if you initiate on that stock with the buy we're leaving and it's not that it's not that I let that influence me but yeah you know it kind of influences so I said you know what I'm just not going to touch it um so that that's an interesting story and it wasn't that I was extremely sold I didn't even meet Elon it was just I I just I was just like this is a new product and you know people like me products anyway so to answer your question get back to your question what what would get me to buy a test look we have I think it's I think the stock is worth 24.33 and I know that sounds crazy but I'll you know I'll tell you this when when tilray was at 300 I think we had like a 40 Target people said you're crazy um with sun Edison which went bankrupt um we had a buy rating at 30.
they did this deal with event and we took our our 30 price Target down to one dollar when the stock was 19. people said you're crazy um in First Solar I remember this is back in 2009 when the stock was like 230 dollars I think we had a forty dollar price target people said you're crazy look I think that's what the stock is worth when it gets there we'll reevaluate um but I think there's a lot of issues which we can get into um and you know are you using sort of the industry average multiples and no we're using a um I I actually think that the the numbers we're using so to answer that we're using a a 20-year DCF okay projecting out cash flows discounting those cash flows backwards or something um uh we're using I think the the discount rate we're using is around eight percent yeah um but so you know and what I'm saying is the assumptions we have in our model to get to 24 I think are pretty aggressive um what kind of volumes are you thinking um I think we have them getting to like 10 million okay so you'll actually have them getting to 10 mil right but your DCF is still putting them at 24 today correct that's scary right because the thing is think about this right so Tesla did what 73 cents um in q1 you you multiply that by four and divide it into the stock price today you're talking about just under 60 times multiple right the industry trades it seven times this is for a company who effectively cut prices roughly I think it was like 10 in q1 yet solve volumes grow just four percent right that means they're cutting prices and they're not seeing the elasticity think about this what if Lamborghini cut their prices by 20 right or forget about Lamborghini Porsche you understand people will be running to the dealership right if if that 200 000 Lamborghini people the elasticity would be massive so the issue with Tesla is very simple in our view um you have a company who over the past four quarters has produced more cars than they've sold that's a record um you have a company who's cutting prices and you're not seeing the same increase in unit volume that you're seeing in price Cuts that's a big problem you have a company who in our view is the Blackberry of EVS I.E they're the first guy out there but now you have all these guys coming in with cars that have equal or better Real World Range better interiors and real service ability um and a long history of um you know being able to make it you know Tesla's never been through it's a frontier asset essentially they've never been through a full business cycle um so I just think that there's significantly more downside because you have you know all this competition and it's not necessarily Tesla's fault right think about this right the cost of capital right over the past three years think about 2020 2021 early 2022.
if you said EV you could go raise billions of dollars and create a car company out of thin air but the demand the demand for those cars increase right you have all these new cars companies all these new EV car companies but like is there is the demand for are there more people to buy the car so what I think is going to happen we highlighted this last year is inevitably you're going to have a price War because it's just Supply demand if you have more cars same amount of demand you're going to have to cut your prices to move those units and because Tesla's the first guy in there they haven't really invested in r d to you know come with new models every car company you know new models every one to two years Tesla's essentially have the same models since Inception um uh and I think that's a problem so you have all these issues you have the issue with you know the specifically Elon Musk around you know the full self-driving he's been saying we're gonna have full self driving next year since 2014.
you have you know um you know all the things he's done you know the fake solar panels he did to sell SolarCity um filing a 13d instead of a 13g clear violation of Securities laws to acquire Twitter the things he's done on Twitter um you know forcing his workers back to work in California at the height of the covet crisis against a county order um and and calling a hero a pedo and a number of other things so I think that's in uh you know uh upset if you will some of his buyers um and we've said this before in a lot of instances you know having a Tesla car now is analogous to wearing a red Mega hat um and I think that you know his core constituency was you know on the liberal side and I think now that he's kind of whether it's true or not moved over to the conservative side I think that's hurt him too so there's a fundamental aspect and then there there's a quantitative aspect and there's a qualitative aspect both I think are working against them and if you look at what's happening in China I mean so so far this quarter we just put our time in no doubt um the the numbers came out early this week you've had six votes go from China to Europe last last quarter over the first 26 days of the uh of the quarter you had 13 votes so significant decline in boats to China um so the cells domestically in China are better than they were last quarter but they're not significantly better despite the fact that you're not having all those cars produced go to Europe that's a big problem they're just not selling the cars in China they need to that also suggests the demand in Europe is a week you saw today again they cut the model y seven seater by another thousand dollars that's the seventh price cut in the U.S this quarter and yet and still their inventories are going up look this is just a company that has too much capacity versus demand I think they've reached saturation and the competition is coming and coming heavy um so I think that you know I think our price Target is going to prove accurate when it hits our price Target we'll reevaluate but you know we don't hate Elon Musk or hate Tesla it's just we think the stock is grossly overvalued and when it gets valued accordingly we will reevaluate but it's not a tech company right they're last in FSD um uh they're buying batteries from catl and Panasonic all the promises they made at battery day were essentially mistruths we now know that the battery has um the 4680 battery they had they they they made is actually worse from a technological standpoint standpoint than existing technology so they don't have any technology either so I think once it gets valued accordingly we'll reevaluate have you tried FSD I am scared to try FSD I have not I have not and I've seen the videos and I know I know every experience probably probably isn't like that but I've been in a pretty pretty uh the Dawn videos the dawned uh I've been in a bad car accident and I'm just once you once you're in a car accident you're not willing to risk your life for you know technology um what about um which companies do you think are beating Tesla in FSD or even regular competition you mentioned Tesla might be the Blackberry so which which other companies yeah so guide house ranks um uh uh uh uh autonomous driving Technologies and they rank Tesla dead last there's probably 20 companies they rank if not more the ones they have at the top are uh wamo and Cruz and Mercedes and byd literally Tesla ranks dead last So when you say which companies are beating them in FSD according to guide house who I trust everyone um with respect to cells right byd is crushing them in China VW is beating them in Europe um and in the U.S we now know that over the first two months of this year their market share has fell from 75 last year to 50 this year keep in mind GM's not even really in the folds yet they're coming with I think like 15 new EB models this year it's not the GMS and the Fords beating them and you know on CNBC a lot of people like to say but look at Lucid look at rivien I think that's cherry picking the guys who are beating them here are Toyota um uh VW uh Mercedes um you know Etc Hyundai those are the guys who are taking share from Tesla and beating them in the U.S um so I think that you know the numbers just tell the story um and I think that you know with these price cuts that aren't working I mean the proof is in the pudding Toyota's CEO recently said that they believe they're part of the silent majority of people who are interested in hybrids instead of fully battery electric vehicles shortly after he said that in December he uh announced his retirement and now the new CEO is talking about moving to All Battery electric vehicles and they're talking about a new lineup of bevs is potentially Tesla just early here and these Legacy companies uh realizing wow we actually have to catch up with real battery electric products where we really haven't yet yeah I I think that again yeah I think they're I think they were early I think they had a first mover Advantage I think that when we had the part shortage in 2020 and 2021 I think they were willing to cut Corners that other people weren't uh with respect to some of the chips they qualified in within months where usually it takes two years Etc we highlighted all these issues nobody seems to care but now you're starting to see some of these cars I think they have the most amount of their their cars are recently ranked the most likely to be recalled Consumer Reports has Tesla ranked nearly dead lasts on uh quality slash performance uh JD Power the same what what question mark which is a rating outfit in the UK the same they rank Tesla's cars literally what what question mark is dead last and quality performance JD Power and Consumer Reports either dead last or you know second or third from last so you know again this isn't me saying this these are reputable you know rating agencies who are saying these cars are just not high quality so with the with the new guys coming with all these different EVS you're getting guys who have done this for you know in some cases a decade who you know can ease think about let me finish that thought who can easily you know go from producing an ice car to producing um an EV card think about this right so when covet hit right Elon Musk was famous for saying we're going to make ventilators right we're going to repurpose our Factory to make ventilators did he no he didn't make one ventilator what he did is he brought a couple of CPAP machines slapped the Tesco Tesla logo on them sent it to a hospital you know who did repurpose their facilities Ford and GM right about this World War II right when we needed tanks Ford in just their facilities to make tanks right these guys know what they're doing and what's more important is the ICS I see Eternal internal combustion engine manufacturers they make cars out of profit they're ice cars right those cars have profits on them they're losing money on their EV cars and I would argue that barring China Tesla might be losing I don't think the Fremont Factory is profitable I don't think the this is my personal opinion I don't think the Texas Factory's profitable I don't think Germany's profit I think the profit is in is in China and if you look at their um you can't tell now with the 2022 10K but in the 2021 10K you work the numbers out they tell you the only profitable facility is China why because they got a sweetheart deal there because you're able to you know I'm not saying Tesla's doing this but in China you're able to hire slave labor everything's cheaper so you know the point is you know outside of all the what I think is um uh accounting Shenanigans um that is going on at Tesla um the reality is they need to generate cash and I think that you know this year they have to pay taxes in China that deal gets less and less sweet each year um and I think that making EVS is not profitable right now but I think the ice can do that they can make these cars unprofitably because they're they're their their core constituency of selling ice cars are profitable so they can use that profit to invest in the uh the EV space so I think that puts Tesla at a disadvantage when a lot of people thought Tesla was at an advantage so what do you say to people who respond and say well Chevy tried with the bolt to have an EV and they just can to the bolt right uh the it seems like they're cutting jobs at Chevy Cruze uh their autonomy division it seems like most companies even byd are focused on let's provide some simple Adas tools that we know will work like uh Lane keep assist something we can go to market with we can bolt on but most industry reports show that Legacy automakers have a ten thousand dollar cost disadvantage in making EVS compared to a Tesla right when when does that switch are you suggesting that the ice will catch up and somehow they'll get that Advantage back that's a great point so if you look at Tesla's margins with the most recent price Cuts you're talking probably about 18 17 to 18 margins that would put them below most automakers all of a sudden they're not the manufacturing leader this is already happening um and with respect to you know GM canceling that car that's normal right so they're replacing that with another EV right you introduce new models I think that's they're replacing it with another low-cost EV so while while a lot of Tesla you know fans and you know Bulls come out and say hey look look look at this replacing it with another EV so I don't think it's them getting out of the business they're just they're just basically updating the model and I think with respect to cutting people look people are struggling right I mean you know the economy is not great despite what you know some politicians may tell you so it's not just you know the car companies cutting employees right there's a ton of tech companies cutting employees uh you know uh there's job Cuts being announced every day so I don't think this is um specific to the Auto industry I think it's a more economic thing do you think that could be potentially why Tesla doesn't have that demand elasticity going back to one of your original arguments that hey you're reducing prices but it doesn't seem like maybe we're getting as much throughput while at the same time I think you would agree they are ramping production substantially right uh is that maybe more macro if we were back at uh you know you finance your car for 1.5 percent Tesla would be having wait lists I think it's partially macro but you're seeing tremendous growth from guys like GM byd VW Hyundai Toyota Etc and their EV sales their EV sales are growing whereas Teslas are stagnating despite significant price Cuts so I do think there's a part of it that's macro but I think there's a big part of it that's I think Tesla has saturated the market and I think that people are saying let me look at something else you know it's just competition right you have you have a ton more EV cars available you know before it was just Tesla now you have you know 10 20 30 options with EVs and I think people are saying let me try this other car let me try this other company my service to Tesla was horrible um you know my brother is um uh manages a dealership in California he said someone came in with their Tesla and this is one person I don't want to say this is everybody but he called me up two days ago he's like call me back immediately you got to call me and I was busy I called the next day and I'm like what's up and he's all excited um he's like look you know people are bringing in their Teslas and they're telling me that like there's this scheme that Tesla is doing where you know you lease a car and you you can't buy it and then they tell you you have to buy a car and then you go to and then they tell you they're bought they'll buy the lease back and then you go to sell them the lease and the price they told you they would give you they cut it lower when you go to sell it so he said there's been a number people people that have come into His dealership saying we want to trade in our Tesla we'll never buy another one because some of these schemes they're doing and again I don't know if that's widespread this is just you know a couple of guys in California but you've heard a number of things like this right on Twitter I suppose I would say it's very likely that anybody showing up at a dealership with a Tesla does not like Tesla so you probably have a disproportionate share of unsatisfied people right that's fair that's fair uh but just the serviceability has been extremely questionable um you know and some of their tactics just you know that we've seen have been questionable but that's that's not the bark of our thesis our thesis is basically competition is going to come in um competition is going to crush them because they're the Blackberry of the EV space they're gonna have to cut prices margins are going to get cut and people are going to see this is just a car company that's the Auto industry every auto company outside of Ford and all the new EV guys has went bankrupt why highly Capital intenses extremely low margin and I think Tesla has been able to Stave that off because of a number of things I think kova was the best thing that happened to Tesla because you had all this stimulus come in you had part shortages and they were willing I think to do things and other auto automotive companies were not willing to do and I think that brought them a couple of more years but I think now we're getting back to the mean level of what the Auto industry is and I think that's extremely low gross margins extremely high competition and extremely Capital intensive and that is not what Tesla's stock is priced for now some say that when it comes to Tesla Service there potentially is virtually no service so is that do you think that's then unique to just all EVS or do you think Tesla has a potential Advantage here no no I think Tesla has horrible service I mean that's that's what I mean pretty much how are you evaluating that um you don't own a Tesla right um I don't own a Tesla thousands of um entries into you know some of these different online forms a number of entries into um you know Twitter that I've seen and some of my friends who have owned Teslas who have had minor you know one of my friends he's a cult um he loves Elon Musk he owns a Tesla he's in in Florida and he brought I think he brought the model S you know he paid like I think 75 000 for this car he's already had to take it in like three times um to get it serviced you know I brought a 10 year old Porsche and I haven't had to take it in once um you know so and and when he takes it in to get service it takes a long time now he won't say anything bad about Elon Musk but this is a real world this is my buddy who's you know having these issues um and I've heard similar issues from other other people out there so look I'm not saying that I have the I know everything on what's going on with service but I think in general if you go to Google and you type Tesla Service I think the stories you'll see will be quite bad and I think that's that's causing demand in the U.S to waiver and you're seeing that with respect to these price cuts and despite these price Cuts even today if you go and check their inventories they're spiking higher despite you know massive price Cuts so it doesn't I don't I can't say exactly what it is but something is causing demand for Tesla cars to decline significantly and again the stock is just not priced for that you know this you're talking about a stock that's priced at Tesla is valid if you look at their market cap I think right now it used to be the next seven largest automakers combined it's probably now the last next five largest automakers combined despite selling like just I think four percent of the cars they do so for that valuation it makes sense they should be selling their quarter over quarter growth should be accelerating significantly they shouldn't be cutting prices they should be raising prices because if they're worth more than the next five largest automakers combined that means demand for their cars should be astronomical it should be in the stratosphere and we're seeing the opposite of that is it possible that you're comparing q1 to Q4 where generally in Q4 you have this Rush of demand and a q1 you have the seasonal decline in demands is that possible no no because if you look at what happened with again byd VW um uh Toyota Hyundai Etc uh Neo leado I can go on and on they all saw tremendous growth Q4 not all but most of them saw tremendous growth Q4 to q1 without the price Cuts right you know last year when Tesla was cutting prices BW was right BYU was Raising prices in China you understand so and they still sold a a massive amount of cars right they saw tremendous growth so this is clearly looking at the data a specific issue with Tesla um and again you're talking about now seven price Cuts in the U.S and if you look at that and by the way the inventory chart I'm talking about is I think it's Matt Jung who keeps the data he just Tesla only shows it's like so for instance if they have like a hundred red you know Model S long range cars in inventory they only show one so that inventory number that Matt Jung is tracking which is going up is actually worse than it appears the service data to some extent it sounds largely anecdotal to some degree like how people as I started this interview Define you as a bear right right like anecdotally it seems like a lot of your tweets are bearish uh so I think I'm very embarrassed I think the stock is grossly over but outside of outside of Tesla as well I think you you had some frustration in that your reputation is of Despair but you're not bearish everything you're one gold long nuclear which we're going to talk about is it possible that maybe the service isn't that bad maybe maybe the the anecdotes of oh I had to go in for service but how did that how does that compare to cars who that gets serviced three times a year four times a year regular ice Vehicles yeah whereas Teslas maybe aren't getting service for a year or more I mean I can give you anecdotes on on the two Teslas that I own of maybe in the lifespan of two cars over an average ownership of four years I've been at service four times right that's an average of uh essentially once every two years per car right um sure it's it's definitely anecdotal there's no doubt about it um but again the core of our thesis isn't that service is going to hurt Tesla or Services What's going to bring them down the core of our thesis is competition is going to crush Tesla and I believe that the data firmly shows that the competition is crushing them um and you're seeing that continue into Q2 right six seven price Cuts in the U.S um and you know inventory is still building another price cut just today um and the data out of China you know again only six boats into Europe whereas you had 13 last quarter and still despite not sending you know over 50 drop in boats you're not seeing a surge in China sells that's very concerning this is just data so the data continues to suggest that things are very bad for Tesla um you know you have Elon Musk telling you he's willing to sell car think about this right he's telling you he's willing to sell cars at break even he's going to make up for it with FSD right here's the problem the FSD take rates have went from 40 to 5 only five percent of the people buying Teslas are are buying FSD so how are you going to make up for selling it doesn't even make sense you understand so and I know that's how you're referring to I think uh part of that could be explained by uh a higher International sale through rate of Teslas where you can't potentially buy FSD yet because of regulatory challenges you know I was looking at even in the US though the FSD rates have collapsed and remain collapsed I have to look at that but um what's fascinating to me is this the guide house insights chart that that you uh refer to I brought it up and they throw Tesla basically in the bottom right and everybody else Baidu zukes mobile I uh Aurora emotional Cruise Nvidia waymu those are the leaders right now their evaluation criteria let me ask you what you think about this they evaluate these based on the following Vision that makes sense but what about this go to market strategy Partners production strategy sales marketing and distribution commercial Readiness those items in this evaluation have a similar weight to actually technology of of the full self-driving and all of the items here uh for a beta product are very easy to anchor down is it possible there's a massive amount of bias in in these insights and would you consider risking your life and trying out FSD confronting Gordon Johnson and trying FSD to actually no I would never try FSD and again I've been in a very bad car accident okay I've actually been in two so given what I've seen what I've seen FSD do by Tesla Fanboys right um I would never risk my life no I would not um with respect to them being biased look it's you know if they had Tesla ranked number one I'm sure you wouldn't say they're biased look you know he removed a number of centimated okay he removed a number of sensors he removed radar right to save costs um you know it's like you know FSD 2.0 FSD you know and it's like every single one you even hear Fanboys saying you know it's getting worse um and this you don't have to take my word for it just literally go online type in FSD and and look at the videos this you have cars turning into you know Lanes running over kids and tests um you have cars you know that are running into you know restaurants cetera I mean this is crazy stuff tesladeaths.com you've had 19 according to tesladeaths.com verified deaths associated with autopilot being on these cars are wrecking into fire trucks I mean this is crazy stuff you know I believe any other auto company this is my opinion that had these issues would immediately recall it and take it off the road whereas it's with Tesla it's been on the road since what 2016 2017.
in fact think about this how do you trust FSD well we now know the painted black video right the painted black video from 2016 which is still on Tesla's website last I checked was completely doctored and and it was directed by Elon Musk it was a video over 3.5 minutes um if you watch that video the start of the video says the driver is only in the seat for legal reasons right we now know that his Engineers were not wanting him to do that but he said let's put that in there we now know that video was shot over 550 miles there were multiple disengage engagements the car wrecked itself but if you watch that video you'll think that Tesla car since 2016 can drive themselves that is extremely Reckless and that that's the best way I can put it so to put your trust in someone who's willing to do that with a video how is that different than Trevor Milton rolling a truck down a hill how is it different I I don't know right nobody died is alleged to have died because Trevor Milton rolled a truck down the hill tesladeaths.com has 19 people and counting that have died associated with you know Tesla's um uh Automotive uh automated technology so I think it's it's extremely Reckless what he's done the reason why I would not test it is because of things like that and other mistrusts that Elon Musk has said and if you watch the Hulu documentary you have two former employees saying yeah we left the company because they were making you know egregious claims associated with FSD these are former Tesla employees so no I wouldn't put my life at risk and look we are factoring no legal liability our working assumption is that Tesla is above the law they will never have to be if they go to court they'll always win they'll never be prosecuted for any of this um uh or have to pay for any of this but if you think about what's happening it's it's a real dereliction of Duty from Nitsa to allow this stuff to continue he's testing beta technology that isn't what he said it was in 2016 on the road that has been alleged to have taken 19 lives I think that's that's pretty compelling is it possible that Tesla's haven't been taken off the road because this 2016 video which let's agree that the claims were substantially exaggerated in 2016.
that's now hold on seven years ago I gave you a shot sorry sorry so seven years ago uh we have this video that had exaggerated claims let's agree with that is it possible though that Teslas aren't being taken off the road because the accident rate per million miles driven is five times fewer than a regular ice right so that data from Tesla has been thoroughly refuted and we now know it's not true Nitsa actually Switched at the 2016 data or the a million miles the million mile accident data we now know that that data is completely I shouldn't say completely but it's farcical because it's comparing miles driven on the highway to other cars where mile or miles are driven in city it's like you're preparing apples to oranges so to use to continue to cite that data when it's been thoroughly disproven I think is misleading I'm not saying you're misleading but anyone who who's doing that is being extremely misleading so it's not safer number one one and number two I think the reason why it hasn't been taken off the road is because I think you've seen a dereliction of Duty from Nitsa um NS the NTSB has stated essentially this stuff needs to be taken off the road but they can't act they can only make recommendations it's only Nitsa that can act so and again this is all our opinion but I believe that you the reason why it hasn't been taken off the road is because you've had a massive direction of Duty and you know our assumption is it'll never be taken off the road that's our working assumption uh because if it is you know our price Target would probably move lower from 2433 right now so again I think that what's happening is is scary um and quite frankly when I see you know given what my research and the years of covering all this and the many mistruths that have come out of Tesla around FSD when I see it Tesla car on the road I keep my distance uh because again you know when you've been in an accident a car accident you don't take any risks so uh clearly you're disputing the the data from Tesla and Nitsa which which is this has been thoroughly debunked um and and and Nitza I I think it's either NTSB or Nitsa has agreed that they were wrong in the way that they conducted their study the Elon Musk he uses that that that that the verbias they use they get there was a I think it was a New York Times article I'll send it to you yeah detailed that this this this this claim that Tesla's making has been thoroughly disbunked this came out like last year so this idea that Tesla is safer has been thoroughly debunked debunked I'm sorry um and there was I think a New York Times article on it yeah it seems like recently in the last Q4 impact report they're now reporting uh it now in fairness it says mostly but they say autopilot engaged mostly on highway miles 0.18 million or accidents per million miles uh mostly non-highway miles 0.31 no active safety 0.68 and then the U.S vehicle Fleet accident rate at about about two to three times that at 1.53 do you dispute that recent data as well no I'd have to look into the recent data um but I know that the claim you're making with the million miles driven and Tesla being the safest car on the road that data has been thoroughly debunked well you did you mentioned that you were debunking because that was mostly highway but now they're parsing out even non-high right I I to be honest with you I haven't looked into the most recent data okay it's when I say I haven't looked into it I don't know what the uh the expert opinion is when I say this has been debunked I'm not saying by me I'm saying by the experts right so I'd have to look at what the experts are saying I I can't I can't speak to that would would you say uh New York Times is the accident I'll say this I do not trust anything I I shouldn't say that but I I'm I'm highly I'm highly highly um uh distrustful of anything that comes out of Tesla given given uh you know the the painted black video given the 13d instead of the 13g given he said he was going to make ventilators he sent CPAP machines given he said he was going to fix the issue in Flint he didn't given he called the guy a pedo given he said he was going to have a million Robo taxis on the road in 2020.
given he continues to tell people he has more he's selling more cars than he's producing where the past four quarters he's produced more cars than he's sold I can go on and on given you know early on right the the the documentary now that is on um uh it's on tuvi to be right we now know that when he did that battery swap to get the the tax credits in California that was also doctored so there's all these things that he's done right that any sane person would say I don't trust what this guy's saying so I will say that I'm not going to say I disbelieve it but I'm saying I need to prove what he's saying before I'm willing to believe it sounds like you don't like Elon no I'm not liking Elon it's just about being a some of the story is maybe no it's just about being a human being right if somebody tells you for five years in a row that two plus two is five right and then you come to me and say Hey you want this guy to do your math problems for you I'm like no I don't want that guy to do my math problems right there have been a lot of mistruths that this guy has said the Tesla devs credibly alleges have potentially led to death so you know every car company has In fairness well no not not every car company has said not one car company has said our cars are driving themselves the guy is in the driver's seat only for legal reasons in 2016 and every year since essentially 2014 said we'll have full self-driving better than humans on the road next year nobody said that except for Tesla probably the best thing on the FSD part is for people to evaluate that themselves I would imagine and I understand that you've been in an accident so you're unwilling uh to test FSD I did though I want to pull up the New York Times thing and I found it and you're right they said these figures always show that accidents are less frequent with autopilot right a collection of technologies that can steer break and accelerate Tesla on its own but the numbers are misleading autopilot is used mainly for highway driving which is generally twice as safe as driving on city streets Tesla has not provided data that would allow a comparison of autopilot safety features on the same kind of Roads neither have any other car makers however now they have and so I know you haven't looked at the new data yet but it would be interesting to the the question that I want to frame out of this is is it possible that yes Tesla may have made mistakes in the past and and maybe elon's been Reckless with his SCP SCC filings is it possible they can fix these in your in your mind no because to get to level five um autonomy you need lidar and radar and Tesla does not have those who says that well any experts you speak to in the space um we've spoken to I don't want to say their names but we have a number of um you know autonomous driving technology experts we speak to I think Tesla will never let me be very clear this is our opinion I think Tesla will never with its current technology get to level 5 Adas it's impossible in our view they need radar they need lidar and they're talking about doing late radar but they're not going to do lidar without both of those I don't think it's possible to get to what they claim that they're going to get to very fair so one thing that I want to bring up is you on your website you have the uh your research you were forecasting negative free cash flow we didn't go negative but it came in substantially lower than expected right and earlier you mentioned some potential accounting Shenanigans of like potentially depreciating some of their or capitalizing some of their their Capital expenditures to to butter out how much they're spending tell me about their cash position because they have had cash flow it's falling they're spending money on these new Factories do you think that if Tesla does go negative free cash flow and cost of capital is higher now that would be a big Catalyst for the stock going down I think it would be one Catalyst yes but I think that and again when we say Shenanigans these are our opinions um there's you know when you provide Gap accounting statements there's a number of things you need to be able to say definitively we can't say that definitely these are our opinions based on the fact that you know in you know you know they're capex right in the first quarter yeah was more right in the first quarter of this year they're not ramping any plants right their capex is more than when they were ramping two plants last year we have questions around that Tesla will not answer our calls they won't answer our emails they never let us ask questions or calls so we don't get our questions as answers so we just have to wonder um but with respect to the cash flow I think that yeah if it's if it goes negatively we think it is um it's going to be bad keep in mind right if you look at their cash flow and you take away the Zev credits they sold this quarter it was negative it was negative 80 million first time I think since um 2021.
um and keep in mind a lot of that is because GM isn't selling EVS I think a lot of the Zev credits that Tesla continue to sell is to GM now GM is about to start selling a lot of EVS what's going to happen you know so I think that's something to be concerned about if you're a Tesla bull I don't think people are focused on that so I think there's a lot of risks around the corner um that I think a lot of people may be overlooking but I think the most important thing right now a lot with a lot of bulls hang their hat on is unit growth right and that's clearly what Elon Musk is focused on another price cut today um so I think that he told you right he told you on the call we're willing to go to zero percent margins on our vehicles and we're going to make up for it by selling FSD again how are you going to make up for that when you have five percent attach rates but anyways um you know a lot of things this guy says doesn't make sense to us right he's saying we have more demand than we can make cars whereas they produce more cars than they've sold more four quarters and running a record that's never happened so again I think that I think that um you know cash flow I think is going to turn negative but I think what people are focused on is units but I think people are going to be concerned about the margins do you think it's possible that uh Tesla could release a complete Suite of full self-driving you already said not level five but of let's say level two and a half uh and and maybe then start recognizing some of the FSD Revenue well they've already recognized significance amount significant amounts haven't broken down how much they've recognized something you're right they break it down into the q's and K's they've recognized significant amounts of SSD Revenue keep in mind FSD is vaporware it does not exist there is no such thing as full self drive it is vaporware that's a fancy way of saying it's a product that doesn't exist the fact that the FTC allows them to sell this is a mystery to us um but nonetheless it it's allowed so but yeah so if they released you know level two 2.0 right they've been doing that every single what month for the past five years right 1.1 version 1.6 whatever um and you know even the Fanboys are saying it's getting worse right if this quote-unquote Dojo computer or this you know the the arc invest thesis that they're collecting millions of miles of data which I think is completely farce it's a complete farce I don't think their cars are learning again if you talk to The Experts this has been disproven as well but you know you're having the same issues um at the same intersections Etc and you're having new problems emerge so I just think that you know FSD is something that was used to you know raise money and allow you know sell side analysts to have these farcical you know fan Fantastical price targets um and we've said all along that it's not what it's chalked up to be and we said that the reason why we said that by the way is because two years ago via a Freedom of Information Act request there were documents that came out between Tesla's lawyers and I think the California DMV were in that communication right Tessa the lawyer said our FSD our autonomous Drive is level two and it will always be level two that's what they said in those documents right the problem was because the stock was going up we were reporting on that nobody cared they're like no no you're wrong you're just a hater um so look I think that you know this FSD hope is something that can continue to keep people you know engaged and happy about the stock and hopeful and that's great for Elon Musk and Tesla but the reality is the competition has passed them everyone according to guide house and you know with their current technology without lidar and radar and taking sensors out they'll only ever be level two so until he fundamentally changes um I don't think he's going to achieve FSD and Elon Musk himself said if we don't achieve FSD Tesla is a zero dollars he said that I didn't say that he said that I'm not saying that's our belief right we have a 24.33 price Target but you know more than zero hey you're a bull yeah I mean but you know you know if you put a 7 times multiple you know you know earnings that are fair that's not how we evaluate but sure you you're talking about like a 20 stop so you don't buy at all the Kathy Wood Brett Whitten argument of let's price in some degree I don't want to speak ill but what I'll say is um you know we we had a debate I think we debated her it was it was a Montana skeptic and I debated her um at the Robin Hood conference I think it was in 2018.
I got Robin Hood socks on nice they were free I love the conference those are nice socks um so but you know her thesis then was Robo taxis it's all Robo taxis you know in 2019 you know they're going to be doing billions of dollars of Revenue they haven't done one there's not one Robo taxi on the road so she got lucky in our view glj researches view because of covet hit you had you know all this massive amount of money that was dumped into the market and every stock went up right AMC went up uh you know every stock went up Tesla was the leader of the Mims and because the stock price went up you know it was like her thesis was validated even though her thesis has been 100 incorrect if you look at her Tesla Model it's riddled with holes and mistakes and when these mistakes are pointed out as we recently did on Twitter we get no response from Brett and Kathy or Tasha um and this isn't talking ill of them I'm just saying like you know we make a small mistake right we got the cash flow number wrong you highlighted that she says they're gonna have like 2 million Robo taxes on the road there's not one and yet nobody talks about it so um you know I think that you know her models are I think incorrect um I can tell you where she's made huge mistakes um and I think that you know when you go out and you say you know pre-split she said it was a two thousand dollar stock now post split she said it's a two thousand dollar stock right and you put these Fantastical price targets out there you attract attention and you know so you think maybe it's more marketing than I think so I think so because selling a Sizzle before the stake well I mean just think about it right I mean her bear case is like what like uh 500 upside um so it's just it's not realistic and but you know when think about it Kathleen would if you had if you ran a hedge fund right look at what her performance over the past two years and you had that performance you'd be out of business she's she's breaking the dough in right because she can say we're going to grow 50 or whatever her number was it's like 50 every year and people get excited and give her money and then she charges an exorbitant management fee and whether she's right or wrong she makes money so I think that the marketing is a big part of it um and it's unfortunate because those people could be allocating their money the money manager money managers who are performing which I think would benefit them two more Tesla questions and then we'll move on um you tweeted that when people find out in 10 years the battery is dead by the way with your you know Emoji here uh that in 10 years when the battery is dead the replacement cost is thirty to fifty thousand dollars right where did you get that that number that was wrong that was wrong I think the replacement cost is around ten to fifteen thousand dollars okay um so yeah sometimes we're not we're not 100 accurate in our tweets but the point is you know this is another thing we saw on Twitter like there's Tesla there's used Tesla cars uh let me know you say that because I forget the exact point but the point is like a used EV is not worth as much as a used ice my my car right is Gonna Last me you know it's 10 years old it's going to ask me another it's a Porsche um It's Gonna Last me another 20 years right if I wanted to if I take care of it you know your your EV car that battery when it when it goes out you're gonna have to replace that that's a replacement cost of 10 to 15 000 right you and me that that's fine right you more than me probably but we can afford that but you know the average American cannot so forcing an American you know forcing an American to take an EV without them understanding that cost but more importantly once these cars are used and that knowledge is widespread and well known the used value of EVS is going to collapse and that will hurt the new cells of EVS so that's that's the point we were trying to make last point on Tesla because you're very clear on Tesla right but the last point you mentioned that they haven't come out with new models cyber truck right I mean so you know right think about this right so when they did the Cyber truck launch right what is it like three or four years delayed now so when they did the Cyber truck launch they were saying it's going to be a 40 000 truck right we'll see if that's right I think it's probably gonna be double that price I personally think it's not that great looking uh given the issues they've had with their cars I think the specs are going to be significantly different the price the range Etc are going to be significantly different than what they've promised so I can't predict the future but what I can say is when they when they announce that truck we said the day they announced it there's no way it's going to be that price and it's going to be delayed and we were right um so we'll see what happens but I think that you know this this idea that they have all these orders and that all these people are going to buy that truck I think it's going to be significantly underwhelm um so we'll see what happens next topic you talk about housing bursts 2.0 yeah what do you think we've seen housing prices fall from about May to December uh Nationwide average around 10 some areas uh have been you know the Phoenix's have been more like 20 Austin um how is that going to affect this economy that's a great question so you know we're currently renting um but you think about it right a lot of the spending patterns in the US are driven by housing and more importantly how much you think your house is worth or how much it's worth so we've seen housing prices fall for the first time you know annual annual housing prices fall for the first time in a long time right mortgage rates are up the price the cost of a house is up significantly why why is it though because the FED brought mortgage-backed Securities and they never stopped since 2009.
that literally they're printing money out of thin air and buying houses that's the way to think about that that is unfair to young people who are trying to buy houses right it's great for people like you and me who not me anymore but who you I used to own a house great for us because our asset value goes up sure but this is artificially boosting the price of houses now you have mortgage rates you know 30-year fixed mortgage rates that were what two percent under three percent not that long ago now you're talking about just under seven it's just it's just a matter of math it's just more expensive to have a house so what happens is it's more expensive to have a house right um people are making literally the same amount of money mortgages are more expensive so you're going to have less demand so what I think has happened is and this is proven in the data you have a lot of people during the housing boom that brought second third fourth homes as Investments and I think right now they're keeping those houses off the market because they think we're going to go back to the euphoric period but if you think about the last housing bus right 2007-8 what happened was the decline in prices started in the East right you're talking about places like you know Florida um you know basically the east coast and then the people in the west didn't see it they say hey we're going to be fine it's not going to hit us and then it hit them slowly worked its way true now it started on the west and I think it's going to work its way to the east interesting and I think it's just math it's just that it's more expensive and you have this less demand um and as prices start to fall right from Peak to trough I think San Fran's down like what like I think 16 a lot of the places are down you know a little less a little more than that on the west um and those declines are starting to pick up so I think what's going to happen is you know prices price decline is going to start to fall more and once those people who are holding that inventory off the market put that inventory back onto the market that's what happened in the global financial crisis if there's like 3.5 units if they put just like I think 10 of that 20 of that this is all the vacant properties not fake uh it's it's it's properties it's not even necessarily vacant it's just properties that are being held off Market okay for whatever reason correct like you know let's say you own three houses right and you clearly you're not saying in all of them maybe you're renting a couple out it doesn't matter but you're not putting them on the market because you think prices are too low right but let's say you're in I don't know you're in Phoenix and all of a sudden prices are down 10 now they're down 20 you start to panic what happened in the global financial crisis people started to put those houses on the market right more Supply same demand prices fall yeah more Supply saying demand prices collapse oh yeah so I think that what that is what could potentially happen I don't know if that's gonna happen but that's what the data is suggesting and if that happens how does it affect the economy when your price when you're the how the value of your price the value of your house Falls right in your mind and rightfully so your wealth Falls and when your wealth Falls you stop spending as much and when you stop spending as much the economy as effective the wealth effect of course so you think a big risk to real estate right now is the potential collab or the rise of inventory because right now we have very shallow inventory in fact the first quarter much like we saw a very seasonably warm January which led to retail sales blowing up potentially due to seasonal adjustments as well we've seen some markets take up again in the first three quarters will that flip-flop back down when inventory Rises if inventory Rises right so I think I think the season know the blip we saw I think is somewhat seasonal but it's also because remember rates fell mortgage rates fell a little bit right 7.3 I think 6.4 yeah and that creates a lot of Demand right at the margin but again with with inflation now turning back higher right with the FED telling you we're going to do we're going to raise rates two more times and keep them there for a long time um and yet the Market's saying you're going to cut rates two times before you're in I think there's a mismatch so once rates correct to what the FED is going to do rates go back higher mortgage rates go back higher I think you're going to see a further law in the housing market what percent downside do you see in housing and then what does that translate to in stocks that's a good question that that's a very tough question I would just say you know the last housing crisis I think peaked the trough a lot of prices were down 40 to 50 percent and I think we'll see something similar I I would say look at where prices were pre-pandemic and look at where they are now and I think we're going to go at least to where we were pre-pandemic but typically price is undershoot back to Trend or or even below that I think it's going to go back to where the the price was not even not even Trend back to where it was where it was potentially lower and if that happens you know I think that it's going to have I don't know what the effect is going to be on the stock market but I think it's going to have a profound effect I would say you know we could see the you know the prep pandemic prices the pre-pandemic lows that's where I would probably get a lot more bullish on everything uh once the s p got down to that kind of pre-pandemic level wow would you do that with individual stocks if let's say you know Amazon or Google or pre-prandemic levels would you consider picking those up absolutely everything okay uh you know once we get back down to those pre-pandemic lows those scary lows you know pre you know fed doing quantitative you know QE Infinity um you got to get bullish stocks okay not saying you have to yeah but I'm saying you have to reevaluate your position if you're a bear so if you're you trade it seems like regularly I mean as we were setting up here it sounded like not not that I was listening to everything you were saying but it sounds like you're working trades right uh you trade what do you say to somebody who doesn't trade somebody who who's long uh and says you know what look I wanna I wanna buy some stocks that are going to be great in 10 years right I I I'm a long-term investor I want to make that clear um there's some positions that we trade around but we we like I like to stay in stocks personally you know six to 12 months that's that's my time frame 6 to 12 months is your long hold listen here's the reality this is a fact um you know two two great books I want to recommend this is actually kind of out of left field right now the stock market operator um and sorry say that again reminisces of a stock market uh operator and the intelligent investor great book reminisces is from a guy who is extremely successful in the stock market from like 1900 to like 1930.
but if you read it like everything that happened back then it's happening right now wow so my but my point is um with respect to the stock market um you know I do I do think that you know there's going to be ups and downs um but you know with respect to over the next 10 years over the long term the stock market's going to go up but I think there's going to be huge fluctuations including Tesla well I'm just kidding no no no um again I firmly believe Tesla's gonna hit our price Target um and when it does we'll read that we'll reevaluate um but you know you have to be nimble because um we've had 10 years of artificially repressed interest rates and you know quantitative easing essentially the FED printing money out of thin air and buying stuff and you know what people will say rightfully what a bull will say to me is Gordon why are you worried now right we've had this stimulus for so many years here's why I'm worried we now have inflation higher than it's been in 40 years that's a big change that's something that we haven't had over the past 15 years even though it's fading away but it's not it's it's now on the uptrend again if you look at the non-seasonally adjusted CPI it's now trending up and you saw a hockey stick in 2021 that's still going up right it was going like this and then at the beginning of the year when crude fell went like this now it's going back up right so I think that's a concern and again the data today kind of supports that month over month you know we're accelerating so um I think you got to be nimble um and the reason I suggested those books is because there's a lot of lessons in those books as to what's happening now look this Market is extremely unpredictable I mean you know you had you know multiple years of put it this way when the FED did QE Infinity right when they when they did that right the risk reward was pretty easy owning stocks but now that you've had you know the FED funds rate go from zero to five in a short in short order right you had a bank that had been extremely nefarious and Incredibly alleged to be engaging in illegal activities effectively bailed out right which is you know it's just you don't know what's gonna happen like what happens when the so my point is it's extremely hard to make money in this market but I think long term you find the companies that are trading at decent multiples not not not 60 times like Tesla you know you're talking about you know five to six times um or whatever the industry multiple is hopefully around where their peers are uh that generates cash and this is the business you believe in and I think if you invest in that you'll do okay do you try to do you ever consider like a PEG ratio so taking that p e dividing that growth or or do you solely focus on PE no no there's there's actually a chapter in the intelligent investor where there's a number of key points you want to look at before you invest in these stocks and I'm not saying you apply each one of those of course yeah sure but I like to you know I like to buy low sell High all right and you know a lot of these stocks are trading at generationally high multiples and those are the stocks we try to stay away from okay um a couple more topics here uh we'll do energy crypto and final question we'll wrap up so you have uh some strong Theses about energy solar uh it doesn't sound like you like for solar uh the Chinese have really substantially taken over solar manufacturing they did a great job actually I think I mean it's from 2013 they got from zero solar to basically now dominating the world and they've got some of the best Technologies yeah what what's going on what's going on with the energy Market is this going to be a short-term blip here in energy stocks a buying opportunity or long-term screw when you say energy I assume you're referring to solar specific group let's do uh yeah let's let's start with solar okay so with solar so the solar stocks are trading at in our view what are ridiculous multiples and the reason that is is because last year due to the push by people like you know Larry Fink at BlackRock Etc on ESG investing forcing money into that space as well as a lot of talk around um you know the green New Deal and then build back better and then find finally the inflation reduction act you know I think and this is our phrase I think the analysts in the space for the most part are criminally bullish oh wow and what I mean by that is you know first of all I just reported earnings last time I checked stocks down 10 today we told our clients we're like listen we've seen this before right we saw it with Obama when Obama got elected over the over Obama's full presidential term eight years the Solar Tan index fell 78 you would not believe that right why here's why we got in the stocks went up like gangbusters why because he said we're going to do solar we're going to do introduce all these incentives he did and people the South Side they were creating these like Fantastical future projections I remember one of the one of the key Theses was you know every single airport is going to have a solar panel on it that was and they create these like Fantastical projections but you think about it right the US is not the biggest Market in the world and just because you give me you know my neighbor right let's forget it I don't mean that but you know let's say somebody in the neighborhood right you give them a 30 tax credit but what if they're going through hard times are they gonna that you know they're not gonna buy the the discretionary 30 to 40 000 solar system sure so our point was to our clients you know people are making Fantastical projections they were doing that all last year which is why the stocks ran up and now these companies are reporting earnings in phases down 26 percent right First Solar down nine percent didn't go down 10 today they're reporting their earnings and the earnings aren't matching up to the Fantastical you know projections we I've been covering solar longer than I'd like to admit I'm embarrassed I've been covering solar since 2007.
so I've seen these Cycles where people get extremely excited and then reality meets you know meets the road and I think reality is going to meet the road this year but the other problem is solar doesn't work and what I mean by that is you cannot replace distributed base load fossil fuel power with intermittent Peak load solar slash wind power and the reason is because you know the eia used to put out these grid parity analyzes and they were saying you know solar power is equal to the cost of fossil fuel and that couldn't be any further from the truth and in fact if you call the eia up they'll admit that now they've included um you know transmission costs um you know brownout costs Etc solar is exorbitantly more expensive and the poop is in the pudding Look at California look at the cost of power in California versus United States it looks like this California same with Germany so I think solar is a good short this year because you've had the stocks run to Fantastical levels based on projections that are ridiculous and I think longer term the reason why we like nuclear is because if you believe that we need to move towards we need to move towards you know zero carbon electricity solar is just not real a real solution think about this right you know Merkel pushed solar on the European Union right solar and wind and they went all in on solar wind and what happened they shut down their coal plants they shut down their nuclear plants but really happened they became Reliant they just basically they're importing power in from Russia that gave Russia the power literally to start a war because they knew they could do it and they would still have to buy Power from them this is dangerous energy security is dangerous um I want to give you a statistic here uh you know you know a lot of the politicians talk about how um you know people are you know CO2 emissions people are dying um so let's see here deaths so since 1920 deaths each year from natural disasters have decreased over 90 percent and one of the key reasons this has happened is because we're investing in things like you know fighting um you know rising sea levels Etc um let's see here CO2 emission that's not the stat I wanted to give you hold on let me find this stuff um and then I'll also while you're looking for that I'll ask you about batteries because that seems to help with that intermittentness of solar and wind so um so let's see here um so yeah sorry um I can't find the statistic but for instance one thing one thing I wanted to make sure I got in there so think about this right so the world has invested four trillion dollars overall in wind and solar over the years and right now the world gets three percent of its power from uh Renewables right and Elon musk's Master Plan Three he's saying with another 10 trillion invested the world's going to get 97 of their power from Renewables do you realize how ridiculous this is do you understand what I'm saying well based on the numbers that you gave I'd obviously I'd have to break them down but based on the argument you're making it that sounds ridiculous right right so one thing I want to highlight right and I'm gonna read from my notes if you don't mind so we're spending trillions of dollars on solar and wind right let me let me give you a statistic so um in the Netherlands right right now the Netherlands sits sits two feet below sea level right but because over the top past 500 years they've invested 10 billion dollars right 10 billion dollars over the past 500 years um they've prospered right so my point is is spending all this money on solar the right way to spend it so if California focused the money that they're spending on solar on forest fire prevention prevention or nuclear um instead would it be money better spent um you know folks in the Netherlands that spent 10 billion dollars over the past 500 years and despite currently being two feet under sea they're flourishing in fact there was a global sea levels have risen one feat over the past hundred years and everybody in the Netherlands is fine um humans are amazing at adapting but sending trillions of dollars to China for solar panels I think is a huge waste of money in fact the airport in the Netherlands right now the airport was the site of a naval battle so you know these fears that oh my God Florida is going to sink under the water if we invest in prevention versus China these solar panels that's proven to be the way to go and I think that the money that's being wasted on solar right now is potentially setting us up for disaster do you understand what I'm saying oh yeah I absolutely do I also agree with your argument on sort of a household level that in these more challenging Economic Times where homeowners who are obviously have to be a homeowner to install solar homeowners are going to be potentially under more stress than let's say a minimum wage worker who's seen their wage rise 50 right yeah you're probably going to see less investments in those 30 40 000 projects especially and actually to to some would reiterate your argument despite the fact that I actually like companies like endphase out of the solar panels right they're into batteries and inverters um one thing that you're right about is with the new net energy metering plans you basically have to get solar and a battery but that now makes your entry cost twice as high for getting in so yeah they're I think I actually think you're right there's a reason to be short-term bearish yeah I mean you so we the only battery tax rate we have is from the California solar initiative CSI and none of my peers track that data it's extremely hard to parse through I had to hire a um a a a data engineer but the point is the battery attachments are collapsing wow that's supposed to be going the other way okay this is just the data I'd love to see that yeah the problem is nobody's tracking this data but you're seeing it right in Phase their battery numbers were horrible um the same thing with the other solar companies that have reported earnings that sell batteries so it's just simple right it's like people are hurting more economically you're talking about a 30 to 40 000 discretionary purpose a purchase solar panels and batteries you're not going to see people buy more of that when the economy is getting worse yeah and face has this argument and I I have a feeling I know what you're gonna say but give you a chance to say it and face has this argument that well you know we sell to wholesalers and in q1 we tend to have a very lagged sale a sell through you know wholesalers have inventory but in addition to that because the cost of capital have risen so has risen so much a lot of the wholesalers are trying to reduce their inventories therefore may be ordering less from end phase end phase thinks this is uh that Q2 will be the bottom in that what do you think is is that right but these same companies were telling you when they reported you know Q3 numbers that you're going to have this massive demand pull in ahead of any M 3.0 taking effect in California it's like they're complete everybody's completely forgetting what these companies told you just three months ago you were supposed to have huge beats in q1 sure right from all the solar companies because that's why when they report earnings the stocks are actually falling right because because of Any M 3.0 taking effect in mid-april yeah the q1 numbers are supposed to be X you know out of this world and now they're actually coming in disappointing these guys are like oh yeah it's going to be better next quarter look I've covered solar forever uh again embarrassed to say how long and the reality is if you go back to 2009 and hey when things get worse these companies get more aspirational the marketing gets worse um so I think the reality is it's too expensive and if somebody's honest with you call somebody to your house who's honest right doesn't care about stocks and say hey should I buy a battery or should I buy a generator and see what they say interesting 100 a 10 out of 10 times they're going to tell you to buy a generator because that solar battery when your power actually goes out is going to give you maybe in two hours of power whereas a generator will actually give you real power it's just the technology is not there yet and it's it's exorbitantly expensive so sure bearish or forever bearish let me give you statistics so it would cost a hundred trillion dollars right and take 400 years to build the batteries lithium ion batteries current technology necessary to power just Europe this winter that's from the Manhattan Institute um to move every car on the road to EVS the world would have to double its grid capacity costing trillions that would send basically when you're talking about a hundred trillion or trillions of dollars you're talking about hyperinflation pretty much everywhere right and by the way no one's doing that right now um if you covered the entire continent of the United States according to the Manhattan Institute with solar panels it would power less than half the country you know so the math just doesn't work um you know um so the Battery Technology is not there we've said this for a long time we said that you know the reason why you know in-phase trades where it does and solar Edge trades where it does is because you know these batteries were supposed to explode right they're supposed to start happening in Q4 then it was going to be q1 because of Any M 3.0 now that it's not happening in q1 oh it's an inventory thing it's gonna happen in Q2 they'll tell you this as long as their stock is up right this is our opinion but it's not happening and it's not happening because it's exorbitantly expensive and it's extremely inefficient and if you don't want to trust take my word for it call a solar installer who's honest right ask the guy who's actually you know the guy who's not trying to sell you a panel asked the honest guy to get maybe the guys who come install and say hey should I do a generator or a battery and see what they say they'll tell you the truth you can call the Generac sales folks because they offer both right they offer better batteries and so right all right last question um you know let me do a really quick rapid fire and then I have that last question so really quick rapid fire uh bullish for bearish crypto bearish script though let me tell you why okay number one the tech doesn't solve a real problem it's simply used to speculate you got this one written out number two it's not a real currency and can't act as a functional currency why because there's a fixed Supply any time in history where you've had a fixed Supply currency it fails tremendously number three wait wait wait that's a big claim right there you're saying because but because people argue that the value of Bitcoin is that it has a fixed Supply you're saying if it has a fixed Supply it's going to fail let me let me explain yeah so let's say you have a fixed supply of dollars right and the economy goes into a tail spin right for instance we had covet right sure what did they do they printed money of course to save us right they needed to do that right I think the initial 2 trillion was understandable I think it was too much the original cares okay but if you have a fixed amount you couldn't print anything yeah well that's true it wouldn't work um number three all cryptos are unregistered unregistered Securities and number four private currencies have always been disasters I'll talk about you know the problem you know the wildcat banks of the 1983 1937 and 63 time frame you know these so-called wildcat banks the issue was their reserves were not verifially backed thus they were subject to runs in which customers couldn't access their funds every time in history we've had a different form of currency it hasn't worked so for those four reasons I think crypto is literally worthless outside of speculation wow uh so uh that then that goes for all all ethereum all the derivatives defy I agree with Munger it's like rat poison I think it's purely speculative and you can see that right Bitcoin essentially moves with the NASDAQ can you can I go to Burger King right now and buy a burger with Bitcoin can I can I buy a car with Bitcoin you understand like it's it's it's it's literally ludicrous this is what happens this is what happens when you print trillions of dollars you print you know 300 years worth of dollars in two months you have stuff like this happen you have like you know pictures being sold for millions of dollars nfts I mean this is just crazy stuff the last question is uh a little dare I say out of left field you have but it's from your Twitter uh you uh quote tweeted this uh from a black millionaires Steve Harvey explains what's wrong with this young generation of men today that was today yeah yeah this young generation of men today asking what women bring to the table this is very Andrew Tay desk right right and uh his response was a woman can make another you so I want to ask you where is your mindset on on this Andrew tadism that we're seeing now yeah I don't know if I'll comment on that but my point with that is I just think that um you know I just think the men need to step up um and I'm a firm I'm old school you know I was you know I'm I'm a little older and you know my parents were alive during the times of um you know when black people in the US are fighting for their civil rights and I think that you know men should you know step up and and take care of their families and their kids I have no view on Andrew Tate um I'm not gonna go there but that was that was the point of that um you know I just I think I think it's a good thing for men to step up and um you know take care of your family very nice anything else that you'd like to add this was great when I sent you the tweet I thought it was going to be confrontational this this has been great you've been extremely nice even off camera um thank you thank you this is amazing shout yourself out how do people follow you and and your firm uh we're glj research you can see our website um and you know I think everybody knows our Twitter address perfect awesome well look forward to seeing you again in the future thank you so much
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