Welcome back everyone: it has been a minute since we have done an interview about the state of the market with an absolute expert in the market and i'm so excited to bring back ross gerber from germa gerber kawasaki they've got an etf. That's actively managed at a ticker symbol, gk uh yeah. You can get it on weeble, robin hood. You name it we're going to talk a lot about the markets today, but we're going to start by talking about a tesla, then we're going to talk about the commodities potential super cycle.

Are we going to invest in oil or what are we going to do? Uh we'll talk about inflation and some of the other uncertainties going on, and so without further ado, welcome aboard ross and welcome back super good to have you yeah thanks for having me great to be back what's happening, a lot has happened. Texas is getting tesla's headquarters. Tell me what is your take on tesla moving out uh moving their headquarters out to texas, uh and uh? When are we finally going to get the cyber truck man, i'm tired of the delays and right self-driving button and how's your new tesla there's so much yeah? You know you don't have the button yet on yours, where you can request it. No button.

I got the 2017x. You know. I've been a loyal, tesla fan boy here. Did you pay for driving dude i paid for it? I got the computer up.

Oh my gosh. I spent an hour on the phone with them. You know. Sometimes i get.

I get the cynical comments in the chats or whatever people are like well kevin. You should drive safer from like i can't even turn on this. No, it's not right exactly exactly um. You know i i'm still like, i pushed the button, but i haven't gotten a safety score and i haven't gotten full self-driving yeah and i'm like dude.

I deal with you like all the time. Just send me self-driving right, but i'm not i'm not a safe driver at all. So you know that i i you know at first. I was like i'm going to drive more careful because i want to get this and i was like screw it.

You know, like i don't care. Like i drive the way i drive, i drive a plat, it's a fighter plane, you know, and so it's like i'm not. I don't care. You just got that too.

Like what a couple months ago, you were one of the first yeah i've had the plaid now for uh three months and it's an incredible vehicle. It's it's not only the fastest vehicle on the road by a margin like again, yet you know there's a lot of ferraris like in the malibu palisades area and again this guy in a ferrari, older guy pulls up next to me, and he sees it's a plaid And he's just like takes a deep breath because he just knows i'll smoke him beyond belief and he paid like twice as much for his car. You know, but the car is also super comfortable. The technology is awesome because they upgraded the whole technology inside the car and then on top of that, it's like really safe.

So what did you have to save his car? I had a model - 3., okay and so you've noticed a difference in the technology. Is it much better like they put the new technology in the plaid and it's way better because they took out the stalks like you, don't have to shift anymore like it's trying to use ai to guess whether you're going forwards or backwards, which is not a really Hard challenge - and so it's pretty good at it, so you don't even have like shifting, and then you use this yoke, which i have mixed feelings about. But it's like a video game controller, so use your thumbs for stuff instead of stalks, but the actual screen technology has been upgraded in many ways that i think will be pushed out to the other vehicles. Soon, it's really quite good yeah.

I still have the 17 model x and when i go to type in on the navigation, i i'll push like one for the beginning of the address, and then i kind of have to wait like a few seconds before it. Lets me push the next number. You know it's like the old it's like having a four or five year old computer or like an apple. It's like oh man, they're, like purposely slowing this thing down, tell me about it and have that problem right now.

Actually, you know i was like talking about apple stock. This week too, like when we get to christmas, i mean everybody's gon na be upgrading, ipads and stuff. I mean we've beaten the hell out of these things and and exactly what you're saying it's like you open up your your kid's ipad and it's like moving like you know: it's like a commodore 64., because he's got like 17 000 downloads of unspeakable or something you Know yeah no kidding my uh, my kids are watching and speaking so well, that's priceless! So what else i can see everyone. Hopefully your fans are as loyal.

You know what i mean. I mean you got. You got purple, hair or green or whatever cover that is, like your fans, better, be loyal, because you are certainly loyal to your fans and you're, certainly loyal to your state. After all the pain you went through running for governor by the way.

Congratulations, i mean. Thank you, the fact that you got every other vote over every other candidate than the republican that spent you know, 30 million. It's so impressive like thank you. It's really impressive kevin great job, great thanks man.

I appreciate that one. Thank you for your support as well. That's awesome, so i want to know, though tesla man, this thing has been uh kind of trading sideways this year i mean, i think, we've gone from what like 7 15 to well now it was true yeah if anything, it's down, so so you know it's lagging Here, uh: what's uh? Is it just because we had a good year last year? Is it the supply crisis? Uh? You know. What's what's holding back the evs, the entire ev sector, the lucids, the neo, the x-pings, the leona, whatever the arkamoto right, they're, all not doing too hot here in 21? What's going on right? So so, yes, you have to preface like stocks are discounting the future.

So like when tesla ran up last year, it was unanticipation of all the good news that we're seeing today and that's why tesla stock isn't down, because it actually did deliver record results that we expected from it a year ago so like when you looked at tesla. As a 30 to 50 billion dollar company, where it was before the big run, then it went up 20 x. You know now we're sitting here and now we're seeing them deliver what the market saw, and so so it's like a digestion. You know it's kind of what netflix has been doing for the last six seven months and now it's breaking out.

You know. So when stocks have a big run on anticipation of great news and then delivers oftentimes, you don't get the gain when it delivers you're. Getting the gain six months to a year before so stocks, in my mind, typically are discounting about six months into the future. What the expectations are can be a year, but typically six months, so right now, tesla's trading at a price.

That's basically saying well, things are really good, but what's next you know what's the next catalyst to move the stock to a thousand, which is what i think it's worth and why we've been buyers in my fun gk in my personal account as well. I've been a buyer of tesla here, um in the 750 range, and my previous i was buying at around 600 and i've moved my buy rate up higher now, so i'm buying tesla on any weakness at all. I've never been more bullish about a company. In my entire career, as an investor in the entire investment history of america, there has never been an opportunity to be an investor in innovation that is so globally significant, so massively important to society and with a beyond genius running this crazy operation that that the 10-year You know opportunity is unlimited, unlimited, just like four listen.

If the biggest issue ford has is the fact that it's for not the fact that what they're trying to do in the future is wrong. They get it now, maybe three years or four years late, but they get it, but the problem is what they already owe and what they already own are lots of ice vehicles that they sell, broncos, which they're selling a ton of right and a lot of car Dealers that they have basically like sold their soul to that they can't really get out of so they have a business model that, unfortunately, involves selling. You know gassy vehicles that need lots of service and now they're trying to switch to a you know, model that doesn't involve gas and no service and there's nobody at four that wants that for real. You know, because it's bad it's bad! So if i sell a maki, i lost a sale.

If i sell an electric pickup, i lost the f-150 sale. It's just ford, customers migrating, that's not a great business! That's interesting! You mentioned that because i think about my tesla, the 2017. I've had the thing in service like once, you know when i first got it uh. There was an issue that got handled and then i had it in to change its tires, but like they put the little self-driving computer in at the safe.

At the same time, the upgrade but beyond that this thing has had like no maintenance at all, and i remember when we first bought my wife's uh minivan. It was like all right, we'll see you in three months, we'll see you in six months, we'll see you in nine months. You know like here's, the schedule, the maintenance schedule right, yeah and uh. That's interesting! That's a big revenue driver and you're right.

I didn't even think about that if, if ford pushes evs too much they're really slamming all of their dealerships revenue models - oh absolutely, you know this is the whole problem. So, like my model 3, i bought was one of the first model, threes that i bought, and you know that model three i had for about three years three and a half years and and the model three basically needed nothing, nothing ever no service, no oil right. No brake changes. Now i had an aston martin before my model three, and i can't tell you how often i had to service this.

It was like, and, and actually it was quite common actually during the time of like that day, that i had that car that it was like. Oh you know like. Why would you buy this car? It's always in service. You know, and i'm like thanks.

You know it's like a 150 180 000 car used and i was like it's always in service. So so then i looked at a ferrari and that guy at the ferrari dealership actually told me when i bought my maserati was like you: don't really want a ferrari because essentially you'll be here all the time - and i was like i don't really want to be Here all the time you know so so, essentially, the model of all car companies is service, so they build a vehicle knowing in three years it will need lots of service and they all benefit from this ecosystem, and when i started in the business one of my First group of clients were auto body shops in la just, coincidentally, and and i never realized how big the auto industry was. Until i started going from body shop to body shop and saw how much money all the people doing service make. So if you're, not a highly educated person - and you go to these - you know mechanic schools and you learn how to work on a bmw and you become like a certified bmw specialist.

It's a very good job too. So for many auto workers. Servicing vehicles is a very good job and supports a huge ecosystem, and that's really the problem with this dramatic shift to evs is a complete change in the ecosystem of automotive companies. Yeah, that's i mean that's just entirely fascinating, especially since uh.

You know you even heard from elon musk yesterday that they're considering leasing out their full self-driving to uh subscription, essentially to other manufacturers. How do you think that's gon na work? Do you actually see somebody like ford going? Oh yeah, we can't figure it out. Let's just rent uh full self-driving from tesla i mean, isn't that, like the biggest testable ad ever that that a legacy company could potentially just uh just buy, i mean who knows maybe white labeled right it'd be like oh no. This is ford self-driving, but it's really tesla in the backbone, but that stuff comes out.

You know people know that uh is something i don't think it'll work yeah, because you need the cameras and, and you need the brain and so you'd have to buy like a package like the waymo package for your car. You know you need like it's just. He said it because i think he he means well, but i don't see how a car company would adopt licensing yeah. It seems like they would almost have to be manufactured with the eight cameras or whatever and have you have the cameras essentially already there and then just apply the tesla software, but is a company really going to? Is somebody really going to do that? Like is gm? Going to be found dead at leasing this stuff from tesla, it's just not going to happen because of all those issues from the manufacturing and technology perspective of of what is put in a tesla.

Just like you can't just like license out an apple. You know like right can, can i just license an iphone? Well, you can look at a samsung and say it's pretty similar actually, and maybe the hardware and software in some ways are better but the ecosystem sucks, and so it's, like you know, elon, said a couple of incredibly interesting things yesterday, which is why i pay attention To him yeah, you know, and he was saying we're as much a software company as we are a hardware company right. It's very important to understand that that made me very bullish that statement, because it reminds me of apple where they really understood they had to make hardware. That was great, the best phone and they did, but they also fully understood that just being a great phone isn't a great business because it becomes a commodity.

Just like tesla's itself. You know the manufacturing margin is, is okay, but when you add in the software margin, that is huge. So when you sell 10 000 full self-driving, you know package, that's probably like eight or nine thousand dollars of profit, because you develop the software and it's scalable forever. Right so it's like microsoft and then, when you build cars, you build this great car with a five or ten percent margin, hope to sell and scale.

So when you combine that it's it's, what apple is and it's what tesla's become that's incredible now. Do you think that somebody like lucid can actually hold a candle to what tesla's doing they say? They're gon na actually start delivering cars here uh in the next two to four months. Yeah. You know lucid's a company, i know well.

It was actually a year ago when i went to a shareholder meeting in fremont that i went to lucid and i love the vehicle and i think they've done a great job with design and hopefully, production they're well behind the timelines that they laid out to me. So you know that you know being said. I i don't think lucid looks at themselves as a tesla tesla's, an ai company tesla's, trying to solve an incredibly difficult challenge that i don't recommend people take on. You know and lucid, isn't trying to solve that challenge.

What lucid is saying is we're gon na make a high-end ev that we can sell a hundred thousand a year of, and if i can make a hundred thousand cars that sell 150 000, i got a 15 billion dollar business that might be worth 50 billion. You see what i'm saying yeah and that's a good company. It's a good, solid, ev company. It reminds me of like a porsche of evs and or a ferrari of evs, where you have a high-end luxury car maker that will probably take share from porsche and mercedes, and i, like lucid, the valuation is, is already half that you know it's.

I think 30 billion or whatever um so there's upside in lucid, but it's years away and then you've got the saudi arabia angle, which is: are they going to use lucid as their little toy to bring ev technology to saudi arabia? Even though it's not to the benefit of shareholders, or it is to the benefit of a shareholder but not outside shareholders, and so i don't like, when majority shareholders do what's in their benefit at the cost of the minority, so i'm not in loosen. How would that work? Why? Why would uh you know lucid selling evs in saudi arabia, be bad for for american shareholders, not selling, they would put a manufacturing facility there. So what what saudi wants is? What china has where you put the evie facility somewhere and you build this eevee, you know mecca in mecca, you know or whatever, and so it's like they know that oil is dead and and and they've now forced prices up so high to try to make up For all the losses over all the years and to pay their bills coming forward and all the investments that they've lost on an oil supply, that's in the ground that, if they take out of the ground, will force prices in half. So saudi arabia knows that they need to shift their economy into the modern era and they've invested in many things, whether it be an entertainment soccer team yesterday or in ev technology like their tesla investment and when they got frustrated with tesla and the whole funding secured Thing when they kind of screwed eon, they sold their stock right before the rally and they bought lucid.

So their goal with lucid is really simple. Is they want to bring that technology and start manufacturing evs in saudi arabia and make saudi arabia the eevee center? For the middle east now great idea for saudi arabia, but for lucid it's the worst place you could ever put a plant like. Why would you want to manufacture cars in saudi arabia? It's like a zero, like there's, zero intelligence of that. It's like from like why you know like why why workers? Okay? Well, because you, you know saudi arabia imports almost like slave labor to to do the work on the oil fields, and all this you know the typical saudi arabian doesn't work in an oil field or a manufacturing facility.

Many people in saudi arabia are just supported by the government. They have government jobs, everybody gets a government job and you're just supported, so you have basically two stratas of of you. Have you know wealth and utter poverty, almost like slave labor? And that's? Who does all the labor so they would build these? Like almost like chinese plants, you know um and essentially their society is so um backwards. Like women can't drive to work, you know like you're, still working in a society where you know like murdering you know, dissidents in foreign countries and cutting them up into pieces is okay, so i don't think it makes a lot of sense when you can open a Plant in europe or in china, or in asia like if i was going to open a lucid plant, i'd, be opening asia.

You know it's like sure. It's a no-brainer no-brainer look at tesla's, china, tesla china is the it's the killer app. You know they're killing it in shanghai, these the chinese manufacturing ability and their intelligence and the workforce and the productivity is, is unbeatable. So that brings up a company like neo uh uh, you know battery swapping is obviously a little bit of a different direction, but you know arguably they're they're doing pretty well with self-driving as well, at least at similar levels, where we are now, certainly not with the Full self-driving beta, but uh similar levels to what we have available in our cars now uh is, is uh neo.

You know, they're, not gon na go structural battery packs. Obviously, so we've got some differences here, but are are they maybe a chinese recovery player? Are they a long hold for for evs in china? What's your take so my favorite ev company in china is byd. Byd makes evs in scale, they sell them in scale and they've been successful for a long time. So byd is my number one pick now.

Neo is the wannabe tesla of china and that's what concerns me is there's a lot of this like flashy stuff and they have been delivering cars. So i'm i i don't own neo in it, so i don't really trust chinese stocks. So, let's start with that. Yeah investing in china right now has enormous risk.

I think the biggest risk to the stock market is not inflation. It's china, the china's. The chinese economy, is under salt from over leverage and real estate collapse. It's very very similar to the financial crisis in the united states in its structure, where you have hundreds of billions of bad loans or empty apartment, buildings or unfinished buildings, and not the money to pay for them and there's only one solution to this, which is the Chinese government's gon na have to rescue all these real estate investors just like we did, and this process is going to have to play itself out and right now it looks like a slow like a slow collapse because they're like trying hard to prevent it, but you Can't see what the chinese are going to have to learn.

Is you can't stop economics? Economics is like like nature, so you can't stop water, like you know the grand canyon or something like that. I guess you could build a dam, but you know it's the water's still coming, and so it's like chinese built this dam saying like oh well, you know who cares how many bad apartments we build? We have jobs and eventually somebody will buy them. Well now people bought them, but they haven't finished them and they're not going to finish them and they bought a lot of money, and most of this money is internally borrowed. So when it goes bankrupt, it really destroys chinese people, they lose their jobs construction.

You know this because you're in real estate construction creates so much economic activity. It's just oh yeah. It's the driver of economic activity here in la it's non-stop construction! That's why i'm in this room right now, i wanted to shoot outside, but there's like tractors going everywhere like mansions, going up like like they're, you know like tiny homes. You know it's like it's crazy.

It's it's crazy! It's like insane, like nobody, builds a regular house anymore. So when you think not here in l.a it's you know, you tear down a house and you build monstrosity which is just a nightmare, so so it employs tons of people and so with the chinese. Real estate slowdown, it's going to have this negative cycle of defaults, layoffs, less income, less spending and that's how you get a recession and the chinese are setting up for their first recession and so, fortunately, because of trump and the trade war. We had already started weaning ourselves from china, and this process is going to go full bore now, as the chinese continue to threaten taiwan and continue to take belligerent tone which they seem to have changed their tune.

Recently with uh. She offering a summit with biden, which i found timing to be amazing. You know, like she's timing, he's like well we're about to run out of money. I better call the americans, because i might really be screwed wow wow.

That's that's a really good point. So uh, you know, i mean evergrand uh, it was was a big deal about two and a half three weeks ago. Uh since then, we've heard of some other smaller property, uh developers defaulting and really it seems, like the chinese news, has kind of gone to. Like page two of the paper uh, is it um? Is it complacent to say the chinese threat is over uh yeah and is it going to come back harder and stronger? You think so? So i don't.

I don't worry about inflation, like i don't worry about what the media is worried about, because i think that's very short-sighted when there's real things to worry about like china and that's why it's on page two, you know three because you know it's like. Oh, you know this is a real thing that might really be a concern, so we have to distract people with things that aren't that important um. I i've been really confounded by china's actions recently because i really saw an opportunity in post-trump for she to bring us closer to the benefit of both of us. Saying like this whole.

Fighting with trump thing was bad. Now he's gone, let's make up with the biden administration and let's work together because ultimately in a global economy is connected as ours. The more we work together, the more prosperity the globe will have: okay right for a hundred reasons, and so like that didn't happen, and what happened was she said, i'm very concerned about losing power to jack, ma and ponymaw, and capitalists and money and billionaires and famous Tv stars and china has video games everywhere and everybody's happy in china. It's china's great and he's like, but i might lose power and the way it works in china.

Is you don't lose power, so he was like i better reign in all these forces that make me seem like an old fuddy, duddy, wow and so boom boom boom boom boom boom boom. He just takes them all and throws him in the jail and that's it. She controls the country. Now, if you don't do what he says you are out of business, you are in jail, you will be deleted from the internet.

You will not exist. Jack ma is gone forever, wow forever, that's great! So what you're saying is you want to start a fund in china? No, what i'm saying is americans should sell all their chinese investments. They should sell them all. I i've kept a little bit in the the battery makers and the tech makers, but the bottom line is that your money is not safe there.

They don't respect shareholder rights, they don't respect outside investors it. They are more concerned about control than prosperity in. In the short term here - and i don't see - they've alienated themselves from the world and if they keep messing with taiwan, they're going to wind up getting their butt, kicked okay, so whether they, whether they like it or not, taiwan is a free country, okay, and they Have no rights or claims to taiwan or the south china sea? We control the south, china, china, sea, we've controlled the south china sea since the battle midway since world war ii. Okay.

So if you want to mess with the u.s navy, they will learn very, very, very hard what a mistake that would be as incompetent as our military is well. It's weird could have a whole live stream on that one alone there, but uh yeah, so that that's very interesting so uh - and i i do - i mean looking back at some of the things that have happened or have come to light even just over the recent Couple months here, it does seem like what you said about. China is exactly what they're doing. I mean restricting video games for children under 18 to certain periods during the day, a couple hours a night or whatever, and that's it.

You've had uh stories of uh real estate property developers, successful ones that uh. I can't remember the name of this one, but i read the story about this: one really successful developer and all of a sudden uh whether he was forced to or whether he chose to. I don't know who would choose to, but whatever uh gave essentially a televised speech about how he yeah he was a fraud uh and then before you knew it. What are you expecting? Of course he was forced to you know, that's i'm just saying like yeah i mean there's there's you know so chinese.

You know i i have relatives in china, so i you know my my dad's wife is. Is chinese and my stepbrother's chinese and i have family in china, so i know how things work in china and - and i can't you know - i don't want to get anybody in trouble, but want it one of my my brother, my stepbrother's real father who's chinese was Jailed for a period of time over a property transaction and the politician didn't come out ahead, and so he jailed him. So i know what happens in china. So what happens in china is like if you get in trouble.

There is no like justice system. If you get in trouble, you go to jail and what happens is. Is they put you in a room in a very uncomfortable chair and you sit there? Okay, until you confess you know like it's, it's like they don't even have to resort to like crazy, tortures and stuff like american, like guantanamo stuff. They just like you'll sit here until you die okay, so either you confess or you're going to sit in a wooden chair for the rest of your life.

You know, and so people, just they confess like there's it's how it works. The conviction rate in the courts is only 99.9 yeah, so so the easiest thing you can do is just admit all guilt. You know say i i'm horrible. You know re-educate me and let me back out that's what you have to do to be free.

If you get in trouble in china, it's so if you want to read about how socialist or communist government's justice system works, just read a little history of it um. You know the post-communist era uh after the communists took over what they did to people um. Certainly, we all know what happened in cambodia when the communists took over. They killed millions of people and if you really want some beautiful history, try some russian history under stalin.

You know wonderful communist regime that murdered and killed pretty much. Everybody came in contact with so murder and torture in jail is a part of socialism and communism that bernie sanders and aoc don't like talking about, but you like aoc, i don't like aoc. You know i i like what she represents. In theory, young people motivated to make a difference like i love that about her and using social media and shaking up the establishment, and many of the things she does are, i think, are very good but she's also completely clueless like she just doesn't have a world View that's accurate and it's mostly, i think, because of her age and her lack of experience in the world and so her belief systems are off and so often she's pushing an agenda.

That's false and because of that she's discredited her value and so now she's. Just like a laughingstock, you know it's like whatever she says, she's a joker. You know so she's actually done work more harm for the cause. She started off.

Doing tremendous good and now she's doing harm for the cause of young smart women becoming politicians, because she keeps doing all these things that i think make her look really dumb and and so people we need young people in government. That's why i supported you. That's why i like aoc or whoever i want, like i tweeted, that if you are over 75, you shouldn't be in government or something like that and it went viral like crazy viral, and i was like wow people really feel this way. You know like we have really old people running our country, who are totally clueless, like my grandpa is young compared to the people who you know, i mean it's like my grandpa is dead, that's the joke, and so it's like when you look at mitch, mcconnell and Chuck schumer and nancy pelosi a bunch of 85 year olds arguing about the budget in our future.

We should be concerned really concerned wow, wow, so uh. I want to know moving from uh from china and politics. You know there's talk about this super cycle coming of commodities, inflation that we might that we saw after world war, one after world war ii, somewhat right before the great recession uh leading up to about the summer of 08, where uh, you know, we've seen it recently. Aluminum prices, uranium prices, copper prices, lumber's falling off its highs, but it's already started inflecting back up.

Are we in a commodity super cycle? Do we go all in on oil and natural gas and and some of these other uh commodities right now, uh to to hedge against uh? Clearly this inflationary storm, so i don't know, what's going to happen in the future, any more than anybody. So when i talk about what i think is going to happen in the future, i always kind of laugh at my predictions because they're never right. So, no you know predicting the future is not a business. You should be in unless you work as a fortune teller in a carnival and then it's a great business, because people like my wife, like do these tarot card things and and insist that it's true.

So i don't read tarot cards and i do have a crystal ball in my office just so when people ask. If i have a crystal ball, i say i do, but the crystal ball has produced no returns. You know like zero percent. So, like i don't like look at my fund and then rub the ball and say what stock, what stock should i add to gk, you know, and it never says, like you know, add upstart holdings or you know it just doesn't tell me so so i have To just do that on my own, so when you're trying to predict the future with inflation, i think about my entire life.

There has not been inflation, so when i was a little child there was this thing called the oil embargo where iran didn't give oil to united states. Oil prices soared and inflation went crazy back in 1978. Okay, now i was this little kid and i would get in my mom's car and she'd be like we have to get gas, there's no gas, and only on tuesdays, thursdays and saturdays. Could you get gas literally one of my earliest memories as a child? Was my mom, who actually now in hindsight, was a young, attractive woman with a little baby and like a gas guzzling chevy or whatever she was driving? And she would she pulled into the gas station on the day that we're not supposed to buy gas? And she was like, we need gas and she was like son.

You shouldn't do this in real life, but i'm about to like lie to the gas station guys. So i can get gas you know and - and she like basically like gave him a pretty smile and like he filled up the tank because back then you had full service. You know and like a dude, came and filled up your tang and then when he looked at the license plate and saw because it was based off your license plate like odd or even that she wasn't. Let's get it.

He was like you're not supposed to get it. She was like. Oh sorry, you know i got a little baby. I got ta, you know, and i and i'll never forget that.

Okay, because i was like my mom said, lying was okay. If there's a gas crisis so um, i don't know if that was the lesson i got. I think the lesson i got is sometimes you got to do what you got to do. You know but like when you go back to the 70s and you think about when we had a real inflationary problem.

It was such a different world than today. So again, let's fast forward to today, oil prices are high. Why? Because saudi arabia and russia is like f everybody, we want we're not going to produce another barrel of oil. There's plenty of oil there's no like shortage of oil.

It's not like, like. Oh iran is the only person pumping oil we've got shale players like oxy yesterday said i would rather pay dividends to my shareholders than pump more oil if it brings prices down, because, quite frankly, things have been too tough on us the last couple years, rightfully because Oil shouldn't be used, and - and it's like so now we have to make in profits, because this could be the last time we make profits ever again. Okay, wow and so oil is a cartel, so think about what a cartel means: they're actually illegal in the united states. I was talking about this.

You cannot afford a youtube cartel right right, like you and all the youtubers get together and say we're not youtubing. Unless you pay us more, you know per stream, you know and youtube would be like delete. You know, like sorry, no more money for you, kevin delete and so like you can't form a cartel in the united states. It's not legal, but yet now our oil producers are working with opec.

The oil cartel secretly to keep prices high to gouge, u.s consumers for profit. This is not about inflation. This is about profits. Over people do not be confused.

Okay, that's oil! Okay! That's interesting supply chain. Oh sorry, i was just gon na say it seems, like fracking really took off uh. You know before the pandemic, the the maybe the decade before the pandemic seems like fracking really took off and we were. Finally, you know there was a time in the early 2000s we're like we're going to run out of oil in 50 years.

You know, then we discover fracking. It's like we got ta, go ready, let's go right right, and so it's it's boom time. You know everybody's fracking like crazy and and oil prices are coming down uh from from some of their 2008 and 14 peaks and oil prices are coming down. Gas is getting cheaper until uh the pandemic, when gas and oil got really cheap and went negative there for a moment, but yeah what's interesting is right.

Now we have half as many rigs operating in the united states as we had in 2019 half as many operating and so what? Why aren't we turning that on? And so you saying yeah, but because if they turn them all back on and tesla keeps doing well and and see this pandemic surge is temporary. We've all been locked up for two years and then you open up the door and you go to like the ucla game and it's like a hundred thousand people all eating hot dogs and, like all of a sudden, it's like i'm gon na have twice as many Hot dogs - i was at the dodger game. I'm gon na have two uh. You know i'm eating hot dogs.

Why? Because we haven't done this in two years, but the hot dog guy who's used to selling - let's say 10 000 hot dogs at the game is now selling 20 000 hot dogs at the game. He's got to get more hot dogs, but not just a few more hot dogs. He needs way more hot dogs, so he calls a hot dog supplier. I need twice as many hot dogs, hot dog supplier says.

I got a hundred people calling me. I got 100 people needing twice as many hot dogs at every stadium in the country. So then he calls his chinese hot dog supplier and chinese guy's. Like dude.

I'm trying to get you hot dogs, i can make hot dogs, i can't get them across the ocean. So what everybody's doing is they're hiring planes and they're flying the hot dogs over at twice the cost. You know, and - and so that's this cost it's if, but in a yeah in another year we have gone to many baseball games and we're going to get back to the normal amount of hot dogs we eat at about a you, know, baseball game and that's going To be next year, so so it's just like it was like. We all needed toilet paper.

Oh there's a toilet paper shorted. Now we all need hot dogs at basketball games. Oh there's a hot dog shortage, you know and it's just a byproduct of the pandemic and it'll smooth itself out so uh. You know this.

Even jerome powell has recently said that inflation is larger and has been larger and lat is lasting longer than expected. Is that just because people have more money, so they're they're buying more for longer than expected, this reopening boom is lasting, longer and and fine. Maybe inflation doesn't inflict down at the end of this year. Maybe it inflects down in spring or summer of next year, but either way the trajectory is it's going down, so you may as well expect it to go down and invest that way, huh right and there's a couple reasons for that, but like so so.

Firstly, there's technology like: if you don't want to pay gas prices, you buy an ev and your cost of living goes down. So technology has been driving prices down our entire lives. That's why we haven't had inflation, it hasn't been some miraculous government policy or interest rates. A lot of people think, like interest rates, are what's keeping inflation low.

Well, interest rates have been zero for the last decade, so that's clearly not what's keeping inflation low, but look at the technological innovations we've had just since the pandemic, like when you think about ordering food today, at a restaurant or or at home. You think about all the technological advancements and even paying your check. A company like toast that just went public is a phenomenal technology company. It's a phenomenally good company, it's just highly valued.

I love the company if you use their technology and you're a restaurant, it's the best restaurant technology. In my opinion, okay, now restaurants, invest in toast. I i want to. I want it to go down.

Yes, okay, good me, too yeah yeah, you know i don't buy. Ipos, you know, i think i wait. I want to see a couple earnings reports. Often you get the stock cheaper in six months as the lock-up just expire and there's so much bs trading in an ipo.

So they soar and you feel like you missed it and you cry all night and then it comes back so um. So it'll come back and and toast is a key technology provider for the the restaurant business. But but if you think about the efficiency that good restaurants have added in their businesses, and now the customers come back, their margins are bigger, their margins are bigger now, so it's like this efficiency of so many industries like healthcare needs, so much technology. Innovation bring down the cost, you know, and, and so these costs are constantly under pressure from technology, and a perfect example is how we've adapted people don't drive that much anymore.

I read this article about how the fact that we're worried about inflation and gas prices, but everybody's working from home - and i was like yeah it's true - i mean for a lot of people. They don't drive to work every day. You know, and and really this burden is mostly on lower income, people that have to drive to do manufacturing, jobs or jobs. You have to do in person and and and construction workers, and so they still have this high gas cost and that's why i think it's irresponsible for the government not to be releasing the strategic petroleum reserves now to bring prices down, because all biden wants to do Is tax and - and he wants to like help people but yet he's letting them get gouged at the tank every week.

You know why? Don't you bring oil down to 60 bucks, where it's more fair for everybody? You know yeah, that's true. So it's manipulated supply chain is temporary, yeah yeah i mean they. I think they can move oil prices. I think, by about 10 for a year uh, if they just uh, if they just uh, started releasing some from the strategic oil reserve right away, but uh oh well, yeah.

You should be angry when you fill up your gas tank if you're you're a listener, and you go this weekend to fill up your gas tank. You should be angry that you're paying this much for gas when the government's allowing the russians to just profit off of us and aren't doing anything because they're getting paid by the oil companies nobody's talking about the fact that, while there's all these ev credits, there's still Oil and gas tax benefits in the current package because union joe, oh i'm all into clean energy, but boy, i'm not going to take any money away from the oil industry. Why? Because unions hmm fascinating yeah? You saw that whole union debate here recently as well with tesla and uh, potentially larger credits going to companies like uh, ford and gm because of the union work. What about uh and a lot of union lobbyists? Potentially writing the uh.

The actual bill for this larger infrastructure package, so the unions, the union's own job, the yo, ouch um. What uncertainties are are left in this market because we just went from uh. You know we we had. We had a nice dip here.

We had our first uh over five percent correction in the s p 500.. We have fears about the government shutting down the infrastructure packages. The debt ceiling is drunk how we're going to taper jobs, inflation i mean evergrand. We had a lot of fear over the last three weeks and in the last week here, a lot of this has started evaporating.

We got a deal on the debt ceiling, infrastructure's getting kicked down the road for a month and a half we've got. You know jerome powell's, given us his pathway, we just had a jobs, miss uh, you know. What's what's your take, i mean what's left, is there any negative catalyst here or do we just buy at this point because we're not seeing another dip coming yeah? I lose you there for a second um. I think the um yeah you've been jumping in, but i think that the the fear was an opportunity for investors.

You know so i look at so stocks. Aren't that hard to figure out in the sense of after my whole life of doing this, and you know i i know you know - maybe i don't look as old as i am, i hope, but um. But i've been doing this. You know 35 years or something since i was a kid um, so you're not allergic to politics, no kidding, okay, yeah! I have to be 75 25 more years so um.

So if you think about all the bad years you've had in the stock market, which aren't that many, it's always because of interest rates, always always because of interest rates, the only thing that stock and real estate investors have to fear is the fed. It's the only thing so right now, i think mnuchin did an interview yesterday and as much as i don't like him he's very smart and he was talking that if rates were correct right now, we would have a three and a half percent treasury based off the Current inflation rate and he's right so like if the current inflation rate continued and it was real - inflation rates - are way low like way low. You know for what inflation is, but the market is being manipulated by the fed to some degree and the market's pretty sure that inflation's not going to stay after 50 years of of evidence. You know what i mean so like, but what minutiae said is very true.

So so, if the fed, tapers and and and taxes go up, we'll see another correction, okay it'll be an opportunity because earnings will continue to go up for some time. So when you're a stock owner, one of the cool things to do is, if you track earnings like the actual earnings with a stock price over 10 years, let's say: there's a 100 correlation. Okay, so there's no confusion on what my job is is to buy stocks with rising earnings. The question is, if you look at that chart you'll see periods of time where the stock is way over the earnings line and sometimes when it's under the earnings time and so over this period of time, you'll see this cycle earnings going up, but the stock going From overvalued to undervalued and overvalued to undervalued, as different events happen in the global economy, that change people's perceptions, but as long as earnings goes up over time, that's the trend of the stock and the trend of the stock will return exactly equal to the growth of Earnings over time right, so there's not much more to this game.

So when you think about what great positions, so many companies are to see increases in their earnings over time in the short, medium and long term. Many stocks are very attractive right now, but the valuations are very high and that's where the interest rate thing hurts. So we saw the treasury hit 1.6 today and you saw tech stocks get sold. It has nothing to do with a human, it's literally computers at blackrock or at fidelity or whatever that says every notch up that interest rates go, they sell some of their high p e stocks and it just brings down valuations.

That's all. It is there's nothing wrong with the market or the stock or the company. It's just that if i'm paying 40 times earnings for something and now interest rates go higher now i might only get 30 times earnings for it, because the alternative is this choice. That's guaranteed that earns me some interest now.

The example i use with clients is very simple right now i can buy a stock with a dividend of one and a half percent very easily, so i can buy a stock that yields the same as a treasury bond and get growth of dividend and growth of Earnings, so if i buy apple, it's a way better investment than a treasury bond, because it has a similar yield in some ways, but a growing dividend over time and growing earnings over time. But if the tragedy bond goes to two and a half percent, then apple is just not as attractive as when it's out one and a half percent. Because now i can get two and a half percent guarantee. Okay and if the long-term rate of inflation is two percent now it's beneficial for me to buy that bond and sell that stock and that's the relationship that hurts stocks and real estate.

So what we look for, the only thing i care about is when fed starts. Moving real rates, higher and or the economy gets so strong that treasury rates move substantially higher on the 10-year. So if we see this the 10-year moving, higher and and then ultimately now the one you're moving higher, that's the game, that's no fun to play for stock investors and real estate investors. That's when you take your chips off the table and you sit on the sidelines.

You know you go from like 100 stocks or whatever you're at 80 stocks and you cut that down to 50 stocks and you hold 30 percent cash and you just wait and you just wait so so you usually you have to wait about a year. You know and and that cycle goes through and then the fed will be like. Oh we're done and let's say the fed gets to one percent. That's what i think they're gon na get to one percent and they'll say we're done, and the markets will have corrected and then you'll have this like off to the races for the second half of the twenties.

So the first half of the twenties, i think, will be pretty good, but valuations are high. So a lot of those gains have already been made. Then we're going to have this pause recession type period of time and then hopefully, if the fed managers are right into another nice boom for three four five, seven years. So that's how i see the next decade.

We will have a recession when rates go higher for sure 100 chance, and i see that happening, hopefully not till 23 year 24, because i like making money - and i don't like sitting on the sidelines, but that's interesting so so get get out of your call options Before 2023, when rates start bumping, huh, oh for sure all that stuff is you get wiped out. There will be people wiped out for sure wow wow. So that's that's fascinating, so they gave us their schedule. They told us uh, one rate increase uh in the second half of 22, 2 and 23 and 3 and 24., so we yeah we, we last saw this in 2018.

This is the most recent time. We've we've been down this storybook and uh. The fed had to quickly reverse course on how quickly they raised rates, because not only did they tank real estate prices 12 in a matter of a month uh in the summer it was like may of 2018 uh, but then the stock market fell about six months Later in november and december of 2018., it was a negative year, actually yeah solely because of the fed and then and then they reverse course, and you start seeing rates come right back down. That was the year of the christmas massacre when the markets were down heavy.

On christmas, eve, remember - and i was like going to christmas like and i'm jewish, so i was like you know, worried about the stock market you know like and and and and we're getting hammered on a half day of trading and i'm like dude jerome. You don't get it and what happened was yellen had a sit down with powell and was like what are you doing? This isn't the 20th century. You don't need to be so aggressive, stop raising rates and then powell's like all right. I'm done and 2019 was like awesome, you know yeah um, so yeah, that's that's exactly the playbook of what investors should be paying attention to, and powell learned his lesson and yellen is the smartest person and fi like one of the smartest people in finance.

You know she went out in front of congress yesterday and said you idiots. If you keep playing this debt ceiling game that has no purpose, we will always pay our debts. Why do you do this? Because it's actually hurting people's perception of america's credit? For no reason? Yeah for no reason at all and she i love her, she went out and just scolded these idiot politicians who are playing this brinkmanship game with our credit. You know it's kind of like you know, you're married, like i'm married, it's like your wife saying you know what we're in a fight and if you don't, if we don't make up, i'm gon na go, spend all of our money.

You know and bankrupt us. You know it's like really honey, like i'm gon na separate from you like tomorrow, because you know but like, but that's kind of the game they play. It's like. If you don't agree to me we're gon na bankrupt this whole country, and it's got to stop so yellen - is really the responsible party she's overseeing the fed in some ways.

So i'm very confident with her around very, very well. Well, that's incredible: she's been, i will say, i feel like she, but then again you know minutiae. That was his role as well back when she was at the fed, uh very apolitical. Now, she's really molded into this uh political role of of, for example, pushing a lot of the biden priorities in in fairness.

I think that might but she she right. It's part of her job she's, not the treasury. Like i mean she's, not the fed chair, she's, the treasury secretary, so it is a political appointment so but she's so much smarter than mnuchin. It's literally like wow.

I mean it's not even comparable. I mean you know good voter confidence, then yeah. Oh, she is a genius, do you think she'll i mean, for example, today we had this total miss on jobs. I mean it was a disastrous jobs report at the same time as you had the uh wages go up at like a seven point.

Four percent annualized rate right. So, if you're working you're, making more money right, yeah, uh, so uh, i mean weird weird uh uh, but i mean: doesn't this also potentially create these stagflationary fears and like how does the fed respond now on on one side, it's like? Maybe we don't taper as quickly because jobs reports are still lagging right, but then on the other side, but wages are going up which is going to push cpi up or or uh. You know, personal consumption expenditures might push this all up uh.