Stagflation Is Coming: Are Your Deals Protected?

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1:01Alrighty folks, we haven't had the opportunity to catch up with Taylor from a life goal investments in a minute. And I have a laundry list of things to run through with them. So it'll be interesting to see which one he wants to start with. But before we get started, Taylor, how you doing? It's been a minute. Talk about all the good. Everything's great. My man, business is great. Family's good. We're having fun. Weather's getting nice. We're coming out of hibernation. Market to crazy. So there's a lot to talk about. Let's do this. So I got a list. I don't know of eight or nine things. So I have stagflation, deflation, private credit, rate hikes, inflation, 200 day average, AI job loss, Iran, 60, 40 portfolio, having worse month since 2022. Where the heck do you want to start? I don't know. We're going to take the nice. You fire them at me because that is just too much. None of this was known to me. Prior to this conversation, but let's do it. You pick them off one at a time, but we'll go to work. Yeah, well, let's start with probably the most pressing thing, which is the conflict with Iran.

2:01Again, you have just today, just this morning, President Trump coming out trying to talk down the market. It feels like the stock market believes him. Although I would argue that other parts of the market don't believe it. Obviously, we also have heard that who tease are now joining the fight. And I don't know about you, but it certainly seems to be getting worse, not better. But what say you this has been going on for roughly, roughly 30 days now? Yeah, yeah. I think that we have poked a beast that might be more prepared than what we anticipated them to be, with a threshold and a tolerance for pain for higher than what we anticipated it being. I think that this is a very tough thing for him to taco. And I think that's a scary proposition. And I think the market has reacted to that over the past three weeks. The first two weeks were, okay, we're in this, we're in a sense of missiles. We're going to take out some facilities there, some of their key leaders. And then I think that the market came in this realization that this is more serious. It's more ingrained. If we're going to do anything with legitimate nature and have any point of finality on any of it,

3:05this is going to be a more drawn out thing. And that's what's scary in the hell out of the market. Yeah, I want to echo that because again, it seems to be, I think there was maybe in some faction, people thought this would be another version of Venezuela, you kind of go and get in, get out surgical, you know, it's over in a weekend, maybe a couple of weekends. I never thought that I have receipts. I've been talking about this since the beginning, this was going to take longer. I also had the horrible feeling from day one that boots on the ground would be required. And that's just, that's just another level. And it's a level, frankly, that I still don't want to see, but I think it's coming. And, you know, then, then you're going to have, now you have just other parties joining the fray. And the big thing for me that I don't think a lot of people understand, it's, it's not US and Iran. It's US, Iran and Israel. And now maybe the hooties. And once you start adding more and more players, the less and less control, even though we have the biggest stick, it's, it can get, it can get out of hand really quickly.

4:06I think that we have not realized that Iran in them poking everybody through a kind of terrorism type stance over the past 20 years, 30 years, 50 years for whatever reason, they also have dug in themselves. And they knew that at some point there was going to be an offensive that came at them that was superior to their abilities to defend themselves. And so they had to get really, really creative as to how they were going to protect themselves. And I think that we're realizing that there is more there than that, than what met the eye to begin with. I think that we are a little get a little arrogant on the front of this, thinking that we would pull Venezuela. And the reality is, I don't think that we can leave because if we leave now, Iran is in control of the straight up. Exactly. And until we could rightfully say that, no, we have control and we are bilaterally controlling it with XYZ other country,

5:10they are so dug in around this. And when we hit them, they basically said, they flailed. And they said that our only defense to this superior attack is to go at all of our neighbors. Now they weren't necessarily friendly or unfriendly with the neighbors, but we are going to go scorched earth on global oil supply. And that is their only defense. And that is something that they're holding their guns to. And so now we come back in them and say, okay, you go scorched earth on them. We're going scorched earth on you. That's the threat. And you know, it's not in the United States, we don't realize how fortunate we are. So you see this massive separation in oil prices and WTI, which is West Texas and Brent, which is global. So you have now a 10 point higher percentage jump in Brent than you do in WTI, which is showing our prowess as an oil producer. But it is more pronounced in the liquefied natural gas space.

6:10The liquefied natural gas that they are bringing into Europe right now is up roughly 60 to 70%. We're down. We're marginally down with our liquefied natural gas domestic prices since the onset of this war. So we don't realize that you can understand why the Europeans are rightfully saying, we don't want anything to do with this because we're bearing the brunt of this. You guys are not. Yeah, that's been one of the things I've been trying to get my audience to understand is this is going to be a world. This is now a worldwide impact. My fear is it jumps to worldwide conflict, right? Right. You start to drag in other parties because they're suffering. And, you know, pretty soon, you know, I don't know how many had got to get together before you have World War three. But I agree this is all about the straighter her moves. I don't see how this gets better before it gets much worse. I don't know how you can take those islands without boots on the ground. And it's just the bad. The other big outstanding factor is I think that the world has to realize that this is roughly a proxy war as well.

7:15So this is us against the East and the East being China and Russian predominantly China. So I don't know there's a lot of gray area. You can read a lot of things that come from slightly suspect sources, but it seems like China is supporting Iran. Not only by Biden or I mean, just look at I mean, just follow the money. Well, I'm not even just saying that though. I'm not saying just the purchase of the oil, which is the massive support that they absolutely need. But I think that there's probably military intelligence that come up with China towards towards Iran as well. And they look at this and they're like, hey, you know, I'm not saying we're best friends with Iran. But hey, if our enemy or largest enemy, which is the United States, the global power of the world. If we can support someone that's attacking them by all means, let's do it. So we'll close on this topic because we could probably talk about this for an hour by itself. And we have a whole laundry list of things to get through our clothes on this question. Do you have any hope that this is over and put to bed by the end of April? If it is, I don't think the United States comes out with a good look, right?

8:16Because there's no way that that straight of her moves has any certitude that we are controlling it versus Iran controlling it by that point. We need to go in and really, unfortunately, to your point, use boots on the ground. I just don't see it happening. I think you're right. All right. We'll move on from that again. We can catch up on that next week. How about the 6040 portfolio? I'm kind of having flashbacks to 2022. I think it was where the 6040 portfolio was flailing. March, again, we have one or two trading days left. But I just saw over the week in the 6440 portfolio is having the worst month since 2022. What say you? Yeah, yeah, bonds getting cooked. Like that's the reality of it. Usually, and this happens during periods of uncertainty and heightened nervousness of investors. What you have is correlations coming to one. And it's gold too, right? Gold selling off as well, which is an interesting one. You would think, hey, we're going into a foreign country. You would think there's going to be flight to quality, flight to safety.

9:17That's gold. It's an inflationary pressure. You would think that's a flight to gold, but it's not, right? And so at the end of the day, the market's looking at this and saying, one, there is so much uncertainty right now. It's funny that you still see earnings expectations by the major analysts on the streets increasing for the S&P 500. Even with all this uncertainty that's outstanding, even with oil prices shocking higher, 50%. You have this massive uncertainty outstanding. They still have earning expectations going higher. Now, I think that that's what analysts are saying. And I think the market is questioning it because it doesn't make sense to get a pretty significant sell-off in short order against the backdrop of earnings expectations going higher. But it's really the inflationary pressure that the market's worried about that's causing bonds to sell off. Bonds predominantly trade on inflation expectations. And it's funny, the difference of inflation expectations that you can see right now. So one year out, 12 month forward, inflation expectations went from 2.6. And they started moving up, ratcheting up before the war was actually officially outbroken.

10:19And you have them move from 2.6 to 5.2, which is a massive, massive, in short order, right? That's not. And so with that, markets start to digest, hey, if I have a bond and, you know, inflation is going to be higher, therefore new bonds are likely to be coming to market at a higher interest rate. I'm going to sell that bond and potentially buy a new one. So that's what's playing out there. But it is interesting when you zoom out and you look longer term, you look five years out, inflation expectations really haven't moved absolutely any. And so I think that probably bonds in the short term are overcooked, oversold. But, you know, we've talked at length, Michael, and you watch enough of our channel on social media that you see that we talk all the time about the value of alternative assets. Alternative assets are that harbinger, that safety point during a period of inflation. They were in 2022 and they are right now as well. Yeah. And that's, that's why I think what you guys do at life goal investments is so important because you don't lean on the 64-40 portfolio because it's easy.

11:21You do the hard work and find the alternatives that perform and that's not doing well. So again, shout out life goal investments for doing that. Let's talk about the market breaking the 200 day. I mean, everybody on Wall Street, every chart person has to be looking at the 200 day. We broke that. It kind of feels like this is the first leg of a downturn, probably like past times, COVID 2008 will have a relief rally. But then comes the second leg down. Is that kind of what, what you see out there? Yeah, we were just talking this morning with our investment committee and it's funny that you just have this like if you're actually watching me, you can see my hand move. This just kind of rolling over. It's not like there's this massive just gap downwards. The market's been, you know, effectively where it is right now since September of last year and it kind of rose and then it wasn't this like snap downwards. It's just this kind of rolling over and usually a rolling over that's really smooth and really persistent like it's been doesn't come with this. This all sudden pop from a bottom bang and we're back off to the races.

12:23It just doesn't make sense that selling pressure is slow and steady right now and slowing steady selling pressure doesn't be get rapid reversal buying pressure that causes markets to zoom higher and very short order. That's just not how markets digest things. So the 200 day moving average is kind of that that level of demarcation and now we're beneath that level of demarcation. And so it goes from being support when you're above it where the market bounce down and it hits it and it bounces off of it and it really is hard to break through that 200 day moving average. And once you've broken through that 200 day moving average it goes from a floor to a ceiling and it's really hard and there has to be some real catalyst in order to propel it back through to the high side. Yeah, I couldn't agree more again. It's going to be very interesting to watch again. I think the president is obviously very much he looks at the stock market. It's clear he does. I'm going to talk up you know that the conflict is near resolution it certainly doesn't feel that way the chess board does not look like we're in an immediate winning position.

13:28I'm not saying we're not going to win. I didn't say that I said doesn't look like we're winning today like you can't declare victory today until you get control of the straight and it's you know it's it's like it was before you can't declare victory at this point that is victory. Yeah, and at the end of the day like let's call a spade of spade to like we don't really know what we're being told is true or untrue right because you know before it's like hey we're in talks with Iran and Iran's like no we are. And so I'm sure you know regardless there are certainly talks that are going on there's no doubt about it. What are we you know we're not really who we're negotiating with that's one thing that I think is it who's really empowered it's probably I would imagine when you start taking out 80% of the senior leaders there's probably factions of the juniors going no it's mine it's mine no George yeah I got another question is like do they actually put at the helm who they think they actually want at the helm because that's like the beheading slate. You're going to be number one like do you want to put your best guy in that in that spot or do you actually have someone that's beneath the surface that's really running the organization the IRG.

14:39I don't know the answer to that yeah well let's talk about the Fed next that wasn't actually on the list but I want to put it there because I actually said something it looks like I got it right after the Fed meeting I made this call on the dot plot and let me know what you think of it. The dot plot comes out the SOP and the basically say inflation is going higher but also is growth and what I said that that the next morning was nobody got this folks you missed it the Fed just told you they're going to hike right these rate cut ideas are off the table you're not going to cut when GDP is up and inflation is up they're trying to set it up and now since then the two year notes hit 4%. I actually went on my channel and already said I was wrong about 2026 I was on record saying for rate cuts in 26 I now think we will have one rate hike in 2026. So what do you think about that do you think the Fed really did a dramatic 180. I think they did a dramatic 180 but I think there is zero chance and hell we get a rate hike this year.

15:40So we went from three rate cuts to now to your point the three rate cuts being priced in the market two and a half call it somewhere between two and three rate cuts being priced in to now a higher likelihood of a rate hike than a rate cut. Yeah there are zero odds of a rate cut all year as of this morning. Yep yeah so I think you have to zoom out a little bit and understand what's actually at play here is the way I view it. So we have this massive spike in inflationary pressure based on oil prices going higher. And I think that when you look at things in short order oil drives inflation hires no doubt about it right there's oil and everything you know not only the gas pump and the prices that we see there but also literally everything plastic is a function of oil everything that gets delivered has diesel associated with it everything we use is plastic and and oil related. But at the end of the day if you have sustained higher oil prices what that does is it takes a discretionary dollar away from somewhere else being spent in the economy and at the gas tank and it puts it as higher prices on the underlying goods that we consume longer term sustained higher oil prices is a deflationary pressure.

16:54100% agree it's demand destruction that's exactly yeah correct. Yeah but there is a there is a a lead lag in all of that so I'll just play out what I see again on my on my chess board so again first off we'll start with CPI CPI comes out Wednesday. Yep no next next Wednesday. Yep and last reading was 2.4 I believe it's going to have a three handle could yeah I think it's going to have a three it might even have a three one. Again the base effect is nothing it's going to come in at a 0.6 or 0.7 it's just like you guys it's just math right it's just math at this point so I think CPI is going to be screaming. Then they have a fed meeting at the end of the month they're going to do nothing right one month is nothing but the next three months are pretty light base effects so a 0.5 and 0.6 we could have a CPI back at 4% in 90 days. Yeah yeah it's just math. I don't know how the Fed doesn't because this is what I again just the chess board so that happens over the next 90 days.

17:54The Fed is boxed in and I think they're going to deliver that one rate hike but to your point what will already be happening is demand destruction because every oil. Crisis since the 70s actually since the 50s has led to a recession. So I think what happens is yes we get this 90 day pop it looks artificially screaming higher the Fed is forced to react. Then the recession things hits and they go on a massive rate cutting cycle in 27 that's kind of what I see. I think there's so much political so I don't think that's a stupid thought maybe clear. There you go Michael you're not going to complete for. I don't think it's a crazy thought but I think at the end of the day you also have to realize that there is a massive political pressure for the incoming Fed chair to cut right so they're not going to cut let me be clear if inflation's moving the wrong direction they're not going to be cutting I completely agree with you upon that. But at the end of the day to your point like we have to have learned some sort of lesson from the rear view mirror you cannot fix supply side shocks with through higher higher interest rates.

19:02But you know it's not to say that that it absolutely couldn't happen I just think that if you have a market selling off and then you couple on top of it. Higher interest rates which tightens credit markets it gets nasty and we know that there's a massive K shaped economy right in the K shaped economy goes back to the fact that we know that the lower end of the K has been in trouble. The higher end of the K has been sitting incredibly pretty because financial markets have made us richer and richer that top shape of the K. But that's exactly why I think they're going to be forced to hike it's because the lower end of the K is not in the stock market the lower end of the K is not in these other assets they don't give a rat's ass that we're 5% highs they're not involved. Yeah but what happens to credit card debt and stuff like that when they start yanking higher on that. Yeah it's again I don't think it'll be an easy decision but I'll still stand on and call one rate hike this year. And to your point I think it leads I think it becomes a knee jerk reaction that forces them to cut very quickly thereafter because to your point you can't have this strangle of the economy and then strangle it again.

20:07By the way they've done this in the past. They have. They've done this in the past like we we know that the result isn't good so hopefully we pay attention to what we've done in the past and we've learned some lessons along the way. But it is funny Kevin Warsh at the end of the day like. He he was a long term hawk so. Oh yeah absolutely was he wants he wants to shrink the balance sheet I don't think anybody's picking up on that he wants that balance sheet which is also going to drain liquid. Yep he doesn't want the fake QE that we have going on right now. All right well I have inflation on the list my thoughts on inflation obviously it's going to be it's going to print a three handle this month and. I think there's a chance at CPI headline hits four in 90 days is that is that out of the realm of possibilities. No I don't think it is but I also don't think the Fed gives a shit about what headline CPI says admittedly so I think they're just going to back everything out and say we're going to look at core PCE which. The oil isn't going to have a massive impact on the food that is going to see higher prices based on higher oil costs.

21:08And fertilizer not passing through the straighter who moves which we haven't talked about that yeah but there's more supply bottleneck there than just oil in that straight and fertilizer being another massive one which is going to cause farm land. You know to to not be as productive and therefore you're going to have higher food costs. Yeah lower in lower yields and I mean it's just all kinds of. Yeah but I think at the end of the day I guess my point is I think they just look right through it and they say hey we're not focused on this I did think one thing was was really interesting in the last Fed meeting. It almost feels like Jay Powell is just you know taking a shot everywhere you can at Trump now just because Trump crushes him all the time but he said listen the other thing that we have not fully chewed through is the remaining outstanding tariff kind of inflation that he made a highlight of that several several times and he said. America leads the world in medicine development it matters we get new medicines first nearly three years faster five million Americans go to work because we make medicines here at home and not relying on other countries keeps us safe but China is racing to overtake us.

22:17Will we let them or will we choose to stay ahead when America leads America cures let's tell Washington to keep us in the lead. Learn how at America cures dot com pay for by pharma. We had this inflation roll over that we expected we expected tariffs to be a one time bump and we haven't fully chewed through that yet. So he he casted some shame on Trump and Trump's tariffs policy. But yeah and that still you know exists but I think broadly speaking that they they stay right through the oil costs increase on headline and they just focus and dial in on PC and focus their attention there. All right well let's get to the big one I remember I think you and I joked about this six or nine months ago when when Jerome Powell said I don't see the stag or the flation. Yeah I don't know how you can't look at today's environment and go there's some stag and there's some flation let's say you. Yeah so he had a funny comment the other day and I think you addressed it pretty darn well. He said that I talk about stagflation he said you know if you want to make the argument that inflation is going you know at the time of not materially higher.

23:20The inflation is creeping higher and that unemployment is ticking up modestly. He said you know yes you could broadly define that as some very light form of sagflation. He said I define stagflation what happened in the 70s right and I think it's fair I think that we are really parsing data and at the end of the day like inflation now mind you like this shock that's coming right now that is going to come to your point. It should be at least relatively one time oriented and oil prices move higher many might sustain longer I get it but at the end of the day this is an exogenous event that caused inflation to move like it did or like it will rather and I think that it can be. Largely stared through until it persists right and if it persists then it becomes a problem and then on the unemployment front yeah it's one of those things where. We don't have massive hiring or firing right now so it's kind of that subdued market and you don't have employment growth almost whatsoever if you look at history there's never really a time.

24:22Outside of kind of recessionary leading into coming out of environments where there's no hiring but we've also made this massive shift in our immigration policy and so it's kind of a net neutral if you will where hiring and firing are both really really low. But that's a function of where immigration came from and Jerome Powell spoke to this and I thought he did a pretty decent job but yeah if you want to start picking through the numbers and saying I can't see stagflation I think he can it's just it's just modest still. Yeah I would and I would argue wait 30 or 60 days you're going to it's going to be screaming in your face so with which side of it to be clear well I think flation is clearly going to be I think I think I think I think higher oil leads to lower production right and we're going to get there next so I don't know right you got inflation at 4% you have GDP sub one that's like the definition on the screws of stagflation it is it is that's fair that's fair I think that you don't see any. Kind of material bleed through it listen the economy could have been slowing before let me be clear on that I and yes I think it was but yeah so it and I tend to agree on that but.

25:29At the end of the day like the slow down the economy that we're going to experience from this event is is not going to be for some time right that's so that's that's that's as I see it again that's a Q4 Q1 yep that's that longer term yeah people can start to not afford things and it bleeds through I think that's kind of how you have to be. That yeah well let's get to that deflation demand destruction because again I think what people don't realize is oil shocks really are demand destruction and cause deflation which just blows everybody's minds how would you kind of at a dinner table or a restaurant tell a friend yes you have you have a bump in inflation but let me tell you what the big boogie man is and that's deflation how would you kind of tell that story yeah deflation seems like the world's greatest problem until your until your economy goes through it right if you don't believe us ask the Japanese who went through it for basically. 30 straight years and their economy didn't didn't grow one Iota at the end of the day it's not hard to look back and say 10 out of the last 11 recessions were a direct function of well by spiking and so we'll miss a spiking causes economies to slow down that causes deflation right and if the deflation is sustained and prolonged that is a much bigger problem although it doesn't seem it then prices going higher if you realize Michael and Taylor sitting here we're like

26:48hey we can go out and make that investment or we could just keep our money in our pocket for a year and then go out and make that investment yeah that's how an economy truly slows and why would you make an investment now if the anticipation is that price they're going to be lower 12 months from now you won't you'll wait and that is a function of saying in the gears the economy driving it to a screeching halt yeah again yeah this is this or in my my fear is oil is still over a hundred bucks and probably hits 150 in the next six months because I don't I don't see a short into this quagmire which is really unfortunate and the to your point I think it becomes a worldwide recession right you already have the Philippines and Thailand declaring emergencies right you're up is going to fill it with natural gas this this this isn't going to be a worldwide deflationary spiral perhaps yeah yeah and again this is one that it'll be very interesting to my point before I don't think there is an easy talk a lot of this to be clear but I think we're going to try to taco our way out of this I'm not entirely sure how you do it politically you could certainly you know one of the things that Trump has intelligently done is not drawn a line in the sand as to this is our goal you can't go hard and fast this is what we are here to accomplish I think that at the end of the day now it's become a straighter her moves game but I think going into it it probably was more

28:16likely we want to seize the enriched uranium yeah probably which was the nuclear the nuclear kind of facility and making sure that they don't have the ability to do anything from a weaponization on the nuclear front but now I think this is becoming more economic duress and our focus has potentially shifted away from the imminent threat of nuclear behavior to this is an economic you know disaster and now they're they're quote unquote letting a few ships through as a appeasement I can't make sense of that at all yeah so I'm not sure entirely what's going on there but I guess back to my point of like the ability to taco out of this is still there I don't think it's the right thing to do necessarily at this point but it's still there because we have not said we are in Iran to do x y we haven't defined the victory so we can declare anything victory correct yeah makes sense and Trump is is the greatest marketer of all time yeah let's switch gears to something kind of in right field based on all the other conversation that is private credit right there are lots of people seeing what's going on with private credit a lot of funds you know kind of hitting their limits and

29:21gating withdrawals lots of talk about AI investments the software companies you know that that being kind of the apex of the pain what are your thoughts on what's going on with private credit today I think there's a massive misunderstanding a private credit massive misunderstanding private credit so two things um let well let's let's talk about AI software spillover into private credit into that space um so one of the big arguments is that these private credit players have big software exposure so 25% right and it makes sense over the long term why it's the same reason why investors love Salesforce workday stock et cetera is because this is sticky reoccurring revenue right and that is what they looked for and so they are exposed the private credit players to that software space and the argument being made is that well look at what the public equity market has done with those software stocks down sometimes 30 40 even 50% in extremes why have you not seen a reaction in the price of private credit it's coming they're going to rug pull you right and I think that is just a dramatic misunderstanding of the difference in equity

30:33and where you sit on the capital structure in private credit so there's two things one private credit is the top of the capital structure right so you need this thing to completely go default and there be nothing left at the end of the day right and that is how you experience pain on a private credit loan right so it eats through all the equity so these founders that have launched these company in poor their blood sweat and tears into them they need to go kaput right and then it eats into that senior secure debt right the other piece of it is a lot of these are private equity backed so they have the backing of a blackstone et cetera the blackstone really wants that equity not to go to zero so they're going to step in with their funds and backfill right but the really the biggest nature and the difference between the two is the length and longevity that the investor needs to think about them so you have a difference in terminal value on these software companies and that is what you're getting a reaction to in the stock price and what I mean by that is 5 10 years out when AI agents can step in and do

31:37some of this CRM type work that is overly simplistic which is what they're making it out to be okay so now you have cash flows getting hit 5 and 10 years out and so therefore the terminal value of the company is lower and that is why you're having equity prices re rack lower these loans are two to four year loans you need meaningful impairment and cash flow in the next two to four years right in order to see real distress in that private credit space so at the end of the day like private credit broadly speaking little secret everyone it's positive you to date yeah with all of its noise with all this noise so I'm not making the case that there isn't some private credit loans that are out there that aren't good you're really some bad yeah they are they don't get me wrong but I think that this overblown hysteria that's taking place in the market and listen they're gaining yeah it's not which means investors cannot get their money back that is not a bug that's a feature right that is what you pay these companies to do is protect me as a shareholder from Michael and every other shareholder saying I'm out forcing the portfolio to

32:45manager to sell at the stress valuations and return capital and and that's just not what they're meant to do they're going to gate and they're going to allow this this loan to continue to make the payments which the companies currently are they're going to continue to have the performance trickle on as it as it did and and that's why the performance is positive but I get it investors don't like it when they say hey you can't have your money back yeah I love the fact amazing headline yeah I love the fact that you brought up gate I actually brought that up but I read an article shout out to Lance Roberts you wrote a substat called subprime crisis 2.0 will private credit be the trigger and it was rather long article but I read it and really there were kind of two things one you brought up gates and again we're trying to compare this to 2008 because everybody thinks the next gfc is coming and one of the reasons the gfc happened is because there were no gates on the loans so when everybody sold it just it was literally a movie theater on fire with everybody running to the exits and that was a problem so gates are a feature not a bug the second thing and this is wild to me

33:50we we had about 1.2 trillion in subprime loans in 0708 what about 1.2 in originations unfortunately because of CDOs and send the derivative of the derivative of the derivative that 1.2 became 62.2 trillion yeah today we have 1.7 in private credit there is no derivative of a derivative of a derivative so we are exactly 3% of the chaos of the gfc plus gates so it's just not and by the way if you're worried about private credit which is senior secured top of senior senior yeah exactly what should you probably be a little bit more worried about that sits beneath that equity a four times larger asset class which is private equity right and I'm not making the case the private equity you should be running hair on fire getting crazy about that either but that goes first before the credit side of things go first that is a function of corporate structure and the capital stack

34:50exactly right so and then you have people come out and like so let's talk about a couple of the things here so if you look back at 2022 2022 private credit was the all star of all investment asset classes in the nastiest fixed income bond market that we had literally since the revolutionary war private credits up 10% right in the nastiest of nasty environments and so but what happens is the narrative starts to get blown out of proportion and then every media outlet starts to plan it and then everyone becomes this expert because they read three recent articles on private credits and all of a sudden the doom and glue starts to take place and then you have someone like Jamie Diamond step in and say hey we've got one cockroach which was tri-color first brands there's lots more out there well guess what private credit is taking the business from JP Morgan Bank and so therefore private credit is taking investor capital and going directly to companies

35:50circumventing the bank that sits in the middle typically taking a three-point spread on it so what does Jamie Diamond gonna say he's trying to protect his business and create this big obnoxious thing over here that's private credit to force people back to the banking system so he can do more business loves incentive yes he's talking his book shocking Jamie Diamond we do that yeah i'm shocked yeah nobody ever does that well the final topic i have a my laundry list we crossed everything out except for a i and job losses obviously big headline a couple weeks ago block whacking 40% rumored 20% at meta where where do you come down on this a i are we gonna just lose all entry-level white collar and just everybody's got to become a plumber and electrician where are you at this a i apocalypse i as a kid they grew up in a one red light blue color as it comes town i love the hysteria that you see when a white collar job comes up comes under pressure like oh oh the rich people are going to get fired and all of a sudden everyone loses their god damn mind on wall street they're like hey wait they're they're they're coming after me now

36:53before when it was an economic slowdown like we were all good but maybe we didn't need to build the next house and the construction worker got fired now they're coming after me this sucks so i think that um there's some hysteria playing out there i i i do think that we have efficiencies in in the business that we run through AI um i don't know that it's necessarily the kind of mental capacity side i think it's more of the hey we track all this economic data and it used to take us going out and farming it ourselves and finding each underlying data points and now we can throw it in clawed and have all that data sucked in immediately right now we still have to digest it and understand what it's telling us and and interpolate that data into making decisions but i do think that there is that kind of college grad type role that that that probably has a little bit more pressure where people start to second guess hey i know i'm not great at AI just yet but i think we're getting better

37:55and i think that we can systematize some of this stuff to not have that next you know 22 year old hired for 50 grand instead pay five grand to some AI you know kind of clawed type system and have it do it effectively know that it's coming from right sources know that the data is being calculated correctly etc i get it i get it yeah well where do you when you step back and you look it let's let's say you're looking back at AI in a decade do you think AI will have destroyed more jobs or created more jobs in total because of human nature and because we have done this so many times the internet's going to get you fired the locomotive the you know the car the tractor the whatever it is i think it's going to create more jobs than it than it destroys in short term i don't know that you can necessarily say that right over time i think that's where we wind up in the short

38:56order we we start to replace some jobs with it yeah i think that's and that's exactly why i said a decade because i think a decade is long enough for us humans to do what we've always done is is create the next you know the next thing and you're right i think in the short term i mean if you put short term like 18 months i'm not taking that bet 18 months now more job losses who is this asshole from anthropic that's the CEO that keeps coming on who who is there a PR person i don't know that's allowing him to say that we're going to replace 50% of jobs or whatever dumbass thing he's saying like what what do you do well you think you're doing good by your company doing that you know yet you know what he's this is what i think is going on is all of these AI folks are trying to raise money yeah and the only ROI they have is labor yep so they're saying stupid things like that not realizing uh i i i don't even think they believe it i think it's the only way they can go get the next hundred billion dollars well it's hysterical right now to see uh Sam Altman flail yeah i mean one he just comes off as a PR ICK and i think that everyone roots against him

40:00yeah but he now what you know what what you're starting to realize that chat GPT has become more of a retail driven user base and we all know that the big money comes when you can get corporate adoption and anthropic is eating their lunch there so what now chat GPT and and open AI and Sam Altman is doing they're saying hey private equity we'll guarantee you a 17 17 and a half percent right and so what they're trying to do there it's not stupid i mean it's it's crazy but it's not stupid what he's trying to do is he's trying to get the buy-in from those private equity companies to invest their capital there because what they're going to do is they're going to force it down the stack on all of their underlying companies so you're going to create demand that sticky corporate demand by that private equity company that purchases you to then force it down on their underlying companies and have them be your user base and by the way AI learns with data right so the more you use it is the better it gets and you know the snowball in the flywheel keeps turning so

41:04it's a creative kind of hair-brained idea i don't know and when you look at the terms of things like i'm sure it's not literal guarantee of 17 and a half like the like plenty of outs plenty of yeah there's plenty of outs right if the company does well we'll guarantee you 17 that or you'll get preferred performance over over the other shareholders etc but at the end of the day like it is a crazy headline to say hey we'll guarantee you 17 and a half like what moron wouldn't take that yeah no there you go well i don't have anything else on my topic something did come to me though i want to ask you i always do this to you try to put you on the spot what do you think the chances are of a recession being declared in the next 12 months zero to 100 yeah i think it's still light i think it's still light around 25 30 percent um yeah with uh what golden sacks i think recently said when up to from 20 to 30 percent yeah so okay i just think that the us economy and granted like you know if the global economy catches a cold like we're going to get it too

42:04don't get me wrong but i think the us economy right now is in the driver's seat because we are very insulated from this yeah comparatively speaking yeah yeah yeah it's just our energy independence that and and and not only energy independence but like now you're also starting to see european countries go like hey uh can we get some of that do we should we should we continue gonna rush it for this because uh they've proven to be bad actors and now by the way the Middle East like um maybe we can't get that that that quite as cheap is what we thought we could and maybe we pay a little bit more to have a better partner long term yeah you know politically i don't know that we're making friends out there right now but i still think that we're perceived to be a better player than both those other two alternatives yeah i think i think of all the craziness we're still better than those do i agree with that well i'm curious do you have anything else that's top of mind that you're thinking about uh you know we put together a laundry list there and that was impressive we we banged down through eight or nine topics very quickly and they were all kind of top of mind i thought uh as always i appreciate the heck out of you because you read and and you

43:05study more than anybody else in this space so congrats all the success you've had well deserved i appreciate that where can people find you yeah find us at life goal investments on whatever platform you watch where they're at life goal investments doing daily 60-second type videos yeah you got to definitely check them out on instagram it's one of my sources really gets me thinking i don't know how he shoves 10 minutes of material in the 60 seconds but he does it each and every day give him a shout out life goal investments thank buddy you're the