Title: The Big Short Partners Reunite: Rates, AI, Gold and Two Stock Picks | The Real Eisman Playbook Ep 75 Show: The Real Eisman Playbook (Ep 75) Guest: Vincent Daniel & Porter Collins (Eisman's former FrontPoint partners; now run a Substack + Discord) Date: 2026-09-14 URL: https://youtu.be/It252p0Ec10 Length: 52:41 Note: YouTube auto-captions pasted by Stephen. Remove-only cleanup per skill Step 1: fillers (um/uh, interjection "you know", tic "like") removed and stutters/false starts collapsed ("I I I think" -> "I think", "it's it's it's" -> "it's"); no words changed, added, reordered or paraphrased; every (mm:ss) cue kept where it was; ">>" speaker-change markers kept. Speakers are not labelled by the captions — attribution in the analysis pages follows context (Eisman asks; "Porter" / "Vinnie" named on air). The Wharton Online / Wall Street Prep FP&A certificate and Shopify sponsor reads (~19:21-22:00) are left in place — advertising, NOT picks. Auto-transcript garbles are LEFT INTACT here and corrected only in the analysis pages: "Bessant"/"Besson" = Scott Bessent · "Wars"/"Walsh"/"wash" = Kevin Warsh · "JCO Miller"/"Dr. Miller" = Stanley Druckenmiller (the WSJ op-ed) · "Torson Sllock" = Torsten Slok · "Leopold Ashen Brener"/"Leupold" = Leopold Aschenbrenner · "Kenny G" = Ken Griffin · "the 72s" = Point72 · "Bill Py" = Bill Pulte (FHFA) · "circle" = Circle (CRCL) · "Alli"/"ally" = Ally Financial · "C van" = as spoken (Walter's Carvana-holding vehicle) · "Delaware Wife" = Delaware Life · "Golar G L A R" = Golar LNG (GLNG) · "Shener" = Cheniere (LNG) · "Malay" = Javier Milei · "Peter Teal" = Peter Thiel · "Glass House" = Glass House Brands · "SAS apocalypse" = SaaSpocalypse · "service now" = ServiceNow · "Shan Connor"/"Connory" = Sean Connery · "Finding Forester" = Finding Forrester · "FPNA" = FP&A · "MVA" = MBA · "shopify.com/isman" = shopify.com/eisman. =====
00:05 Hey, it's Steve Eisman and welcome to another episode of The Real Eisman Playbook. So, when this podcast got started April of last year, one of the first guests were my former partners, Vincent Daniel, Porter Collins, and Danny Moses. We had this really great conversation. And since last April, I mean, to say that the world has changed sounds stupid.
00:29 It's just so incredible how much things have changed. And sometimes it's a good idea not to interview someone, but to sit down with some old friends and kind of hash things out. So that's what we're going to do today. Porter Vincent, welcome back. >> Good to be here. >> Thanks for having us. >> So let's start.
00:46 I mean, where could we start? We could start with anything this. Let's start with Scott Bessant. Okay. We'll do a little bit we'll do like a lightning round like Porter, what do you think about what the hell's going on with Scott Besson and the Treasury Department buying [laughter] buying long-term treasuries? >> Well, this is our old sandbox, right? This is the Fed.
01:04 This is monetary policy. This is the Treasury. I think they're screwed. They're at a point where they have to try these extraordinary measures because they're out of things to do and they're trying to keep a lid on yields, but inflation's a problem. It's still high and Wars is doing his little dance, but they can't do anything.
01:32 And at this point, I see it as interest expense plus entitlements isund and call it 10% of tax receipts. There's nothing you can do. You can't cut interest unless you Well, you certainly can't cut interest. I mean, >> you can in theory cut entitlements, but no one is going to is even talking about >> We've been talking about this for how long, Steve? And they haven't done anything long time.
01:53 >> Yeah. >> Long time. >> And so I don't know what you do. You either got to raise taxes a lot, which >> that's not going to happen. >> Not going to do print, >> right? And so, you can see why, >> I think I've had as much conviction in this precious metals trade as I've had in anything in a long, long time.
02:15 So, explain to viewers who are not familiar with precious metals. >> What is the relationship between on the one hand what you're talking about interest rates and on the other hand precious metals? Because >> it's not intuitively obvious, >> no >> to most people that they're connected. So explain it to people like why do you think owning precious metals is the result of everything you just talked about with respect to interest rates? Well, it goes back, you got to take a little history lesson, but in terms of central banks used to own
02:46 assets, right? When you own other person, when you own debt, it's a you're owning a liability, right? And they own US government bonds. I know it's an asset, but it's someone else's liability, right? And so gold is an asset. And that's why you've seen central banks around the world, including China, buy more and more of it, right? Right.
03:05 And so I think you've crossed or close to crossing depends on the gold price obviously as between gold and treasuries as which is bigger as a percent of central banks balance sheets. >> So you're talking mostly about gold. >> Gold. Yes. Gold. And gold's nothing. It's just it's an asset but it's an asset that's been it's doesn't have any debt.
03:29 Doesn't just sits there right? And so it's a rock. It's a rock. and it's formed in outer space, but it's a rock and it basically everything else is crashing against it, right? And so that's the sort of thesis. It just stays there. Everything else goes down, right? So is it value in dollars goes up because the dollar goes down and that's been the history.
03:50 And if you look at the chart of it, the dollar, US dollar has gone down and down a lot in the last hundred years. And I think that trend continues and probably accelerates at this point because they're out of arrows. So you like gold as kind of a result of all this stuff? >> Yeah. I can't tell you what it's going to do today, tomorrow, but I think >> Who could? >> Yeah.
04:10 But I think, if I look back in five years, I think it's going to be a lot higher >> then. If you put yourself in the shoes of Bessant, I like doing this. Like what would >> you love doing that? >> I do. And I would say, well, what would I do? Well, the first thing I would do is I would go up to >> Well, by the way, before you say what you would do, you're in Besson's shoes.
04:29 >> Yeah. articulate the problem from his perspective. What's the problem? >> So the problem is that right now I have as Porter said expenses that are higher than receipts. >> Right? >> That's one of the issues to the point where 40 trillion times an interest rate is a big number and it's really eating into all the other things the government can do >> and going higher.
04:53 >> So you need rates lower, >> right? So that's the problem my primary agenda my issue is to get rates lower because that's the problem >> and it helps the economy >> of course and of course it helps the economy. So the first thing I would do >> is go up to my boss which is President Trump and say respectfully Mr.
05:14 President can you end this war because if you can end the war maybe we could get oil down from say 86 to 60. Inflation expectations will come crashing down. rates will come crashing down. And so that gives us time. >> And the president just said no. >> Well, the president just said, "For some reason, I can't.
05:36 " Right? I think he's trying to be fair, but it's not working. >> Okay? >> So then what do you do? Right? Then you say, "Well, then we need to cut entitlements." No. Then we need to raise taxes. No. These are all nos. So then you start with theatricality and deception by playing twist games that the three of us when we were in the office together and if we saw something like this we would start laughing at each other and like what's 4 billion going to do? Well he said at least 4 billion which means it's infinite.
06:06 He's trying to have his draggy moment. So I think he is going to keep trying to get rates down because that's what he needs to do over the next six months to nine months. It has to. >> Why do you say 6 to 9 months? >> Because I just I think they need time for inflation expectations to come down. And you're trying to make a bet that somehow someway economic growth will slow a little bit, not a lot, to a point where inflation can come down to the point where rates.
06:42 But this is all a bet that they're trying to make. And in the interim, I think they're playing a lot of games to try and pull forward lower rates by signaling to the market, this is what we're going to do. I'm going to get what I want. You better follow my lead so rates can come down. >> Okay. All right.
07:00 >> And the war was just a massive strategic error from a interest rate and debt perspective. I think he thought they would be over in two weeks. He did >> and he That's a bad miss. >> Yeah. Okay. All right. I'm going to voice my opinion. >> Okay. Go for it. >> Here it comes.
07:22 So, I'm not nearly as hung up on the deficit as you guys. As you know, I have this whole comedy routine where I go people like you are part of the oil the deficit. We only talking about this for the last 25 years. I don't think despite how bad it is that it's like eminent doom and destruction at this point.
07:46 I don't think we're close, but we're moving in that direction. >> I mean, the question is defined doom and destruction. Like we're not going to >> think the rates are going to go 50 basis points higher in the end of the day is not the worst thing is not to me the worst thing in the world. I think the mistake that Bessant made is basically putting a line in the sand. Now he has to defend it.
08:08 >> Yes. >> That's this is what Dr. Miller said. By the way, did you read about the scandal about JCO Miller? >> No, >> he wrote it on AI. He wrote >> Oh, that he admitted to it. >> He admitted to it. It's like that's why it's not a scandal. >> My response to him is you could have just written it yourself.
08:24 It's not that complicated. Why would you do that? It's lazy. He said he's an econ major, not an English major. >> You could still write a stupid editorial that's five paragraphs long. It's not that complicated. It >> was 100% written by >> 100% every word. Every word. So I think it's a bad sign.
08:43 I think that doing it is actually the sign of weakness. Not the problem is not the sign of weakness. Doing it. >> You're coming our way. >> I'm a little more nervous than I've been. And let's leave it at that. So what we would contend always was that when you woke up in the morning and you turned on CNBC, >> right, >> and you saw rates benign, Nvidia up, >> Apple up, >> that made everyone come and said and said >> nothing's wrong here, right underneath the surface, the amount of work that they're doing to make sure that everyone wakes up in the morning
09:22 and sees calm. I think is incredible. And this is the first time that people are starting to see what we see. >> It was just so out in the open that it couldn't be hidden anymore. Right. Right. And saying like to me it's like he's been doing this for about 5 years. >> 10 years. >> 15 years. >> Well, the Fed has the Fed has.
09:42 >> The Fed has correct. The irony here is that Wars comes in and says, "I don't want to do this anymore cuz he's in a box." >> Right. And Besson says, "I'm going to replace you." >> I have a theory for that. >> Okay. Oh, please share. >> So the theory is that let me provide let me just explain because viewers understand this.
09:59 >> So the Fed over since basically 2010 has done quantitative easing multiple times where the Fed goes out and buys treasuries with the idea of bringing interest rates down. That's supposed to jumpst start the economy. It never helped the economy but it did help the stock market go up. So Walsh as a new head of the Fed has basically said I don't want to play that game anymore.
10:21 I don't want to do quantitative easing and I don't want and what's more I don't want to talk about it. So and so he's stepped aside and they're still doing QE every day. They just don't call it Q. They're printing money every day. >> Yes, they're printing money. They're not actually going but he but in theory he has stepped aside.
10:43 Now Besson comes in and says I'm going to do it. >> That's so you first off they're playing a great good cop bad cop right? I think the majority of the market has been conditioned to look at the Fed as dovish or hawkish and that's their signal right so when he's hawkish >> wash the market can cool off maybe slow down maybe market will go down maybe rates will go down that's the biggest thing right >> whereas Besson is wide open >> and no one really knows >> because no one has focused on him before >> kind of no one knows really what the Treasury is doing what's this twist
11:18 thing. What's >> any It's not just the Treasury. It's wide open. The entire fiscal that we're running $2 trillion deficits or whatever the root cause of all of this. >> 6% six or seven% budget deficits. >> Look, the only way that the government is ever going to do anything about this is if we get close to the edge.
11:43 >> For sure. >> Yeah. They just said, it's not just entitlement, it's defense. I mean, it's the whole budget. So, how you going to get the federal government to you don't even necessarily have to cut the budget, but you could, let's say, slow the growth rate by half.
11:59 Let's say that's what you could do. But they're not going to do it >> unless things get really bad. >> Doge lasted a month. >> A month. Remember that? A month. And what they cut was nothing. Correct. >> So, it has to get bad. There was supposed to be all this fraud and there probably was but it's nothing.
12:16 >> But that's nothing compared to what's actually being spent legitimately on social security. You can't say that people what's being spent on Medicare is illegitimate. It's just a lot of money. >> Correct. It's probably a lot of fraud too. So >> I'm sure it is. >> But it's a lot of money. >> But it's a lot of money and there's parts of the government I mean the defense department there's stuff that the government spends on.
12:36 It's not fraud. It's just they spend a lot of money. So would you like sort of concede to us that any part you guys were kind of right about calling you the oil the deficit [laughter] crowd but I'm not but I'm not saying it as passionately as I use. All right. [laughter] >> Just want to put that on record.
12:55 You want to put it on record. You got it on the record. Okay. >> All right. So let's talk AI. So I had on a guy named Ed Zitron. He's like Mr. negative AI and he does the kind of research that you guys do but on AI. So he puts out something every week that's like 20 pages long >> every week, >> right? >> And he pointed out something I didn't know cuz when he came in, Nvidia had just had literally just reported the night before.
13:27 And so I said to him, Nvidia's revenue numbers were up over 100%. and he said, "Yeah, but and then he pointed out and I confirmed this later in the day that in the 10 Q there's in note 7 I actually looked this up >> stuff that we used to do to financial stocks. So note 7 says that the top five direct customers of Nvidia accounted for 70% of accounts receivable in the quarter. Okay.
13:57 At the end of the quarter. >> Yeah. So on the one hand your revenue is up over 100%. On the other hand it's totally concentrated in a handful of names >> and a couple of those handful of names are not looking so good. Open AI certainly >> open AI is in trouble. So I'm just curious. I mean we could talk about this for the next 10 hours.
14:16 Give me your thoughts about the whole what's going on in AI from where you guys sit. >> Morning serving. >> I spoke to a friend. He's a friend of ours. Yeah. >> Yourself included. >> Okay. And he has one of those jobs where he would publicly traded company name not for attribution. >> Let's call him Mr. X. >> Mr.
14:38 X told me that his company's queries are up, I'm forgetting the percentage, 30, 40%. Tokens, the amount of tokens he's using for AI, >> right? >> But his costs are down something like 60%. Because >> because what the company has done in my words, not his, is centralize all the queries that are make in AI and rather than sticking everything in leading edge trying to figure out what are Leaning Age frontier queries that require best-in-class versus the offtheshelf open source.
15:12 So in other words, they're very careful now about what they send to anthropic and open AI and everything else they send a small percentage of the very very important queries to them and everything else they let's say they give to the Chinese openweight models. So therefore the costs have come down a lot. so careful that the costs are coming down.
15:30 >> Now, >> let's take that. That's just one example. So, you can't make a whole >> mosaic on it, but assuming most enterprises are doing this, right? Right. >> How do we get to the returns on invested capital of all the money that we're spending on artificial intelligence? So our view is yeah the funding can continue as we've seen but at the end of the day are we dealing with a very similar and Porter is probably going to speak about this >> capex boom that history would suggest you have boom bust and then
16:07 >> what we get are good cycles afterwards right and that's where we stand this is like the topic >> yes >> I had Torson Sllock on and he said GDP PE will grow let's say 2% this year at least half of it is AI capex. So if all of a sudden open AI failed and the whole thing reversed the economy would go into recession almost immediately.
16:34 No, I'm not making the call. Listen, we're not >> I'm not making that call yet. >> We're not AI experts. This is not our expertise, right? But I look at the balance sheet of open AI or anthropic and I look at what these hyperscalers have gone from huge >> cash flow machines not machines like spew out cash like no one's ever seen and they were buying back their own stocks to go in the other to issuing debt to Google >> and in some cases equity.
17:05 Google issues $85 billion in equity, right? Bought by Buffett, which is like geez, what that's not a sure not or I guess it wasn't Buffett, but sure not a distressed purchase, right? So >> I think you're in a different paradigm here. And yes, it scares me, right? And they're going to force this issue, right? They're going to let AI come public.
17:29 They're going to let anthropic come public because they need to. My contention always is that just like SpaceX, it's bad for the market >> because >> it's supply, right? It's you >> new stock >> new stock of supply, right? And that's what usually has killed markets, right? That's in 2000 in 1929.
17:50 That's what killed the market was new supply of stock. And so it's just supply demand. It's kind of that simple, right? And so we've had this machine where everyone's been investing in their 401k and you have new supply of buyers every day, right? They talk about the S&P. It's the dumbest investment philosophy ever, right? If I get more money in, I buy.
18:13 If I get money out, I sell. There's no other thought to anything, right? They don't think. That's the two thought process. And so >> if you flood a market with capital, right, it's problematic. And that's the way I think about it. And that's what makes me nervous. >> Look at SpaceX.
18:31 Where's the re, when everyone who made all this money finally sells >> asteroid mining? Don't poo poo asteroid mining. [laughter] >> Exactly. >> I was impressed by that. The Oh, you loved it. I loved it because I'm a sci-fi guy. I don't even know what you're talking about, but I'm sure Musk saying >> no, in the S1 there's a whole section about things that SpaceX will do in the future and one of them asteroid mining.
19:02 So in my weekly podcast I commented I said, it's kind of interesting that there's a show on Apple right now called For All Mankind, which is a sci-fi show where asteroid mining is a major theme. >> Full self-driving is about a decade behind and it's at level three. So he makes a lot of good comments that don't quite come true.
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21:45 You have more time to focus on growing your business and the tools to do it. If you're ready to hear the of your first sale today, head over to shopify.com/isman to start your free trial today. That's right. Start your free trial at shopify.com/isman. that shopify.com/isman. So my thought about the whole AI thing, which is what makes me nervous right now, >> is that there were some very good reports by some Wall Street firms that basically said that 70% of hyperscaler AI revenue is from just anthropic and open AI.
22:29 70% of AI revenue. >> Correct. That make sense? >> Yeah. And then so if you just take that math, that equates to about 25 to 35% of their total cloud revenue. >> Yeah. >> That's huge when you think about it. >> That's why they need to come public. >> Yes. Well, I know they need to come public.
22:50 The problem is that the Open AI numbers that have just come out are actually quite poor. >> Yes. >> Compared to Anthropic, >> they had huge market share and they just they lose it every day. >> Well, and they keep losing it. And Steve, you're closer to it than we are. The sequential growth rates, are they slowing, accelerating? >> So, Anthropic put out like 11 and a half billion in revenue for the June quarter.
23:09 They didn't say anything about costs and that was up over 100% in 3 months. >> Okay. >> Open AI was at 6.5 billion and it was up only 18% in 3 months. Its costs were 12 billion. But the crazy thing was that if you look at forget about these the percentage in increases if you just look at the dollar changes in three months their revenue went up a billion and their cost went up three.
23:37 >> Yeah. >> So I think Open AI is in trouble and if Open AI and when you're not profitable as you know >> narrative is everything like our country >> right there narrative is everything like our country. Exactly. So look, if you're a really really profitable company and somebody writes a bad newspaper article about you, >> big deal.
24:03 The stock goes down for a day. Who cares? >> You buy back stock. >> You buy back stock. Who cares? You got you're swimming in money. But when you're open AI and you're bleeding cash every single day and all of a sudden the narrative has really started to change and got they've lost tremendous number of people. >> It's bad.
24:18 Your cost of capital is rising. Yes. >> And you can't afford that. >> And you can't afford that. I make this joke that whoever buys open AI at out of bankruptcy, it's going to be a fantastic deal >> probably. >> And that's the history of what happens though, >> right? >> Just like they railroads if the railroads failed.
24:34 Whoever bought WCO, when Wakovia was purchased for nothing, it was a great deal for Wells Fargo, right? Same thing with Bear Sterns. That's what happens. >> You guys do a newsletter. >> Yes. >> And you wrote an article about shorting. >> Yes. Mhm. >> So, why don't you share with people your thoughts from that article because it was kind of interesting.
24:53 >> Thanks for reading, by the way. >> Yeah. Well, I like to read. >> Are you a fan of the Untouchables? >> I Yes. >> Yes. >> So, I was thinking about >> team team. [laughter] >> But really, when you think about a movie, whatever movie Shan Connor is in, he outshines everybody else >> all the time. >> All the time. Yeah.
25:12 >> There's got to be I love Finding Forester. You must like >> love finding he's unbelievable. >> He's unbelievable. And anyway, so >> it's not a soup question. >> I [laughter] go with this. >> A great line. It's a great line. >> I thought about his arc, right? And his character and it's kind of like shorting stocks or the way we probably feel right now, >> right? >> Like we just want to go long, we'll choose gold, you'll choose whatever, be the B cup, but then all of a sudden you get like interesting shorts
25:41 that come your way. Right. >> Right. And then you got to make a decision, right? And then do I do it or not? >> Do I do it or not? And you know that if you decide to do it, and we could talk about like one where we decided to go there, >> you're aim for a war. >> A war, right? >> Fighting crazy is hard.
25:59 >> And yes, very hard. >> Yes. Most of the people in the investing world like you're short, they're long. >> Not only that, let's think about the people who are short for a living, right? When you look at the citadels, millenniums, the 72s, what is probably not well known is that the people that work there, the pods as they're called, >> explain what a pod within a millennium or citadel is.
26:23 What does that mean? >> When you work at a millennium or 72, their GPS, the grand PMs will give you an allocation of money, right? Call it $2 billion. >> So, I could be running a team. >> Yes. >> And I don't raise any money. The money is raised at the parent. Correct. Ken Griffin gives you the money. >> Or if I'm at Citadel, Ken Griffin says, "Oh, I think this is he's a good guy.
26:46 I'm going to give him >> 250 million in capital. Go do something with it." >> Correct. >> And so, and if I'm running the financials pod >> like you guys ran at Citadel for a while, then what you're doing is they gave you money and you're investing long short in financials. >> Correct. Now, let's keep it simple.
27:07 For every long that you have in your portfolio, you have to have almost dollar for dollar a short >> at these firms. >> At these firms, right? And these firms have grown. >> They're huge >> in huge size and they're highly levered. >> Explain that. What do you mean by they are highly people don't understand this world? >> Well, and it's amazing.
27:28 And I'm not saying even I think the financial media doesn't really understand this world all that well. So let's just say make up a number that Citadel has 25 billion in capital that they're running >> for their investors that investors have given them $25 billion. When you say it's levered, what does that mean? So in order to lever, you have to make sure that your annualized volatility is statistically below a certain level.
27:56 Call it 6 8 9%. In order to do that, you have to have a very low net on your >> your longs and your shorts are roughly equal. >> And then once you figure out that gorgeous science, you can leverage yourselves 5 to1, which means >> in other words, Citadel would be running they have 25 billion in capital, but they borrow and they're running 125 billion in positions.
28:20 >> Correct. >> Okay. >> Correct. >> Got it. And so and if you >> and it's all long short and it's roughly equal half of the 125 billion is long and roughly half the 25 it depends >> at least on the equity side on the equity side >> then there's they do energy and fixed income and stuff like that but on the equities they but they match it so perfectly on a beta dollar you couldn't for every I think they'd sweep it every five minutes so you were perfectly hedged >> right >> and this is on a beta adjusted basis
28:51 >> beta a factor neutral basis. >> What does that mean? Beta factoring ourselves. I apologize. So beta is it has to be beta adjusted. So the beta of your longs have to equal the beta of your shorts. Correct. They also want you to be factor neutral. So every stock has a personality. >> Right. >> That's the word I would use.
29:08 >> I can't be long value or like this is the Leupold guy. The whatever his name was >> Leopold Ashen Brener. >> Yeah. So he was long AI short software. >> Right. >> And he blew up. >> Right. Right. Ken would not any of these firms would not allow you to have such mismatches, right? They want you to be long some software and short the bad software.
29:31 And so you're more perfectly balanced with >> you could be 100% long one sector and 100 or sub sector and 100% short another subsector. >> Long growth short value. Can't do that. >> Can't do that. You're not supposed to long neutral factor neutral at least where we work. But I know the other shops are very >> probably roughly similar.
29:52 >> So their return thresholds for their shorts are very different than ours, right? Meaning >> meaning if they're long let's go into our neck of the woods. Okay, >> right 100 million of JP Morgan, right? >> And they're short a 100 million of Bank America >> and they would do that something like that. >> If they made a spread between the two of three to 5%, >> they're happy >> and they're done and they're done, >> right? and they have to move on to the next >> and they have to move on to the next trade.
30:20 >> When we're shorting stocks, >> we want to make like 150% or whatever. They want a big hit. >> So, but because they're the predominant short in the market and their size market share of the overall market and trading is so ubiquitous, it almost makes it impossible. They know like every short that we would come up with, right? They're probably short as well in size.
30:46 And if it doesn't work for them in 3 weeks, they're covering. So, you have to contend with all these squeezes, let alone that the market just generally goes up. >> What we used to do for a living is brutal, >> extremely more difficult. >> There are much more shorts in the market than there used to be. >> Explain that.
31:04 Why are there more? because these firms they lever up and just the dollar amount of shorts is so big like there just wasn't amount the amount of shorting that occurred 20 30 years ago wasn't as big. It was a small little >> cuz they're bigger. >> Cuz they're bigger >> and they're levered. >> Yes.
31:23 >> I see. And they're not allowed to lose a lot of money because when you're levered five to one, >> you can't. >> You can't. Your business model doesn't work if you're losing four to 5% per month, >> right? Cuz multiply that by five. >> Correct. >> Yeah. And Leopold obviously wasn't as sophisticated as these big guys.
31:40 And they knew it and they blew him up. >> They blew him up and Kenny G cleaned his clock. [laughter] He did cleaned his clock. >> Cleaned his clock. Unbelievable. >> Smart guy, but you know what I analogized it to? I said, ' imagine if it's like the year is 1905 and you have a thesis that the automobile is going to take over the world.
32:04 So you're long every auto and auto parts company and you're short every horse carriage company and it's working great and you're making money on your longs and you're making money on your shorts and you're levered four, five to one. So you look like a genius and then all of a sudden on Fifth Avenue a terrible car accident takes place and it's on the front page of the paper and all of a sudden everybody says wait a minute maybe this auto thing is too is dangerous and so for two months it all reverses when you leverage four five to
32:34 one they matter you're out you're they take you out >> and so shorting [clears throat] is and we pointed out shorting is a very tough game right especially when we've been on and off only short or nothing Tesla for part better part of five or six years and fundamentally many could argue that we've been right right the earnings have been >> oh there's no question fundamentally you've been right the have gone in one direction >> down >> and the stock has gone up >> yes so that's a tough short
33:02 [laughter] [gasps] >> and so I think the lesson is don't short a cult unfortunately it >> it is sadly sometimes we don't learn our lesson on certain you can't help yourself >> because we can't and that was the part of Connory couldn't help himself right he knew better not to do that but He went in anyway.
33:19 We're just doing it with significantly less capital than we used to. >> So, is there anything short-wise you really like these days >> that you're willing to share? >> Yeah, but it doesn't work. So, let's start [laughter] let's start with a few caveats. I listening to your podcast, I think, circle doesn't make any sense to me.
33:39 >> Zero. >> Okay. >> And yet the stock has rallied enormously. Every I don't even know why. crypto's going on. >> The crypto legislation nonsense. >> Let's bring something near and dear to our hearts. So, we're back in our neck of the woods cuz circles Finn or Fintech. >> We short a lot of stuff in our neck of the woods.
33:57 We don't stray too far a field in our shorts >> other than other than >> you short FICO. >> Yes, >> we are short FICO. >> Me too. >> So, you know the reason. >> I had two shows on FICO when I've listened. We shorted it the day that Bill Py came out and said something which was like I was around then which was like $2,500. I was I agree. It was it's bad.
34:17 >> It's by the way it goes back to the same stuff that we used to be pissed off about is basically companies gouging customers. >> Yes. >> Yes. >> If FICO had raised prices over the last 5 years like call it inflation plus 2% Mastercard, right? like Visa, Mastercard, like nobody would even have paid attention and said they raised prices 1,600%.
34:41 >> It was pigish. And not only that, they're pulling credit files and mortgages and charging I think it's 3 to 5x what you're doing on credit card and auto loans. So imagine if you're Fanny May or some big rocket, right? >> Just because they can. >> Just because they can because of the law and like if I was Rocket or Fanny and Freddy, I'd be like, you're going to lower your price now, right? But everyone's like, "Oh, it's such a small piece of the loan.
35:06 " It's like, "Well, that's small anymore." >> No. >> So, the other name which is near and dear to all of our hearts is Carvana and the mystery and the mystery buyer of paper north of 110. >> Okay. Go explain that. >> This will be that's a cryptic comment. >> I will explain. So, what does Carvana do for a living? Okay.
35:24 They sell used cars, right? Right. In addition to >> online online in addition to used cars selling the used car they provide the financing for it. >> Okay. >> Okay. >> Which at this point >> by the way I just wanted to say that the father who had a company called Ugly Duckling I know >> I actually went and visited the company in the 90s when you and I were working together and as part of the trip I got an Ugly Duckling towel >> which I loved and used all the time.
35:52 Do you still have it? I used it so much it became like a rag but it was one of the best towels I ever had. So all due respect to Ugly Duckling, they had a great towel. >> By the way, when I [laughter] when I first came to work for you and call it 2001, I looked on the sheets and I was like, "What the hell is this Ugly Duckling that you're short?" [laughter] >> And that was Ernie Garcia Senior.
36:14 >> Ernie Garcia Senior. So they sell used cars. They finance the sale of those cars. a good portion of those loans are subprime in nature. >> Okay. >> And the majority of their profits, almost all of their profits, >> a good portion of their pre-tax income between 75 and 100% from gain on sale.
36:37 >> Explain how gain on sale works here. What does it mean? >> So, when you originate a loan or you create a loan, you could either hold it on your books and earn the spread, >> right? >> Or you're going to sell it to a third party. Are they selling it or are they securitizing it? >> Well, selling it and securitizing it are similar things.
36:56 They're doing both, right? So, they're securitizing it, but blowing out even the residuals, meaning the last piece of the securization. So, they're not really >> They're actually selling the loans. >> Correct. They also sell loans on a whole loan basis that meaning the whole loan, not securitizing it >> to third parties like Ally.
37:14 Ally is one of their biggest finance years. An ally probably pays I'm going to give a wide range because I don't know exactly what it is between 102 and 104. That means if I originated a loan for $100, I get to sell it for $102 or $104. >> Okay. So far everything you've said sounds legit. >> Correct.
37:33 Their average gain on sale over the last two years has been 109 110. >> Okay. So if we do some simple math and say if Alli's 20% at 102 103 that means somebody in the world is paying north of 110 meaning I originate a loan for 100 selling it at 112 113. >> Okay. >> So there's a mystery buyer out there and no one knows who the mystery buyer is.
37:53 They won't disclose it, but I think like eight years ago, they said it wasn't Mark Walter. And Mark Walter was is the guy who just is attempting to sell the Lakers and the Dodgers and all this other stuff >> cuz his insurance company is in trouble. >> Yes. And allegedly, >> that's the only thing they said.
38:13 Did it >> was not Mark Wal. >> Who is the number five holder of Carvana? >> Oh, that's right. He is the number five holder of the stock. It's a one-sto multi special purpose vehicle called C van that's owned by him owned by him. >> And allegedly Delaware Life owns a heck of a lot of Carvana paper.
38:36 >> And Delaware Wife is who? >> Mark Walter. >> Insurance company. >> Yes. So did we find the mystery buyer? >> We've kn people have known the shorts have known this for a long time. This is nothing new. >> Okay. Because that's why they came out the Mark Walter connection. >> Yes.
38:53 Because they came out, I think eight years ago and they said it wasn't Mark Walter who's buying it, but everyone still thinks it's Mark Walter. And now >> it could be Delaware Life, who's not technically Mark Walter. >> And apparently in the court filings, Delaware Life had to increase the disclosure of how much counterparties they've had related party transactions they had something substantially.
39:18 like I think they said that the related party transactions of the Delaware life and its related party like Mark Walter and such went from like three to something like 30 or 40%. So oops that's a big Yeah. Okay. >> And also listen Mark Walter came out and said publicly there is no fraud here. >> Yeah. >> There is no fraud here >> and the market believes it.
39:40 So I got squeezed. >> You got squeezed? >> Yes. Yes. >> So which hence why it's so difficult to short sell. What has the stock Carvana done of late? >> It was >> a lot of nothing for the past year. >> Yeah, a lot of nothing. Yeah, >> it's expensive. It's like 30 or 40 times earnings and it's a lot for a used car.
39:58 I mean like I guess they are changing the way that used cars are bought and sold but it's expensive for a used car company that's and they have a great service apparently but a lot of their profits are probably artificial or enhanced steroid enhance >> but proving that is going to be impossible. that has proven to be impossible for eight years.
40:17 >> Well, I guess if Delaware Life goes under, then it's not going to be so hard to prove because then the buyer of the paper is gone. >> If they are the buyer, >> if they are the buyer of the paper. >> Yeah. So, the only way, again the only way that you get paid on a short is usually if you bring light, >> or truth to what happens, right? Oh, I knew it all along, right? just, like just that they finally couldn't >> bury the subprime losses, right?
40:45 Or in the big short like, oh, this is where, we were faking the prices all along, right? So that's what finally happened. >> So you need a moment like that to really get paid on the short. Whether that happens or not, I don't know. >> So besides gold, >> yes, you guys like anything >> very idiosyncratic odd things.
41:06 >> Okay. >> Which kind of makes fits us. Well, that's that you're you guys are weirdos. So, >> we have about that's what you >> we probably have about 10 weird names and a lot of gold. >> Okay. Would you be willing to share two? >> Sure. >> Where you going first? >> Two weird names.
41:25 One you put, you speak one, Vinnie, you speak one. >> Well, we own a lot of a company [clears throat] called Golar. >> Golar. >> Golar. G L A R. >> Yep. G L N G is a ticker. And what Golar does is they have they first were in shipping a long time ago and they kind of got out of shipping, but they have these boats.
41:44 They right now they have four boats. And what these boats do is they pull up to a country like Argentina and convert the natural gas into liquid natural gas. So then the gas can then go to the buyers around the world. And so, you can either build a huge project like Shener does in Louisiana, which cost them probably between >> gab billions of dollars.
42:10 >> Yes. I think it's >> LNG is a symbol. >> Yes. I think that they said that YPF in Argentina is going to spend 30 to50 billion dollars building that. But in the meantime, they're buying these boats and, they're going to take a toll. But the capex is minimal. It's like three and a half or two and a half billion.
42:30 How do they convert it though into liquid natural? >> Well, they have a it's a converter. It's the ship on the ship. >> I see. >> And so it's basically a 20-year contract, a toll road. And one of the things that we've been bullish on is Argentina. And >> Argentina finally, figured out under Malay kind of figured out their fiscal situation and balance the budget.
42:53 But what they have is a lot of natural resources in terms of oil and gas and it's been trapped gas. They couldn't get it. It's there. They can find it, but how do you transport it out? >> Right. >> And the big thing for them is they're going to move these Golar ships in, two of them, and pull the gas out starting next year.
43:12 And then eventually more gas and more oil comes out. And we think because of that budget surplus go wild and interest rates which have gone from down from 100 plus% to 30 come down a lot more. So there's a lot margin is a big theme for us as he probably don't know but Peter Teal moved there and has a big >> he plays chess with the president.
43:36 >> Yes. And has a couple investments that we have similar investments in but Golar is part of that thought process. We own a farm. Do you work on the farm, Vincent? >> No, but I've seen the farm. Do >> you wear a hat? I've seen the farm. >> He has a cool stylish trucker hat that you can wear and a shirt. Yes.
43:56 Shirt. >> So, the farms in California. >> This a public company. >> Yeah. farms in California in vegetable, tomato, blueberry country where almost all of the product a lot of the products of America that are made your fruits and produce is made there. This just happens to be cannabis that they produce rather than fruits and vegetable.
44:18 >> Full disclosure, the last time that I smoked weed, May 1984. >> Wow. Wow. [laughter] which is I think it's safe to say a long time ago. A long time ago. So this company Glass House, you own it. I own it too. So go ahead. >> So the ticker >> and none of us use the product. Correct. We do not use product.
44:39 We do not use [laughter] the funniest thing >> couple sleep gummies every once in a while but that's about it >> is that none of us use the product but what I do like about it is that they are the lowcost provider but that's not enough right? whatever that means in California that in proforma they could produce it for call it 90 to 100 bucks a pound.
44:59 These guys basically bought a huge vegetable glass house and gut >> and gut it in May and they grow weed. >> Yep. The opportunity here is recently last December and then eventually finalized they rescheduled >> the government federal government >> federal government rescheduled the classification of medical cannabis from schedule one to schedule three.
45:22 >> Right. >> Which really reduces the restrictions. So a schedule one drug is heroin or fentinyl. Right. >> Right. Schedule >> which is a no no. >> Which is a no no. But cannabis was under the same rules as something such as heroin. >> And you can't die from you can't OD on marijuana. >> No. Right.
45:40 >> I assume you can. I can. But so in >> but because it's for medicinal purposes. The whole story is can they and right now the answer is not yet but we believe it will be the case produce cannabis and hemp in California >> and sell it elsewhere >> and sell it elsewhere. And the margins of selling it elsewhere are ginormous.
46:02 >> So everybody should know in California they say they sell it for $200 a pound >> and if they were able to sell it in Germany >> it's 600 700 bucks a pound. >> It could be a thousand but what else will come down it's a lot more. >> I run conservative so I'm so but that is 50 to 65% IBIDA margins if they can do that on higher revenues.
46:25 >> How close do you think we are to this? That's the $64,000 question. We believe it's probably evolving slowly and probably in my opinion might get yelled at right now by Porter a 2027 event that we start seeing progress whether it's interstate or overseas. >> They sold hemp overseas this quarter. >> Yes.
46:52 and small amount small but then they're trying to get sell obviously the cannabis and then the question is can they get into selling they have bombs that fix like icy hot but it actually works >> right >> and so can you get into and can they find a distribution partner and get into the wellness business there's a lot of >> there's a lot they could do a lot they can do and so is it's a small cap company >> it's like a 500 million what is it a billion billion it's a billion in 5 800 million something.
47:21 >> So we play we have a lot of companies that were long and these small cap stuff that we can find that no one else really traffics in and we like it. We don't we've owned Google for years but that's basically the only household name that you >> the only time we go into what I would call the mainstream media neck of the woods is when there's something's for sale, right? So for example when SAS apocalypse or whatever we call it was there and they were destroying some of these names we bought into it
47:53 and service now on the cheap >> when Google was allegedly being disrupted >> we bought Google. >> Okay. >> But we typically don't play the you don't play the standard game. >> We don't play the stand >> we don't own Amazon or this other stuff. >> All right. We only have a few minutes. Let's I'll give you guys the last word.
48:12 reporter say something. Again, I'll go back to what I started with in that I think that they're going to have to print a lot of money. I just think that and it's not going to it's not a big disaster, but I think that just it's not like the world's going to blow up because they can't do it, right? >> So, but what they when there is a problem, what do they do? Come in they come in and helicopter print lots of money, >> right? And so I think that if something really goes bad, I know they're going to
48:41 helicopter print money. And if status quo happens, I know they're going to keep continue printing money. And so therefore, I think that gold continues to do well. And I think that that's where the majority of our capital sits. And I'm pretty bullish on it. >> And Steve, I want to say just thank you.
49:00 You're doing a great job. You look great. Thank you. People love your podcasts. It's interesting. Thank you. Thank you for saying that. It's like being part of a dialogue debate, the AI, private credit, all I mean you guys are involved, too. It's like being front and center on like the most important questions of the age.
49:28 and the new media that we're involved with deals with this much better than old media. >> What you do a great job of is doing the whole what do you mean? Right. You it's like cuz people like to talk fancy and >> Oh, it was like when Vinnie was talking the leverage.
49:46 I know that most viewers it's not a criticism to viewers. Why would they know how a hedge fund lever the book? >> So I've sort of learned that from you over the years and I asked a question on a call recently and someone's like god that was a good question. I was like, "Yeah, it was a Steve question.
49:59 " [laughter] >> Thank you. >> Go, hold on. Go back and say that again. What do you mean? What do you mean? What do you mean? Explain that. >> Yeah. >> So, >> and it's a lot of fun for us, you're right. I mean, our jobs are never boring now. Like, you're waking up. >> You wake up every day something is interesting has happened and you learn about it.
50:15 And I mean, I've learned more about tech in the last year than I ever learned. >> Yeah. I mean, if you said to us, five years ago, hey, Porter and Vinnie, you're going to start this Substack, like, what? No way would I ever do that. >> Yeah. Yeah. >> And so, it's been fun. We enjoy educating our subscribers and our own little pocket of crazy.
50:37 And it's fun, we enjoy it and we get a lot of feedback from them and we have this little Discord that we use and so people ask us questions all day, all the time. Funniest comment I got was I always and not today but I usually wear this jacket with a hoodie. >> Yep. >> Yeah. >> So few months ago I wore it and there was a comment from someone that says is he wearing a jacket with a hoodie and somebody one of the other viewers replied saying you must be new here.
51:06 [laughter] >> I make fun of Vinnie's wife and I like to make fun of V usually Vinnie's clothing attire. >> Oh yeah. all the time like he likes his cargo shorts and you look good today though. >> You look good. >> I was in the middle of Penn Station and they were soliciting me but people were soliciting me and one called me GQ and CEO so I had to give them money, right? [laughter] Like whether it's true or not, it just felt good.
51:32 I was like I got to give you money. Don't sign me up for anything. Here's 20. So >> that's great. >> Remember we would Stew the H had this exchange company that we owned. Remember back in the day? >> Sure. And it was a big meeting and they're like, "Well, okay. Just come down to our offices right now." And Vinnie's like, "I'm not dressed for this.
51:50 " So you went out into Paul Stewart. >> Paul Stewart and he had like this he got a nice bright pink button-down and like a socks. >> Oh my god. And blue sweater. I was like, "Oh my god, [laughter] what the hell is going on?" >> Like when in Rome, you >> look great. You look great. >> When in Rome, you got to dress the part. >> Got to dress the part. All right, guys.
52:12 Thank you. That was great. Thank you for coming in. [music] >> This podcast is forformational purposes only and does not constitute investment advice. A host and guests may [music] hold positions in stocks discussed. Opinions expressed are their own and not recommendations. Please do your own due diligence and consult a licensed financial adviser before [music] making any investment decisions.