WAWD Reunion: Porter Collins and Vincent Daniel Are Back for On The Tape
Summary
Danny Moses reunites with former partners Porter Collins and Vincent Daniel to discuss trading and positioning amid a fluid …
Transcript
Welcome to the On the Tape podcast. I am Danny Moses and it's been a while. So today what are we doing version on this podcast with my former partners Porter Collins and Vincent Daniel. What's up, guys? What are we doing? What are we doing? Uh so for those who don't know, we've kind of shifted the what are we doing rhetoric to Substack with our what are we doing contrarians at the gate and we've amassed I mean over I think 6,500 I'm going to say subs total and over 1,000 are actively paying and enjoying our enjoying the back and forth on Discord etc. And it's been a lot of fun. So if you if you have not gone over there, that's kind of where a lot of our stuff has been going. We felt it was time for a kind of broader update to the broader universe and again, you can always find us there. So Um Danny, I think one of the reasons we went over there is that Twitter was amazing and you know, to begin with and and I think over the last 10 years it's been a really great source of information but lately it's just turned into a mess and there's you know, obviously a lot of bots and a lot of you know, you say anything a lot of hate mail back and so I think what we've we've curated here is a little bit of a a nicer a friendlier nicer gentler uh community where we're able to push back on ideas and not you know, lambaste someone for saying something stupid or you know, cuz everything's constructive and or you know, or negative which is fine, too. So it's it's been really nice. >> Vinnie is the Pulitzer probably the next Pulitzer Prize if it's won on Substack for writing. I mean Vinnie, it's got to be you. It's it's fun to watch. I did I never knew I mean you always wrote our quarterly letters and but how much you enjoy it and get into it and really able to express themes and there's been some clever stuff that has occurred here. So Well, it's a full transformation since Steve used to make fun of Vinnie for his writing. I love Vinnie's writing. Vinnie >> In in a prior life, remember I was a sell-side analyst Danny when we worked at at Oppenheimer and and there was a lot of negatives associated with being a sell-side analyst. Crap you had to do, but the cool thing that I used to like to do was write, right? Particularly when you had something witty to say and it was almost a challenge to get people who typically don't read a lot to say, "No, no, no, I'm I'm going to make you read this cuz it's going to be interesting." So, it's a lot of You had some good titles for your research reports, I remember. Yes, I I I one there was a Capital One title. So, when I knew that I was on I thought I was onto something and it was an ode to Robert Palmer, right? And the IR person wrote a dissertation back using the lyrics of Robert Palmer, but that's not the better story. The better story was You had the Robert Palmer girls in? Yes, I got an email from a groupie, right? Saying that she used to tour with Robert Palmer, go to every single one of his things. I think at that point in time he passed away or was and and was telling me if you wanted to meet up or hang out, if you're as big a fan as Robert Palmer as I am and I was go I go, "This is pretty cool, right?" >> Was it Was it Simply Irresistible? Was that the title of the Cap One report? No, for Capital One it was uh Might as Well Face It, You're Addicted to Growth. Okay. So, yeah. Got it. All right. Uh well, that's good and for those just to give an example of a note that uh will be coming out um it will be after the it will be tracking the movie Almost Famous. Um so, we're drawing parallels to the some of the current environment going on. So, all right guys, so let's >> Danny's Beautiful Mind uh works >> Well, Vinnie cleaned it up for me. So, I do write I do write something called Padilla's Corner from time to time when I pick up little tidbits here, but never the extent that I I actually think I turned it into Padilla's Corner because I wanted to use a a picture of Vicente Padilla. So, yeah. Those of you that don't remember, we used Vicente Padilla was my nickname on the trading desk and if you ever look up the doppelganger picture of the former pitcher, uh you might see some form of some type some type of resemblance. Anyway, all right. Let let's get into it here, guys. Um we've been tracking all the stuff. We talk about it. We have a Friday night dirty podcast. I should add also that we added onto the substack. So, for subscribers, every Friday. Um we've talked about and tracked gold here. We've obviously been tracking what's going on in the war. Um and we just try to kind of trade the policies as best we can and stay true to fundamentals and when things get over their skis and you know they can't last, we normally try to pull things back. Um as we sit here today at this moment, um it things are calming down a little bit in Iran, it appears. The market's rallying. Well, Danny, you forget it is Taco Tuesday. It's Taco Tuesday and it's the last day of the quarter, too. So, there is there is something to be said there. But, talk about kind of what you guys are seeing and uh you know, let's let's dive into it here and how how you're kind of trading this and positioning. Wow, I I it's hard to know where even to start today because uh we we got we got Trump with the hard taco and then Iran a couple minutes ago came out and said, you know, we're we're open to you know, ending the war sooner rather later later. So, a lot of stuff going on like everything in this market, it's hard to know what's real. Um as we like to say, the conspiracy theorists are doing a lot of winning right now. And just a a shout out to the guys in the energy space, guys and girls in the energy space, they nailed this the best in terms of what when the war started, they said, "Hey, this is a much bigger deal than you think it is. Uh we know more than you do. And this is going to be a real problem. And they were 100% right because uh everything in this war is about energy and energy infrastructure. We forget uh no no one can even try to understand why we started it, but that's a different issue. But to understand how we end it is all about energy. And I think that um you know, obviously the whole world needs it. Um but walking away from wars is not easy. I I pointed out today that um during Vietnam it was 4 years between the initial troop drawdown and the end of the Vietnam War. And so I think I mean we don't have another month of this the because the the energy uh problems are so acute. So I don't know. That that's at least that's that's a context of where we are. I don't know how I don't know where we go from here. How about you, Vin? We we all three of us gravitate to conspiracy theories and bearish tendencies and misfits, right? In general, right? So if we rewind the clock when we had quote the nut flush and we were PhDs in what the hell was going on in the world. We were parading around in 2006 and 2007 telling people how bad the world was. Remember that? You don't know. You don't know. We're uh we're >> know. rewind the clock to COVID era. And Porter, we were listening to podcasts of people who were in the health care industry who were saying the same thing we were saying. We had no idea what they were talking about, but we're saying "Hey guys, in a month or 2 months this whole world's about to shut down. Just get ready." And they were dead right. So the more modern version, Danny, now is what Porter was saying is that I I was going out for drinks with a guy, Paulo Macro, right? Uh we had a few too many and he gave us gave me the story of the plumbing of the Strait of Hormuz. And this was about 4 weeks ago. Right right at the beginning of this. Right at the beginning. And and he was telling me, "You don't know what the [ __ ] is about to happen if this war lasts for 3 4 weeks." Well, we're in the third week right now, right? Something of that nature. >> Fourth. And I this can't last that much longer because I think you're going to see a COVID-like contagion. Uh and there's been a contagion or slow contagion in our markets. And it just seems like it seems like we'll see because this is a super fluid. Seems like Trump's had enough. Uh we'll see if they can >> Let's Let's Let's talk about the kind of the three ingredients of what's right. So, we Let's actually go back a year. One of Porter's favorite things to call it, liberation day, is in a couple days, the anniversary of that ridiculous thing. There's been a lot of dumb things that have This might be liberation day number two, Danny. Yeah, well, whatever you want to call it. Taco Tuesday, call it whatever you want. But, let's go back to that. Companies were forced into deal with something they hadn't dealt with. What is the What is the impact going to be to pricing? And then the Fed, who remember was still in the in the midst of potentially cutting rates, backed off and said, "You just jacked up potentially jacked up inflation. You messed up my soft landing. Now, we're going to wait and see." So, I don't think that the inflation ever got as bad from the tariffs that have come and gone in fits and starts and who cares what the Supreme Court says cuz they're not even here anyway. But, here we we now we fast forward exactly what just happened. Now, to Vinny's point, oil is the number one ingredient in into the consumer. It's a regressive tax. Um and it gets priced into so many different products. So, that's one of the three. The other is rates, which obviously longer-term rates, which go higher because obviously of inflation, right? And the third component is the dollar, obviously. Those three things, right? Which are all kind of connected. Oil, rates, dollar, things that we were dealing with that were never necessarily on the road map. A month ago, they're like, "Okay, we're getting through the So, now what happened?" Fed went from potentially cutting rates to potentially raising rates, although we all would think that's not going to happen. And now we're kind of zero cuts or zero rate or zero rate hikes as we sit here today. But now you got to factor all this in. And so, you know, what does this look like when I try to take a step back and figure out how I can tell you this, when we get first quarter earnings reports and pre-announcements will start coming next week, it'll be a a free pass. "Oh, I had everything going, but we taking numbers down due to uncertainty. It was the last month." That's the stuff we're going to start to see now. So, I just threw a lot of you guys, but it's just been hard enough on the micro level to figure out how companies are going to do. When you throw this stuff in on the macro level, and and Vinnie, I'm going to throw it back to you for a second just on the idea of higher rates, you know, for for longer, and I'm talking about the longer end or the short end, what what that really does. I Look, I I'm on record of saying I don't think the market can handle higher rates uh for longer. And so, as a result, if I solve for what is needed for the world to work, we're eventually going to have to get lower rates, which goes against the underlying fundamentals and supply demands of our fiscal deficit, right? So, it's a difficult one. So, what do I expect, Danny? If, and again, it's remains all fluid whether this war is going to last or not, right? If we it is talk through Taco Tuesday, not fake Taco Tuesday, and we do get a de-escalation of the war, we'll get a reprieve. The world, like COVID, will be kind of screwed up for the next few quarters, but I actually think that the Federal Reserve, perhaps not Powell, perhaps the person who replaces Powell, is going to use that as uh a catalyst to lower rates 50, 70 five, 100 basis points. And I and I expect that to be a a two late two Q, probably more like three Q type of event. Importer is gold now telling us that you and I talked last week on the dirty about, you know, gold had to crawl through Andy Dufresne type uh foul-smelling [ __ ] to get out the other side of this um kind of margin call situation look like it was in. Now, is it is it clearer now given that this war ends what what's ahead? Well, I'll get to that in 1 second, but let's go back to our roots in terms of financials and interest rates. And and our you know, one of the first things we do in the morning is look up and see where interest rates are. That's just our you know, our financials background. And someone asked me in our to plug our Discord, some someone asked me in the Discord, you know, how do you guys think about PEs cuz he was taking a class about economics or whatever. And I said and I posted a chart two charts. One was the correlation between higher rates and PEs, which is as rates go up PEs come down. And as rate volatility goes up, PEs come down, right? And so, I think that people constantly underestimate what a financialized economy this is, right? There's nothing that's unlevered except for gold miners. But um you know, the the we have 38 trillion 39 trillion dollars in debt. You know, most uh corporates are I would call they they like to say optimally uh leveraged, right? When they're not opt they're not levered to allow things to go poorly. And I think that you look at the mag seven, which has driven this market for the better part of a decade, they were always net cash. And now a couple of of you know, like I think that you look at the Delta, go to you know, Meta's balance sheet, the Delta in the last four quarters has been from net net cash to net debt. And so, everything is levered. And so, when when the when the bond move market moves that way, it moves. Um you know, as for gold, I've been joking around that the best chart in the market, bar none, is the chart of the government debt. The total government debt. And it's a straight line up. It never pulls back, never checks back. Uh sharp ratio of an infinity. And so, so if you think about that, that that's that's my that's the only thing that in in in in in a you know, in this market where we have no idea what's going on day to day, oil prices, tacos, no tacos, you know, bombs, no bombs. I I I don't know, but I look at that chart and I say, "Well, this this chart's never ever going down." Sadly, but it's never going down. And so that that that's my that's where my bullishness comes in. And I and I okay, how do I play that? And we've played that through gold. And so, I look at the gold miners, which are, you know, all producing EBITDA margins higher than the Mag 7. All of them are in uh you know, I think that the top 20 names are average 10% of their of cash balances as a percentage of their market cap. And they're all between three and seven PEs or EV EBITDA. And so, you know, that that's where I'm hiding. And there's been M&A in the space, too. Um >> True. Yeah. And I would just add, Vinnie, on that, um you know, reminds me of the the show Squid Game, what Porter just mentioned. So, the green light, red light game, you know, at the beginning where you go, you go, you go. So, these tacos and these green lights have been okay. I I never I never That was That was a COVID show, right? What was it? They they came out with a second season. It was actually pretty good. Anyway, came out this in the last few months. Anyway, so red light, green light. So, the red light the green light has been okay. It's done and then the red light's been oil. You know, oil's keep you know, keep people from running and then kind of get oil coming down. What's the the third, you know, fake green light, red light is rates. Okay, you finally got the two-year coming in a little bit, the 10-year coming in a little bit. But what Porter just mentioned on the debt and the green light for gold per se, the interest cost on the debt. I just went back and looked. So, when fiscal year ended 24, which is September 30th, 2000, which is exactly roughly 18 months ago, right? The debt was 35.5 trillion. We're at third We're north of 39 trillion right now to Porter's point. And rates So, Vinnie, put your Scott Bessent hat on here for a second. Um and by the way, the other chart Porter that might be done going down is the Fed's balance sheet, which is now starting to turn back up again. You know, Porter would call that a bearish to bullish reversal, by the way. Exactly. Finally from the 6.5 trillion kind of back to 6.7, buying T-bills, but it's not QE. Vinnie, what I I'm I know I'm feeding your fire here on gold, but oy, the deficit, do we care? Well, of course we care and and but Sorry, that just for context, Steve used to make fun of us cuz we would talk about the deficit and he would go, "Oy, the deficit is not a big You guys are worried too much." So. Can Can Can I correct your statement, Porter? Okay. >> Yeah. Not used to make fun of us, still makes fun of us over it. Um So, which is fine. It's great banter, but So, put yourself in the shoes of Scott Bessent, Danny. The last thing you can tell the world is we have a debt problem. We have to figure out how in the world we're going to issue debt and get some idiot to pay for it at below market rates. He's never going to say that. So so, what are they going to do? Well, he pulled a shining right, where he said that I'm never going to do what Janet Yellen did and lo and behold, he's not only doing it, but he's probably doing it in greater quantities than she did. And that and what that is is issue T-bills at the short end of the curve and not issue long duration bonds. Expect that to continue. In fact, one of our friends came up with an interesting theory that they're probably going to issue more bill T-bills than they need and take some of the proceeds and buy back some of the off-the-run long duration debt to create more of a lower to have the 10-year go lower so that you could somehow some way >> Treasury does the twist versus versus the Fed and forces the Fed's hand as well so on this one which should be Vinny, what's what's the reference to the shining? Sorry, it's not redrum. What what what what's the reference? I I I could be getting the movie wrong, but didn't when he come into and become caretaker of the hotel, he he knew about the haunted >> the freaky twins are riding around in big wheels. But he never said he said he was never going to turn into that person and then all of a sudden he became a freak, right? Well, that's by the way. That's best. What's that? That's a great reference. Thank you, bro. We'll use that for another Substack note. See, this is what you're missing. Shelley Shelley Shelley Duvall who also played Olive Oyl in Popeye in that movie as well. Um but I think he's also going to get a helping hand from the Fed, perhaps not a Powell Fed, but whoever replaces him, whether it's Warsh or somebody else. And what I think they're going to do is extend the duration of the reserve management system right now, which is they're issuing $40 worth of T-bills or or sorry, not issuing. Apologize. Buying $40 worth of T-bills. I think they extend that and perhaps increase that calling it another temporary measure to offset the recent issues associated with the excursion. Not called QE by the way. No, they're not going to call it QE. They'll call it anything else, cuz Lord knows you can't have >> just look at the Fed's balance sheet there, you'll see it. But yes, go Correct. So, long long-winded way, Danny. They're going to do whatever it takes to keep these rates down, to suppress rates, to try and get this economy going. But again, all of that is predicated on ending this war. If we don't end the war, none of it matters. >> And Porter, Porter just mentioned before about what goes into a PE and how you discount a stock back and its value over time and I I'm I'm pretty convinced that again, VIX popped up, you knew it'd come back, but I think we're in an extended period of volatility. And I've been saying that for a while, so it's not like I'm just saying it now. When I say extended period, I'm not talking about the VIX at 25 or 30, I'm talking about low 20s. And when you incorporate that into being able to predict company's outcome and earnings, all these things we're talking about, when all the smoke clears, no no pun intended and everything we're dealing with, I don't see how on a valuation perspective, Porter, just using the S&P 500 on a PE basis that 19 or 20 times, and that might even be generous, Ford is cheap by any measure. And and I go and I look at Japan and go look around the world and lo and behold, where did the yen bottom out? 160 again, that kind of key level. So, it feels like a lot of technical stuff happening, but when you pull it back fundamental perspective, I I just feel like the damage is going to be done for a little while here. in in terms of US valuations. I that's a that's above my pay grade, but an interesting thing in in our Discord yesterday, I I asked the question, is anybody looking to buy Mag 7 names? And probably a a what a super nice value irrational value person says, "You idiot. The you know, the the have you looked at the cash flows? They stink. You know, the the the the the real cash flow number is, is, you know, way lower than the PE. And, you know, you could just see this market yesterday and the last two Friday, yesterday, people were shorting the heck out of it. You look at the prime brokerage stats, you know, they're most short in in like eight years. And you get one glimpse of good news and, you know, Tesla's up 4%, Nvidia up 5%, Apple up 3%, Amazon up 4%. And it's just, you know, it's it's very tough to trade this market, but I think that, you know, again, use a contrarian lens. We we actually, you know, after seeing that news and seeing the hate that that we actually bought a little Google yesterday just for a a trade. Probably sell it soon, but um you know, it's just it's just this market's very tough right now. And so, but I think our core themes that we believe in, whether it's gold or energy infrastructure, you know, things like that, you know, we we've been slowly adding on this on these on these pullbacks. And, you know, this is, again, not an easy market to trade, but I think it's going to be a good in in my opinion, a good run here for stock pickers because you can see the indices have gotten, you know, too big, too much passive, and they're very inefficient. That's just my That's my view. At about 9:58 last night, while Porter was watching the Mets on route to a 4-2 win, he sent out a chart in Discord showing the global long short ratio. And what that is is basically the net positioning of the hedge funds, whoever's aggregating that. And right now, it is probably of the lowest long short ratio, meaning the most bearish, uh over the last 15 years. Right? It's hard to believe. Hat tip to our friend Pat Burke on that one, by the way. >> Okay. Oh, so that was a Pat Burke? Okay. So, so it's So, there's there's What up, Pat? That's authentic. So, when we see a chart like that, and we do this a lot on the Discord chats, and and this gets back to the whole idea, Danny, of positioning. Where people like us, fundamentalists, view um, the multiples and probably what is about to happen to the economy. However, this market has a coiled spring-like impact in terms of positioning, where if something were to go right with this conflict, you could get a 10 I mean, we're seeing it today, right? You you could get a 10% upside just because just because people are wrong way. And and that is so powerful, and as people sit there, you're like, well, I could take it. No, you can't. No, you can't. So, you you just have to accept the fact that you might have a coiled spring before we get back to a lot of the issues that we like to talk about. And the And within that, I think when we're being honest with ourselves, and we've all been long energy now for several years, and we we've seen that rotation. We've seen things improve. Oil going up like that, while it won't, you know, last only hammers the point home, right? That these stocks were cheap. But, if you're being honest with yourself, you have to be taking some of that stuff down, which I know you are and we are, in terms of, you know, some of the great calls you had, whether it was Transocean, and I was I was on the ExxonMobil. You guys like Like you you just got to be honest with yourself and say, okay, if there is going to be a rally in the market, it would be because oil's there's peace of some kind, oil's going to come down, and now this money's going to rotate back out into what you just mentioned, which is Google's of the world and so forth, the things that got basically oversold, right? So, you got to kind >> great note on our Substack just about how to be contrarian. How to you know, buy stocks when they're out of favor, and how to how to let them go when euphoria is in in the market. And so I think that's, you know, innate to us. But most people don't most people chase higher, sell lower, right? It's just it's not easy to do. Not easy to buy stocks when they look like death and then they feel like death. And not easy to sell them when they're euphoric. I think we haven't been on together in a while in this format, but I want to talk about private credit, which on days like this they take a deep breath and be like, okay, hey, hey, they call up the analyst or the salesperson, any redemptions in there today? What do we got? What are we looking at here in the last day of the Anyway, obviously rates is extremely important to them. All this stuff is important, but again, feels like things are still in motion there. But we all believe that the large PE firms, the Apollos, the KKR's, the Blackstones are at the end of the day will be beneficiaries. And these are names that we want to own the longer term because not a huge portion of their business is directly in what private credit, private debt markets. But give me your thoughts there cuz I know we've all been nibbling kind of on some of these names here, but not full bore yet. Um I I I guess I'm probably a little bit more long-term bearish on on these names and and I I look at the allocation to to private equity and it's high. Look at Look at Yale and Harvard and all these these endowments, they have a huge allocation to private equity, which is fueled by private credit, right? They're they're the buyer of a lot of the the the leverage. And so I just think in terms of long cycles, this has been a very long cycle and it's been a very very good cycle and people made a lots of money. But I think, you know, that that someone once said to us in you know, I think 2010 and I didn't I I kind of laughed at that comment at time, but he said, reversion to the mean is a [ __ ] And I think you might see a longer cycle of a reversion to the mean. And you know, cuz these private credit funds have had inflows for a long long time. And the banks have lost lending to these private credit funds for a long long time. And so, could you see a swing back? I I I think I think the answer is yes. Um and so, that's just my >> My idea of Porter was and and I've told you Vinnie is that if things get really bad in this Nothing's going to happen to those companies I just mentioned. I mean, they get your right. Stocks may trade down, but they're in no danger. They're going to be the ones that are going to pick off these portfolios at 20, 30 cents on the dollar. So, my point is that you want to own the companies that have a huge arsenal. And yeah, might have but Vinnie, give me your thoughts there cuz that's how I think about it kind of longer term, but I think you can have both. Stocks trade down and then and then certainly zoom zoom back up. So. >> Well, and let's add additional element. Stocks can trade up first because again, these stocks have been cremated over the last 6 months to year. So, they might have a pre first before they go down and where a lot of Porter's issues come into play. And then after that, because let's get away from the war for a second. These stocks were going down for a different reason. And it was mainly because they they increased their their composition of assets in software. And all of a sudden, we were quite concerned about AI and the forces associated with AI and how it's going to impact their portfolios. Uh the one I'm in your camp, Danny. Albeit, I probably want lower prices, reasonably lower prices. Apollo was getting there or or is there. The one thing I do worry about if give the note away. If the turbulence is too strong, right? Um do the policy makers try and regulate this? That's the question I'm I'm asking myself. This is all of a sudden, if you have a regulation of private equity, not now, 2 years from now. Uh then all of a sudden the beauty of these business models that we see and they're gorgeous business models relative to the banks, my opinion. Uh perhaps that gets neutered away by regulation and policy. Well, you you bring up an interesting point, Vinnie, and and that that we talk about all the time is that is the pendulum of of public policy. And it swung really hard to the left, Trump came in, and now you have all this, you know, deregulation and you know, kind of everything associated with Trump, and the pendulum swings. And then you get to the bottom of the pendulum now where, you know, everything Trump touches is a disaster, and you know, it looks like they're they're losing the polls, and then it it swings back. And so yeah, I mean, if so many things can change if a Democratic president comes in in in another 2 years. And so, you know, that's one of the things that I know, you know, Vinnie and I have spent a lot of time on is, okay, what when when elections cuz so much is driven by um the government right now, right? Go government spending, government everything. It's such a big percentage of the economy. Yeah, they're taking stakes in companies. Yeah. So so Yeah. And so Policy obviously is has always been important to our sector, at least the core sector we used to cover all the time, but I want to get into this Fannie and Freddie real quick cuz we haven't really talked about it in this format. And I was I think they're going to continue to obviously use the balance sheets to keep buying mortgage-backed securities because you just had mortgage 30-year mortgage rates go back up. They were below 6%. I think they shot back up to over 6.3% Vinnie, if I'm not mistaken. I think they continue to use that kind of as a as a as a way to keep rates down. And will they go public? I don't know, but any updated thoughts there? And then just on affordability stuff in general and the stuff that they're trying to do. Well, the struggle with the US government, the Trump administration is running into an issue associated with buying more mortgage-backed securities on Fannie and Freddie's balance sheet because by current statute, they can't do it. Right? Like you were running into a ceiling as to how much they can do. Now, a naysayer would say, "Vinny, shut up. They're going to change the law. So be it." And that might be true. >> up. They're going to change the law. So be it. So be it, right? And so but let's see the law change while they do it. The other thing is can you keep running into less and less capital under conservatorship? We'll see. The big risk to Fannie and Freddie, and you nailed it, Danny, is does he continue to use it or does he, not even continue, does he use it as a cookie jar rather than roll them out and quote take them public. We'll see. Uh the preferreds have suffered as a result of that theory. The commons have come down a lot as a result of that theory. We are holders of the preferreds. We continue to be so, but I am I am cognizant of the risks that we might be just holding a value trap bag if Trump punts punts the football yet again on my poor junior preferred fellow holders, and we're just stuck there in regulatory purgatory. It's very possible. You know, we we own them from much lower levels and so I would say we're we're a bit on so we're frozen in carbonite right now in terms of what to do. But you know, the the grift is so strong with this administration that you know, who knows? Maybe they they give a a gift to you know, Act men and such in the second half of the of the the term. So I I don't know. We're we're holding out hope, but it doesn't look good right now, obviously. Um before we get into Masters picks, which we're I know we're we're still over a week away from when this thing begins, but I do want to get into that with you guys cuz it was always our favorite It is our favorite time of the year. Anything else you want to cover here? This has been somewhat of a serious not serious, but a little intense of a conversation cuz there's so much to talk about. >> It's an intense time, you know, it's you know, there's a lot of uh a lot of stress and emotions from a lot of people. You can see it out there in the market. >> you have to sing all the time and just, you know, get it off your chest. All right, let's get in let's get into the Masters here. Um I think Porter, I think you and I are aligned on on who we're taking. I think Vinnie could be in that camp, too. Vinnie likes some of these kind of you know, geeky financial analyst types such as Justin Rose who kind of could have been a specialty finance analyst, Matt Fitzpatrick who definitely could have been a financial analyst, Akshay Bhatia who, you know, these guys that over analyze and study the game, whatever. Vinnie, I'm going to go to you first. Uh Give me a Give me Give me two for you. >> I can't believe you nailed two of them for me. So, first off, Fitzpatrick is trending really well, right? He's He's probably playing the best on the tour and my boy Bhatia, I mean, I just I feel like I could just be sitting there hanging out with him talking about, you know, bread financial. You almost have the same lefty swing, Vin. It's very close. I wish not. Yeah, super close, yeah. Um And so, I just love watching a lefty who's a string bean out there swinging away. And correct me if I'm wrong, Danny, lefties tend to do well on that course. >> Yeah, they do well there. Yep. Bubba Watson, Mickelson, Mike Weir. I'm Mike Weir. He's just won it there. So, yes. Sorry. >> Fitzpatrick is is on your your weight workout. He Does he join you in the gym? I mean, he's put He's packed on like 10 lb of muscle recently. He He kind of looks like Andrew Cullen a little bit. And he does actually look a little bit like Cullen. Yes. I love So, I'm going to go to So, Robert MacIntyre who I sat on a podcast with Ned Michaels last week is my kind of like who I who I think I'm the most like not obviously in skills of the guy but the anger the everything you know this if this guy starts making putts at the in in Augusta he's going to be right there too and he's like 50 or 60 to one. Uh Bobby McIntyre but Porter I know you and I both like Xander here he's playing well you're going to get him at like you know 16 to one. Which I think we have here right? Um give me some other players you're looking at. I have Kepca three cents Morikawa three cents Schauffele at six cents you know so I I I like we we like these Those are Calci numbers. Calci yeah so Yeah I I'm shorting Scheffler so I shorted Scheffler on Calci and took the proceeds and going along. So it's like a one by two so I'm going along two Xanders for shorting basically one Scotty cuz whether Scotty wins or not those odds you could I could never take that at those at those levels it's it's six to one five to one just makes no sense to me in a golf tournament. >> way I play small money on these I was I was $3 $3 $6 to to 100 so that's uh uh >> right by the way if anyone can guess which of the three of us has actually played that course might be difficult I know to figure that out. >> shirt right now. Well that's as close as I can get as the pro shop there but Porter what shirt what shirt am I wearing? I can't quite see that. Almost looks like a Houston Texan >> maybe? Uh no uh we played in Pinehurst. Oh yeah. That's the par three the cradle. Yeah the cradle. >> the way my question Porter what is This turned into a really freaking douchey commentary right now so >> It is but I wanted to know Porter's shot you played it once or twice? Played it once. What did you shoot? I shot a genuinely 85. Okay. All right. Did not play great put it in the water in 12. What was what was your most memorable hole Porter? I it just the the the topography is just so memorable. The topography is but it's beautiful. Oh it's a It's cool. You don't realize how hilly it is. Sorry. Right. No, I realize it when you huff and puff and as a spectator. Yeah, and then and then I I four-putted the first hole. I was like, "Oh my god, these greens are fast." Ernie Els uh did that. What do you think he he six-putted it or something like that in the first hole? So Uh Greg Norman famously four-putted number one and with it lost a six six-shot lead in '86. All right. Well, we'll see uh we will see um how that works. So, yeah, as a as a patron or spectator or player. But anyway, all right, guys. Well, thanks for doing this. Uh again, uh come to our Substack. Um the contrarians at the gate, what are we doing? Uh we'll put that into the show notes and guys >> of hate mail from the talking about golf shirts. That was terrible. We did? Yeah, we're going to Yeah. Oh, we're going to? Oh, yeah. Yeah, well, that that comes with the territory. All right, guys. Love you and uh I'll see you guys shortly. All righty. See you. Thanks for listening to the On the Tape podcast with Danny Moses. If you like what you heard, please subscribe on either Apple or Spotify to the weekly podcast and please leave a rating and review, positive only. You can also watch on the On the Tape channel on YouTube and give us a thumbs up there as well.
WAWD Reunion: Porter Collins and Vincent Daniel Are Back for On The Tape
Summary
Danny Moses reunites with former partners Porter Collins and Vincent Daniel to discuss trading and positioning amid a fluid …Transcript
Welcome to the On the Tape podcast. I am Danny Moses and it's been a while. So today what are we doing version on this podcast with my former partners Porter Collins and Vincent Daniel. What's up, guys? What are we doing? What are we doing? Uh so for those who don't know, we've kind of shifted the what are we doing rhetoric to Substack with our what are we doing contrarians at the gate and we've amassed I mean over I think 6,500 I'm going to say subs total and over 1,000 are actively paying and enjoying our enjoying the back and forth on Discord etc. And it's been a lot of fun. So if you if you have not gone over there, that's kind of where a lot of our stuff has been going. We felt it was time for a kind of broader update to the broader universe and again, you can always find us there. So Um Danny, I think one of the reasons we went over there is that Twitter was amazing and you know, to begin with and and I think over the last 10 years it's been a really great source of information but lately it's just turned into a mess and there's you know, obviously a lot of bots and a lot of you know, you say anything a lot of hate mail back and so I think what we've we've curated here is a little bit of a a nicer a friendlier nicer gentler uh community where we're able to push back on ideas and not you know, lambaste someone for saying something stupid or you know, cuz everything's constructive and or you know, or negative which is fine, too. So it's it's been really nice. >> Vinnie is the Pulitzer probably the next Pulitzer Prize if it's won on Substack for writing. I mean Vinnie, it's got to be you. It's it's fun to watch. I did I never knew I mean you always wrote our quarterly letters and but how much you enjoy it and get into it and really able to express themes and there's been some clever stuff that has occurred here. So Well, it's a full transformation since Steve used to make fun of Vinnie for his writing. I love Vinnie's writing. Vinnie >> In in a prior life, remember I was a sell-side analyst Danny when we worked at at Oppenheimer and and there was a lot of negatives associated with being a sell-side analyst. Crap you had to do, but the cool thing that I used to like to do was write, right? Particularly when you had something witty to say and it was almost a challenge to get people who typically don't read a lot to say, "No, no, no, I'm I'm going to make you read this cuz it's going to be interesting." So, it's a lot of You had some good titles for your research reports, I remember. Yes, I I I one there was a Capital One title. So, when I knew that I was on I thought I was onto something and it was an ode to Robert Palmer, right? And the IR person wrote a dissertation back using the lyrics of Robert Palmer, but that's not the better story. The better story was You had the Robert Palmer girls in? Yes, I got an email from a groupie, right? Saying that she used to tour with Robert Palmer, go to every single one of his things. I think at that point in time he passed away or was and and was telling me if you wanted to meet up or hang out, if you're as big a fan as Robert Palmer as I am and I was go I go, "This is pretty cool, right?" >> Was it Was it Simply Irresistible? Was that the title of the Cap One report? No, for Capital One it was uh Might as Well Face It, You're Addicted to Growth. Okay. So, yeah. Got it. All right. Uh well, that's good and for those just to give an example of a note that uh will be coming out um it will be after the it will be tracking the movie Almost Famous. Um so, we're drawing parallels to the some of the current environment going on. So, all right guys, so let's >> Danny's Beautiful Mind uh works >> Well, Vinnie cleaned it up for me. So, I do write I do write something called Padilla's Corner from time to time when I pick up little tidbits here, but never the extent that I I actually think I turned it into Padilla's Corner because I wanted to use a a picture of Vicente Padilla. So, yeah. Those of you that don't remember, we used Vicente Padilla was my nickname on the trading desk and if you ever look up the doppelganger picture of the former pitcher, uh you might see some form of some type some type of resemblance. Anyway, all right. Let let's get into it here, guys. Um we've been tracking all the stuff. We talk about it. We have a Friday night dirty podcast. I should add also that we added onto the substack. So, for subscribers, every Friday. Um we've talked about and tracked gold here. We've obviously been tracking what's going on in the war. Um and we just try to kind of trade the policies as best we can and stay true to fundamentals and when things get over their skis and you know they can't last, we normally try to pull things back. Um as we sit here today at this moment, um it things are calming down a little bit in Iran, it appears. The market's rallying. Well, Danny, you forget it is Taco Tuesday. It's Taco Tuesday and it's the last day of the quarter, too. So, there is there is something to be said there. But, talk about kind of what you guys are seeing and uh you know, let's let's dive into it here and how how you're kind of trading this and positioning. Wow, I I it's hard to know where even to start today because uh we we got we got Trump with the hard taco and then Iran a couple minutes ago came out and said, you know, we're we're open to you know, ending the war sooner rather later later. So, a lot of stuff going on like everything in this market, it's hard to know what's real. Um as we like to say, the conspiracy theorists are doing a lot of winning right now. And just a a shout out to the guys in the energy space, guys and girls in the energy space, they nailed this the best in terms of what when the war started, they said, "Hey, this is a much bigger deal than you think it is. Uh we know more than you do. And this is going to be a real problem. And they were 100% right because uh everything in this war is about energy and energy infrastructure. We forget uh no no one can even try to understand why we started it, but that's a different issue. But to understand how we end it is all about energy. And I think that um you know, obviously the whole world needs it. Um but walking away from wars is not easy. I I pointed out today that um during Vietnam it was 4 years between the initial troop drawdown and the end of the Vietnam War. And so I think I mean we don't have another month of this the because the the energy uh problems are so acute. So I don't know. That that's at least that's that's a context of where we are. I don't know how I don't know where we go from here. How about you, Vin? We we all three of us gravitate to conspiracy theories and bearish tendencies and misfits, right? In general, right? So if we rewind the clock when we had quote the nut flush and we were PhDs in what the hell was going on in the world. We were parading around in 2006 and 2007 telling people how bad the world was. Remember that? You don't know. You don't know. We're uh we're >> know. rewind the clock to COVID era. And Porter, we were listening to podcasts of people who were in the health care industry who were saying the same thing we were saying. We had no idea what they were talking about, but we're saying "Hey guys, in a month or 2 months this whole world's about to shut down. Just get ready." And they were dead right. So the more modern version, Danny, now is what Porter was saying is that I I was going out for drinks with a guy, Paulo Macro, right? Uh we had a few too many and he gave us gave me the story of the plumbing of the Strait of Hormuz. And this was about 4 weeks ago. Right right at the beginning of this. Right at the beginning. And and he was telling me, "You don't know what the [ __ ] is about to happen if this war lasts for 3 4 weeks." Well, we're in the third week right now, right? Something of that nature. >> Fourth. And I this can't last that much longer because I think you're going to see a COVID-like contagion. Uh and there's been a contagion or slow contagion in our markets. And it just seems like it seems like we'll see because this is a super fluid. Seems like Trump's had enough. Uh we'll see if they can >> Let's Let's Let's talk about the kind of the three ingredients of what's right. So, we Let's actually go back a year. One of Porter's favorite things to call it, liberation day, is in a couple days, the anniversary of that ridiculous thing. There's been a lot of dumb things that have This might be liberation day number two, Danny. Yeah, well, whatever you want to call it. Taco Tuesday, call it whatever you want. But, let's go back to that. Companies were forced into deal with something they hadn't dealt with. What is the What is the impact going to be to pricing? And then the Fed, who remember was still in the in the midst of potentially cutting rates, backed off and said, "You just jacked up potentially jacked up inflation. You messed up my soft landing. Now, we're going to wait and see." So, I don't think that the inflation ever got as bad from the tariffs that have come and gone in fits and starts and who cares what the Supreme Court says cuz they're not even here anyway. But, here we we now we fast forward exactly what just happened. Now, to Vinny's point, oil is the number one ingredient in into the consumer. It's a regressive tax. Um and it gets priced into so many different products. So, that's one of the three. The other is rates, which obviously longer-term rates, which go higher because obviously of inflation, right? And the third component is the dollar, obviously. Those three things, right? Which are all kind of connected. Oil, rates, dollar, things that we were dealing with that were never necessarily on the road map. A month ago, they're like, "Okay, we're getting through the So, now what happened?" Fed went from potentially cutting rates to potentially raising rates, although we all would think that's not going to happen. And now we're kind of zero cuts or zero rate or zero rate hikes as we sit here today. But now you got to factor all this in. And so, you know, what does this look like when I try to take a step back and figure out how I can tell you this, when we get first quarter earnings reports and pre-announcements will start coming next week, it'll be a a free pass. "Oh, I had everything going, but we taking numbers down due to uncertainty. It was the last month." That's the stuff we're going to start to see now. So, I just threw a lot of you guys, but it's just been hard enough on the micro level to figure out how companies are going to do. When you throw this stuff in on the macro level, and and Vinnie, I'm going to throw it back to you for a second just on the idea of higher rates, you know, for for longer, and I'm talking about the longer end or the short end, what what that really does. I Look, I I'm on record of saying I don't think the market can handle higher rates uh for longer. And so, as a result, if I solve for what is needed for the world to work, we're eventually going to have to get lower rates, which goes against the underlying fundamentals and supply demands of our fiscal deficit, right? So, it's a difficult one. So, what do I expect, Danny? If, and again, it's remains all fluid whether this war is going to last or not, right? If we it is talk through Taco Tuesday, not fake Taco Tuesday, and we do get a de-escalation of the war, we'll get a reprieve. The world, like COVID, will be kind of screwed up for the next few quarters, but I actually think that the Federal Reserve, perhaps not Powell, perhaps the person who replaces Powell, is going to use that as uh a catalyst to lower rates 50, 70 five, 100 basis points. And I and I expect that to be a a two late two Q, probably more like three Q type of event. Importer is gold now telling us that you and I talked last week on the dirty about, you know, gold had to crawl through Andy Dufresne type uh foul-smelling [ __ ] to get out the other side of this um kind of margin call situation look like it was in. Now, is it is it clearer now given that this war ends what what's ahead? Well, I'll get to that in 1 second, but let's go back to our roots in terms of financials and interest rates. And and our you know, one of the first things we do in the morning is look up and see where interest rates are. That's just our you know, our financials background. And someone asked me in our to plug our Discord, some someone asked me in the Discord, you know, how do you guys think about PEs cuz he was taking a class about economics or whatever. And I said and I posted a chart two charts. One was the correlation between higher rates and PEs, which is as rates go up PEs come down. And as rate volatility goes up, PEs come down, right? And so, I think that people constantly underestimate what a financialized economy this is, right? There's nothing that's unlevered except for gold miners. But um you know, the the we have 38 trillion 39 trillion dollars in debt. You know, most uh corporates are I would call they they like to say optimally uh leveraged, right? When they're not opt they're not levered to allow things to go poorly. And I think that you look at the mag seven, which has driven this market for the better part of a decade, they were always net cash. And now a couple of of you know, like I think that you look at the Delta, go to you know, Meta's balance sheet, the Delta in the last four quarters has been from net net cash to net debt. And so, everything is levered. And so, when when the when the bond move market moves that way, it moves. Um you know, as for gold, I've been joking around that the best chart in the market, bar none, is the chart of the government debt. The total government debt. And it's a straight line up. It never pulls back, never checks back. Uh sharp ratio of an infinity. And so, so if you think about that, that that's that's my that's the only thing that in in in in in a you know, in this market where we have no idea what's going on day to day, oil prices, tacos, no tacos, you know, bombs, no bombs. I I I don't know, but I look at that chart and I say, "Well, this this chart's never ever going down." Sadly, but it's never going down. And so that that that's my that's where my bullishness comes in. And I and I okay, how do I play that? And we've played that through gold. And so, I look at the gold miners, which are, you know, all producing EBITDA margins higher than the Mag 7. All of them are in uh you know, I think that the top 20 names are average 10% of their of cash balances as a percentage of their market cap. And they're all between three and seven PEs or EV EBITDA. And so, you know, that that's where I'm hiding. And there's been M&A in the space, too. Um >> True. Yeah. And I would just add, Vinnie, on that, um you know, reminds me of the the show Squid Game, what Porter just mentioned. So, the green light, red light game, you know, at the beginning where you go, you go, you go. So, these tacos and these green lights have been okay. I I never I never That was That was a COVID show, right? What was it? They they came out with a second season. It was actually pretty good. Anyway, came out this in the last few months. Anyway, so red light, green light. So, the red light the green light has been okay. It's done and then the red light's been oil. You know, oil's keep you know, keep people from running and then kind of get oil coming down. What's the the third, you know, fake green light, red light is rates. Okay, you finally got the two-year coming in a little bit, the 10-year coming in a little bit. But what Porter just mentioned on the debt and the green light for gold per se, the interest cost on the debt. I just went back and looked. So, when fiscal year ended 24, which is September 30th, 2000, which is exactly roughly 18 months ago, right? The debt was 35.5 trillion. We're at third We're north of 39 trillion right now to Porter's point. And rates So, Vinnie, put your Scott Bessent hat on here for a second. Um and by the way, the other chart Porter that might be done going down is the Fed's balance sheet, which is now starting to turn back up again. You know, Porter would call that a bearish to bullish reversal, by the way. Exactly. Finally from the 6.5 trillion kind of back to 6.7, buying T-bills, but it's not QE. Vinnie, what I I'm I know I'm feeding your fire here on gold, but oy, the deficit, do we care? Well, of course we care and and but Sorry, that just for context, Steve used to make fun of us cuz we would talk about the deficit and he would go, "Oy, the deficit is not a big You guys are worried too much." So. Can Can Can I correct your statement, Porter? Okay. >> Yeah. Not used to make fun of us, still makes fun of us over it. Um So, which is fine. It's great banter, but So, put yourself in the shoes of Scott Bessent, Danny. The last thing you can tell the world is we have a debt problem. We have to figure out how in the world we're going to issue debt and get some idiot to pay for it at below market rates. He's never going to say that. So so, what are they going to do? Well, he pulled a shining right, where he said that I'm never going to do what Janet Yellen did and lo and behold, he's not only doing it, but he's probably doing it in greater quantities than she did. And that and what that is is issue T-bills at the short end of the curve and not issue long duration bonds. Expect that to continue. In fact, one of our friends came up with an interesting theory that they're probably going to issue more bill T-bills than they need and take some of the proceeds and buy back some of the off-the-run long duration debt to create more of a lower to have the 10-year go lower so that you could somehow some way >> Treasury does the twist versus versus the Fed and forces the Fed's hand as well so on this one which should be Vinny, what's what's the reference to the shining? Sorry, it's not redrum. What what what what's the reference? I I I could be getting the movie wrong, but didn't when he come into and become caretaker of the hotel, he he knew about the haunted >> the freaky twins are riding around in big wheels. But he never said he said he was never going to turn into that person and then all of a sudden he became a freak, right? Well, that's by the way. That's best. What's that? That's a great reference. Thank you, bro. We'll use that for another Substack note. See, this is what you're missing. Shelley Shelley Shelley Duvall who also played Olive Oyl in Popeye in that movie as well. Um but I think he's also going to get a helping hand from the Fed, perhaps not a Powell Fed, but whoever replaces him, whether it's Warsh or somebody else. And what I think they're going to do is extend the duration of the reserve management system right now, which is they're issuing $40 worth of T-bills or or sorry, not issuing. Apologize. Buying $40 worth of T-bills. I think they extend that and perhaps increase that calling it another temporary measure to offset the recent issues associated with the excursion. Not called QE by the way. No, they're not going to call it QE. They'll call it anything else, cuz Lord knows you can't have >> just look at the Fed's balance sheet there, you'll see it. But yes, go Correct. So, long long-winded way, Danny. They're going to do whatever it takes to keep these rates down, to suppress rates, to try and get this economy going. But again, all of that is predicated on ending this war. If we don't end the war, none of it matters. >> And Porter, Porter just mentioned before about what goes into a PE and how you discount a stock back and its value over time and I I'm I'm pretty convinced that again, VIX popped up, you knew it'd come back, but I think we're in an extended period of volatility. And I've been saying that for a while, so it's not like I'm just saying it now. When I say extended period, I'm not talking about the VIX at 25 or 30, I'm talking about low 20s. And when you incorporate that into being able to predict company's outcome and earnings, all these things we're talking about, when all the smoke clears, no no pun intended and everything we're dealing with, I don't see how on a valuation perspective, Porter, just using the S&P 500 on a PE basis that 19 or 20 times, and that might even be generous, Ford is cheap by any measure. And and I go and I look at Japan and go look around the world and lo and behold, where did the yen bottom out? 160 again, that kind of key level. So, it feels like a lot of technical stuff happening, but when you pull it back fundamental perspective, I I just feel like the damage is going to be done for a little while here. in in terms of US valuations. I that's a that's above my pay grade, but an interesting thing in in our Discord yesterday, I I asked the question, is anybody looking to buy Mag 7 names? And probably a a what a super nice value irrational value person says, "You idiot. The you know, the the have you looked at the cash flows? They stink. You know, the the the the the real cash flow number is, is, you know, way lower than the PE. And, you know, you could just see this market yesterday and the last two Friday, yesterday, people were shorting the heck out of it. You look at the prime brokerage stats, you know, they're most short in in like eight years. And you get one glimpse of good news and, you know, Tesla's up 4%, Nvidia up 5%, Apple up 3%, Amazon up 4%. And it's just, you know, it's it's very tough to trade this market, but I think that, you know, again, use a contrarian lens. We we actually, you know, after seeing that news and seeing the hate that that we actually bought a little Google yesterday just for a a trade. Probably sell it soon, but um you know, it's just it's just this market's very tough right now. And so, but I think our core themes that we believe in, whether it's gold or energy infrastructure, you know, things like that, you know, we we've been slowly adding on this on these on these pullbacks. And, you know, this is, again, not an easy market to trade, but I think it's going to be a good in in my opinion, a good run here for stock pickers because you can see the indices have gotten, you know, too big, too much passive, and they're very inefficient. That's just my That's my view. At about 9:58 last night, while Porter was watching the Mets on route to a 4-2 win, he sent out a chart in Discord showing the global long short ratio. And what that is is basically the net positioning of the hedge funds, whoever's aggregating that. And right now, it is probably of the lowest long short ratio, meaning the most bearish, uh over the last 15 years. Right? It's hard to believe. Hat tip to our friend Pat Burke on that one, by the way. >> Okay. Oh, so that was a Pat Burke? Okay. So, so it's So, there's there's What up, Pat? That's authentic. So, when we see a chart like that, and we do this a lot on the Discord chats, and and this gets back to the whole idea, Danny, of positioning. Where people like us, fundamentalists, view um, the multiples and probably what is about to happen to the economy. However, this market has a coiled spring-like impact in terms of positioning, where if something were to go right with this conflict, you could get a 10 I mean, we're seeing it today, right? You you could get a 10% upside just because just because people are wrong way. And and that is so powerful, and as people sit there, you're like, well, I could take it. No, you can't. No, you can't. So, you you just have to accept the fact that you might have a coiled spring before we get back to a lot of the issues that we like to talk about. And the And within that, I think when we're being honest with ourselves, and we've all been long energy now for several years, and we we've seen that rotation. We've seen things improve. Oil going up like that, while it won't, you know, last only hammers the point home, right? That these stocks were cheap. But, if you're being honest with yourself, you have to be taking some of that stuff down, which I know you are and we are, in terms of, you know, some of the great calls you had, whether it was Transocean, and I was I was on the ExxonMobil. You guys like Like you you just got to be honest with yourself and say, okay, if there is going to be a rally in the market, it would be because oil's there's peace of some kind, oil's going to come down, and now this money's going to rotate back out into what you just mentioned, which is Google's of the world and so forth, the things that got basically oversold, right? So, you got to kind >> great note on our Substack just about how to be contrarian. How to you know, buy stocks when they're out of favor, and how to how to let them go when euphoria is in in the market. And so I think that's, you know, innate to us. But most people don't most people chase higher, sell lower, right? It's just it's not easy to do. Not easy to buy stocks when they look like death and then they feel like death. And not easy to sell them when they're euphoric. I think we haven't been on together in a while in this format, but I want to talk about private credit, which on days like this they take a deep breath and be like, okay, hey, hey, they call up the analyst or the salesperson, any redemptions in there today? What do we got? What are we looking at here in the last day of the Anyway, obviously rates is extremely important to them. All this stuff is important, but again, feels like things are still in motion there. But we all believe that the large PE firms, the Apollos, the KKR's, the Blackstones are at the end of the day will be beneficiaries. And these are names that we want to own the longer term because not a huge portion of their business is directly in what private credit, private debt markets. But give me your thoughts there cuz I know we've all been nibbling kind of on some of these names here, but not full bore yet. Um I I I guess I'm probably a little bit more long-term bearish on on these names and and I I look at the allocation to to private equity and it's high. Look at Look at Yale and Harvard and all these these endowments, they have a huge allocation to private equity, which is fueled by private credit, right? They're they're the buyer of a lot of the the the leverage. And so I just think in terms of long cycles, this has been a very long cycle and it's been a very very good cycle and people made a lots of money. But I think, you know, that that someone once said to us in you know, I think 2010 and I didn't I I kind of laughed at that comment at time, but he said, reversion to the mean is a [ __ ] And I think you might see a longer cycle of a reversion to the mean. And you know, cuz these private credit funds have had inflows for a long long time. And the banks have lost lending to these private credit funds for a long long time. And so, could you see a swing back? I I I think I think the answer is yes. Um and so, that's just my >> My idea of Porter was and and I've told you Vinnie is that if things get really bad in this Nothing's going to happen to those companies I just mentioned. I mean, they get your right. Stocks may trade down, but they're in no danger. They're going to be the ones that are going to pick off these portfolios at 20, 30 cents on the dollar. So, my point is that you want to own the companies that have a huge arsenal. And yeah, might have but Vinnie, give me your thoughts there cuz that's how I think about it kind of longer term, but I think you can have both. Stocks trade down and then and then certainly zoom zoom back up. So. >> Well, and let's add additional element. Stocks can trade up first because again, these stocks have been cremated over the last 6 months to year. So, they might have a pre first before they go down and where a lot of Porter's issues come into play. And then after that, because let's get away from the war for a second. These stocks were going down for a different reason. And it was mainly because they they increased their their composition of assets in software. And all of a sudden, we were quite concerned about AI and the forces associated with AI and how it's going to impact their portfolios. Uh the one I'm in your camp, Danny. Albeit, I probably want lower prices, reasonably lower prices. Apollo was getting there or or is there. The one thing I do worry about if give the note away. If the turbulence is too strong, right? Um do the policy makers try and regulate this? That's the question I'm I'm asking myself. This is all of a sudden, if you have a regulation of private equity, not now, 2 years from now. Uh then all of a sudden the beauty of these business models that we see and they're gorgeous business models relative to the banks, my opinion. Uh perhaps that gets neutered away by regulation and policy. Well, you you bring up an interesting point, Vinnie, and and that that we talk about all the time is that is the pendulum of of public policy. And it swung really hard to the left, Trump came in, and now you have all this, you know, deregulation and you know, kind of everything associated with Trump, and the pendulum swings. And then you get to the bottom of the pendulum now where, you know, everything Trump touches is a disaster, and you know, it looks like they're they're losing the polls, and then it it swings back. And so yeah, I mean, if so many things can change if a Democratic president comes in in in another 2 years. And so, you know, that's one of the things that I know, you know, Vinnie and I have spent a lot of time on is, okay, what when when elections cuz so much is driven by um the government right now, right? Go government spending, government everything. It's such a big percentage of the economy. Yeah, they're taking stakes in companies. Yeah. So so Yeah. And so Policy obviously is has always been important to our sector, at least the core sector we used to cover all the time, but I want to get into this Fannie and Freddie real quick cuz we haven't really talked about it in this format. And I was I think they're going to continue to obviously use the balance sheets to keep buying mortgage-backed securities because you just had mortgage 30-year mortgage rates go back up. They were below 6%. I think they shot back up to over 6.3% Vinnie, if I'm not mistaken. I think they continue to use that kind of as a as a as a way to keep rates down. And will they go public? I don't know, but any updated thoughts there? And then just on affordability stuff in general and the stuff that they're trying to do. Well, the struggle with the US government, the Trump administration is running into an issue associated with buying more mortgage-backed securities on Fannie and Freddie's balance sheet because by current statute, they can't do it. Right? Like you were running into a ceiling as to how much they can do. Now, a naysayer would say, "Vinny, shut up. They're going to change the law. So be it." And that might be true. >> up. They're going to change the law. So be it. So be it, right? And so but let's see the law change while they do it. The other thing is can you keep running into less and less capital under conservatorship? We'll see. The big risk to Fannie and Freddie, and you nailed it, Danny, is does he continue to use it or does he, not even continue, does he use it as a cookie jar rather than roll them out and quote take them public. We'll see. Uh the preferreds have suffered as a result of that theory. The commons have come down a lot as a result of that theory. We are holders of the preferreds. We continue to be so, but I am I am cognizant of the risks that we might be just holding a value trap bag if Trump punts punts the football yet again on my poor junior preferred fellow holders, and we're just stuck there in regulatory purgatory. It's very possible. You know, we we own them from much lower levels and so I would say we're we're a bit on so we're frozen in carbonite right now in terms of what to do. But you know, the the grift is so strong with this administration that you know, who knows? Maybe they they give a a gift to you know, Act men and such in the second half of the of the the term. So I I don't know. We're we're holding out hope, but it doesn't look good right now, obviously. Um before we get into Masters picks, which we're I know we're we're still over a week away from when this thing begins, but I do want to get into that with you guys cuz it was always our favorite It is our favorite time of the year. Anything else you want to cover here? This has been somewhat of a serious not serious, but a little intense of a conversation cuz there's so much to talk about. >> It's an intense time, you know, it's you know, there's a lot of uh a lot of stress and emotions from a lot of people. You can see it out there in the market. >> you have to sing all the time and just, you know, get it off your chest. All right, let's get in let's get into the Masters here. Um I think Porter, I think you and I are aligned on on who we're taking. I think Vinnie could be in that camp, too. Vinnie likes some of these kind of you know, geeky financial analyst types such as Justin Rose who kind of could have been a specialty finance analyst, Matt Fitzpatrick who definitely could have been a financial analyst, Akshay Bhatia who, you know, these guys that over analyze and study the game, whatever. Vinnie, I'm going to go to you first. Uh Give me a Give me Give me two for you. >> I can't believe you nailed two of them for me. So, first off, Fitzpatrick is trending really well, right? He's He's probably playing the best on the tour and my boy Bhatia, I mean, I just I feel like I could just be sitting there hanging out with him talking about, you know, bread financial. You almost have the same lefty swing, Vin. It's very close. I wish not. Yeah, super close, yeah. Um And so, I just love watching a lefty who's a string bean out there swinging away. And correct me if I'm wrong, Danny, lefties tend to do well on that course. >> Yeah, they do well there. Yep. Bubba Watson, Mickelson, Mike Weir. I'm Mike Weir. He's just won it there. So, yes. Sorry. >> Fitzpatrick is is on your your weight workout. He Does he join you in the gym? I mean, he's put He's packed on like 10 lb of muscle recently. He He kind of looks like Andrew Cullen a little bit. And he does actually look a little bit like Cullen. Yes. I love So, I'm going to go to So, Robert MacIntyre who I sat on a podcast with Ned Michaels last week is my kind of like who I who I think I'm the most like not obviously in skills of the guy but the anger the everything you know this if this guy starts making putts at the in in Augusta he's going to be right there too and he's like 50 or 60 to one. Uh Bobby McIntyre but Porter I know you and I both like Xander here he's playing well you're going to get him at like you know 16 to one. Which I think we have here right? Um give me some other players you're looking at. I have Kepca three cents Morikawa three cents Schauffele at six cents you know so I I I like we we like these Those are Calci numbers. Calci yeah so Yeah I I'm shorting Scheffler so I shorted Scheffler on Calci and took the proceeds and going along. So it's like a one by two so I'm going along two Xanders for shorting basically one Scotty cuz whether Scotty wins or not those odds you could I could never take that at those at those levels it's it's six to one five to one just makes no sense to me in a golf tournament. >> way I play small money on these I was I was $3 $3 $6 to to 100 so that's uh uh >> right by the way if anyone can guess which of the three of us has actually played that course might be difficult I know to figure that out. >> shirt right now. Well that's as close as I can get as the pro shop there but Porter what shirt what shirt am I wearing? I can't quite see that. Almost looks like a Houston Texan >> maybe? Uh no uh we played in Pinehurst. Oh yeah. That's the par three the cradle. Yeah the cradle. >> the way my question Porter what is This turned into a really freaking douchey commentary right now so >> It is but I wanted to know Porter's shot you played it once or twice? Played it once. What did you shoot? I shot a genuinely 85. Okay. All right. Did not play great put it in the water in 12. What was what was your most memorable hole Porter? I it just the the the topography is just so memorable. The topography is but it's beautiful. Oh it's a It's cool. You don't realize how hilly it is. Sorry. Right. No, I realize it when you huff and puff and as a spectator. Yeah, and then and then I I four-putted the first hole. I was like, "Oh my god, these greens are fast." Ernie Els uh did that. What do you think he he six-putted it or something like that in the first hole? So Uh Greg Norman famously four-putted number one and with it lost a six six-shot lead in '86. All right. Well, we'll see uh we will see um how that works. So, yeah, as a as a patron or spectator or player. But anyway, all right, guys. Well, thanks for doing this. Uh again, uh come to our Substack. Um the contrarians at the gate, what are we doing? Uh we'll put that into the show notes and guys >> of hate mail from the talking about golf shirts. That was terrible. We did? Yeah, we're going to Yeah. Oh, we're going to? Oh, yeah. Yeah, well, that that comes with the territory. All right, guys. Love you and uh I'll see you guys shortly. All righty. See you. Thanks for listening to the On the Tape podcast with Danny Moses. If you like what you heard, please subscribe on either Apple or Spotify to the weekly podcast and please leave a rating and review, positive only. You can also watch on the On the Tape channel on YouTube and give us a thumbs up there as well.