Ep. 87 Transcript: Joe Weisenthal Returns! Stimulus Checks, Stocks, Bitcoin's Surge, and 2020 Finance Recap
Joe Weisenthal, Bloomberg Editor and co-host of The Odd Lots Podcast, rejoins The Realignment to discuss stimulus checks, the government’s economic response to the pandemic, cryptocurrencies, and more.
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Note: This is a rough transcript, lightly edited for clarity.
Marshall Kosloff: Joe Weisenthal. Welcome back to The Realignment.
Joe Weisenthal: Thanks for having me.
Saagar Enjeti: Hey, good to see you, Joe. I'm really glad that you were able to join us, man, because we were off for the last two weeks. We probably got more like listener mail and feedback and more than any time, cause they're like what the hell is going on $2,000 stimulus checks.
It was probably the most consequential week for policy and more in a long time, at least since the CARES act and all of that. So maybe let's just get your immediate reactions to the ultimate result, which is we had this $900 billion package passed, whatever $600 checks. A lot of people are upset about checks.
Save your checks hot takes because those questions are coming. Overall reaction, was it enough? Was it not enough? What are the problems? What are some of the solutions that we should look forward to, or look to try and implement an advocate for in the future?
Joe Weisenthal: I, it was a big package that they put together.
Look, over 900 billion or about 900 billion. That was that's more than the recovery act was during Obama's stimulus during what, in retrospect, and I think even at the time it was clearly a much bigger, more problematic economic downturn. I think the way a lot of people are thinking about the economy right now is that a, it recovered a lot more in 2020 than people expected.
Especially if you go back to expectations in the spring and earlier that summer and b, most likely at some point in 2021 this year, we're going to get a fairly fast rebound as the vaccine rolls out. It's not off to a great start, but I think it's still reasonable to think that at some point in the middle of the next year, We will have fairly big, fairly brisk growth.
And so the goal of this stimulus was basically to build a bridge between now and the true reopening when we could finally say, all right, we're returning to normal and it's a lot of money. It's probably not perfect. It's not ideally targeted. There are going to be people who needed more help than they got.
They're going to be people who really end up through this crisis in a significantly worse position than when it started. If you include lost businesses, lost jobs, evictions, lost healthcare and so forth. But, it's a lot of money. And I think there is a, a, it puts us in a pretty good position overall to get to the other side.
Close to whole is how I put it.
Marshall Kosloff: I want to follow up on something you said, because it's counterintuitive to a lot of the perceived narratives a lot of us have, which is that the 2008 crisis was worse than this one in many ways, which we were both in high school then. So we couldn't feel it the way we felt it working out in the actual world here.
But the economy wasn't closed. You didn't have the same degree of mass unemployment it felt. Can you just give people a perspective on that?
Joe Weisenthal: Sure. I think when we go back and look at it, this particular crisis versus the previous crisis and really, versus past, past recessions and downturns in general, where I would start, my analysis would be in analysis of household balance sheets.
And that's a topic that I think a lot of people are very obsessed with and thinking about, we've discussed it on our own podcast a lot, think 2008, 2009, what it really was, was just private sector, balance sheets, getting blown to smithereens. So many people's assets, their livelihoods tied essentially to the value of their homes, home values, collapsed.
So you have these people who are millions of people, massively underwater, and you have this whole economy back then oriented in some way or so much around housing finance. And when that was, when that bubble burst. That's, you don't just put that back together. You don't just go back to the last bubble.
And so you have so much of the economy, so much of people's wealth destroyed, and then over the years after the great financial crisis, then you see household balance sheet repair, people paying down their debts, rebuilding their assets and so forth. That didn't happen at all this time, and to my surprise, to a lot of people's surprise, home values held up, the value of people stock portfolios more than held up. Thanks to the cares act there was not a lot of drawing down of savings. In fact, if you look at household savings in the aggregate, which is not to say every individual household, but combined household savings have been very high, the amount of cash that people have in their checkings account.
So when you add that in. Checkings accounts, savings accounts, stock portfolios, home values. You actually end up with a private sector, an American household sector, weirdly, bizarrely in a better shape today than at the start of the year in the aggregate. And I think what the lesson will be is that yeah, this was a much more harrowing crisis.
By far in the sense, because the fear of death, of the fear of sickness and so much disruption to our lives, but because household balance sheets managed to stay intact, the healing process can be much faster. You don't have years of people having to focus on the aggregate, again, paying down their debts.
And I always just want, like the specify in the aggregate to acknowledge that millions of people are hurting right. But in the grand scheme of things and on the big picture, private sector balance sheets have held up very well.
Marshall Kosloff: So, what's so interesting about that though is let's go to a couple industries where a lot of people who are much less optimistic on the recovery have focus for example, commercial real estate. That seems to be an area where if you're working in a city and you're making your money, because there are a bunch of firms who were New York city, for example, that seems to be screwed. Movie theaters, Wonder Woman in 1984, despite being a terrible movie actually did well at the box office.
So that was probably a good sign that people would return. But that being said, there are a lot of people who aren't very bullish on movie theaters. So can you speak specifically to these COVID impacted sectors themselves.
Joe Weisenthal: Yeah, I think, look, there's no question that there has been an extraordinary divergence in sectoral winners and losers throughout this crisis.
If you look at, obviously companies like Amazon have done really well and Netflix, Peloton, but lots of e-commerce related companies have just done extraordinarily well, lots of retail has done, not terribly, particularly big box, chain, retail, grocery stores, Walmarts and Targets and so forth.
There's no question that mom and pop ground level retail in many cases, not all but many have absolutely, it's been terrible for restaurants. It's been brutal. Yes. I think the two things I would say is a. PPP, the small business loans, that turned into grants have done a reasonable job of keeping a lot of businesses, afloat, keeping them potentially whole.
And then the bigger picture which I would go back to is that a lot of what we saw as pain ended up being to the benefit of another sector, another group of parties, which is not good in a sense, but what it means is that the pain is not at the aggregate macro GDP level. The same way it was in 2008 is more of a reorganization of the winners and losers.
Saagar Enjeti: Yeah. This is the, I'm sure there's a lot of people out there who were already screaming at you, Joe, through their headsets. What are you talking about? This was a multi-billion dollar bailout of corporations. And I did, got absolutely nothing. I only got, I actually agree with part of it. Yeah. But I guess part of the bigger question here overall is how to evaluate it. It's, what I like about what you're saying. You're like, look, it was $900 billion. It probably wasn't enough, but it's a bridge. How should we think about this in terms of households?
Cause it's like you said, we got to acknowledge that there are millions of people who got completely and totally screwed by all of this. Do you think that the checks were themselves, the $2,000 checks if they had been implemented would have been an effective tool at doing something towards this.
This has been such a huge debate amongst these policy wonks. They're like, we could, have targeted unemployment or we could fund the child tax credit for 40 years with this amount of money. My argument is, look, this is universally popular, but popularity isn't just the only reason to do it.
But it's in the middle of a pandemic where everybody has suffered so much, a payment, it's almost a trickle-down economics thing. It's, hey, give people some money. It actually dropped a lot of poverty.
Joe Weisenthal: It did but also it's trickle up because t's better than it's better for the most, yeah.
It's real. It's good. It puts money in people's pockets because it primarily doesn't go to the super rich, unlike say tax cuts. It goes towards spending. It goes towards consumption. That goes towards more businesses. The checks discourse as they say on Twitter, that discourse was not my favorite.
Because I do think that by focusing so much on the singular checks, whether it was the $1,200 check that we got in the spring or the $600 check that was part of this bill, it did give short shrift to a lot of money that went to the people that needed it the most. And our unemployment insurance expansion income replacement was actually one of the better ones, at least for those first four months than anywhere else in the world.
The focus on, or the many places in the world, the focus on the checks as if all we did was pass a $1,200 check was wrong. Same with this one. This most, this latest, I don't even know what was this latest one called, whatever they didn't do a very good job branding. Cause we all remember the CARES act.
Saagar Enjeti: Oh right, because they tied it to the omnibus spending bill. So it wasn't even real. What a disaster, but we can talk about branding disasters.
Joe Weisenthal: I wasn't crazy about the, oh, just $600. And I think that, again, because I think the unemployment insurance expansion that is way more important, in my opinion, the more, the new trench of PPP money, that's probably more important.
The best argument for checks, and probably expanded checks to go up to 2000 was probably exactly this point, which is that not everyone who is suffering was eligible for unemployment insurance. Some people had their hours cut, or maybe they weren't working or whatever it is. And a fatter expanded check would have done a reasonable job of solving that. It wouldn't have really solved it, but it would have helped.
What I see is not much cost overall. So I do think that there's a good argument to be made that the checks should have been bigger. But I also think that the focus on the checks misses the fact that there was a lot of money to a lot of things, and that's helped us get to at least the point that we are now.
Saagar Enjeti: See, I'm glad you said that because this is where I want to split the difference. I can be pro check and also support some of these immensely important government programs. As I'm sure you saw Dave Portnoy has got this fantastic restaurant fund going on. I think it was 17 million. I donated $500 to it.
I absolutely support everything that he's doing. And I think it's amazing, but there's just incredibly annoying, libertarian meme, which is going on Twitter. Dave Portnoy has done more for the restaurant industry than Congress. And I'm like, that's just not true. This is just bullshit.
Right? We've had the paycheck protection program. We've had it now twice. Yes, one in five, one in five restaurants in America shut down. Half of that is government policy half. That is a failure of government policy all around. We need to give some credit to some of these programs and say, yeah, maybe it wasn't enough.
So in that vein, what have been the most successful programs? Not just in this bill, but in general throughout this pandemic, because I think there's actually a lot to learn here about what the state can do in a time like this.
Joe Weisenthal: I think that, you mentioned libertarians and there seems to be like a cross ideological anger.
It doesn't mean, I actually can't put my finger on it. Exactly. Because you have people on the left, you have blue check liberal types, you have libertarians. I've never actually been able to put my finger on exactly who the complain caucus or the, you just got $600 checks, caucus.
It's really hard to actually pinpoint what it is. But I think actually, if you just want to, from a left liberal perspective, I would say that, oh, we just got 1200. We just got 600 is a corrosive meme in particular, because I do think that you want to, if you want good policies going forward, you should elucidate what's been done and what's been working. And it's incredibly striking that back in May at the peak of the CARES act dispersals, poverty in the United States actually fell. We just need to stop and talk about that for a second. Poverty in the United States actually fell, now again, were there people who missed, who fell through the cracks in the cares act?
Unquestionably. Are there people whose livelihoods were destroyed? Yes. Terrible. And I do think there's more that could be done, but if you're thinking, you're like, oh, let's build upon what works. Let's build upon something. Good. I do think it's worth pointing out that we can give grants to small businesses without much cost without much damage.
And I'm not using costs in a sort of like dollar amount, as in it costs us billions, I'm using cost as, is there some drawback, did we have inflation? No, not really. We didn't have inflation.
Saagar Enjeti: Save that for the bitcoin section.
Joe Weisenthal: There's a lot we can do to repair air household and private sector, balance sheets.
And that's, we discovered that and, you mentioned libertarianism and something I've been thinking about a lot, is that I think when we come out of this crisis, The welfare state will look a lot better than the regulatory state, than the bureaucratic state and that the two are fundamentally different.
And so you look at like this, oh, like the vaccine rollout, absolutely abysmal, the testing ramp up, in February and March, absolutely abysmal, public health messaging, terrible inconsistent. On the other hand, keeping the economy afloat, keeping people, solvent, keeping people in their homes. The government has done phenomenally well, for the most part, and they're two separate things.
And I think libertarian critics of the government tend to collapse the two and they say the government is bad and fails and regulators, and let's cut the deficit and they're like fundamentally different things. And I feel like coming out of this. It makes sense for the more libertarian minded people to sharpen the attack by acknowledging that, government spending, the welfare state can actually be very effective at raising like the general welfare.
And that if there's an area that really comes out looking bad, it's more the bureaucratic state, the regulatory state, which has arguably seen failures for through and through.
Marshall Kosloff: Let's see, to push back on that, Joe, what's probably going to happen. I agree with you from the perspective of us where it's three people talking about something, what libertarians are going to do is they're going to say the following.
They're going to say. Joe. The only reason why the welfare state got involved is because government shut everything down. So government set the house on fire, and yet, duh, if we print trillions of dollars in fake money to pay for a fire department to come down and fix the house, quote, unquote, maybe they could fix that problem.
And what they're also going do is they're gonna bring it into the national debt issue. And they're going to say long term, my child, my grandchild all these things are going to get worse, but I do want to, so that's just, I wanna hear the libertarian part, but on the second part, I want you to respond to our last, most destructive meme, because it was what was so frustrating to me is that this crisis has really expanded my perspective on the smart MMT take.
The smart MMT take from my perspective is basically pushing back on scarcity mentality within government. It's not about, we could literally spend $20 trillion, right? The point is that we could probably spend much more than our popular rhetoric and conception of government as a business would tell us.
So we had people like Scott Galloway on who, I like Scott, Scott's very smart, we're having this episode. And he's saying, why did we do the PPP program? We just should have given money to people. Why are you giving money to businesses? Why can't we just do both of these things. So can you just respond to this left, this was a phenomenon of the center left and the center, right. So we're not just trying to criticize the far right and the far left here. Can you, could you just respond to the center left center right scarcity mentality that the many ways, which is counterproductive because by the way, the last thing I would say to the Scott argument is, there are a lot of people who don't want to give checks and don't want to support small businesses, right?
So you're not going to get a situation where either happens.
Joe Weisenthal: I think I'm the, it's, I think there's a really good argument for supporting businesses and maintaining business solvency and, think about MMT, you mentioned MMT. Yeah. One of the things that they talk about a lot is, okay, what is the constraint on spending?
It's they say, the real resources constraint. So we have enough money to give everyone, enough cash to buy a Tesla, but we don't have enough manufacturing capacity to give everyone a Tesla. So that's a way to think about there's no monetary constraint, but there is a real resources constraint.
And if you pass a law saying everyone gets a Tesla next year, you'd have all kinds of problems because we simply do not have the capacity to manufacture enough Teslas for a hundred million drivers or whatever in the United States. But, real resources constraints, real resources capacity is really, so it's not just about, do we have the factories, all the businesses that we're talking about, whether it's like a local, like pizzeria or hairdresser or movie theater, these things are not easy to just spin up on the fly.
And this is, I think one of the really tragic aspects of this crisis, which is that we'll lose a lot of businesses that people want. When this crisis is over. So let's say the crisis is over. Sometime this summer in July, people will go, we will have diminished, productive capacity, particularly in a lot of services areas.
And people want these things and it'll be like, wait, okay. We had this, I don't know. Maybe it'll be 18 month or 15 month crisis. Okay. Why did we need to lose restaurants and movie theaters and all of these things and they, you don't spin them up overnight. You don't call back the employees after 15 months and say, Hey, come back.
We're open now. Like they may have moved. They may have gone other places. So the argument to me for shoveling money to large swaths of, the business world is that supply side constraint, because we want that supply side capacity, the productive capacity of the nation to exist for us. One way you could think about it is,so when I was starting to use the term, like winterizing, we want to winterize the economy, we keep it stable so that it doesn't deteriorate, the pipes don't explode while we're in this weird hibernation period, but then it's there for us when we get back.
So I don't think that just giving money to households, even though that's extremely powerful, has a lot to recommend to it. And it's something that we should do really in every downturn going forward is enough for that reason, because you could risk getting to the other side with degraded capacity.
And just one other point on this is the virus is, it's nobody's fault. And I don't just mean that like in, so that's one reason I think it was easier to pass more generous fiscal policies that people didn't feel like anyone needed to be punished or anything like that. But even beyond that, it doesn't really tell us what kind of economy we want going forward.
There's a good chance, I think that, okay. Yes. Maybe we're going to have things like, more digital services work from home and stuff like that. This will accelerate that transition, but just because movie theaters weren't in a good position to ride this particularly crisis out does not mean that the future does not include movie theaters.
It does, or cruises or airlines or all kinds of things. We want that there in the end. Now maybe over time again, market forces, maybe there won't be movie theaters one day. Maybe it really will be all streaming and that's fine. Maybe, who knows? I don't really know. That sounds hellish not into that, but maybe, who knows, things sometimes, industries do become obsolete or go out of business, but there's no particular reason to think that the entities that were hit particularly hard by the public health crisis, we won't want them on the other side.
And so we should want to preserve that capacity. And I don't think there's, you could quite do that just by giving money to households.
Marshall Kosloff: Yeah. And I'm just thinking about. And I'll direct this to you, Saagar too. You're giving the really strong financial case for supporting the businesses, but I'm also thinking of the politics here and small business owners are a huge constituency.
So if you're someone who like me supported lockdowns, especially in April, May, June, we had absolutely no idea what was going on. The notion that we could have just closed down small businesses without any form of compensation or recompense and said, a lot of you guys are wealthier, so good luck.
That would have been insane, terrible politics that wouldn't have worked.
Saagar Enjeti: Oh, yeah, this drove me crazy. Watching the lockdown thing hijack this whole, I, Joe, I've definitely vented to you about this as well. Which is the chief opposition in Congress, as I understood it is basically we can't pass this new stimulus bill because it will fund blue state lockdowns.
That's basically, it was like, no, we can not give money to people in, I don't know, what's locked down like Detroit or something. Chicago. Chicago is a good example. We can't give money to people in Chicago because we want them to suffer and rise up against mayor Lori Lightfoot and force them to reopen the economy and go back to work.
And here's the problem. Not only is that immoral and weird, but it's also not going to work. If you go and you look at LA, look at California, look at, there's a lot, we can talk about evidence, whatever, and all that. It probably is, a lot of populist backlash within the populace, but there's also a large part of the populace that is yeah, we'll support you no matter what you do.
And so you just end up punishing poor people for absolutely no reason.
Joe Weisenthal: It's like this bank shot theory of politics. And I think people on all different, from all different perspectives at times, subscribed to this idea that you'll get good outcomes if you induce some pain first.
Yes. And I don't think that's a really, and you hear it on the left too. And you hear it with a lot of the left critics of the CARES act was, the Democrats had a lot of leverage in March and April and they squandered it because they could have demanded more. And I just think that you're like, you're really playing with fire there.
You're really playing with people's lives and you don't really know how the politics are going to work. So you might have some theory of politics where it's like you do this and suddenly everyone in Chicago will be like reopen the city. Oh. And while you're at it, let's change our pensions and slash future pensions and achieve a lot of other, longstanding priority goals.
Like you don't know how these things are going to work. And there's probably good arguments that the lockdowns have never been properly calibrated for all kinds of reasons. And I'm pretty sympathetic to that. But then the other hand, a lot of people just don't want to go out. Like it's dangerous.
We're, thousands of people a day are dying right now. Is this, it's a real, to like several hundred thousand, 400,000 people may I think the latest estimates I've seen by the end of January we'll have died. Like this is pretty serious. Is this very serious public health crisis? And so the idea that, oh, it's just the lockdowns and everyone's like being irrational.
It's not true. That's not right.
Saagar Enjeti: Joe. I just want to put a final nail in the coffin of a debate that I've seen that's really bothered me, which is that these $2,000 checks are going to people who don't quote, unquote, need it, as in, why does a family, $200,000, couple kids like. Why do they need a $2,000 check?
And here's my, and this is something that you just talked about, about trickle up economics, which is yes, the most aid should go to the people who most need it. AKA boosted, unemployment insurance plus checks, but checks in the hands of people can also a, miss those who have fallen through the cracks, but B there is a trickle up phenomenon here, which I'm not endorsing like UBI or something.
I'm saying in the middle of this global economic depression, putting some money in these people's hands can actually float up and help some of these businesses that are in the economy. And I think that's one of the lessons that we learned with those $1,200 checks when we had them back in March.
Joe Weisenthal: Yeah, I think that's exactly right. And I mentioned it earlier, but I really think it's useful that people should start thinking about costs, not in nominal dollar terms, because it's really doesn't mean very much. So if they say, Oh, if we expand the checks from 600 to 2000 it's going to be another half a trillion or whatever. I don't know the exact math. Yeah. And so people conceive of costs as,oh, half a trillion as if that really means something. But I think people need to think of costs in a slightly more useful framing. And I think there are two ways to conceive of economic costs.
When we're talking about government spending, one is theoretical inflation. So let's say you hand people tons of money and they just started spending money like crazy. And there isn't this capacity to absorb all this spending and people are just shopping like crazy. And you could imagine it happening if you gave people enough money and then you have prices going up.
And so that's a negative. And then the other, I think way to think about a potential cost of fiscal policy is if it exacerbates inequality, which probably has a negative political cost over time and starts having a corrosive effect on society. So I think that's how we need to conceive these things.
And I think $2,000 to even if a family has income of 200,000 does not impose a very high cost to society. It's not enough that people are going to spend so much that we're going to, we're not going to have shortages of goods and we might a little bit, it's like, I, it might be hard to like book a Vegas hotel room next, at the end of this coming summer, that's a good, that's a good thing.
A good thing. Like we might have a little bit of a shortages of that kind of stuff, but by and large, I don't think there's any like meaningful, like costs associated with it. And so I think the benefits of this more spending more activity, more private sector, balance sheet repair, and so forth, definitely worthwhile.
Saagar Enjeti: Joe the other thing that kind of confounded expectations here was stocks. This is probably the area where you're best known. All of your odd lots fans are here. They're waiting for this. What the hell happened with the stock market in 2020, there were a lot of doomer predictions. Then there were a lot of takes about how the stock market isn't real.
I will confess, I said it a few times and I regret it after reading one of your best posts that you've ever written over at Bloomberg. And in general, what does, this is more of a meta question. What are the markets actually represent here in this time? It's a snapshot of the U S economy, about graph of rich people's feelings.
Just lay it on us.
Joe Weisenthal: I kind of do, I guess sometimes people will tweet that they'll be like, oh, the stock market is like astrology for rich people, or like a measure of rich peoples. I kind of agree with that. It's not totally. By and large, but no, it all seriousness is like by and large, I've never really been very comfortable with this idea that like the stock market is super disconnected from the real economy.
And there's a few things I would say, a, if you just look at actual, if you were to like, somehow have a chart of the economy, which is impossible to do, but if you were to like distill the economy into a single number, you would probably find that the actual real economy bottled up, like around the end of March that we had this like super hard collapse and real activity in the second, the second two weeks of March and then things are improving.
And there's a lot of evidence for that. If you look at mobility data, if you look a restaurant data credit card spending data. If you look at an initial claims, the worst week for initial jobless claims was at the end of March, and they've been steadily improving since then. So on some sort of directional basis, the stock market is clearly beat to the same drum, to some extent with the real economy.
The second thing I'll say is that, stock market really is not meant the measure of the stock market, the test of the market is not whether it aligns with the real economy, but does it reflect corporate profits? Ultimately that's the reality that you want to benchmark equity prices.
Again is individual profits of the individual companies that make up the indices. A lot of companies that are listed have done extremely well this year. And obviously some of the biggest have been like those tech companies that dominate the indices and they've done insanely well. And so that's a huge chunk of the stock market right there.
But, you could like even look at, then you're like get into a bunch of retailers have done incredibly well or a bunch of like consumer products, companies are looking at a Johnson and Johnson or a company that makes toothpaste or a couple of days that makes Tupperware or a company that makes sneakers or whatever.
A lot of these companies have just done extremely well this year period. And then, there's other aspects of it. Like I do think probably, the fall in inflation. Low interest rates that probably has a positive effect on multiples. And so you get companies trading at a higher valuation than they otherwise would have had interest rates stay at higher.
So that probably helps a little bit. And then you like, think about also long-term we just look at this, the U.S. And the fed just showed that it can knock out, obliterate, stop a recession in its tracks if it wants to. This is knowledge that maybe if we're lucky, our politicians will remember in the future.
And some of these things will, be repeated, hopefully we never know.
Marshall Kosloff: Wait Joe, quick thing to take this back to our 2008 conversation, because that's a critical difference in the response. The response this time was aggressive. It was quick. And that's the thing to build on there.
Joe Weisenthal: Yeah, exactly. So now, you think, if you think you're an a, if you're thinking of an investor and you're like, okay, I'm going to value this equity, the stock over expectations over the next 10 years.
And you figure every 10 years or eight years or so the is a recession. And so I have to put it in my simulator, the odds of the recession crushes the earnings of this company. But now I know that politicians can eliminate recessions at the push of a button or if they really want to that should, all else equal, raise the value that you would be willing to pay for a productive asset. So I think there were like a lot of things that happened this year. Look, it still blows my mind. The NASDAQ was up 40% in 2020. I won't lie, that's pretty weird. It's not exactly. Yeah. Like it's not intuitive like that.
You would get that. Yeah. But it also does not strike me as completely impossible to explain their logic or you don't have to reach and say, oh, it's an irrational bubble. And I tend to think that this obsession with calling everything, a bubble is lazy.
Marshall Kosloff: We gotta hit this speaking of bubbles, depending on your perspective, we have to get your opening 2021 take on cryptocurrency, Bitcoin, Ethereum, everything. Bitcoin's up 300% over 2020.
Give us something, any take will do
Joe Weisenthal: It's weird. You know what I was thinking about this, it's a weird thing. It was 300% is not that impressive, this it's, it was like, no, if you think about it,
Marshall Kosloff: I read that in a newsletter this morning. I was so impressed to be able to say it you're like, that's nothing.
It was the correct percentage.
Joe Weisenthal: No, think of how many things went up, like 300%. You could have, I honestly Amazon stock, Dave Portnoy, Penn gaming, which bought up Barstool's up, like what 900,000 this year it's a thousand percent. Bitcoin is very big and it, so it is impressive, but it's like it almost like 300% that seems normal for a high flying thing. I was, it is interesting because as Bitcoin crashed, in the middle of March, along with equities, and I was pretty surprised to see that. But I do think that we're starting to see that as crypto or Bitcoin specifically becomes more of an asset class or a thing that institutions invest in, it'll probably be even more and more correlated over time with risky assets.
It's a cliche is that in a crisis all correlations go to one. And by that means it's like a normal time I'm going to buy a little bit of this all over that in a crisis. You're like, I need cash.
I'm going to sell everything that's not nailed down, including the chair I'm sitting on and the microphone that I'm talking to because I need to pay the bills. And so the more Bitcoin is part of institutional investors portfolios, the more we'll probably see that in the future, that when there's like a boom in stocks that Crypto and Bitcoin will boom.
And when there's a bust, it'll sell off too. And I think we saw that pretty clearly this year.
Saagar Enjeti: What's funny about that, Joe, is that if you're going to talk to the Bitcoiners and there are many who listen and look, I hold Bitcoin, I'm very open about it. I like Bitcoin. I think it's awesome. But the reasons that I like it and the reasons I'm hopeful for it's future align much more with what you just said, whereas they would tell you.
And a lot of them are like, look at all this money that the fed is printing and the balance sheets, and it's totally out of control and people are finally flocking to a smart fixed asset like Bitcoin, because Elon Musk can't go to the moon or can't go to an asteroid and mine gold, like you can with gold, which is why Bitcoin is better.
And I'm like, that is one of the dumbest takes on why Bitcoin is better than gold than I've ever heard. The other one is a lot of blockchain as online and you can send it to somebody easily. Let's just destroy some Bitcoin myths here about why exactly it is surging right now. First of all, inflation, do we have widespread inflation despite the fact that what is it like one in $5 or something has been created?
They love this one, one and five.
Joe Weisenthal: That's like a fake stat. There's like, first of all, one thing that people should recognize is that, they fit, dollars are created privately. So banks create dollars all the time. The act of lending is the creation of dollars.
Government spending is one source of dollar creation, but also in a good economy when people spend, when people borrow, when people make VC investments, that's the creation of new money. So all of those stats about money printing are completely wrong. I think that I'm going to split the difference between your Bitcoin, rational Bitcoiner take, and this sort of like Elon Musk needs to have something too for charging stations for Tesla on Mars.
And he's going to get Bitcoin for that, which is that even though I find all that to be total nonsense and there's stuff about asteroid mining, diluting the value of gold and all that. If I think if it weren't for those people, Bitcoin, wouldn't have gone, wouldn't go very far. In fact, I would even say like the rational Bitcoin or like yourself is almost free riding off the crazy Bitcoiners because you need them.
You need them to tell amazing stories about charging stations on Mars. To get people into the story. So even though I think they're wrong and all their stories about inflation are like wrong and they're like, not very good on like mechanics of how monetary policy work. It's part of the meme. To me, the value of Bitcoin ultimately is that, I could pay you in Bitcoin, person A can pay person B without person C getting in the way.
And that's a really big deal because as more commerce comes online, there's fewer and fewer opportunities to pay in cash. And we live in a world in which centralized authorities dictate what you can spend on. And they'll say, oh, you're not allowed to spend on this. Obviously you can't, there's all kinds of things that, Visa, MasterCard, Facebook, PayPal, Square will deplatform you, if you do violate.
So there's going to be more demand in other countries. You could be, you could get in trouble for selling a religious text, selling a Bible or something like that. And so I think that there's going to be ongoing demand for payment services that circumvent sensors.
Marshall Kosloff: Yes. For our last section here, the big theme of the debates we've been having on the episode today, it's really been about what are trends that are happening, what's accelerating. What did stay the same, one of those big fights, which is fun on Twitter, but also speaks to a bigger idea is the debate about whether or not big cities like San Francisco are over, and whether or not people are, especially in the tech community are going to move to Austin or Miami, which is a mix of tech and New York finance.
So you're from Austin. Can we just get your perspective on the debate about decentralization? Right? So are these big established places you could say, we have all of wall street. And we have Stanford university and Berkeley in our backyard has COVID and the year 2020 really knocked away those long-term reasons that would make you bet on SF, even if you're not too happy about the poor handling of issues like homelessness and poverty, gentrification, et cetera.
Joe Weisenthal: Man, it's a really a difficult question. I have to admit, I don't have strong views on this. I tend to think that the network of these cities that already exist, whether it's San Francisco or New York will be pre, will be a lot, hold a lot stronger than people think. London is another example with after Brexit, people are worried London's going right, but it's not going to lose this place where we're going to go.
Look, it's nice to be warm. I get why people want to leave New York or Connecticut and go to Florida. Being warmer in my opinion is better than being colder. So that's pretty great. I think that for some of the tech people specifically, it's a little weird, cause sometimes they're like, oh, work from home is the future.
Also, we're all going to go to Miami.
Marshall Kosloff: That's a sad centralization
Joe Weisenthal: Two. I think like there is something I've been thinking about a lot and it's just that I think there's obviously a lot of frustration with governance in San Francisco, specifically, homelessness is a problem.
Home prices are a problem. I'm not really sure that bringing a tech industry to a city is going to do wonders for governance anywhere. Austin already has a very serious housing problem. Every time I go back to Austin, it's clearly that the problem of homelessness is getting worse and worse.
So I think that like any city that tries to hard to court, this is probably inviting a lot of these same issues. I think another thing with tech is I do think that a lot of tech leaders, I'm not sure if they really believe in politics. I'm not really sure if they believe in engaging with politics.
I think that probably a lot of them think that all of these problems, whether it's a housing or homelessness or free speech or whatever are problems to be solved with an algorithm, distributional problems that could be solved with tech. And I don't think that , I don't think that's realistic.
I think like politics is always going to be here. So I think to some extent a lot of the, how these cities do the future, whether it's Miami, Austin, Nashville, or wherever will depend somewhat on the degree to which the new leaders of these places really want to engage in politics or do they sneer at politics and allow problems to fester?
I don't know. We'll see.
Saagar Enjeti: Yeah. I want to tease that out into my final question to you. Cause I know we gotta get you out of here, which is that I think one of the most profound things of yours that I read, I think it was back in, maybe it was March, maybe it was April and it was a post titled this, it's a choice, or something like that. Just about how the decision to, to select discrete things that we do bail out, and that we do let go bankrupt, give checks to, let unemployment expire. Many of these other things have caused immense suffering. That was an explicit political choice. It didn't have to happen.
It was a choice that was made. And that is what I think you said you were like, that's politics actually. The decision to allow something to happen is politics. And when I'm looking at these tech guys and they're like, yeah, we're going to go to move to Miami and all this I'm like, it's like you just said, unless you actually care about politics itself, making choices. It's not just a program of housing. It's about okay, which group gets the housing or what other people already live there? Do they like it? What do these people think? Like those are political choices. So what do you think taking all that in mind our biggest lessons story of 2020 from your perspective was having covered probably one of the most tumultuous economic years in modern history since 1930 something, I don't know.
Joe Weisenthal: I think I'm just, I'll just go with the really straightforward lesson that. Think of downturns as some sort of pain is necessary to readjust. And I think we think there's because we think in moral terms or we think in biophysical metaphors where we're like, to get healthy, we have to run a lot and we're going to get sore.
And that's gonna suck for a while or we have to lift weights. So that's going to feel really miserable, but we like come out on the other side a stronger. And I think that is a, it's not the right way to think about the economy that, we can have better things without worse things. And it was the point I made, we were talking about earlier about, politics in Chicago and so forth.
Like this has just been accepted that to have better things, and it was really tragic, 10 years basically went on after the great financial crisis, watching Europe deal with this pointless austerity and years and years of elevated unemployment. Why. What that was, what was the better end?
Now you could say okay, governments aren't run well in Europe, or you could say businesses are corrupt or whatever. You could come up with all kinds of like ills. That may be correct. But the idea that to solve them, pain is needed to solve them. I don't really think has much basis in reality.
And the, here was a clear example where the politics came together because we said, you know what? This is an external shock it's nobody's fault domestically. And so to a hiss, even though millions of people did fall through the cracks. We took a response that was essentially this is nobody's fault.
And we're going to try to make people whole, we're going to try and make businesses holiday to some extent. And it was been, it's been more successful than people would have guessed. The economy is in a much better place today than people would have guessed at the. Beginning of April without question.
Or you look at the Fed's own projections where they expected unemployment to be, it was still expected to be around 10%. It's currently below 7%. We don't need things to be painful, to get better because that's fundamentally a sort of moral thing. That eat your vegetables mentality or that we're going to pay for it or something bad will happen or something.
And I don't think that's, I think what this crisis bore out is that we don't need to have bad things to get to better economics. We can just design better economic policies.
Marshall Kosloff: That is a great place to end it on.
Joe Weisenthal: All right.
Saagar Enjeti: Yeah. Thanks, Joe. Really appreciate you.
Joe Weisenthal: Thank you both. It was a blast as always
Saagar Enjeti: One second, where can everybody find you, Twitter, your podcasts?
Joe Weisenthal: Yeah, find me on Twitter. My handle is at the stalwart and, uh, check out the odd lots podcast that I co-host with my colleague, Tracy Alloway. Check it out.
Saagar Enjeti: Awesome podcast. Thanks Joe. Really appreciate you.
Joe Weisenthal: That was fun.