#6 - Inflation Persists, Retail Inflows to Stocks, Asset Bubbles, Tech Valuations, and Gambling/Cryptocurrency

Unknown: 0:16

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Adam Rice: 0:33

Hi, everyone, and welcome to episode six of the applied MMT podcast. I'm your host, Adam rice. Thank you again for listening. In today's episode, Ryan and I talk about the effects of rate hikes, which is a topic we've touched on quite a bit lately. We also talk about the latest economic an inflation data that was released on Friday. Another thing we touched on is the retail inflows into the stock market, interest rates and their effect on asset bubbles and tech valuations, the venture capital boom, post 2008, and also gambling and cryptocurrency. Thank you again, for listening. If you're enjoying the podcast, please subscribe. And with that we'll get started. One of the things that kind of came to our attention recently is that the idea and Ryan and I have talked about this quite a bit in the first, you know, four or five episodes, the idea that interest rates are or I'm sorry, raising interest rates is expansionary, is not necessarily consensus within MMT. Or amongst you know, the MMT academics. I think it's what Ryan and I tend to believe, you know, based on what we've seen in the data for the past few months. But it's by no means consensus amongst the you know, the MMT pros or the MMT. Academics. Ryan, do you want to touch on that a little bit? Yeah,

Ryan Benincasa: 2:02

sure. Thanks. Um, like you said it, you know, I think we kind of came a little hot in the first couple episodes talking, you know, because we were so excited to kind of be vindicated with with some of the data that was coming out. And so we should kind of take a step back and acknowledge that this was a controversial topic or was it is a controversial topic within the MMT community. And in fact, when I was at the levy Institute last summer, for the for the MMT seminar, they didn't really acknowledge the the Warren Mosers view, essentially that rate hikes are, you know, if the if the government debt to relative to GDP is at a certain level, rate hikes can be inflationary and procyclical, because of the because of the interest income channel, and because of what he calls it, the term structure of prices. And you know, that so that kind of, to me, the fact that they didn't really talk about that made me realize that, oh, this is actually not a consensus view in the MMT community. And so if we, when you and I started talking last fall, we were kind of persuaded by Mosers take, and we were looking at a lot of the data, we were looking at commercial industrial loan growth, revolving consumer revolving credit, balances, capex, and there were no signs that we could see of that slowing down. And so that was what really turned me on to this idea that wow, that, like, everyone's got this completely wrong and backwards, you know, with debt to GDP so high, that's essentially offsetting the, the, the so called tightening effects of monetary policy. And so I think is important for us to acknowledge that for, you know, for our audience, because there may be some confusion the way is this, you know, depending on who you read from MMT. You know, there may be some disagreement, and so I just, you know, want to for the record, just just acknowledge that and, and emphasize that part of what we're doing here is a little exploratory, right. It's taking what we know about MMT and trying to apply these concepts in novel ways. So I just want to make that clarification.

Adam Rice: 4:51

Yeah, yeah, that makes sense. So, on that topic. On Friday, we got a few data points that were interesting and the market reacted in a big way. So core PCE core inflation rose point 6% versus point 4%. Expected and last month, point three percent increase was revised up 2.4%. So as a result, the stock market took a pretty big hit. And simultaneously, you know, in this I think this kind of further confirms our thinking, and Mosler is thinking that rate hikes are expansionary new home sales, were up 50,000, more than expected, consumer sentiment was the highest in over a year that was, according to the University of Michigan survey, and disposable personal income was up 2%. So easing, so one of the situation where the market is reacting, reacting negatively to good economic news. I mean, obviously, inflation is a problem. But, you know, from my perspective, I see no evidence that the rate hikes are doing anything to fix inflation, but they are keeping the economy going, in part, at least, because there's other kinds of fiscal activity that is, you know, stimulating the economy. But the rate hikes, you know, at this point, I just don't understand it, you know, I don't I don't get what it's going to take for the Fed to say, alright, this isn't working, you know, are they thinking, Oh, if we keep raising 25 bibs, that's going to do it eventually, I just don't understand what they could possibly be thinking at this point. So it's a strange situation. And I think it's very strange. You know, it's strange how the market keeps reacting negatively to the rate hikes, even though it seems pretty clear that the rate hikes are, you know, stimulating the economy, which should ultimately be good for stocks.

Ryan Benincasa: 7:04

Right? I mean, first of all, it's a little bit scary, I would say, you know, if the Fed, if the Fed does keep hiking, I mean, they're, I mean, you could, you could do some real damage in terms of inflation in terms of income distributions. If, if, if they go crazy, and, you know, take take rates up to double digits or up to like, 2030, whatever percent, then then, you know, the economy starts to look something like Argentina and, and Turkey, which has crazy inflation and super, super high interest rates. I, you know, the thing about the, the interest rate, I mean, there, there is somewhat of a truth behind, you know, the relative value of the risk free rate and the return that you can get on on stocks, for example, but I think it's way, way over emphasized. And, you know, this is something I think, for for so long, post global financial crisis, we brought rates down to close to zero. And supposedly, this represented loose monetary policy and, and caused investors to quote unquote, or as, as Howard Marks likes to say, like, go further out on the risk curve. And, you know, this sort of there is this Tina concept, there is no alternative to stocks meant that people were irrationally plowing into equities. And as the narrative goes, now, that that now that the Fed is hiking, that is starting to unwind. I, I mean, in general, you know, I do see merit in like, you know, relative value of, you know, of risk free treasury bonds. And, and, and owning a company, right, if you're paying, if you're paying 20 times earnings for a company, you know, that's a 5% earnings yield, that is, you know, if you could get 5% RISK FREE by buying a treasury, that does seem a little rich, you have to be confident that that company can grow their earnings to sort of justify the risk you're taking right because the Treasury is is theoretically credit risk free, whereas, you know, the company's earnings, you know, depend on the depend on the actual operating performance of the business. So, from a from a relative value perspective, you know, to an extent, there is some validity there the problem that I have with this, well, many problems with this narrative, is that, you know, when interest rates are or at 0%, or whatever. I mean, No self respecting Wall Street analysts that I've ever met, ever said to themselves, Oh, hey, you know, let me let me update my model, my discounted cash flow model that I use to value that this equity security. And you know, because the tenure is now at 1%, I'm, you know, the, the rational input discount rate for my discounted cash flow model is 1%. Because that's the risk free rate. It's like, no, no one, no self respecting analysts does that. I mean, that's like, this is so common that we hear about that, that, Oh, you know, stocks for years, stocks are going up, because the, you know, the Fed is taking rates lower. And that means that, you know, the, the present value of, of the future cash flows of the company need to be discounted at a lower rate and therefore, result in a higher valuation today, it's like, no one on Wall Street. That's a sucker's bet, if you're putting in 1%, you know, as your as a risk free rate as your discount rate for for, you know, analyzing a, an equity security, no one on Wall Street, thinks that they're a sucker. So, in your head, you have this, this, you know, this hurdle rate, this discount rate, whatever you want to call it, you know, if, I mean, a lot of people I've spoken with over the years have said, you know, on average, you can have long term average treasuries, you know, we pay around 5% or something. So, so that can be kind of like, okay, a floor with regards to what kind of discount rate I'm using. And, and yeah, sure, there's, there is something to be said about, you know, the financial engineering of well, you know, I mean, there were high, there were junk bonds issued that, you know, a sub 3% in 2021. And so, you know, they're, you know, if, if the company's interest costs are going down, that there is a real impact on that sort of cash flow model that you put together and stuff. But overall, the that is the exception than the norm. Overall, I would say it's just, it's just a completely false narrative. It's this weird, like, people turn their brains off almost, when they when they throw this narrative around that, oh, this is a What's the meme? Adam? It's like, oh, this is this is the result of 0% interest rates. It's like a meme that's been going around.

Adam Rice: 12:59

Right? Yeah. Yeah. Well, yeah. So there's two two points I want to make that we were talking about before we started recording. One is that so post financial crisis pre COVID. All the central banks were wondering why. Yeah, you know, there was no inflation anywhere with with very low rates with near zero rates. And now they're raising rates and inflation is continuing. I mean, it's come down, but it's, it's higher than we would like, and they think the solution is to keep raising rates, which seems totally backwards to me. And then on the topic of, you know, this idea that you know, things like equity valuations and all these asset bubbles like cryptocurrency and you know, you name it, we're a result of zero interest rate policy. Look at what's going on today. You know, we've had the fastest rate hikes, I think, since Volcker and the past year, and crypto like Bitcoin is up 40% year to date. And, you know, another another meme was, you know, people you know, people are still saying this stuff that you know, all the the retail the retail investing that was going on during the pandemic, like the the Gamestop stuff, the Bed Bath and Beyond stuff, the meme, the meme stocks, everyone was saying that that was a zero interest rate phenomenon. And I just saw an article the other day that retail investors are pouring, it says retail investors are pouring a record $1.5 billion per day into the stock market. That's the highest it's ever been. And retail inflows into equities are higher than they've ever been. And this is after the rate hikes, right? So like, it's like, I don't the theory is just totally disconnected from what's going on, you know, in the data and in the real world. And it I don't, I don't understand what it's going to take to kind of, you know, break this, this cycle or break this this way of thinking about interest rates, because it's totally contradictory to what's actually happening.

Ryan Benincasa: 15:11

Right and, and it's just it's so intellectually lazy. dishonest. That's, that's what really annoys me about it is people just turn their brains off, they don't even question is like, oh, yeah, you know, fed, the stock market's up because the Fed is is taking rates lower or people think the Feds taking rates lower, you know, backing up for a moment, because I was very curious about all this stuff, you know, for years, and I come from a finance background, that's, you know, kind of looking at fun, you know, company's fundamentals, cash flow, earnings, etc. And, you know, for a while there were renowned professional Wall Street money managers who were getting completely run over because they were short, some of these high flying VC funded tech unicorn stocks that would go public or what have you, or, or they just vastly underperformed because they weren't invested in them. Because according to the source of the traditional framework of investing, where you're looking at a company, and you know, it's got to be profitable, and generate cash so that it can so it doesn't go bust. Right, because theoretically, it can't, they can't just keep raising more to doing more and more equity, fundraisings. You know, they were just getting completely smoked, because they weren't invested in this stuff. And, and every time I read about I talk to him about this, oh, this is this is because of low interest rates. This is because of QE, the Fed is injecting all this money, and they're providing all this liquidity and they're, and they're, you know, pitting rates irrationally low, and it's calling all of this irrational exuberance, and all this other stuff. And my problem with that explanation is there's no clear channel of Fed activity, and quantitative easing, and, you know, private venture capital investors, you know, injecting equity capital into these fast growing tech companies like those, like, those VCs don't have accounts at the Fed. Right. Right. And, and, you know, these, these were equity finance, they weren't debt finance, they weren't getting loans from banks to pay. So like this whole, to me, it just was very, nobody could give me a clear answer about where the money is coming from, because theoretically, they have to run out at some point, if you I mean, he's a crazy statistic, I think, Uber Ubers accumulated deficit. Right. So on the on its balance sheet, you could see kind of the paid in equity capital and and below that, normally, for normal companies, there's a retained earnings balance. If, if the company over the over its life hasn't hasn't generated net profits than it has an accumulated deficit and instead of retained earnings. The last time I checked, Ubers accumulate deficit was $29 billion. That means that Uber over its life has lost on a GAAP basis. $29 billion.

Adam Rice: 19:13

Right. So

Ryan Benincasa: 19:17

it's, it's, it's crazy. So. So when you think about it, you're looking at and you're saying, at some point, if you don't understand MMT, you have to think that at some point, the, like, the money train runs out, the venture capitalists can't keep pumping money into this. The the public investors who bought it at the IPO, they can't, you know, they can't continue to to raise equity capital, the lenders, I mean, they do have some, some high yield debt, the lenders are going to say, No, we're not we're not going to you know, continue to finance this the only way that they'll that they the only reason they did finance is because you have a large equity market capitalization underneath the debt that would come higher up in the capital structure. So So theoretically that high market value is is Is, is currency that the company can use to raise additional capital? So, you know, getting back to saying is I was just curious about, I didn't understand where the money keeps coming from Why is it such that it seems like people can just keep, you know, these companies can just keep raising equity capital, and their investors never seem to run out of money. Yep. And so I want to share, I want to share a quote from this book by Wynn Godley. And I think his partner's name is Mark lowboy. And so here's a quote says, The key factor is that as households increase their consumption, their money balances fall, and so do the outstanding amount of loans owed by the firm's similarly, as households get rid of their money balances to purchase newly issued equities by firms, the latter are again, able to reduce their outstanding words, or their outstanding loans. So I share that quote, because when you think about it, and we saw this happened in the, you know, the post COVID sort of mania that we had, there's essentially to, like businesses have to constantly incur and then pay down debt. Right, right. You know, if you, you know, trade, trade debt, whatever it is, I mean, maybe you have to borrow a loan, or, you know, money from a bank to finance, you know, you're building a factory or something, or it's just like, regular trade debt, like, you know, accounts payable, right, you import, you have employees, you have to, you have to pay them, you purchase goods from a supplier, you have to pay them back. So, that's how the economy works, or how businesses work. You're constantly incurring and cancelling debts. So, right there, what this is saying is, there's two ways for a company to access cash that can cancel debts. One is by increasing your sales, and the other is by raising equity capital. And so, you know, just using that as sort of a mental framework when we need to then look at what was happening, you know, basically for the last 20 years, and the fact that we've ran, you know, since 2000, we've run a budget deficit, every single year. Right. And so that when when the government runs a budget deficit, that that ends up in, you know, private sector, bank balance balances to be higher, right, it's a surplus for households and firms and municipalities, when we when the government runs a deficit. So to me, it's very clear. That is, is what's the source of cash. And so the way I kind of the analogy and tell me if this is, you know, if you have a better analogy or something, but the way I kind of think about it is, is like a like a sink, right? You turn the faucet on the water flows through, that is the government essentially turning on turning on the money spigot so to speak, the pipes underneath, or like the institutional structure, and that affects where the money flows to. So when we so when we think about that, we ran deficits. I mean, the last time we ran a surplus was 2000. That also happens to be when the original tech, maybe a tech bubble popped. Yeah. And then in 2022, again, we had this situation where we had a rapid fiscal tightening, right, the record tax receipts at the US Treasury. And once again, the tech bubble pot. I mean, you know, in 2002, I think Tesla was down 60 or 70%. Meta was down like 70%. You know, a lot of these facts and these unprofitable companies were down. I mean, Carvana Carvana was down like 96% or something like it was, it was, like just Blue Apron. I have a soft spot for Blue Apron. I have to have to have to admit. I'm still a user of their product, which I know is a little crazy. But But yeah. Another I mean, just all so many of these things that have the real real you know, We work blew up, all these things got completely smashed, and all the Evie stuff anyway, that was not like they started, they actually started to kind of roll over actually in the fourth quarter of 21 which, which was the start of the new fiscal year and represented a much bigger fiscal tightening. And so the way I think about the this sort of the this boom in VC funded, you know, tech unicorns or what have you and, you know, both private markets and public markets is you had this constant new stream of cash flowing into people's bank accounts for for decades after, after the Clinton administration. And the that the the institutional structures, the forces in our, in our political economy were such that they were flowing to these venture capitalists who were then funding new companies who, you know, a lot of them were like, direct to consumer brands like, right like Casper mattress or like your like Blue Apron, like we talked about? And how do you grow a brand from scratch? Well, you essentially have to, essentially have to pay marketing rent. So it's basically like a toll paid to Facebook and Google, right, that's the only way to get the scale that would be necessary for these companies to meet their fixed costs, and then eventually attain profitability. So you have this sort of cycle where, you know, new VC funds would be launched, they would provide these new companies with, with fresh equity capital, that they would then go spend it on marketing, and advertising on Google and Facebook, Google and Facebook, right. The Fang stock part of the fang stocks grew tremendously in the post, particularly well, in the last 20 years. But also, you know, post global financial crisis, it was like the only only real source of growth. And for a long time in the economy, were these textbooks. So people get excited, and they keep plowing more and more money, saying, Wow, look at Google, look at Facebook, you know, I want to find the next one of that. And so there's this sort of constant cycle of, you know, VCs funding new companies, and then then in the funds flow, the Facebook and Google for marketing and advertising. And, and, and, you know, that enriches Google and Facebook shareholders who then can sell their stock, and leave and start their own VC firm or, or their own startup. And so it's this whole sort of cycle that didn't get stopped until the the federal government tightened its belt in 2022. And all of a sudden, it popped the fact that that is not even part like, like, it's not even in consideration for the narrative of blaming the events that no one talks about in in Wall Street. I don't hear I mean, you're in the you're in the VC tech world, like, does anyone talk about that?

Adam Rice: 29:00

No, it's all it's all interest rates. It's actually I thought, you know, just going back to the institutional structure thing, I thought of a good kind of a, it's to me, it's like you look at look at something like cryptocurrency so like, as I mentioned, Bitcoin is up 40% This year, right? And this is this is in in wake of these rate increases. To me, this would be like looking at something like sports, gambling. So obviously, there's been this proliferation of, you know, legalizing sports, gambling, and all these apps are out there. Now. It's just from your phone.

Ryan Benincasa: 29:39

And it's horrible. It's horrible. But

Adam Rice: 29:42

it's it's very disruptive. But to me, this is like looking at that phenomenon. So let's say that's happened over the last five to 10 years, right? Where there's this massive proliferation of legalized sports gambling, obviously, there's going to be huge inflows into those apps and into the gambling industry in general, if the institutional structure allows for it. It has nothing to do with interest rates, right? It's like this. Like to me this would be like looking at sports, gambling, a child say a chart of inflows into sports gambling apps, and saying, Oh, it must be because of QE. You know what I mean? Like, the reason that The reason these gambling apps, there's so much volume now compared to 10 years ago is because the institutional structure has changed. The reason that cryptocurrency, you know, the these, the market caps, these cryptocurrencies and just all the trading activity, the reason it's exploding is because of the institutional structure because we're allowing it to happen. It has nothing to do with QE or with with zero interest rates. It's just it's because we're allowing these entities to exist, these businesses now exist. There's money to support their existence and their legal. Like that is, that's the answer. It has nothing to do with with fed liquidity. You know what I mean?

Ryan Benincasa: 30:59

Right. Well, I mean, I mean, we've been repealing laws like this, none of this is possible without actually repealing, like gambling laws that had been in in place for decades, if not centuries. That's what that's what you mean, with the institutional structure? We're, we're changing the law. And and that is affecting capital flows. I mean, that it's not it's not rocket science. You know, I read this really fantastic book called The Code of capital. Who I don't remember the, the author's names.

Adam Rice: 31:38

I read that it's not Katrina.

Ryan Benincasa: 31:41

Yes. Do

Adam Rice: 31:43

Catarina

Ryan Benincasa: 31:44

Yes, that's it. One of the best books I've ever read. And the point that she makes, is that like, oh, my gosh, highly recommend is that like the like things like property rights, intellectual property, like rights, land rights, what have you, that is a massive source of economic value? I mean, if you think about it, right, there is no such thing like a business can't exist, unless, unless it actually exists in law. Right. I mean, I've Yeah, I mean, I think you've launched businesses before I launched the business last year, you actually have to go, I mean, mine exists in state A registered in the state of Connecticut, you actually have to go and file paperwork and and have the entity the legal entity created, right, the term Corporation is derived from the same word that that corpse is, is in reference to a body, right, because it only exists in law, it doesn't exist elsewhere. So the actual existence of a business is a is a creature of, of law, not of anything natural. So any sort of, I mean, if the government decides that, you know, they're going to, you know, that they're going to allow patents for, for drug companies to exist for 10 years, instead of five years. Well, guess what, those those patents are now? Way, way, way more valuable than they were before. Right. The only reason that there is economic value there is because the intellectual property right gives you a legal monopoly over selling that drug. Right? Or if you know, I've ever gotten in, like an argument with with, with someone, and they were there, they made some obnoxious comment about, oh, you know, the government is so stupid, and they're going to screw up the energy policies, like they always do, and blah, blah, blah, and I'm just gonna sit here and collect my oil and gas royalties. I'm like, Okay, let's take a step back, bro. You're, you're a nice little oil and gas royalty stream only is only valuable because there's a contract that is enforced by the government for you to collect on those royalty streams. It literally does not, if if you buy a house, I mean, we bought a house back in, in in 2021. There is no equity in a house. If if the government doesn't actually acknowledge and enforce your right to own the property, right, someone that can't come to onto my, you know, onto our property and just, you know, stick their flag onto the land and declare it there's right we call the police and haven't thrown in jail. Right. And if they tried to sue and say, No, this is my property, the judge will say no, that's, that's these people's property. They you know, they have legal title to the land. This is a this is a a public handout. This is a this is a you know, it's the ultimate subsidy is having a court system that enforces contracts and you know, and a Congress that grants property rights, so and writes it into law. So it Yeah, so so much of the discussion. I'll never forget I was on. So on Bloomberg, right. It's like we're all Wall Street people use us Bloomberg, whatever I was on this anonymous distressed chat conversation thing, and I got into it with someone who they were complaining about, you know, and again, going back to the, to the low rates saying like, Oh, you know, the government is inserting itself into the, you know, is influencing the price of securities and, and need to stop interfering in the markets and blah, blah, I'm like, dude, and I'm sure it was a dude, because there are almost no women that work in distressed debt. What you like no one held a gun to your head and, and said, You, you need to, you know, get into distressed debt investing, you did this, because you wanted to do this. And in when you buy debt of a distressed company, frequently, your investment outcome is ultimately ultimately comes down to the whims of a judge in a, like a, you know, a bankruptcy chapter 11 situation and, and how they divvy up how they interpret contracts, and divvy up the the assets of, you know, amongst the competing creditor claims. So, literally, it comes down to a judge, and you're gonna sit here and complain about governments influencing securities prices. Right, but completely through needle think about that.

Adam Rice: 36:53

No, definitely not. And it's like, you know, it goes, it's the same thing with the companies I was just talking about with like, the these entire industries, like sports, can't these sports gambling apps exist? Because they're allowed to exist? And we've made the decision to make them legal? You know, what I mean? And whether that exactly, and that bad is a different question. But the structure is set up, so they're legal, so we should expect that people will now start putting money into them. And it's like cryptocurrency, like like the the retail inflows to the stock market, for example. Is that a consequence of QE and interest rates? Or is the fact that, you know, is it a fact that there is a plethora now of these consumer apps that encourage people to gamble on the stock market constantly? Right, right, right, like that. That, to me is the obvious.

Ryan Benincasa: 37:47

And they also have excess savings from interest rate hikes.

Adam Rice: 37:51

Yes, that's that's part of it, too. But, but it's because we have this institutional structure now where anyone can create a stock trading app like Robinhood. And you can encourage your everyday retail investor to gamble on the stock market as much as they want using instruments they might not understand. That's the reason that we're seeing these retail really

Ryan Benincasa: 38:10

don't understand, definitely don't understand. I mean, I mean, the shenanigans that Robin Hood has pulled, you know, with, with making default, making margin accounts, people's default settings, and, and, you know, encouraging people to trade call options. It's disgusting. It's a it's a perverse form of, of capitalism. I mean, this whole, you know, a lot of I mean, we were kind of talking about, again, going, thinking back to the, you know, the flow of funds, and, you know, we ran deficits every year, and that, that replenishes money into the economy and grows the account balances. Another huge source of funds was the, you know, particularly for, you know, the so called Tech unicorns was the, the Vision Fund, the masa stones, you know, Softbank Vision Fund, the anchor investor in the Vision Fund was the Saudis. Right, where did they get the funds from? Well, you know, I hear I pulled up the statistics, so. Okay, so let's say, from 2000 to 2014, on average, we ran a 22 billion trade deficit with the Saudis. So presumably, we were importing oil and and paying them with with up to $22 billion per year since then, right and 2014 is noteworthy because it's the energy price collapse that year, the high yield market got killed because it had funded the shale revolution. And, you know, because of the huge increase in capacity for drilling oil in the United States. Um, that crushed the price of oil. And so we no longer need to import as much. So, you know, from 2020 14 22 billion per annum since then it's averaged 3 billion per annum. So I mean that, so that's, but that was a huge accumulation of funds for the Saudis. And so it, you know, and with the price collapse of oil and stuff, they, they wanted to, you know, diversify their economy, you know, in case, you know, they can't make all this money from from oil anymore. So they hired masa zone, to run this Vision Fund, and it was like $100 billion. And so he would go around and meet Adam Newman, and like, the way you look or what looked or whatever, and so said, Okay, we're gonna, we're gonna give you a $47 billion valuation. Right, that has nothing to do with interest rates. Absolutely nothing. And in fact, I mean, we work ended up I mean, the their IPO blew up in 2019. Right, this $47 billion valuation was absurd. And the public markets kind of threw up all over it. They ended up going public via spec. And I mean, I think today, what have you sent it to me today? What is it? It's like a billion dollar market cap now? Was that right? 4 billion thing

Adam Rice: 41:50

it's actually under? I think it's under a billion so. So they've they've raised 22 billion to date, and the company is now worth about 900 million.

Ryan Benincasa: 42:02

That's pretty impressive. Like, I think, I think if somebody just handed out $22 billion to you, and I, we could probably do better than that.

Adam Rice: 42:13

I would hope so. Yeah.

Ryan Benincasa: 42:16

But but you know, and I think like a year ago, it was around it, like $5 billion market cap or something. So again, a year ago, rates were were still pretty close to zero. And, and in 2019, they were at 3%. So a year ago, I was kind of pounding the table on this, I'm like, this, this, this interest rate narrative is pull BS because the, you know, rate, I think the tenure was around 3% in 2019. And we work had a $47 billion valuation. Now it has had like a at the time, this was a year ago, it had like a $5 billion valuation and rates are at zero. So right. I just it, there's just no intellectual honesty, when people make these arguments. And the much, much more rational argument is that there were changes in institutional structures or changes in laws. You know, we, while we did run deficits, post financial crisis, it's pretty, there's a pretty strong case to be made that we weigh under invested in our, in our full economic capacity. And that's why we had such low growth for so long. That being said, you know, Tech was one part of the economy that was kind of booming, and it had people excited. And so a lot of funds flowed away from sort of more traditional economy companies and into these exciting new tech companies. And, and a big function of that is just the fact that, you know, we had this suppose a hangover in the housing market, and, you know, factories were shutting, and we were outsourcing to China. And, you know, really sort of, you know, there wasn't any growth left in the, in the, the traditional common industrial economy, but there was a lot of growth potential in in the tech sector, which, by the way, I just want to, I just want to for the record, I have like a little bit of a pro. I know, we've talked about this, I have a little bit of a problem with the characterization of some of these companies as being tech companies. If you're, if your primary source of revenues is advertising, you're in media. You're a media company, you're not a tech company. And, you know, speaking more about the institutional structure, right? The the whole section 230 provision that essentially serves as a legal carve out for Internet companies to not have to adhere to the same standards as traditional media publishers. That to me, is a huge explanation for the explosive growth in Facebook and Google because and Twitter, frankly, because they didn't, they weren't treated like traditional publishers. And so they didn't have to play by the same rules. They didn't have to. They didn't have to, they didn't have any standards for what got published on their platforms. That being said, there are many instances, as we have found out, where these companies and this is not a this is not a political right left issue. It kind of went both ways. You know, the company was clearly showed that they were pressing their thumb on the scales on information that got disseminated. They weren't acting as, as a passive platform, they were an active participant in terms of influencing the the information flow. And yeah, I just think that that's, I mean, that has that has come to a head and I think people have started to realize that and now there's a lot of questioning about what whether, you know, the, the rationale of the section two, three carve out continues to make sense. And I think it's actually being litigated in the courts. And the courts are kind of are going to end up saying like, Listen, this is this is a congress issue, like you guys just have to if you want to change this, you got to rewrite the laws or whatever. I don't think these these Supreme Court justices, frankly, even really understand. Don't even use these apps. Like it's hard enough for them to understand it. But But anyway, getting back to the to the point is that yeah, if you have companies that are that don't have to play by the same rules as everyone else, then yeah, they're gonna obviously perform a lot better.

Adam Rice: 47:03

Unfortunately, we ran into some technical difficulties, the end of our recording here, so we're going to cut that episode there. Thank you again for listening. If you are enjoying the podcast, please subscribe. If you're watching on YouTube, it'd be great if you could like and comment on the video. Thank you again for listening. And we will see you next time.