Tyranny, Glitches, Cults, and Wall Street
"When you're one step ahead of the crowd you're a genius. When you're two steps ahead, you're a crackpot."
Of all tyrannies a tyranny sincerely exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.
C.S. Lewis, God on the Dock
When I saw that headline, I paused to pull on my Tyvek suit before clicking through. I knew the unintentional irony and hypocrisy were about to get thick. But I had no idea how thick.
‘In the case of Cape Cod, there were more than 16,000 short-term Cape rentals registered with the state this April, which is up from over 12,100 in March 2021.'
I have to credit Wall Street with creating this career for me because few people do basic analysis anymore. The company analysts take whatever the companies tell them verbatim, accept that as the gold standard, and don't do their own analysis. The rest of Wall Street more broadly places analysis secondary to their profit motive.
I hate to be cynical about it, but most people on Wall Street are paid to tell you that everything will be great forever and that you should always buy stocks and this and that. Maybe occasionally, you want to churn from one sector to the other to generate some commissions, although that's less of a thing now. Research is the monkey on the back of the deal-making engine for Wall Street.
It's a long way of saying, "Basically, I just look at the data."
"When you price it for perfection. and you have a some glitches here and there, it flips it hard the other way."
- Anthony Dilweg
Jack: So far we talked mostly about office - you said you also have concerns about multifamily, or apartment buildings - tell me about that?
Anthony: The sector had an extraordinary run. Your new newer product has done extremely well…I think that the the the the deeper concern I have is, like, industrial and multifamily was priced for perfection - literally guys would go in there buy a property, maybe it's a three yield, they fix it up, pump a bunch of money in, and then they think they're going to flip it out at a four and a half yield, and there's a lot of B and C Apartments out there, there's a lot of aggressive folks going after that space, especially in the last two years, and if you look at it, you know just the debt - office is a slice, but multifamily is a bigger slice of the debt in the US, and I just - with costs, you know, to run these properties gone up - I know we're more disinflation now, but you know the inflation, the surge there, I think that, you know, the debate's always been more around the need for housing, but I think that you've got some operators within this space that were probably not as skilled and and not as experienced, and their cost - there's been probably number of cost overruns - and then they look at their interest rates, you know, tripling, or doubling if they don't have caps in place, and they're going say, wait a sec, I was hoping to get out a four and a half cap and now it's a six cap. I do the math on that, because, you know, when you go from a nine cap to 10 cap is not as punitive going than going from a three to a four. It's crazy, so when you price it for perfection and you have a some glitches here and there, it flips it hard the other way.
What happens when there’s no money in real estate markets? This is fascinating and worth listening to if you’re into real estate, from the guys at Fundrise, which was buying up single-family houses as investments over the past couple years (at the peak). The transcript is here.
People outside of the real estate investment industry may be unaware, but the market is currently navigating a period of turbulence comparable to what it experienced during the 2008 financial crisis, with cap rates and pricing down as much as 50%.
“I got into a tiff with someone on social media, where I said I believe office buildings are going to be over 50% delinquency rate, and that guy lost his marbles, he's like, dude, you know the high-end delinquency rate was only 12% - how are you doing that? I said you're right, it may not work out that way, but the numbers tell me that it should be at 80%.”
Larry Jeddeloh, TIS Group: The Outlook for Global Markets Also worth listening to. Somebody on the Spaces call said, “All roads lead to yield-curve control, they’re just not going to call it that.” Jeddeloh also did a Spaces back in March 2023: "The number one risk right now to the U.S. is de-dollarization. It's the loss of reserve currency status by the dollar."
I’ve been goofing on Ray Dalio for a number of years. Clearly he’s a smart guy, and I agree with him on many things, and he’s much richer than me, but so much of what he writes and say - his “principles,” for example - strikes me as nothing more than pompous navel-gazing pablum from a Davos all-star who works for President Xi.
There’s a new book out, The Fund by Rob Copeland, that sort of confirms Dalio as a weirdo and Bridgewater almost like a weird cult. This is not the worst story in the book.
BY NOW McDowell had figured out that when Dalio said he had a solution to a problem, it was best not to argue. McDowell pledged to give believability a shot.
For months, he sketched and tested the idea. He asked top employees to rank one another on the notion of who was most trusted to make decisions in a given subject matter, starting from the top. The system began to work a bit dynamically. If a slew of Bridgewater executives gave an underling overall positive believability ratings, the subordinate’s own opinion would begin to carry more weight. McDowell began to see how believability could be a way to identify talent across the hedge fund. Employees seemed to take to the idea, too, seeing it as a way to prove they were deserving of advancement. McDowell rolled out a prototype inside the firm in which staff could see one another’s believability ratings on a one-to-ten scale.
Not long after that, McDowell’s phone buzzed with Dalio on the line.
It was the first time the Bridgewater founder had called him one-on-one since his job offer in Canada. McDowell hoped for a compliment, but instead Dalio’s voice snapped with anger:
“Why doesn’t believability cascade?”
It does, McDowell explained. The baseball card prototypes crunched tens of thousands of data points.
Dalio didn’t seem to see it that way. One of his subordinates had just flagged for him a suspicious finding: two people inside Bridgewater—one in investment research, the other a lowly information technology grunt—had higher believability scores than Dalio himself. People were beginning to whisper about it.
McDowell explained to Dalio that this was a sign the system was working, that Bridgewater was fishing out the pockets of talent in its ranks—exactly as Dalio had asked him to do.
Dalio’s voice made no secret of his irritation. Why doesn’t believability cascade from me?
McDowell thought back to Dalio’s index card drawing. He realized that Dalio hadn’t been sketching out the mere concept of believability on top. He had drawn himself quite literally at the head, bestowing believability to all beneath him.
The fix was obvious. McDowell assigned an underling to go into the software and program a new rule. Dalio himself would be the new baseline for believability in virtually all important categories. As the original, topmost believable person at Bridgewater, Dalio’s rating was now numerically bulletproof to negative feedback. Regardless of how everyone else in the firm rated him, the system would work to keep him on top. It would take more than two years to perfect the rigging of the believability system. The system was then rolled out for use on iPads, so that Bridgewater employees could input scores of one another in real time and see their scores dip or rise. Dalio’s own ratings, hardwired into the system, remained sterling.
The man responsible for making Ray Dalio the paragon of believability would receive the promotion of his life. At year-end 2011, McDowell sat down with Dalio, and the Bridgewater founder handed over a sheet of paper on which he’d written McDowell’s bonus for the year.
Dalio told McDowell that he would now be let into an inner ring at Bridgewater, the relatively small group of staffers who received what was known as phantom equity, or an ownership stake in the firm itself. Every quarter, McDowell would receive a check with a portion of the fees Bridgewater had earned from its clients.
Dalio grabbed the paper and scratched out the figure he’d handed over just a moment earlier. He replaced it with a new number $300,000 higher. McDowell was stunned at the amount of money so casually changing hands. Dalio handed the paper to McDowell and waved his hand toward the door, signaling him to leave with the new scribbles. “Just tell them that I gave you more.”
As McDowell reached the door, Dalio spoke one more time.
“This means you’re part of the family.”
When did this start? It started in 1971, when Nixon officially took us off the gold standard, and we came up with an agreement with Saudi Arabia that they would transact in US dollars for their oil, and so that's been going on ever since, and that's that's given us a lot of rope, because it it makes other countries who are energy dependent have to hold us treasuries in order to have access to dollars at all times to buy that energy…but the world is waking up, and you're hearing you're hearing frustration from countries like Brazil and Saudi Arabia and India, the BRICs, Russia, and they don't want to to be beholden to the US dollar anymore. Why? Because they know that we're running these huge deficits and we have no choice but to have long-term, perpetual, structural inflation, and inflation that we don't admit to, and that's the biggest problem, and we're starting to feel it across the the economy, and individuals are starting to feel it. Every single day there there are thousands of videos of people on on social media saying “I don't understand how people are making it - everything costs so much. Who has a job that that pays them enough to spend money like this, and to buy food that cost this much, to buy houses or cars that cost this much, and it's becoming a problem internally, and that's kind of a big red red flag for us. You're a lot younger than me, you don't remember this, but back in the 1980s we had we had a similar problem of inflation, and it was painful. It was severely painful back then, but because we were running 30% debt to GDP, Volcker was able to raise interest rates up to 20%. Can you imagine if we did that now? Our debt - it's not even an option…
The Complete Jeffrey Epstein Series (Darryl Cooper). This is epic.
Grant Williams (27:18): [Re: Tether] At this point in time, I figure the only reason this thing hasn’t been shut down is because the authorities are getting so much information from it that they just want to leave this thing open, because you look at the things that have been shut down and they’ve been involved in way less sketchy things than Tether has, right? So there’s a reason this thing is not being closed for the time being in my mind anyway.
Zeke Faux (27:39): That’s one of the theories I’ve heard from the start is it’s a honeypot and they are somehow cooperating with authorities behind the scenes. I have no evidence for that yet.
Grant Williams (27:50): No, I don’t necessarily think they’re cooperating. I think that the forensic analysts or the DOJ, and the FBI, and whoever are all over this thing and monitoring these flows, and it’s probably a great source of information for them.
Was reminded of another interview Grant did with David Dorr back in December 2022.
"...reported annual volumes for Binance last year...they’re claiming 34 trillion dollars worth of volume...I call complete BS...if that were true...every single intelligence agency and criminal investigation...is up on those exchanges and monitoring everything that’s going on..."
"I think that’s one of the more plausible reasons why we haven’t seen these systems shut down earlier, is that they really are facilitating advanced types of crimes from arms dealing, money laundering, you name it."
"We know that every type of crime is moving across these networks...So there’s a bodega in Caracas, it’s moving 10 million dollars worth of Tether per day, per day...If you’re an intelligence agency...you don’t give a shit about retail consumers..."
The Mysterious Mr. Andrew Bustamante
And then there’s this, from a Reddit “Ask Me Anything (AMA),” with Andrew Bustamante, “a former covert CIA intelligence officer and founder of the Everyday Espionage training platform.”
BATIRONSHARK: What do you think is the biggest threat to America national security in the coming years? Russia climate change Iran North Korea or something else?
imAndrewBustamante: Block-chain technology. No joke. Super powerful stuff, and the first one to figure out how to hack it, manipulate it or bring it down wins.
Note that Andrew Bustamante also gave this extremely disturbing answer in the same AMA. I’ve asked him about this and never received a reply:
Now Andrew’s the star of the History Channel’s, “Beyond Skinwalker Ranch.” Hmmm.
Abraham Lincoln used to tell the story of "the boy who, when asked how many legs his calf would have if he called its tail a leg, replied, "Five," to which the prompt response was made that calling the tail a leg would not make it a leg."