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Twitter adopts 'poison pill' to prevent Musk takeover: Billionaire weighs in - YouTube
Channel: Fox Business
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want to go to ken fisher right now over
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the years i've been blessed given the
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job i do to talk to some of the finest
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brains
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uh in the financial world and i
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certainly rank him up there with that
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not only because he's become a
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billionaire many times over zigging with
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others zag but he's also been a very
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calming presence in the middle of
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craziness in these markets and
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correlations that we seem to buy that
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aren't always so
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picture perfect or reliable ken fischer
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is the founder executive chairman
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co-chief investment officer fisher
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investments and ken very good to have
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you back with us
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thank you so much for having me back
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neil it's great same here so ken um
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i i read a lot of your writings and and
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not too long ago you were looking at
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this correlation between rising rates
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and how the markets performed and i was
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a little surprised to discover that for
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the most part the markets not only hold
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up they
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they go up um it's it's it's not a
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hundred percent but it's a much higher
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percentage than i thought so
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why is that
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so
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first of what is abundantly clear which
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is that the correlation
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uh rising rates and stocks is actually
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positive not negative whereas the
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mythology is they're negative
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and and the thinking about the
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negativity would be and is
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that as
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long rates go up the long bond becomes
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more attractive
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pulling money away from stocks and that
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thinking has been around close to
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forever but we have almost now 100 years
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of history of the s p and
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uh 10-year rates and the correlation
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which is 0.33 which is positive it's not
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like like you say it's not
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1 which would be 100 or reverse one
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which would be exactly inverse but it's
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positive not negative why is your
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question and the answer is that first
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off the rising rates get pre-priced the
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same way the stocks do secondarily as
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those rates are rising the actual and
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particularly when they're rising steeply
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like now the price of the bonds is
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falling steeply and money doesn't want
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to go where the prices are are falling
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and in reality then
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that money wants to think longer term
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than that short term shift another point
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now that people don't think through and
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and i've not seen anyone say this is
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they all get fixated on this yield curve
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and susan was talking a few moments ago
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without saying those words about that
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and how the fed may push short rates up
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above long rates making the normal
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relationship of a
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positive up slope between short rates
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and long rates reverse the fact that
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people miss
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is that 40 years ago and before
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time deposits were the basis for making
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long-term loans and they made up 65 of
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bank deposits today they make up seven
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percent of bank deposits and aren't the
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basis for making long-term loans loans
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with no maturities do that and those
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actually have an average basis point of
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nine basis points that's what the banks
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are getting on them so they have a huge
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incentive to lend what people should pay
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attention to in terms of yield curve is
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a spread between short-term and
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long-term not two year and ten year
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which is what they should all be fixated
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on and in fact when you think about that
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which nobody seems to think about this
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year that spread's been getting wider
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not narrower and there's plenty of room
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there for the fed to raise short rates a
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la what susan was talking about lots of
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times before you'd ever get close to an
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inversion
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the fact is just think of that off your
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three-year bond and your nine basis
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point cost of money to banks it's really
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the bank lending that's the force behind
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what is important or not important about
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the yield curve and that changed sharply
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over the decades so if you're talking
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between short and really long term is
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short and really long term too and 30
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year or what are you looking at if
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you're looking at it at all
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30 or 90 days compared to two or ten
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years the core business much shorter and
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more got it all right
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always been taking in short-term
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deposits as the basis for making
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long-term loans and that's gotten a lot
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more true in the last 40 years
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as money markets have become a non-bank
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system
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for other people to get higher yields
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it remains true that lending is driven
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net off the banking system by net
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outstanding loans driven by taking in
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short-term deposits and making long-term
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loans and the rising rates normally
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what's happened
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a lot of the time the short rates have
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gone up before long rates have sometimes
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long rates on up before short rates have
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as they have this time the correlation
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when long rates have gone up before
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short rates is actually much higher than
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the 0.33 it's actually 0.67 because
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the fact is that spreads the yield curve
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that makes the incentives for banks to
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lend and with that wider spread banks
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make more money off of subsequent loans
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and they lend more which provides
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lubrication to the system and provides
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lubrication
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and money going into financials all
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right well
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they might want to lend more in this
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environment but are they getting that
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business or is it something that will
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pan out
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it is something it'll pan out the banks
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are actually flush with low interest
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rate deposits and the fact is at one
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level and this is the negative part that
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people don't think about the more that
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30 or 90 day to two or ten year spread
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widens
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the more incentives banks have to lend
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the more incentives banks have to lend
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the more actual pressure that puts on
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inflation what what the fed does
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sometimes is tries to slow down the
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train before it gets to the sharp curves
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and and that's easy to understand they'd
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never want to run it off the tracks
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sometimes they do make mistakes and run
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it off the tracks but what they're going
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to be doing in the short term is
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actually not
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doing things to deter inflation but
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actually doing things to increase it so
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are you bullish in this environment
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oh yeah no this is a correction in a
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bull market there's so many obvious big
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fears that are pre-priced the market is
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having an almost archetypal stock market
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correction meaning a decline of 10
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to 20 percent
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but not a bear market which is decline
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off global peaks of more than 20 percent
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this is a near archetypal correction
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with people all a jitter about all the
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standard fears you know about inflation
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interest rates the war etc etc etc and
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yet all of that stuff now is a little
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bit like a digested cud with a cow it's
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uh all in price mode and as that
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continues we're going to see that
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correction bounce and that the aftermath
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of these corrections for people that
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hold on through them and don't sell out
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thinking that you know it's a suckers
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rally the aftermath is always deeply
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positive and oh by the way i'll make the
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point that after we've had very high
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inflation
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but it's also been true because we've
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got that same history since 1925 that
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when you look at for example inflation
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rates year over year over five percent
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uh which are the highest
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uh that we have long history of uh the
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fact is that
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six months returns for the s p 500 have
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been four percent 12 returns have been
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14
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and 18-month return 19
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the the fear is a false fear it's easy
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to see why people have it but it's a
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false mythology and false mythologies
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are always bullish fearable false
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factors always bullish
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so can when i always argue that people
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live in their own heads and their own
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life experiences and the difference with
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the backup at interest rates i know
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there was alarm expressed when we this
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week officially average you know five
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percent plus uh 30-year fixed-rate
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mortgages of course
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uh my wife and i when we bought our
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first home it was at 13 and a half
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percent and of course
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then we thought we were you know
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financial nostradamuses
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but again that's our perspective so
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we would look at this and say oh what
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are you complaining about that's still
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incredible but for a whole generation
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and it's we've had these low rates now
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you know for a very very long time it's
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a jarring development and i'm wondering
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if part of your bullish equation here
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factors in uh you know a consumer revolt
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here where they stop buying homes they
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stop buying period because they're
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scared
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well that's a another dual-edged sword
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uh neil at least in my opinion it is
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because what we've seen this year as
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rates have been going up is that home
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prices have been going up too so you've
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kind of got this one pressure that says
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oh it's costing me too much and you've
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got this other pressure that says but i
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better buy before the price of the house
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goes up more and those are two
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competitive features just like the one
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that i mentioned before about rates
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rising and and bond prices are negative
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developments right for the consumer
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right i mean if you're trying to buy
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something that's getting pricier and
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it's costing you more to finance what's
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getting pricier that's a double whammy
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right yes that's all that's all true but
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the killer feature that people never
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think through is that if you just go
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back to a very long term history there
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is a four percent bandwidth of consumer
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spending as a percent of gdp and it
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never gets outside of that the theory
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that consumers drive the economy down is
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just a false theory it's the business
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cycle on the business side that drives
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the economy down not consumer spending
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and that won't happen this time well i
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have you kennedy it does good it does
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impact customers negatively for sure
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right it does impact negatively for sure
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there's no doubt about that but the fact
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of the matter is markets aren't kind
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markets aren't caring markets don't give
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a darn
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yeah um let me switch gears talk about
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uh elon musk and this
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this twitter battle it looks like
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twitter has you know started a poison
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pill that's not a shock we haven't heard
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the the the complete details but the
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stock is barely budging of course today
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markets are closed but it barely moved
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yesterday there's nowhere near of the 54
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20 share that uh you know musk is
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looking at um
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and we didn't see any spillover in the
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technology sphere or nasdaq 100 any of
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these tech etfs i'm just wondering what
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that tells you and what you make of it
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all
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so i personally don't make too much of
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it in this way
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first
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musk who is clearly not dumb
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is also clearly unpredictable
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i have no idea what he will actually do
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he can do pretty much whatever he wants
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so if he wants to raise the 54 he can if
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he doesn't want to lord only knows what
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he's thinking and in reality betting
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against elon musk is pretty often a
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mistake so i think that you got to be
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thinking you're pretty darn smart to
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want to bet against him but what he'll
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do i don't have a clue about and i think
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anybody that thinks dude kind of misses
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the history of elon musk's
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unpredictability well he became a
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multi-billionaire because of that
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as of you as of you you know ken i'm
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just wondering though because i always
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thought
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how does a billionaire finance something
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i mean he's he's very rich obviously uh
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but as there's the cash flow issue
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because it's tied up and stocked up i'm
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not here to ask you how you protect and
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your billions i i i am curious though
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it depends on how you access that money
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if you ever wanted to do so and whether
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you leverage against that take out a
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margin loan against that only reason why
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i raise it in that context here is that
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really
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it could be an important factor here
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going forward right and then that
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you know gets others involved uh you
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know either providing that money or that
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collateral what have you i'm just
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wondering how you think that part works
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out
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well i don't uh have a history myself of
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doing acquisitions as i think you know
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i'm not a buyer i mean i'm a buyer of
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securities but i'm not a buyer of
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takeovers
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and what he has to do to do that is
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get money provided which basically has a
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ratchet down penalty if he fails
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but he can he can get as much money as
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he wants relative to his net worth
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uh uh to the extent that he wants to
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take the risk that it impacts him and
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he's yeah guess what it wasn't clear ken
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i'm sorry to jump on you my friend but
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uh
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if he were to withdraw the shares from
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let's say tesla i know spacex is a
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little different it's private you know
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it's he has a 50 billion dollar stake in
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that half the 100 billion but if he were
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to take tesla stairs and just sell them
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outright to raise the 41.3 billion or
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whatever he needs that would be more
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dramatic and maybe a worry for tesla's
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shareholders than if he were to borrow
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against them
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what do you what do you make of that
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yeah and and he wouldn't sell them
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outright i do not believe what i believe
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he would do say is borrow against them
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and then the ratchet penalty would be
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if effectively that borrowing forced him
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to later sell tesla shares
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but in the beginning
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if you don't
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if you just borrow the money at that
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point in time he doesn't sell the tesla
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shares everything's fine for a while and
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it takes him a while to work through the
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point of it either being a success or it
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not being a success as a takeover
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um these are problems i don't have but i
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just wanted to know from a billionaire's
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perspective how you would deal with them
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if you if you did but but finally i i do
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want to get your
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take right now the tone in washington
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and the temperament of course we don't
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know how the midterms will go they don't
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look very good
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for democrats but they had increasingly
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talked about a wealth tax going after
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guys like you um
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to try to raise more money uh even
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singling out the couple of thousand
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families in this country who are in your
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league and what have you uh how do you
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feel about all that that you're not
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paying your fair share not you
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specifically can but that that this is a
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fair and right thing to do
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well first off it's a thing that won't
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happen
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so therefore in my opinion it's a
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hypothetical trying to create an actual
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wealth tax as has been discussed
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for uh people is going to have
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constitutional problems and it's not
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going to get passed in the first place
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because you have to discern particularly
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for somebody like me
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what's my worth and you know what while
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forbes and bloomberg may say i'm a
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multi-billionaire the fact of the matter
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is that based on them trying to make
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guesses about what my firm's worth and
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nobody really knows because there's no
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market there and
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most of the wealthiest people in america
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and the world are that because they own
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things that are basically illiquid and
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you can't price precisely therefore
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putting a tax where some of them own
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this kind of stuff and some own that
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kind of stuff gets very unequal among
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them and taxing inequality uh in a
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single tax is basically unconstitutional
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i lied when i said that was my last
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question the federal reserve is in the
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middle of this rate hiking
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you know
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launch here uh and maybe aggressively so
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uh
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when do you think all that ends
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uh i think the fed raises
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so so we step back it for a moment we
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think about those long rates for a
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second and the long raids have gone up
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steeply but compared to the inflation
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rate they haven't begun to approach it
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and what that said to me almost from the
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beginning is that the inflation is a
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more temporary phenomenon longer term
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than let's say the head of the fed
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thought last fall but shorter term than
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many want to suppose now and therefore i
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think it's rates for a while then they
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cut off got it
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here we are out of time my friend very
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good catching up with you uh ken fisher
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the founder executive chairman fisher
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investments
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