Yen Carry Trade, Recession odds grow, Buffett cash pile, Google ruled monopoly, Kamala picks Walz

Bestie intros: Jason is back from COVID! rel="noopener noreferrer" target="_blank">(00:00:00)

• The speaker returns to the podcast after being absent due to a COVID-19 infection. He shares his experience of contracting COVID-19, which he believes he got at a Billy Joel concert.
• The speaker discusses the recent Olympics and jokes about the paparazzi taking photos of celebrities, including himself, at the event.
• The speaker makes light of the fact that he was photographed at the Olympics, implying that he was there for the "virtue signaling" aspect of the event.
• The speaker mentions that he was "virtue signaling" in the 100-meter dash and was edged out by Reed Hoffman.
• The speaker concludes by welcoming the audience back to the podcast.

Yen carry trade unravels, Japan's unique economic issues rel="noopener noreferrer" target="_blank">(00:03:55)

• The Yen carry trade involves borrowing Japanese Yen at near-zero interest rates and investing in higher-yielding assets, such as US Treasury bills or stocks. This trade has been popular due to Japan's long-standing policy of keeping interest rates low.
• The recent rise in interest rates by the Bank of Japan, albeit small, has caused a significant unwind of the Yen carry trade, leading to market volatility and a decline in global equities.
• The unwind of the Yen carry trade has put pressure on other asset classes as investors scramble to cover their positions and avoid margin calls.
• Japan's unique economic situation, characterized by a large public debt, an aging population, and a reliance on imports, makes it difficult for the country to raise interest rates without exacerbating its debt burden and potentially triggering a financial crisis.
• The Bank of Japan's decision to maintain low interest rates, despite rising inflation, has weakened the Yen and contributed to a decline in Japan's purchasing power.
• The Yen carry trade has provided a subsidy to the US Treasury by allowing investors to purchase US debt at low interest rates.
• The unwind of the Yen carry trade highlights the fragility of the global financial system and the potential for systemic risk arising from highly leveraged positions.
• The text suggests that the Yen carry trade may be re-established as the Bank of Japan has indicated its unwillingness to raise interest rates in the near future.
• The text concludes by discussing the potential impact of the Yen carry trade on the global economy and the need for increased regulation of highly leveraged hedge funds.

Recession odds growing, is the US already in a "lowkey recession"? rel="noopener noreferrer" target="_blank">(00:27:22)

• The US economy is facing a potential recession, with indicators like job growth slowing, unemployment rising, and consumer spending weakening.
• The recent job report showed a significant decrease in job growth, with only 114,000 new jobs added in July, below the Dow Jones estimate of 185,000.
• Hourly earnings growth has also slowed, decreasing from almost 6% to 3.5%, indicating a decline in consumer spending power.
• The Federal Reserve is expected to cut interest rates in response to the economic slowdown, with prediction markets indicating a high probability of a 75 to 100 basis point cut.
• Despite the potential recession, the stock market has performed well year-to-date, with the S&P and NASDAQ both up 11%.
• Some investors believe that the US is already in a "low-key recession," with evidence of declining demand in cyclical businesses like Airbnb.
• The US government's high level of spending is a significant factor in the economy, accounting for roughly 30% of GDP.
• There is a concern that the government's spending is artificially inflating economic growth, rather than being driven by productivity gains in the private sector.
• The potential for a recession is a major concern for investors, with many hedge funds and professional investors expressing worry about the risk.
• The possibility of government programs to mitigate the effects of a recession could lead to continued stock market rallies, even in the face of economic contraction.
• The potential for a recession is a complex issue, with various factors contributing to the current economic climate.

Why Buffett is selling Apple and massively increasing Berkshire's cash position rel="noopener noreferrer" target="_blank">(00:45:46)

• Berkshire Hathaway has sold 55% of its Apple holdings since the start of the year, reducing its stake from 50% of its portfolio to a smaller percentage.
• Some analysts believe this move is due to concerns about Apple's valuation, its reliance on China, and potential regulatory risks.
• Others argue that Warren Buffett's investment strategy often involves holding companies for long periods, regardless of short-term market fluctuations, and that he may be simply rebalancing his portfolio.
• Buffett's decision to increase Berkshire's cash position could be a sign of his anticipation of a recession, allowing him to make strategic acquisitions at lower prices.
• The regulatory risks facing Apple, particularly in areas like antitrust and its relationship with China, could significantly impact its future profitability.
• The sale of Apple shares could also be part of a long-term strategy to simplify Berkshire's portfolio and facilitate a smooth transition to a new CEO.
• The potential loss of the $20 billion annual payment from Google to Apple, if the antitrust ruling against Google stands, could significantly impact Apple's valuation.
• Despite the recent sale of Apple shares, the company's stock price remains relatively high, indicating that investors are still optimistic about its future prospects.
• Berkshire Hathaway's large cash reserves provide Buffett with significant flexibility to make strategic investments in the future.

Major antitrust ruling against Google, predicting outcomes rel="noopener noreferrer" target="_blank">(00:55:54)

• A federal judge ruled that Google has a monopoly in online search and advertising. The ruling found that Google illegally maintained its monopoly by paying billions of dollars to third-party platforms like Apple and Samsung to be their default search engine.
• The ruling does not yet contain remedies for Google's behavior, but it could result in changes to Google's business practices, such as preventing them from paying companies to be the default search engine.
• The ruling has sparked discussion about the potential for Apple to enter the search engine market, potentially by acquiring an existing search engine like DuckDuckGo or Brave.
• The ruling is considered a significant event in the tech industry, comparable to the Microsoft antitrust case in 2000. It is expected to have a significant impact on the search engine market and could lead to increased innovation and competition.
• The ruling has also sparked debate about the potential for increased regulation of big tech companies, with some arguing for a breakup of Google and others advocating for more transparency and accountability in the company's algorithms.
• The discussion also touched on the perceived bias in Google's search results, with some arguing that the company's algorithms are biased towards left-leaning media outlets and candidates. Others argue that this bias is a reflection of the overall media landscape, which is dominated by left-leaning outlets.
• The discussion concluded with a call for Google to be more transparent about its algorithms and to take steps to ensure that its search results are unbiased.

Kamala picks Minnesota Governor Tim Walz as her running mate rel="noopener noreferrer" target="_blank">(01:22:41)

• Kamala Harris selected Tim Walz, the governor of Minnesota, as her running mate.
• Walz is a member of the Democratic Party and is considered to be on the left side of the party.
• Some critics have raised concerns about Walz's record, including allegations of "stolen valor" and his stance on transgender issues.
• There was speculation that Josh Shapiro, the governor of Pennsylvania, would be chosen as Harris's running mate, but he was ultimately passed over.
• Some have suggested that Shapiro's Jewish faith may have played a role in his not being selected, but others have argued that he may have bowed out of the running to pursue a presidential bid.
• The selection of Walz has been criticized by some as being a rushed decision, with concerns that he was not adequately vetted.
• Some have argued that Harris should have chosen a more moderate candidate from a swing state, as this would have been more strategically advantageous.
• The discussion also touched on the vetting process for vice presidential candidates, with the speakers noting that Donald Trump had more time to vet his candidates than Harris did.
• The speakers also discussed the potential impact of Walz's selection on the campaign, with some suggesting that it could create a distraction and hurt Harris's chances of winning the election.