Transcript
0:00 USG GP this year will grow about 2% half of it is purely AI capex. >> Today's guest needs little introduction to anyone who follows financial markets. Best known for calling the 2008 crisis and making one of the most famous bets in modern Wall Street history, Steve Eisman. >> Steve Eisman >> Steven Eisman >> is one of the financial world's most outspoken voices. You may have seen him portrayed by Steve Carell in The Big Short. >> One of the lessons of the financial crisis is that incentives Trump ethics every time.
0:30 >> He said if you can breathe, you can get a subprime mortgage loan. >> I literally think anybody could have gotten a mortgage loan back then. >> Today he joins us to break down how the US economy has become increasingly dependent on the AI boom. >> The only sectors that I can see that are not correlated at all to the AI trade are staples, health care, and real estate. >> Where he sees the biggest risks and opportunities across global markets.
0:55 >> At some point of higher interest rates, the stock market corrects. >> And whether the warning signs emerging in private credit point to bigger trouble ahead. >> Just like private equity has had explosive growth, private credit has had explosive growth. The issue is >> He's here now for our three pressing questions where we'll get into three hot topics in finance. >> My view is in a way the entire stock market is one trade because everything is correlated to it and that trade is AI.
1:27 >> Steve, thanks so much for joining us. >> Brooke, thank you >> for having me. So, we were just chatting off cam and I was so surprised to hear that this is a very new venture for you with the podcast. You only started podcasting last year, is that right? >> April. >> Wow. >> Beginning of April. Just I think the the on my first interview was literally like days after President Trump announced the tariffs. And I had a I I great guest on Dan Clifton from Strategas who's like a political analyst. And the but that was complete accident. I had just arranged to interview cuz I know him and I like him.
2:02 And it was like it could not have been more crazy relevant than than than that moment. That's how we got started. >> I was just saying I couldn't believe that because of the, you know, huge community that you seem to have built in such a short amount of time. But, you know, just to kind of set the stage here, I did a little bit of a deep dive into your background and I realized, you know, we all know you now as this finance guy, right? But, I understand this wasn't the case originally. You actually originally studied to practice law.
2:27 >> So, right? So, tell us what was that like for you and what made you want to make the switch over? >> Well, I think I might have been one of the worst lawyers in the history of law. >> I don't believe that. >> Oh, oh, I was. I was a corporate lawyer. And I was utterly miserable. I was miserable. I I really just disliked it intensely. And my wife, Valerie, was a tax lawyer and she was pretty miserable, too. And so, she arranged for us to go to this institute called the Johnson O'Connor Institute, which doesn't exist anymore.
2:58 It tests your aptitude, which is kind of your intelligence, but it's more like what are you sort of naturally gifted at? It's a full day of tests. And at the end of it, when they gave my report, they said to me, "You were very, very good at generating ideas, but you are not detail-oriented at all. The worst thing you could be as a corporate lawyer." Which I found very refreshing cuz I actually now understood why I was miserable. And so, I managed to get get a job on Wall Street as a junior analyst and in 1992, I got promoted to be the financial services analyst at Oppenheimer and that's how my career got started.
3:37 >> You know, obviously, Steve, there's no way we'd sit down with you today without talking about what happened in the years of 2006 to 2008 when you made what some would describe as the call of your career, right? Betting against subprime mortgage bonds here in the US well before the housing crisis became obvious to everyone else. Now, those of us who remember that time or watched The Big Short movie, know exactly what happened. But, for those who aren't familiar, can you kind of just talk us through a bit of the story, you know, in broad strokes?
4:03 >> Sure. Let's go back in time. In the mid to late '90s, there was I call it the first generation of subprime mortgage companies. We And I covered them all as a sell-side analyst. And in night So, at one point in 1998, 1999, the entire industry effectively went bankrupt for reasons that are very complicated that we don't need to get into. And then starting in 2002, the second generation of subprime mortgage companies went public. The funny thing was that it was they were all Most of them were run by the same people who ran the first generation of subprime mortgage companies. They just changed the names. You know, people think that I'm like this genius who like foresaw everything.
4:48 The The point was that I had seen the play already, and I was waiting for the the you know, you know, Terminator 2 to have the same plot as Terminator 1. because I'd already seen Terminator 1. And so, I was just sitting waiting. Well, if you're waiting for something to happen, and then the evidence that you need happens, you're kind of ready. And effectively, what happened was in by the summer of 2006, the loans that had been securitized in early in 2006 were going bad very, very rapidly. And the reason was that underwriting standards had kept deteriorating. And that's what got me into did into starting to think about shorting subprime paper.
5:33 >> You had a great line in one of your recent podcast episodes where you were talking about this loosening of underwriting standards from 2002 to 2006, where it was, you know, basically loosened up to such an extent that it was like you said, if you can breathe, you can get a subprime mortgage loan. >> I think that's actually true. It's not an exaggeration. I literally think anybody could have gotten a mortgage loan back then. >> And why do you think people weren't paying attention to this or perhaps weren't doing anything about it at the time? Just for again, those who don't understand.
6:01 >> Sure. I think one of the lessons of the financial crisis is that incentives Trump ethics every time. And everybody in the entire subprime chain from the lenders to Wall Street which bought the loans, securitized them, and then sell sold them, everybody was was compensated on volume. They were not compensated on quality. So, they were all incentivized to keep doing it, and the only way to keep generating more and more volume is to loosen underwriting standards because you you increase the pie.
6:33 >> That's what happened. >> You've said that covering subprime as an analyst early in your career taught you that Wall Street didn't care what it sold. How did that change the way that you approached the markets, and how did you also frankly handle criticism, right? When everyone else was maybe, you know, seeing something different or telling you to look the other way. >> I remember >> >> I had a meeting with the head of asset-backed research at one of the big firms. So, in the meeting was this person, a guy, and it was me, Porter, Vincent, Danny, we're all in the room talking to this guy. And it got a little heated because we're like telling this guy, you know, the world's about to end, and he's telling us everything is fine. And so, I asked him, "Well, what what why do you think everything is fine?" And he said, "Well, since World War II, housing prices in the United States on a national level have never gone down."
7:29 And I looked at him, and I said, "Is that a law of physics or just an accident of history?" He he he thought it was like a law of physics. That and people you know, look, when times are very good for very very long, people can't imagine that it'll that it'll ever go bad. >> So much that I could go on with about that, but you know, just to kind of turn us back to the timely questions for today because I know you spent a lot of time every week unpacking what's going on in markets, and kind of like decoding, you know, the main questions that your viewers have about finance. I want to get to our three pressing questions today. First up is AI. You know, frankly, this This we're going to spend most of our time today because it obviously is one of the biggest talkers right now.
8:09 >> It's the topic. >> Yeah, especially with the eye-popping valuations, investment boom we've been seeing. You have predicted, Steve, that if this were to stop, the economy will fall into recession almost immediately. Tell us why. >> So, we had on our podcast, the economist Torsten Slok, who's the economist at Apollo, who's quite talented. And he pointed out that US GDP this year will grow about 2%. Half of it is purely AI CapEx. So, I think you need to divide the economy and the market. Because the market story, in some ways, is even worse. But, let's just focus on the economy first.
8:49 So, the way I look at it is it's like a chain. So, Nvidia sells all the chips. Now, people looked at Nvidia's numbers when that when they reported them, and everybody thought they were incredible, which they were incredible. I mean, the largest company on planet Earth, revenue grew more than 100%. I mean, it's an astonishing statement, and it's unheard of. But, buried in the 10-Q is a little footnote that says that 70% of the company's accounts receivable is from five accounts.
9:23 So, yes, it grew over 100%, but it's highly, highly concentrated. Now, who is that? Nobody really knows, but it's it's either immediately or indirectly the hyperscalers. So, Nvidia sells the chips, the the the hyperscalers buy the chips, and so far that's okay. Where where I think things start to get dicey is there have been some reports by Wall Street firms that have been very good, which have said, I'm going very careful how I say this, 70% of hyperscaler AI revenue is just from Anthropic and OpenAI.
10:03 Okay? Now, that number, whatever it is, is equal to 25 to 35% of their total cloud revenue. Well, that's huge. What that tells you is the reason why the hyperscalers are buying so many chips is because they have all these commitments from Open AI and Anthropic. So, if anything bad ever happened, and I'm not making this prediction yet, but I'm just saying if anything bad happened to Open AI or Anthropic, the whole chain stops. Because if if let's say hypothetically Open AI went bankrupt tomorrow.
10:41 Let think about what that would do to Oracle. Oracle has a $600 billion backlog. Half of that backlog is from Open AI. So, the entire chain of buying all these chips, of Nvidia growing revenue 100%, goes into reverse if one of these two companies gets into trouble. That that is the problem. Now, between the two, Open AI is the weaker company. That is unquestionable at this point. That could change, but it's definitely cheaper.
11:14 They have less revenue, their growth rate is slower, they lose more money, and both of them are completely dependent. Since they lose money like crazy, I was on this show with with another podcast who said, "You know, these companies lose billions." And I said, I said, "If only they lost billions." so, that's the weakness of the AI story. It's highly concentrated. At the end of the day, it's dependent upon two new companies who lose money. And if anything bad were to happen to either one of those two companies, it would be it would be a in a bad situation. If that were to happen, and the entire AI story reversed, the economy would go into recession immediately.
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14:22 That's chime.com/btb. Sign up now, it only takes a few minutes. >> Chime is a fintech, not a bank. Banking services and Chime card provided by Chime's bank partners. Qualifying direct deposits required. Terms and limits apply. Go to chime.com/disclosures for details. >> When you first said that, I was just struck by that, right? And I thought, wait, are we being too alarmist here? And then obviously then you backed it up by saying that AI capex alone accounts for about half of US GDP growth this year. That is astounding, right? Because hyperscalers, I think you've said as well, are projected to spend and it's been shown about $700 billion this year.
15:02 So you've pointed out much of the risk here is partly because the boom relies heavily on just two AI companies, OpenAI and Anthropic. Can we talk a bit more about, you know, the underlying risk? Because again, like I know that you are always very careful by couching everything you say. >> I'm not making this prediction yet. I'm just I'm just saying I'm saying what if and I'm very nervous about it. >> So the what if here, right? Like what is the potential risk here? Because for instance, I think that, you know, a lot of analysts have noted that if cheaper open source or let's say Chinese models are, you know, extremely competitive in this space, >> Definitely.
15:35 >> trigger a price war and hurt these two companies, then the massive capex that we're seeing by big tech obviously could face the severe downturn. Is that your view? >> I think there is a risk of a price war. You know, there was earlier this week at the Goldman tech conference in San Francisco, the CFO of OpenAI said that they had just cut price on their most recent model, that it increased compute their business by like tenfold. I've no idea what that means, but let but let's take it at their word, but they cut price.
16:09 is that does that mean Anthropic's going to cut price? The other issue, which is just as important, is that a lot of this revenue growth that Anthropic and OpenAI have experienced is because of what's called token maxing, which is basically I work at Uber, let's say. I'm the tech guy, and I am under orders, literally orders by my superior, to use AI 24/7. Forget Forget the cost.
16:39 That lasted through the summer or much of the summer, and that's over. People are much more cost-conscious now. >> What's also interesting as, you know, we're taping here at the New York Stock Exchange today, and both of these companies we're talking about, OpenAI and Anthropic, are obviously set to go public soon. How much does that even change the equation in your view? Is this something we should really be paying attention to? Does it change anything basically for investors, the fact that if they become public suddenly, or what's your view?
17:05 >> I can't wait for the S-1. I mean, I just can't wait. >> Special episode coming up. Yeah. >> I mean, we know actually so little about the financials of these two companies, but when you go public, you got to open the kimono, so to speak. They They have to They have to show the numbers. So, we'll have a much better understanding of what their numbers are really all about when when they go public. >> I think it's so important that we're talking about this because, like, candidly, and I'm sure you've seen just anecdotally, I have so many friends right now who are just so excited and all in on AI. So many of my friends across different sectors have been like, "I want to quit my job and try to get a job at Anthropic. You know, they're paying so well." And such. I'm sure you've seen that craze, right? And so, it's just so important to contextualize what's really going on here, right?
17:50 Because there's so much hype and excitement. But at the same time, like, people then don't stop to really think about what's going on. You know, there's been a term >> Can I interrupt you just for one second because I think this is something we have to explore as well, cuz what what we've just spoken about is the impact of all this on the economy. But I think in some ways the impact on the market is bigger.
18:12 >> Which market? >> The stock market. And the reason is that when you look at the economy, 70% of the US economy is consumer. So, that's why it's only half of the growth in GDP, even though it's a very, very big number. But, when you look at the market, you know, if Infotech is 38% of the S&P, and then if you add in all the companies that are that are really tech companies, but are tech but are not technically in Infotech, like Google and Amazon, etc., you get over 50%.
18:51 >> Yeah, I was going to say, what is the like ratio of the Mag 7's like total value? >> about 38-40%. The only sectors There are 11 sectors in the S&P. The only sectors that I can see that are not correlated at all to the AI trade are staples, health care, and real estate. That's it. Everything else is correlated to one degree or another. Like utilities, which are obviously building power plants for for AI, to banks and investment banks, which which supply the you know, the financing, you you to industrials, which which are building the stuff. So, so much of the market, it's My view is in a way, the entire stock market's one trade.
19:41 It's one trade. Cuz everything is correlated to it. So, and that trade is AI. So, as long as AI works, the market will go higher. >> Yeah. >> But, if something were to happen to AI, it's not just going to be a recession, it's going to be a massive correction in the stock market. >> What are the main bottlenecks of this growth, right? You've talked about like power availability as one of the biggest constraints, for instance, and we've seen that, right? Obviously, like they're all rushing to kind of build out and whatnot. you know, can you kind of talk through some of the main risks that could happen here, you know, to kind of constrain the growth that everyone's so excited about?
20:15 >> Look, I think the big risks are the end of token maxing and what that does to revenue growth. I I actually think it's possible that Anthropic is rushing to go public because they they want to go public before third quarter numbers because the growth is explosive through through the second quarter and may have flattened out starting in the third quarter because of the end of token maximum. So, that's one thing. The second thing is a price war and the third thing, which we can't really handicap cuz it's so political, is how difficult it is to build these data centers. I mean, we've never built data centers this big.
20:51 >> Or this many. >> Or this many. Right. So, look, I'm no engineer, but what I'm hearing is that things are getting are difficult. That doesn't mean it won't get done, but it's hard. >> There's a term increasingly coming up right in this whole world, which is circular financing. You've talked a lot about this. For those newer to the subject, can you kind of briefly walk us through what's going on with that and the risks involved?
21:12 >> So, a lot of the circular financing is happening via Nvidia, but others as well. So, just for your viewers, a circular financing from Nvidia would be, "I'm Nvidia. I sell chips. So, I either make an investment in company X or I lend money to company X or I do or some version where I give money to company X and then company X buys more of my chips.
21:43 That's circular financing. Now, I have concerns about it, but I don't think if Anthropic and Open AI go on to glory, it won't matter. So, at at the end of the day, you know, people write a lot about circular financing. It's It's intellectually interesting to me just to see what Nvidia is actually doing. But, >> Cuz have we seen something like this before? Like, forgive my ignorance here, but have we seen something like this before in regard to circular financing or is it kind of a newer trend?
22:14 >> There've been circular financing in the past. I mean, not to this massive degree, but like I said, I don't see I mean, if tomorrow Open AI goes bankrupt, you know, Nvidia's going to have problems with all this circular financing that that it's done. But as long as those companies are okay, that that's not the bottleneck. >> Yeah. What metric are you watching most closely to kind of gauge whether this enormous spend we're seeing on AI infrastructure is actually generating adequate returns? What are like the numbers that you're watching the most?
22:43 >> You know, there aren't any numbers that are out yet. I mean, it'd be nice to see numbers from Anthropic and Open AI, but they're you know, this is the difference between you know, being negative and why I'm careful about about being too negative about this story versus being negative about subprime. You know, subprime had databases. You know, Moody's had a database where you could get literally every single credit metric for every single securitization that that was ever created every month.
23:14 So, you could check every month to see what's happening. It's all very anecdotal. >> Yeah. >> You know, you got to talk to a lot of people. >> Yeah. >> You know, you can't trust everything everybody says, but there's no database, unfortunately. >> Yeah. Let's turn now to markets. I want to get your take on the IPO market in particular. You know, we've seen companies staying private much longer than they used to with the share of startups that eventually go public falling from a peak of more than 25% in the late 1990s to just 2% now.
23:44 >> When you say 2% 2% of what? >> 2% of startups that eventually go public. >> I see. Okay. >> So, you know, what has fundamentally changed in how companies think about the value of going public? I imagine you have some thoughts here. >> I lay this at the feet of private equity. And and not necessarily in a good way. So, I mean, private equity has exploded. And so, as a result, they, you know, have bought all these companies.
24:12 And they really haven't taken them public, and they basically have sold them out to other investors, and that's what's really kept things off the off the IPO world. Now, unfortunately for them, the time to even sell anything has greatly extended. And it used to be in the private equity world, you'd buy something, you'd sell it 3 years later. Now it's 7, 8, 9, 10 years, and the investors are getting very upset because they're not getting their money back. But, you know, one thing that happened post-crisis, which really helped private equity, and I think this is where people make intellectual mistakes, is you know, institutional investors at after the the great financial crisis were very upset because they lost a lot of money, and there was a lot of volatility in their portfolios. So, what they did was they put money into private equity because they concluded, "I'll have a lot less volatility in my portfolio."
25:10 >> That was the thought then. >> That was the thought. Now, there's perception and there's reality. Yes, you have less volatility because you don't get daily pricing. That doesn't mean you have less volatility. You just don't know. But because, you know, ignorance is bliss, they kept piling money into private equity. I think that's over. >> Is there also, I think, a thought about how, you know, a lot more capital might be available to, let's say, like startup founders in private markets these days?
25:39 Cuz it seems like the data is showing that, you know, the amount of private capital you can raise these days is a lot higher than it used to be back in the day, like >> That's for sure. For the same reason. >> Right. So, then maybe people, you know, startup founders out there might be saying, "Why don't want to go public? You know, I can just keep raising, you know, the money's rolling in. I don't need to have the same requirements, let's say, to go out and report 3 to 6 months, whatever it may be with the SEC rules these days. you know, and just keep the party going that way."
26:03 >> Yeah. No, I think that's probably right. >> I recently stumbled upon this beautiful little gift shop, and it was one of those places where you walk in and immediately realize how much thought has gone into every single thing on the shelves. The curation was amazing, and there were so many pieces I'd never seen before. Basically, the kind of things where you just know your friends are going to ask, "Where'd you get that?" I ended up stocking up on gifts for my girlfriends. That's what I think makes shopping small so special. It feels more personal, and you often discover things you wouldn't find somewhere else.
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27:23 That's f a i r e.com/btb. Terms may apply. >> >> Stepping back, you know, there's a lot happening globally right now, from oil and geopolitical conflicts to tariffs, and here in the US, obviously, uncertainty around interest rates. Outside of AI, what are you most focused on right now, and where do you see the biggest pressure points for global markets? >> I mean, the war is the war. I have no more insight into the war than anybody else, but I think the pressure point right now is interest rates.
27:54 You know, at some point of higher interest rates, the stock market corrects. What that point is, nobody knows. Now, I thought that that point was 4 and 1/2%. That that was the Rubicon, and I was 100% wrong. You know, Treasury Secretary Bessant has tried to manipulate the bond markets to drive interest rates lower, and he's failed miserably, which I think has hurt his credibility a lot, very quickly.
28:25 So, look, I think at some point, if rates keep going much higher, we will get a big correction in the stock market. But like I said, I don't know what that point is. >> Can I ask you, do you think the Fed chair's job right now is just like an impossible one given the situation we're in and obviously just the let's frankly the administration we have. >> The Fed chairman does not report to the president of the United States.
28:46 He just doesn't. So, you know, the rhetoric makes it uncomfortable, but the Fed can do whatever it wants. I I I don't see that as an issue. >> Looking beyond the US, are there any markets or economies that you think investors are either overlooking or misunderstanding greatly right now? I know you say that like you always get asked to predict the end of the world in every interview you do. So, I'm trying to not go there, but I don't want to I just want to get your you know, gauge.
29:11 >> So, I do not invest outside the United States. I used to. Part of the problem that I had when I ran my hedge funds, when I invested outside the United States, was that there was no night and no day. My portfolio traded 24/7. >> Whereabouts were you guys in? >> So, we were US, Europe, India, Japan, a little bit in China. It just never ended. It drove me crazy. I really do think there's plenty of opportunities in the United States. And so, I stick to the US. You know, I I don't invest in Europe. I mean, European markets have done well of late, but long-term, I think the European economies are incredibly sclerotic.
29:49 And so, I I just don't I'm that's not I'm just not interested. They have very little There's very little tech in Europe. >> Well, you know, that's actually a great segue to my next question because I was going to point out obviously the US makes up almost 50% of global market cap, which underscores the enormous appetite from investors globally. There's long been a notion in some parts of the world, including where I'm from, Hong Kong, that Wall Street is king, right? That the US is the best place to invest. Looking ahead, you know, I realize none of us have a crystal ball here, but do you see that continuing?
30:18 And are you spotting any kind of structural shifts that could let's say change your outlook of the US as an investment venue? And I know obviously you're a patriot, you're not going to like talk bad about your own country, but you know what I'm saying. Yeah. >> I don't see it change. I mean, to me, the dominant investment story of our time is some variation of the growth in tech. And the biggest and the best growth tech companies in the world are in the US.
30:42 That doesn't mean there can't be a correction, that doesn't mean there can't be an AI correction, but long-term I think the US is where you want to be. >> I think what's really interesting is like we're seeing, you know, a lot of countries obviously like continue to fight for their homegrown, the few homegrown tech champions that they might have to obviously list at home and stay at home and not go to Wall Street, right? So like I'm interested to see like just in the years ahead of any reforms make it more enticing for some of the big firms that we've seen overseas that have done well. You know, if they will decide to like not pursue coming here or you know, a lot of times we've seen like the dual listing dream.
31:15 >> Right. >> So, remains to be seen. Lastly, private credit. As a business reporter, it's long been an industry that I've just frankly slept on and just thought was the most boring thing ever. >> Until recently. >> Yes, until recently, right? I think most people could agree with that. There's been so many headlines about this and the crunch that private credit is in. For those who don't know, can you kind of just tell us a bit about what you're spotting here because you've warned of a quote ticking time bomb.
31:42 >> So, private credit is an outgrowth of private equity. That's the first thing that everybody needs to know. What private credit mostly does is lend money to private equity to buy companies of all different kinds. The circularity of private credit is that many of the private credit funds are owned by private equity. So, as an example, the largest private credit That's just the first point. Just like private equity has had explosive growth, private credit has had explosive growth. And the issue is that during COVID and slightly afterwards when rates were zero, private equity through borrowing from private credit bought a tremendous number of software firms.
32:35 The issue is that that debt is going to need to be refinanced starting next year. When rates are going are significant A, significantly higher than when they bought the companies. And B, and here's the sort of the interesting point, is that despite the fact that there's been a rally in software stocks of late, they're still down huge. And the software companies that are going to need to get refinanced, their valuation when they get refinanced is going to be significantly lower than when they got bought out.
33:09 So, if you're So, imagine the the negotiation between the bank or the private credit firm and private equity. We want to refinance our debt. And says private credit says, "Great. Put up another $100 million in equity because you're basically underwater. We want more protection." At which point the private equity firm is either going to walk away like Thomas Bravo walked away from a company recently called Medallia, or they'll put up more money. You know, that's a that's the story for next year.
33:41 >> Yeah, and you know, just so everyone understands, it seems like software is particularly at play here because of the amount of money that they often need to keep the business going. Is that right? That they are like often the ones that need to refinance. >> It depends on the software firm. I mean, software firms can can be very profitable, but I don't think, you know, if your valuation gets cut in half, your valuation's cut in half. It doesn't matter how profitable you are.
34:03 >> What do you think could happen here? Like, are we We've already seen some defaults. Like, are are you looking for Are you seeing more restructurings on the way? And you know, what are you really watching for? >> I do. I think I think there'll be bankruptcies. I'll be think there'll be restructurings. This is not a I don't lose sleep over this. This is not a systemic end-of-the-world problem because the banks were levered 40 to 1.
34:28 Private credit funds are levered 2 to 1. So, there'll be losses. Investors will take losses. Private credit funds will take losses. It'll be painful. You nobody will be happy. But it's not a a systemic problem. >> What would have to happen for private credit to become a bigger issue for the broader financial system, or are you saying that it is largely contained essentially? >> I think I hate to use the word contained because Bernanke during the before the crisis what once got up and made a speech where he said subprime is contained. I remember turning to to one of my partners and saying, "Yeah, it's contained all right.
35:04 It's contained to planet Earth." So, we won't use the word contained. >> trigger word. We'll stay away from it. Okay, but why does this matter? You know, like >> I I just don't think it ever amounts to a massive problem. It could be painful. >> Well, regulators are starting to pay a lot more attention to this field. Do you think we're headed for a regulatory crackdown? And if so, you know, is there anything in particular you're really hoping to see in terms of greater oversight?
35:28 >> The area that I think needs more oversight is life insurance. This is sort of the black hole of the financial system these days because a lot of these a lot of life insurance companies today are owned by private equity companies. And who then bought and then and then those life insurance companies buy paper created by the private equity company that owns them. You know, there's a scandal now with I think what is his name? Mark Walter who who used to own the Los Angeles Lakers and still owns the LA Dodgers. He's got We're going to do a show on this very soon, but this is like one of those like you're going to put like a chart up on the wall and you're going to stare at it and it's so complicated cuz there's so many tentacles of all these different companies and they're all interconnected that it's going to it's going to be a little weird. But I I think if if if you look if I was insurance czar, this is what I'd be focused on. The problem is that life insurance and property and casualty insurance are regulated by the states.
36:33 They're not regulated by the federal government. And generally, they get away with murder because they're because they're regulated by those entities. >> Are you waiting to see if the Lakers sale indeed goes through? I know that's really up in the air right now with Bob Iger and whatnot. >> Oh, I think the the sale itself will go through. But I think the question is do they have to sell the LA Dodgers, too? >> Okay, Steve, thank you so much for breaking this down. Now, we're going to do a quick rapid-fire round. Don't overthink it. Just say whatever comes to mind. Ready?
36:58 >> Okay. >> Scale of 1 to 10, how accurate was Steve Carell's portrayal of you in The Big Short? >> 10. >> Favorite business book of all time? >> I don't have a favorite business book. I don't read business books. >> I am very surprised to hear that. >> Do not read business books. >> Not 1929? >> I read 1929. That's a good book. Yeah. The one that I liked recently was the book Capitalism, a history of the United States by Alan Greenspan. What I thought was pretty good. I couldn't call it my favorite favorite book, but I thought it was a very good book.
37:25 >> By Greenspan, you say? Interesting. I was going to say favorite Fed chair, because we know your least. >> Well, my least is Greenspan. my favorite Fed chair, we Volker. For sure. >> What's harder, finding a great investment or knowing when to get out? >> Oh, the latter. Much harder, because you you Finding a great investment is like an intellectual exercise. Getting out is can be emotional, because you've you've owned the stock, you've made a lot of money, and selling it is like is like selling one of your babies. It's it's it that's hard.
37:58 >> That's going to apply to so many things as well, right? Just doing career, when to get out. After everything you've seen over the years, are you more optimistic or cynical about markets? >> I don't think I'm any more optimistic or cynical about markets. >> Very insightful, Steve. Thank you. I've enjoyed this. >> You're welcome. >> Thanks for joining us on Behind the Business. For more stories on business and leadership, follow us on Apple Podcasts, Spotify, YouTube, or wherever you get your podcasts. See you next week.
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