Nick Denton's Big Bet Against the United States

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1:57Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Allaway. Tracy, what do you think the rich people are doing these days? You know, like, I know there's a lot of, like, big business people lining up or who have lined up behind the Trump administration. But they have to be kind of anxious, right? Because things like mass tariffs and so forth talk about reducing the role of the dollar and global trade. It's got to make them kind of anxious. I actually know the answer to this. Oh, yeah? As a rich person. No. Because the New York Fed publishes a survey of consumer sentiment where you can break it out by pay bracket.

2:38And so the highest pay bracket, it's probably not the super, super rich, but it is pretty rich. And yeah, they're getting worried for all the reasons you just laid out. But I do think if you exist in a pay bracket, that already sort of suggests that you're not that rich. You're not the real, you know, you're getting a pain. What high standards you have, Joe. But anyway, I think these are really interesting times, needless to say, for the globe, for people who have money, for people who have feet around the world where they want to bet. You know, one of the things I wrote about it last week or according to this, March 25th, you know, one of the big trades that really had been characterized for the last 15 years is like bet on the U.S.

3:21literally against everything else. Buy the S &P 500. You get no payment for global diversification. You didn't make any money in China. You lost money. You didn't get any pay for EM. You didn't really get anything in Europe. At least for a couple of weeks so far this year, that's reversed pretty sharply. And so one question is like, if you want glory, should you look outside the U.S. borders these days? Right. Diversification finally potentially paying off. Although, again, it's only been like three weeks. I know. And you've got to be careful with this. We have seen a lot of people. In fact, we've recorded episodes about this talking about how this is a huge sea change in global politics, potentially in global markets as well.

3:58This big moment similar to the fall of the Soviet Union, something that could forever alter Europe's economic and political and security paths. So we'll see. Big things are happening. Yes. Germany is like, we're going to spend hundreds of billions of dollars on defense, which they've really never done. That's a big deal. So anyway, I'm really excited about our guest. Someone I've known and talked to numerous times over the years, but we've never had on the podcast. Luminary in the worlds of journalism, previously a financial journalist, an interesting guy who suddenly popped up. He started posting again recently.

4:35And so I was like, oh, maybe he's in New York City these days. We're going to be speaking with Nick Denton. He used to work at the FT. He used to work, and he wrote a book. And most people would probably know him as the founder of the Gawker family of websites. He currently has a new thing called Futura Chiado, which is going to be some sort of journalism trading kind of hybrid. Maybe we'll find out what that is. Nick, thank you so much for coming on OddLots. It's going to be fun. I can tell it right. I have a question. I've known you for a long time, but I've never asked you this. I actually don't know the answer to this.

5:06How would you describe your political ideology? The reason I ask is that, you know, like. Starting with an easy question. I'm just going to like say like the most awkward intro to it ever. Your former company Gawker was put into bankruptcy in large part due to Peter Thiel. But then I've talked to him. I was like, I kind of think he has like some like Thielite sympathies at times, which is a weird thing to say. But I'm like, oh, I'm sort of picking up on some of that. But I don't know if I'm wrong. Are you like quietly based? How would you describe yourself? I remember a conversation with you actually on Twitter.

5:36I mean, a DM conversation in maybe 2016, 2017. At the end of which you said, oh, maybe preference falsification is happening on a very, very wide scale. So I think you may have been surprised back then. At the time, I would call myself a libertarian back in Gorka days. But I don't think that's really accurate. Okay. So what do you know? Just a liberal? No, I'm probably an authoritarian, growth-oriented follower of Lee Kuan Yew and, to a lesser extent, Deng Xiaoping. Benevolent authoritarianism. Okay, I got it. It's helpful contact. All right, Tracy, you. So Joe mentioned that you are a longtime journalist, a veteran journalist, and I think you started your career in 1989 covering the fall of the Soviet Union.

6:28And as I mentioned in the intro, a lot of people are kind of reaching for that analogy in describing this moment in Europe. Do you think that holds? Are we seeing a shift on that kind of scale? Well, I guess Naya Ferguson's piece, We Are All Soviets Now, was the one that got people thinking in these terms. And then, you know, yes, I was in Eastern Europe in 89. And that was a very classic empire, Soviet empire, and a very classic uprising against it. Demonstrations, unions, protests, and eventually a complete collapse of legitimacy. This American empire is definitely more subtle and been around twice as long.

7:10Did you say more subtle? More subtle. Yeah. Keep going. A hidden empire. In fact, I think there's a book with that name. 80 years rather than 40. It's been a lot longer. It didn't end immediately with the fall of the Iron Curtain. And I think it's been in all our heads as Europeans for a long time. I come from my father was an Atlanticist. I was an Atlanticist. I saw the United States as being an extension of Europe, a place where Europe had gone to seek new adventures and new continents and new industries. And that dream is utterly gone. Hmm. Because you still, you know, you have the world economic forums of the world.

7:51Does anyone believe it anymore? I mean, I guess the polls. If you're talking to Christine Lagarde or something like that, right? The polls still seem to believe it for a while. Oh, the polls. And, you know, and some English. But, you know, I think for me the two key incidents, not the abuse of Zelensky in the Oval Office, But the abuse of Denmark, a loyal, small but loyal American ally. A country that actually is arguably very much in alignment on immigration policies. Well, if you're going to talk about civilizational suicide, I don't exactly know how you fit Denmark into that, where the Social Democrats have actually stolen the entire agenda of the right wing in Denmark.

8:35And as a result, there is really not much of a right wing resurgence anymore in Denmark. So Denmark totally shows the way for a lot of social democratic parties in Europe. So there was that. And then there was the abuse of Radek Sikorsky, one of the prime Atlanticists in Poland, calling Elon Musk with an assist from Marco Rubio, telling him to be quiet, little man. Now, that might just seem petty on my behalf to focus on that. But you're talking about somebody who was absolutely in the American camp. And so if they're abusing somebody like Radha Sikorsky, they clearly don't care at all about the Western alliance.

9:11And you're actually leaving the U.S. now, right? Why? Have you been here? Yeah, to some extent I've been gone since the end of 2016. We came back for family reasons and now we're going for good selling the apartment. How come? I mean, I was 100 % in US assets pretty much in January, both in terms of stocks, real estate and everything. And now it's pretty much the stocks are 100 % China and Southeast Asia. Wow. And the real estate, we just got a nice, lovely little house in the Buddha Hills. So you're diversifying in your portfolio and in real life? I guess the diversified portfolio would be something like, I don't know, US 15%, China 50%, rest of the world 35%, something like that.

10:06So I'm obviously not doing that because I think the adjustment is going to be an opportunity for people to make money. So I guess it's going to end up more or less where electricity production divides up in the world. I come from an emerging markets reporting background too, where you couldn't really believe any of the statistics. You couldn't believe the GDP numbers. The only numbers you could really believe were maybe output in tradable sectors, electricity output, that kind of thing. And so that tends to be how I've looked at the markets now. So you're going to be living full time. The Buddha Hills looks very, very nice, part of Budapest.

10:42Who should I believe about Orban? Should I believe Tucker, that he's a great defender of civilization? Or should I believe the liberals, that he's completely corrupt and not a friend at all? I mean, something in between. I knew Orban a bit early on, back in 89, when I was with the FT for, whatever, four years in Budapest. And he was always the most talented of his generation as a politician. You know, clearly knew how to play the game and clearly knows how to play the game now of having channels open to China, Russia and the United States and playing a small country's hand really rather well. There's a giant PYD factory in Hungary.

11:24There's a giant CATL factory in Hungary. If it actually comes down to it, I think most of Hungary's economic interests are actually China aligned. So I think that's where they'll end up forced. But there's no harm in maintaining channels with the other powers. Just going back to the intro, we were talking about whether or not, let's call them the global elite, are feeling anxious at the moment. I think it's fair to say you probably move in some of those circles, ultra wealthy. What are people saying right now? Like, what's the mood music that you're hearing? Well, are we going to talk about anti-Semitism or not?

12:00Definitely. Okay. It's free space. So when globalists get the blame for what was actually at that time, I think only a 5 % or 7 % correction when Trump blamed globalists, I think it's a foretaste of what will happen if there is a significant repricing of assets in America. The globalists, quote unquote globalists, or is it like four brackets? I forget what the code is. Yeah, the three parentheses. So the Cosmopolitan's, the internationals, the quote-unquote European Wall Street Journal, anything that seems international, anybody who's ever been to Davos, or maybe just the Swiss Alps full stop, is going to come under suspicion.

12:45And they are going to be, their life is going to be uncomfortable in the States. I think it's going to be uncomfortable. They're going to be attacked from the left for being capitalist. And they'll be attacked from the right for being unpatriotic. and I think people are going to find, as they did during the looting phase of the 2020 protests, that there is no real sympathy for the Soho loft dealer in an environment like this. When people are actually asking, so where did all the money go? Where did all the money of the last 25 years, you know, during this period of American exceptionalism when America was really the only place to put your money if you wanted to invest your time or your money in the future?

13:25So where did it all go? What was left at the end of it? Where's the high-speed rail network? You know, where are the new companies? And I think those questions are going to be very hard for people to answer. These are the thoughts that I have, like, late at night scrolling at my phone. And then I wake up and I'm like, oh, I, like, make my kids breakfast and I go to work and it's fine and it's fun. I love coming in here. And then, like, 10 o 'clock at night, this is, like, where my mind drifts to. So, like, I was hoping, you know, I need someone to say that. Have you spent much time just playing around with AI?

13:56Yeah, of course. He spends so much time playing around with AI. So much office time. What were you going to say? Well, under normal circumstances, I'd say this transition would take a good long time. Historically, it takes decades, not years. But since January 20th, and I don't mean the Trump inauguration, and I don't mean the Roman salute by Elon Musk, but I mean the deep sea drop. Since January 20th, I think it's actually clear that AI is universal. It's going to be everywhere, in every country, on every chip. And one of the first things that people are going to do with it is they're going to ask how to make money.

14:36And then they will ask more sophisticated questions and have more sophisticated methods of working out how to make money. You're doing something with this, right? Like you have a new venture where you're using AI to trade or to research for trades. Yeah, I just started, I started actually doing simple analyses of the electric car market, projecting forward BYD and Tesla sales into 2030, just to see where it would end up and, you know, to look at the, you know, who is in the lead at every single level of the value chain. And then, you know, when you've got an army of researchers at your beck and call, and you know how to manage them well enough, you can get pretty robust answers pretty quickly.

15:14You know, answers that then lead you to make trades that maybe you wouldn't have had the confidence to make otherwise. And I think I'm not the only one. So I think it's recursive. So we all know that we're all working more and more like this. And as we recognize this in other people, so the feedback loops accelerate. And so system changes that might've taken decades get compressed into months or years. That's my theory. I'm actually not still totally convinced. You know, I use AI, but Tracy was kidding. I mean, I do, and I've used like deep research and many of them, I still think it's just a tremendous amount of garbage.

15:52And I don't say this, but I also want to, it's funny when you are answering, when you're talking about AI, I could only imagine if Chad Chupiti had come out in like 2013, what you would have devised to torment Gawker writers about making them compete with AI and very, you know, because all media orgs have this like anxiety about well this is actually pretty good at writing stuff and then the journalist like you would have loved you would have loved torturing your writers in some way by making them compete actually prefers to torture the ais to compete with each other but you would have they you would have gotten a kick out of it i feel like and they would have really hated you for it okay i think that some kinds of journalists i wouldn't say you're absolutely run-of-the-mill journalists but some kinds of journalists are extremely well equipped i don't think they recognize the talents they have and their ability to ask good questions or to play games with somebody else who actually has information that you want to get out of them that their skill in playing that game is actually is a very is very powerful right now that they could be traders if they wanted to be especially you no especially not me i don't have to go

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18:15To learn more, visit easycater.com slash podcast. You're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic options plays on the side. The point is, you're engaged with your investments, and Public gets that. That's why they built an investing platform for those who take it seriously. On Public, you can put together a multi-asset portfolio for the long haul. Stocks, bonds, options, crypto, it's all there. Plus an industry-leading 3.8 % APY high-yield cash account. Switch to the platform built for those who take investing seriously.

18:56Go to public.com and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com. Paid for by public investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S.-listed registered securities, options and bonds, and a self-directed account are offered by Public Investing, Inc., member FINRA and SIPC. Crypto trading provided by Backed Crypto Solutions, LLC. Complete disclosures available at public.com slash disclosure. What's been your best trade so far this year? Yeah, good question. Let's talk trading. I guess BYD and Xiaomi. And that was based on your AI research?

19:30Yeah. Look, I've been into electric cars for a while. I'm a gadget head. I look at things from a consumer standpoint, not a producer standpoint. That's always what we sought to do with Gizmodo and Kotaku and Jalopnik and the other consumer technology properties that we had. And you look at these cars side by side, especially when you're talking about the SU7, not a BYD car, a Xiaomi car. BYD was a battery factory, a battery company, and Xiaomi, a phone company, and they both come into the car sector. Xiaomi's very first car out the gate is really quite exceptional with a very nice design, totally automated, or as automated manufacturing process as you're likely to get.

20:09And anybody who's had their hands on it, including the CEO of Ford, does not want to let it go. It is clearly either half the price for the same quality or twice the quality for the same price, but we're not talking about 20 % Japanese advantages as they had in the 80s. But we're talking about 50 % to 100 % advantages in many areas. And the lead of Chinese manufacturers is extending. So that seems pretty obvious to me. Why do you think now, one of the interesting things, like I just pulled up a chart of Xiaomi, and BYD is a little similar. I wrote about it. For a long time, for like the last 10 years, Chinese stocks have kind of been dead money.

20:48So even though like the rise of Chinese manufacturing dominance has been a story that's existed for several years. I wrote about it this week in the newsletter too. It has not redounded to the benefit of Chinese shareholders. This is a phenomenon. And there's actually been this incredible amount of, you know, they talk about like overcapacity and I don't really like that term, but you know, things that have not benefited shareholders. Do you think something's changing on that front such that the lead that these companies have now developed will be monetized in a real way? There are signs that China is opening up its capital markets.

21:23Small signs to begin with, but you've got mainland funds investing in Hong Kong stocks. You've got the anointing of various Chinese companies by Xi Jinping at the meeting that they had whenever it was three weeks ago, four weeks ago. You have the, I think, recognition on social media that the strongest PR that China has, aerial nighttime videos of cyberpunk cities, which cannot be argued with, and YouTubers going for a ride in the SU-7 and being blown away by the acceleration. I actually don't think it's a total accident that there's black YouTubers who seem to find it easiest to embrace the quality of Chinese products.

22:04But I think you're going to have two different debates. You're going to have the Tesla narrative, which seems to be almost exclusively political at this point. There's very little product content in the pitch at all. In fact, the only photographs you see of Tesla products usually involve them being in flames. And I'm talking about Elon Musk's own account. And meanwhile, the CEO of Xiaomi is posting up product porn all around the clock. And just in terms of a product battle, in terms of features and in terms of marketing, in terms of price point, the Chinese have won. It's as simple as that. And if you don't recognize that, well, you're just not paying attention.

22:45How do you actually go about valuing political risk or trading on political risk? Because when I think about journalists potentially trading, the competitive advantage isn't really number crunching, right? It's kind of looking into the company and feeling the vibe and figuring stuff out that no one else has seen yet. It's a multidimensional approach. So I assume that the earnings forecasts are priced into the stock already. So there's no point reanalyzing that. You might as well just take that as a given. The question is, what do you see that other people do not? And journalists tend to have an idea of the momentum of a story.

23:25So for instance, right now, I would say, speaking as a journalist and editor, that the fall of Elon Musk is the greatest business story of my entire life. Absolutely worth getting out of retirement for. Because here you have somebody who was a real life Iron Man, You know, absolutely genuinely has three world beating major achievements under his belt. I don't care whether other people helped him do it, but he made it happen more than anybody else in the Western world. But the problem is there's only one of him and he's up against a lot of Chinese competitors in cars, in robotics, in batteries, in mobile phones, in a whole bunch of different fields.

24:04And I think he's going to lose. We should sit on this for a second or we should stay with this for a second, because I think there are a lot of people kind of like the people who have called for, let's see Trump wriggle out of this one again, like who've convinced themselves that actually this could never happen, that Trump will always wriggle out, that Elon Musk will always wriggle out, that he's always able at the last second to find something because of his cult of personality or genuine managerial skills or the genuine managerial skills of the people at right below his level. You say the story now is that this is the fall.

24:39I mean, I think this is the fall. I think he may have a couple more tricks up his sleeve. But if you think about the gap between the Tesla fundamental value now as an electric car company that is X growth, just think about that. Like think how much their valuation depended on extrapolations of growth and the interruption of that growth and what that means to any net present value calculation. The international markets are plainly being torched by Elon Musk himself with all of the PR and propaganda that he puts out that might shore up the MAGA base. But every single thing that he does, every single pitch in front of the White House is turning off both natural Tesla buyers in the big blue cities and also the international market.

25:24He's managing to alienate everyone. Everybody except for the MAGA base. you know so you're gonna who probably don't buy that many evs anyway well apparently they are buying some so it's not entirely it's not entirely a fiction but every single one that they buy further cements this image as the maga mobile that's right and kills the international story an international story which is in any case in trouble and because tesla you know in china doesn't have very exciting cars compared with the ones that it's that its competitors come out with So I don't think the international market is going to work, which means that it's pretty much all down to robots.

26:02And he's pretty much put all his chips on the Optimus, which seems incredibly dangerous to me. And the mark of somebody who's really desperate and putting it all behind a very, very risky race in which he is starting from behind. How did you get so into cars out of curiosity? How did I get into cars? Isn't that just something that just is? You were born with an interest in cars. Like the Cybertruck. I mean, I was very disappointed when I saw the metal panel. I thought somehow, I guess I didn't research enough, I thought it looked like it had been forged somehow. Like a single, yeah. And then to see, so I think the most damaging thing for Tesla, the most damaging video for Tesla, apart from the I Love Speed video, but the most damaging video for Tesla is actually seeing the metal panels come off because the glue isn't, they didn't use the right glue.