RWH062: Bubble Warning w/ Jim Grant

31:49Deremon my book by David Emanuel Derman's book, I think was published in 2003 or 2004, My Life is a Quad. Anyway, at one point, Emanuel harks back to the long-term capital management affair in 1997, I think. 98, 1997. It was the now fabled, then frightening collapse of a hedge fund that was run by literally by Nobel laureates. So in his memoir, Emmanuel Durson said that he was on a call with other Goldman Sachs people talking with the principals after the blow occurred. And he said he was startled and deeply impressed by the depth of sophistication on the part of these so-called failed, well, failed, but of the authors, the long-term capital manager.

32:55And they knew much more and asked much better questions about valuation and the composition of the assets and the hedge technique than did the Goldman Sachs traders who were trying to value this stuff. And Emmanuel takes away from this that sheer metal power, sheer metal acuity is not invariably the road directions you have. It's not necessarily the equipment that gets you where you want to go. I don't think he used the word humbling, but it gave him pause for thought. A lot of times, I think a lot of times on Wall Street, that simple common sense, I don't get it. Tell me again. So you're telling me that you put all these self-investment grade mortgage tranches together, slap them together, and if one's at the 40, 40th percent of the staff have been transmodified into triple a securities is that where i'm set it to you again this time more slowly you've written a lot about artificial intelligence in grants and um obviously this is one of the things that's been driving the euphoria in the market.

34:22And you've talked about the insatiable enthusiasm for anything related to AI. And I was looking at one of the daily newsletters that you sent out from grants the other day. Almost daily grants. Almost daily grants. And it was talking about how Amazon, Microsoft Alphabet, Google, Meta, Oracle, and CoreWeave will splash out$382 billion in capital expenditures this year by Citigroup's count, up more than 50 % from 2024 and triple that scene in 2023. And you said that the Magnificent Seven now accounts for 31 % of the S &P 500's total capital spending, up from 19 % at the end of 2019. And you point out that there are these firms like OpenAI and Anthropic that have raised billions of dollars every few months and are now valued at hundreds of billions.

35:08And so you wrote this piece in July about the check writing contest within the world of AI, where everyone is basically racing to invest as much as quickly as possible. And I just was wondering, as a battle-hardened investor, an observer of craziness as you are, when you look at this excitement, how reminiscent is it of previous booms, whether it's the railroad bubble that ended in disaster in 1873, or the dot-com bubble that ended in disaster in 2001? Or is this really different this time? Can you put in some context what we're seeing here? I think what we are seeing is the promise of a marvelous technology with human characteristics.

35:59And those human characteristics have to do with falling online and doing what others do. and if possible, doing more of it, higher, faster, and louder. And this reminds me a lot of the fiber optics tech writing contest of the late 1990s. How much of the stuff you put in the ground is in demand for? Well, there will be. Just go, there will be. Or the, as you say, late 1800s, the railroad building contests, as it were, and the check writing contest of the Jaguar track, parallel track to your competitor, but still, the contest is worth it. We'll beat that. So there's a lot of redundant capital investment then.

36:42And these things end invariably with a panic and a crash. I think that's the model for now. One of the other points that David Rosenthal made was, problem with the capital investment may not be so much in its size, but rather in the demonstrated fact so far that people are not willing to pay for the product of that investment. So the extraordinary sums being laid out for data centers and these buildings that in the case of I think men just keep building something the size of Manhattan Island. Well and good, except are you going to get paid for it? Well, people, you know, college students go away in the late spring, and they'll come back into a fall, and when they go away, the demand for AI goes way down, because who else has such a deeply, deep and persistent need for plagiarism?

37:46You know, they have to plagiarize papers to get through the year. So the demand for AI falls off markedly and measurably come the springtime. So I hear myself saying, I'm saying, I get a horse in 1903, it's cars, they stink, look at the tires that blow up all the time, where steamboats explode and kill hundreds every fiscal quarter in 1840s. But I'm not even talking so much about the technology as the very human response to great technologies and the promise thereof. And don't forget, there's still a promise. And I think the question, what comes next? Is it the realization of the promise with the payday, or is it the crash that precedes the realization and the payday?

38:43I perfectly love to conceive this stuff as going to do wonders for somebody, but for the time being, people seem not to be willing to pay for what the producers of these large-language marvels are laying out to achieve them and just completely others achieving them. So I'm all in on the comparisons to the busts of yesteryear. I think that's the model for now. Let's take a quick break and hear from today's sponsors. Curious about online trading, but haven't taken the first step yet? You're not alone. And Plus 500 Futures is a great place to start. The futures markets are moving fast. And with Plus 500, you can explore popular assets like oil, gold, S &P 500, Bitcoin, and more.

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42:10Start your free trial at shopify.com slash tip. Start your free trial at shopify.com slash tip. All right, back to the show. There was a lovely quote that I don't know if I had heard before that your friend Pierre Lassonde, who's a very successful gold bug, quoted from Voltaire, where he said, history never repeats itself, man always does. And I I thought that was quite revealing about what happens with these deals, right? Like the tendency at certain times in cycles for people to get carried away. And you had someone, I think, at your other conference, the credit conference earlier in the year, who was saying exactly the same sort of thing, that basically, at times like this, there's just this sort of fear of missing out.

43:01I think it was Michael Gatto, who's head of direct lending at Silverpoint Capital. He said, When there's a lot of capital and the emotion is greed and there's fear of missing out, bad deals get done. And similarly, when there is a lack of capital and the emotion is fear, great deals get done. And so I think this is one of those areas where it's not like we can say what's going to happen with AI and all of this spending, but there's a sort of familiarity to the pattern of human behavior here. Is that fair to say? I think, yes, I think it is. When Pierre said, history doesn't repeat, I said, he's not going to say, but it rhymes.

43:41Don't say that. Not again. So Pierre had Voltaire's twist on this. I guess maybe Mark Twain had the twist on it. Maybe Mark Twain never said it. I don't know. I suspect Voltaire didn't say it either. Whenever you are writing a book, you look back and you check the origin of these quotes and you discover very inconveniently that nobody said what we claim they said. He should have said it, yes. If Voltaire had been smarter, this is what he would have said. And more cynical. Exactly. Impossible. Exactly. So assuming that AI has been driving a lot of the euphoria in the current US stock market, there is ample reason to be a little wary of what we're seeing in the US market.

44:26And you've reported recently in your newsletter that the S &P 500 is priced at more than 40 times its cyclically adjusted price to earnings ratio. And that back in the fall of 2021, it was at 38.6 times. And you said that that means it's the richest reading in history after the dot-com bubble when it was 44.2 back in 1999. Can you put it in context when you look at the market at the moment when you look at US stocks? This isn't a prediction of what we think is going to happen, but can you give us a sense of why it's wiser to proceed with caution than with our foot as heavily on the gas pedal as possible?

45:14Yeah, well, everyone has to be in, and evaluations show that. But apropos, there are many ways to make money we heard from John Humes, who is a renowned compounder of capital. He's a very concentrated portfolio and companies that embody the virtues he thinks are that dispositively define a great investment with barriers to entry and with capital. allocation and with management quality and the like. And he holds it through thick and thin, and he's done marvelously through all manner of thins, right? And that's about a broad Buffett's counselors too. But with respect to people who are listening, perhaps a lot of this has to do with their age and with their risk tolerance.

46:07And there are few who are starting happen you have a reasonably diversified portfolio and um near your 20s and well i think it's it's it's entirely prude not to pay attention to what i am now saying or to talk about you and these macro things come and go if the long-term america's gray is going to be great that i am this but say you hypothetically you're a gentleman of a certain age and you own a lot of stocks and uh and you might want to pay a little more attention to the signs of excessive, and they are at every hand, every hand. Valuation, sentiment, the incidence of unmistakable corrupt promotion, the swaggering of newly empowered through wealth people who know only one thing, which is that markets only go up.

47:06And it's all here, the whole theater of the National, Major for National Markets, top is on the stage. The theater is opened and the pageant of top making scenery and actors and script, all that is in play. Now, the question of timing, does it have to end now? No. Does it have to end in two years? No, it does not. But the end it will. There are a lot of legends of people who got out in timing. 1929, I've read a book about one of them, Bernard M. DeLuke, who's a great specter. I think he's a subject of my first book way back when, like 40, 40 more years ago. And the legend has come down through the years that Bernard M.

48:01DeLuke sold Ali E. of the crash in 1925. Nope, he did not. I had the stock market, I had his records to prove it. But what he did do was take the measure of things in 1930 and get out salvaging. Like, I forgot now, like 60 % or 70 % of his capital in a cycle that would denude the buy and hold investor by up to 95 % or so of his capital. And that took 20 years to wear off that cycles. Dow made a tie in 1929. It made its... Oh, we captured its high in 1954. To put that in context, that was the year the giants were in the World Series. It was a most extraordinary. Now, it was dividends are counted that market came back before then.

48:55If you just look at the Dow, it was 20, I guess that's 25 years, right? 1929, 1954. And my mentor and boss of Barron's, Robert M. Blyberg, was a kid, he was a depression child. And I had quite vivid memories of the crash and this aftermath, and was very, very cautious in 1954. What he did not say in 1954 was, oh, there was a great markets man, very great instincts. I went back and read his stuff in 1954. What he did not say was, we are on the eve of one of the greatest errands of American prosperity and investment success that you won't be able to and it's all in front of us. There will be bumps in the road, but consider that, put away those memories of the bad old days.

49:50They are not humane. But yes, I think that this is a major topic in formation. I'm with Nate Kappacar, and I've dealt with others, I'm with myself. I don't need anybody else to help me along with this, but Nate did such a good job in exposing the underside of things, the point you have credit in private markets. So it will come unstuck. And you'll have me on the show, William. And I am not going to gloat at all. You know why? Because I have been around the block. And the important thing is to recall at moments like those who were able to expect themselves us is that just recall how full of beans you were, and they've run up to the moment of crowning success.

50:43Just remember that. It's a very difficult game, right? I was listening to an interview that David Tepper, who I've never interviewed before, but he's obviously a very smart, very successful guy he had done on CNBC when he said, we're having a really good year, and I'm so miserable because I still own the market and i can't stand that i own the market but he said he said i'm not i'm not ever fighting this fed with all these expectations of interest rate cuts coming before the end of the year and he said you've got to stay for some of the party because the punch bowl is still there they haven't taken it away yet so how how do you it's an approach of he he is he is a consummate constantly successful speculator i remember watching him on cnbc in 2010 i wouldn't um Bernard, Ben S.

51:30Bernard, PhD, wrote a piece in the Washington Post saying, we are going to institute QE, and this will infuse the net worths of the people who have equities, and America will be growing again because the stock market will be rising again. That was essentially the argument. I remember David Tempere, I remember he was sitting on the set in the CBC, and it was a chair, he was going like this, and nervous about it back and forth like He was exactly explaining how this was going to happen. And it happened exactly as he said it would. And so, you know, he's someone to pay attention to. I think if he were listening to it, he'd probably say, I'm miserable because I know full well all the odds are against much more of this, except he's also in the business of not getting off the train prematurely.

52:22He bets FOMO because he's rather too sophisticated for that. Although I dare say, as a human being, he's not immune entirely from it. But he knows also that things go on so much longer than you would think they would, or if you're a moralist, should. Yeah. You happen to be a moralist. Should. So he is getting on the shed, as I said. I often bet against the fact, I can't stand this. at it. I said, don't fight the Fed. I've made my life throwing left hard jabs and left hooks to the Fed and occasional overhang right at the Fed. And they never hit back except sometimes I feel the blow. Yeah. People will be shocked if I don't ask you very briefly about the Fed.

53:13We talked at great length about it last time on the podcast and your lack of tremendous enthusiasm for the way the Fed is run. If you could just give us a sense of how you expect the Fed to handle what's really a very challenging economic situation at a really important juncture with, I think Chairman Jay Powell's term expires in May 2026. You interviewed Kevin Warsh yesterday, who served on the board of governors of the Fed until 2011, and who a lot of people are saying could be Jay Powell's replacement. Obviously, there are a lot of demands for the Fed to lower interest rates and the like. And when you look at this institution and its position at this very interesting juncture, what do you see?

54:04What should we be thinking about? I think we'll be looking at administration's attempt to convert to subjugate it and to institute its own regime of ultra-low interest rates at the Fed having conquered it, I think. Stephen I. Moran, this is the advanced, the Praetorian Guard of MAGA of the Fed. He came under a question by Elizabeth Warren on the Senate Banking Committee, he was bulging his fitness for a unique position of chairman of the council of economic providers and governor of the Senate. And she said to him, tell me, Mr. Bush, did Donald Trump lose the 2020 election? He answered. The Senate confirmed Joe Biden as the winner of the election.

55:12We know that, Mr. President. Did Donald Trump lose the election? The Senate confirmed the NISA. So it's the robotic response to me is a little bit concerning. The people around Trump are saying, Mr. President, you had your golf cart sized bottom kicked in 2020. May we please move on? I dare say no one at all is saying that to him now. But they also say, Mr. Morantone, the Bureau of Labor Statistics, did they fake these numbers to make the president look at it? The quality of the federal economic data has been declining for some... Yes, yes, yes. Did they intentionally the quality of it like that?

56:05So it would not be a shock to me that the president's views on interest rates, which everyone knows what were the better. And in 2000, whatever it was, 2018, this line was, well, the Swifts have negative, and the Japanese have negative. Why can't we have negative? Why are we paying? What's wrong with less than zero? He still thinks that. And so if he does subjugate the Fed, if he manages to bring his own people in for May, I think we could look for much lower money market interest rates, and a much weaker dollar, and a much steeper yield curve, meaning that longer-dated interest rates, longer-term yields, bonds, mortgages will be higher, much higher than short-dated money market instruments like T-bills.

57:00So I think that what MAGA believes, well, you might be right. I gave up certitude a long time though, but as though it may not sound like that something. But there is great hope for AI, great hope for transformation of American productivity. Not after the crash that has typically occurred with excess exuberance and investment, but before. So next year, year after, you're in a revolution. No, there's going to be a crash first, and you'll be sorry you ever heard the phrase AI. That's how sorry it is because I'm asking you to be. Yeah, that's fine. But there's hopes for a productivity revolution such that this country should handle much lower interest rates, a much more dynamic, as they use the word, credit market where people can access the credit market and find affordable mortgages.

57:55The housing market's going to take up after this long, and some people can't afford to move. That'll change. They paint a wonderful picture of what life might be like after the president finds his people and plants them at the Fed. And as Donald Trump himself often says, we'll see, or we'll know more in four years. So while we're busy worrying everyone that we haven't already alienated, let's talk about government debt, which also was a major recurring theme at the conference yesterday. Pierre Lassonde, the gold investor we mentioned before, pointed out that the world is drowning in debt, as he put it.

58:35He talked about the fact that there's this overstretched fiscal situation, not only in the US, but China, the UK, France, and elsewhere. He had some amazing statistics. He said that the total global debt has risen from$16 trillion in 1980 to$314 trillion in 2024. And likewise, he said that US federal debt has risen from$1 trillion in 1980 to$37 trillion in 2024. You've also pointed out in grants, you said that nothing puts the fiat money era in stark relief than the fact that it took the US 222 years to borrow what the efforts of President Biden and Trump achieved in not quite eight years. So we're not, I mean, we can be equal opportunity in blaming different parties for the history of recklessness here.

59:29But can you talk about, you know, give us a very practical economics lesson for people like me who don't understand this stuff. Like you've argued for a while that the fiscal deficit's unsustainable. Can you give us a sense of what's causing the problem, what's likely to happen, and most important perhaps what the implications are for long-term investors like our listeners and viewers here. Let's take the contrary argument first, which I have to deal with. Very few people think about it, there was a time when the contrary argument was upper in the minds, uppermost minds, and that argument held basically that, yes, debt is a thing, but so is the income that the debt produces.

1:00:15And for every debtor who may be worried about overindulgence, there is a creditor who is more than happy to buy those ions. And in the case of a country such as the United States whose currency is sought after and accepted worldwide, there's no limit to what you can borrow. And that particular line of reasonings has held up until this function left in this very moment. I mean, so recently speaking, the government, I guess, is still shut down, was supposed to be shut down. But, you know, the world still seems kind of cocaine with our shenanigans and our debt, and that's because they like the dollar established the world's reserve currency, meaning the currency that enjoys the Coca-Cola quality brand name, and people accept it as good money, even though they're not sure what was behind it.

1:01:15No, is it just the promise of government or is it something? Okay. So that's the argument against concern, against anxiety in the world, right? So the argument for concern is that the burden of interest, and the weight of issuance will exhaust even the friends of this country, and the friends of its dollar, and those are friends of both domestic and foreign. And you have seen signs of this already. You've seen in 2019 and 2020, saw a little bubbly anti-bubble eruptions concerning the market's willingness to accept bonds. What you saw in 2019 and 20 was discontinuity in the supposed deepest of all world security markets.

1:02:082019, it's concerned the money market, short-ended money market, short-ended interest rates because suddenly there was a crisis about in the funding market for our debt, meaning access to short-dated loans with which to buy bonds. That was in the fall of 2019. And in 2020, there was a fright scare in around March and April concerning the world's tolerance for buying more of our longer-dated securities, like the 10-year and 20 - and the 30-year bond. And that happened due to the pandemic and with the Treasury's evident plans to borrow a lot of money. And the Fed's expressed intention to buy a lot of bonds with money that didn't exist until it was ready to print it.

1:03:09So those were kind of amber lights. So the question really is, what is the ultimate demand for U.S. securities at these rates of interest? You know, so another question, are they marketable at any rate? So if the United States was going to sell treasuries 10-year note, not at 4 something, not at 418, 4.18%, but rather at 10%, wow. That would be a little bit of all, right? Right? Or 12%. But consider the also, this is not isolated to the sovereign debt, consider also the private debts that have been accumulated. And to be sure, private bonds receive the interest on those debts, right? So it's a two-sided argument, pro and con.

1:04:02But the U.S. economy, as resilient as it famously is, has been rendered much less so, rather vulnerable, by the years of near zero percent interest rates that precipitated and encouraged the deal-making in private equity and elsewhere. These aforementioned 20-odd thousand, more than 20 ,000 companies that are now trying to find their footing at a time of interest rates they can't quite handle. So what happens if the world loses its taste for American securities owing to the shambolic nature of the administration and how they so characterize it. And if it's fresh and, for example, comes back at unscripted fellowship and the Fed can't lower rates in good faith, but rather must consider raising them, how would higher interest rates play in this world of financial fragility?

1:05:00At least some of us see it. So that's a kind of an attempt at an overview of what's wrong with too much debt. Part of it is the American brand in dollars and debt being corroded and debased by overdoing it, by overissuance. And then there's the question of whether in the event of, say, are unexpected in inflation, whether the private sector is going to be badly damaged by the need of the field to post higher interest rates. So the reason that people like clean balance sheets is it affords the borrower, the would-be borrower, the future borrower with flexibility. I mean, that's why companies with clean balance sheets get the imprimatur of AAA or AA, But that's good.

1:05:56That's good. And because that company can opportunistically invest when the times are difficult. But when the times are difficult in this country, the government famously, because of its construct of the welfare state, must borrow much, much more. We are borrowing heavily in a time of a 4 % plus rate of unemployment, long thought to be full employment. that we were borrowing at a time of lowering markets. And if the GDP is rising, according to the Atlanta Fed, a rate close to 4 % annualized, wow, we need a 6 % or 7 % deficit to make things work? That doesn't sound like a well-managed public financial operation, public finance operation.

1:06:42So these are latent problems now, as I say. I say, just look at the screen. you know, the bond market is kind of okay. Credit spreads meaning the premium of private borrowing costs over public ones is near an all-time modern, all-time low, meaning no anxiety about private debts. So the arguments against heavy borrowing must be made rather defensively with time being. But I have no... This thing I'm pretty confident, I think, that the too much debt argument will prevail. We will rule much of our mismanagement of the public credit and of so much private credit. I wanted to talk a bit more about inflation.

1:07:25I was reading a back issue of grants from earlier in 2024, where you connected inflation, basically the flaws in human nature, and use this as an argument for why we can expect a future of more inflation in what you've described as inflation nation, America, that is. And you quoted a German economist called Wilhelm Röpke, if I'm pronouncing it right. And I wanted to read a little bit of what he wrote in the 1950s, because you've said, you wrote, has anyone said it better? And so I'm going to read a few sentences to him that maybe you've got to unpack. So he wrote this in the 50s about inflation as the way a national economy reacts to, quote, a tendency towards excess in every sphere and all circles, to a presumptuous overconfidence in oneself, to a frivolous attempt always to draw bigger checks on the national economy than it can honor.

1:08:25And then he said, people want to invest more than savings permit. They demand wages higher than the growth of productivity justifies. They want more imports than exports can earn. And above all, the government, which should know better raises its claims on this overstretched economy higher and higher. Thus, there is a riot of claims and an insufficiency of goods produced to meet them. And then he talks about the impact that this tendency in human nature has on money. And he writes this very elegantly. He says, just as there are organs in the human body in which if consistently abused, ailments slowly but surely accumulate, eventually taking their revenge.

1:09:05So the national economy has its own equally sensitive organ. That organ is money. It becomes feeble and ceases to resist. And it is this enfeeblement, which we call inflation, a dilation of money, so to speak, a managerial disease of the national economy. Can you unpack that a little bit? No, I cannot unpack it because it's like, can you unpack the Declaration of Independence? or Lincoln's second inaugural address. You know, it's a... All I can say is, ah, man, I mean, it's just... I think the way Rekka Pappert puts us elsewhere is it's an overstraining of things, you know, it's an overstraining.

1:09:48And I think what you can read, you can impute in his writing is that some of what he was saying is the way things worked under the gold standard. When there was a sort of sharing, money would leave the country, gold being money would leave the country. And because paper money was unacceptable in the world, but acceptable within the boundaries of a nation that could print it, the departure of gold was a deflating force. You were losing the monetary things, you were losing the capacity to issue credit, debt, loans, credit, debt, and that was how the body politic began to protest. Now, in this age, you have a reserve currency country, America, meaning it's the kingpin, monetary kingpin, and there is, to date, no real hard limit on how much it can do.

1:10:53There are some softer limits than the ones to which Ripker, I think, was referring. One is the domestic protests against too high rate of inflation. But, you know, the Fed is capable of defining that away. It's just got this press to digitation, this magician stuff. So now they are saying that 2.8 % is going to get a little bit of all the way. It's fine. We're going to be vigilant. We're going to get a voice on this. So you watch, 3 % is going to be a little bit less fine, but we've got this. And certainly, Donald Trump is going to say, I'm not sure he's going to use the word transient, but I think he might say it's going to be the way.

1:11:40AI will wipe it from the slate. But what a beautiful succession of sentences you wrote, describing what I think is exactly the, almost exactly, this dynamics of inflation. And notice as well that inflation under a paper money system, that the dollar never regains the purchasing power it loses to inflation. Now, we had met Chesney Martin, the longest serving head chairman said that in 1957, the dollar never regains the person who loses to inflation. In times past, they were being present to go up, then go down, business cycle, not the war. So one of the things that I think helped Donald Trump get elected in 2024 was that people saw inflation even when the rate of inflation declined.

1:12:32Well, they should because the prices they saw, not the prices they knew in 2019 and 2020. So the economy was saying, confusingly, the rate of inflation was what people saw to their very eyes in the supermarket. I don't care what they're saying. Look at this. Look at the price of what was the eggs that was the same for a time. What are the interesting features about the present day in the shed's concern or lack thereof is the price of gold, which is kind of knocking on the door of $4 ,000 an ounce. And so it was$35 until 19... it was$20.67 from basically Alexander Hamilton, and there's some ups and downs until 1933.

1:13:28And there was$35 a newt. We could get with some wiggles until 1971. There was some cut loose, being cut off the gold standard, what remained of the gold standard. And it was free to flow, we didn't take a float. But now it's just kind of gone bonkers. And people who are just as worried as our friend David invited stocks, you know, why? What's driving it? And is it priced as it is, only to disappoint its many somewhat bruised and calloused followers by collapsing as it did in 2011. 2011, the price got to$1 ,900 and something dollars an ounce. And what followed the next three or four or five years was a return to like$1 ,200 an ounce.

1:14:27And the collapse in gold mining shares, upwards of 90 % in some of them, 95%. So everything's kind of out of whack, right? The credit spreads are out of whack. Gold seems, even for the gold, people who love it, seems that, and love it is unfortunately the word for many of us. It's a seductive asset. It's not just any old asset. You know, it's not broom handles. So you fall in love with it or not. Maybe it's like Bitcoin or something. Fall in love with it or not. And you've had a long love affair with this. I mean, you bought it in January 1980, I think, your first true grand for what,$850? I don't mean to brag, but I happen to have invented it.

1:15:14Nice job. So you're a few thousand years old. Good job. Well, I don't know what it looks to see if it was, I think, 2300 years old. So I wear that, shall we say, not pinpoint timed purchase as a badge of honor, or at least of constructive humiliation to... I don't need to admire myself, but others who mistakenly in their ignorance fasten the guru title on the mail of the gold press. So it's a... The early sign of the conference showed this very well, it did gold moves in cycles, and it can down it can go sideways or down for 15 years and then there is uh he puts it down to an overissuance of the public debt and the questions about the public print and then it just takes off like like a stuck pig and you know it startles everyone as it is too much now i think he makes fans It's a curious kind of bull market, because public participation is still rather muted.

1:16:30There are signs of it growing, but there isn't the frenzy we saw in Bitcoin in 2020, for example, or common stocks today. But you've been pushing gold for many years, right, in this sort of very contrarian way, and now that it's hit... Pushing gold seems awfully crass. Sorry. I'm in a commission business. I said, touting, hawking, peddling. Now that it's hit 3 ,900 an ounce this week, and it's up, what, a good 40 % this year, it must be very uncomfortable for you as someone who is always a skeptic. Now you're looking at it and thinking, we have a speculative bubble in gold, or is the run-up justified given the backdrop of all kinds?

1:17:15I happen to be in the presence of one of the great speculators of our age in the springtime. And I said, this is closing in on 3 ,000. I've lost track of one. It just cleared some high hurdle. And I said, you think gold's a bubble? He said, of course it's a bubble. Is it justified by what we on Wall Street are pleased to call the fundamentals. And this is where you construct these great metal, I'm trying to say, you build this narrative for yourself about what's causing it. I remember very well in 2011, that S &P had just downgraded the treasury from AAA to AA+. And by the way, lived to rule that for the next 10 or 15 years because the authorities went after them big time for having done, I mean, to marry them.

1:18:23And the price of gold had been in the mid-1 ,500 years for a while. And I thought something, well, now the world is catching on to the joke, and the world will demand of this country a reform in the finances, which will entail some role for gold in the monetary system. And gold will find its place at a higher price. I'm not sure we actually use the phrase permanent high plateau, but that's what a gold standard is. It's literally a permanent plateau. It's a very high or low. $20.67 for 135 years is a high plateau, or it's a plateau. $35 for decades was a plateau. So that was some of the thinking among the thought leaders of the gold world.

1:19:15It turns out that there was not any such thing as a worldwide permanent condemnation of our messy fisc, nor was there any intention, the party authorities, of bringing gold back into the world of America's monetary system. America has and bred out gold from its monetary shares during 1976 under Treasury Secretary Bill Sons. Absolutely. We're going to turn our back on it. No more gold, period. And the IMF or in the Treasury, gold is a, it might as well be scrap metal that is housed under guard to be sure than Fort Knox and elsewhere. But no more gold. So that's, so you can build these air castles of narrative.

1:20:04You have to be careful. I mean, my current narrative counsel, so if I were to have the first one, we would consist of an administration that seems that Trump is unlikely will prove to be successful in taking over the central bank and opposing its interesting theories of money market interest rates on the dollar and on the world that loses the dollar. That's one plank of this cash flow. And another would be the proclivity of the Treasury to borrow much more than it takes in, and the Congress to allow that. And for the fiscal dilemma, which we talked about, but never acted upon it. So that would be enough to convince the upside and still in front of us, but mine, you can't be sure.

1:21:01And if you have too much of this stuff, you have a restless night's sleep. But you don't want to, as David said, you don't want to miss all the upside, you know? So that's what makes this line of work so interesting. There's no firm ass, there's no certitude, there can't be. And people, what they have is, you know, one thing about there are two things that I know they're not very old. I know they have not really had the invaluable educational experience of having their face ripped off during a bear market. There's two things you know about, or one of the two. Let's take a quick break and hear from today's sponsors.

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1:25:26You said basically in 2021, we entered a 40-year, well, after a 40-year bull market, we've entered a long period of bear market. I own some bonds personally, my wife and I do, because no one's getting any younger. And I dearly love coal, but you'll notice that it is deficient for one thing only. It pays no interest, which is also one of its great virtues. It's money. It's simple. It's money. in the world regards that. So, bonds. So, I own some kind of a... Not the ones you think of as... It's a fund that ingests in special situations that yield rather more than the ones that trade in public markets.

1:26:15And it's risky, but it's well-married. So that's part of our lives, this bond for the time. I intend to work my whole life. I don't have any intention of retiring, but approvals would dictate that there's some reasonably assured income outside of social security. So that's that. So that's my codicil in my anti-bond stance. I own some of them. Preston Pyshko And I saw yesterday at the conference and talked to you briefly, the great Paul Isaac, who we talked about last time you were on the podcast, who you'd invested with many years. So I'm assuming you still have some exposure to the stock market through people like Paul.

1:26:54Oh, yes, I do. I do. And he's coming into his own. All these stocks that stood still or seeped lower and lower. And of course, in the past five or 10 years, which I managed to grow, I said, it seems to be a, by way of preface, is it? It's a deep value with Nestor. They look for special situations that he feels are protected, both the downside downside. And this would have to do with the quality of the balance sheet, of the earning stream, of course, of the price that for a foreign sub-protection has been beaten down and ignored sufficiently by Wall Street, there's some sub-protection that's very obscuring.

1:27:39It's not going to be a part of the kind of portfolios that are liquidated. It will pay a price during the liquidation because it's traded somewhere. And this has to do with companies. So banks, for example, in Europe, it has to do with medical device companies in this country that are kind of on the call that have been neglected because they once failed at something. I'm not sure in special situations is a better description of some of his investing style than been valuing, but he looks for opportunities that will not necessarily be borne aloft by a great rush into Mag 7. And they have been left behind, so he just suffered by comparison with that.

1:28:29But he thinks, wow, it's starting to work. Yeah, it's brilliant, brilliant man. Unless what is happening now is every last dog is finding its adopter from the pound. It's like every pandemic dogs, even the most improbable beasts get let out of the hound. So let's hope that he's not listening to this and thinking you're describing him as a three-legged pandemic hound who's finally having his day. But I think the point is that it's not like you're going to cash and crawling up in fetal position in the corner. It's about taking intelligent risk, whether it's with golden commodities or bonds or diversifying beyond the US market and beyond them.

1:29:20So this isn't you advising everyone to panic and cash out. It's just saying be more conscious of the risks that you're mindlessly taking. or or or thought then you can take them thoughtfully even though i mean it's well and good to uh to anticipate your peace of mind come the liquidation but um you know it's like uh you know everyone's got a plan until it gets hit the tyson like tyson line they never under never underestimate how sweaty your palms are gonna be I mean, these liquidations can seem but ending. I think also, sorry to interrupt you, Jim, it's also about this, you know, I was listening to Grant's Current Yield podcast, and you were talking about how we're in the age of decadent finance.

1:30:13And so part of it is about being wary of having stuff sold to you that's kind of marginal and speculative at a time when we should be being more prudent. And there was a lovely line you said, we at Grants take a rather moralistic view sometimes, instead of credit being man's confidence in man, in this day and age of decadent finance, it now demands man's confidence in the sagacity of his lawyer. What you were saying is, you know, you can't just be trusting at a point like this where all of the most rapacious, cunning people come out to try to sell you stuff that is not necessary. And all, of course, rapaciously cunning people have done very well by their rapacity.

1:30:54and by their guile. Markets, when allowed to function properly, go down as well as PUP. And the downforce serves any number of functions, one of which is to skim the bad actors off the stage, just to flick them away. But what happens when the shed, with every good intention, I'm sure and lends its force, its arm and strength to prolonging cycles and forestalling bear markets and to pumping up the GDP so that we never have to endure this kind of experience again. So bad conduct goes uncorrected, unchastised. Mr. Marker is the best disciplinarian, never mind all these only lessons that you could read to reflect on Warren Buffett.

1:31:58He is a great coiner of phrases by Charlie Munker, but nothing succeeds like having your head handed to you. It's a learning tool. and disbarment in the case of the bar or a de-licensing in the case of financial advisors just to get some of these people out where they ought to be which is like that work for the fed i don't know whether they'd go after this get them get them out of the markets where they have lingered too long and they're going to get too many people in trouble so that's my moral with the argument let's turn to your your lovely book friends until the end which is a a double biography of these two magnificent 18th century orators, Edmund Burke and Charles James Fox.

1:32:41And it's set against the backdrop of three great events, I guess. So Britain's loss of the American colonies, the rapacious exploitation of India by the East India Company, the great dominant monopoly of its time, and also the French Revolution. And it would be great if we could chat for half an hour about the book and the lessons therein. Early in the book, at the end the preface in writing about Burke and Fox, you say, I love them for what they said and the way they said it, for what they believed and for what they did. Can you give us a sense of why you so greatly admire these two figures who were in many ways giants, but also have been widely forgotten by many people, although Burke obviously is an important figure in the world of conservatism still.

1:33:28For me, at least, a great oratory is like music. I read it as I would listen to a third moment of Brown's Third Symphony, which I happened to love. So, may I read you a little something? I would love that, yeah. This is Burke's panegyric to his friend Fox, and the preface to this is that to bring the British East India Company to heel, to curtail the most abusive practices of its agents in India, Edmund Berg and Charles Fox together drafted a bill to revise the governance of this monopoly, but I think it's the biggest company in the world, sorry. And Fox, who was the front man for this in the House of Commons of Great Britain, bore a lot of abuse because if the bill went through, rule, he would command a great deal of power in nominating functionaries to serve on the new governance commissions.

1:34:41So he had all this power awaiting him, if only the bill would get through. So this is Forksy. So they question his motives, but he has put to hazard his use of security, his interest is now even as strongly popular. No guns that have been to both children is ever held by the same. This is the mode that all herons have tried to be thought in. He has introduced and will be used for his supposed modes. He will remember that objectly is a necessary ingredient in the composition of all true glory. He will remember that it was not only in the Roman customs, but is in the nature and constitution of things that calamity and abuse are essential parts of triumph.

1:35:28Now, is that not a wonderful read? So, that speaks to the first word I tried to make the reason about what they said, how they said it. A book is well seasoned with quotations from both Bortan and Fox. They're both magnificent speakers, and they both came into their prime after stenographers were at least semi-legally allowed that the House of Commons take close notes. They couldn't get all of it. It's like catching a bird on the wing, and they were writing, scribbling, and shorthead of creation. But witnesses to Fox, Fox, and Brooks, Eloquits, contend it was much better than reading the page.

1:36:12Oh, my goodness, that's pretty good of the page. So that was what they said and how they said it. There was an amazing line from Boswell in your book, the biographer of the great Dr. Johnson, where he said, watching book, if I get this right, it was something like being in this orchard where he could just pluck these apples at will so fast. And I think one of the amazing things about their oratory was both of them, they were so brilliant and so quick speaking and quick thinking that they could be quoting Virgil and Horace and, you know, they would be quoting in Latin from memory. And the same with people like William Pitt, who became Prime Minister at 24, who you quote, that they could, I mean, I think there's a bit in the book where Pitt suddenly quotes Scipio in Latin from memory about some old guy who's insulted him.

1:37:07I think that's part of what's so amazing about the rhetoric, the oratory that they use. Ah, yes. At one point, I'm not sure how much this isn't documented, but supposedly Lord Norris, who was the prime minister during much of the time of the book, was in the House of Commons, as was Burke. and Dirk was lacing into the government on Lord North, and North happened to be sleeping during this. Supposedly, and Brooke then quoted something about him, but North heard and misquote something about him. And he awakened, corrected him, and then failed, returned to sleep. I had an amazing history teacher, a legendary history teacher at Eton, which is where Charles Fox went and pit, this guy called Michael Kidson, who now, if he was still alive, would be banned from teaching because he would say such incredibly inappropriate things.

1:38:14But he was wonderfully articulate, and he would always say, they were giants in those days. and and you get that sense not only i mean not only from the quality of the rhetoric of the actual use of language and hyperbole and just uh you know all all from memory and all off the well a lot of it off the cuff anyway they wouldn't deign to look at their notes and you know burke could speak for 11 hours it was very bad it was very bad form to speak for a script yeah so amazing but then also the i and i think this is probably what you were about to get to It's not just that, it's the moral courage that they demonstrated.

1:38:53And I think, I mean, if you could talk a bit about that, because that certainly comes through, particularly with Burke, like this sense of his humanity and his moral courage and his compassion. And there's a point where he says that he has one rule for himself, which is to act as the representative of the people who had no power. Can you talk about that? Because I think that's the other thing where you feel not only that you're uplifted by reading the quality of their language, but also the quality of Burke's morality and decency. He was a difficult person, personally, on so many occasions. But he was also, most of the time, incredibly generous and courageous in the causes.

1:39:42he would take out, for example, two guys were caught making him off. And of course, it was crime, serious crime. And they were called before the bailiff and sentenced to time in the stocks, and put your head and your arms to the wrists and would stand before all the worst people around and they would toss stuff in your head. Sometimes merely vegetables, only times rocks. And these two male lovers suffered rocks. One of them was killed in the stocks. One of them was named, I'm not sure where he died, didn't die either. But Burke took up their cause in the House of Commons. And of course, you can imagine a ridicule that came down his head for this and all the knowing leers one member to another on the other side of the house of commons of the government leers at this man who must have had both curious motives for taking up the cause of these two reprobates these two offenders against the laws of god in nature but burke persisted you know and and he had a newspaper libel to him, and he sued the newspaper.

1:41:07He won a modest symbolic settlement, which he gave away as a gift to somebody. That's one example. There was a wonderful example, too, where I think you write about this poet Crabb, who's at the end of his tether, and he comes as a total stranger to Burke. And Burke not only reads his poetry but helps him revise it, gets it published. I mean, totally transforms this guy's life, this total stranger. And Krebs is literally hungry and destitute. He's sleeping on the embackment, and holds himself together enough to knock on the door of Edmund Burke, and Burke takes him in. As you say, I came to view Burke as a kind of a next-door neighbor to a saint.

1:42:02He was a saint, or a saint. I mean, he can say, you'll say it. My friend and neighbor, Amity Schlaes, who I read the book, said, you know, Burke is crazy and not crazy. And then that comes across, as he aged and his poetry became, if not more, not florid exactly, but more complex and more heavily decorated with Shakespeare and Milton and the Latin poets. The younger people came in, and he became rather an old number. He had been working, And he would be greeted by coughs, or arroganized coughing by the young folk. And he came to be on us the dinner bell, because when he rose, they left and went to the House of Commons.

1:42:56I guess the cafeteria was at that point, right? They went to get themselves a dinner. One of my favorite things from him is that there's a... I mean, you were talking about his willingness to take unpopular positions, and there's a beautiful thing similarly where he was often accused of being catholic because he was a great defender of the catholics and there's something where he responds and the catholics are obviously tremendously persecuted at the time and he's and it says and if burke went on on account of such sentiments people call me a roman catholic it will give me not the smallest degree of disturbance they do me too much honor who aggregate me as a member to any one of those respectable societies which composed the body of Christianity.

1:43:38Wherever they choose to place me, I am sure to be found in extraordinary good company. It's beautiful, right? It brings tears to my arms. It does. That was Birkin's best, and his best was, you know, fantastic. Anyway, what they believed. So what did they believe? So these guys were, Birkin and Fox were in the opposition their whole careers, basically. Each one had the short time in government, in the ministry, which meant they drew no money from the House of Commons, unpaid. So they scrambled around for money. Sometimes it takes rather gaming speculations and Caribbean land deals, of course, unsuccessful.

1:44:23So as members of the opposition, what do they believe? They believe that the king was overstepping in his balance and that he had gone too far. The king was going too far, but he was kind of rather a tyrant. And they did what they could to stymie the king, and the king got out of stymieing them. So the two of them believed the following, in the following episodes of their careers together, they believed the following. So in the American Revolution, they were both allied with George Washington and his feeble ragtag army and the ideals of the revolution against the heavy hand of Lord Martha and King George III.

1:45:02Now, Edmund Burke welcomed the affection of the American people but would squash them if they had presumed to achieve power over England. He was not a friend of a risen and powerful American state, but he believed that the colors were in the right and the dismissal of taxation. And like, Fox, as was his kind of unchained want, he wore George Washington's colors around London, his carousings and gambling at Brookings Club, buff and blue. And what did you know, some people mistook his enthusiasm of her cause with treachery.

1:45:49So that was America. They both were quite strong. And Mark would say, after George Washington's rout in the Battle of Long Island, let us stand by our friends and their adversity as well as making their prosperity, never abandoning people who stand for the principles of the glorious revolution of 16 in this country, but always support them in those ideals. So that was one episode. The second one had to do with an overbearing, corrupt, and a quite cruel regime at times, quite cruel regime of the Eastern Newfoundland in India. And this shows Burke and his dogmatic and semi-crazy side involved the trial of Helen Warren Hastings, who was a leader of St.

1:46:43Houston, the accompanying. And I'm not sure whether Warren Hastings was quite as guilty as everything as Burt fought him, but the trial lasted for eight years. And by the end of it, only Edmund Burke was interested in pursuing the case against. And again, my friend Abedish calls this lawfare. So that shows a dogmatism of Burke and how he could seemingly be unselfaware. It's worth dwelling for a moment on the East India Company, because as you write in the book, it was as well hated and well envied as any modern day technology giant. And so this was the world's largest business. And so Hastings, who you mentioned, was the governor general who got impeached.

1:47:28Can you talk a little bit about the misdeeds and the wars and the cruelties and the scandals and the plundering of money from India. I mean, it's kind of amazing because we talk about business now and the nefarious things that we've been saying Wall Street has done. There's a level of brutality and corruption to what they were doing that's quite astounding. Well, all you have to know about, see behind you, William, the portraits of Charlie Mugger and I guess Warren Buffett. Yeah. Charlie Mugger is it's fun of saying, show me the incentive, I'll show you the outcome. And so the East Indian Company would send to India as employees of the firm, lads of 16, 17, 18, 20, scarcely shaving.

1:48:18And they would be very ill-paid. They would be ill-paid. And they were to make their way in the company by setting up shop for themselves and by conducting their own business as a sideline. Actually, the side hustle became their focus and their main day job. And so instead of enriching their employer, they enrich themselves. And that's one thing to know about incentives. The other was the East India Company was itself a sovereign. It had its own arm, and it had its own virgin fleet, and its own navy and what would a prophet singing company do with its own military power in search of profits it would wage wars right well maybe the equivalent is musk having you know starlink and you know maybe he's the uh uh the person with the power that they had yeah well maybe that's coming.

1:49:20But knowing those two things, you can imagine what liberties the agents of the East India Company, the servants of the East India Company took on their own behalf, as opposed to that interest of their stockholders, and indeed the interest of the sovereign that gave them the monopoly. So they ravaged the country, and I know you probably have a favorite episode of misgovernance, but it was pretty steady and pretty heavy-handed. Well, Clive was amazing. Clive of India. When I was living in Belgravia in London, I would pass this gorgeous house that would say, you know, Clive of India lived here. And you'd think, oh, this must have been some noble guy.

1:50:02And it's like, then you read your book and you realize, no, they were just pillaging left, right, and center. And then having plundered jewels and stuff they would come home with just millions and millions of dollars and and and buy themselves you know respectability not respectability they would buy themselves seats of parliament yeah yeah power i think so social respectability was loose i'm not sure anyone had enough of that but clive of india was was uh was the yeah was the avatar uh was the eternal mogul yeah They turned their lupias into jewelry. My favorite bit that you write, well, actually this is a book that you quote on the East India Company, he talks about these young men, boys almost, governed there, without society and without sympathy with the natives.

1:51:01They have no more social habits with the people than if they still resided in England, nor indeed any species of intercourse but that which is necessary to making a sudden fortune with a view to a remote settlement, animated with all the avarice of age and all the impetuosity of youth. They roll in one after another, wave after wave, and there is nothing before the natives but an endless hopeless prospect of new flights of birds of prey and passage with appetite continually renewing for a food that is continually wasting. And just that image of these new flights of birds of prey coming in to rip off these poor natives plundering their wealth.

1:51:47It's just an amazing piece of writing and rhetoric. Ah, well, you see why I wrote the book? Yeah. So I think the book, I mean, in some ways, it almost tells me as much about you as it tells me about Burke and Fox, because it seems like it's just infused with your love of language and writing and scholarship. Yeah, it is that. So then comes the trial at Hastings. Of course, at Warren Hastings, the governor general of India, as you noted, impeached. It was tried off and on, mostly off, I guess, but still over the course of eight years. And this is a picture in the House of Lords. And he finally gets off.

1:52:33And it's this most remarkable display. Okay, but there's more of that side of work in the death scene. And we're coming up to that now with the French Revolution. And this is where these two friends parted company. I mean, it was quite irreparable to Fox. The French Revolution was the best, the greatest thing that ever happened in the history of the world. tossing off and throwing off the chains of the tyranny of the French crown and of the miserable system of aristocracy and the suppression of the lives of the people. He thought it was marvelous. And okay, that was Fox. And Burke saw this, he saw chaos, he saw the destruction of civil society, he saw that structure of things, that the border of society by social rank, very important to him, but family, privilege, all this stuff which to him was the fabric of the functional and prosperous.

1:53:52All this would be destroyed. The church would be destroyed. The religion itself trampled underfoot. And much of that indeed did come to pass with the terror. And Fox was rather chagrined by the Terry could imagine, in Wall Street terms. He said, I'm really bullish on this. And then the most terrible things that happened to the company, it goes broken and everyone's revealed to be not only an offender against the laws of the country, the rules of the SEC, but also criminals of the most horrible sort. So that's the kind of the Wall Street analog to the call that he made after the fall of the steel.

1:54:34But still, Fox clung to his view that this was a glorious moment in the history of man. And of course, he had many computers in this, one of the romantic generation coming up, and cheering him on, and he'd cheer them on. And that's okay, so that's that. But Perk was equally unmovable in his view about not only the net evil of this, but also the grossing order. You didn't see much much that would come out of it except the end of France. So what about the friendship? Well, it came to a tearful end in the House of Commons, and it was a debate over something having nothing to do with France, and Burke, in instance, went on about the French Revolution.

1:55:27Fox said, you know, you can't, this is not germane, you can't do it. And Fox folded back to Burke some of his thoughts on the American Revolution. And Fox and Burke went incandescent over the incivility of having his long words pulled it back to him. That to him was a heinous crime against the unwritten rules of the house and more especially against the rules of friendship. And he said, our friendship is at an end. And Fox, downbreaking in the tears, said, no, it's not. It's not. So that was that. And, you know, time passed, and Burke's son tragically precedes him and that predeceases him and then burke falls ill and falls poor they're all they're both of them are broke both their whole life scene you know fox lives from bankrupting bankruptcy lurk is broken again and that there's nothing to lift his spirits and um and as brook uh lay dying uh fox reaches out to his wife mary and right she may i come and see my friend.

1:56:43And she consults with her husband and she writes back to Fox, no doubt that's not word for word, certainly in the spirit of his retile. A stiff reply that Mr. Burke must adhere to the views that the public knows so well and that if he were to severe from them it would be a great hurt to the community and to it. He couldn't do it. So and three eyes, Burke does. And Fox lives a long time afterwards, many years, in declining health himself. And declining health well earned by the way he so were glorious and lived. And somebody comes around to ask Fox if he would not like to contribute to a fund, as they're mentioned, in collection to raise a monument to the late editor for dad foxes well no i i i can't pretend to a spirit of forgiveness such that i could do this without making a wankhipper tonight i can't can't see that was that and see what so the book closes in there with the fox having finally succeeded in putting over a lot of outlawing the slave trade in Britain.

1:58:08That was what he wanted most of all. And this is a statue of Fox in Westminster Abbey depicting a new clip, a freed slave or something, a freed slave that's lying on his lap and in gratitude. He called them And so I said that Fox is an enduring monument in marble and that Burke's collected items are a marble of another kind. One of the things, Jim, that was so striking to me is both Fox and Burke were incredibly admirable and gifted in so many ways. And yet they were both absurdly bad with money. And both of them lived in debt. Both of them died broke. But I think Fox was kind of extraordinary.

1:59:07Can you talk a little bit about his gambling? Because, I mean, the recklessness of it is quite staggering. and his father was absurdly rich. So it was quite impressive what he managed to achieve. Well, he comes from an interesting line, financially speaking, as his grandfather, Sir Stephen Fox, was a paymaster of the forces, which meant, very briefly, that you got to invest the money that was entrusted to you for the payment of the troops until that money was needed by the king to discharge those debts so you could do anything with it and you got to keep the profits whether it's interest on investing from government securities or or profits from dealing on college stocks so that was sir stephen fox and uh hit and the focus own father who came to know as lord Holland got the same gig, and he became fabulous and rich.

2:00:11People couldn't believe what he did with that money. He just fanned the profits to his, what we call now an addicted gambler. Fox would play night and day at his club, Brooks' club. He played games of dice and cards, and he's a horse player, rather better at that than cards and dice. But he lost quite literally fortunes at gambling. He lost 900 pounds on a single game of billiards, you write, at a time when that was real money. But I mean, I think you write that in 1776, he had 140 ,000 pounds of gambling debts. I mean, that's many millions in today's money, right? Yes, and did not speak well of his moral character, but in the scene of other people would say, how can you sleep at night?

2:01:05All I want you to do is, in fact, the question is, how can my crad just sleep at night? And it's so amazing. He would go out, sort of, drinking all night, sleeping with prostitutes, sleeping with his mistress, and then he would come into the House of Parliament and give an amazing speech. And I think there's a wonderful bit where Horace Walpole listen to a speech that he's just given off to basically being out drinking and carousing all night. And he's like, this is just total genius, what he could do. Yeah, yeah. So he was, you know, people were astounded by it, but also they recognized that the king was spacious together, just a big sponge.

2:01:47He borrowed from his friends, from everybody. His father died despairing of the debts that he had accumulated and what it did to his estate. But he still kept feeding him money. Burke was different entirely. He brought a lovely estate, Beacon's Field. And it was, as so many lovely estates are, it was a money pit. You know, he didn't make any more money at farming than most people do today. He took him with, he was a student of scientific agriculture, but think of the productivity that he had or didn't have. Now this place lost money. So he could, by hitching some oxen ahead of horses and plowing, better chance, he could plow one acre a day.

2:02:34Now, today, a mechanized farmer, not so very accommodating hilly New York farm can do 21 acres a day. mechanized plowing. So 20-fold appreciation in plowing. So Burke had two jobs, he was a parliamentary pay devil. He was a gentleman farmer, but actually more than a gentleman, he was a hands-on farmer, a scientific one at that, who, with the right equipment, oxen, as well as horses, could plow all of one acre a day. Upstate New York, we can do 21 acres a day with machinery. So not much productivity growth there. And so the place never paid for itself, it was mortgaged. So he was perennially in debt to his friends and to his political mentor, Lord Rockingham, and with all the insecurity that entails.

2:03:35And so at length, Burke became a member of Brooks's Club as well as Fox was towards the end of his life. And one of the documents that my quite terrific research assistant and length intellectual partner, James Smelberson, managed to shish out of archives was a letter from Brooks's Club to Mrs. Edmund Burke about eight years after Mrs. Jess Dunninger for unpaid dues as Brooks's. Huh. Oh, God. So that was the state of his exchequer. And both of them lived... I think that Brook never suffered in his lifetime the indignity of the anchors. More than once,

2:04:24Fox's furniture was out on the sidewalk. The debt collectors came and just took his stuff. and once he was after a night of Brooks's after immense losses one of his friends came to him concerned about what this might do would he take matters into his own hands with a pistol alone in the dead of night so he came and there was Fox reading some great Latin poet and his friend said what are you doing and Fox said well what do you think I ought to do I've lost Evan Schilling There was a serenity in the face of ruin that will amaze the readers of I hope. In fact, I want to share one last story about Fox's death and his simply no peace.

2:05:19So he fell in love with a courtesan. This is a marvelous thing. Not even sure whether it was a Mr. Overson. But they had a genuine love affair. and at length, during one of the breaks in the Napoleonic Wars, Fox takes his then wife, he was leading her at length, takes her to France and they sit down with a Talleyrand, French diplomat, and Talleyrand too had married a courtesan. And the two ladies sat next to each other on the banquette and they shared very interesting observations about people they had known. Oh, marvelous. Before I let you go, Jim, one last question. You spent so much of your time studying history, and I wondered if it gives you a sense that life has improved, that we've survived these terrible periods in the past, whether it's the French Revolution or civil wars and the like.

2:06:22Does it you a sense that even in our strange and difficult moment now that we sort of muddle through after all? Does your study of history kind of give you optimism or pessimism about the future? A little bit of both. Hence to the material side of life, it is onward and upward. Nothing like it's ever been seen. And we would not be having this discussion, except for advances in medicine that wouldn't be interlocutory, you can't get somebody else. So, you know, the marvels with which we live are just astounding. This little thing I have in my pocket, which I forgot to put to airplane mode, it has the entire Canada World College.

2:07:03It does. And so people think, yeah, I say, yeah, what about the next edition of the Apple, whatever it is, you know, get jaded about these things, get jaded about. I find myself complaining about the pills have to take to ward off the next round of disease and rank in gratitude. So in some ways, things have never been better, and we should thank our lucky stars and live when we do. In other respects, we live, it's back to living in rags in the forest, with respect to public oratory, going back to grunting and groaning, wherever they were, business before, the perfection of writing and the arts of literacy.

2:07:53I said, just compare what comes out of today's House of Commons as well as, of course, Truth Social or the House of Representatives or the dignified Senate. I mean, just lay your head down and not watch television, you do something else. So it's mixed. So all of the intellectual energy of Burke and Fox's time for a certain class of people was in literary pursuit. There's a great American chenanness here called Albert Gallatin. He was the treasury secretary. He was a near successor to Alexander after Hamilton. I think there was one or two between the two of them. But Hamilton was a Treasury Secretary under Jefferson and Madison.

2:08:47And then he was a diplomat who helped to settle the War of 1812 when he came back, which was a banker. Then at length, he retired. And the Gravestone talks about... So he retired to pursue academic studies and literary pursuits, Gallatin did, and went down to the green, universally honored. But this is about literary pursuits. I go over to the churchyard from time to time and read his great story at Gallatin and said, think about him. And you can tell what happened by memory in the past 50 years or so years. I can't remember exactly the phrasing, but it's marvelous. And so if you're a lover of the oratory of anguish of, you know, be disappointed to not to have lived in some other time.

2:09:38But otherwise, just when you go, never mind the dramatic diseases of late life, or common, not dramatic, commonplace diseases of late life, just go on a trip to the dentist. Just thank your lucky stars, you know. But it's pretty great on balance. Pretty great. I'm glad to be here. On that note, Jim, it's been such a delight, and I'm so happy to have got to spend this time with you. It's one of the great pleasures of having a podcast is that it gives me an excuse to hang out with you. I'm awfully kind, and what a pleasure it is to be in your company. My biography was mainly about people whose company I wanted to have to be in.

2:10:21So I like your company too, William. Ah, thank you. That's lovely to hear. And I loved coming to the conference yesterday. So now I'm planning to become a regular. I'm looking forward to it. Thanks so much. Lovely chatting with you. Okay, well, happy days. Thank you. Thank you for listening to TIP. Make sure to follow Richer, Wiser, Happier on your favorite podcast app and never miss out on episodes. To access our show notes, transcripts or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by the Investors Podcast Network.

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