Mar 24, 2023 · 1h 34m · allin
E121: Macro update, Fed hike, CRE debt bubble, Balaji's Bitcoin bet, TikTok's endgame & more
David Sacks · 21m spoken Chamath Palihapitiya · 21m spoken Jason Calacanis · 20m spoken David Friedberg · 19m spoken
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In Episode 121 of the All-In Podcast, the co-hosts analyze pressing macroeconomic risks including Fed interest rate hikes, banking balance sheet instability, commercial real estate debt, and crypto regulations, before examining the geopolitical fallout of TikTok's Congressional hearing and technical milestones in commercial space flight.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The hosts hold 99.7% of the talking time here. How this is scored →
The hosts as informed peer 7.1 Guest teaching 3.1 Guest disagreement 2.6 The hosts pushing back 3.6
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 55:06 Sacks refutes bailout accusations
Sacks forcefully rejects Jason's framing regarding media and Twitter critiques, vehemently clarifying that SVB equity, bondholders, and executive options should be entirely wiped out.
Hardest push from the hosts ▶ 50:04 Chamath refutes Operation Choke Point tinfoil framingChamath directly calls out Sacks' Operation Choke Point 2.0 narrative as unproductive 'tin hatting', arguing SEC aggression is simply Gensler reacting to embarrassment over FTX.
Biggest teaching moment ▶ 1:06:00 Friedberg explains deposit insurance actuarial game theoryFriedberg educates the panel on probability versus severity of loss in insurance underwriting, demonstrating how insuring all deposits removes bank run mechanics and lowers aggregate system costs.
The host holds their own ▶ 57:45 Sacks debunks $18T deposit coverage myth with exact mathSacks uses precise figures ($8T uninsured out of $17.5T total deposits) to expose the innumeracy of media claims that backstopping all depositors would cost $18 trillion.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| The All-In Podcast Title Sequence | 1 | 0 | 1 | 1 | The panel engages in light banter about snacks and Jason's paid corporate moderating gigs. There is no substantive debate or deep technical expertise displayed. | |
| Fed Rate Hike and Monetary Policy Debate | 7 | 3 | 3 | 5 | Sacks argues the Fed should have stood pat or cut rates due to banking stress, citing latency in inflation data. Chamath pushes back directly, arguing that taking the 25bps middle path is worst and advocating instead for breaking inflation's back or injecting aggressive liquidity. | |
| 10-Year Treasury Yields and Bank Stability | 8 | 4 | 1 | 2 | Friedberg details the math behind 10-year treasury yields dropping from 4.1% to 3.4%, explaining how duration risk impacts bank balance sheets across $7 trillion in assets and 15% equity ratios. | |
| Commercial Real Estate Debt and Urban Refinancing Crisis | 8 | 4 | 2 | 3 | Sacks and Chamath analyze commercial real estate distress, highlighting a record spike in Fed discount window borrowing that exceeds 2008 levels. Sacks outlines how tenant lease rolls and elevated refinancing rates create underwater debt covenants. | |
| Global Debt Spirals and US Dollar Hegemony | 8 | 4 | 3 | 4 | Friedberg voices concern over global debt-to-GDP at 360%, comparing USD devaluation risks to the post-WWII British pound. Chamath counters MMT theories and explains that dollar hegemony is reinforced during crises through central bank swap lines. | |
| Balaji's $1M Bitcoin Bet and Macro Crisis Framework | 7 | 3 | 4 | 6 | The panel debates Balaji Srinivasan's $1M 90-day Bitcoin bet. While Sacks defends Balaji's COVID track record and presents a 'Balaji-lite' framework, Chamath aggressively dismisses Bitcoin maximalist claims as self-serving day-trading rhetoric. | |
| Crypto Regulatory Crackdown and Operation Choke Point 2.0 | 7 | 3 | 4 | 5 | Sacks summarizes Nick Carter's 'Operation Choke Point 2.0' thesis alleging a coordinated government campaign against crypto. Chamath pushes back, characterizing conspiracy theories as unproductive and pointing to Gensler's embarrassment over FTX as the primary regulatory catalyst. | |
| Debating SVB Bailouts and Systemic Moral Hazard | 6 | 2 | 5 | 6 | Jason prompts Sacks regarding public critiques accusing him of flip-flopping on bank bailouts. Sacks forcefully clarifies that SVB equity, bondholders, and management options should be completely wiped out, separating shareholder rescue from depositor backstops. | |
| FDIC Insurance Math and Depositor Protection Policy | 8 | 5 | 3 | 4 | Sacks dismantles claims that insuring all US bank deposits would cost $18 trillion, pointing out that only $8 trillion is uninsured and calculated insurance premiums would equal roughly $100 billion. Chamath reinforces Sacks' point while noting the hit to bank equity profitability. | |
| Market Solutions, Bank Balance Sheets, and Balaji's Bet | 9 | 4 | 1 | 2 | Friedberg delivers a comprehensive actuarial analysis of deposit insurance. He demonstrates through game theory that guaranteeing 100% of deposits lowers bank run probability so significantly that overall insurance costs drop rather than rise. | |
| Banking Disconnect, Asset-Liability Duration, and Regulatory Reforms | 8 | 4 | 2 | 3 | Sacks highlights the core structural mismatch in banking between customer expectations of safe transactional services versus banks treating deposits as 10-to-1 leveraged loans. Chamath proposes moving high-risk lending into private credit structures. | |
| TikTok CEO Congressional Hearing and Bipartisan Surveillance Concerns | 7 | 2 | 3 | 4 | Sacks assesses TikTok CEO Shou Zi Chew's congressional testimony, noting his inability to deny consulting CCP officials sealed his fate. Sacks contrasts bipartisan outrage over Chinese spying with the lack of consensus on US domestic social media surveillance. | |
| TikTok Ban Predictions, CCP Golden Shares, and Geopolitical Impact | 8 | 4 | 3 | 5 | Chamath rejects the idea that TikTok can simply be divested, explaining that auditing a separated codebase to satisfy Congress is technically impossible. He argues a total US shutdown is the most likely outcome, citing CCP board golden share dynamics. | |
| Relativity Space 3D-Printed Rocket Launch and Space Economics | 8 | 2 | 1 | 1 | Chamath details Relativity Space's successful launch of an 85% 3D-printed rocket using methalox engines, reaching Max Q and main engine cutoff. Friedberg adds context on how low-cost power directly dictates the economics of synthetic rocket fuels. |
Statements from this episode (30)
Calacanis calls Hindenburg Research's short report on Block a work of art
“That Hindenburg report is, I mean, it's a work of art”
Sacks: The Fed was nine months late reacting to inflation
“They clearly reacted way too late to the inflation. We've talked about this before. We had that surprise inflation print in the summer of 2021, 5.1%. They said it was transitory. They didn't react until November. They continued QE for another six months, and t…”
Palihapitiya: Fed funds rate will need to reach 5.5% to 5.75%
“Which means that a five percent fed funds rate is insufficient. So we're going to need to see a print of five and a half, 5.75% And that's when you're going to have enough contraction, and then the fed can come back with liquidity.”
Friedberg: 10-year Treasury yield fell from 4.1% to 3.4% in weeks
“The yield on the ten-year treasury dropped from 4.1% down to, it looks like it closed at 3.4% today, nearly a .7% decline in the past two and a half, three weeks. And that's also off of 3.8% since the start of the year.”
Palihapitiya: Markets expect Fed will cut rates massively in short course
“The markets have completely said, we now discredit what you did. And they're basically banking that the fed will be forced to cut rates massively in short course because the crisis will be so severe that it'll outweigh the risk of inflation.”
Sacks: San Francisco commercial real estate vacancy rate sits at 30-40%
“Take San Francisco, which has got to be the worst market for Siri in the country right now. That's something like 30 to 40% of the space is vacant.”
Sacks: Avoids office towers, invests in boutique Jackson Square spaces
“Look, I never invest in office towers. I do small boutique kind of brick and timber spaces in Jackson Square. We're doing okay, because people still want to be in those spaces, but”
Friedberg: US government will spend $2-3 trillion to backstop assets
“We'll have probably two to three trillion dollars of federal money, you know, spent to Backstop and support the asset.”
Friedberg: US dollar will not undergo hyperinflation or fall to zero
“So it's really hard to kind of just say, hey, it's going to be hyperinflationary, and the value is going to go to zero, it's just not going to happen.”
Palihapitiya: Modern Monetary Theory is clearly idiotic
“MMT. Was in hindsight, idiotic in the moment. It never quite made sense, but in hindsight, it's clearly idiotic and I think that we can properly dispense with that.”
Palihapitiya: Global financial stress reinforces US dollar hegemony
“Does it reinforce or does it decay U S dollar hegemony? And I think it actually reinforces it.”
Sacks: Commercial real estate and government debt are next crisis phases
“So I think there's three phases to this financial crisis. We're in phase one, and I think CRE and government debt are the next two phases.”
Friedberg: Bitcoin is not accessible enough to be an inflationary exit ramp
“We have a real problem if Bitcoin is the exit ramp. For an inflationary crisis, because it, it's not accessible enough. It's not easily transactable for, I'm sorry to be negative to the Bitcoin maximalists.”
Sacks: US government agencies are executing a concerted crackdown on crypto
“I think it's hard to argue that there isn't a concerted effort now to crack down. On crypto by a wide variety of government agencies and authorities, starting with Gensler at the SEC, who seems incredibly hostile to crypto.”
Palihapitiya: Most Bitcoin investors are day-trading, not hedging fiat risk
“Most people in Bitcoin are not trying to hedge their existing fiat currency exposure. They're just picking off people in retail and they're just day trading this thing.”
Sacks: SVB shareholders, bondholders, and management options should be wiped out
“I was really clear that SVB shareholders should be wiped out. Their bondholders should be wiped out. Their management stock options should be wiped out.”
Sacks: Depositors are not equipped to evaluate bank balance sheets
“Listen, the typical depositor, even a fairly sophisticated depositor, like a small business, or even a high net worth individual, they're not in a position to evaluate the balance sheet of these banks.”
Sacks: $10 trillion of $18 trillion in US bank deposits are insured
“We have about 17 and a half trillion in deposits in the US, almost eight, 18 trillion. And one of the misnomers you'll hear is, well, it would cost us 18 trillion to basically insure all the depositors. That's not true, because first of all, 10 trillion is alr…”
Sacks: FDIC fund held $130 billion in premiums at end of 2022
“So if you look at FDIC at the end of last year, there was about a 130 billion that had been paid in to the FDIC fund by premiums paid by these banks.”
Palihapitiya: Guaranteeing 100% of deposits would crash large bank stocks
“Is it viable for large G-SIBs to guarantee a hundred percent of their deposits? Absolutely. The implication of that will be an enormous hit to their short-term profitability and their return on invested capital. It would just take a massive hit. And so as a re…”
Friedberg: Broadening deposit insurance lowers overall costs by preventing bank runs
“The more you insure at this point, the cheaper the insurance will actually be. Because now you don't have this money movement problem. And so, you know, the point is, the more you insure at this point, the cheaper the insurance will actually be. If you're an a…”
Calacanis: Startups are using five to ten banks to manage deposit risk
“Startups right now are doing five to 10 banks. I'm watching it happen. They're doing all these sweep accounts. They're doing multiple accounts.”
Sacks: Banking system incentives encourage high-leverage gambling with depositor funds
“They're highly leveraged. The deposits, from their standpoint, are leveraged. They're leveraged 10 to one. So their incentive is to go to the casino and gamble it because they get to keep all the upside, and if they lose it, It's basically someone else on the …”
Palihapitiya: Mega-banks like JPMorgan are far better run than regional banks
“If you look at how well run Citi, B of A, Wells and JPM are relative and contrast them to the sub GSIBs, it's like night and day.”
Sacks: TikTok faces either divestiture or a US shutdown
“I think it is divestiture or shutdown for TikTok.”
Friedberg: TikTok will be forced to spin off to US investors
“I think they're probably gonna have to spin this thing out. And if they hold any equity, if the Chinese parent company holds any equity interest, it'll probably be non-voting shares. And there'll be a mandate that the majority of the shares and some degree of …”
Palihapitiya: TikTok will be shut down in the US, not divested
“I think it'll be shut down. I think they're getting kicked out of the United States.”
Sacks: Auditing TikTok's code and moving US data centers is technically possible
“And if you truly can't move the servers to the United States and vet the code base, I feel like you could, I think you could have an acquirer figure it out, you know, vet the code base, move the data centers, make sure there's no back doors. I think it's not i…”