William Cohan
Appearances
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
I thought, okay, I'm going to put, I'm going to have some money in another currency. And of course, the moment I did that, I think I bought my place and I converted dollars at, I think, $1.26 and then immediately went to $1.10. I remember moving in and thinking, this house is worth 15% less than I paid for it 30 days later. Now it's back to $1.32.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
And I like the idea of having some assets in foreign currencies. And it just goes back again to this notion, of diversification, but The way you grow an economy is you're able to borrow more than deposits on hand, right?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
You can borrow $120, a bank can borrow $120 from depositors and lend out 150 because as long as they don't ask for it back at the same time, you kind of have this great leverage and you can lend more than you would if you were just only lending the money that's been provided to you.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
And basically the U.S., because it has the lowest interest rates and the most trust, has the lowest cost of capital in history. meaning we can be more aggressive. And so when the cost of that capital goes up, much less the cost of human capital, think about how difficult it is to get people to come here now. I mean, people just don't need this shit.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Anyways. How are you? You're in Palm Beach, right? I'm in Palm Beach. Why? I'm not sure. Probably... I forget. Either my sons have friends here or my partner has friends here. I don't even... Why am I here? I have no fucking idea why I'm here. Seriously, why am I here? I don't know. Anyways, we're at this new hotel called the Colony Hotel.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Very simply, when there's tumult in the market, people want to take moves. A company says, whether it's Mercedes that wants to hedge its exposure to the dollar, or whether it's a company that needs to come up with another you know, another $100 million to offload their products. They're going to have to pay a tariff on they weren't expecting.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
They have to either raise money, go to a bank, or a consumer says, I freaked out about this. I'm retiring in two years. I'm going to take down my equity exposure. I'm going to sell stocks. But anything in the news like this just creates more urgency and more action and just more trading.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
I mean, we've all been – everything we're talking about in terms of diversification, all the moves require a certain – or induce, if you will, a certain level of action. What we've been saying is don't do panic selling. And there's friction in that activity in the form of commissions and trading commissions for investment banks.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
So whenever there's activity like this and tumult in the marketplace that inspires a lot of actions, buying and selling, the volume of commissions go up. In addition – There's going to be more exotics and more derivatives and more margin and more kind of sophisticated trading vehicles that clients and corporations will call on. They'll say, I'm worried about the U.S. market.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Can you hedge my dollar exposure? And those types of products... tend to have much higher margins. In addition, that sense of urgency, quite frankly, creates pricing power on behalf of the provider, specifically the bank riding those types of vehicles.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
And it's what I call a 64 hotel, six-star prices, four-star service. And they just throw people at everything. And it's all these nice young people who have no desire to be in the services business who are waiting to go, I don't know, what people do in Florida, find a bale of cocaine. I don't know what it is. What do people do here in Florida? Open a nightclub? Fight crocodiles.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Calm as she goes, steady as she goes, is not good for these guys, I mean, in terms of trading, because there's just less trading and less sophisticated kind of vehicles that are lower margin. So you know, when the bullets are flying, these guys are the arms dealers.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
But the only thing I would argue is that I think it's a sugar high because I think this is probably suppressing a lot of kind of systemic capital raising like IPOs, debt market offerings. I would think M&A has kind of come to a standstill. The price discovery here is really difficult. What do you pay for something? Well,
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
the buyer's going to think, oh, it should be 20% less expensive than what I offered you 30 days ago. And the seller is like, no, I'm not buying that. So I think this is a sugar high. I don't think this is going to last for these guys.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
They have gators here, not crocodiles. That's Africa. But it's actually a really—I mean, first off, it's spectacular here. It's spectacular. I'll put up with—especially if Florida's passed a law such that, like, eight-year-olds can work now. I'll put up with that for this weather.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
It's funny. My interpretation of that was it's a giant reach around to Trump that they don't even want to engage in the argument. And they're worried about his wrath. So they don't use the term. They just talk about volatility rather than saying the ass clown has created economic uncertainty for all of us. I mean, I know David Solomon. I like him a lot. I think he's a great leader.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
I am incredibly disappointed that. across all corporate leaders who all wake up every morning, look at themselves in the mirror and say, hello, Mr. President. I bet 498 of the 500 Fortune 500 CEOs think there's a non-zero probability they should be president, that they're so fucking awesome that they'll be drafted to run for president. And the key attribute of a president is leadership.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
And leadership kind of comes down to one basic fucking thing, and that's doing the right thing, even when it's hard. And none of these guys are doing the right thing because it's hard to call out just how ridiculously damaging this is to America. There is such a lack of leadership across our Fortune 500 CEOs. We keep waiting. Everyone assumes that our corporate leaders are the best in the world.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
They're the best in the world at making profits. They have not demonstrated themselves to be great leaders.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
He must have left because the traffic got noticeably better last night. When he's here, they shut down A1A.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Well, it cuts off. They basically close an artery. One of the most beautiful drives, I think, in the U.S. is up to A1A here, and they just close it down because Mar-a-Lago's on the beach. Although, oh, I got some gossip. I ran into my friend Mehmet Oz. I was at, I think it was at Bibloque, which is a great restaurant here. And I was with a bunch of people.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Mehmet, the new head of, I think it's Social Security and Medicare or Medicare, Medicaid. Anyways, overseeing like $2 billion. who I like, I think is a good man, came up, said hi, and he said, let me introduce you to Bobby Kennedy. And I'm like, oh, I met Bobby on Bill Maher thinking that we'd like, and he came up to me and RFK Jr. shook my hand and then walked away. So he's mad at us, Ed.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
There's a general sense that last week that either intentionally, you know, using the debt markets as a weapon. And that is people are fed up with Trump and these sort of what they believe are reckless, mutually, you know, assured mutual destruction tariffs. And that they went, the Japanese and potentially the Chinese, went into the bond market and
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
did some short, you know, fairly abrupt, pulsed sales that took the tenure up to basically say, hey, boss, you fuck with us, we're going to fuck with you. Do you get the sense that's what happened?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Something you said. Something you said. He's mad at us.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
If you're a banker, if you were hired by the Chinese Communist Party, if you were hired by the CCP with the mandate of quietly, elegantly saying, devastating the U.S. economy.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Well, most of my questions are comments, just disgusting. I think that Trump, I'll put forward a thesis, so Bill and I are friends. I think the Trump administration has vastly overplayed their hand and has absolutely no sense of how powerful or vulnerable we are. That if China wanted to, they could seriously fuck with us.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
that they could go into the market, sell their $700 billion in treasuries, and spike the 10-year and maybe inspire just like a crazy panic here. But they're not stupid. They realize that if they kneecap their third biggest partner, trading partner, behind the EU and Asian nations, that would be bad for them. So they're showing more restraint than we are.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Am I overestimating, underestimating their ability to wreak havoc on our economy, given that they're now kind of, I think, one of our largest creditors?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
That's not fair. I just said there are a few people in modern history that are going to cause more death, disease, and disability. But I'm not sure. He's handsome. I've also said that. He's handsome. It's just, you know, this whole rubella and measles and kids having limbs amputated unnecessarily, I think that's a bad thing. I think that's a bad thing. Shall we dig into our episode?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Thank you for the lifeline. Get to it.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Today's number 60. That's the percentage of general admission Coachella attendees who use Buy Now, Pay Later to finance their tickets. Ed, have you ever had sex at a music festival? No. It's fucking intense.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
So I think the majority of the people, at least the circles we run and think that this is one, bad, but two, a lot of the damage has yet to be felt. Now, obviously, we see the markets because they get marked every day.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
But a lot of this damage, the way I would describe it is Trump pausing the tariffs has just pulled the knife halfway out of the back of the economy, but the damage is going to take years to heal. Any sense for where the next manifestations of this damage will pop up? Is it hiring? Is it more market tumult? Is it earnings calls? Is it Reduction in tourism?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Like, what are you waiting on for sort of the next card to be turned over?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Tim Cook is the CEO or the business person that Donald Trump thinks he is. He's going to figure out a way to give an exemption to all Apple products. Your reactions? Let me just say I'm really enjoying this podcast so far.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Look, this is an easy one, and this is a form of corruption, and that is whoever has proximity to the president or is a popular company or is a big company, this is a transfer of wealth from small business and medium-sized business to big business. The company that could probably—it would be hugely damaging, but let's go to the other side of the spectrum.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
I spoke to a fraternity brother of mine from UCLA who built this really nice little specialty products company that—so, you know, if you go to a conference, the mugs, the logo mugs, the fleeces, the signage that all says, NetSuite by Oracle, and the water bottles at conferences when you go speak somewhere— That's a big business. And he has built this nice business. I would imagine it's 10 to 20.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
I mean, small business, right? He doesn't give a million dollars to inauguration. He's not on Trump's radar. It doesn't have a cult like Apple does. And I talked to him over the weekend. Basically, his business has been shut down. It's like COVID, but worse. And that is he has to come up with a bunch of additional revenue to get stuff off a ship, a tanker that's on its way that's going to land.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
He has told all of his suppliers in China to stop producing and shipping. And there's no way he can turn around to, you know, call it, say Coachella had branded merchandise. He can't turn around and go, oh, I got to increase the the amount I was going to charge for those branded stage signs by 145% because of what Trump did. He has these contracts he has to live up to.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
So he doesn't think the market's going to be able to absorb that type of price increase. So he has two choices. He can either go out of business or try and reroute all this supply chain madness that's taken him 20 years, slowly but surely, to reroute to China. And you might have said, well, he should have known better. He shouldn't have been that concentrated. Well, guess what?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
The majority of these businesses are very concentrated in China, including Apple. But Apple gets a reprieve. But the 98% of companies who depend upon import and export are small and medium-sized business. They're shit out of luck.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
So when it's the richest companies, the companies with proximity to the president, the companies that can give him money for his inauguration, get quote-unquote exemptions, that's corruption. And this is – I mean, there's so many points of light I've been absorbing over the last week.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
I spoke to another, I spoke to the CEO of a pretty well-known Cadillac company, and this person said, okay, I have, whatever, $20 million on a boat of outdoor furniture or sweaters or what have you. I've got to show up with $29 million to get the stuff off the boat. I've got to pay a tariff of $29 million. I said, when the merchandise left Cadillac,
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
China, I didn't think I was going to have to pay. So I got to walk into my CFO and say, I need $29 million in 72 hours. They don't just have that lying around. That's going to hit earnings massively.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
And then the one I just didn't consider was this person said, and now I've got to figure out a way to get dozens, if not hundreds of people down to the port of Long Beach to re-tag and re-label every single item that Because what people do now or what companies do now is when they order stuff in China, they attach the labeling and the pricing in the factory.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
And you say, I've got to reprice and relabel everything. So I've stopped all shipments from China. It's going to take my inventory down. I'm going to have to pass on as much as possible of these prices to consumers, meaning inflation. But at the same time, I'm ordering less merchandise, which means prices go up, sales go down. I'm looking at charging consumers higher prices.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
Meanwhile, my earnings are gonna get absolutely kicked in the nuts. So every point of light I've seen is small and medium-sized businesses are getting really hammered here. My friend who runs that small business is saying, He said, Scott, this is like COVID times 10, but I'm not getting any relief. Business is just shut down for me.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
I think we're going to see the next two cycles of earnings calls, even if they decide all bets are off, which quite frankly, I think they're going to do. I think they're going to back down on almost everything. You weight every single CEO, any weakness in their earnings calls, of which there's going to be a lot, they're just going to say tariffs.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
The tariffs absolutely wreaked havoc on our business on so many different dimensions, and it took our earnings down. I wonder if this is—we kept talking about a rewriting down of stocks. I think this is the catalyst, and I don't even think we've seen—the real damage here is like an iceberg. The vast majority of it is below the waterline. We don't even see it.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
What are the Elson men doing together? Like, what did you do with your dad? What did you take him to see?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
I haven't heard anything you said since you used the term candle in the wind. Jesus Christ, you're so Princeton. Let me ask you this. Do they make that university for a man? Do you think any of my colleagues from UCLA have ever used the term a candle in the wind?
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
During lunch, I know my dad and me. Oh, you can always, you guys can already hear it coming. Yeah. Everyone's like putting their hands over their... Do you remember when my father used to come visit? During long lunches, he would pause and he would reach across the table and he'd look at me and he'd say, you're such a disappointment. And... Has that happened to you? I'm still waiting on that one.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
If people lose faith in our company's ability to pay money back, they're less likely to loan us money, meaning companies and the government have to increase the interest rate they offer people who loan us money in order to justify the increased risk. So our costs go up. And at the same time, our dollars, our remaining dollars, have less purchasing power overseas.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
So our costs go up and our purchasing power goes down, both in terms of the interest rate we have to offer and also just the remaining dollars we have even after that become worth less. So that's a reduction in prosperity. That means we're no longer going to universal, we're going to Knott's Berry Farm or King's Island. It means we no longer have 10 gifts under the Christmas tree for our kids.
Prof G Markets
Breaking Down Warning Signals from the Bond Market — ft. William Cohan
We'd have eight. And if these tariffs hold, given that 77% of toys under the Christmas tree are about to double or go up two and a half X, then you're talking about four gifts under the Christmas tree. So this is an immediate decline in prosperity. When I moved to London, one of the reasons I wanted to buy in London was was I wanted to diversify out of the dollar.