The Intersection: Dan Tapiero's Most Controversial Opinion (w/ Raoul Pal)
RAOUL PAL: Okay, now I'd like to start a post chat called the Intersection. I'm going to ask you a series of questions which we ask all of our guests. Is there one person living or dead, that you would want to interview more than anyone? If so, who and why? DAN TAPIERO: For me, I would love to be able to interview Churchill and get him to explain how he felt at those moments of at the absolute very bottom at the low, he seems to me, you have to believe he's one of the three great Western statesmen in the history of the West going back to Greece basically, and to be able to speak with him and interact with him in person and for him to describe how he mustered the energy and power and strength to live through that period, I think that would be the most fascinating thing. RAOUL PAL: What is the book or books that have changed how you view the world, and how so? What are you reading right now? DAN TAPIERO: Actually, this book I'm reading right now, the Neil Ferguson book about the square, and the tower. It's the history of networks. It's a history of the West basically but through that prism that the scaling of networks is where all value comes from. It's so interesting because it's the perfect historical intellectual backdrop for the birth of Bitcoin and yet he doesn't make the connection. It's a 500+ page book, and there are only two pages about Bitcoin. It's a phenomenal read. It's made me think differently about how to assess value of things, of markets, of business projects, of almost anything. RAOUL PAL: As an individual and a leader in your field, how do you stay engaged and relevant in a world that's moving so quickly? DAN TAPIERO: Recently, in the last six to nine months, it's been Twitter. I just found Twitter after we did that interview on Bitcoin. I gave out this address, I'd never used Twitter. It is an unbelievably powerful tool. It's incredible. I have never, in the 25 years of getting access to every single piece of research, having an unlimited research budget, at the places I was working at for years and years. There's nothing like this because it's live and the quality of the-- now, there's a lot of garbage on there too and a lot of overly emotional people and overly ideological, all of that but they're a core group of unbelievably smart, informed people also thinking differently, especially when you cross over into the Bitcoin digital asset space. The guys, and I've said this, under 35 I would say in the investment world, the smartest guys under 35 are all in that space. The real entrepreneurs, the risk takers, the guys who have a vision of the future. That, I look for different ways at different times to stay plugged in and engaged but Twitter recently has been the one thing. RAOUL PAL: Some of our guests could tie their success to one key breakthrough. Did you experience a tipping point in your career? DAN TAPIERO: You can answer that question so many different ways, because there's so many different tipping points, but for me, really the first one, the very first one was very early in my career in '92, in '93, I was working at Tiger for Julian Robertson. His style of investment in macro was something that I took to very naturally and it was something, it's a very idiosyncratic style. It's very qualitative, very big picture, super macro, super long term macro. Julian wasn't really that concerned with the month to month moves or any of that stuff that the business has turned into now. He was really able to make billions and billions of dollars and he had had specific background in macro in the '80s but his analytical framework for understanding great investment ideas he was able to apply across the board. It was seeing that and being on the front lines and being the guy on the phone pushing the brakes of the peseta or the lira, or the punt, living that, buying Spanish bonds at 11%, developing the macro thesis for that, and then taking massive positions. I was very young, but that thematic almost historical but I say in that analysis that one uses it as a history major, you read 20 books and then you come up with a thesis. It was the same thing. Julian would speak to 20 people, he would read 20 things, he would come up with a thesis and then position. I was able to do very well, very young in this business because I was fortunate to be in the presence of someone like that. To see it firsthand, and then lucky enough that it actually spoke to me. RAOUL PAL: The flip side of that, can you identify failure that had the most significant impact on your career, and what do you do to overcome it? DAN TAPIERO: Yeah, that's easy, because 1994, Japanese bonds. In '93, I had made literally thousands of percent return in my portfolio, leveraged, it's just long bunds and European bonds, Australian bonds. In '93 of course, a lot of people had money. I had sold everything very well, except I kept a very large position in JGBs because it was certain to me at that time that rates were going to zero basically. It was a crazy thought, but I thought they're going to be in recession forever. Again, I was at thousands of percent return in '93 and I lost about 35%, 40% of everything I made in the previous year in one week in March, I think it was of '94. I was long I think it was 50 JGB calls, by personal account. 50 call, JGB calls is enormous position. Those are big contracts. I think $50 million worth. They all went to zero. I basically, yeah, exactly. Thank goodness, I had calls but I didn't talk for about three months. I was just so blown away. I was very young. I was walking around in a daze, really in a daze. That taught me the importance, number one, of using options because thank goodness, I still kept 65%, 70% of what I've made the previous year. Also, that and understanding that trends that are super-duper clear with macro fundamentals that are super clear, don't always have to play out in the timeframe that you're expecting. Remember in '95, the '96 JGBs bottomed, and they rallied basically for 20 years or whatever it was, but in '94, they went down-- I can't remember, at least 10 or 15 points, maybe 20 points. I wasn't the only one who got killed in that period, many more experienced guys too, but it really taught me to know that when you have outsized gains that they aren't necessarily going to be replicatable forever, meaning be happy with what you've-- if you make a big chunk, and you're feeling really successful, time to start thinking that that might be enough. That was the first time and again, I made that mistake not to such a degree ever again, but I've made that mistake, made it in the following years and each time you make it, it reduces the probability that you make it again. Now, I haven't made that mistake in years. Yeah, that was '94. I'm sure you remember it too. RAOUL PAL: Unbelievable time. Unbelievable time. Next question, two more questions left. Who is a person you admire and why? DAN TAPIERO: When I think back to when I was really blown away by somebody, it was about 15 years ago. Now, I was fortunate to be invited to a-- it was a lunch with the Commandant of the Marine Corps. I had not really known just how impressive the leadership was in the military. I have to say I was totally blown away and felt completely safe. This was after September 11th. The way that he described the world and the way that he described just our forces and our readiness versus the way the press had been explaining things, just blew me away. I don't think I've ever-- and from then on, I've just held the leadership of our armed forces in super high regard. I think people in the private sector are just not aware how efficient and well thought and certainly, not in the world are people in the world do not realize the quality of those individuals. That's a broader answer, but-- RAOUL PAL: A nice answer. Okay, final question. What view do you hold that is the most controversial in your professional life? DAN TAPIERO: Well, controversial. I think right now, it's that I think that Trump has been doing a phenomenal job on the policy front. There's so many people here on the macro policy front. I'm not really qualified to talk about a lot of different things and most of these things as an expert, but in terms of ranking, and I mentioned this before ranking his feel of monetary, I've called it monetary fiscal policy, there's no president or leader that I've ever seen who's had such an intuitive feel. People on the East Coast, especially, around New York, they don't like Trump and they're super emotional about him. They can't even see that he's skilled or talented in any way. Look, he does come across not great a lot of times and sometimes, there's a roughly in but if you're just looking at his skill in this area, and this is one of the reasons I said before, I think we can potentially still have a move up into the election. I've just been very impressed. I think there are very few people who are even willing to listen to that view and just think, have their personal opinions and I'm taking it completely out of that realm. I think that's very controversial. Then of course, the other view connected to that is I think this is, eventually we're going to see a doubling and tripling of the gold price. I don't think that's understood. Maybe in the gold community, I have some buddies, but I'm not going to get anyone like spiking my drink for that. Whereas I make some positive comments about Trump, and people are coming after me. Now, even if it's on a strictly analytical basis, so anyway, that's what I would say there. RAOUL PAL: Dan, as ever, an absolute pleasure to speak to you, let's see how this pans out in the next few months. I think we'll probably get back together then try to scratch our heads and figure out, okay, what's the next-- DAN TAPIERO: Yeah, and maybe with a dinner in the city. Hopefully, things will unfreeze literally, the credit markets are frozen. We're frozen in New York City, New York City will unfreeze too. RAOUL PAL: I look forward to it.