# Big Short Reunion w/ Danny Moses: Rising Rates, AI & Private Equity | The Real Eisman Playbook Ep 80

Markdown copy of https://realalpha.app/v/bjikXzIJqSM/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

Danny Moses argues that AI’s buildout is real but its financing, concentration and uncertain profitability deserve scrutiny.

- Show: The Real Eisman Playbook
- Hosts: [Steve Eisman](https://realalpha.app/people/steve-eisman/)
- Guest: [Danny Moses](https://realalpha.app/people/danny-moses/) is a former Big Short partner and host of On The Tape.
- Published: Oct 19, 2026
- Length: 40 min

## The best minutes

- [16:50](https://realalpha.app/v/bjikXzIJqSM/?t=1010) [AI financing echoes the warehouse lines behind subprime](https://realalpha.app/s/ai-financing-echoes-the-warehouse-lines-behind-subprime/) (4 min)
- [22:38](https://realalpha.app/v/bjikXzIJqSM/?t=1358) [Private equity's fundraising model is colliding with exits](https://realalpha.app/s/private-equitys-fundraising-model-is-colliding-with-exits/) (6 min)

## Also worth watching

- [5:04](https://realalpha.app/v/bjikXzIJqSM/?t=304) [Small Fed and Treasury moves cannot offset the debt backdrop](https://realalpha.app/s/small-fed-and-treasury-moves-cannot-offset-the-debt-backdrop/) (3 min)
- [8:30](https://realalpha.app/v/bjikXzIJqSM/?t=510) [Equity wealth now poses more economic risk than housing](https://realalpha.app/s/equity-wealth-now-poses-more-economic-risk-than-housing/) (2 min)
- [11:05](https://realalpha.app/v/bjikXzIJqSM/?t=665) [Real AI demand does not guarantee profitable infrastructure](https://realalpha.app/s/real-ai-demand-does-not-guarantee-profitable-infrastructure/) (3 min)

Skip the five-minute On The Tape setup, the eight-minute media transition and Big Short stories, and the sponsor reads.

## Full analysis: Danny Moses says CoreWeave may be vulnerable with $51 billion in debt

- Moses said he thought CoreWeave was vulnerable and cited $51 billion in debt, including leases.
- That flags financing exposure, not proof that CoreWeave cannot become profitable.
- Teams should test utilization, customer concentration, cash conversion, and who funds the buildout.

Its 6 sections, what it means for you and what to watch are on [the page](https://realalpha.app/v/bjikXzIJqSM/#analysis), free with an account:

- [15:41](https://realalpha.app/v/bjikXzIJqSM/?t=941) Moses thinks CoreWeave is vulnerable with $51 billion in debt
- [14:07](https://realalpha.app/v/bjikXzIJqSM/?t=847) Real AI demand does not guarantee infrastructure returns
- [17:22](https://realalpha.app/v/bjikXzIJqSM/?t=1042) Warehouse lines reveal where financing can fail
- [20:47](https://realalpha.app/v/bjikXzIJqSM/?t=1247) Customer concentration makes AI demand harder to underwrite
- [19:21](https://realalpha.app/v/bjikXzIJqSM/?t=1161) Off-bank credit leaves part of AI exposure opaque
- [22:52](https://realalpha.app/v/bjikXzIJqSM/?t=1372) Slow exits make private equity's smooth marks less informative

## Summary

Danny Moses was Steve Eisman’s former partner during the Big Short period. He now hosts the On The Tape podcast, whose offering includes a Substack project with Porter Collins and Vincent Daniel.

Moses argues that AI is a genuine long-term shift but says investors should test whether its massive capex, chip supply and customer economics can support profits. He compares AI financing with the warehouse lines that enabled mortgage securitization before the financial crisis and warns that lending has moved into less visible private-credit channels. Eisman and Moses discuss how higher rates pressure housing and leveraged businesses, as well as private equity’s extended realization cycle. On deficits, Eisman says Treasuries have no serious substitute; Moses says the dollar’s reserve-currency position is weakening, expects more quantitative easing and thinks investors may require higher yields.

### Minute by minute

- [0:24](https://realalpha.app/v/bjikXzIJqSM/?t=24) **On The Tape expands into media.** Moses says On The Tape features guests from several fields and has grown to include a Substack project with Porter Collins and Vincent Daniel, events with Clear Street and a Friday Night Dirty weekly wrap. He describes the podcast and writing as complementary parts of the offering.
- [4:54](https://realalpha.app/v/bjikXzIJqSM/?t=294) **Rates and debt pressure housing.** Moses says Treasury efforts to lower long-term yields are too small to move a market this large, and he sees rates staying higher amid inflation and heavy debt. He cites the Fed balance sheet at $6.7 trillion after reaching $9 trillion and U.S. debt above $40 trillion, up from $8 trillion; Eisman points to $500 billion of AI issuance and 7.5% mortgage rates. Moses says younger buyers think differently about homeownership and sees a K-shaped economy with weak activity below its wealthy end.
- [10:33](https://realalpha.app/v/bjikXzIJqSM/?t=633) **AI spending echoes past capex booms.** Moses says AI is a real secular shift but compares its capex to the 1999–2000 fiber-optic boom, where spending outran the economics. He says NVIDIA’s gross margins remain in the high 70s, but expects chip supply and competition, including China and open source, to pressure returns over time. He prefers Alphabet, Amazon, Meta and Microsoft on pullbacks because they can curb capex, questions whether OpenAI and Anthropic can become profitable, and sees CoreWeave’s $51 billion of debt, including leases, as a poor way to express the theme.
- [16:50](https://realalpha.app/v/bjikXzIJqSM/?t=1010) **AI financing echoes mortgage warehousing.** Moses sees a parallel between AI financing and the subprime warehouse-line model: lenders financed mortgage originators, which sold loans into securitizations, and funding stopped when loan values fell. He says AI-related securitization deals and lending outside banks, including private credit to technology firms, make leverage harder to track, though he is not calling the situation systemic.
- [20:19](https://realalpha.app/v/bjikXzIJqSM/?t=1219) **AI growth depends on concentrated buyers.** Eisman says NVIDIA’s 10-Q showed that five accounts made up 70% of its accounts receivable, despite revenue being up 110%. Moses says AI contributes at least half of GDP growth and that the economy has little room to slow the buildout. He also says the technology’s potential cybersecurity risks unsettle him, though he cannot predict the consequences.
- [22:38](https://realalpha.app/v/bjikXzIJqSM/?t=1358) **Private equity faces slower exits.** Moses calls private equity an attractive permanent-capital model but says fundraising pressures firms to put money to work, raising concerns about underwriting and covenant-light loans. Eisman says monetization timelines have stretched from three to four years to seven, perhaps 10. Moses says some funds cap redemptions at 5% and argues that retail investors may receive deals institutions pass on.
- [28:10](https://realalpha.app/v/bjikXzIJqSM/?t=1690) **Eisman frames his show as education.** Eisman says he started the show in April of the previous year with Dan Clifton, two days after President Trump announced tariffs; their first interview drew 5,000 views. He later added a weekly wrap and says his goal is to educate viewers without trying to prove others wrong.
- [32:50](https://realalpha.app/v/bjikXzIJqSM/?t=1970) **Moses recalls the Big Short trade.** Moses recounts Eisman holding up a zero to challenge a speaker’s claim that losses would stop at 5%. They describe their subprime credit-default-swap position as an opportunity trade: it started small, and they say being wrong for a year would have cost about 5%. Because the contracts were over the counter, they waited for marks rather than watching prices on a screen.
- [36:12](https://realalpha.app/v/bjikXzIJqSM/?t=2172) **Deficits could demand higher yields.** Eisman says the U.S. has no serious alternative to Treasuries, which underpin the global financial system. Moses counters that the dollar’s share of reserve currency has fallen from 71% to 57%, while gold represents 27% of central-bank holdings and Treasuries 22%; he expects quantitative easing to return. Both say neither political party has an appetite for spending cuts, and Eisman agrees that investors may require higher yields.

## Transcript

The Real Eisman Playbook, hosted by Steve Eisman, with Danny Moses.

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[0:05](https://realalpha.app/v/bjikXzIJqSM/?t=5) Hi, this is Steve Eisman, and welcome to another episode of The Real Eisman Playbook. I'm really pleased to say I have a recurring guest, an old friend, former partner from my big short days at Frontpoint, and who is now also a podcaster, Danny Moses, who runs a podcast called On The Tape. Danny, welcome back. Great to be here, Steve. You're now lapping me on the podcast arena, just so you know. You went from zero to 60. I'm still stuck at 20, But thank you for asking. Thank you. Thank you. So, you run a podcast called On the Tape. Tell us a little bit about some of your guests, things that have been happening on your podcast that are of interest. Yeah. So, I have guests from various fields. Some are technicians, some are strategists. We just had R.P. Eddie from Ergo, who does geopolitical consulting, whose clients are sovereign wealth funds, hedge funds, governments, corporations. Really, really enlightening. And part of the offering for On the Tape now also includes our sub stack, what do we do in contrarians at the gate? And just this week- Which you work out with- With Porter Collins and Vincent Daniel, who you obviously know very well. He had money a couple weeks ago. So now it's kind of all blended together. And Clear Street is now sponsoring-

[1:16](https://realalpha.app/v/bjikXzIJqSM/?t=76) Who's Clear Street? They're a broker dealer on Wall Street that's kind of grown over the last few years. And their service offering is really catering to every type of investor. And they do lending, their clearing, everything. And so we're excited to partner with them. We're going to be doing events with them. But I bring that up because it's now kind of all coming together. What started out is just on the tape that I started with, you know, the guys at CNBC, Dan Nathan, Guy Adami, and you've been on the show as one. Then they have three or four other properties now. This has now become part of this unit.

[1:45](https://realalpha.app/v/bjikXzIJqSM/?t=105) So it's been great. And, you know, writing, which I know you like to do, it's a great expression. We do a Friday Night Dirty podcast, kind of like your weekly rap. We have it called the Friday Night Dirty. We just sum up the week and kind of what's out there. And so it's been a lot of fun kind of growing both sides. So, let's start with your show. So, you interview people like I interview people. Tell us a few guests in the last, let's say, two months that you thought were particularly interesting. What did they say and what did you learn? So, actually, the podcast that just came out this week was with Ergo, which is a political think tank type of geopolitics consulting company.

[2:27](https://realalpha.app/v/bjikXzIJqSM/?t=147) And R.P. Eddy, who went to college with Porter Collins at Brown, runs it and gave us his thoughts on everything going on from geopolitical to midterm elections. He wrote a book in 2017 about Cassandras and how they're not just chicken littles and what to look for. And some of the stuff that came up that was really interesting was Fukushima has led to a power shortage in Europe because they went anti-nuclear, things like that. What was Fukushima? Yeah, that was a nuclear facility in Japan that burnt because of the tsunami that occurred. And the point being, the reaction to Fukushima around the world by not wanting to build nuclear and use, you know, and that stuff has created potentially the stuff we're in today up to and including AI power issues that we're now, as you know, you've talked about this at length.

[3:14](https://realalpha.app/v/bjikXzIJqSM/?t=194) How are we going to meet this demand? Right. A lot of it's nuclear. I mean, so it's amazing how one event- Which we might have had, what you're saying is, but for Fukushima. Correct. So it's just how those things. And so that was really interesting. Dennis DeBuscher was on recently. the son of the great Dave DeBuscher, who runs 22V Research. Wait, wait. Yeah. I know who Dave DeBuscher is. Yeah. And you know who Dave DeBuscher is. Well, tell the audience, who was Dave DeBuscher? Until recently, one of the last remaining, obviously, was part of a team that won the NBA championship with the Knicks in the 70s.

[3:44](https://realalpha.app/v/bjikXzIJqSM/?t=224) He was the powerful. Yeah, he was amazing. And 22 was his number. So, Dennis DeBuscher, who we know from ISI days and everywhere he's been, he's a strategist and an economist. He started a firm called 22V, and you know a lot of the people that work with him, including Bill Hebel. who you're a former bank analyst. I don't know Bill Hebel is there. You've got to get him on. Recently running bank research there. Oh, my God, I've got to get Bill on. OK. So, Dennis was there. And, you know, Dennis was saying he thought the market was going to hit $7,800 this year on the S&P. That's what he said last time he was on a market.

[4:16](https://realalpha.app/v/bjikXzIJqSM/?t=256) He was right. He thinks the Fed wasn't going to cut rates. This is even in the face of rising inflation. I thought they wouldn't cut rates. Sorry, I thought they wouldn't raise rates any longer for the rest of the year. I thought he was wrong about that. No, but recently he came on and said, no. So, the September chance, or the, sorry, the October chance, which has now dropped chance. Anyway, so, that's been great. So, it's been, you know, it's a nice mix of people that come on. And some come back on every quarter or so. Luke Groman, who you need to have on. Who's that? He's a macro guy, really amazing.

[4:43](https://realalpha.app/v/bjikXzIJqSM/?t=283) Forest for the trees. He's been long gold for years. And brilliant guy. And thinks away. You know, I like to get people on that don't think like everyone else does, right? And this is, so, kind of. All right. So, let's talk about, let's start with the Fed. OK. Now, let's talk about Besant. I can't figure out what Besant is trying to accomplish. So, he's Fed or Treasury? We're going to go to both. We'll do both. OK, fine. Give me your thoughts, because I got thoughts, you got thoughts. We'll start with yours. Fed raised rates. Do you think they're going to raise more? More importantly, Besant pulled this whole twisty twist thing, where he issued short-term bonds to buy long-term bonds to try and drive down long-term rates, which only caused long-term rates to go higher.

[5:28](https://realalpha.app/v/bjikXzIJqSM/?t=328) Just give me your thoughts about this whole stuff that's going on in that part of the market. You know, it's amazing. Nobody's bigger than the market itself. It doesn't matter if it's the Fed trying to control the short end or if the Treasury trying to control the long end. It's too big of a market. And you and I both know, if everyone knows your position and what you're going to be doing, your hand is out. So, as far as betting against the House, we wrote a piece on our sub stack, counting cards, basically. You could count cards right now and figure out what the dealer has, Treasury. You know what they're doing, they've told you. But it's too small and it's ineffective.

[5:59](https://realalpha.app/v/bjikXzIJqSM/?t=359) It's more symbolic in nature. So, that's the part to deal with best in the Treasury. As far as the Fed goes, if you're truly an inflation hawk, we would want the Fed to raise rates short-term to control the longer end of the curve, right? Because that's what it's supposed to happen in our economics class, right? It's supposed to happen. So, I don't envy either of their positions that they're in right now. Obviously, the higher oil, at some point, hopefully, there's peace of some kind in the Middle East and oil comes down. And then the assumption will be that inflation will come down. But we're running. We've moved the goalposts from that 2%.

[6:31](https://realalpha.app/v/bjikXzIJqSM/?t=391) number to the three. As long as it's going towards two, we're okay. But the cost of living is going up faster than wages. And we're in a cycle now. This feels like a much more secular than cyclical cycle as far as where rates, because rates were so suppressed for so long. And so you and I lived through, held hands at some points, and literally holding hands in 2008. And when you think about 2008, what did we do? We never solved the underlying problem. We transferred the debt to the government balance sheet. I know you've talked about this before. And rates were, you know, we went to zero on rates. And the Fed's balance sheet went from, you know, from zero to $9 trillion in a straight line through COVID, obviously, some things that came. And now it's sitting at $6.7 trillion. And the debt on our balance sheet in the U.S. went from $8 trillion to where it sits here to over $40 trillion. And so, rates higher, debt higher.

[7:23](https://realalpha.app/v/bjikXzIJqSM/?t=443) Quite an impressive move, by the way, to go from $8 trillion to $4 trillion. Amazing. Can you imagine being long that? What an accomplishment. Yes. How do you go long that? I wish I knew. Exactly. So, when you think about nominal growth and real growth in the economy, it's been physical and monetary stimulus that has been really what's been driving everything to a degree. And so, back to your original question, when you start to do things or you're forced to do things that are supposed to kind of rein that in a little bit, whether it's debt, whatever it might be, whether it's inflation, get things under control, no party wants to deal with this.

[7:54](https://realalpha.app/v/bjikXzIJqSM/?t=474) No one wants to stomach it. And so, again, I don't envy the position, but I think the course is set. And I don't think anything that they do right now will have any impact.

[8:03](https://realalpha.app/v/bjikXzIJqSM/?t=483) **Danny Moses:** Raising a quarter point here, stopping, cutting a quarter point here, buying $20 billion worth of 10, it's an ant.

[8:10](https://realalpha.app/v/bjikXzIJqSM/?t=490) I agree with you. The level of underlying rates is going to be higher for longer. The fact that $500 billion of AI issuance is taking place this year is crowding out. The statement that something in the private sector is so large that it would actually crowd out treasuries has never happened before, but it's that big. One thing that I would be very nervous about right now is just the whole housing sector. I think as of now, mortgage rates are 7.5%. People are not buying homes at mortgage rates of 7.5%. They're just not. So, it's a big negative. I think there's a demographic shift that has occurred since COVID.

[8:55](https://realalpha.app/v/bjikXzIJqSM/?t=535) Yeah. This generation, our kids' age, whether they buy a home or not, it's just different. They don't think of it like... Like we used to. I was giving a speech yesterday, and somebody way in the back, a young person, raised their hand and asked, is it a good idea to buy a house? And I said, nicely, I said, listen, if you find a house that you really like, and you can afford it, and you can afford the payments, include all the other payments, like the taxes and stuff, God bless, buy the house. But don't expect to make money buying the house. I think those days are completely over. Did you ever tell the story that from in 2008, so during the crisis that was going on, we all went down to Orlando, not the Vegas trip, the Orlando trip, the second year, it was an ASF, it was a fixed income conference, and you gave up to give a speech, and you said, you said you were going to pass out Prozac before you spoke.

[9:54](https://realalpha.app/v/bjikXzIJqSM/?t=594) Oh, I remember this. And I think you made a comment or something, turn to your left, turn to your right, one of those people won't have a job. A job, right.

[10:00](https://realalpha.app/v/bjikXzIJqSM/?t=600) **Danny Moses:** So, again, kind of along those lines of what part of the cycle are we in here, there's actually more wealth, there's more household wealth in the stock market right now than there is in people's homes.

[10:12](https://realalpha.app/v/bjikXzIJqSM/?t=612) So, what's interesting is that you shifted the risk, the stock market going down poses more of a risk to the economy right now- Than housing. Than housing. That is very interesting. Yeah, and then the K-shaped economy, obviously. You can see the high end of the K, the housing, who cares what rates are people are buying in cash or whatever it might be. But underneath, there are not a lot of transactions going on. The bottom part of the K, people are not buying. It's bad. It's not easy. But the top part of the K continues to carry the economy. It's amazing the spending that still goes on. All right.

[10:39](https://realalpha.app/v/bjikXzIJqSM/?t=639) So, let's turn to AI. OK. We could probably talk about this for the next three hours. Let's see if we can narrow it down to 20 minutes. There. Just random thoughts. Give me some random thoughts about what you're thinking about. So... And I'm sure you've had tons of guests to talk about it. Absolutely. So, weave all that in. So, obviously, not a tech person, right? Me neither. But you know what? Yeah. You don't have to be a tech person to understand what's going on. Correct. So, a couple of comparisons, and then every cycle is very unique. So, this secular trade is massive. It's a secular change, right, that I thought would, by now, have become more cyclical.

[11:21](https://realalpha.app/v/bjikXzIJqSM/?t=681) What do I mean? NVIDIA's gross margin staying up in the high 70s. If you told me two years ago that we would still be in the high 70s, I'm like, there's no chance. There's no chance. At some point, competition comes. Right. The memory chips. I know what's going to happen. I don't know when, but Micron, great, good for them. There's a reason the stock's traded eight to nine times earnings, because people don't care what earnings multiple trades at today. It's like, what does it look like? Is this a commodity? Is this going to be a commoditized product? And the answer is yes, at some point, because all you've got to do is build a fab and start making these chips at some point.

[11:49](https://realalpha.app/v/bjikXzIJqSM/?t=709) What really bothers me, and the comparisons that I see, it's a little bit of 1999-2000 and a little bit of what we lived through, GFC. What are the comparisons? 99-2000, the fiber optic craze. You and I were working together at the time. As everybody knows, Danny and I were at Oppenheimer. I was the financial services analyst. Danny was one of the more senior salespeople. And Danny used to take me on the road to go see clients. I could tell that story. That would be a seven-hour podcast. Taking you to Alabama to an embassy suite with no hot water and you coming downstairs. That was quite something.

[12:23](https://realalpha.app/v/bjikXzIJqSM/?t=743) But let me tell a story now that you bring it up. So, I started there in 1997. 1996, you were one of the first analysts I met. Merith Whitney was working for you. Vincent Daniel was working for you. And your first call on subprime auto and home equity lending, I'm a salesperson sitting there covering accounts. I cover hedge funds, state pension funds. And you got up on this podium and said, the following eight stocks are going to zero. And I turned to the guy I was kind of learning from, Barry Koretnik. And I said, Barry, how do I make that call exactly? He goes, you don't make that call. I said, I don't make that call.

[12:57](https://realalpha.app/v/bjikXzIJqSM/?t=777) He goes, you can't call a portfolio manager or analysts and say, the stock you own is going to zero. You get him over here. You talk a little bit, whatever. So, I grabbed Meredith. I grabbed Vinny. I grabbed you. I'm like, what is this Moody's trust securitization data? And why should ... Anyway, I wanted to tell that story because that looked ... Anyway, so, 99, 2000, Henry Blodgett, Jim Jungjahan. We're living in this very similar ... Yeah, Henry Blodgett was an op and on him. Yes. And Jim Jungjahan, who was one of the ... Jungle Jim. Jungle Jim. There's a reason his name was Jungle Jim. covering JDS Uniphase and these things, right?

[13:28](https://realalpha.app/v/bjikXzIJqSM/?t=808) And you sit there as a salesperson, and you sit there as an analyst covering financials, which you can't really meme, book value this, ROE this, it's hard to get past the stuff. They can dream the dream. What was the dream? The dream was that fiber optics were changing the world, that the internet was growing so fast. They were right. They were right. But if you actually stop to do the math, which is what I'm going to get to in a second, on the amount of capex that was being spent, the amount of fiber that was being laid, the amount of fiber that was being leased, amount of equipment that was being leased by Lucent and Nortel, how Lucent and Nortel were basically, you know, providing loans.

[14:01](https://realalpha.app/v/bjikXzIJqSM/?t=841) to people to buy their equipment to do this stuff.

[14:03](https://realalpha.app/v/bjikXzIJqSM/?t=843) **Danny Moses:** The math didn't work. You could have wrapped that fiber around the globe 10 times.

[14:07](https://realalpha.app/v/bjikXzIJqSM/?t=847) So stop and do the math back to where all this capex is on AI. And again, it's a real story. I'm not saying that it's not, but so was the internet. And there was winners and there were losers into that trade and trying to identify the secular and the cyclicality of various names within the AI play. For example, I love Alphabet, Amazon, on Met and Microsoft on pullbacks. Why? Because they have an incredible business. Yes, their CapEx, in some cases, has now gone negative for the first time. They can turn that... Their cash flow has gone. The cash flow, sorry, cash flow has gone. They can turn off that spigot whenever they see fit. They said, we're done. We're done. It's enough. So, where is the mismatch between the capacity that we're building, the time that it's going to take, the demand, and the economics of the products which are being created? I have no idea if OpenAI is going to make it or not. I know we've had people on the show talk about it. Anthropic. I think are burning cash like crazy. At some point, you're going to need to show that you can make money, a profit. I don't know where the math ... Show me the math, both on the enterprise demand side and the consumer demand side with token and all that. Again, I won't pretend

[15:12](https://realalpha.app/v/bjikXzIJqSM/?t=912) to know all that. But common sense tells you that if you were to stop and do the math on all the loans, the amount of debt that's gone out there, what the prices are that people are charging, over time, you're going to create more chips. GPU pricing is going to come down. You can have the next generation, the next generation. China's coming, open source, this, that, and the other. So, to me, it's not something I want to short. There's a few names out there that aren't as financially sound as some of the others. Like who? CoreWeave, which I think is vulnerable. Why is CoreWeave not so financially sound?

[15:43](https://realalpha.app/v/bjikXzIJqSM/?t=943) It's really like a we work of the trade. Yes, they're buying chips. They have big clients. And now they've gone to renting out shorter term. So, they have a mismatch, potentially, on their balance sheet. They have $51 billion in debt, which includes leases, obviously. You know what's funny? Yeah. You just said that Corweave has $51 billion in debt. It's a lot of money. Yeah. But we're sort of... Numb? The numbers are so big. You're numb. Like in the context of Corweave, $51 billion, when you take a step back and you actually think about it, you say to yourself, that's frightening. But you actually have to take a step back.

[16:28](https://realalpha.app/v/bjikXzIJqSM/?t=988) That's my point. Because the numbers that are being, you know. They're spending a trillion dollars this year. So, when you say that CoreWeaver has $50 billion in debt, my initial reaction was, eh, whatever. Whatever, right. Who cares? It's not so big. Exactly. When are they going to make money? So, if you're not making money, you need a path to profitability. Could they make money at some point? I haven't done enough analysis. My point is that that's not a stock I want to own to express my AI theme. Okay. Okay? That's just not. So, where are the similarities to 2006 and 2007? I'll tell you where it is, especially with the news a few months ago about this securitization partnership between NVIDIA and all the banks on Wall Street.

[17:05](https://realalpha.app/v/bjikXzIJqSM/?t=1025) Yes. Okay. Which I don't know what's happened since then. They're starting new deals right now. It's starting. It's starting to do now. Okay. And so, remember, I'm telling you as if ... I'll explain it to the world, which you already know because you taught me everything to deal with this, was the mortgage trade went on because of one reason and one reason only. Wall Street's willingness to lend to the mortgage originators to provide lines of credit so the mortgage companies could produce these mortgages and they could package them, Wall Street, and buy them and sell them to the world. Same thing.

[17:34](https://realalpha.app/v/bjikXzIJqSM/?t=1054) Let's actually just repeat that. So Wall Street, just so everybody understands, Wall Street would basically lend money to a mortgage lender so that the mortgage lender could lend money to a consumer. And they would take that loan and they would sell it to Wall Street, who would then package it and sell it to investors. So, they would use a warehouse line. They would provide a warehouse line. They would provide a warehouse line. And as long as the economics kept working, Wall Street was more than willing to provide them the warehouse line. Correct. So, if a loan's at par, which is 100, and accredited home lenders cost them 2.5% to originate a loan, their cost is 102.5%.

[18:09](https://realalpha.app/v/bjikXzIJqSM/?t=1089) As long as you can sell loans for more than 102.5%, it works. We're all in business.

[18:14](https://realalpha.app/v/bjikXzIJqSM/?t=1094) **Danny Moses:** The minute the thing started to drift lower, you and I both know what happened, Wall Street started to pull the warehouse lines.

[18:20](https://realalpha.app/v/bjikXzIJqSM/?t=1100) And then what happened? Those mortgages were then stuck on the balance sheets at New Century, Countrywide, or Cardinal Menders, and the rest is history. Right. There is a similarity here within kind of the lending and when we got into the securitization space. And the craziest quote was Larry Fink on CNBC, which was a great interview. They had everyone around. When was this? This was a couple months ago when they announced this deal. Okay. Jensen was on there. This was the deal that Jensen created with Wall Street. Yeah, it was created. They were all sitting around. Right, right, right. And I think Fink was the only one that was remote.

[18:46](https://realalpha.app/v/bjikXzIJqSM/?t=1126) Everyone else was actually in the CNBC studio. Right. And Fink goes, you know, this is amazing. This reminds me so much of what we did with mortgage-backed securities back in the 70s. This is incredible. I'm like, what did you just say? What did you just say? So anyway, so there are some, you know, and the other thing. The other thing, Steve, is, just to take this full circle here, is that, and you know this better than anyone, we were so shocked in 2008 that the government had no idea. The reason we got so scared at the end, we're like, whoa, we thought you knew. You thought we knew. Me, the government.

[19:16](https://realalpha.app/v/bjikXzIJqSM/?t=1156) Yeah, the government. We thought the government knew what we knew. They weren't tracking anything. They didn't know the leverage anywhere. Well, what's happened since then is the perfect storm, which is that a lot of the lending has gone outside of the banking system. Correct. Yes, it's at Blackstone. It's at Apollo. And I know you've had guests on and Glenn Short. You've had people that have talked about this. But I don't know what's, you know, we don't know what's the type of, you know, the amount of lending that's actually out there. A couple trillion dollars, what are they doing? Private credit.

[19:40](https://realalpha.app/v/bjikXzIJqSM/?t=1180) And a lot of the private credit trade has lent itself into the AI growth sector and the technology sector. So, there's nothing systemic. I'm not saying that, but this has to be accounted for somewhere. And it just seems like, yeah, one-off bad credit here in the private equity world and private credit, a one-off thing here. things don't feel, things feel fragile to me overall because the fragility that, you know, we're at five point, as we sit here today, we could be very different when this airs, but 5.27, 5.3% 10 year yields. We can live with that. It's not an issue, right? If you have the growth to support it, but you're reaching levels now where companies that aren't growing, their ability to grow in a higher rate environment is just different. This episode is brought to you by One of the things that bothers me, and I'm like you, I'm not going out telling people to short the whole AI trade.

[20:29](https://realalpha.app/v/bjikXzIJqSM/?t=1229) I think that would be insane. But one of the things that concerns me is the concentration risk. So, just as an example, NVIDIA reported maybe like a month ago, I think revenue was up 110%. Everybody said, hurrah. But the next day, you got the 10Q. And the 10Q said that 70% of NVIDIA's accounts receivable is from five accounts. I was like, and I remember when we were at Oppenheimer, there was a software analyst there. Melissa Eisenstadt? Melissa Eisenstadt. And I remember she told me this story where the bankers came to her with a software company to bring public. And it was a very fast-growing company, but she dug down into the numbers, and she realized that the company had like three customers.

[21:18](https://realalpha.app/v/bjikXzIJqSM/?t=1278) And she said, that's too concentrated. I'm not going to take a company public that has three customers. Well, NVIDIA is the largest company in the world, and 70% of its revenue comes from five customers? There's just a tremendous amount of concentration risk. And the other part is that so much of this whole chain is dependent upon the health of OpenAI and anthropic, which I can't handicap. Nobody can handicap. We don't even have any financials at this point. It's a national security issue in the sense of the economy, the reliance we have right now on the growth. It's contributing a huge amount of growth to GDP.

[21:50](https://realalpha.app/v/bjikXzIJqSM/?t=1310) Oh, it's at least half of GDP growth. It's massive. And so, you can't afford to take a step back and take a deep breath. No one on Wall Street or in Washington wants to say, oh, let's slow it down a little bit. It's the last thing they want to see. So, what do you make of the whole AI is going to destroy planet Earth routine? We'll figure it out. Listen, again, I don't know the technology enough. It's a little scary, the stuff that I've seen, approaching it from a non-investor lens. We already have cybersecurity issues going on all over the place. Hopefully, this could be used in a way to help cybersecurity.

[22:24](https://realalpha.app/v/bjikXzIJqSM/?t=1344) but it seems like there's some rogue agents. I mean, I've watched these videos. I try to educate myself and I get so scared when I watch it. I'll never, like, how do you try? that. If that's going to happen, there's going to be things that happen. It happens in every technology. But I can't predict it. I think some bad things are going to happen. Just hopefully it's not catastrophic. Right. Okay. Let's go to our good friends in the private equity world. Okay. I mean, one thing that's been happening is, I mean, if we were talking five, six, seven years ago, that amount of time for monetization was three to four years. Now it's seven. Maybe it's going to 10. Do you have any thoughts on the future of private equity?

[23:05](https://realalpha.app/v/bjikXzIJqSM/?t=1385) It's an incredible business model in the sense of permanent capital. Management fees just go on forever. It's not an area. You can trade them. So let me go back. You can trade them at massive inflection points when people get so scared that private credit's going to blow up and they destroy the stocks. You have a chance to buy them. And the flip side of that is when it looks like the Fed's going to be in a rate cutting cycle and these things explode higher. But for the most part, Like I said before, they have replaced the traditional banks as far as lending goes. Yes, they have. And because they're not regulated, but they're smart, they all own a piece of their business, they're not trying to blow their firms up, they had one job.

[23:39](https://realalpha.app/v/bjikXzIJqSM/?t=1419) Go out and raise as much money as you can. We've been around that world. We know that. So, your salespeople go out, insurance companies, pension companies, go out and raise as much as you can from them. Let's close fund one, fund two, fund three, fund four, fund five, fund six. So, there's a tail here. So, they have the ability to keep investing, whether it's in the same companies that they want to invest or whatever. So it was an AUM game, gathering game for them, because that's where they can make... Now, to your point, distributions and realizations is really where they want to make their money. And those go through cycles. We haven't had a true shutdown cycle since COVID, which was a one-off in that sector, since it's been a secular growth story after taking assets away from the banking system. So it hasn't been tested yet. We haven't seen anything other than during COVID. And what happened during COVID? The Fed and Treasury were buying HYG. They resurrected a lot of companies that probably they'd lend to that should have gone to zero, and they didn't. So, they were more focused on it. And what do they have to do? They're paid to put the assets to work, the cash to work. So, they lend. And I'm

[24:41](https://realalpha.app/v/bjikXzIJqSM/?t=1481) concerned about some of the coverage ratios, the EBITDA ratios. I know you probably do a teach-in on your sub-stack on that, on covenants and things like that, covenant-light loans, so to speak, because they needed to deploy. So, you underwrite in a different way when you have so much money, because you have to deploy that money to raise more money. Fund seven, let's go. We're almost done with fund six. It's already accounted for. I think it became an AUM gathering game over a maximizing- Let me pause you on that point, because I think this industry really took off post-GFC, like exploded. Amazing.

[25:14](https://realalpha.app/v/bjikXzIJqSM/?t=1514) Now, in its defense, one of the reasons why it exploded was because the banks had to pull back, so somebody had to replace them. But on the other hand, there's another aspect to this, which I think is really hurting them, which is, you're an institution. You were not previously invested in private equity. You were in public markets. 2008 was unbelievably painful, because you lost basically 40% of your money like that. You don't want that volatility anymore. So what you did was, you put money into private equity, because at least you could pretend that it wasn't volatile. Now, the private equity is just as volatile as the public markets.

[25:56](https://realalpha.app/v/bjikXzIJqSM/?t=1556) It's just that you don't get a price every single day. So, you could sleep at night pretending to yourself, I got my money with some real great professionals in private equity who are going to make me a lot of money, and it's not volatile. And I think that's one of the big reasons why that industry grew so much. Now, no one's getting monetized. Rates keep going higher. This business really only works in low rates, because it's a leverage business. I think the private equity business is going to go through a long period of very troubled times. So this is like, this reminds me of definitely one of your favorite movies, definitely one of mine, Willy Wonka with Gene Wilder, right?

[26:34](https://realalpha.app/v/bjikXzIJqSM/?t=1594) Where he brings out the contract at the end. You lose! And he brings out this long thing, goes, Article 4, Section 3, whatever. This whole thing with gating, okay, which you never think about when times are great. Gating of a fund. All these private funds are gating. Demand for redemptions is exceeding what they wanted to give. So they all, we're done at 5%. There's a built-up amount of money that needs to go out the door. And the second thing is, to the point you just bring up, is the mark-to-model versus the mark-to-market. There's no incentive to mark-to-market, if you don't have to, to your point, because the AUM changes.

[27:06](https://realalpha.app/v/bjikXzIJqSM/?t=1626) Everything changes at that point. And the last thing, Steve, is that if you're a retail investor, which a lot of people that watch you here are, and I've been saying this for years, how do I have the good fortune of being able to invest in this particular product? Why am I the lucky one that sees this, you know, this private deal that comes to my, why am I getting this in my inbox? Like, you know, this whole distribution into retail, getting access to these sophisticated products happens.

[27:33](https://realalpha.app/v/bjikXzIJqSM/?t=1653) **Danny Moses:** For one reason and one reason only, they need to fill it. They need to fill these deals. Institutions don't pass on good deals.

[27:39](https://realalpha.app/v/bjikXzIJqSM/?t=1659) There's always, it's like an IPO in equities. When did the IPO doesn't work? When the hedge funds and all the large institutions and Wellington and Fidelity don't want it. And they stuff retail. What did we used to do on our desk? Happy Thanksgiving in July. You know, they stuffed us. Oh, we asked for 200,000 shares. Steve, hey, Danny, what did we get out of that IPO? 200,000 shares. Fuck. You know, you don't want 200,000 when you ask for 200,000. Anyway, my point is that they might be overstaying their welcome in that. And I think that's another thing that has happened, is allow retail investors to have everything that institutions have.

[28:12](https://realalpha.app/v/bjikXzIJqSM/?t=1692) Careful what you wish for. What else should we talk about? I mean, let's talk about the media world that you've entered here. I would love to ask you some questions. Okay, go ahead. You know, you've been involved in the markets longer than I have, a few years longer than I have. And I made the transition to kind of this media podcast before you do. And you've always been a professor. You've always loved to teach and to learn. That's always been your thing. If you didn't go to Wall Street, you'd have been a professor at Columbia. That's what you would. I could see you in the outfit. You'd be spectacular.

[28:38](https://realalpha.app/v/bjikXzIJqSM/?t=1718) Probably a pipe. Long cardigan. Long cardigan sweater. Probably a pipe at this point. But so I think there's, I want to ask you the enjoyment. You asked me, the opening question was, what have you learned from your guests? I love learning new things. Me too. You do as well. So talking about the journey, because you were on On The Tape four years ago, you came on a few times. Right. And you were good on it. I think you were a little bit, you weren't comfortable, not because you weren't comfortable what you were talking about. You're kind of like, what is this? What am I supposed to say? And now, look what's happened.

[29:09](https://realalpha.app/v/bjikXzIJqSM/?t=1749) So, congratulations on what you're doing. And I know who the brains are behind the operation. That would be my wife, Valerie. Yes, obviously. And so, that's a great team. So, talk about your journey. Sure. Yeah. So, we started April of last year. I interviewed Dan Clifton of Evercore. We had the fortune of, it was sort of weird, I had scheduled him just because I just had scheduled him to be my first guest. And it turned out that I interviewed him like two days after President Trump announced the tariffs. So, couldn't have been more relevant. I remember we did the interview and I think we had 5,000 views.

[29:55](https://realalpha.app/v/bjikXzIJqSM/?t=1795) And we were like, wow, 5,000 people. Why don't you watch me? How crazy is that? And... So, look, it took time. First of all, I found that I could interview people, and then we added the weekly wrap, which is, when I wrap up the weekend, I just speak into a camera. And the first several times I did the weekly wrap, it was awkward, because you're looking into a camera, there's nobody here, you're getting no feedback, and you're just talking. It took time to sort of ... Sounds like being a research analyst on Wall Street. Exactly. And so, I think the sort of the niche that we've sort of developed, which you intimated at, is I'm not here to tell anybody that they're wrong or to convince them that I'm right and you're wrong.

[30:48](https://realalpha.app/v/bjikXzIJqSM/?t=1848) I'm just trying to educate people so that they have a better understanding of what's going on. And I try and do that in a very non-confrontational kind of way. So, and it sort of took off. It's interesting. I need to ask you on that because I'm flipping it completely. Yeah. We're sitting on the desk. You have money at risk. As a portfolio manager running your fund, you would do everything you could to explain your side of the story to an analyst that you either thought wasn't being, not honest, but wasn't really looking at these things from the standpoint that you were. It could be a lender. It could be whatever it might be.

[31:24](https://realalpha.app/v/bjikXzIJqSM/?t=1884) And you would get heated and you would get very upset. I would. Not even because maybe the stock wasn't working yet because you're like, are you like you not see what I see right and that's because you were coming at it from a different angle right you you're you have a position on you're not forcing them to do anything but my point is that it's interesting to see how you can take you literally can wear that hat and wear this hat because you have to have a little I'm a little older yeah so I'm not quite as emotional as I used to be and I've I've sort of taken the attitude that what I'm trying to accomplish is education there's some great stories Steve I could we could can I tell a couple stories? Go ahead. Okay. This episode is brought to you by Indeed. You're ready to level up your business, but the pressure to find the right person to make that happen is intense.

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[32:58](https://realalpha.app/v/bjikXzIJqSM/?t=1978) The story I get most, the question I get most. The question you get most. About the big short, which is 100% true, because the book was 100% accurate, the movie was 75% to 80%, is this, you holding up the zero. And I can't tell you, I still get emotional when I think about watching you actually do it. People said, did he really do that? I go, he did that. I mean, Ryan Gosling did a much better job of narrating. You were in the room. You were sitting next to me. It was just you and me. That's right. I mean, the room was full of fixed income people. And I'm next to you, ho-hum, ho-hum, option one guy up there.

[33:32](https://realalpha.app/v/bjikXzIJqSM/?t=2012) I'm like, I go, Steve, what are you doing? And you raise your hand, and you show a zero. And the guy's speaking and literally said, I'm sorry, is that a question? No, that's not a question. There's a 0% chance your losses are going to stop at 5%. I'm sorry, what? Zero. And then he's trying to get his wits about him, the itch and our block guy, option one guy. And literally, as he's about to come back at you or say something, or hopefully you go away, your phone rings. It was Valerie. Valerie's calling you and I'm looking now your phone's ringing in this thing. We just went to dead silence when you stopped everything by doing the zero and you walked out and you left me there and I did this. I literally, I've never, like you see it in movies. I literally went like this. I didn't know what to do. And we were sitting in the middle. Like it wasn't like I could get up and go. So I stayed for the rest, but you actually did it. You actually did it. And the dinners and I was, I can't even make that up. Like the stuff that went on there. It's a once in a lifetime. It was crazy. And the other thing people always ask is, no one insinuates that we're lucky. You know, I always say it as it was an opportunity

[34:36](https://realalpha.app/v/bjikXzIJqSM/?t=2076) trade. We couldn't understand how you could effectively express the short theme for these companies in the form of a bond, which you're shorting at par, which can't go really up more than par, can go up maybe a couple of points and paying two to 3% coupon. So if you're wrong, you're wrong for a year, you lose 5% and you're out. Michael Burry, I always tell this, we didn't know him at the time. And if that had been us, I think you would admit, if we put that on in 2004, No chance we're around in 2006. Not even possible. We've already been out of business. Yes, exactly. For once in our lives, our timing was impeccable.

[35:12](https://realalpha.app/v/bjikXzIJqSM/?t=2112) Steve, the day we put it on, that trade was small. We started out small. Come in the next day, and immediately the marks that we get were in our favor. Right. Not once did it go against us. Every day would start, Danny, did you get the marks? Anyway. Right. So, everybody understand, when you do a credit default swap on subprime mortgages, which is what we did, There's no screen. It's OTC. It's not like, during the day, you and I are looking at the screen and we're going, oh, the price is changing to our benefit. We would have to wait until the end of the day, or sometimes in the morning, to get prices.

[35:47](https://realalpha.app/v/bjikXzIJqSM/?t=2147) And you were always the one to get the prices. And I would always say, Danny, what's the price? What's the price? How are we? We're starting out good. We're up a little bit to start the day. So it changed our mindset. So it really was a useful tool. But that was the other misnomer. People are like, oh, I go, no. There was a long book. There was a short book. And if we had wanted to, that book could have been much bigger. But we were doing the thing that we thought was responsible. So anyway, wouldn't trade those times for anything. Even though it took years off of our lives, that was amazing. Certainly did.

[36:14](https://realalpha.app/v/bjikXzIJqSM/?t=2174) I do want to ask. I do want to talk about something else, though. I want to talk about the debt and the deficit. Okay. Because I know you care. I do care. You care as an American. By the way, I actually wrote on Substack, you can do those chats and notes. Yes. So, I wrote a note today comparing what's happening in France versus what's happening here, because there are real parallels. The debt to GDP in France and the U.S. is roughly the same, about 120%. France, like us, is completely, what's the right word, politically paralyzed. And they're beholden to the euro. Right. But they're completely politically paralyzed about cutting the deficit, to such a degree that one of the people who's running for president, Marie Le Pen, actually wants to reduce the retirement age from 63 years to 60, which would increase the deficit even more.

[37:07](https://realalpha.app/v/bjikXzIJqSM/?t=2227) Rates are now marching higher in France. It's not that I don't have concerns about the deficit. It's just that, because we are the reserve currency of the world, and the entire financial system of planet Earth functions on treasuries, I don't see the alternative. Put it this way. If there was a serious alternative to treasuries... we'd be in trouble. Because people could say, I'm not going to own treasuries. I'm not going to do repos with treasuries. I'm going to do repos with, I don't know, Bitcoin, whatever. And if that was a possibility, whatever problems that you're concerned about with the deficit would be much more important. So, let me push back. So, we have no appetite to cut spending either. No kidding.

[37:56](https://realalpha.app/v/bjikXzIJqSM/?t=2276) Nobody does. Nobody. Neither side. Sorry. We're just like the French, in that sense. So, we wake up one day, and in France, they decide to send yields higher because they're concerned about their ability to fund themselves. The List Trust moment three years ago in the UK, same thing. She's gone. I mean, because you have these periods of time. We might be experiencing a little bit of that in our bond market. The reason that, OK, we're moving higher because of economic growth. OK, we are, to some degree. But maybe part of it's a term premium of what people risk people will. Let me give you a couple stats here.

[38:29](https://realalpha.app/v/bjikXzIJqSM/?t=2309) The dollar is 57% of the world's reserve currency. It was 71% a couple decades ago. It's dropping. It's still dominant. It's not going anywhere. Central banks, global central banks, number one holding is not U.S. treasuries. It's gold at 27%. Treasuries are 22%. And now gold's gone up. It's the reason it's obviously passing it to a degree. And then the brick nations were talking about, for a while, coming up with their own currency. So there are things underpinning that concern me. we're playing with fire in the sense of, I think we take for granted that the dollar is still going to be the world's reserve currency.

[39:02](https://realalpha.app/v/bjikXzIJqSM/?t=2342) But listen, you could drive yourself crazy. I'm not, you could literally drive yourself crazy. It's not sustainable, but the math, if this was the balance sheet that you were underwriting USA Inc., I think Mary Meeker did it in 2008, whenever that was in 2008 or nine. Remember her, Morgan Stanley, she actually did a, let me treat the USA as if it was a company. Right. And you analyzed it. So anyway, there's some, there's some things that just concern me. I don't know, to your point, I mean, who's willing to take pain to help us get us out of it? I believe QE is coming again. Do you really? 100%.

[39:32](https://realalpha.app/v/bjikXzIJqSM/?t=2372) Because? I mean, the only way out. I don't know how you're going to—you're going to have to print your way out and deal with the consequences later.