The War That Made The Fed; The Fed That Made The War

Authored by Byron King via DailyReckoning.com,

It’s Veterans’ Day, originally called “Armistice Day” to commemorate the end of the Great War (aka World War I) on Nov. 11, 1918.

In this regard, it’s appropriate to discuss the war. And since this is an investment-oriented letter, we’ll address how the U.S. Federal Reserve helped finance it.

Below, we’ll look at how the 1914-18 conflict reshaped America’s system of national finance, and laid foundations that eventually brought us to the current situation of $38 trillion in national debt and $4,000 gold.

Great War recruiting poster. Courtesy Imperial War Museum.

The Central Bank’s War

Most people don’t associate the Fed with World War I, but the institution played a crucial role in the event and I’ll go down that rabbit hole. Here are some historical basics.

Let’s begin on Friday night, December 23, 1913, meaning Christmas Eve weekend when few people (except deep insiders) were paying attention. President Woodrow Wilson signed the Federal Reserve Act into law.

President Wilson signs Federal Reserve Act. Courtesy Federal Reserve History site.

To all intents and purposes this new entity was America’s central bank, although its creators didn’t label it as such due to strong public aversion to the idea. Recall, for example, how in 1832 President Andrew Jackson vetoed a bill that proposed to re-charter the Second Bank of the United States. Long story; not here.

Later, as 1914 unfolded the Fed stood up and began to work within the U.S. government system and of course played a role within the national economy. By design of its promoters, the Fed was intended to oversee a so-called “elastic currency,” not necessarily tethered to a fixed supply of gold in the vaults of America’s banks.

That is, the idea behind the Fed was to avoid monetary disasters like the Panic of 1907, when the federal government literally ran out of cash and had to borrow gold from banker J.P Morgan. The Fed’s mission was to issue credit – aka “create money” in the form of dollars – during tight times and ensure the general liquidity of the American economy.

Banker J.P. Morgan bailed out Uncle Sam after the 1907 Panic. Courtesy Library of Congress.

And who knows? The idea might have worked out well, except for what happened later in 1914, in August to be exact, when Europe went to war on all fronts. The short version is that Austria invaded Serbia; Russia mobilized; Germany mobilized; France mobilized; Britain mobilized; and pretty soon, almost every nation in Europe was fighting, to include combat across the globe from Africa to South America to the South Pacific.

Just a few months later, by about December 1914, pretty much every nation involved in the European fight was at or near technical insolvency. Governments had blown through their respective treasuries and could no longer pay the bills; but since when has that ever stopped a war, right?

Meanwhile, in those few short months, the European war sparked a business revival in the U.S. The short version is that innumerable banks and businesses sold and financed goods to belligerent nations, mostly to Britain, France and other “allied” parties because an Anglo-French naval blockade of Continental Europe kept Germany or Austria from importing too much from the U.S.

Insolvent or not, when Britain and France ran out of cash with which to pay for U.S. goods, they turned to credit markets. And in the U.S., President Wilson was okay with that. He supported American banks and businesses to make sales with credit, and this is also where the Fed comes in because it backed the banks’ issuance of credit.

Plus, under Wilson, the U.S. government went so far as to guarantee many billions of dollars’ worth of British and French bonds. This meant that if investors bought British or French paper, they would be assured of return on their investment if the bonds defaulted.

The takeaway here is that, among its first macroeconomic impacts, the Fed issued credit to enable Britain, France and other nations to buy U.S. materiel. This was inflationary at home in the U.S., and beyond doubt it enabled and prolonged the European war.

War, Bond Markets, and a Global Credit System

This Fed-backed wartime credit system continued to 1917, when the U.S. formally entered the war and began a vast, internal military buildup. Then, the requirements for U.S. government funding immediately skyrocketed, a macroeconomic issue that landed squarely at the front door of the Fed.

In other words, instead of just issuing and guaranteeing credit for Britain, France, etc., the Fed now had to fund a colossal American military effort that included bringing millions of men into the Army and Navy, plus building out a vast array of equipment, munitions and much more.

This U.S. military buildup led to new levels of federal borrowing at a historically unprecedented scale, via a series of what were called “Liberty” loans, and a later “Victory” loan issuance.

The Sine Qua Non of war: men and money. Courtesy U.S. Navy, History & Heritage Command.

In essence, the U.S. government sold Liberty Bonds during the war, and Victory bonds as the war concluded, all to raise money to fund military operations and then meet post-war obligations.

One interesting aside is that in those days before computers and electronic trading, bonds were printed on sturdy paper in fancy script, like this:

U.S. 1918, 25-year Second Liberty Loan, $50 face value @4.25%. Courtesy U.S. Treasury.

Obviously, there’s a $50 bond. And note the “coupons” printed on the same sheet of paper. But also, note the single serial number on the bond and all of the coupons. The idea was that after a period of holding, the bondholder would “clip the coupon” (i.e., literally cut it out with a pair of scissors), take it to a bank, and redeem it for the interest due.

All in all, millions of Americans and many foreigners bought these bonds, and thus was created a global-scale market for U.S. government debt. If there was any pre-war doubt about the idea of the U.S. dollar as a global-scale currency, the Liberty-Victory bonds sealed the deal.

Indeed, this 1910s-era, wartime government finance mechanism became DNA, so to speak, of modern American federal fundraising. World War I and the Fed created those above-noted bond markets that are closed on Veterans’ Day, today. And the pathway from financing the Great War to the current system of deficit spending and national debt is clear; it’s the same mechanism, updated to modern technology, to be sure.

Modern War Is Industrial War

Now, a few more comments on what all that Fed-credit bought, way back in the 1910s. Because the war was about far more than high finance, raising money and bond trading.

First, all of that financial credit to Britain, France and other nations allowed them to raise large armies and navies, send them into battle, and get entire generations of young people killed; and Germany and Austria lost similar, large numbers. Even today, that demographic echo bounces around across Europe if not the world.

Anymore, it’s difficult to envision the scale of manpower (and it was almost entirely men) who went into the armed forces of all belligerent nations; and this certainly includes the U.S. after President Wilson marched the U.S. formally into war in 1917. Obviously, the war distorted the entire scope of the population and labor force within Western nations. And people write long books about this; not here, not today.

Great War recruiting poster for British Army. Courtesy Dominicwinter.co.uk.

In a related macroeconomic impact, the global war required vast amounts of goods and services to equip all of these new armies and navies. And again, American and Fed-backed credit led to immense redirections of capital in economies across the world, and certainly within the U.S. And this was the true industrial origin of the modern military-industrial (and Congressional) complex that relies on large levels of government funding.

Great War poster depicting military and industry. Courtesy Bonhams.com.

For example, during the war U.S. President Wilson essentially nationalized America’s railway system, supposedly to expedite movement of troops, equipment and other supplies. The effect was several years of profound overuse and underinvestment, a situation from which the overall rail industry never really recovered.

Meanwhile, across America the war led to boom-times (excuse the pun) for agriculture and quite a bit of manufacturing, which led to large amounts of excess capacity that fell into disuse when the war ended in November 1918. And this led to a postwar recession, or more accurately a “mini-depression” that carried over to about 1921.

Also of interest, a youngish fellow named Franklin Roosevelt served as Assistant Secretary of the Navy under President Wilson and learned quite a few things about how the U.S. government worked; especially, how to raise a lot of money and spend it in a hurry. More books on these matters, to be sure; but not here.

My goal with this note is simply to point out that it’s Veterans’ Day, remember the Great War, spur a few thoughts about all who fought and sacrificed, and highlight how the Fed played a major role in funding it all.

Indeed, World War I was the war that made the Fed; and in another sense the Fed made the war. We still live with that legacy.

Tyler Durden Tue, 11/11/2025 - 16:20

US Government Agencies Terminate 67 Wasteful Contracts Worth $1.4 Billion: DOGE

Authored by Naveen Athrappully via The Epoch Times,

Federal government agencies terminated and descoped 67 wasteful contracts over the past five days, which had a ceiling value of $1.4 billion, while saving $648 million in taxpayer funds, the Department of Government Efficiency (DOGE) announced in an X post on Nov. 8.

The canceled contracts include “a $54k State Dept. training contract for ‘leader as a coach course’, a $456k USAGM broadcasting contract for ‘24/7 FM broadcast service in hosting, operations, technical, and maintenance support in Juba, South Sudan’, and a $1.3M State Dept. education contract for ‘Botswana MI curriculum,’” the post said.

In another Nov. 8 X post, DOGE praised the cross-agency coordination involved in tackling fraud related to the Small Business Administration’s 8(a) program.

Businesses that partake in the 8(a) program are eligible to receive federal contracting as well as training and technical assistance.

According to DOGE, the General Services Administration has facilitated the nonrenewal or termination of 17 “wasteful” 8(a) contracts, generating a savings of $75.1 million. These contracts were active across four federal agencies—the Department of Agriculture, the Department of the Treasury, the Department of Energy, and the Department of War.

DOGE had responded to Treasury Secretary Scott Bessent’s Nov. 7 X post about the crackdown on fraudulent use of government programs.

“President Trump has directed his administration to eliminate fraud and waste wherever it occurs, ensuring that each taxpayer dollar is spent as intended,” Bessent wrote.

“Treasury will not tolerate fraudulent misuse of federal contracting programs. These initiatives must benefit legitimate small businesses that deliver measurable value to the government and the public.”

Democrats have raised concerns about DOGE’s activities, particularly regarding the data privacy of Americans.

In September, Sen. Gary Peters (D-Mich.) released a report suggesting that DOGE’s activities were likely violating federal privacy and security laws while putting the personal data of millions of Americans at risk, according to a Sept. 25 statement from the lawmaker’s office.

The report was based on investigations done by Peters’s staff and whistleblower statements.

At the Social Security Administration, DOGE employees had access to personal data of all Americans, including their Social Security Numbers (SSNs), the report said, adding that such access was made available in a cloud environment without “any verified security controls.”

“One whistleblower noted the possibility that the agency may need to re-issue SSNs to all who possess one. A compromised SSN can be personally devastating. That’s because SSNs are the backbone for accessing all kinds of public and private services, from acquiring a driver’s license to going to the doctor,” the report said.

“Unwinding the harm done by identity thieves can involve years of credit and identity monitoring, mountains of paperwork. If penetrated, this data vulnerability could result in the most significant data breach of Americans’ sensitive data in history.”

Meanwhile, during an Oct. 31 interview with Joe Rogan on his podcast, former DOGE head Elon Musk said the initiative continues to reduce government waste and fraud.

Musk said that since he left DOGE in May, the initiative has become less publicized because people who oppose DOGE now have no single person to target.

“You turn off the money spigot to fraudsters, they get very upset, to say the least,” he said.

“My death threat level went ballistic, you know, was like a rocket going to orbit. But now that I’m not in D.C., I guess they don’t really have a person to attack anymore.”

According to the DOGE website, the initiative has so far saved $214 billion in taxpayer funds as of Oct.4.

This comes to more than $1,329 saved per taxpayer, based on an estimate of 161 million individual federal taxpayers.

The savings were made through a combination of asset sales, interest savings, grant cancellations, minimizing fraud and improper payments, workforce reductions, and regulatory savings.

The Department of Health and Human Services ranks as the top agency that has registered the most savings under DOGE. This was followed by the General Services Administration, the Social Security Administration, the Office of Personnel Management, and the Small Business Administration.

Tyler Durden Tue, 11/11/2025 - 15:40

'Mark It Zero': BlackRock Hit With Sudden Total Loss On $150 Million Private Loan

Another cockroach crawls out of the woodwork...

In the grand tradition of Wall Street's endless parade of "resilient" investments that evaporate faster than a hedge fund's excuses, BlackRock - that $10 trillion behemoth masquerading as a fiduciary - has just discovered the hard way that private debt isn't quite the "uncorrelated" panacea it's been hawking to pension funds and the terminally optimistic.

Bloomberg reports that a mere month ago, the iShares overlords were marking Renovo Home Partners' IOUs at a pristine 100 cents on the dollar, as if the Dallas-based kitchen-and-bathroom flipper was churning out profits like an OnlyFans 'influencer'.

Fast-forward to last week, and poof: valuation revised to a resounding zero.

Because nothing says "diversification" like watching your balance sheet get torched in a single earnings call.

Renovo, a Frankenstein's monster of a roll-up stitched together by private equity players at Audax Group back in 2022, didn't just stumble - it plunged into Chapter 7 oblivion, signaling a full liquidation shutdown.

Bloomberg notes that while BlackRock, ever the glutton for yield, gobbled up the lion's share of Renovo's $150 million private debt buffet, it was not alone.

Apollo Global's MidCap Financial and Oaktree Capital nibbled at the scraps, per whispers from those in the know who wouldn't dare attach their names to this private equity horror show.

No one with a Bloomberg terminal needed a crystal ball to see the dumpster fire brewing.

Back in April, the lenders - those paragons of patience - took haircuts, swapped loans for equity confetti, and prayed a recap would resurrect the zombie.

By Q3, they even greenlit "payment-in-kind" interest deferrals.

Regulatory filings paint the picture: a desperate bid to keep the lights on while pretending the emperor had clothes.

Yet, as September wrapped, BlackRock and MidCap funds were still polishing their Renovo turds to a par-value shine, signaling to the world (or at least their NAV reports) that full repayment was as inevitable as the Fed's next pivot.

Ah, the magic of private debt mark-to-model - where liquidity is whatever you say it is, until it's not.

Enter Q4: the quarter where illusions go to die.

“Early in the fourth quarter, company-specific performance and liquidity issues led the Renovo board to determine that the best available path forward was a liquidation process,” Philip Tseng, chief executive officer of BlackRock TCP Capital Corp., said during an earnings call. 

Tseng, in a tone-deaf earnings confessional, admitted the inevitable:

"We expect to fully write down this position in the fourth quarter of 2025."

Because nothing screams confidence like pre-announcing a wipeout.

While the Renovo debt represents a mere sliver of total assets for the three lenders, Bloomberg concludes poignantly that its sudden collapse strikes at the heart of what critics see as a major vulnerability in the private credit market: the disconnect between the valuation of illiquid loans and the performance of the underlying companies.

Remember Zips Car Wash? Lenders marked it near-par for months before it imploded earlier this year. Or Tricolor Holdings and First Brands Group, those subprime auto and auto-parts cadavers that blindsided the Street, igniting a blame-game cage match over who peddled the shoddiest underwriting standards.

In private credit's shadow banking circus, where yields are chased like molly at a rave, Renovo's vaporization is less anomaly than canary in the coal mine... and to mix metaphors, we suspect more cockroaches are on their way, and the next one may not be a mere 'fleshwound'.

Tyler Durden Tue, 11/11/2025 - 15:20

Trump Says US Close To Securing 'Fair Trade Deal' With India

Authored by Aldgra Fredly via The Epoch Times,

President Donald Trump said on Nov. 10 that the United States was “pretty close” to reaching a trade deal with India that would be fair to both sides and indicated that he may lower tariffs on Indian goods.

“We’re making a deal with India, a much different deal than we had in the past,” he told reporters at the Oval Office. “We’re getting a fair deal, just a fair trade deal.”

Trump did not provide further details about the potential trade deal with India but said it would be “good for everybody.”

When asked whether the U.S. government would lower tariffs on imports from India, Trump suggested it is possible “at some point,” noting that India has recently reduced its purchases of Russian oil.

“Well, right now the tariffs are very high on India because of the Russian oil, and they’ve stopped doing the Russian oil,” he said. “It’s been reduced very substantially. Yeah, we’re going to be bringing the tariffs down.”

India currently faces a total U.S. tariff rate of 50 percent, including a 25 percent tariff that Trump imposed in August over the country’s purchases of Russian crude.

Trump made the comments during the swearing-in ceremony of his envoy to India, Sergio Gor, whose role will focus on strengthening U.S.–India ties, promoting investment in key U.S. industries and technology, increasing U.S. energy exports, and expanding security cooperation, the president said.

During a White House press conference last week, Trump hinted that he could visit India next year at the invitation of Indian Prime Minister Narendra Modi.

“[Modi] largely stopped buying oil from Russia, and he’s a friend of mine, and we speak, and he wants me to go there. We’ll figure that out, I’ll go,” he said. “Prime Minister Modi is a great man, and I’ll be going.”

The U.S. president has previously warned that his administration would maintain its massive tariffs on imports from India if it continued to buy Russian oil amid Russia’s ongoing invasion of Ukraine.

While Trump had repeatedly said that India has largely reduced its imports of Russian oil, the Indian government has not publicly confirmed any such cutback.

India has become a major market for Russian oil as Russia faces sanctions and export controls from Western nations aimed at pressuring Moscow to end its war in Ukraine, which has been ongoing since 2022.

Before Russia invaded Ukraine, India’s annual crude oil imports from Russia hovered at about $1 billion. Since the war began, imports have skyrocketed, reaching $25.5 billion in 2022, $48.6 billion in 2023, and $52.7 billion in 2024, according to the U.N. Comtrade database.

Trump signaled on Sept. 7 that his administration is ready to move forward with a second phase of sanctions against Russia, as negotiations to end Russia’s war in Ukraine stalled and Moscow intensified its attacks on Kyiv.

Tyler Durden Tue, 11/11/2025 - 15:00

UK Cuts Intelligence Sharing With US Related To 'Illegal' Venezuela Action

Just as the USS Gerald R. Ford carrier strike group entered Caribbean waters on Tuesday, it's been revealed that the United Kingdom has made the unprecedented and provocative move of cutting off intelligence-sharing with the United States related to suspected drug trafficking vessels off Venezuela.

CNN reports Tuesday that Britain cited that it does not want to be complicit in ongoing US military strikes against alleged drug-trafficking boats, as it believes the action is illegal, amounting to extrajudicial killings, also after recent criticisms from United Nations officials. However, it is said to be a cut-off in only "some" intel-sharing.

UK Ministry of Defence

This is of immense importance from one of America's closest allies - and part of the 'Five Eyes' intelligence sharing nations - which has time and again enthusiastically joined in Washington's military adventurism abroad, from Afghanistan to Iraq to Libya and Syria.

The fresh report details the UK's prior role in assisting US agencies in the Caribbean, where Britain has small overseas territories:

For years, the UK, which controls a number of territories in the Caribbean where it bases intelligence assets, has helped the US locate vessels suspected of carrying drugs so that the US Coast Guard could interdict them, the sources said. That meant the ships would be stopped, boarded, its crew detained, and drugs seized.

The intelligence was typically sent to Joint Interagency Task Force South, a task force stationed in Florida that includes representatives from a number of partner nations and works to reduce the illicit drug trade.

The report confirms that the intelligence has actually been paused for over a month, which would have been soon after the Pentagon began attacking small boats off Latin America in September.

There is an irony in London suddenly discovering the moral high ground on the issue of Venezuela, given that for years the government has frozen more than $1.8bn worth of Venezuelan gold stored at the Bank of England. The Maduro government has sued to get it back, denouncing the move as brazen theft.

It could be that UK leaders sense that Trump is serious about pressing regime change in Caracas, and doesn't want to be a direct part of it. Indeed the unprecedented numbers of US warships currently parked in SOUTHCOM waters does strongly point to imminent military action.

But clearly London is now saying it will sit on the sidelines on this particular military adventure in America's backyard. At this point some 76 alleged drug-smugglers have been killed, and 19 boats destroyed, in the Trump-ordered Pentagon action.

Tyler Durden Tue, 11/11/2025 - 14:40

MSU Under Fire For Radical Teacher Training Materials On Race And Capitalism

Authored by Jonathan Turley,

Michigan State University’s College of Education is under scrutiny for its radical training materials for teachers as part of its program, “Social Foundations of Justice and Equity in Education.” The material includes radical race theories and a video of Communist and Black Panther Angela Davis explaining that “racism is integrally linked to capitalism.”

The Federalist reported on the material, which includes a warning to educators that those “who cling to their Whiteness cannot participate in abolitionist teaching because they are a distraction, are unproductive, and will undermine freedom at every step, sometimes in the name of social justice.”

Imagine if material told black or other minority teachers that they had to drop identities to their race if they want to teach. “Clinging to your Whiteness” is often a complaint leveled against those who do not repeat race-based mantras or statements in these sessions. Such public demonstrations have long been a part of the academic orthodoxy. Years ago, I noted with concern how academics were expected to engage in public confessions like the one at Northwestern University School of Law when Northwestern Law Dean declared publicly, “I am James Speta and I am a racist.” He was followed by Emily Mullin, executive director of major gifts, who said, “I am a racist and a gatekeeper of white supremacy. I will work to be better.”

MSU requires teachers to listen to Davis make the absurd claim that capitalism is inherently racist. Another video claims that “America can never be a meritocracy” without fundamental changes to create an “equal starting point and equal resources.” 

Telling teachers that they cannot succeed unless they give up their racial identity can be an environment of extreme intolerance and orthodoxy. It is one thing to address racism (in all forms) and singling out white teachers as having to address their race. Some students may assume that public demonstrations or affirmations are required to counter assumptions about their bias or inherent racism.

As for the use of Davis to claim that capitalism is the driver of racism, it ignores how capitalism fuels the advancement and empowerment of citizens. There is nothing inherently racist about a system emphasizing individual productivity and success. My Sicilian grandparents faced prejudices and extreme poverty in arriving in our country. They soon found that hard work allowed them to secure a better life for themselves and their children.

While she later left the party over internal disputes, Davis previously declared:

“I am a Communist because … If we are going to rise out of our oppression, our poverty, if we are going to cease being the targets of the racist-minded mentality of racist policemen, we will have to destroy the American capitalist system. We will have to obliterate a system in which a few wealthy capitalists are guaranteed the privilege of becoming richer and richer, whereas the people who are forced to work for the rich, and especially Black people, never take any significant step forward.”

I actually think that Davis’s views on capitalism and racism would be valuable in a course on those subjects to explore different views on such subjects. The question is why MSU would select Davis to be part of the mandatory material for new teachers as part of an education training and whether there is true balance offered in the material from figures like Milton Friedman or others on the benefits of capitalism. That does not appear to be the case at MSU.

MSU should address these concerns and show how, if such material is included in required reading, there is also material that offers real balance and counterpoints to these radical views.

Tyler Durden Tue, 11/11/2025 - 13:40

Syria Signs Declaration To Join US-Led Coalition To Defeat ISIS Terrorist Group

Authored by Aldgra Fredly via The Epoch Times,

Syria has agreed to join the U.S.-led coalition to tackle the ISIS terrorist group following a meeting between President Ahmed al-Sharaa and U.S. President Donald Trump on Nov. 10, according to a Syrian official.

Syrian Information Minister Hamza al-Mustafa said on Nov. 10 that Syria has signed “a political cooperation declaration” with the Global Coalition to Defeat ISIS—a coalition signed by 89 other partners to combat ISIS in Iraq, Syria, and globally—confirming its commitment to efforts to combat terrorism and support regional stability.

“The agreement is political and until now contains no military components,” al-Mustafa said in a statement posted to X.

A senior U.S. administration official also confirmed to The Epoch Times that Syria will join the international coalition.

Al-Sharaa’s meeting with Trump at the White House on Nov. 10 was the first visit by a Syrian leader since the country gained independence from France in 1946.

Al-Mustafa said the talks centered on expanding economic cooperation between the two nations, U.S. investments, and easing sanctions imposed under the Caesar Act—which bars the sale of U.S. goods and technology to Syria and blocks the country from the international banking system.

The two leaders also discussed plans to integrate the Syrian Democratic Forces into the Syrian Army, al-Mustafa stated, noting that the move aims to “unify institutions and ensure lasting stability” in the region.

The meeting resulted in Trump granting a 180-day extension of his waiver of sanctions against Syria. Trump told reporters Nov. 10 that he wants to see Syria “become a country that’s very successful.”

In an interview with Fox News that aired Nov. 10, al-Sharaa said Syria has entered “a new era” in its relations with the United States after the fall of the Assad regime, emphasizing Damascus’s intention to establish itself as a geopolitical partner.

“The goal is for Syria to no longer be seen as a security threat but as a geopolitical ally and a country where the U.S. can invest significantly, especially in gas extraction,” he said, according to a translation from Syria’s state media.

When asked about Syria’s participation in the coalition against ISIS, al-Sharaa acknowledged the reasons for the U.S. military presence in Syria but said that it should now be coordinated with the Syrian government.

“We need to discuss these issues and reach an agreement regarding ISIS,” he stated.

Al-Sharaa took office in December 2024 after former leader Bashar al-Assad fled to Moscow, ending his family’s 53-year rule in Syria. Al-Sharaa led the Islamist group Hayat Tahrir al-Sham (HTS), which claimed victory in the country’s 13-year civil war.

HTS, which has roots in the Islamist terrorist group al-Qaeda, was designated a foreign terrorist organization by the State Department in 2018 but was removed from the list this year.

Tyler Durden Tue, 11/11/2025 - 13:00

This is worth repeating ...

Back in 2005 I was mostly writing about the housing bubble - and the coming housing bust. But I also mentioned the possibility of a financial crisis. In early 2007, I started forecasting a recession, and by the end of 2007 the housing bust causing a financial crisis was becoming obvious.

Here is an article from the WSJ in 2007 quoting a crazy blogger: How High Will Subprime Losses Go?

Back in the U.S., the Calculated Risk blog sidestepped the colorful language and went straight for the big number: “The losses for the lenders and investors might well be over $1 trillion.”

Many people thought I was crazy. But losses for lenders and financial institutions ended up over $1 trillion.
Then in 2013 I wrote that there will be another crisis someday: "Each new generation of Wall Street wizards figures out a new way to turn lead into gold, and to become wealthy while damaging the financial system. Some of these wizards are probably perfecting their financial alchemy right now."
The key for the "wizards" was to find a way around the regulatory system, and if they could use leverage, the fool's gold would eventually lead to a crisis.

By 2013 the seeds were planted, not by Wall Street wizards, but by Tech Wizards. Now the seeds have taken root (Of course, I'm talking about cryptocurrency, what Charlie Munger called financial "rat poison").

Last year, researchers at the NY Fed looked at the impact of crypto on the financial system: The Financial Stability Implications of Digital Assets. And they concluded: "that, to date, the contribution of digital assets to systemic risk has been limited, given that the digital ecosystem is relatively small and not a major provider of financing and payment services to the real economy."

The key to preventing a financial crisis is to keep the non-regulated (or poorly regulated) areas of finance out of the financial system. A good example is the Tulip Bubble in the 1600s. Some people got rich, others were wiped out, but it had no impact on the financial system.

Unfortunately the current administration has embraced crypto. They are allowing it to creep into the financial system, and allowing 401K plans to hold crypto (aka future bagholders). There has been some discussion of allowing financial institutions to lend against crypto holdings - like for a mortgage.  This is mistake and increases the possibility that crypto will be the source of the next financial crisis.
A final note: CNBC should be embarrassed to have crypto prices on their website. 

Flight Cancellations Climb To 6% As Washington Edges Closer To Ending Record Shutdown

Airlines are set to cancel 6% of flights at 40 major U.S. airports today under the FAA's mandated reductions linked to the longest-ever federal government shutdown, even as the Senate passed a bipartisan deal - now awaiting a House vote for final passage before arriving on President Trump's desk. 

The eight Democrats who broke ranks late Monday to support the bill likely did so after realizing that the FAA's planned wave of flight cancellations threatened to paralyze the nation's busiest airports in the coming weeks, with Transportation Secretary Sean Duffy warning that flight reductions could soon exceed 20%. 

Was your flight delayed or cancelled?

Thank a Democrat!

All of this chaos could have been avoided had Democrats put Americans over politics 40+ days ago. pic.twitter.com/IcjzzPCAZn

— Rep Andy Biggs (@RepAndyBiggsAZ) November 11, 2025

As of 11:00 ET, 1,528 flights were delayed and 1,201 were canceled, with United Airlines publishing a nationwide list of cancellations through Wednesday. Major airports in New York, Chicago, Atlanta, Denver, Boston, Charlotte, and Dallas are among the hardest hit. 

The FAA intends to ramp up flight cancellations this week to ease pressure on air traffic controllers and TSA staff, many of whom have now gone 42 days without pay. The agency's plan calls for cancellations to rise to 8% on Thursday and 10% by Friday if lawmakers fail to resolve the shutdown. 

Related:

• Duffy Warns Flight Cancellations Could Top 20% If Gov't Shutdown Drags On

Polymarket odds now show a 95% probability that the government will reopen by Saturday, suggesting relief may be imminent.

On Monday, President Trump wrote on X, urging "All Air Traffic Controllers must get back to work, NOW!!!" threatening that "Anyone who doesn't will be substantially "docked.""

Furthermore, he offered 'patriotic' controllers, who did not skip work, a sizable bonus: 

"For those Air Traffic Controllers who who were GREAT PATRIOTS, and didn't take ANY TIME OFF for the "Democrat Shutdown Hoax," I will be recommending a BONUS of $10,000 per person for distinguished service to our Country."

On Sunday, before there was any news of moderate Democrats crossing the aisle to back the GOP bill to reopen the government, we outlined:

• As Thanksgiving Travel Looms, Airport Chaos Threat Could Force Washington To End Shutdown 

Duffy's warning that flight cancellations could surge to 20% likely jolted Dems to the negotiating table, as the prospect of nationwide travel chaos during the busiest travel period of the year threatened to infuriate tens of millions of voters.

Tyler Durden Tue, 11/11/2025 - 12:40

PA Election Results Signal Danger For The GOP in 2026

Authored by John Hinshaw via RealClearPennsylvania,

The Commonwealth of Pennsylvania is pretty evenly divided, so why did voters send such a lopsided signal?

In terms of voter registration, Pennsylvanians divide their loyalty between the Republican and Democratic parties.  Yet more than 60% of voters supported the retention of Democratic Supreme Court justices. 

Decennial off-year elections for judges are notoriously quirky things, and only one justice has lost a retention election since 1968.  And as the GOP’s base has become less country club and more country, Democrats hold an edge in more educated voters, who reliably vote even in municipal elections.

However, this was not a particularly low-turnout election. About 40% of the electorate showed up, or about two thirds more than in 2015, when these justices were first elected. This reflects the large amounts of money that Republican and Democratic groups spent to raise awareness and to encourage participation.

Moreover, in two judicial elections where a Republican faced a Democrat, Democrats won around 56% of the vote. Other down ballot elections tell a similar story of a blue wave.  Democrats swept control over the Luzerne County Council. In Allegheny County, Republicans lost all but eleven elections they contested. School board elections in suburban Philadelphia likewise saw a Democratic sweep.

The elections signal the erosion of once-stalwart Republican strongholds, such as Lancaster County. In 2015, Democrats won just under 36% of the vote in that year’s judicial election. In 2025, that figure was 48%. Likewise, Democrats increased their share of the electorate from 45% to 62% of the vote. In more rural counties, like Perry or Juniata, Republicans held onto voters. The problem is that increasingly voters are living in Southern or Eastern counties that more closely resemble counties like Lancaster or Chester than Perry or Juniata.

Democrats were energized by the Trump presidency for a host of reasons that you can imagine for yourselves. Likewise, Republican voters were not particularly energized, if for no other reason than President Trump was not on the ballot.

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Of course, one swallow does not make a summer, but if this is the electorate that shows up in 2026, Republicans would likely lose some vulnerable seats in the House of Representatives (like Mackenzie and Perry) and likely control over that body. Republicans certainly hope that the economy improves for everyday voters by the midterms and are downplaying these election results.

In our era of nationalized elections, local elections are reasonably good indications of how, and who, will show up to vote. So, let’s glean what we can from the races in Virginia, New Jersey, and Georgia.

Until Tuesday, Republicans had high hopes that they were assembling a diverse working-class coalition. In 2024, significant numbers of working-class Latinos and African Americans voted for Trump. That support evaporated on Tuesday. 

In Virginia, Republicans lost whatever ground the GOP had gained with Black, Hispanic, and Asian voters.  The spread between the 2024 and 2025 races indicate a loss of 20% of the vote share of Latino voters, 11% of Blacks, 42% of Asian Americans, and 17% of those with incomes under $100,000. This is why Abigail Spanberger won, and Democrats picked up 13 seats in the House of Burgesses. The shift in Latino voters was also evident in New Jersey. In Union City, a city that is more than 80% Latino, more supported Sherill than had voted for Kamala Harris last year. 

Georgia also had elections on Tuesday, and Democrats won their first state-wide elections since 2006, flipping two seats on the Public Services Commission.  This was a low turnout election, with about 20-30% of the rate of the last presidential race.  (Morris breaks down figures by county).  Morris observes a consistent shift in Democratic vote share, consistent with the new reality that Democratic voters tend to show up for off-year elections more so than Republican voters.

But Virginia and New Jersey’s elections were not low turnout affairs. There, turnout was about 65-80% of the size of 2024 presidential election. There, the same pattern emerges of a strong shift toward Democrats. 

Exit polls showed that around two thirds of voters concerned about the economy voted for Democratic governors. In 2024, Trump won 81% of those voters. That’s a 93% shift in voter sentiment on that issue and should be a klaxon for Republican elected officials. These election results indicate that Democrats are overperforming their 2024 baseline by 8% points. That’s a strong indication of a blue wave like in 2018.

It’s quite possible that the electorate’s mood will sour more by 2026. Today, voters are dealing with higher prices, which they hate, and levels of economic pessimism are growing due to tariffs, the threat of AI on jobs, etc. The labor market is not booming, but we have not yet experienced the kinds of layoffs that typically accompany recessions.  Last Tuesday voters were worried about rising costs of health insurance, or the possibility of hospital closures; by 2026, those will be realities they are living with. 

It's likely that the government shut down had raised the profile of the cuts to health care subsidies, or Medicaid, or SNAP, and that voters’ anxiety or anger about that has peaked.  Perhaps forces will shift voters’ attentions to culture war issues.

If not, or if the economy deteriorates further, voters’ moods would darken further and likely take it out on the party in control of government. In this election cycle, Democrats came close to winning the partisan judicial races in ruby red counties like Washington (where Trump won 63% of the vote), or Adams, where Trump won 66% of the vote. In that scenario, Republicans would likely lose control over the state Senate.

Buckle up, we’re in for a heck of a ride.

Tyler Durden Tue, 11/11/2025 - 12:25

Clock Ticking On Looming Anti-Maduro Action As Ford Carrier Group Has Arrived

The USS Gerald R. Ford aircraft carrier strike group has finally arrived in the US Southern Command Area of Responsibility, after late last month President Trump ordered it to Caribbean waters from its deployment in the Mediterranean.

This represents a drastically-stepped up campaign with an eye on Venezuela, at a moment Washington is mulling possible regime change targeting President Nicolás Maduro, with US officials describing the Ford carrier's purpose as to bolster the Navy's capacity to detect, monitor, and disrupt illicit actors and activities.

US Navy Image

It also comes after weeks of drones strikes taking out alleged drug smuggling boats - and the tally now stands at nineteen vessels destroyed and over 70 killed.

The Ford and its current three accompanying warships sailed through the Strait of Gibraltar on Nov. 4. "Ship spotters detected Ford escort, USS Bainbridge (DDG-96) off the coast of Puerto Rico early Tuesday. Bainbridge sailed with Ford through Gibraltar," naval publications note Tuesday. Additionally, Navy.mil announces Tuesday:

The maritime forces’ arrival comes after Secretary of War Pete Hegseth directed the Carrier Strike Group to support the President’s directive to dismantle Transnational Criminal Organizations and counter narco-terrorism in defense of the Homeland.

Previously, the Washington-based Center for Strategic & International Studies laid out why an entire carrier group in Caribbean waters represents a "use it or lose it" scenario which is ultra-costly, also in terms of removing it from other parts of the world:

Moving such a major element of U.S. combat power is highly significant because of the strategic trade-off it represents. The Navy has only 11 aircraft carriers. In general, only three are at sea at any one time because of the need for maintenance and training. All the regional commanders want them. U.S. Indo-Pacific Command always wants one—as a supplement to the carrier permanently stationed in Japan to counter the Chinese navy and conduct exercises with regional allies and partners.

Central Command wants one for the Indian Ocean for use against Iran and the Houthis or in the Eastern Mediterranean to provide air defense for Israel. European Command wants one for operations around Europe to deter Russia. By contrast, the Caribbean has been a low-visibility region for decades, with carriers rarely visiting.

Of course, all of this represents something likely much more than just a renewed 'war on drugs' - after Trump already said that potential land strikes against cartels in Venezuela are on the table.

The CSIS report also hinted that the scope is likely far beyond blasting a few drug boats out of the water:

Carriers are immensely powerful because of their air wing. Their striking power comes primarily from the fighter/attack aircraft, typically 24 F/A-18E/Fs and 24 F-35Cs. However, these aircraft are not well suited for counterdrug search because they move too fast. In addition to the fighters, carriers have support aircraft like E-2Ds for aerial surveillance (four, typically) and SH-60R/S helicopters (19) for antisubmarine warfare. The helicopters could help with search and can fire antiship missiles, like Penguins, which are designed to attack fast boats.

There's also the immense numbers of missiles which can now be trained on Venezuela, as CSIS further documents: "With the addition of these three ships, U.S. naval forces in the region will have over 700 Vertical Launch System (VLS) cells."

The report continues: "Those launchers carry a variety of missiles, including Tomahawk missiles for land attack, SM-2/SM-6 missiles for air defense, and SM-3 for ballistic missile defense. With an average loadout across the force of 25 percent land attack missiles, roughly 180 Tomahawks would be available for strikes against the Maduro regime or cartel facilities."

With this level of Pentagon assets parked in one SOUTHCOM region, which is unprecedented in recent history, the "clock is ticking" - as The Economist has highlighted.

Tyler Durden Tue, 11/11/2025 - 12:05

Supreme Court Takes Up Case On Whether Ballots Must Arrive By Election Day

Authored by Matthew Vadum via The Epoch Times,

The U.S. Supreme Court decided on Nov. 10 to consider a challenge to a federal law that blocks states from counting mail-in ballots that officials receive after Election Day.

The court granted the petition in Watson v. Republican National Committee in an unsigned order on Nov. 10. No justices dissented.

The Republican National Committee, the state Republican Party, and the state’s Libertarian Party sued over the law.

Eighteen states accept mailed ballots received after Election Day if they bear a postmark from on or before Election Day, according to a National Conference of State Legislatures report.

​​Mississippi Secretary of State Michael Watson filed the petition with the Supreme Court in June.

Federal election law sets the Tuesday after the first Monday in November every four years as “the ‘election’ day for federal offices,” the petition said.

Mississippi law requires that ballots for federal offices have to be marked and filed with election officials by that day, but also permits ballots to be counted if election officials received them within five business days after Election Day.

The U.S. Court of Appeals for the Fifth Circuit ruled that the federal law requiring ballots to be cast and received by election officials by Election Day preempts—or prevails over—Mississippi law.

The Fifth Circuit’s decision “defies statutory text, conflicts with this Court’s precedent, and—if left to stand—will have destabilizing nationwide ramifications.” Five circuit judges said in dissent from a denial of rehearing that the ruling is “deeply wrong and raises an issue of exceptional importance,” the petition said.

In a related case, the Supreme Court seemed receptive on Oct. 8 to a Republican congressman’s argument that he should be allowed to challenge an Illinois law that allows the counting of ballots for two weeks after Election Day.

Arguments in the case, known as Bost v. Illinois State Board of Elections, focused on the question of legal standing, as opposed to the merits of the lawsuit contesting the Illinois statute.

Standing refers to the right of someone to sue in court. A party must show a strong enough connection to the claim to justify participating in a lawsuit.

If the lawmaker wins at the high court, his stalled lawsuit would be reinstated and would continue its journey in the lower courts.

The oral argument in the case has not yet been scheduled, but is likely to take place early in 2026.

A ruling would likely come by the end of June 2026, in time for the mid-term elections.

Tyler Durden Tue, 11/11/2025 - 11:50

 

 

The transcript from this week’s, MiB: Brandon Zick, CIO, Ceres Partners Farmland, is below.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

~~~

This is Masters in Business with Barry Ritholtz on Bloomberg Radio

On the latest Masters in Business podcast. I sit down with Brandon Zick. He is the Chief Investment Officer at Ceres Farmland Funds, a $2 billion firm that specifically invests in farms. I know Brandon for, for a long time. And I’ve watched this asset class grow. I thought this was really a fascinating conversation. You just have no idea how complex and interesting farmland investing can be. I thought this was fascinating and I think you will also, with no further ado, my conversation with Sarah’s Farms. Brandon Zick.

Brandon Zick: Thanks for having me, Barry.

Barry Ritholtz: Well, you and I know each other for a long time, and this is long overdue to have this conversation. And the Wisdom Tree acquisition was the perfect excuse. We’ll, we’ll get to that in a moment. I wanna start with your background, which is kind of fascinating. You grew up on a dairy and crop farm in northeastern Pennsylvania. How did that farming upbringing shape your attitudes and thoughts about lands, agriculture, value and risk?

Brandon Zick: Yeah, that’s a great question because growing up on a, an really active family farm, you learn a lot of things. And one of ’em was, I definitely did not wanna be a farmer for the rest of my life. We did real work. I was the oldest of six and so, and I had great parents who, you know, instilled great values with us. But one of those values was the value of hard work. And we spent a lot of time before and after school every day actually running this dairy with our parents. So, so you’re,

Barry Ritholtz: You’re up at 5, 5 30 milking cows Before school?

Brandon Zick: Yeah, before school, yeah. For us it’d be about four 30. And with, with three brothers, usually there’s three jobs on a dairy milking cows, working with equipment and then managing manure. And even though I was the oldest brother, I was really good at the third. So that’s what I was focused on. Well,

Barry Ritholtz: Shoveling manure prepped you for your jobs on Wall Street, right?

Brandon Zick: That’s right.

Barry Ritholtz: That’s the obvious joke. So, so let’s talk about what led you to Wall Street. You go to Notre Dame, you get A BBA in finance and a concentration in Japanese, which is sort of surprising. What was that career plan originally, other than not a farmer?

Brandon Zick: When I went to Notre Dame, I, I just wanted to do something different and I didn’t really know what I wanted to do, but I actually had a, a friend in my dorm that I said, what are you majoring in? And he said, well, my dad works at Merrill Lynch, I think finance. And I said, well that sounds interesting. And so that’s how I started thinking about that. And taking Japanese as a, a freshman at Notre Dame was really more about just doing something different than the Latin and French I took at my Jesuit high school in Scranton, Pennsylvania. And they talked me into doing a study abroad in Japan. And I really fell in love with the country and the culture. And if I had been looking in, you know, forward instead of reverse, I probably would’ve taken Chinese or something else. I thought I was looking backwards and, you know, continued on with the Japanese and then was lucky enough throughout my career to be able to spend some time there. Not full-time, but at least to travel to Japan. And if we ever get to the point that we have Japanese investors, that’d be really exciting too.

Barry Ritholtz: So first gig, right outta school, as you become, you join the finance analyst program at Lehman Brothers. Was that here or was that close to home?

Brandon Zick: That was here in New York. Yeah, we started training in one World Trade at July of 2001 and we were eventually in three World Financial Center and I spent three years at Lehman Brothers and learned a lot of different things, but some of it was, I don’t know what I want to do. Right. And I had a friend that had moved to Morgan Stanley and that’s how I made my way shortly thereafter over there and spent six years at Morgan Stanley in various roles. But I knew I always wanted to be on the buy side. And there, you know, everyone dreams of being in private equity and how do you get there? And it’s a difficult path. And when you think about what are the things that you could be good at or that you have interest in, that’s how I kind of looped back around to this agriculture piece because I had a lot of valuation experience at Morgan Stanley and we worked on a number of transactions and I thought, well, how do I apply this to agriculture?

And they’re just, it’s not like in every other asset class where there’s 30 or 40 places and everyone has a fund and you just choose where you want to go. There’s actually very few people that invest in agriculture exclusively. And so it was kind of stacking that background of valuation and transaction experience and maybe a rekindled interest in agriculture and farmland. Not on the actual labor side, but on the investment side. Right. How do you do this outside of just the big boys like John Deere or Case ih or at the time Monsanto or these big ag companies, how do you do it? So that’s kind of how I made that path all the way back around.

Barry Ritholtz: So you prefer spreadsheets to pitchforks and shovels

Brandon Zick:  A little bit, yeah. Although there are plenty of days in my career now that you get tired of being in the office and you say, I’d rather, I’d much rather drive around and look at some of our properties and check in on some of our farm tenants. Well,

Barry Ritholtz: We’re gonna talk about the farms and the tenants and what that, that investment process is like. But I just wanna stay with Morgan Stanley for another moment. You’re there for six years, you start out really as a grunt in strategic planning, due diligence, valuation analysis, deal negotiation, execution, but eventually you become a VP in the investment management division. Is that where you really hone your chops on acquisitions and strategy?

Brandon Zick: Yeah, it was an interesting time to be there within investment management. Morgan Stanley had a mandate to really grow that business, especially on the alternative side. So the plan had been to put together a, a pretty sizable balance sheet by minority stakes and asset managers, maybe take some asset managers like Frontpoint over completely. And then the great financial crisis happened and we went from a team that was really given the opportunity to, to use a balance sheet to, we were told we need to create a balance sheet. So things that we had bought now needed to be sold. And that was really the impetus for the transaction that sold Van Campen and a handful of other Morgan Stanley equity businesses to Invesco. So on that deal, I was actually working more on the sell side of that deal. And when you’re selling things, you realize this probably isn’t a long-term career strategy. Eventually you run out of things to sell,

Barry Ritholtz:  So you started at Lehman, but you got out of there before the financial crisis. You lived through the financial crisis at Morgan Stanley, the CEO at the time was John Mack, is that right? Oh,

Brandon Zick: When I started it was Phil Purcell, John Mack came shortly thereafter and then, or came back shortly thereafter. And then during my time there, within investment management, James Gorman came, came over from Merrill to take over.

Barry Ritholtz: I had Mac on the program a couple of years ago after he wrote his autobiography. And really, of all the major brokerage firms, there were a handful of companies that came through the financial crisis balance sheet and reputation intact. Max seems to be the guy that guided Morgan Stanley through cut that very reasonable deal with Mitsubishi for some much needed capital and came out the other side. And Morgan Stanley is now absolutely one of the biggest brokerage shops full service brokerage shops on the street.

Brandon Zick: Yeah, I mean they’ve, you know, not without peril for everyone at that time, but certainly, you know, they were able to navigate, navigate through in a way that very few were able to do it as successfully as Morgan Stanley was.

Barry Ritholtz: And at Morgan Stanley, is that what you got your chartered Alternative investment analyst credit?

Brandon Zick: Yep, yep. I did that. I didn’t have the time to do the CFA also at the, during that time. But yeah, it was something that was slightly different and you know, I always had interest in commodities and other types of alternatives, not just hedge funds or private equity. So there was, it was just a way to learn a little more and add it to the resume. How,

Barry Ritholtz: How much did the financial crisis precipitate? You’re saying, Hey, I have skills and I have insights, I’m going back to farmland, but from a different perspective.

Brandon Zick: Yeah, well, it definitely started the conversation and being here in New York, I knew there were very few options for probably investing in agriculture at, at least at that time. Even today, we don’t recommend it, but there are people in the big city in on the coast that invest in farmland. And I had a, a very close friend from Notre Dame that at the time was running private equity at Notre Dame’s Endowment. And I had contacted him and said, I’m interviewing with a few of these firms that invest in farmland. So groups like John Hancock and UBS that had existing funds or separate account businesses that would invest in US or global farmland. And I asked him, have you guys underwritten them? Have you invested with them? Have you talked to them? And he was very frank, and he said, generally, we don’t think you get paid for the, the risk involved with investing in land and the duration that you need to hold it. But he said, let me introduce you to it. There’s another Notre Dame guy that, he started something really small, he’s got very few assets, but he’s investing in farmland. And that’s how I met our founder, Perry V through my friend Tim Dole, who’s now the CIO of Notre Dame’s endowment actually runs the whole shop. Oh, really? And so he’s had a very successful career and one of the best decisions, at least from my standpoint that he made, was putting Perry and I in touch.

Barry Ritholtz: It’s a, it’s amazing how these random introductions through various networking groups and alumni groups really can lead to some interesting outcomes when you join CS in 2010, $30 million. I mean, that’s a, that’s a small single brokerage account. What, what were you thinking joining a firm that tiny.

 

Brandon Zick: You know, that sounds a lot like what my wife was asking me at the time too. Why are we doing this and what are we doing? And it was interesting, there were, Perry had 30 million in assets, I think it was 17 million in equity, and we didn’t charge on the debt. So he said, I can afford to pay you something. It won’t be much, but it’ll be something. And I, I talked to my wife Erin, and said, I think this would be a great opportunity. And she kind of echoed some of the things that people I worked with at Morgan Stanley when I said, well, what do you do if this, yeah, what do you do if this fails? And of course no one knew anything about what we were gonna do, but they said, well, what if it fails? And I said, well, if it fails, there’s two things that gimme confidence.

One is I’ll know it, there’s only, you know, it’s a very small shop, it’s not like some trader in Singapore’s gonna blow us up overnight. I’ll know it’s not working. Either the investments are bad or we’re not raising money. And the second was, there’s gonna be a great skillset developed here that even if it doesn’t work, the worst thing I can do is just move back to New York. And now I’ve got a differentiated thing on my resume. So, you know, we started there, we moved in December of 2010 to South Bend, Indiana. It’s not a great weather trade really. Right. Even in New York, December’s not great, but South Bend it’s much worse.

Barry Ritholtz: That’s like zero and a lot of snow.

Brandon Zick: It’s cold. Yeah. There was a lot of snow as the moving truck was moving in, but it, but it’s been great. And we started to really build that, that momentum. And you know, just being in on the ground floor of a company with a founder who has a vision is, you know, you can’t ask for anything more.

Barry Ritholtz: So farmland is a real asset. It’s different from traditional real estate assets. You think of offices, multifamily warehouse, there’s so many different single family homes. What is it about farmland that makes it such a unique investment opportunity? Yeah,

Brandon Zick: I mean there’s a few things that go into it that just make this market different. And you don’t, I don’t personally think you have to have grown up on a farm to know anything about farmland or agriculture, but it is a very, you know, it’s a very people person business because these are the types of properties that we believe you have to rent directly. We don’t use just property managers to go out and do it. But in farmland, there hasn’t really been an institutional roll up. So in office and in manufacturing and distribution centers and cold storage, everything’s been rolled up over time into big institutions. And probably the most similar to farmland, when you think of what is the underlying asset would be timber. And back 40 years ago, Jeremy Grantham and others started a huge kind of move of taking the end users of timber and handing their, their assets that they’re gonna use as part of the end product to investors.

But in farmland, the end users don’t own the land. So the groups like John Deere and Monsanto and Mosaic and a DM, they might either sell into agriculture or buy products out of it. But the land, while it is the true means of production, it’s usually owned by others, not these big corporations. So particularly in the Midwest, you’d say the active family farmers like that farm I grew up on own, about 40% of the real estate institutional investors today own about 3%. And that includes the largest investors like the Mormon church, the Bill and Melinda Gates Foundation groups like Cirrus that might own between a couple hundred million to three or 4 billion in assets. But you just don’t have these big other groups that own land. It’s a very disperse ownership group of made up of estates, trusts, non-farming heirs that have owned this for generations. And two or three generations previously, they were actively farming the ground. They went to college and did other things. But there’s zero, pretty much zero vacancy in US farmland. Zero vacancy.

Barry Ritholtz: That’s amazing.

Brandon Zick: Every, every farm that can be farmed is farmed every year. And you lose farmland every year in the US because of things like development and conservation. And in parts of California, maybe lack of water aridity that they take farms outta production to transfer water to other properties. So you have this group of, or this total pile of farmland in the US that gets smaller every year. You have farmers that understand this is a scale game they want to grow. So it’s an interesting dynamic for investors to come into the space because it’s not as if, if you decided tomorrow, Barry, that you wanted to farm a hundred thousand acres, you could buy all the equipment, the seed, the fertilizer, the chemicals, and you could find the labor to do all of that. But what you wouldn’t find is a hundred thousand available acres to go to go farm it.

Barry Ritholtz: It’s that that small amount of acreage comes up each year?

Brandon Zick: Yeah, it’s very well, it’s just not up. There’s not a jump ball every year for it. It’s all occupied. And even most farmers, and I’ll use the Midwest as an example, because growing up in the Northeast farmland was much different. There wasn’t quite as a robust, a rental market in the Midwest, which is one of the reasons we’ve focused on that is there’s a very robust rental market and we wanna rent land. So we want not just one or two large farmers who will get, provide us with a rent indication or a rent bid. We want the opportunity to have 10 or 20 different farmers then. And these are all we work with across the board, 170 different farm tenants today. And you know, all of those farm tenants rent our land, they own land and they rent a lot of land from other people. So that actually becomes kind of a long-term proprietary deal sourcing network for new acquisitions. So we feel like we are doing the institutional roll up. If you decide if we decided we’re only gonna do deals of 25 or 50 million in size, there’s not a lot of deals to do every year. And certainly not in the Midwest, mostly smaller family farms, regional farms that occasionally come up when the next generation decides, we don’t wanna farm this the way mom and dad and grandpa did. We’re we’re going in the big city.

And even a lot of what, they’ve already made that decision in some cases a generation ago, but they still own the land. It’s been more of not a financial asset, but more like a family asset. And what you tend to see, and and taxes drive a lot of behavior in every industry in agriculture, it’s pretty meaningful because if you have this one very large real estate asset, people usually wait to get that step up in basis. And then they’re saying, well, now is the time we’re gonna sell regardless of market conditions. It’s, we don’t wanna pay the tax going back 3, 4, 5 generations to a cost basis of nothing. Right. So there are kind of unique time periods and maybe 2012, end of 2012 was an example where there were some new tax things coming up, a higher cap, long-term capital gains tax, the Obamacare investment tax. And there was at least a discussion around that estate tax exemption being reduced from, I think at the time it was at four and a half or five and a half million per spouse down to a million. So that drove some real behavior at the end of 2012 from people saying, we wanna sell this before the taxes go up. Usually folks just wait until they get that step up in basis and then they’re gonna sell it

Barry Ritholtz: And, and today a family, or what is it? 15 million?  12 used, used to be 12 million exemption for states. I think it’s up to close to 15 per

Brandon Zick: Yeah. Per spouse. Per spouse.  Significantly larger. So any discussion around a reduction in that, which obviously things get banned permanent, and I’ll use air quotes around permanent because 10 years is permanent these days, everything changes. But yeah, that when you have this one significantly large asset, the the tax taxation on that will dictate how they move it sometimes. Huh.

Barry Ritholtz: Really fascinating.

We were discussing earlier how farmland generates revenue, and we’re gonna go into great detail with that. But I, I wanna explain to investors what farmland gives them exposure to. What, what are you getting when you buy a chunk or a bunch of different farms?

Brandon Zick: Yeah, so farmland, and I’ll sp I’ll focus more on Midwest row crops, but row crops generally are annual crops because there are a few different buckets. And when

Barry Ritholtz: You say row crops, I think corn, wheat, barley?

Brandon Zick: Vegetables, annual crops, crops that are planted every year, you rotate as opposed to permanent crops. And, and really it’s a, a complete distinction. Permanent crops would be things like wine, grapes, pecans, almonds, pistachios, blueberries, things like that where your exposure is not just to dirt, which is what row crops really is like our asset is dirt and there’s optionality around what you can plant there. Your exposure in permanent crops is more specific to a specific crop and in some, in some cases also a very specific variety. So if you had red delicious apples and they’re out of favor and people want honey crisp apples, then while you own apples, you don’t own the prime asset. And so we’ve focused almost exclusively on row crops and with ro, and we’ve done that for a few reasons. One is we think it’s much less risk, but it also hits on the, the investment objectives of farmland, we think more cleanly.

So some of that is current income, a positive correlation with inflation diversification in a portfolio, non correlation, and then also an appreciating capital asset. So our asset is primarily dirt. So there’s, there’s a little bit of appre depreciation you can take around things like if there’s buildings or grain storage bins or irrigation equipment. But primarily our asset is just dirt and it’s appreciating over time. And the reason for that is a few things. The Chicago Fed has data going back almost 70 years. It’ll say that farmland has averaged about 6% price appreciation during those 70 years on an annualized basis.

Barry Ritholtz: Is that real net of inflation or before inflation?

Brandon Zick: That’s total. Wow, that’s gross. So if you look at what compose it, what makes up that it’s really just inflation plus gains in productivity. So every time there’s new technology, whether it’s seed genetics or fertilizer technology or equipment technology, anything that can create more yield on a farm, in theory that re that return should fall to the landowner. Or at least a portion of it should fall to the landowner, not just to the operator. So if you’re an active manager, we feel like you’ll capture some of that. If you are a passive owner of land that doesn’t understand well, what is the, what is the land actually producing? What should I be generating in rent? How do I capitalize that into a land value? Maybe you don’t. But if you look back over time, that capital appreciation’s been about 6% and it’s really just those, maybe there’s been a little bit of cap rate compression, but it’s more around gain some productivity and then just CPI inflation. Let,

00:21:49 [Speaker Changed] Let, let’s talk about inflation. I was reading last week that beef prices are at record highs for many types of investors, especially fixed income inflation is really a big challenge to navigate around. It sounds like with farmland, inflation isn’t necessarily a bad thing. How, how do you think about rising prices, especially in the supermarket and what that means to the properties you own?

00:22:16 [Speaker Changed] Yeah, so within agriculture inflation comes two ways. So if you’re an operator, if you’re a farmer, inflation’s real because you’re,

00:22:24 [Speaker Changed] You’re paying more for seed, fertilizer, chemicals, equipment,

00:22:27 [Speaker Changed] Wages comes in wages, everything that gets baked into growing that crop. Inflation plays a part in it as the landowner, the actual dirt has a very positive correlation with inflation over time. So we, I’m not gonna say we love inflationary environments, but this is an investment that’s built for inflationary environments and the way that we think about how global central banks treat, you know, the way they do business. We think we’re in an inflationary environment for the, the long term. So we think this is an asset that works well with that

00:22:58 [Speaker Changed] This is a good hedge against rising prices.

00:23:00 [Speaker Changed] That’s right. And we’ve, you know, back when rates were extremely low, a lot of our investors used farmland or used Cirrus as a inflation sub or a fixed income substitute. Something that’s positively correlated with inflation, even with rates being higher, I view farmland more as a tips like thing, and we haven’t seen much appreciation there. What,

00:23:21 [Speaker Changed] What is the yield on farmland as an investor and where does that yield come from? Is it rent, is it sale of property? Is it other elements?

00:23:31 [Speaker Changed] Yeah, so the, the gross rental yield on our portfolios range between four and 5% a year. Now, when you think about, if you look at the index, so there’s non investible in indices that are out there, or if you look at the, the Chicago Fed or some of the large land grant universities, they’ll put out a lot of data around what cap rate do, do farms trade at. Because while there’s no Indiana farmland go on Bloomberg yet, there, there are a lot of public transactions that happen and will attend two to 300 public auctions a a year and they’ll be in attorney’s offices, VFWs, these are on a random Tuesday night at six o’clock, someone’s selling 120 acres of farmland and we track where does this sell versus our reserve price. We know what rent we could earn on that property. So what implied cap rate is land selling at, generally speaking in the Midwest, in the Chicago Fed seventh district land trades at one point half to 2.5%, and your buyer is typically a neighboring farmer.

00:24:33 So that’s their strategic investment they’re making. And that farmer may take the land owner rental return and their operating return and compress them together to justify whatever price they’re paying. But we try to target that four point half to 5.5% when we purchase a farm. And that’ll come, it’ll all come exclusively in terms of rent, that’s what we’re underwriting. But then the total return will be that mix of rental income and then appreciation over time. And appreciation can be that beta that I referred to that, you know, Chicago fed data that says 6% a year on average. But then there’s alpha that we can add. And a lot of that is because the people that are selling farms are usually not active farmers. I mentioned these are estates trust, non-farming heirs, and there’s some low hanging fruit in terms of CapEx that a farmland investor can do to decrease the risk of a crop growing and also increase the yield. So a really, you know, a common thing that we do is add irrigation, huh? And that irrigation will help us increase the yield, decrease the risk for the tenant, and it increases our rent, but also we can capitalize that increased rent into a higher land value over time. So if we can find those opportunities to do the CapEx, that’s our bread and butter.

00:25:48 [Speaker Changed] I I, I’m gonna say something that sounds a little ridiculous, but you are a gram dod valuation investor into farmland. Is, is that, am I getting this right?

00:25:58 [Speaker Changed] Yeah, I mean, there’s no black box here to what we’re doing. It’s really a blocking and tackling strategy. And we encourage all of our investors when they, when they’re contemplating this, or even on an annual or or biannual basis, come out and look at these properties and see what we’re doing. And, and we have folks that have, you know, trade, they’ve been trading their entire career and they’ll come to a farm auction and say, well, you were underwriting the same rent on two properties across the street from each other. One sold for x one sold for two x, how does that happen? Right. And it’s just who wanted which one and how in some, in some cases or instances, the way in which the farm is being sold is inefficient. The rental market’s completely inefficient. So there are times that we’ve bought properties in some cases from other institutional investors and we’ve doubled the rent on day one, not because we wanted to charge an uneconomic rent, but because the farmer was willing to pay that rent for that land and, and the, the active management that the previous owner was using was either not very good or not that active.

00:27:00 So that’s where we think we, we do a really good job of just identifying where can we add alpha? And then again, it’s not a black box. This is really just ticking and tying and blocking and tackling.

00:27:12 [Speaker Changed] So let’s, let’s talk about that alpha, you talked about rental income and appreciation and sale of land, but I recall a conversation we had years ago up in Maine where you described all these additional ways that professional farmland management generates improved economics. And some of the notes I took mineral rights, solar and wind farm easements, additional land use, how do you take farmland that for centuries has just been producing crops and find ways to improve the economics?

00:27:49 [Speaker Changed] Yeah, it, and you know, investing in the US has a key part of this because the landowner has a lot of rights that in other parts of the world you just don’t have so mineral rights here in the US the the surface owner generally owns them

00:28:01 [Speaker Changed] All the way down, right?

00:28:02 [Speaker Changed] Yeah. And, and in some cases those rights have been severed a hundred years ago and in certain parts of the Midwest and out west you don’t own mineral rights. We like to own them. It’s, it’s kind of funny, the family farm I grew up on in northeastern Pennsylvania growing up, no one knew what Marcella Shale was, right? But everyone in Susquehanna County has made more money pumping gas than they ever did milking cows. And it was really seeing that in the early two thousands that as we buy land, you think, well how do you maximize the value? These are, these are real assets, they have to be actively managed. Something as simple as harvesting timber, that that’s really low hanging fruit, doing select cuts, renting farms out for recreation or hunting. Frankly, if you don’t rent it out, someone will hunt that property anyway without insurance and without paying you anything. Right? So you might as well get insurance and get paid for it. So Perry had Perry Vit our founder, he had been doing that long before in parts of Indiana and Illinois generating mineral rights. But the way that he structured our vehicle was really beneficial to some of these long-term value options because I think when he was starting Sirus in 2007, most of the people that he worked with at the time and and friends of his in private equity said, just set up a typical draw down fund and get it invested. And

00:29:17 [Speaker Changed] As opposed to perpetual, yeah.

00:29:18 [Speaker Changed] At the end of eight or 10 years, just sell ’em all off. He decided that an evergreen fund really fit the asset class better because most of the farm tenants were working with, they wanna farm this property for 10, 20, 30 years. And that’s kind of the way they’re thinking in terms of how they grow their business and being able to own the property for that long makes a lot of sense. If you have lessees that wanna rent that way. And if you think of who are the ultimate over time, who are gonna be the ultimate investors in this asset class, it’s going to be folks that have very long dated either goals or liabilities. So endowments, foundations, trust, insurance companies, infrastructure funds, companies, insurance companies. So having this long dated asset where you’re not forced to churn or forced to have these transaction costs is really important. And what we’ve, what we found later on too was some of the optionality around farms. So wind has been around for a long time and that’s kind of a mildly incremental increase in revenue on land. You, you can

00:30:14 [Speaker Changed] Put a wind farm up on a farm, but still you

00:30:18 [Speaker Changed] Continue to farm it also. Yeah. On a 700 acre farm, we have one in western Indiana has seven wind turbines. They might take up 20 acres total between the turbine and the roads. The rest of it we continue to rent. So that rent from those wind turbines, it’s incremental. It might increase 20 or 30 basis points over your farm rent. So we’ll take it, but, but it’s not gonna change your life. When we started doing things like solar. So solar, you’ll instead of seeing 20 or 30 basis points, you’re seeing on an option period, maybe a three to five x the income return. Really? Wow. So if you think back to, we’re buying land at a four point a half to five and a half percent income over the course of five years during an option period, if it were to go to solar, now we’re generating 15 to 20, 25% annualized income.

00:31:04 Wow. So we like that. But in that case, it’s taking the whole footprint of the land. And if when we buy a farm, we’re just underwriting it as an agricultural property, farm rents CapEx, what type of return do we think we can earn over time? And we’re targeting kind of that eight to 10% net through a cycle on farmland. But then once we own the property and as you aggregate properties over time, maybe we started with a couple hundred acres 10 or 12 years ago, but now in a township we now own 2000 acres and it’s just been all of these incremental Bolton acquisitions. Now that has probably more interest from some of the developers on the solar side or for other things too that can be even much higher revenue or value. But we always fall back on, if it’s just a farm, that’s what we underwrote and we’re happy with that and we’ll continue to aggregate those properties over time. We have over 500 today. There are years where we’ll do 30 or 40 closings or transactions to invest 80 or a hundred million. Most institutional investors would never do that. But we’ve, we’ve really decided that that’s where you can add a lot of alpha on the acquisition side by doing these boltons at a discount to what that, you know, like you said, it’s a very finance worthy strategy. It’s just being applied to an asset class that you usually don’t see it.

00:32:21 [Speaker Changed] You mentioned leases. When I think of a lease, I think of either an apartment lease for a year or two or my office lease here in New York for 10 years. How long does a, the average farmer lease their land for or lease your land for if they want to farm a crop?

00:32:42 [Speaker Changed] Yeah, so we try to target three to five year leases. And I’d say three is the overwhelming majority given that we’re, our farms are mostly growing row crops. You can see three years on the board of trade, you have transparency to where our prices, so farmers, if they want to hedge, if they wanna think about selling a part of their crop into the future, they can do that. And, and we can all agree, okay, over the next three years, this is what that rental income will be. But when you think about other, like across a farmer’s portfolio I mentioned they own land and they intend to own that forever. You know, that’s how they think about it. And they rent our land and those are usually three year leases, but then they rent a lot of land from other people. Those other people, even if a farmer’s been operating that land for 30 years, it’s usually 31 year leases.

00:33:30 Really. So making decision because the landowner, I’m not gonna say they’re not sophisticated, but they’re unwilling to do a multi-year lease because they want to have the optionality to sell the property free and clear of a lease if they decide they wanna sell it. So usually when farmers look to us, they’re saying, well, we want to add a new combine or a tractor or make these overhead or hiring or infrastructure decisions. They actually view a three year lease as a long term lease. Huh. In, in the farmland space, we have some leases that’ll go eight or 10 years if they’re growing more specialty crops. So we have about 20% of our portfolio that generates higher revenue because they’re growing things like potatoes for potato chips, processing tomatoes. The, the kind of highest quality mint you can grow in the world is in the Midwest. So we grow that on our properties and that requires a more diverse rotation and a longer planning for the farmers. So we’ll allow a longer lease in those instances and we allow that because they’re paying us a stronger rent.

00:34:29 [Speaker Changed] Huh. Really, really kind of fascinating. I wanna talk about scale. You mentioned bolt-ons and a lot of things. I’m kind of fascinated by the scale. And the question I wanted to ask is, are each farm that comes up for sale, do they have the same or different value for different acquirers? Like I’m gonna assume if you’re the adjacent farm that next farm might be more valuable. You spend a lot of money on combines and tractors. Hey, if you can use it on 500 acres instead of 300, you’re, you’re cost per acre should go down. Of course. What, what’s the impact on scaling up and what’s a big farm? Is a hundred acres big? Is a thousand acres big?

00:35:15 [Speaker Changed] Yeah, I mean it’s all relative. But in to your point about are there different values for different buyers? Absolutely. Even if you, even if two buyers both intend to farm it, there are absolutely differences in how someone will value it. In some cases on the same land, it comes down to what crop do you intend to grow? Huh. So I had talked briefly about specialty crops, but if, if you are, if, if there’s a farm in northern Indiana with irrigation that comes up, if the, the tenant we’re looking at wants to grow corn and soybeans, they’re gonna be able to pay us one rent. If the tenant we’re talking to would grow popcorn and processing tomatoes or potatoes, they can pay us almost double this rent on the same land. So when we look at farmers, we’re trying to identify which farmer can generate the highest revenue, has a strong balance sheet, operates with the least amount of risk so that our rent will be paid every year in the spring.

00:36:07 But there’s, you know, it’s really important when you look at land to determine what’s the highest and best use even just on the agriculture side. So when you think of every farmer would love to have a thousand acre blocks of land in the Midwest, that’s hard because the history of ownership was the Homestead Act. Right? So it’s 40 acre blocks. So within our portfolio we have 40 acre farms and we don’t love doing those transactions. But if we can bolt them onto an existing property with an existing lease and the same farmer, that’s kind of a no-brainer. But our largest farms in southwestern Georgia, it’s 7,000 contiguous acres. Wow. So that’s about 10 square miles in one piece. It’s all irrigated. And the history of ownership there is plantations out west, the history of ownership were ranches. So these larger tracks of land, you tend to see more institutional investment in those areas along with permanent crops.

00:36:57 And there’s a lot of reasons people will tell you it’s around scale and efficiency. In some cases I think it’s just you can write a bigger check. If I need to deploy 50 million at once, I can do it better in those areas ’cause the farms are just bigger or it’s a permanent crop that it’s a hundred or $200,000 an acre so I can deploy capital more quickly. For us, it’s harder to gain that scale. But it really starts with that tenant network. So those 170 farmers we work with today, they farm our 170,000 acres or 180,000 acres, they own collectively about 250,000 acres that I don’t expect they will sell, but that’s kind of what they own. But they rent over 750,000 acres from other people. And those other people are those estates trust, non-farming heirs. And when those folks wanna sell, usually they don’t have a public auction. Usually it’s a private transaction, the first person they call is their farm tenant. And while we would, if our fund was closed, we would love to see prices just continue to escalate up forever, you know, over time.

00:37:59 [Speaker Changed] But you buy or also, but you are on both sides. Yeah,

00:38:01 [Speaker Changed] We like cycles. So when farmers have really strong balance sheets, like in 2021 and 2022, they were probably not passing on as many of those purchase options to us. But now we’ve, we’re in our third year of lower commodity prices, farmers have to be careful about how much working capital they’re gonna liquidate to go buy a long-term asset. And if it’s a very strategic farm to them, they’re gonna try to buy it very close to home. But if it’s something they’re willing to travel for and they’ve, they’re currently farming and as much as they’d like to grow their acres, to that point about efficiency, you mentioned they don’t wanna lose acres. So if a farmer farms 5,000 acres, if one of their landlords who owns 500 sells and they don’t, they’re either not able to buy it or, or someone that we’re partnering with them on, if they’re not able to buy it, then they just lose those acres and they immediately become over capitalized. Every other acre becomes more expensive to farm

00:38:55 [Speaker Changed] Per per

00:38:56 [Speaker Changed] Acre to farm. And so they think about it in terms of protecting acres and growth. When you say, well why would they partner with someone like us? So when we look at farms, that would make sense to add to the portfolio. In some cases we’d pay a little more because it’s a strategic farm that’s close by, but we say no probably 29 times outta 30. Really, when we’re at a public auction, the hit rate is low. And while we’d like that to be higher, that’s the investment discipline we right. We will lose sometimes by 40 or 50% above our reserve price.

00:39:25 [Speaker Changed] Back to Graham dot Abso. Absolutely. You mentioned ranch ranching. We’ve been mostly talking about farming. When I think of ranches, I think of cattle farms, horse farms, sheep. What do these ranchers do? How much of the assets you own are ranches versus farms? Yes. Or is there a mix? Some do a little bit of both.

00:39:45 [Speaker Changed] Some can do both. Not our farm. So our portfolios exclusively farming, not ranching acres. You tend to see those ranching acres. You know, if you think of what’s the highest and best use, if you could grow amongst row crops, even corn is the highest revenue, then soybeans, then we, I mean, cotton would be up there as well. But as you look kind of down the value cycle, ranching would be very low because you’re, you’re just not generating much rent. So it’s more marginal land that’s used for that. Or larger tracts of land. Typically, like one of the big farmland owners is the Mormon church. They’re also one of the five largest cattle feeders in the country. So they own a lot of ranch land. So they, where

00:40:26 [Speaker Changed] They’re actually grazing cattle, so they’re gonna feed and then sending it to their own cattle. Yeah.

00:40:29 [Speaker Changed] And they’ll graze the cattle and then eventually, you know, take that all the way to market. That’s the type of vertical integration you’ll see in some areas. And row crops, you just don’t see that. We like to identify tenants we’re working with that if they have a dairy, so they need the land to feed the cows, they need the land for their nutrient management program. Those tenants are willing to pay more for farms. If it’s a strategic farm that’s close by because they can’t travel all over the place. But a lot of our tenants, they might have a home base that kind of looks like the center of this table and the radius that they’ll travel, being willing to farm, you know, they’ll rent in these other areas if they can find enough acres to have scale. Because ultimately every time a son or daughter wants to come back to the farm to help increase that family business, you can’t just slice the pie more ways you have to grow the pie. And I mentioned earlier, the amount of total acres in the US is going down every year. And in the Midwest you don’t have problems of aridity or erosion, but you have a lot of development pressure coming in. The cities are expanding, manufacturing’s, expanding. So there are acres that farmers lose for, for those reasons every year.

00:41:37 [Speaker Changed] So it seems absurd to talk about farmland and artificial intelligence, but there are two different ways I want to go with this. The first is these giant data centers, they pay a lot more. They are a higher spending buyer or renter than say someone growing row crops. What’s the relationship between farmland and AI and big infrastructure investing?

00:42:05 [Speaker Changed] Yeah, I mean we’re seeing it firsthand now in the Midwest. The amount of additional building that’s happening around data centers is unbelievable. And the, the amount of capital that’s being invested in, in these areas like Ohio, Indiana, Michigan, Illinois, around data center development, it’s really staggering when you think about it. So there’s just outside of South Bend, Indiana, two very large data center projects that I think each is investing between nine and 11 billion on these data centers. Wow. And the real estate price, even if it’s, I think our average cost per acre across our portfolio is about $8,000. You see data center prices anywhere from a hundred to $300,000, 10 an

00:42:45 [Speaker Changed] Acre x, 12 x. That’s crazy.

00:42:46 [Speaker Changed] Yeah. At least if not more.

00:42:48 [Speaker Changed] And who are these? Who are the companies that are these big buyers? All the big names we know. Yeah,

00:42:52 [Speaker Changed] It’s the big ones that are out there. I think you see

00:42:53 [Speaker Changed] Google, Microsoft, who else is,

00:42:57 [Speaker Changed] Yeah, groups like Amazon. It’s, it seems like what you’re finding now is a lot less hoteling space for data centers. And they’re all single user and it seems like they’re going after the best locations, which would be large tracks of land close to infrastructure. So you want natural gas, you need three-phase power with capacity on the line. You need fiber lines or rail access to run fiber water and you need water. Yeah. And that while there are multiple ways for cooling water, whether it’s closed loop or open loop is a big part of all of it. So it you, what you tend to find are a lot of these old rust belt areas, but, but kind of virgin farmland is the best candidate for it. And you have these single users that are going after that land. So in our portfolio we’ve aggregated large properties over time and there seems to be a lot of interest around that because it’s just, there are very few of these places where you can do it. It’s not like a, even a distribution center that next to every exit on the highway, you could justify putting one there. You need all the energy and water infrastructure and fiber infrastructure and you need capacity. So every new, and there aren’t a lot of new natural gas fired power plants that get built. But when one gets built, it seems like a logical kind of co user of that power would be one of the,

00:44:16 [Speaker Changed] I gonna say, what about co-location where you just run a, that gas line and build your own electrical facility adjacent to one of these power plants.

00:44:23 [Speaker Changed] I feel like some of that is definitely happening and will continue. I mean, ultimately some of these data centers will all be powered by modular nukes when when you get down to it you need

00:44:32 [Speaker Changed] Thorium. Is that what we’re talking about?

00:44:34 [Speaker Changed] Potentially? Yeah. Yeah. I mean the idea of when a data center’s going in or even a big manufacturing facility, sometimes you’ll see co-location of solar and while solar has a lot of benefits, it’s not gonna power something like that. Right. That’s more just, I think for credits to sell into the grid. I mean, we have three mile island potentially coming back on. So there’s a lot of different options. And I think across states like New York State, they’ve closed down some nuclear facilities or consolidated. I,

00:45:02 [Speaker Changed] Well, Shoham never opened here. They spent billions over 20 years. There was no escape route. Bad islands are not great places for nuclear facilities. But you know, you see countries like France, 90 plus percent of their power generation comes from nuclear.

00:45:18 [Speaker Changed] Right. And the hard thing, when you think about power, I mean, I, I kind of laugh. I had two siblings that both went to Cornell. So I’ve been to Ithaca quite a bit. We own farms in upstate New York. And every time I drive from our farms there, down to our family farm in northeastern Pennsylvania, you’ll drive through parts of New York state that will say no industrial. You’ll see signs that say no industrial solar, no wind farms, no fracking, no nuclear, but they all turn on their lights. So we have this really perverse view out there that, and you could call it nimbyism, you can call it whatever you want, but we need more of everything if you look

00:45:53 [Speaker Changed] At more power For sure.

00:45:54 [Speaker Changed] Yeah. If you look at a, there’s a few great graphs out there that show kinda the history of consumption for power and the same amount of coal that’s been used throughout history. This year will be the year that the most coal is used, the most peat that’s ever been burned or wood is happening this year. The most oil produced or burned natural gas, the only energy source that’s ever gone down really is nuclear. And that was out of,

00:46:19 [Speaker Changed] Out of regulation. The three mile island. Yeah. There’s a lot of fears around it. And

00:46:23 [Speaker Changed] So if you look at what do we need, there’s no energy, in my opinion, there’s no energy transition that will ever happen. This says we need more of everything. So that’s,

00:46:31 [Speaker Changed] That’s really fascinating. I, I saw a chart, I forgot where biggest producer of solar energy in the United States, Walmart, all their distribution centers, all their superstores, especially in the south, they just say, we have dead space on the roof loaded up with solar. And they’re not only subsidizing their own power consumption, they’re getting credits for selling it back to the grid. Yeah.

00:46:55 [Speaker Changed] I think it makes a ton of sense, especially if you’re building greenfield when you can actually, it’s tough to retrofit things for solar. And even when we look at farmland that goes to solar, the idea of these little community solar gardens, I don’t think is very scalable. You tend to see more industrial sized solar fields and it’s, you know, from the, the landowner standpoint or the farmer standpoint or the, if the, if a farmer’s, the owner, you know, they’re interested in the highest and best use. So what you tend to see is we have farm tenants that they sell land for development all the time. They, you know, these farmers are very sophisticated, they’re CEOs. This has been happening for generations where someone will sell land that’s close to town for a very high price and then they’ll move 20 miles farther out and buy three times the amount of land and set up shop there. So while the idea of a farmer moving always seems, you know, really hard to believe this has been happening forever. The western suburbs of Chicago have extended and extended and extended. And farmers are, you know, I consider them dumb as a fox. Like they’ll, they’ll sell for

00:47:58 [Speaker Changed] You say that as a farmer.

00:48:00 [Speaker Changed] Yeah, I know. It’s, it is interesting. They, they’ll sell for a very high price and when that development doesn’t happen, they’ll buy it back for less and they’ll wait for the next round of development and sell it again. So.

00:48:09 [Speaker Changed] Oh, that’s funny.

00:48:10 [Speaker Changed] So, you know, some of the competition we see when we’re buying farms, it’s not just farmers that had profitable years. It’s farmers that have 10 31 exchange money because they sold land to a data center. Or they sold, they

00:48:22 [Speaker Changed] Sold land, they lived three years to reinvest before they get hit with taxes. Something like that.

00:48:25 [Speaker Changed] Yeah, it’s about 18 months and they have to identify properties, but they have to go out there and reinvest it and kind of like, like to Right. Keep their cost basis. And farmers are really good at, you know, figuring their way around these tax codes and you know, good for them. And I think that’s a lot of the competition we see are 10 31 buyers because there’s just big dollars getting thrown around that

00:48:47 [Speaker Changed] Have no choice. They have to get deployed, otherwise you pay

00:48:50 [Speaker Changed] The tax and they wanna continue to buy farmland. And a lot of farmers, I mean it’s really interesting when you talk to them and you’d say, well what’s your dream scenario? And one of our tenants who sold some land to a solar company and they were selling land for a data center, I said, well, what’s your goal? And they said, well we wanna continue to farm, we just wanna do it debt free. So it’s not like they just wanna buy a place in Florida, they’ll have one, but they, they wanna continue to farm. So they wanna go buy more farmland.

00:49:14 [Speaker Changed] Huh. Really, really interesting. Coming up, we continue our conversation with Brandon Z, chief investment officer of CS Farms, discussing the state of farmland investing today. I’m Barry Riol, you’re listening to Masters in Business on Bloomberg Radio.

00:49:43 I am Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Brandon Zick. He’s Chief investment officer of Sarah’s Farms. They are a specialty fund investing in farms and farmland. We haven’t really talked about the risk of farming. And a couple of my favorite YouTube shows. So I’m a car guy, I like Harry’s Garage and his adjacent channel is Harry’s Farm. And watching him do this stuff, you realize what a difficult job farming is, especially sometimes there’s drought, sometimes there’s too much rain, it’s so expensive and, and so much of your product is totally out of your control. And then if you liked top gear, there’s an Amazon show called Clarkson’s Farm and, and it makes you realize, God, this is an impossible business, at least in the uk farmers there are having a really hard time. So let’s talk a little bit about the risks of farming and the risk of investing in farming. What are the possible downsides?

00:50:52 [Speaker Changed] Yeah, so on the, being a farmer is a very difficult business. I mean there are so many different risk factors and so many decision points that you can make that completely can impact your bottom line in a material way. Not just what crop you grow and when you plant, but when you sell it, how you sell it, who you sell it to, how you store your grain. And all these things can change year to year. And to your point, and this kind of goes back to there hasn’t been a lot of institutional rollup yet on the land side, but the people that sell inputs to farmers and the inputs can be seed, fertilizer, equipment, whatever it may be. And the buyers of their crop, the large grain buyers out there, your bungees and ADMs and Cargills, they all have a lot of pricing power. Your average farmer doesn’t have any pricing power.

00:51:39 So there are price taker on the input side. They’re a price taker on the crop side. So part of our value add for investors is we try to identify farmers that are the most well positioned to have whatever pricing power they can get. So they have to have scale so that when they’re buying inputs that they can go out and, you know, negotiate the best price possible. You want farmers that can store their grains so they’re not selling it all at harvest. They wanna be able to sell it into the spring when other people don’t. Prices don’t have the crop. Right. Yeah. So hopefully you get that positive carry. So we try to identify those folks. But when you’re, when you’re looking at investing in farmland, what are the downsides? Well, there’s certain just climate issues. So if you’re close to a river and it floods, that’s a problem. If you have very sandy soils and it doesn’t rain drought and you have drought, that’s a problem. So we like to have farms where we can do some of that CapEx, like adding irrigation or adding drainage so that you can help manage some of those risks.

00:52:37 [Speaker Changed] How do you manage around weeds, pests, bugs and disease? ’cause there are a lot of dangerous diseases that literally come in on the wind.

00:52:46 [Speaker Changed] Yeah. And that’s, I mean, part of what, the way we’ve constructed this portfolio, I mean, Perry was really prescient when he thought about the Great Lakes, the Midwest. It wasn’t just because he was from Wisconsin or he was traveling to the Midwest. It’s because in the Midwest we have the best soil, some of the best water resources. And what I mean by that is these recharging aquifers, the Great Lakes aquifers, but also it rains during the crop season. So the cheapest form of irrigation is still just rains. You don’t have to turn anything on or do anything. But there are parts of the south and the west where it doesn’t rain when you’re growing a crop or it’s very sporadic. So you can’t really grow a crop without irrigation. In the Midwest, it’s more supplemental. So from a risk management standpoint, it starts with good soil, good water.

00:53:30 We like good infrastructure so you can move your crops around. You also, and I had mentioned earlier, we like areas where it’s a highly competitive market for rent because we’re renting ground. We want to have lots of farmers out there that are all looking to grow. They’re all looking to add acres. And so that makes a very competitive market from the rental side. Some of the stuff that, you know, investing in the US isn’t a risk, but there are a lot of people and a lot of managers that invest outside of the US currency. Risk is a big deal. Sovereign risk is a big deal. I mean, there’s been many investors that, that have had more than their hand slapped for buying land in South America, particularly in Brazil, that they found out, the group they bought it from might not have been the owner.

00:54:10 And there’s a lot of things that we think transparency is key, but we, we really like title insurance. We like rule of law. So we invest in the us we invest in areas that are very friendly to farmers, you know, and so that’s, we don’t own any land in California today. Maybe we will at some point. I think that’s a little bit more difficult from a regulatory environment. And water is something that we view as longer term. You know, water’s gonna be a gating issue or a gating factor in a lot of areas. And you’re seeing not just regulation but restriction all across the country. So we wanna be in areas where water’s plentiful. It’s one thing to have a paper water, right? It’s another to have water availability. Huh. And that’s what we focus on. So.

00:54:53 [Speaker Changed] So last question, last two questions before we get to our favorite questions. We ask all our guests, let’s look out five or 10 years. What are some of the biggest opportunities in farmland and, and, and what are some of the potential dislocations and risks you’re, you’re considering?

00:55:10 [Speaker Changed] Yeah. So in terms of opportunity, I mean we, we think there’s just so much capacity out there to continue to invest in the, the current markets where we are today. But within the US we think, you know, the world’s gonna continue to need food as water becomes more expensive in other parts of the us. So California as an example, or Arizona as an example. A lot of those crops that people wanna have the USA sticker on, so vegetables, produce, they’re gonna be grown more, at least seasonally in areas where they’re cheaper to grow. And every, like

00:55:44 [Speaker Changed] Mexico or

00:55:45 [Speaker Changed] Or so a lot of that today a lot of produce is grown in Mexico. And that’s labor’s the biggest issue. Labor there is next to nothing. So if people don’t care if, if they’re blueberries, or if they’re watermelon, say USA, then it will all come from Mexico. If people don’t care because it’s just from a cost of production standpoint, it’s so much less. But in California, the cost of water, so let’s say you have a well that you need to pump a thousand gallons a minute to grow celery that might cost a couple hundred thousand dollars a year. The cost of the well itself is a million dollars. Wow. To grow that same celery, maybe less of it because you’re not growing year round in Michigan, that well cost $50,000 and it costs $200 a year to operate. So even if the labor cost was same, same, the cost of production’s much, much less. And every crop in the us, almost every crop moves west to east toward the population center. Right? So if you’re east of the Mississippi, you’ve cut a huge freight cost off of the cost of production too. So I think

00:56:44 [Speaker Changed] So Midwest, straight to the west, east coast, and much cheaper than coming up from Mexico.

00:56:49 [Speaker Changed] Yes. And I think over time, you know, we’re gonna see more and more of that high revenue production move there. So we view that as an opportunity. A risk is always do, does the cost of labor outpaced technology growth? We’ve seen, and part of the reason we like row crops are because there’s more technology being implemented and much less labor. I,

00:57:08 [Speaker Changed] I’m glad you mentioned that. ’cause one of the things that was fascinating on both those shows were the GPS driven tractors. So if you’re gonna run a combine, you’re gonna lay fertilizer down, you’re gonna harvest these things, essentially drive themselves long before Tesla because doing that efficiently is a giant money saver. Talk about the technology that’s making farmland more productive.

00:57:34 [Speaker Changed] Yeah, I mean technology, I would say in agriculture is moving as fast as anywhere. And, and it’s really because there are real tactical issues around labor’s too expensive. The cost of inputs has gone up. So to talk to our farmers and, and that’s a big part of our underwriting, is we want farmers who are using the latest technology. Whereas in the past, if someone was planning a crop, they would broadcast equally across the entire field, the fertilizer, the seeds. And when you look at actually some of these farms, the soil types and quality throughout a farm can be highly diverse. You could have five to a hundred different soil types. So the soil mapping that they can do with technology to them

00:58:13 [Speaker Changed] Via satellite, right? Yeah. A lot of

00:58:15 [Speaker Changed] Via satellite. And they also use probes to get out there, trust, but verify. You go out there and do that, and then they can use variable rate applications of fertilizer and seed. So in an acre of ground of really high quality black dirt, they might plant 35,000 seeds per acre. But then in the sandier, less lower quality soil, that’s only 20,000. So, and and achieve the same yield. So what you’re doing is saving money on the seed, applying fertilizer so that it’s not running off. And farmers don’t want waste either, right? Because that’s money that’s just rolling away. And

00:58:50 [Speaker Changed] This isn’t just satellite, it’s satellite, it’s drone, it’s a lot of high tech tools that you don’t think of. You think of picks and shovels with farms, but there’s a lot of high tech here.

00:59:00 [Speaker Changed] Well, and something as easy as if you said 20 years ago you had irrigation on a property, these big irrigation pivots. And there, you know, there’s some publicly traded companies that manufacture all these in the US like Valley and Lindsey. And 20 years ago, if a farmer had 20 pivots, they’d have to have five or six different people in the morning get in a truck and go out and start them up. And then throughout the day drive by and make sure they’re still running. Now that farmer can control everything from his or her iPhone. They can start it, stop it, monitor, they have soil moisture probes out, or they have moisture probes out in the soil so that they know do we need it. In some cases they are using AI or some learning mechanisms to say, well, based on is it going to rain, we’re not going to turn itself on. So farmers are subscribing to some of this kinda smart data to go out there and make them a better operator. And those are the farmers that when you look at who are the people that are gonna grow, they’re the ones that are using the latest technology. Huh. That’ll do that.

00:59:57 [Speaker Changed] And our final question before our favorites. What do you think people don’t understand or aren’t talking about when it comes to farmland as an investment?

01:00:08 [Speaker Changed] Yeah, I think most people don’t understand just the sophistication of the farmers they’re dealing with. When people say what’s going on in agriculture, they paint with a very broad brush. And you wouldn’t say that if you said what’s going on in accounting? Well there’s some great accountants and probably some poor ones or what’s going on in any industry, you have to look at who are the people leading the way and that’s who we try to partner with because we think they will help us generate the best returns. Whenever that Bloomberg, Indiana farmland go exists, it’s gonna be pretty fully priced. I think it’ll be much more efficient. The inefficiency is still out there. And I think that’s what we’re able to, I won’t say take advantage of, but that’s what we’ve been able to lever over time is focusing on that inefficiency. There will be a lot more money that comes into investing in farmland. We’re seeing crowdsourcing of farms, we’re seeing more public REITs that are gonna be launched and that will be out there. But I think it’s a long way when you think of there’s no cheap beta, there’ll be a lot of expensive beta out there. There are still alpha generators, and this is NASA class. You just have to go pick a manager. You can’t just say asset allocation helps us and gets us there. You have to pick a manager.

01:01:16 [Speaker Changed] There’s no vanguard for for passive indexing for farming.

01:01:20 [Speaker Changed] Not, yeah. There’s no wisdom tree for that. Yeah. No.

01:01:22 [Speaker Changed] Alright, so let’s jump to our favorite questions. We ask all our guests starting with tell us about your mentors who helped shape your career.

01:01:31 [Speaker Changed] Yeah, so I, I’ll start with my parents because they encouraged all of us on the six of us in our family do something else. We know this is not,

01:01:40 [Speaker Changed] Not uncommon with farmers, right? Yeah.

01:01:42 [Speaker Changed] And they both grew up on dairy farms and we grew up on my dad’s family farm. And my parents were both very well educated. You know, I remember some of my best memories as a kid were having dinner watching Jeopardy with them. And it was, we were always shocked. How do they know all these answers?

01:01:59 [Speaker Changed] It ran the table.

01:02:00 [Speaker Changed] Exactly. We were not very successful. But, you know, our parents were really focused on education and just doing, you know, something better. You know, we’ll always have the family farm. My mom still lives there today and it’s great to go back there. But you know, they really encouraged all of us go do something else and gave us the opportunity. There was no pressure for any of us to come back to the farm. They actually said, I remember my dad telling me the year you were born and the year you graduated high school, the price of milk was the same. This is not a long-term strategy. So that’s very funny. And, and so, so I’ll start with them. But you know, I had some great folks I’ve worked with throughout my career. Someone at Morgan Stanley that I think really made a difference for me was Arthur Lev, who had come from Front Point.

01:02:43 He was the head of chief legal officer there, and he was probably the biggest proponent of, of me going to Cirius. He said, you have to do this, huh? Why, why would you not? And I’ve worked with some great people that, you know, having been at Lehman Brothers, there’s a lot of people that got vaporized Yeah. That I really respected. And you just think, okay, if you’re gonna take a chance on something, you gotta do it. And seeing kind of what’s happened over time throughout my career, a lot has occurred. You know, it’s all shaped you in a different way. And, and our founder, Perry Beef, I mean he, I think about this today in five years, I’ll be 52. And that’s when he started Cirrus when he was 52. Wow. And it was completely different than being the fixed income money manager that he was. And, you know, building a great team, I think is the, the best thing he did. And the people that we’ve been able to hire over time, you know, I wanna be their mentor because I know they’ll be better than me. Huh. And, and that, that to me has been the most important thing.

01:03:39 [Speaker Changed] Really fascinating. Let’s talk about books. What are some of your favorites? What are you reading currently?

01:03:43 [Speaker Changed] Yeah, so a book and I, I mentioned water is just such an important thing. A book that I I read often. It’s called Water, the Epic Struggle for Power and Civilization. And it really talks through, it’s a history book, but it talks through the success of civilizations around their ability to access clean water and their ability to treat dirty water and get rid of it. And it’s just a, a fascinating story of, of and I kind of the growth of throughout the world population growth, but something I’m reading now that, or I just finished and it’s because I’m on the board of my high school. They just did away with cell phones and it’s “The Anxious Generation” and it’s really eye open. It’s a jump and hate. Yeah. It’s an eye-opening book about social media and when people have their phones, just how it impacts their life. And so our Jesuit high school did away with cell phones and I think it’s the greatest thing they could have done.

01:04:32 [Speaker Changed] There’s a lot, a lot of that going on these days. More and more school districts are, are forcing them, the kids to put schools in phones in lockers.

01:04:40 [Speaker Changed] Yeah. They sh they should do that. I mean we have to get them out of our house, the iPads and stuff within our, that’s a, a bigger battle to get through. But yeah, it’s something that’s just eye-opening. Let,

01:04:49 [Speaker Changed] Let’s talk about streaming. What are you listening to or watching on Netflix or Amazon Prime?

01:04:54 [Speaker Changed] Well, I have a lot of windshield time, so I listen to a lot of podcasts. So you know, invest like the best. Obviously you know, MEB Faber, Jeremy Schwartz, Barry Ritholtz. I listen to a lot of business podcasts. I also love sports. So I listen to a lot of Ringer podcasts too around sports and entertainment on the streaming side. You know, I rewatch the wire every year really. It’s just my favorite show. Wow. Ever. And so I do that every year. I’m now watching Severance, which is an interesting, I’m not all the way done with the three seasons yet, so

01:05:29 [Speaker Changed] It takes a couple of of severe turns that are like, where did that come from? Yeah,

01:05:33 [Speaker Changed] I can imagine. And

01:05:34 [Speaker Changed] But the whole concept is kind of fascinating. Yeah,

01:05:36 [Speaker Changed] Exactly.

01:05:37 [Speaker Changed] Final two questions. What sort of advice would you give to a recent college grad interest in the career in either investing alternatives or farmland investing?

01:05:50 [Speaker Changed] Yeah, I think back to, you know, building the network is probably the most important thing you can ever do because there’s, there’s so many people that are good at whatever you think you’re good at, there’s someone that’s better at it for sure. Whether it’s modeling, you know, thinking about investing, you know, whatever it may be, someone’s always better. So to me, building that network and, and you can’t be full of it. Like you have to be genuine when you’re, when you’re talking to people. But I think that’s been the best thing I’ve ever done. And that’s the thing I can, and that’s why I take a lot of time. I mean we get a lot of people that reach out to us with all types of questions and all of the portfolio managers on our team grew up on family farms. They all went and worked in finance and there’s probably a lot of Wall Street people, not per capita, but generally a lot of Wall Street people that grew up on farms and had this great foundation of hard work.

01:06:43 And then they figured, we’ll just, I’ll never be able to use that again for the rest of my life. So I think being able to build up your network because sometimes you can pull on a thread and you won’t know where it’ll go. And so that’s what, you know, that idea of talking to someone at an endowment to say, you know, kind of do a reference check for these people I’m talking to and they just say, well you should talk to this other person instead. And you just never know what path you’re gonna go down. So leverage that. Really,

01:07:09 [Speaker Changed] Really interesting. Our final question, what do you know about the world of farmland investing today that might’ve been useful 15 years ago or so when you were first diving into this space? Yeah,

01:07:22 [Speaker Changed] I think when I think about it now, there are very few farms we missed on that I wouldn’t love to own today. And you know, being able to look back in the rear view mirror and say, that would’ve been a great purchase. You know, that’s always interesting. And

01:07:36 [Speaker Changed] Is the regrets more the things you did and shouldn’t have or, but the thing or the things you missed and wish you did?

01:07:44 [Speaker Changed] No, it’s the things we miss that we wish we had done. But today we’re in a position that we use no leverage when buying properties. They’re all cash purchases. You know, you can never say you’re bulletproof, but we have a great balance sheet. But over time we were, we were still doing missionary work in terms of telling people this is a real asset class. So we were using leverage to purchase properties just when we didn’t have new money coming in. So we’ve always been very conservative and in farmland, leverage is a different beast. You know, you can’t buy a farm, it’s

01:08:12 [Speaker Changed] Not 20 x,

01:08:13 [Speaker Changed] No, you can’t buy a farm with 5% down. You need 50 or 60% down to buy a farm to

01:08:18 [Speaker Changed] Have. So it’s modest leverage and unless there’s a disaster and it’s

01:08:22 [Speaker Changed] All fixed, great mortgage debt. But we were just always very conservative. And I think some of that conservatism now, you’d say, well maybe that was overly conservative, but you know, we also didn’t get burned. And you don’t move from 30 million to 2 billion by being overly aggressive or you don’t do it all at once. You have to do it over time. And that’s kind of how what we focused on.

01:08:42 [Speaker Changed] Brandon, this was absolutely fascinating. We have been speaking with Brandon Zick. He is the Chief investment officer of Sarah’s funds now owned by the time you’re seeing this by WisdomTree Asset Management. If you enjoy this conversation, well be sure and check out any of the 569 episodes we’ve done previously over the past 11 years. You can find those at Bloomberg, iTunes, Spotify, and here at YouTube. Be sure and check out my new book, how Not to Invest the ideas, numbers, and behaviors that destroy wealth and how to avoid them, how not to invest at your favorite bookseller. I would be remiss if I did not thank the crack staff that puts these conversations together each week. Alexis Noriega is my video producer, Anna Luke is my audio producer. Sean Russo is my researcher. Sage Bauman is the head of podcasts here at Bloomberg. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.

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Islamabad Court Bombing Kills 12 - Pakistan Quickly Blames India, Afghanistan

A suicide bombing attack outside a court in Pakistan's capital Islamabad has killed 12 people and injured at least 27 more, and by all reports the carnage could have been worse as the attacker was unable to get inside a district courthouse, the intended target.

Pakistani President Asif Ali Zardari has said he "strongly condemned the suicide blast." And Sindh province’s Home Minister Ziaul Hassan Lanjar said in a statement, "Suicide bombers and terrorists have no religion. They are enemies of humanity."

Aftermath of the attack Tuesday, AFP/Getty Images

"As I entered the court building, a huge blast occurred. I thought the entire judiciary building would collapse on me," a court lawyer and eyewitness, Zahid Khan, told CBS News. "When I went upstairs, I saw people lying on the ground around the fire … Just three minutes earlier, I had been at that exact spot while parking my bike."

"I saw many people lying injured, with blood on the road," he said. Smoke had still been visible rising over the area in the wake of the blast.

Importantly Pakistan Prime Minister Shehbaz Sharif has quickly laid blame on India, despite suicide bombings not being typical of operations out of India:

Sharif has blamed India for the “suicide attack” in Islamabad as well as the attack on a cadet college that took place near the border with Afghanistan earlier today.

Without providing any evidence to back up his statement, Sharif said: "Both attacks are the worst examples of Indian state terrorism in the region."

"It is time for the world to condemn such nefarious conspiracies of India," he continued in an official government account post on X. "We will continue the war against them until the complete elimination of the scourge of terrorism."

Casting stones at India is typical of rival nuclear-armed power Pakistan, as the neighboring countries have long been bitter enemies, but the past week has seen the Pakistani Taliban, or TTP, as well as some representatives within the Afghan Taliban issue repeat threats against Pakistani cities.

Pakistan's Minister of Defense Khawaja Asif did narrow his blame on Afghan and border terrorism. "Kabul's rulers can stop terrorism in Pakistan, but today's suicide attack at the Islamabad district courts proves this is a nationwide war," Asif said in a statement Tuesday.

Explosion outside Islamabad court in Pakistan kills at least 12

'We are probing what kind of blast it was. It is not clear yet,' a police spokesperson said pic.twitter.com/JmNCyTZthj

— RT (@RT_com) November 11, 2025

"Anyone who believes the Pakistan Army is only fighting on the Afghan-Pakistan border and in remote Balochistan should take this attack as a wake-up call. This is a war for all of Pakistan," he added.

The timing of this attack is interesting related to India, however, as just the day prior a large car blast targeted Red Fort, which is a highly populated tourist destination. It killed eight and wounded many more, after which India's Prime Minister Narendra Modi vowed that the "conspirators" behind the blast "will not be spared," and that "all those responsible will be brought to justice."

Tyler Durden Tue, 11/11/2025 - 11:20

61% Of Institutions Plan To Boost Crypto Exposure, Despite October Crash; Sygnum

Authored by Zoltan Vardai via CoinTelegraph.com,

Institutional investors are maintaining confidence in digital assets despite a sharp market correction in October, with most planning to expand their exposure in the months ahead, according to new research.

Over 61% of institutions plan to increase their cryptocurrency investments, while 55% hold a bullish short-term outlook, Swiss crypto banking group Sygnum said in a report released on Tuesday.

The survey covered 1,000 institutional investors globally.

Roughly 73% of surveyed institutions are investing in crypto due to expectations of higher future returns, despite the industry still recovering from the record $20 billion market crash at the beginning of October.

However, investor sentiment continues facing uncertainty due to delays in key market catalysts, including the Market Structure bill and the approval of more altcoin exchange-traded funds (ETFs).

Institutional crypto allocation plans. Source: Sygnum

While this uncertainty may carry over into 2026, Sygnum’s lead crypto asset ecosystem researcher, Lucas Schweiger, predicts a maturing digital asset market, where institutions seek diversified exposure with long-term growth expectations.

“The story of 2025 is one of measured risk, pending regulatory decisions and powerful demand catalysts against a backdrop of fiscal and geopolitical pressures,” he said, adding:

“But investors are now better informed. Discipline has tempered exuberance, but not conviction, in the market’s long-term growth trajectory.” 

Despite October’s correction, “powerful demand catalysts” and institutional participation remained at an all-time high, with the growing ETF applications signaling more institutional demand, added Schweiger.

At least 16 crypto ETF applications are currently awaiting approval, which were delayed by the ongoing US government shutdown, now in its 40th day.

Crypto staking ETFs may be the next institutional catalyst

Crypto staking ETFs may present the next fundamental catalyst for institutional cryptocurrency demand.

Over 80% of the surveyed institutions expressed interest in crypto ETFs beyond Bitcoin and Ether, while 70% stated that they would start investing or increase their investments if these ETFs offered staking rewards.

Staking means locking your tokens into a proof-of-stake (PoS) blockchain network for a predetermined period to secure the network and earn passive income in exchange.

Meanwhile, investors are now anticipating the end of the government shutdown, which could bring “bulk approvals” for altcoin ETFs from the US Securities and Exchange Commission, catalyzing the “next wave of institutional flows,” according to Sygnum.

Tyler Durden Tue, 11/11/2025 - 11:00

FBI Seeks To Unmask Anonymous Web Archiving Service Owner

Authored by José Niño via Headline USA,

The FBI has issued a subpoena to Canadian domain registrar Tucows seeking to unmask the anonymous owner of Archive.today, a popular web archiving service used by millions worldwide. 

The subpoena, dated last Tuesday and posted publicly on Archive.today’s X account, states it relates to a federal criminal investigation being conducted by the FBI, as The Verge reported. However, the document provides no specific details about what alleged crime is under investigation.

The FBI is requesting comprehensive identifying information from Tucows, including customer or subscriber name, address of service, and billing address associated with Archive.today, per The Verge report.

Beyond basic contact details, the subpoena demands an extensive array of data such as telephone connection records, including incoming and outgoing calls and SMS or MMS records, payment information like credit card or bank account numbers, internet connectivity session times and durations, device identifiers, IP addresses, and details about services used such as email, cloud computing, and gaming services.

The subpoena instructs Tucows not to disclose its existence indefinitely, as any such disclosure could interfere with an ongoing investigation and enforcement of the law, as recounted by Gizmodo. 

That request became moot when Archive.today publicly posted the document. Journalist Max Blumenthal, editor of The Grayzone, drew attention to the subpoena on X, emphasizing that Archive.today is used by journalists and researchers to “document edits to articles, bypass subscription walls and avoid giving traffic to the failing corporate media.”

The FBI has issued a subpoena seeking to unmask the owner of https://t.co/V3xqR5qqoa, which we use to document edits to articles, bypass subscription walls and avoid giving traffic to the failing corporate media https://t.co/g36rB7G83R

— Max Blumenthal (@MaxBlumenthal) November 6, 2025

Launched in 2012, Archive.today functions similarly to the Internet Archive’s Wayback Machine but with key differences.

Users can submit URLs to create permanent snapshots of web pages, preserving content before it disappears or changes. 

The service supports ZIP downloads and image based page saves, and crucially, pages are almost never deleted except in extreme cases like child pornography. As AV Club noted, the site gained prominence during the 2014 GamerGate controversy, when users employed it to track article edits while avoiding directing traffic to certain websites.

Very little is known about who runs Archive.today. The original domain was registered in May 2012 by someone using the name Denis Petrov from Prague, Czech Republic, as Gigazine reported. However, this is likely a pseudonym, since Denis Petrov is an extremely common Russian name, and the same contact information was used to register sketchy domains including carding forums and piracy sites.

Tyler Durden Tue, 11/11/2025 - 10:25

Electric Bill Crisis Blame-Game Begins: Democrats Slam Data Centers, GOP Faults "Climate-Cult Ideology"

It only took politicians a little over a year to catch up to our Mid-Atlantic power bill crisis theme (read here), as the battle to control the narrative over surging electricity costs intensifies.

Democrats are pointing the finger at the explosion of data center buildouts and power-hungry server racks, while conservative politicians blame disastrous green-energy policies, specifically, the early retirement of fossil-fuel power generation plants and the rapid rollout of unreliable solar and wind generation. 

On Monday, Sen. Bernie Sanders and several Democratic senators, including Sens. Blumenthal, Van Hollen, Markey, and Wyden, penned a joint letter to the Trump administration and Commerce Secretary Howard Lutnick about the adminstration's fast-tracking of AI infrastructure is creating "bidding wars" between households and trillion-dollar companies such as Meta, OpenAI, Alphabet, and Oracle for limited electricity supplies.

"As American families face soaring electricity bills caused by the Trump Administration's sweetheart deals with Big Tech companies, we write to demand information about the failure of the Administration to prevent consumers from being forced to subsidize the cost of data centers — costs compounded by the Administration's reckless abandonment and assault on new, clean energy sources," the senators wrote in the letter. 

Democrats are correct that data centers are certainly fueling the power bill crisis across the Mid-Atlantic states. However, they are never able to tell the whole truth, conveniently leaving out that their climate crisis hoax led to the early retirement of fossil fuel generation plants, which in turn stripped the grids of now much-needed spare capacity. Goldman warned this past summer of "Price-Spikes & Blackouts."

In fact, these Democrats doubled down and blamed this mess on Trump's "assault on clean energy sources." Democrats need a major wake-up call: intermittent green power sources do not provide stable power for data centers. In fact, Spain's nationwide blackout last summer was centered on unreliable renewable energy.

On the opposite side of the political spectrum, the Maryland Freedom Caucus, a coalition of conservative Republican members of the Maryland House of Delegates, joined forces with lawmakers in surrounding states to address skyrocketing power bills.

"Politicians and special interest groups have traded energy independence for a delusional climate cultist ideology, and every Maryland family is paying the price with skyrocketing bills and a rapidly dwindling energy supply," Maryland Delegate Brian Chisholm recently told local outlet Fox Baltimore. 

Chisholm continued, "We stand firmly united with our colleagues in neighboring states to deliver real, adult solutions and finally put an end to the childish nonsense impacting our state."

ICYMI: https://t.co/IXynLYD8o4 pic.twitter.com/PzQsOpnP3F

— Maryland Freedom Caucus (@MDFreedomCaucus) October 23, 2025

In a recent note, we cited a Goldman Sachs report by analyst Carly Davenport that found "higher power bill inflation has been the most pronounced in the Northeast, Mid-Atlantic, and California in the past three years." Please do note, these regions and states are governed by leftist politicians wearing climate crisis blinders, ones that even Bill Gates had to take off last month after he acknowledged the whole climate crisis narrative was fake news.

Why is it that Democrat-run states are experiencing the brunt of the power bill crisis? Is it grid mismanagement?

Davenport added more color:

Residential utility bill inflation has accelerated in certain regions, raising concerns about customer affordability. A few states in the Northeast/Mid-Atlantic such as MD, CT, DE and DC, as well as California, have seen accumulated bill inflation of 29% in the past three years (20pp above CPI), while other states such as MI, ND, AR, SD and LA had bill growth of only 5% in the same period (Exhibit 2). Interestingly, the states with higher bill inflation during this period have deregulated or competitive power markets, and those with lower inflation are in traditional regulated markets. We provide more details on power market fundamentals and utility bills within.

Northeast/Mid-Atlantic States Hit Hardest by Power Bill Crisis

While Democrats are busy pushing their affordability narrative ahead of the 2026 midterms and blaming data centers for the power bill crisis, they're conveniently ignoring one key fact: their so-called "climate crisis" agenda has gutted America's power grid. By forcing the early retirement of fossil-fuel plants and replacing them with unreliable solar and wind, they've stripped the grid of critical spare capacity, a policy failure now colliding head-on with the data center power surge.

What's clear is that political parties will be ramping up their own narratives about why power bills are exploding in the Mid-Atlantic and Northeast.

In one year, this will be the most popular chart on this site pic.twitter.com/h93gWXMoNL

— zerohedge (@zerohedge) August 11, 2025

This is happening much sooner than we anticipated. 

Tyler Durden Tue, 11/11/2025 - 10:05

Electric Bill Crisis Blame-Game Begins: Democrats Slam Data Centers, GOP Faults "Climate-Cult Ideology"

It only took politicians a little over a year to catch up to our Mid-Atlantic power bill crisis theme (read here), as the battle to control the narrative over surging electricity costs intensifies.

Democrats are pointing the finger at the explosion of data center buildouts and power-hungry server racks, while conservative politicians blame disastrous green-energy policies, specifically, the early retirement of fossil-fuel power generation plants and the rapid rollout of unreliable solar and wind generation. 

On Monday, Sen. Bernie Sanders and several Democratic senators, including Sens. Blumenthal, Van Hollen, Markey, and Wyden, penned a joint letter to the Trump administration and Commerce Secretary Howard Lutnick about the adminstration's fast-tracking of AI infrastructure is creating "bidding wars" between households and trillion-dollar companies such as Meta, OpenAI, Alphabet, and Oracle for limited electricity supplies.

"As American families face soaring electricity bills caused by the Trump Administration's sweetheart deals with Big Tech companies, we write to demand information about the failure of the Administration to prevent consumers from being forced to subsidize the cost of data centers — costs compounded by the Administration's reckless abandonment and assault on new, clean energy sources," the senators wrote in the letter. 

Democrats are correct that data centers are certainly fueling the power bill crisis across the Mid-Atlantic states. However, they are never able to tell the whole truth, conveniently leaving out that their climate crisis hoax led to the early retirement of fossil fuel generation plants, which in turn stripped the grids of now much-needed spare capacity. Goldman warned this past summer of "Price-Spikes & Blackouts."

In fact, these Democrats doubled down and blamed this mess on Trump's "assault on clean energy sources." Democrats need a major wake-up call: intermittent green power sources do not provide stable power for data centers. In fact, Spain's nationwide blackout last summer was centered on unreliable renewable energy.

On the opposite side of the political spectrum, the Maryland Freedom Caucus, a coalition of conservative Republican members of the Maryland House of Delegates, joined forces with lawmakers in surrounding states to address skyrocketing power bills.

"Politicians and special interest groups have traded energy independence for a delusional climate cultist ideology, and every Maryland family is paying the price with skyrocketing bills and a rapidly dwindling energy supply," Maryland Delegate Brian Chisholm recently told local outlet Fox Baltimore. 

Chisholm continued, "We stand firmly united with our colleagues in neighboring states to deliver real, adult solutions and finally put an end to the childish nonsense impacting our state."

ICYMI: https://t.co/IXynLYD8o4 pic.twitter.com/PzQsOpnP3F

— Maryland Freedom Caucus (@MDFreedomCaucus) October 23, 2025

In a recent note, we cited a Goldman Sachs report by analyst Carly Davenport that found "higher power bill inflation has been the most pronounced in the Northeast, Mid-Atlantic, and California in the past three years." Please do note, these regions and states are governed by leftist politicians wearing climate crisis blinders, ones that even Bill Gates had to take off last month after he acknowledged the whole climate crisis narrative was fake news.

Why is it that Democrat-run states are experiencing the brunt of the power bill crisis? Is it grid mismanagement?

Davenport added more color:

Residential utility bill inflation has accelerated in certain regions, raising concerns about customer affordability. A few states in the Northeast/Mid-Atlantic such as MD, CT, DE and DC, as well as California, have seen accumulated bill inflation of 29% in the past three years (20pp above CPI), while other states such as MI, ND, AR, SD and LA had bill growth of only 5% in the same period (Exhibit 2). Interestingly, the states with higher bill inflation during this period have deregulated or competitive power markets, and those with lower inflation are in traditional regulated markets. We provide more details on power market fundamentals and utility bills within.

Northeast/Mid-Atlantic States Hit Hardest by Power Bill Crisis

While Democrats are busy pushing their affordability narrative ahead of the 2026 midterms and blaming data centers for the power bill crisis, they're conveniently ignoring one key fact: their so-called "climate crisis" agenda has gutted America's power grid. By forcing the early retirement of fossil-fuel plants and replacing them with unreliable solar and wind, they've stripped the grid of critical spare capacity, a policy failure now colliding head-on with the data center power surge.

What's clear is that political parties will be ramping up their own narratives about why power bills are exploding in the Mid-Atlantic and Northeast.

In one year, this will be the most popular chart on this site pic.twitter.com/h93gWXMoNL

— zerohedge (@zerohedge) August 11, 2025

This is happening much sooner than we anticipated. 

Tyler Durden Tue, 11/11/2025 - 10:05

Trump Asks Supreme Court To Take Up E. Jean Carroll's Defamation Case

Authored by Sam Dorman via The Epoch Times,

President Donald Trump has asked the Supreme Court to wade into his defamation dispute with author E. Jean Carroll, alleging that an appeals court failed to recognize multiple evidentiary flaws that led to an adverse verdict for him.

Trump’s legal team told The Epoch Times it filed a petition for writ of certiorari to the Supreme Court on Nov. 10. The justices have not yet decided whether to take up the case.

“The American People stand with President Trump as they demand an immediate end to all of the Witch Hunts, including the Democrat-funded travesty of the Carroll Hoaxes,” a spokesman for Trump’s legal team told The Epoch Times.

“President Trump will keep winning against Liberal Lawfare, as he continues to focus on his mission to Make America Great Again.”

The petition, which has been reviewed by The Epoch Times, is the latest development in a years-long saga surrounding Carroll’s allegation that Trump sexually assaulted her in a department store at some point during the 1990s. Trump has repeatedly denied the allegations.

Carroll sued him for defamation and won more than $80 million in two trials. Trump’s petition to the Supreme Court concerns a December 2024 decision by the U.S. Court of Appeals for the Second Circuit that upheld the verdict in one of the trials. That trial resulted in a $5 million award for Carroll.

The purported evidentiary errors in that trial prevented Trump from fully contesting Carroll’s case in another trial that resulted in an award of $83 million, Trump’s attorneys argued. The Second Circuit later upheld that larger verdict in a decision from September.

According to Trump’s attorneys, the Second Circuit’s 2024 opinion misinterpreted the Federal Rules of Evidence and wrongly allowed Carroll to rely on propensity evidence, or evidence that purported to show Trump had a propensity to act in a particular way.

One of those pieces of evidence was the Access Hollywood Tape released during the 2016 presidential election. Trump’s attorneys also took issue with allowing testimony from two women who accused Trump of unwanted touching and kissing.

In its 2024 decision, the Second Circuit rejected Trump’s criticisms of the lower court’s handling of the evidence.

“On review for abuse of discretion, we conclude that Mr. Trump has not demonstrated that the district court erred in any of the challenged rulings,” an unsigned opinion read.

“Further, he has not carried his burden to show that any claimed error or combination of claimed errors affected his substantial rights as required to warrant a new trial.”

An attorney who represented Carroll in the Second Circuit did not respond to The Epoch Times’ request for comment before publishing time. In a briefing to the court, Carroll’s attorneys called Trump’s evidentiary arguments “empty.”

“There was no error here, let alone a violation of Trump’s substantial rights.”

Trump attempted to have the whole circuit rehear the case, but was denied in June, with two judges dissenting from that decision.

Tyler Durden Tue, 11/11/2025 - 09:50

Trump Asks Supreme Court To Take Up E. Jean Carroll's Defamation Case

Authored by Sam Dorman via The Epoch Times,

President Donald Trump has asked the Supreme Court to wade into his defamation dispute with author E. Jean Carroll, alleging that an appeals court failed to recognize multiple evidentiary flaws that led to an adverse verdict for him.

Trump’s legal team told The Epoch Times it filed a petition for writ of certiorari to the Supreme Court on Nov. 10. The justices have not yet decided whether to take up the case.

“The American People stand with President Trump as they demand an immediate end to all of the Witch Hunts, including the Democrat-funded travesty of the Carroll Hoaxes,” a spokesman for Trump’s legal team told The Epoch Times.

“President Trump will keep winning against Liberal Lawfare, as he continues to focus on his mission to Make America Great Again.”

The petition, which has been reviewed by The Epoch Times, is the latest development in a years-long saga surrounding Carroll’s allegation that Trump sexually assaulted her in a department store at some point during the 1990s. Trump has repeatedly denied the allegations.

Carroll sued him for defamation and won more than $80 million in two trials. Trump’s petition to the Supreme Court concerns a December 2024 decision by the U.S. Court of Appeals for the Second Circuit that upheld the verdict in one of the trials. That trial resulted in a $5 million award for Carroll.

The purported evidentiary errors in that trial prevented Trump from fully contesting Carroll’s case in another trial that resulted in an award of $83 million, Trump’s attorneys argued. The Second Circuit later upheld that larger verdict in a decision from September.

According to Trump’s attorneys, the Second Circuit’s 2024 opinion misinterpreted the Federal Rules of Evidence and wrongly allowed Carroll to rely on propensity evidence, or evidence that purported to show Trump had a propensity to act in a particular way.

One of those pieces of evidence was the Access Hollywood Tape released during the 2016 presidential election. Trump’s attorneys also took issue with allowing testimony from two women who accused Trump of unwanted touching and kissing.

In its 2024 decision, the Second Circuit rejected Trump’s criticisms of the lower court’s handling of the evidence.

“On review for abuse of discretion, we conclude that Mr. Trump has not demonstrated that the district court erred in any of the challenged rulings,” an unsigned opinion read.

“Further, he has not carried his burden to show that any claimed error or combination of claimed errors affected his substantial rights as required to warrant a new trial.”

An attorney who represented Carroll in the Second Circuit did not respond to The Epoch Times’ request for comment before publishing time. In a briefing to the court, Carroll’s attorneys called Trump’s evidentiary arguments “empty.”

“There was no error here, let alone a violation of Trump’s substantial rights.”

Trump attempted to have the whole circuit rehear the case, but was denied in June, with two judges dissenting from that decision.

Tyler Durden Tue, 11/11/2025 - 09:50