On this episode of Okay, Computer, Dan talks with Business Insider columnist Linette Lopez about her new piece on why the stock market is probably “screwed” (2:30), new COVID-19 lockdowns in China creating fresh headwinds for the global economy (7:30), the time Linette became a target of Elon Musk (11:00), Tesla shareholders likely suffering from Elon Musk’s focus on Twitter (15:30), and how so many sophisticated investors were duped by Sam Bankman-Fried and FTX (22:00).
Read Linette’s new column: The US economy may not be screwed after all — but the stock market sure is
Check out Linette’s epic Twitter thread showcasing her work on Tesla & Elon Musk over the years
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Show transcript:
Dan Nathan: [00:00:36] Welcome to Okay, Computer. I am your host Dan Nathan, I am here with the illustrious Linette Lopez, columnist at Business Insider and my friend. Hi Linette. [00:00:48][12.2]
Linette Lopez: [00:00:50] Hi, thanks for having me. [00:00:50][0.3]
Dan Nathan: [00:00:51] All right. Listen, you and I have a lot to talk about here. I feel like the last time I saw you was a few weeks ago. There was some libations, there were some steak. There was some of that. We probably talked about a lot of the same stuff we’re going to talk about right now. But there was a couple of things, your work product that have caught my attention over the last couple of weeks that I really want to talk about. Of course, we’re going to talk about, you know, Elon Musk and Twitter and Tesla and all that sort of stuff. You’ve been reporting on him for a very long time and talk about this SBF and the FTX situation. But first and foremost, let’s just say this. I met you ten years ago. I think you just started at Business Insider. I got to give a shout out to TRV. That is the reform broker, Josh Brown. I’m sure. It had something to do with him, didn’t it? [00:01:38][47.0]
Linette Lopez: [00:01:38] Absolutely, yeah. I think we were probably at Ginger Man or something. [00:01:43][4.5]
Dan Nathan: [00:01:44] Yeah. [00:01:44][0.0]
Linette Lopez: [00:01:44] Having a beer. And I was Business Insider’s like 30 something employee. It was like very early. I started there. I got there right out of Columbia Journalism School and I wanted to do something digital first and that that really paid off in a big way. [00:02:01][16.7]
Dan Nathan: [00:02:01] It’s interesting the way you graduated college in the late odds, you know, you got an advanced degree and you just made your mind up. At any point you could have gone to the Wall Street Journal or The New York Times or Barron’s or anything like that. But you wanted to do a digital first. And again, you know, Business Insider, I will tell you this, the first time I ever read anything about Bitcoin was on Business Insider. There was a lot of things that you guys were really early on. You weren’t simping for Bitcoin, you were talking about it because it was a thing that traders in the market or, you know, some interesting tech folks or whatever we’re talking about. And so I always thought it was just a really interesting platform. And I look at you and I look at the kind of arc of your career. You’ve gone from a reporter on markets, in finance and economics in the like to now a columnist. So you wrote this piece in Business Insider yesterday. It really caught my eye. And I really want to get to why you wrote it, but it was titled The U.S. Economy May Not Be Screwed After All, but the stock market is. Now, I thought was a fascinating read, a really succinct kind of summary of where the economy is, where it’s been over the last few years, what the Fed and the Treasury and Congress had to do just to get us here. And kind of when you think of the stock market again, you kind of reference this bubble that was kind of bubbled up here, but it was not just in stocks, it was in a whole host of different risk assets. Now, many of them have corrected meaningfully, reminding people like myself who remember what the dot com implosion looked like of that period here. But your point here is that stocks are not done going down even if the economy doesn’t turn into a really bad recession. So talk to me. Why did you write this? And really how bad do you think it’s going to get for the stock market? [00:03:50][108.1]
Linette Lopez: [00:03:50] I don’t try to predict what is going to happen to the stock market in terms of like I think it’ll go down X percent. I just think that what the dynamics that we’re seeing here in this economy, the stock market is being led by by rising interest rates. And that’s the gravitational pull of all of it. Rising interest rates are impacting the economy, but but obviously not to the degree that it’s impacting the stock market. We’re still seeing job growth, that the companies that are experiencing layoffs were very frothy companies in the stock market. This whole growth tech names not really making very much money, but like using fun accounting tricks. Just look like make it look like you have cash flow, like, you know, Twitter, Tesla, all these companies. So we’re seeing that part of the market dragged the market down and it will continue to do so until those the wildest parts of the market get religion. As for the economy, we don’t know actually what’s going to happen to the economy because it’s in a very strange place. We’ve never had a pandemic before. We’ve never helicoptered money on people like this before. We haven’t seen inflation like this before. Like you really don’t. We really don’t know it. It could be that the Fed continues hiking rates and we somehow don’t have meaningful job losses. [00:05:09][79.3]
Dan Nathan: [00:05:10] Yeah, I guess I go back to kind of the post financial crisis and again, when we thought we were kind of out of the woods at some point, maybe in 2010, 2011. I just remember a lot of investors back then just kind of predicting a double dip recession. They’re obsessed with it. And this was when you were coming into the business, you kind of remember it. And what was really interesting is that the financial crisis here in the U.S. became a rolling debt crisis around Europe and around other parts of the world. And that was really kind of supressing growth for a while. And so I kind of think there’s a scenario that could play out. I know a lot of people are expecting that a tailwind to the global economy will be when China finally reopens at some point next year. And I guess I wonder if that happens to kind of coincide with a recession in the U.S., whether it’s deep or not. And therefore, we just have a scenario where, you know, sovereign balance sheets are really high. In your post yesterday, okay. You talked about what Greenspan has been saying. He’d rather overdo it. He’d rather over tighten and then use the tools to support the economy. And I guess my point is, is that if they never run off any of the balance sheet, do those tools become a bit more blunted? Right, that, you know, the more times they take out the same playbook to kind of do what they’re doing right now is like they’re going to over tighten. They just kind of over eased. And then if the economy starts to weaken to a point where we go into a recession, then they start easing again. [00:06:37][87.4]
Linette Lopez: [00:06:38] Yeah, maybe. Remember peak oil? [00:06:40][1.7]
Dan Nathan: [00:06:40] Yes, I do remember peak peak oil. [00:06:42][1.6]
Linette Lopez: [00:06:43] Oh my Gosh. Remember, we’ve been we’ve been wrong about so many things. [00:06:45][2.4]
Dan Nathan: [00:06:46] Well, not really. I mean, like like but but here’s the thing. Look at crude oil right now. I mean, crude oil. Did we just hit peak oil again? And maybe what we just saw over the last year and a half or so with the commodity complex was just another reverberation of just the weirdness of this black swan in a way. So I guess what I’m saying is, is that like I’m I’m deeply skeptical of the stock market and valuations here. I do like the fact that large pockets of overexuberance, whether it be the SPAC market, whether it be non-profitable techs, whether it be, you know, I mean, the list goes on and on, crypto, that sort of thing, whether it meme stocks, these things are all dying. Okay. And the lessons that I have from the dot com implosion or the financial crises is that they’re going to overshoot to the downside the way that they overshot to the upside. So I buy your premise that the stock market is in for a rocky period and no matter what I mean, I just think that the going forward, the return environment is going to look a lot worse than it did in the prior years to the pandemic because of the rate situation and the likelihood that rates stay higher than where they had been in the run up to the pandemic. [00:07:58][72.1]
Linette Lopez: [00:07:59] We don’t know what stable looks like. What if it’s rates at 4%? You know what if it’s rates at 6% and Powell can’t quite figure out how to get them back down, like, yeah, I know. There’s just there’s so, so much about this. Just open ended. One thing I will say, though, is I don’t know how China gets out of this lockdown situation. They started easing a little bit. And over the past two days, cases have spiked. It’s just the vaccination situation is not getting that much better. I don’t know how Xi circles that square. I think investors keep falling for this like China reopening story. It’s kind of like Lucy and Charlie Brown with the football guys. Until you really see meaningful reopening, it’s just hard to see how Xi lets go of that much control. It’s just not in its nature. [00:08:51][51.7]
Dan Nathan: [00:08:51] I think that some people would say that India is in that same situation. I just heard that from a friend of mine who runs a, you know, a high end global travel company. I mean, they are bracing for what could be a rocky few years. Like, you know, here we are. And, you know, China started locking down in late 2019, early 2020, you know, I mean, you know, and we’re still talking about it here. So, listen, I’m with you. I thought it was a very thought provoking piece. And like I said, you did a fabulous job of kind of summarizing of kind of where we were, just how epic, you know, what the Fed here had to do and what they continue to do. And obviously, they did it too long. And when I think about the markets, I’ve been in them for 25 years and I look at what happened just on a headline standpoint. If you look at where the S&P and the Nasdaq are, it doesn’t seem too bad. I think it’s important. Remember, the S&P was up 28% last year. It’s only down 16% as we speak. And it looks like it wants to party. I’m not in that camp. I’m not buying. [00:09:53][61.7]
Linette Lopez: [00:09:54] The stock market always wants to party. That’s one thing. Stocks want to go up sometimes They just can’t. [00:09:59][5.0]
Dan Nathan: [00:09:59] I get it. Well, I guess the other thing I would just say about the market is like last November and December, we had this unholy rally where we just literally went parabolic closed at an all time high. And I remember just thinking to myself, man, the higher we go, the harder we’re going to fall next year. And if you look at just the chart of the S&P 500, you just see these, you know, kind of palpitations. But it’s a series of lower highs and it’s a series of lower lows. And I guess to your point, we don’t know what’s going to happen, but I know a lot of very smart people who’ve looked at lots of different market cycles, don’t think that the market can materially rally or break out of this range until the Fed does stop raising interest rates. [00:10:42][43.4]
Linette Lopez: [00:10:43] And rally into what like the economy is slowing down. There’s got to be what’s good news right now. That’s another question I ask myself. Okay. So we have a good jobs number, but that’s that’s bad news and that’s good news. We have prices are going down a little bit. It’s going to hurt margins. Is that bad news? Is that good news? You know, this is a very confusing time. It’s very noisy. I really appreciate being around at this moment. This is a good this is a good time to be, you know, making jokes about the stock market. [00:11:16][32.6]
Dan Nathan: [00:11:16] Let’s let’s hit something. Speaking of a joke, you know, Elon Musk is just kind of dominating. Just, you know, if you’re predominant, if you’re in Wall Street or you’re in tech, it really is hard to open up whatever you read first in the morning, whether it’s your facts that are your Bloomberg or your CNBC or whatever the hell it is. Literally three of the top ten stories are about Elon Musk, whether it’s about Tesla, whether it’s about Twitter, whether it’s about some stupid meme. Tell our listeners a little bit about your history covering Elon Musk. You put out an epic thread on Twitter. This was on November 8th and it was, How do I know so much about how Elon Musk does things? I spent three years investigating Tesla at Business Insider from 2018 to 2021. Here’s some of the sloppy, dangerous, callous things that I learned. And then you threaded all of the stories. It has 33,000 retweets, 112,000 likes. That’s kind of Elon Musk Twitter action there. Why do you think that thread took so much fire? [00:12:25][68.9]
Linette Lopez: [00:12:26] First of all, I was sitting on my couch waiting for election returns and I was like, if I’m sitting on my couch watching Twitter waiting for election returns, every idiot is sitting on the couch. So I was like, I’ll just thread. And those are even all my stories. I have seen some stuff go down at Tesla and Elon kind of reacts to everything the same way, and that is with extreme paranoia and aggression. And so you put yourself kind of in his line of vision. I started investigating the company in 2018. He found one of my sources sued the guy, this guy, Martin Tripp, who is like a factory line worker in Tesla. He hired some security goons from Uber who had been thrown out at Uber to harass this poor man. And then I kept writing about the company. At one point, I wrote a story. I’d seen an email where Elon directed his engineers to stop doing a test on the brakes on each and every car that was rolling out of the factory, because this was during the model three ramp. And the cars were just I mean, they were they were plopped out of the I don’t I don’t know I don’t know a word that the kind of graceless landing that they were making as they left the factory it’s a plot. These cars are just failing. Bernie’s brake and roll test is slowing down the production line. So Elon said, just stop doing the test. And I published that on a light day in the market, probably like around the July 4th holiday, and it moved the stock a little bit. And after that, Elon freaked out. He accused me of taking money from a short seller named Jim Chanos to pay my sources inside of his company to say negative things about the company. He said that I was being paid to write negative things about the company, which is not true. I was being paid to write things about the company by my employer, Business Insider. There’s something about journalism that he doesn’t really consider a legitimate job. After that, he went on this Twitter rampage for a couple of days. [00:14:28][122.1]
Dan Nathan: [00:14:29] But just to be clear, a Twitter rampage at you. He was @ you and it was going on and on. Yeah. [00:14:35][6.5]
Linette Lopez: [00:14:36] I tweeted that out that Mariah Carey said, why are you so obsessed with me? I think that that was the only that was like the pettiest thing that I did. But other than that, I kind of really enjoyed myself, to be perfectly honest. [00:14:47][10.4]
Dan Nathan: [00:14:47] Yeah, but what does it feel like? You know, at the time, I mean, again, he wasn’t the guy that he is today, the richest, supposedly the richest guy in the world, CEO of these two big companies. What did that feel like being attacked like that? Because he was attacking your your professional integrity. But it was also we know that he’s got just legions of fans, you know[00:15:07][20.3]
Linette Lopez: [00:15:11] Oh just yeah, I always call them forever virgins. And I don’t know if that’s. Can I say that on the pod. [00:15:16][5.1]
Dan Nathan: [00:15:16] Yeah, you can say whatever you want. [00:15:17][0.4]
Linette Lopez: [00:15:18] I mean. These guys. He’s not your dad. He isn’t your dad. And he doesn’t care about you. That’s what that’s what I don’t understand about his bad boys, but they’re very, very aggressive. I don’t have open DMS. Like, I’m not one of those journalists who’s like, I think those people are crazy. Like, why would you keep your DMS open? I, I just, I don’t know. I kind of enjoy the attention I guess. [00:15:44][25.2]
Dan Nathan: [00:15:47] Let me ask you this. What do you think after the years reporting on him, having him attack you personally? When you look at what’s going on right here, you look at the fact that that Tesla is his most liquid asset. Right. He’s long, I think 15% of Tesla. It was a $1.2 trillion market cap company at its highs a year ago. Now it’s about 534 billion. He’s been selling stock for the last year. First, he said to pay taxes. Then when he made the bid for Twitter there, we suspect that he’s pledged a large part of his existing holdings in Tesla. [00:16:26][39.0]
Linette Lopez: [00:16:26] If somebody said, oh, yeah, like let’s do a trade, I’ll give you a bunch of my Twitter stock for a bunch of Tesla stock. Nobody in their right freaking mind would take that trade. Nobody in the world. Not last year. Not the year before. Not any time at no time would say, hey, would anyone say, hey, give me a bunch of your Tesla stock or Twitter stock? Oh, yeah, no. But that’s essentially what Musk is doing right now. He is selling Tesla to keep the lights on at Twitter. And for as long as he is repulsive to advertisers, which I don’t think he can change, I don’t think he wants to change, so there’s that. Like I just don’t see how he makes money off this thing. Based on my reporting from people who just left Twitter, he didn’t really seem to understand how Twitter made money in the first place. [00:17:14][48.1]
Dan Nathan: [00:17:15] He likes the idea of engagement. I mean, he keeps tweeting out some of the kind of user growth numbers in the engagement numbers. But here’s the thing. He’s the largest account on the platform and he’s literally doing this was, you know, what Trump used to do every morning he’d wake up, he’d be on the shitter, take his iPhone out, and he’d start tweeting crazy shit. And then people would basically be discussing that on Twitter all day long. Right. And this is exactly what Musk is doing every morning. And the point that I would just make is that, yeah, people think it’s fun for now. I don’t find it particularly fun. I know a lot of people who are going to be leaving and advertisers are going to be leaving it. So he never thought that the advertising model he did say this before he closed on the deal was the right thing. He wanted to do subscriptions while he’s tried to do subscriptions. What happened? It pissed off a lot of advertisers. Right? And so it pissed off a lot of people. And so, again, I mean, I think what he’s doing is it seems to be, you know, a little bit of a tempest in a teapot, if you will. And it’s sooner or later this is my point. This is why Twitter and Tesla are really linked because Tesla shareholders have been underwriting this gambit with Twitter. Okay. And sooner or later, they’re going to say, hey, brother, you better get your ass back here and start making these cars again. Right? Even if they’re in tents an they’re crappy and the brakes don’t work in the snow or whatever, that’s the business that we have chosen, right? That’s what we’ve invested in. And all of the time that he’s spending in San Francisco at Twitter, tweeting all day is literally look at the stock. It sold off 25% in less than a month since he took over. Yeah. [00:18:55][100.0]
Linette Lopez: [00:18:56] Wild. It’s wild. But and the Tesla board, I mean, if you’ve spent any time watching the company, you know that there’s no one who can tell him what to do at Tesla at all. There are no adults in that room. It’s like Robin Denholm, who used essentially paid off his brother, who is essentially Woody from Toy Story. Like, there’s nobody there to say Elon, like come back to work. [00:19:20][23.5]
Dan Nathan: [00:19:21] Won’t there be shareholder lawsuits? Won’t there be people leaving the board for fear that they are going to be sued for being asleep at the wheel while he was off doing this other thing? [00:19:29][8.8]
Linette Lopez: [00:19:30] Maybe, but he doesn’t care. So that’s all possible. But Elon was going to Elon. No matter what. Tesla shareholders have to understand, this is the guy they chose. You know, this is this is the guy who said back in 2018, I don’t think we’re going to have any more bet the company moments like we just had to do, ramping the model for him, he admitted that Tesla was on the verge of bankruptcy, all that stuff. Well, he bet the company again. He did it again to you and not even on to on a Tesla thing. I don’t like. He bet the company on Twitter like that is so embarrassing for all of you. You have to I my old pin tweet was Elon Musk is on Facebook taking screenshots from my profile and tweeting them out with friends of your Tesla shareholder. You need to sit with that. You need to sit with this Tesla shareholders. He went to the casino, put a bunch of money on Twitter and threw Tesla in there, too. He seems like kind of like the kind of person who if he’s going down, we’re all going down. You know there will be no survivors. Like if this ship is going down, he’s going to take the shareholders. He’s going to take probably a couple of family members like I don’t know, people forget the big things fall apart. He’s put a lot at risk. He likes to do that. That should have been obvious. I keep saying like it would it would kind of be funny if Tesla bought Twitter, but it would also not shock me at all. [00:21:01][91.4]
Dan Nathan: [00:21:02] No. After the Solar City thing that he did back in the day, I mean, it wouldn’t shock me, except that that Tesla’s shares would absolutely get decimated. So think about that. Current Ad. Masterworks Ad. Taboola Ad. All right, Linette, let’s switch gears here. This this SBF, the Sam Bankman-Fried FTX situation. I know. Well, it’s funny. It kind of is a pretty amazing situation. It kind of reminds me a little bit of just kind of 2001 and some of the corporate malfeasance that was kind of uncovered during that bear market. And you know, this one, though, I guess a lot of people saw it coming. I mean, whether it was going to be SBF or somebody. [00:24:03][180.3]
Linette Lopez: [00:24:03] Where were the signs [00:24:03][0.3]
Dan Nathan: [00:24:03] Doing it, just like, you know, there’s a lot of like, you know, traditional finance people who are looking at these guys and just saying they’re all a bunch of frauds. They didn’t have the receipts at the time. But talk to me a little bit about how you’ve been covering finance for over ten years and you’ve had your finger on the pulse. You talked to a lot of big investors. I mean, the speed in which this thing came unwound from him being the kind of buyer of last resort, the savior to actually being essentially on the run in the Bahamas and with, you know, billions and billions of dollars missing. What do you think the scale of this situation is? Do you think there’s a potential for some sort of contagion to traditional finance, or do you think this will be fairly well contained within this kind of crypto ecosystem? [00:24:53][49.8]
Linette Lopez: [00:24:54] I have no idea. I know a lot of hedge funds, a lot of rich people are going to lose money on this. It is stunning to me how many really sophisticated people. I get crypto definitely a thing like I muted bitcoin. The word like in 2013 I was like, I cannot believe this. This nonsense is catching on in it. I don’t know. There’s something about people. When they hear something that doesn’t make sense, they just default to, well, I guess I just didn’t get it. And I must now be brilliant because every time I’ve ever heard somebody talk about this stuff, it’s just it seems like it’s not offering anything. It offers nothing that we don’t see in traditional finance, nothing that we don’t see in traditional finance, but more expensive and slower. So I was like, this is I don’t understand this, though. But the concept of trust is what these guys were trying to make money off of. You don’t trust traditional finance. We can have a trust list system because you put everything on the blockchain. But this is not a concept that can be screwed with. This is thousands of years old. The very principle of it is what they were really trying to change in the game. The technology is software for software sake. It’s software masturbation. It’s useless. Sam Bankman Friedman dresses like a kid who just got home from summer camp and desperately needs a haircut. This is not serious. I can’t believe these people are so deeply unserious. [00:26:32][97.7]
Dan Nathan: [00:26:33] Well, it’s funny. I actually think many of them were too serious. And I will say this is you know, I’ve tried to keep an open mind about it. And I think some of the smartest people that I know in tech, in finance, are pretty intrigued by it. Put their money where their mouth is. It reminds me a little bit about, you know, the dot com in 2001 and 2002, a lot of people were saying, like, the Internet is a fraud. Look at all these fraudsters. Look at how, you know, we just didn’t need to do this in a digital world or whatever. And there’s a lot of parallels. You know, it’s kind of hard to see that now because I don’t think we’re even done with all this. I mean, there’s probably, you know, a handful of large exchanges where a lot of people, you know, have been trading cryptos on over the last few years are going to go under these stablecoins are probably going to go under and it’s going to have to rebuild itself if there’s any value in it. But I guess the lasting thing that I’ll just say, you know, I saw a headline today, you know, that Sequoia is apologizing to its investors for its investment in FTX. But just think about this. I mean, some some very, you know, venerable financial institutions, you know, both VCs and public markets associated. They all bought this stuff hook, line and sinker. So maybe SBF and some of the other ones that we’ve seen blow up this year are just the tip of the iceberg. And again, this goes back to what I said about all this other pockets of overexuberance in the markets here. You know, the things that overshoot to the upside. They’re also due to the downside. So if you think this thing is over any time soon, it’s not likely. All right. Well, let me tell you what is over this podcast. Linette, I really enjoyed speaking to you. I really enjoyed your work. I’ve enjoyed it for ten years. I thought the post that you wrote this week on Business Insider, it was fabulous. Everyone should go out and read it. I also thought your thread from Election Night on all the work that you’ve been doing investigating Elon Musk over the years was really interesting. I also find it interesting that he gets very aggravated by what you write about him. So I guess keep doing it here because again. [00:28:33][120.0]
Linette Lopez: [00:28:33] I miss his attention. If he wants to tweet it, he absolutely can. It was a good time. I remember it fondly. [00:28:41][7.5]
Dan Nathan: [00:28:41] Well, we’ll @ him with this podcast. So listen, Lynnette, we really appreciate you being on with us. We hope you’ll come back. So thanks a lot. [00:28:48][6.7]
Linette Lopez: [00:28:48] Yeah, of course. [00:28:49][0.5]
Dan Nathan: [00:28:52] Thanks again to our presenting sponsor Current and our supporters Masterworks and Taboola for bringing you this episode of okay Computer. If you like what you heard, make sure you hit, follow and leave us a review. It helps people find our show and we want to hear from you. Email us at contact at risk reversal scam. Follow and connect with us on Twitter at OC Computer Pod. We’ll see you next time. [00:28:52][0.0]
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