All right, let's talk about corporate

bankruptcies. According to N S&P Global

Report, so far in 2025, we've seen the

most corporate bankruptcy filings since

2010. That was after the great financial

crisis, you remember? Uh, or some of you

might have been too young. So, uh,

corporate bankruptcies, according to the

S&P, are public companies with debt of

at least 2 million and private companies

with assets or liabilities of at least

10 million. I'm not sure why the public

companies is less than the private. It

didn't make sense to me, but there must

be a reason. Uh, these are also called

large bankruptcies. Here's a chart

showing you corporate bankruptcies since

2008. The blue bar is through July. Gray

bar is the full year. So, uh, we're

looking at a partial year here,

obviously, in 2025. We're at 446 large

bankruptcies, 7 months into 2025, which

would put us on track for the most since

2010. And um

yeah, nothing close to GFC numbers, but

uh you know, it's not trending well. And

if you look at corporate bankruptcies

broken down by month since 2020, you can

see uh that bankruptcies are increasing

after the massive rate hike cycle in

2022 and 2023. So obviously rates has

something to do with this. What are your

thoughts, Chimath, on what we're seeing

here? It's not like super dramatic, but

it's definitely uh notable.

>> Yeah, it's notable, but I think it's

notable not for the reasons that the

mainstream media tries to describe it

in. I read these articles and I was a

little bit caught off guard because

initially what it said was the tariffs

were causing this and I was like

large companies don't go bankrupt 30 60

days.

>> Yeah. Because of the tariff this makes

no sense. But the narrative was very

strong basically trying to paint the

Trump administration as having caused

this. So I just started to look into

this and couple of interesting things to

note that I the conclusions that I came

to. I think the most interesting is that

there were a lot fewer bankruptcies over

the last four or five years

than there should have been. And I think

that there are two reasons. The first

reason is that you had rates

artificially suppressed at zero for an

incredibly long amount of time. And so

you had all kinds of companies

able to raise enormous enormous amounts

of capital that they probably shouldn't

have been able to or at a minimum should

have done at much higher rates which

weren't really there because the poor

rate was at zero. So what that means is

that many companies were able to fill

the reservoir of money and then when the

core structural business started to

fail, they had a lot more oxygen in the

tank to survive a lot longer. So I think

a lot of what you're seeing and if you

look Jason at some of these companies

like Joann's Fabrics and Party City,

these were businesses that were upside

down for years.

>> Yep. And a number of these right were PE

buyouts that you know their strategy is

to saddle them up with a bunch of debt

too. So that that speaks to what you're

saying.

>> So I think I think the reason why

bankruptcies are up right now is because

the reservoir of free money the money

printer that printed frankly since 2010

up until about 2021 because you know we

still gave an enormous amount of money

in co is finally starting to run out.

That's number one. But the second is

that we actually haven't had a process

of creative destruction in American

company formation for a while.

>> Yeah. Probably since GFC GFC, right? It

was that

>> a similar a similar thing happened at

that time too, Jamal, right? We had all

these backed up companies that probably

should have died and it kind of

>> Well, what I think I think what happened

was like, you know, startups ran out of

money. There was certain parts of of

industries that had some trouble, but by

and large there was no transformational

or catalyzing M&A that could have

actually happened and that in part was a

structural issue because of the way the

federal bureaucracy reacted to it. Not

just in the United States to be fair,

but around the world. And I think when

you relax those constraints, what you

can start to see are companies identify

assets that they want inside of other

businesses, be much more aggressive in

getting them. Businesses that are

floundering, being able to see that

they're about to run out of money and

have the confidence to try to do an M&A

deal to survive. You need all of these

things to work in lock step for a market

to be efficient. The market was

incredibly inefficient since 2010.

artificially suppressed rates, a

regulatory regime that, you know,

disallowed any form of M&A and

consolidation. Now that those

constraints are lifted, you're going to

see a lot of this creative destruction

work its way through the economy. That's

one big trend. The other big trend, and

I think we saw this in Nick, can you

please find the tweet from Delion where

he talked about the Chipotle competitor

that TK launched? I just want to point

to this because I think this is another

wave of competition that's going to put

a bunch of categories of business under

duress which is you know our friend

Travis Kalanick who's the founder of

city what is it called city logistics is

that what it's called

>> yeah cloud kitchens is how

>> cloud kitchens okay

>> he launched a Chipotle competitor and

it's apparently totally kick-ass and way

better than Chipotle and it just starts

to show that there's an a wave of

competition that's also coming from

completely different companies you never

would have expected going after a bunch

of these businesses. So if you put these

two things together, I think you're

going to see more, not less,

bankruptcies. But I think the outcome is

probably positive in that you clean out

a bunch of businesses that were taking

up time and resources. You should

allocate a lot of the human capital that

are in those companies to different

businesses. is and I think uh man it's a

long list of companies but I just want

to know which one hit you harder forever

21 or Hooters which one of those

bankruptcies hit harder for you trying

to game it out here. Um, I think that we

should buy Hooters. I mean, we should

buy Hooters Chim. We should have If you

have a teenage daughter, if you have a

teenage daughter, what I'll tell you is

Forever 21 was That was going to

go to zero anyways. Like, you need to be

long. Brandy Melville,

>> you need to be long. Oh god, what is

this other one that's like the the

clothes are so

>> like yoga pants? Aloe,

>> hold on.

>> The kids wear a lot of those. They're

into the athletic wear.

>> What's the name of that clothing store,

>> Vori? you know, where Sloan like always

wants the, you know, the the skirts and

stuff. Not Brandy Melville, but the

other one.

>> Oh. Um,

uh,

>> anyways, there's all these brands. Yeah.

Forever 21 was not it.

>> Yeah. What do you guys think? Should we

do a should we buy out Hooters and put

Sydney Sweeney as CEO? This could be a

great brand extension. I don't know. The

chicken wings are amazing.

>> Saxs, any thoughts here on the creative

destruction and what we're seeing?

Obviously, it can't have to do with

tariffs because they're only three

months old and it seems largely the

companies.

>> Well, every company you've mentioned,

every company you've mentioned is a

retail business. They have physical

locations that people have to go to do

stuff or get stuff. And I think that

this demand you had 2020 and me, you had

Wag.

>> You had a Yeah, but yeah, I think

>> but I think the retail getting flushed

out makes sense given the age of Amazon

and Sheen and Target. Yeah. Well, the

retail channel, like others, is highly

levered because in order to have a

retail store, you have to pay a monthly

fee to the physical real estate owner.

And so, it's unlike other businesses

that are services or are more nimble and

can relocate, you actually, it's the

equivalent of having debt. When you sign

a lease, you're stuck in a 10-year debt

cycle. You have to pay every month a

fixed amount of money and you can't get

out of it. So, the retailers make a lot

of sense. they were basically levered

businesses in addition to all of the

kind of macro trends of people not going

to physical locations and co but I think

Chimath has it right which is this is

all kind of zer era you know indigestion

that's being washed out and to the point

like some percentage of overfunded

negative unit economic type businesses

are also getting cleaned up in the kind

of call it tech space which involves

typically a lot of companies that are

not tech but math does tech

>> so um That definitely makes sense to me.

Saxs, any insights here?

>> Well, just to pick up on this. So, you

know, when you showed those charts on

the bankruptcies, I didn't see a huge

trend there. I mean, I can see that

there's some pickup since the ZERP era,

but it doesn't look like a huge trend to

me. We just had a 3.3% GDP print for Q2.

I think it

>> that was restated, right? That's what

happened today is they restated it.

>> Well, no, there was an estimate.

Remember the Atlanta Fed had this 3.3%

estimate. Then they reduced it to 3.0,

but now the actual number is in 3.3%.

>> So the economy seems pretty hot and it's

doing well. But I would say that there

is some softness in the economy in those

sectors that are exposed to high

interest rates. And the best example of

this is real estate. I remember on this

program a year and a half ago, we talked

about the wall of debt on commercial

real estate that was coming due and had

to be refinanced. And there's 2.2 two

trillion of debt, CR debt that's

maturing before 2028. And what we talked

about back then was the banks don't

really want to foreclose on these

buildings because then it hits their

balance sheet. So, everyone has a

incentive to restructure this debt. And

there were a lot of these blend and

extend type deals where they would

extend the debt and work out a a lower

interest rate. Some people call these

deals pretend and extend because you're

pretending that the real estate sponsor

still has equity in these buildings and

they might have

Have these started to come back?

>> What I'm seeing is that some real estate

developers are starting to lose

buildings. Now, the reason for that is

that the debt is coming to you and has

to be refinanced. And there's two

problems when you refinance. One is

you're paying a higher interest rate. So

now you take a building that was cash

flowing and now at that higher interest

rate, it might have negative cash flow.

In other words, it it's basically

bankrupt. So those buildings don't make

sense anymore. And those are situations

where you're going to lose the building

to the bank. The other problem is when

you refinance, you might not be able to

get the loan to value that you had

before because valuations have also come

down because real estate valuations are

inverse to interest rates, right? So in

other words, if you know, let's say you

had a building that was worth uh $100

million before at zer era interest

rates, you could borrow twothirds of

that. So call it 66 million. Now, if the

building's only worth, I don't know, $60

million, then you can only borrow $40

million. So, the amount of proceeds you

can get when you refinance is much

lower. And that gap has to be replaced

with something. So, in that situation,

the equity holders would have to come in

and do an equity in refinancing where

they've got to put up that gap. In the

example I gave, that gap would be $26

million. So, the equity holders have to

come out of pocket, which is very

difficult to do. and they might not want

to do it and in that case you're also

going to lose the building.

>> Sax, I have a question. Nick, can you

show up? Show this to Mitch. Sax, how

does this trend build on top of that

other trend which is on top of

everything else now? It just seems like

the real estate financing flows are

moving far away from typical office

construction towards data centers. So if

you add that to the mix, then people

seeking funding for traditional office

are going to find or refinancing are

going to find fewer lenders. Is that

true or not true?

>> Well, yeah. I think there has been a

little bit of a credit crunch, but also

there's no reason to really be building

so much office space when there's so

many buildings that are underwater or

>> vacant.

>> Yeah. Like a third of the real estate in

San Francisco is basically vacant

>> still.

>> Still. So why would you build any more

real estate? But what needs to happen is

those buildings effectively need to go

back to the bank and then they need to

be auctioned off at some lower price so

that new equity holders can come in and

new capills can be formed and then you

can get the money you need to do the

tenant improvements the TI's so that you

can get more tenants in there cuz right

now one of the reasons why a lot of

these buildings are empty is because the

equity holders don't have an incentive

to put in more money to do the TI's

necessary to sign new tenants. So you

got these zombie buildings that even if

there was a tenant who wanted the space

at some lower rent, the owners of the

building have no incentive to do that

because they can't put any money into

the deal. So like we finally need a

bunch of these buildings to go back to

the bank or we need rates to come down

so that you can do refinancings without

them being these punitive refinancings.

And I do think that there is a lot of

risk in the economy in this sector

because again of this wall of commercial

real estate debt that's coming due. And

I think this is the the problem. You got

Pal sitting there. You got too late Pal

sitting there in his ivory tower. He's

willing to keep rates artificially low

so he can get renominated and he can

help Biden and Yellen. He's willing to

cut rates to help Kamla. But as soon as

Trump gets in there, he stops the rate

cutting cycle even though inflation's

down to 2.0%. So you got this too late

pal and the rest of his Fed cronies. Jal

wants to make it sound like they have

some dissenting voice. It's nonsense. In

any event, they're all collectively

sitting there in their ivory tower,

completely out of touch with what's

happening in the economy, and they're

being slow to cut rates. And I do think

that at least sectors like real estate

do need these cuts.