 So Q1 has been pretty good for 2023. Now going into part of Q2 and Q3 and Q4, the big question is, where do we go from here? And thankfully, I've got someone who could help us understand this on the macro side. This is Nigel Glende and he's been an investment banker for quite some time. So Nigel, welcome to the show for the first time. Thanks, Rob. Thanks for having me. Yes, I'm excited about this because there are parallels and we have to be aware of what's going on, especially with the macro because we actually do follow macro a little bit here on for crypto and digital assets. So just a little background for Nigel here, investment banker for some fairly large institutions. We're looking at UBS, Morgan Stanley, VP at Storm Harbor Securities. And now you're the chief financial officer at Masterworks, getting people into fractionalized shares of artwork. So just before we get into the banks and the collapse in Q2, Q3 and some parallels between the Great Recession, Nigel, how did you go from that to over to artwork? Yeah, that's right, Rob. I've had a career that's really intersected these two paths, both in traditional financial services and investment banking and the art market going on nearly a decade here. I started my career at large investment banks in their financial institutions groups. These are investment banking groups that are focused on capital markets and M&A work among financial services companies. So I began my career really pre financial crisis, seeing the run up a number of different companies kind of grow into that. There was a ton of cleanup work as you might imagine in the aftermath of the financial crisis. After nearly a decade long career as a banker, I was invited by one of my very first bosses to help a DeNovo financial services company that was focused on lending into the art market. So you can think about this as mortgages for art collectors. So lending collateralized by high value art. That was really the first time that I had taken my sort of especially finance financial institutions career and started to merge it with the art market. I sort of by accident spent a ton of time building relationships and knowledge and know-how within the art market that eventually resulted in my meeting with the founder of Masterworks really at the very inception of the whole Masterworks project got underneath the hood very early on and joined Masterworks almost four years ago now as their CFO. This is when you were at Athena Art Finance asset based lending securedized by high fund. Okay, gotcha. So that's how you went from the traditional sector all the way over here into two fractionalized shares of our pieces. So this is interesting because it kind of comes down to taking a look at the past. I don't know where we're going, but we can kind of see where we've been to kind of take a look at where things are going to head out to. So the first thing I'm going to ask you is this, since you were in banking before the Great Recession and then you went through it and then you went after it, what kind of parallels do you see right now that's going on, if any at all? Well, I mean, obviously there are a huge amount of differences when you just talked about what precipitated the last financial crisis versus what we're looking at now at the root of what was going on in 08, 09 really started in the housing market. There was, you know, decades of sponsorship of home ownership certainly in the U.S., which then precipitated a mortgage buildup in subprime, which then led to credit contagion across institutions. Today you have a very different situation and really as it relates certainly to what happened at Silicon Valley and at Silvergate and Signature, really precipitates from a rising rate environment. So you've got a couple of different things that I would say are parallels, right? Both cases you had, I would say financial risks that were hiding in plain sight in many cases, right? Going up to the financial crisis, you had, again, decades of policy sponsorship around home ownership that really led to an attitude that home prices don't go down in value. And from that really precipitated loosening in mortgage standards over an extended period of time that then led to the financial crisis. Now, maybe a little bit different here is I would say the speed on which some of those same risks built up. Here we're not talking about a or today we're not talking about a credit crisis so much as duration risk crisis or duration risk that's been built up through a rising interest rate environment that's happened sort of relatively quickly and that's had sort of two major impacts. It's had an impact obviously on the value of securities that sit on many bank balance sheets, but also has had a really profound impact on how behavior has changed around deposits and that was really what drove, I think, a lot of what you saw at Silicon Valley Bank signature and Silvergate. Sure, gotcha. And that is one of those things that we take a look at. So that would pretty much go into the second question. So you pretty much covered both of them in one part. So the question that I have then as far as like banks, I mean, we've had three collapses and it's debatable about, you know, which parts those were, but do we see more on the horizon as far as more banks collapsing for unrealized losses for T-bills? Yeah, the short answer to that is I think the risk of that is greatly diminished. I think the actions that Washington took on really the back end of SVB was to put a line under all those institutions saying we're not creating a financial crisis from here. There was a lot of policy from ensuring all deposits at those institutions when they were resolved, putting in a term lending facility that allowed banks to pledge their securities at par. These were strong signals to the market that they wanted to stop the contagion right there. And it's a lesson that they took away, I would might add, from the great financial crisis because again, the financial crisis really started in 2007 with the first inklings in the cracks in subprime crisis. When I was at UBS, there was a small hedge fund that UBS was running internally that was among the first casualties of the subprime crisis. The UBS CEO was actually fired very shortly thereafter. That was in the spring of 2007. It wasn't until the next year that Bear Stearns collapses and then Lehman collapses. You had a bit of a gradual buildup in that period. I think the Fed wanted to take much quicker, much more decisive action around these institutions. One of the things also, John just said about why I think the risk is a lot lower is these institutions were unique in a number of respects. And one of which is they had massive sector concentration for different reasons. Silvergate was a relatively small Southern California bank engaged in traditional banking operations for an extended period of time. About eight years ago, they pivoted into the crypto market, developed very interesting franchise in and around crypto assets and a lot of innovative things around their payment networks. But that was really a very new business for them. Signature is a little bit of the same story as a very different bank. They're a bank that has a, they're a New York based bank. They have a great ultra high net worth franchise, a really strong franchise around the real estate market, but then started to build up a presence on the West Coast. They got a great lending team from a bank called Square One Bank that really knew their way around the tech lending sector and really leaned hard into that sector, including crypto. Silicon Valley Bank is in order of magnitude larger than both of those institutions. And what you had there was a bank that had huge concentration in the tech sector as well as the VC community. Now, as a result of that Silicon Valley Bank had an amazing franchise within those sectors. They knew how to navigate them. They knew the relationships. They knew how to underwrite a very, very attractive franchise in that respect. But the problem is you had deposits all in one sector. You had deposits that were very large. So uninsured deposits were nearly 90% of their deposit base. So in at the same time, while you had all this deposit growth, you had a number all that liquidity going into their securities portfolio, which was getting caught in a rising rate environment. So when they took action to, to, to readjust their securities portfolio and took a big loss on that securities portfolio, which happened as it happened right on the heels of the Silvergate collapse, you really had kind of a tinderbox if you were what in the, in the deposit base, which no one was really paying paying attention to because you had large deposits all in one sector, all uninsured that could move out very, very quickly. And I think regulators were looking at these types of banks maybe 10, 15 years ago, you'd think these, these types of deposits are sticky, their core deposits, their transactional deposits, they don't move particularly easy. Now we're living in a world where CFOs of these institutions are able to move entire accounts and wire them over lunch over their iPhone. And that's basically what happened in the span of about 36 hours. And there was really the speed of that, that took really the markets and the regulators by, by surprise. I highlight all of that just because I don't want to say these institutions are entirely different from any others, but there were just factors that were so unique to them that it diminishes the risk of a broader contagion. There were other banks, First Republic is a notable one that was caught up. They similarly have a franchise that is not as concentrated within the tech sector, but certainly has a large private equity and VC portfolio and has a high balance of uninsured deposits, which could be moved very easily over time that creates just a lot of volatility in that deposit base. Yeah, excellent. So and who knows what's going to happen in the future. And it seems like we're in a, like you just said, we're in a brave new world. There's an ability to transfer funds quite quickly. There's people that say, you know, I don't really trust this, there could be runs in the banks, but who knows how much we'll see it as far as a collapse. But the real thing, which will lead me to the next question is this, even all the problems that we had with the banks and the things that were going on and people were losing trust in the banks. Of course, the government did step in, they did what they had to do. And we had a pretty good Q1. I mean, we're looking at NASDAQ was up 16.8%. Gold almost nine S&P 507% and Bitcoin between 72 and 80% is for Q1. So now that we've gotten past that, Nigel, what do you see coming into Q2, Q3, maybe even Q4? Yeah, there was no doubt that Q1 wound up being very strong for the markets. I mean, I'll be with a high degree of volatility built into that. Some of that was a little bit of a bounce off the lows. And some of it, frankly, is just a reaction to how far the markets fell last year. And the markets are usually falling in anticipation of a bottoming of macro events. So last year, as you saw inflation continuing to rise and then eventually peaking late last year, that's really when you saw the greatest drawdown in the markets. Now the markets are seeing a bit more of a light at the end of the tunnel with respect to the rising rate environment. So I think that's ultimately what you wound up seeing in Q1. I think as you go forward, however, and it certainly does our view at Masterworks, long term equity returns are going to remain muted because while we will see a tapering in my view of the rate increases, I think we may see another quarter point at the next Fed meeting. It's less likely we see anything after that. I think it's unlikely that you're going to see rates fall dramatically from there. And there are a couple things behind that. The economy, certainly in the U.S., is proving incredibly resilient. Unemployment is still very low. There's high labor force participation. So there's a lot of driving forces that I think are going to prevent them, certainly the Fed from doing anything to bring rates any further down. So I think that's really going to cap what the equity markets are going to be able to do. So I think you might have seen a little bit of a relief rally here now that you just see kind of a little bit more of an end game of the rate rising cycle. And that's a good thing. But I don't think that's necessarily going to translate to a more constructive, longer-term outlook for equities. And I mean, don't forget, we've still got a debt ceiling fight that is on tap in Washington. Don't underestimate their ability to wreak havoc in the markets. You remember the last time we had this major fight a couple of administrations ago, the U.S. lost their AAA credit rating. So not suggesting these things are on the table, but that's a messy fight ahead, could have impacts in the markets and certainly in the nearer term. Yeah, excellent. And these are the things that will, it could go either way. And of course, every time there's a fight on the debt ceiling, what usually wins is they say, we'll raise a debt ceiling and then they'll just keep going and adding up. So for me, like this is the things that we talk about on the channel, which is it's not just about the right now, it's about the long-term horizon. If people are looking to get rich quick right now, it's not, can't say it can't work, but 99% of the time it's not going to work. So it's all about a long-term outlook, dollar cost averaging, and then trying to balance a portfolio. So that would be leaving to our last question, Nigel, which is based on all this stuff we just talked about, which assets are you looking at for a balanced portfolio? Because I don't think it's prudent to put everything into one basket. I don't think everybody should put everything into gold. I don't think everybody should put everything into crypto or real estate. So how do you see things here? Look, we are extremely constructive and built our whole business around the art market and the contemporary art market in particular, and there are a number of things that go behind that. So we talked a lot about parallels between 2007 and what's going on now. Some of that has to do with financial innovation. Back in the financial crisis, you had a number of structured products, obviously crypto is the new financial innovation product. There is nothing innovative about the art market, and that's one of the beauties around that market. It's a market that has existed for centuries. It's not a market that we have to build out of a whole cloth. This is a 1.5 to 1.7 trillion dollar market in terms of asset class value that's turning over anywhere between 50 to 70 billion dollars a year. So a market with significant size. Add on top of that the fact that it is incredibly data dense market. So it allows places like Masterworks to really understand how does this market behave over time. It's a global market and it has global mind share. When there's a major sale at Christie's or at Sotheby's, it's on the front page of the New York Times. It's on the front page of the Wall Street Journal. So it has mind share whether you're active in the art market or you're a financially sophisticated investor that's just keeping tabs as you go. So all these things add up to for us an asset that really warrants strategic allocation to someone's portfolio. I think the problem the market really has had is other than buying a painting or buying physical art, there's no way an investor who's just in the business of buying stocks and bonds, making alternative investments, to make an allocation to the asset. So Masterworks' whole mission is how do we take this really interesting asset class and put it in a form factor that investors can actually take action in and that's what we do. Yeah, perfect. And with this one, this is how I see my portfolio. And again, diversification I think is key. Of course, now you're watching the video, it's up to you to make your decision in all those things. But I will just say this is not financial advice. This is just what I am doing. I think it's a more prudent way to do things. I've got a good amount into cash and stable coins. Masterworks 4%. And land and real estate make up a bulk of 40%. My Amazon business crypto and of course, my trust IRA. If you're looking for more information on Masterworks, there's a link in the description looks just like this. And I've also made it even simpler because the things that we talk about are just like the very top level. To really get into it, to talk about what Masterworks is, how it actually works, I made a playlist. There's a link as well down in the description. There's one I want to direct everybody's attention to. There was a great video by Upper Echelon, which talks about Masterworks, a terrible investment, which goes even deeper than my deep dive of what it is. So Nigel, I have to say thanks so much for stopping by and giving us little bits of background as to what's going on the macro and then make a little bit of balance with portfolio. We appreciate it. Thank you. All right, buddy. That's it for today. So like today's video, thumbs up, subscribe all that good stuff and we'll see you in the next one.