The only way the Fed can get the U.S. out of fiscal dominance is if they cut rates to
zero and they partner with Treasury.
So Treasury issues all the bond issuance at the front end at zero rates, which is kissing
cousin of printing money to finance a deficit.
The AI thing unwinds.
You're going to have a very big stock market problem.
You're going to have a recession.
You're going to have a rise in unemployment.
You're going to have a significant rise in interest rates in a recession, which no American alive has really seen since probably the 70s.
Fundamentally, I think what's happening with the fiscal situation is unfixable by anything other than significant devaluation.
Warsh isn't going to cut aggressively without a crisis.
And I think the crisis could show up as Warsh raising 25 basis points.
Look, if you have a long term view, you're probably going to be buying Bitcoin now.
I, you know, like I said, I'm probably being too cute.
I think I can get it cheaper.
Right, Luke, I've got so much I want to get into with you today.
Beautiful.
I think we should start,
and we talked about this last time we're on the show,
on Bitcoin, because you sold all your Bitcoin.
Almost all.
Almost all your Bitcoin.
Around 90 something thousand, was it?
96, 95, 96.
And again, I told you this last time,
but I thought you'd made a mistake.
You clearly hadn't.
But the question is, when you buy back,
Like that's how you make this trade a full, like a good trade.
And how are you looking at that now?
Sure.
I am looking at it.
So strategically, I want to buy it back.
I still think it's an energy link neutral reserve asset for the people and very attractive
because I still fundamentally think what's happening with the fiscal situation is unfixable
by anything other than significant devaluation of the currency.
and really all fiat currencies, to be clear. Tactically, I'm getting closer, but I still
haven't bought it back yet. And the reason is fewfold. Number one, you've got the Fed.
And right now, if the Fed starts cutting rates aggressively, I'm going to have to chase it,
I think yeah to be to be blunt so I but I that then feeds into where why I haven't started buying
it back very aggressively at any yet which is Warsh seems like he will eventually do what
Powell and Yellen and Bernanke did but he needs a crisis to do it he needs political cover
And then I look tactically at what's going on in AI, and particularly just in the last two, three weeks, where you've got Chinese competition, you've got rising borrowing, you've got rising rates, you've got slowing collateral price appreciation there in terms of open AI in particular,
but others in terms of the valuations, the rate of growth are slowing. That's an issue for me as
it relates to Bitcoin. Because I think, A, I think Warsh isn't going to cut aggressively without a
crisis. And I think the crisis could show up as Warsh raising 25 basis points and then Chinese
competition beginning to raise questions about AI? Because that's the thing. I don't have the
training, the background, the intellectual chops, to be honest, to have a debate about
is the Chinese low-cost open AI model better? Is it going to overtake the US models? Is it not?
I don't. But I have 30 years of experience in markets and investing. And what I can tell you
is the US AI segment broadly is a debt financed and be valued like there are no issues and can be
no issues. And the very fact that we can actually have serious people who do have the intellectual
chops to debate US versus Chinese AI, et cetera, tells us the Chinese stuff's an issue. Maybe
technically it's not an issue immediately today, but the very fact there's a debate is there's an
issue. And this segment can't have issues. And it's valued as if it's never going to have any
issues. So this is an issue in a sector that's valued like it can't have issues, will never have
issues. And thus far this year, part of the reason I sold most of my Bitcoin was it was increasingly
trading like a tech stock and tech was making me increasingly nervous. And fast forward today,
I've got a Fed chair who thinks he thinks that Powell, he could have done Powell's job better.
than Powell did And I been clear with you and others I no huge apologist or I think Powell did fine I don think he did a bad job I think he missed an opportunity to just inflate stuff
away and take the pain and put the country in a better place. I've been very vocal about that.
Warsh thinks he overinflated. And so to my eyes, Warsh thinks he can be inflation tough guy.
He can raise rates 25 basis points or more. And I don't have a strong view for this week, but
And I think that could very well kick the legs out of what's happening in AI.
And when I then look at that as relative to Bitcoin, what I see this year is Bitcoin has
led tech. So it started down way more than tech in the first half of the year. In the last two,
three, maybe four weeks, Bitcoin's actually outperformed tech on the downside. In other
words, tech has kind of caught up a bit after running away from Bitcoin a little bit, mainly
by Bitcoin falling.
But I'm still noticing on days where tech's down, Bitcoin's down.
On days where tech's up, Bitcoin's up.
And so I just look at this.
I might be being too cute by half.
My view of it is that I think Warsh has put himself in a position where he has to tighten
to try to establish his inflation-fighting credentials.
I think he needs, and by the way, he let himself an out last week to Congress.
He's like, well, if we have a crisis, then we need to make sure to, what did he say,
fix market prices or make sure to establish a fair market price.
Which means print money.
Which means print money, right?
So he's the same.
You're going to see from me at some point, spoiler alert, sometime in the next six to
12 months, you're going to get the Dennis Green meme from me on X, right?
They are who we thought they were.
So he is what we thought he is.
But for now, I think he's going to try to tighten.
I think he thinks he could use a political cover to do some of the things he wants to do.
And I think Bitcoin will go lower if tech gets hit, which is a long-winded way of saying that.
And so I think I can buy it back cheaper in two, three months, which would be right on schedule for like the four-year cycle.
for if you believe that or not.
Yeah, so much to unpack there.
Just quickly before we get into it,
your long-term thesis on Bitcoin hasn't changed yet.
No.
Good.
No, I want to be long energy in dollar terms
at the end of the day.
And I want, right?
So I've owned solar panels.
I just bought new solar panels.
I bought a lithium ion battery pack.
That's long energy in dollar terms.
That's like a bond whose coupon is going to go up over time.
And I look at Bitcoin as energy.
It's essentially a tie.
A lot of the things that Saylor and others have said about it as it relates to energy,
a neutral reserve asset with an energy tie.
I like that.
Gold is a neutral reserve asset with an energy tie.
That's what I want to be long.
And there's a lot of different ways you can do that.
Companies take energy, convert it into things,
et cetera, et cetera.
So these aren't the only two ways,
but as far as a currency goes,
I want my currency to have an energy tie.
Yeah, okay, good.
So let's get into the Fed stuff then,
because I think Walsh has said a lot of interesting things.
He probably came out more hawkish
than I think everyone imagined.
And I've kind of always thought that that's just
because he doesn't want to look like a puppet to Trump
and just that he's going to do whatever he says.
But you said he wants to be an inflation tough guy.
Why do you think that's the case? Because he did come out and say he only really cares about the left-hand side of the decimal place, meaning like 2.7% inflation, I guess, means 2% to him. Do you not think he's giving himself some leeway there?
He probably has. He probably has in the same way that his statement last week of, well,
I want to fight inflation unless there's a crisis, in which case,
then I'll do whatever it takes to. And I think that ultimately that I'll do whatever it takes
is to make sure there's fair prices or whatever, which is he's referring to the treasury market.
Yeah. And so I go, we've been saying for ever since Powell really coined the phrase for us,
the treasury market functioning since 2021, the Fed's shadow third mandate really since 2019
with the repo rate spike. But the Fed's shadow third mandate has been treasury market functioning.
Nothing can interfere with that. And if they have to inflate, then they inflate. If they have to,
you know, well, cutting, cutting jobs, that doesn't really help with treasury market functioning. So
So it's really given a choice between inflation and treasury market functioning, the Fed has
100% of the time in the last seven years chosen inflation.
And I think he's going to be the same thing.
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How do you sort of weigh up how much the Fed matters in these decisions?
Because like Lynn Alden, who's been on the show a ton of times,
always talks about how we're just in fiscal dominance
and the Fed is becoming less and less impactful.
How do you weigh those two things up?
I think I agree with her 100%.
The US is in fiscal dominance,
which then significantly reduces the Fed's ability to adjust.
The only way the Fed can get the U.S. out of fiscal dominance is if they cut rates to zero
and they partner with Treasury.
So Treasury issues all the bond issuance at the front end at zero rates,
which is kissing cousin of printing money to finance a deficit, then the Fed would have a
high degree of influence. Because basically, if they did QE through that, that would basically,
if you have the Fed buy the bonds by printing cash at zero while the government spends the money,
the U.S. will get out of fiscal dominance. Now, astute listeners will say that's literally
exactly what the Reichsbank did after World War I. You're exactly right.
And it would be really tough because some of your obligations, like the entitlement portion of all
of this, is cost adjusting. So the more you do that, the more cost of care is going to go up,
the more you have to print. And so the Fed could get out of fiscal dominance by doing that for a
period of time. And the proof of that is in what happened from 2020 to 2022. If we look at
COVID happened, deficit blows out, Fed's rates start going up in the worst recession,
worst crisis in forever. That had never happened before. Fed comes in, starts buying, what was it,
$600 billion a month in treasury bonds, I think it was off the top of my head.
And then the government does stimmies, right?
So you are doing fiscal stimulus.
You're handing money to people and being financed, money financed, tax cut, as Bernanke called it.
This was true helicopter money.
And what happened?
U went from being in fiscal dominance which is a rough guideline I use as the true interest expense as a percent of receipts So gross interest plus entitlements in the heat of COVID or the depth of COVID was 120 In other words they had to print
money or they were going to default. They didn't have the tax receipts to cover interest and
entitlements. So they printed. Inflation takes off. Rates don't because the Fed's buying it all,
essentially helped by the banks. And what happens at true interest expense? It goes from 120%
down to 85% by the end of 21. The dollar goes from whatever, 103, 105, wherever it was, down to
81, if I recall correctly. So the Fed can absolutely do something about fiscal dominance.
Nobody likes to hear what it is, right? There's nothing a brief period of extremely high inflation
and currency to value can't get you out of.
And does it need to do that?
Yes.
It's ultimately going to have to do that.
So I remember you coming on the show a long time ago
when Peter was still doing it.
And you talking about a short period of very high inflation,
talking maybe even triple digit inflation.
That's what would work.
I don't know.
It's the more they delay,
that's what's going to have to happen.
But it seems crazy to think about.
Do you think that could realistically happen?
What probability would you put on that happening
at these, you know, in the next 20 years?
Well, let's take the alternatives.
You have to slash defense spending by, I don't know, probably, let's just say it's
three, 4% of GDP.
Let's just say it's 3% of GDP.
That's a trillion dollars.
So we need to cut defense, which was like a trillion one last year by 90%.
Never happening.
And by the way, it has to happen.
And even if you did it, you take 3% of GDP out of a country that's growing, what, one
and a half real right now?
You're in recession.
The deficit's actually going to rise 600 to 1,000 basis points of GDP in any recession.
You're done.
So, okay, take that off the table.
Next option.
Boomers.
Trillion dollars out of, so they got to cut Medicare, Medicaid by 30 to 35%.
percent immediately permanently forever without a recession without boomers then going oh well
we also have 70 trillion dollars in stocks and bonds and real estate we'll just start selling
that well what happens then stocks market is the economy consumer via consumer spending link
receipts boom recession same problem you if you could come up with some magic thing where
like the sickest half of the boomers all died by next Tuesday, that would fix the problem.
I'm not hoping for that. But again, let's just, this lays out. And option number four is
cut rates to zero, run the stimulus, inflate the heck out of it for six months, and that's it.
Or the equivalent, which is you could do, if you let gold really, really rip,
Yeah. And 20,000, 30,000 ounce, something like that. You basically just take the yuan price of
30,000 and move it over to America, $30,000, and then have Besant instruct Warsh to revalue the
gold, creates a TGA deposit, buy back a ton of the debt. And now you're out of fiscal dominance.
You can get out fiscal dominance that way without, you wouldn't have 100% inflation,
triple digit inflation. And you would have significant inflation, but you would then
have taken the debt to GDP from 120 to 80, 60, 50, depending on the gold price. And now the Fed's
right back in the game. Now they can actually raise rates without adding to inflation because
everyone's getting more interest on their bond portfolio and without pushing interest over
receipts. And so I guess the odds, when you look at it through those options, the first three are
not possible. And then you're left with either sort of a brief period of really high, even triple
digit inflation or some sort of gimmick. It's basically the platinum coin, except it's provided
for in the financial accounting manual for Federal Reserve Banks. That's clearly the best option.
And now there's probably a sixth option, which is, hey, if we can go to war and, you know,
that doesn't cost us a lot and happens really fast and doesn't kill many Americans and tips over
Russia and China at the same time, and we get control of their resource and factories,
then yeah, that's not going to happen either, right? So there's another option.
So the only ways out are option A or option B, really high inflation for a brief period,
or run up gold, buy down the debt, and get the Fed back in the game to get the US,
which is just another way of devalue on the dollar. But when you see the pieces that
that Bessent and Walsh and Trump
are putting into place.
Is that what you think they're doing?
I don't know.
I think strategically,
this administration has a pretty good idea
of what it's doing.
I think tactically, I think they are just like making a dog's breakfast of everything
because they're getting pulled in a lot of different directions.
And what I say strategically, this commentary by Warsh about Hamiltonian economics, excuse
me, by Besson about Hamiltonian economics, I thought was super interesting for a number
of reasons.
What does that mean?
Hamiltonian economics is essentially high trade barriers, capital controls, subtle deficits
in gold.
Okay.
And that's an oversimplification, but not that much.
It's essentially we need to produce a lot more of our own stuff based on Alexander Hamilton,
of course.
And Besson gave a speech at the New York Economic Club about five weeks ago, June 23rd.
And just in case people thought, which is sort of all of the bigwigs, there was a 250th
America 250 gala, right?
So anyone who was anyone from a policy standpoint is there.
And he rolls this out.
In case anyone thought he was just talking off the cuff or out of turn, he wrote an op-ed in the Wall Street Journal, same day published it.
Trump's economic policies or Hamilton drives, Hamiltonian economics drive Trump's statecraft, something like that.
You can find it.
That's what he believes.
Go back to before this whole Iran debacle.
And U.S. Trade Representative Jamison Greer gave a speech at Davos.
this year. He flat out said America is moving to Hamiltonian economics. He said that the
Bruton brought up Bretton Woods, brought up that probably would have been a better idea if we had
had a neutral reserve currency, as Keynes advised. But because we were running surpluses at the time,
we decided we didn't want that. And everyone else was flat on their back. So they had no say.
So that's interesting, especially with either the Times or the Journal saying that Greer is driving
much more of the Trump administration's economic policy. They just wrote that two, three, four weeks
ago. You go back to Trump sometime last year, I believe it was January. He said, I want to take
us back to when America was richer and more powerful than ever before. Something Trump said
over and over. Goes on to say 1870 to 1913, U.S. had the highest tariffs it's ever had,
protecting our industry. And he said, we were taxing foreigners to pay for America's growth
rather than taxing Americans to pay for foreigners' growth. Hamiltonian economics.
And Trump's famous for that, right? He gets the concept. He talks about it differently in his own
unique way. J.D. Vance, February last year in Europe, referred to the stupid Washington
consensus that de-industrialized America as being over, done with. And so the chapter and verse,
you've got Hamiltonian economics, Hamiltonian. So what does that imply? Higher tariffs,
protecting American industry, reshoring, inflationary, net settling gold, right? What's
been America's biggest export eight of the last 10 months? Gold. Bigger than jet engines, bigger
than oil, bigger than gas, bigger than pharmaceutical preparations. So it seems like
that leaves me really encouraged because that's a really good thing for America. It's terrible
for bondholders. So what? Who holds the bonds? The boomers. Guess what? They have underpaid for
everything their whole lives. Everything has been slanted to help them. And I have boomer parents,
I love them dearly. I love the boomers of the generation, most of them. And the reality is,
my children need a chance. My children's generation, you need to do, and that is only
fair. Yes, they paid into social security and they are using way more than they ever paid in.
They are using way more in Medicare and Medicaid than they ever paid in.
You can't raise taxes on them.
How do you get them to pay?
You load them up with the bonds, and then you devalue the crap out of them by implementing
Hamiltonian economics, which is going to send inflation up.
It's going to send wages up for the younger generation, and so on and so forth.
That's the encouraging thing.
That's what I think the economic plan is.
Now, there have been a lot of distractions so far here to date.
There have.
I mean, I don't know how many times the Iran war has stopped and started.
But on the Hamiltonian economics thing, it sounds like, and I could be oversimplifying
this, it's essentially going from the US being a hyper-financialized economy to being an
industrial economy again.
And I've read enough of your work that you're kind of bearish on the idea of reshoring actually
working.
So how does that play out?
I wouldn't say I'm bearish on the idea of it actually working.
I'm bearish on this idea that we get sold by so many people that it's going to be fast
and easy.
Okay.
and cheap and buy bonds because America is going to reshore like buy bonds are you high like no
no I just have an interest in my my clients not being the ones who get fleeced yeah as I do think
we are moving inexorably in that direction right like the the you know Martin Luther King the arc
of the arc of society over time moves towards justice the arc of our economic policy is moving
toward reshoring and I say that because Trump started with the trade war Biden basically ran
you know Trump economic policy except as a doddering old man instead of as sort of a bombastic leader
So we're moving toward reshoring.
All I'm saying is, don't piss down my back and tell me it's raining and buy bonds because
America is coming back as industrial power, and we're going to be producing rare earths
in two years and refining them.
And we're going to be making all this stuff in two years.
I think I wrote last week.
there's an old saw in producing things right in manufacturing you can have it fast cheap and done
well pick two well we need it done fast because we're losing to china yeah or at the very least
our margin of in certain areas we are losing but in some critical ones our margin of winning is
shrinking more than leaves us feeling comfortable and we need it done cheaply because otherwise the
bond market blows up. Well, we have to have it done well. There's no point in doing it at all
because we'll still lose three. Right. So we have a trilemma. We need it done fast, well, and cheap.
And it's not going to be done that way. It's not, especially when you look at sort of the
45 years of de-industrializing. We don't have the labor. We don't have the engineering. We don't
have any of these things. We might, and AI could certainly help that in some ways. And it's going
to cost a lot of money. And so that to me, it's less that I'm bearish on that. And I'm bullish
on the ability to do it. I am bearish on the ability to do it fast and cheap. We're going to
do it. It's going to take longer. We think it's going to be more expensive. Stay the heck away
from long-term bonds because the real value of them, if you think America is going to compete,
let alone win, let alone get back to making stuff, you can't be anywhere near long-term bonds. They're
going to get destroyed on a real basis. They have to. So if this is going to take a long time,
is the next few years, maybe that's up to a decade. I don't know your sort of timeline,
but is that basically the most chaotic time we've ever gone into in terms of the economy?
It's going to be right up there. It's going to be right up there because it's
it's hard because on some level you need to do some very Chinese things in a society that
knows it needs to do Chinese but is afraid to do them because it is you know it's like it's like
it's like asking a hardcore Catholic to be Protestant and and realistically there's not
that big a difference between the two you know to the I mean certainly like you know the Buddhist
or the Muslim would say what's the difference I guess but if you're a hardcore believer and
that's what you have. You've got the free market people and they think this is all a free market,
this and that, and we are not like China. And then there's people like, we need to build as
fast as we can and whatever it takes. And that fight is happening as we speak all the time.
What's the Chinese thing that America need to do?
It's ironic because actually Chinese did the Hamiltonian thing, right? Which is,
I wrote about this this week. Hamilton encouraged everyone to steal intellectual property from the
Brits and the Europeans and bring it here. And they put up high tariffs and all that. And guess
what the Chinese have done, right? They take an IP and same thing. And then they improve upon it
and what have you. Same thing. It was the same playbook. So yeah, what we need to do is essentially
close the capital account except for gold, like the Chinese. The Chinese capital account is open
on an unlimited basis through gold. But think about what that means, right? I said this the
other day. Everything is downstream of this capital account. Raja, he and I found each other on X. He
had great points. I refuse. And this is a point that Brad Setzer and Michael Pettis in particular
make over and over and over. Essentially, America is the victim of our open capital account
from the Chinese. And Raj was like, I refuse to say the most powerful country in the world with
an open capital account and the reserve currency is a victim because it can't control its own
capital account. And he's exactly right. These are all choices. They're all trade-offs. In other
words, if you don't like what the Chinese are doing, all you got to do is close your capital
account. What does that mean, Luke? That means the whole world stops recycling their money into
stocks and bonds. They have to go to gold. There's precedent for this. No less a U.S. eminent
policymaker than Henry Kissinger in the 70s was discussing the same problem. They had a different
version of the same problem. In the 70s, because oil had risen up so much because we had devalued
the dollar and gone off gold, you had all these petrodollars, right? And they were being recycled
Well, OPEC Arabs are no dummies.
They're in there buying up companies
of these valuable properties left and right.
It's all free, right?
I'd cheap money.
And so they had a problem of Arab,
this is Kissinger's words, not mine,
Arab control of European and Western European industry Where does this sound familiar Chinese control of US and European industry Okay well one of the things that was proposed is let settle the oil deficits in gold at a floating price
So basically, it protects our industry from being controlled then by Arabs, now by Chinese.
they get protected because they have absolute national control their words not mine of their
reserves in physical gold in their borders and it's inflation protected their words not mine
same problem same problem and so that's why i say like oh the chinese no they're just playing the
game that's been dealt to them and the game is buy up american industry with the dollars
Americans don't like it. Close your capital account. Why won't we do that? What would happen
to stocks if you came out and said, everybody but Americans can't buy stocks anymore, can't buy U.S.
bonds anymore. They got to do it through gold. The gold to Dow ratio would go to one like it did in
1980, like it did in 1933. And why do they care so much about saving? I understand the bond market,
but why do they care so much about saving the stock market? Well, now because it's the economy,
but also it's their source of wealth, right? This is ultimately a Game of Thrones. This is about
corporate America loved China. They still love China. You even saw it last week. So we're in
the midst of all this. So we've gotten to this point. Micron stock is soaring because of the AI
boom, the demand for memory. Prices of memory are going through the roof. What's Apple doing?
Buy memory, I imagine. They are. But this week in Washington Post, they come out,
they are actively lobbying Trump to let them buy Chinese memory.
Because the price of memory is going up to an American company.
God forbid an American company is making a lot of money in memory.
And if they can buy from the Chinese, they can knock prices down for the American.
And they can keep Apple's margins okay.
Whose side is Apple on?
But it's an American company, ostensibly.
But this is the fight.
It is ultimately corporate elites have,
what percentage of CEOs and execs
have their money in the stock, you think?
Their stock.
It's a big number.
Everyone.
It's a big number.
Yeah.
So what happens the day you say foreign money's out?
We're closing the capital account.
Do you think they want that?
Do you think they want their margins?
Corporate profit margins are at all-time highs.
Corporate profit margins would come down initially.
Wages would come up initially.
And then ultimately, you begin to produce more of your own consumption.
Now you build a consumer base that's in America, right?
That's not based on credit.
Oh, by the way, you're taking away the need for credit.
You're bolstering wages.
You're bolstering inflation.
Banks don't want that.
Bond market doesn't want that, right?
So what you end up with is Wall Street and multinational corporations hate that idea.
So many of these questions come down to like what they should do and then what they're
actually going to be able to do.
Is this another thing that they should do?
Well, forget about should.
This is so similar to pre-Civil War.
Do you know 60% of the wealth in this country was in the South before the Civil War?
I didn't.
It was.
They were the original globalists.
They wanted open trade, no tariffs.
Why?
Slave labor.
And they're selling cotton and tobacco and crops to Europe.
Meanwhile, the North, the technologists, the producers at the time, or the manufacturers at the time, they need a protection because they're trying to compete with the globalist Brits and Europeans who are making stuff.
And their fledgling industries couldn't produce without tariff protection.
Well, we need a way to, you know, globalists against the nationalists.
Well, no one's going to go die for economics, so we need a useful social issue.
Any useful social issues we could highlight in the 1860s to get 600,000 Americans to die?
Oh, slavery.
The same fight's happening right now.
Nationalist, globalist.
And it's interesting because the divisiveness of this country, Peter Turchin, who studies these things,
said that in his book End Times, you've got elite overproduction and wealth inequality
are your two drivers to domestic political instability.
They're the highest now in America since 1855.
So should is a political question.
What will they do?
I don't know.
And it's a highly contentious political issue.
As an American, I think what's best for America
is to not have massive wealth inequality because I don think that politically stable I think we end up in some sort of domestic really ugly situation And so that where I shake out of like hey it makes more sense
to control the capital account, redirect some of those flows away from the Plutarchs
into domestic production.
That makes more sense.
What should they do?
I'm not in government.
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And like the wealth inequality in America, I travel a lot.
And in sort of the Western world, I think it's probably the highest that I see.
And it seems like everything that they are doing and going to do is only going to create a bigger divide.
That is only going to lead down a really bad path.
And it's hard because when we talk about these topics, it's very hard to be optimistic about the future.
And I'm a very optimistic person generally, but it just seems like we're going down a really bad path.
these things happen. I mean, at the end of the day, humans are, you know, humans are products
of nature, right? And you go through these cycles of, you know, look, you go around here, you know,
there's this beautiful, we're here recording this here in Cleveland, there's beautiful, we have
metro parks, right? So there's a, literally, it's about a mile wide swath. Most of it has a river
through it, or much of it's on the west side, certainly, actually on the east side, different
River. But you can literally mile wide swath parks, centuries old trees from the from the lake on this
side, all the way around the west side, down south, back up through the east side, up to the lake on
the other side. They call it the emerald necklace. And due to the development of this country or
country of the state, most of the natural predators of deer were killed centuries ago. And so over a
period of time you know when i was a kid it's like wow a deer and now you're like oh my god a deer
like literally everywhere you drive you're trying not to hit a deer why why are there so many deer
take away the natural predators they become victims of their own success they eat up everything and
and now there's way too many deer and then you have a you know deer disease or they eat all the
plants and they start whatever it's natural cycle of nature and i think these economic cycles
unfortunately, we're products of nature as well.
We're victims of our own success.
And I'm optimistic about the future.
I'm just realistic about it as well.
Like where we are, what that implies,
what that possibly implies, what are good things,
what seem to be good moves, bad moves,
what are good ways this can, and then accelerants, right?
There are things that are accelerants.
And I think, you know, technologists would tell you,
oh, well this technology bifurcates the economy into case shapes
anyway. It does. They're right. And that doesn't necessarily change the outcome, right? Like some
of them are saying, well, fine, I'll just buy a bunker or I'll move to New Zealand or whatever.
And I guess that's one way to deal with it, but I think it's a little antisocial, but I get it.
So I don't know. That's sort of a, I don't know. I don't know exactly that that tells us anything
other than I just, I don't think there's any avoiding the natural cycle. Like you can delay
it for a while, but you can't stop it. And so then if you can't stop something, then it's about
preparation and understanding and trying to do what you can in your own little way to get us to
a better outcome that might otherwise have been achieved. Buy Bitcoin and gold and think very
carefully about where you're going to live. AI, like you say, is obviously going to be hugely
instrumental over the next decades. But for now, do you think it's in a bubble? And what kind of
bubble? Because like the obvious most recent examples are like, is this 2001 or is this 2008?
Yes, I think it's a bubble now.
And I think it's going to be a situation where the early bird gets the worm,
but the second mouse gets the cheese. Which is to say, for a long while, myself included,
I didn't really write or talk this way, but it was in my mind. Whether AI was a bubble
and whether the AI companies were a bubble were inextricably linked. In other words, there was only...
And now I think the companies are bubbles, but I don't think the technology is a bubble.
I think we're in the early days of those things separating.
And that's what I mean about the, you know, the early bird gets a worm and the second mouse gets the cheese.
Rails were enormous bubble, railroads.
And they were an enormously productive technology that changed this country and changed every country and are still in use today.
I was at a conference 18 months ago.
There was a guy there who was extremely wealthy.
Nice guy.
He made his money by buying up telecom fiber for pennies on the dollar.
after 02 when it all went bankrupt.
It's all still being used.
The internet, wildly useful.
And we saw that, right?
The Pets.com and all these crappy companies,
they went away.
And the internet is every bit as big
as we thought it would be.
And I think we're in the early days
of that being recognized.
And that's one catalyst of the ball
where there's just this recognition.
But I think that, and that's being recognized,
I think because some of the financing stuff,
some of the same shenanigans that we saw in telecom and Enron and all that, the sort of
circular vendor financing stuff that is being openly discussed and questioned for good reason.
The thing that actually is different this time as it relates to either 2000 or 2008 is
the Chinese are competing. We were talking about this earlier, which is we're having a debate,
are the Chinese better? Are they not? It doesn't matter. They're there. They're only going to get
better. And American technologists don't know what to do because they haven't had to compete
with another country's technology since probably, what, 86, 87 with the Japanese?
A lot of these guys weren't even born yet. If they were, they were in diapers.
And we were talking about before we went live, this is the Rust Belt. Cleveland had four of the
seven richest cities in our, excuse me, Ohio had four of the seven richest cities in America
in the early 60s. Maybe it was in, maybe it wasn't as late as early 50s, but the point stands like in
one human life for the seven wealthiest cities in this entire country, the wealthiest in the history
of the world were in this state. You know how many are now in the top 10? Zero. Zero. Zero as Steve
I know how this can go. I've seen it. I watched it in my lifetime. The tech guys don't get it yet.
The fact that the tech guys are going to Washington and asking for a savior from
China, for protectionism. Not very American.
Well, it isn't. It isn't. It's kind of Hamiltonian, but it's definitely changing the
rules versus before. And there's a different set of rules to that. But, right, there's nothing
more American than Hamilton, right? It's been on Broadway for what? How many years now? What did
he do? Hamilton did what the Chinese have done the last 20 years. It's all one big, you know,
it all happens over and over. It is interesting though, because obviously the news broke a couple
of weeks ago about Kimmy K3 coming out. And like you, I'm not deep in the world of AI, but you see
some of the benchmarks is at least competitive with the biggest frontier labs and a fraction
of the cost I believe So I can understand why those frontier models those frontier labs are very paranoid about this and they trying to figure out how to be saved essentially But why save them If their models are broken
why would the US save them? Because otherwise, I want to say this so everybody hears it,
because if they don't, the whole system is at risk of coming unwound.
There was a great sub stack. If you haven't read it yet, and you'll have seen it from my work.
I don't know who the guy is. Groundbreaker is the name of the sub stack. Go read it. It was
published July 2nd. I read it and it was funny. I was reading it on our patio. My wife can always
tell. Mrs. FFTT can always tell when something's blowing my mind because I'm rubbing my head.
I'm reading and I'm rubbing my shit like, wow, what are you reading?
and he lays out that the 08 crisis was not a,
the popular understanding is once home prices turned down,
everything came unwell.
But when you look at the actual facts,
which he puts right in front of you,
it wasn't when home prices turned down year over year.
It was when the rate of growth,
the second derivative of growth of home prices,
they were still rising, there was still demand.
when they slowed, that's when default started rising because it wasn't that home prices fell.
It was that they just slowed so that the refinancings couldn't occur. And after that,
everything came unwound. And he lays out that people are evaluating his cases that
people are evaluating the AI as a tech play. It's not, it's a real estate play. And he says,
in real estate, you got boom bust because number one, they don't derate gently. They derate
violently. And he's absolutely right. And he said, number two, real estate things don't blow up.
They're very rarely blow up with demand declining. It almost is always up. It's just that second
derivative. And he runs through and he points out basically chapter and verse, open AI is ground
zero in this whole thing in his view. And I have no reason to disagree after it's a very, it's
probably took me 45 minutes to read through and I read fast. And it just lays out the different
cross financings, the amount of debt, how they have gone from basically 0% of cash flows to 100%
of cash flows going into new capacity, then borrowing, who's guaranteeing it, what's therein,
what's happening with Oracle CDS, Microsoft CDS all starting to rise. And that is why I think the
government is nervous. And they should be nervous. The US government should be nervous about this
because when you then tie it into capital flows,
there's huge inflow of capital from abroad,
all heavily tied to AI.
I lived through the 2000 bubble.
I remember what happened.
The dollar kind of went up a little bit more
and then it fell like 40% in six years
after the tech bubble burst.
So they have those issues.
The tax receipts.
Oh my God.
Do you know what happens to tax receipts if the tech bubble bursts?
We're already at 100% right now.
If you add interest expense plus entitlements plus veterans benefits, which are a cool 8% receipts, $400 billion a year, you are over 100% of receipts.
With receipts and capital inflows inflated by this AI bubble.
And the one thing underpinning, as this groundbreaker says, is OpenAI.
If OpenAI just slows the next round.
so they came out at the end of june and they delayed their ipo possibly and that was and then
they also offered remember about a week later they it was reported that they were floating since
denied floating possibly giving the trump administration a five percent stake i saw that
now how many of these tech billionaires have you seen offer out of the goodness of their hearts
a government five percent stakes is that literally just i mean i don't want to use this word too
liberally but a bribe to be like keep us alive yes i think it is i mean i hear i heard credible
rumbling six to nine months ago that the discussion around what does an AI bailout look like had
already been broached in Washington. Do you think that's why China are pushing the open source AI
so hard? Is it an attempt? Is it like essentially economic warfare? Whether it's intentional or not,
I don't know. I think they are absolutely aware of the implications of it. I think they're
absolutely aware. They would have to be stupid not to. And they're very good at this. They're
better at the second and third derivative thinking than our policymakers seem to be, in my opinion,
for a number of different reasons. But that's why I think the government's worried about it.
Open AI, can't price, boom, then this, then the debt. The debt starts, okay, who owns the debt?
I don't know. Okay, sell them all. Okay, now, and oh, by the way, 80, 90%, depending on who you read,
80, 90% of GDP growth in this country over the last 12 to 18, 24 months has been driven by AI
related spend. Uh-oh. Now what? Now you're in a recession. Now what happens to the deficit?
Remember we just said before, up 600 to a thousand basis points of GDP. Well, GDP is 30 trillion for
easy math That 1 to 2 to 3 trillion more on top of a 2 trillion deficit Now your deficit is 3 to trillion Receipts on top of a trillion deficit Now your deficit is to trillion Receipts are down huge because stocks are down And oh by the way yields are probably going to
go up on this because in the dot-com bubble, we were running a surplus, a fiscal surplus,
not a 6% deficit. I think that's the last time there was a surplus, right?
Right. And so now you've got, it just came out last week, Google went cashflow negative,
first time in its history. So you've got all these guys competing. They'd be competing more
to borrow more money to keep things going. At the same time, US deficit would be blowing out three.
So you're going to have a risk. If the AI thing unwinds, you are going to have a recession
and a stock market event where you're going to have a weak dollar, probably not initially,
dollar will strengthen initially. So let me do it in order. You're going to have a very
big stock market problem. You're going to have a recession. You're going to have a rise in
unemployment. You're going to have a significant rise in interest rates in a recession, which no
American alive has really seen since probably the 70s. And even then, it'll be much more emerging
market, which the 70s was, of course, sort of. So I guess that's probably the last time anyone
would have seen it. But if you were 30 in 1974, you're 82 now. Not a lot of them around. So not
a lot of people have seen this. And oh, by the way, the rise in rates will then force, and that's
where I think the dollar rises on that initially. But go back to Warsh, we started. What did he say?
I'm not going to let the market set the price for treasury bonds in a crisis. Okay. What are you
going to do? Check to you, buddy. And it might be as little as a 25 basis point height that could
trigger all this. But I think they are absolutely aware of it and concerned about it. And I think
the Chinese are too. So now you go to the game theory, you're China. And you got a lot of tough
guys saying, we're going to choke off China's oil. What are they going to do about it? Oh, look,
China didn't put troops on the ground anywhere in the Middle East to fight us. What are they
going to do about it oh we just seized venezuela china didn't do anything about it they're crap
knowing the chinese mentality which is turn the other cheek and wait and then do something very
subtle like oh i'm so sorry what happened what happened open ai oh yeah i think it's exactly
what they're doing it's what i would do if i was them but it's hard to know what they could even do
to protect it? Because I mean, back to the question, is this 2001 or 2008? It sounds like
it has sprinklings of both. And the problem is like, if they do start to roll over and the growth
slows, like sure, Walsh can, you know, drop rates and he can start buying his own bonds. But like,
does that get into the markets that he needs them to get into? Like, how do you protect it?
And this is why the Iran war was so dumb. If you're actually a multi-level thinker,
you know, the people that are like, oh, this was such a good idea. No, it wasn't.
If you can hold one thought in your head at one time, yeah, it was a great idea.
Because now, where's oil?
We started this little adventure.
10-year treasury yields are 3.95%.
Oil was 55, 65, 62.
Now this thing comes unwound.
Yeah, this thing comes unwound.
Worsh can really aggressively cut.
What's oil going to do?
It goes 75, 80 because you're in a recession, down.
Great.
You start an oil from a standpoint of 85 bucks.
I see what you're saying.
And I know you've said a number of times, like oil at 120, I think it was, is like game
over really for the economy.
It is.
But even more, like we've been very, you know, written it many times over the last four or
five years that 60 to 80, oil is fine.
Oil gets 85, the treasury market starts having problems in fiscal dominance.
We've seen this over and over and over and over.
And is it at the moment?
Oh, absolutely.
I mean, the move index is down at 50, but rates are at 4.7, right?
4.6, 4.7.
Got to 4.7, war off.
Back to 4.6, war back on, right?
So that is the, that's another tricky part of all this.
Oil's at a price where, what do you do if you're worse?
If you start to, AI needs support.
Some of it's competitive.
There's not a lot you can do.
the financing side of it is going to be having a problem. Stocks are going to be heading down.
Meanwhile, you've got the war going on. And so there, yeah, there's some element of downward
pressure on oil, but ultimately, what do you think the Chinese are going to do? Right? They ran down
all their oil. They ran down some unknown amount of a very large oil SPR is the accurate way to say
that so say oil goes from 85 to 70 what do you think the chinese would be doing
let's put it right there guys yep so oil's not going to come down that much if at all
when worse is going to have to be printing money to figure this thing out
it was just an unnecessary complication that iran war was relative to all this other stuff that was happening to the exclusion of everything else right it was just it was hubris to think well if we do this there not going to be any fallout And to only think of retaliation in terms of boots on the ground or bombs or this or that What did Besant say in his Q three weeks ago
Bond markets have taken down more governments than howitzers. He gets it. He gets it. Even if I don't
think he has the ability to kind of say, hey guys, the Iran war, let's not. I don't think that was his
call. This might be a silly question, but is it possible to think they might be as avert as
doing money printing and actually stepping in to the stock market and propping up strategic markets?
Well, they're kind of already been doing that, right? When you're making investments. And just
here too, it's this dichotomy or this two-faced, the yin and yang of it. On some level, you need to
do that right i mean that's what we're talking about hamiltonian economics is protecting your
domestic industry um that you've that you've been allowing to be hollowed out
so on some level you need to but you don't want to do it because in an emergency you want to be
strategic about it this will be the antithesis of strategic yeah it'll be because you're trying
to put out a fire. So yeah, they stepped in it, right? There's almost like an ideological
problem with some of this in that like America is about supposedly about free markets and it feels
like to beat China becoming more like China is a mistake. But are you saying you think that's
they're going to have to do. I think the first step is admitting we don't have free markets.
You can't sit there and say, we can't do these policies because we need to have free markets.
When you have the Fed chair saying, I will only allow a free market and treasury bonds when I
like the price, when the rate is not at a level that doesn't bankrupt my government.
That is not a free market. And he said it last week to Congress. He stood up and said, America
does not have free markets. He just used words that, you know, because everyone's still enamored
of him, you know, give it a, give it a couple of years. He's going to be Powell. Um, that to me is
the first step you have to take. Like, let's be honest. What free markets, what was free about
Oh eight? What was free about COVID? What was right? So we need to actually decide, Hey,
these industries have strategic value beyond I can make money on it this quarter.
And that's the challenge.
The Apple Micron example before.
Micron's minting money.
Stock's outperforming Apple.
Memory prices are soaring.
It's a commodity.
It's no different than if coal prices or oil prices are soaring.
And Apple doesn't like it.
Where's Apple's margins relative to all time?
Where's right?
So like, it's a mindset.
You need to have the upper shape of the K, the upper leg of the K, both in corporate
and as individuals say, here's where I want my country to be.
In 10 years, 15 years, we can be ripping each other apart.
or the bottom half will have starved one way or metaphorically or literally,
and I won't have to deal with it because I will be in a walled garden of my own construction.
Or I want my country to be thriving.
And to get there, I need to take lower margins.
And I need to somehow sell that to my shareholders with a K-Shiller PE at 42,
pricing no margin nothing but margin expansion forever more because you know unicorns rainbows
and skittles for everybody that's the issue that's the decision and i see it from some people
i don't see it from others and i definitely don't see agreement about it and and the challenge is
like that's not the mainstream discussion right like it would be much more encouraging to me if
That was the discussion we were having as a society.
But instead it's, you know, what's a boy?
Can I date a tree?
You know, can I wear a furry tail to class
like some of the kids at school,
at university with my kids?
Like, okay, great, right?
That's more Weimar vibes of like, you know.
I mean, that's insane.
Your words, not mine.
Is this like an existential threat to the US
as a global superpower?
Oh yeah, absolutely.
It already is.
I mean, look at the headlines this weekend.
We don't have the missiles.
We don't have the air defense missiles.
And so, right, so we are the global superpower
whose most powerful
powerful military in the history of the world ultimately backs the dollar along with the 13
aircraft carrier battle groups that we have, right? How often have we heard that? Except when
the missile started, those carriers in the Gulf went a thousand kilometers further away because
they knew what would happen if they stayed too close or could happen. We ran out of air defense
missiles. Our naval base at Bahrain got trashed. We evacuated many of our people from the Middle
least. The Russians were helping target our guys, helping the Iranians target our guys.
We can only go to war when the markets are closed and when the 10-year treasury yield is below 4.7%.
So we are still the global hegemon. As terms and conditions apply.
As long as a 10-year, you want the guy at the end of it, we're still the global hegemon.
As long as a 10-year yield is below 4.7%, as long as the S&P is not down more than 5%,
as long as oil is below 85, as long as it's a weekend, and as long as we have enough Patriot
missiles, which we are currently on backlog for two years. Talk to your representative for further
conditions. I mean, with those caveats, then, is it already over? It's already in the state of change.
We can always come back. We can always come back, right? And look, I agree with Warren Buffett. Hey,
for 250 years, it's been a bad idea to bet against America.
Yep.
Right.
And what I never hear Americans still say yet is that I bet you in 1850, there were people
saying in Mandarin for 1500 years, it's been a bad idea to bet against China.
And yet, eventually, they made enough stupid decisions and had enough outside forces, one
of which is a widespread opium addiction.
Hmm.
You know, they have a name for it in certain areas around here.
It's called Fentwalk.
I don't know if you ever heard the phrase Fentwalk?
No, not Fentwalk.
Is this where people like drooped over?
Correct.
Yeah.
We could take you to areas where there's Fentwalk around here.
So it's not over yet.
But, you know, it's getting later innings where we need to be having the discussion of
do i as a plutarch of this not i i metaphorically not i specifically as a plutarch
as a ceo of a multinational as one of the wealthiest people in this country as a member
of the upper shape of the k want where do i want my country to be in 10 years 20 years like
And there's other like warning signs about it.
You know, I have a friend of mine who has the monopoly contract, right?
So he's the only provider for the medical examiner pickups in two major second tier US cities.
and what that means in plain English is anybody who gets murdered commits suicide overdoses
accidental or otherwise or suffers an accident dies in an accident he picks up he's the only one
who gets his his his companies and they said something a couple weeks ago man we have never
been this busy we are busier now than we were at the depths of the COVID when people in this country
were killing themselves, overdosing themselves, drinking themselves to death when they were
locked down.
Wow.
Bleak.
Very bleak, right?
So there's something happening, right, where in the context of this K discussion that we
need to be having, and look, maybe that's the plan.
Maybe that's a plan for the upper half of the K, at least the ones that are controlling
the strings, which is build a wall and just let those ones overdose and kill themselves.
It's the permanent underclass.
And we spoke about this in Nashville.
It's like, it's the economy of despair.
Like if AI does end up replacing a number of jobs,
like what do you think is going to happen to those numbers?
Like bullish on his company in a horrible way.
It's an enormous, it's enormous.
I mean, there's actually a shortage of funeral directors
in the state of Ohio right now.
Do you know that?
And a number of other states.
Some of it's an age thing.
There's very few young ones,
but it's so much so that they are able to,
they've changed the rules.
before you had to have at least an undergrad degree.
And then you would have to go to mortuary school for two years.
Or you could go right to mortuary school.
Or you could get a degree and apprentice under an established senior funeral director for two years after your degree.
they're in such dire straits they actually have changed the rules so that as long as you will be
done with your undergraduate degree by the time you are done um by the time your apprenticeship
is done wait a minute i mean these are depressing signs it is a it is a sign it it just it like death a part of life right Like Forrest Gump mom said
So I think some of it is around how you feel about that
for when they're young people.
Yeah, it's horrible.
And, you know, some of it is a demographic, right?
Wherever the boomers have been, you cater to the boomers
and you do well, right?
And wherever they've been in their lifespan, right?
When they went into the workforce,
number of workforce went up
and then inflation picked up
when they're buying houses,
when they, you know, vacation houses,
vacations, whatever.
And what are the boomers doing now?
Like if you do high-end service, right?
So pools, landscaping,
high-end service and death care, boom.
Some of it's just boom
or some of it's just demographics.
So I don't want them to make you think
it's all opiate and stuff related,
But there is some signal there around a warning sign of this discussion we need to be having,
we should be having, of where do we want to be?
And that's where I think, look, I do think the Chinese do that better than us, right?
People say, oh, China's housing is in the trash.
Yeah, or in the tank.
It is.
And Xi came out and said, houses are for living for, not for speculating.
And that was like the absolute peak.
Like they basically went in the, like they tanked their own housing market.
Why?
Why? Because then the capital flowed into investing. That was a plan. Now, that has its own
offshoots, right? That's going to weigh on profitability of firms in that. You've got to
compete. Wait, high degrees of compete? Isn't that capitalist?
It certainly sounds like it.
Interesting. But I think they have the structure, luxury, culture, history ability to say, look,
we would like to not be in a revolution in 10 years. And a good way to contribute to that,
especially with AI taking jobs in our country and everywhere, is to jack the price of housing
to the moon. So not only do young people not have jobs, but they can't afford houses and
their healthcare is up and they're educated. That's how you end up with Mamdani. You're
going to end up with a Mamdani in every country in the city. So what do you want?
So it's almost like the perverse incentives of crony capitalism.
I think that's exactly right. Right. Like once upon a time in this country,
what did, I think it was Nixon who said, right? Hey, these guys are too big to fail. Nixon said,
well, tell them to get smaller. Perfect response. Perfect response. Get smaller. Oh, wait,
it was a very simple response. Break up the big banks, send the ones that committed crimes to jail,
wipe out the equity, let the bondholders take over the company. Why didn't we do that?
crony capitalism. And if the government in some form step in and try and protect these AI companies,
like that's maybe the most egregious form of crony capitalism. Yeah. And it's, you know,
it's going to, I've had people say it's going to be like the Soviet union, right? Like I have a
friend who lived in East Germany. He's like, that's, you know, you, you guys let markets work
and you get all nice stuff. And you know, we didn't, and we had all the crappy stuff. And so
we're going to have you know expensive crappier evs and expensive crappier solar panels and
expensive crappier electronic stuff and the china like there's electronics that i've had people show
me over there we don't even have access to way more than byd cars like i'm like wait what and
that's what happens so it's it's it's a time to be asking what we want and where we want to be
and it's a time not to be using black and white labels right yeah right like chinese are doing
some very capitalist things and americans have done some very communist socialist things
for certain classes of people right it's like animal farms some animals have been more equal
than other animals and that's fine but you know when you end up you know when you take a road
somewhere don't be surprised when you get to your destination so what should like if people are
listening to this what's the actionable advice what should people be doing to prepare for this
Like, I agree we should do everything we can to try and change course, but assuming you follow the incentives and maybe that course is not going to be changed, like, how do you protect yourself from this?
Look, I think it's about simultaneous protection and optimism, right?
There's the yin and the yang to this.
This can go really well.
This can go really badly.
And so it's a constant, you know, there are certain facets that are in place already that it's going to be, makes it harder for it to go flawlessly.
But there's going to be winners and losers at all times.
So look, we're not going to be able to reshore fast enough.
It's not going to happen.
Okay, well, guess who's going to get a lot of that business?
Japan.
Okay, well, tell me about Japanese industrial equities.
Okay.
Electrical, you know, is we're going to reshore of something, you know, some degree.
We're going to have more electricity.
It's easy because we, as a country, we have not grown our electric grid in 20 years.
It's astonishing.
It tells you a lot of the GDP growth is inflation.
Fiction.
Yeah.
Fugazi.
Great, electrical infrastructure equities.
We're going to devalue the currency.
Unless we come up with some new math that going to happen Great be overweight gold Look if you have a long view you should probably be buying Bitcoin now Like I said I probably being too cute I think I can get it cheaper
I still have probably a 3%, 4% position in Bitcoin and Bitcoin-related stuff.
I'm not flying fully out of the trade.
I'm not short.
I'm just underweight what I think, because I think ultimately they are going to have to
get much more aggressive and much more obvious about devaluing printing.
And Bitcoin has demonstrated an ability to be the fastest horse relative to, I don't
like playing any altcoins, anything like that.
That's my limit, right?
Of-
When the tide does turn and you're ready to get back into Bitcoin in a bigger way, what
is your ideal allocation?
So the last time I was probably 10, 15% and at the highs, it was like 47, 48%.
Oh, wow.
Yeah.
It was so big, it was occupying way too much of my mind space.
And so-
No such thing, Luke.
For me.
So exactly.
There's a lot of maxis out there going, see, that's why I hate him.
No such thing.
No.
It's the same Nixon thing.
Get smaller, right?
Tell him to get smaller.
get smaller. So I got smaller. But to answer the question, I think some of it depends on
events. But look, I don't see any reason why I wouldn't want to be at least 25% golden Bitcoin
over the next five years on average aggregate. And I think it's very dependent.
look I think you always want to have some gold I think how you structure that is dependent on
your age because fact bitcoin's way more volatile than gold yep in the last two years
when you adjust when you vol adjust the returns gold is much more attractive that should change
when they print, whenever that is, again.
But that's something I'll be watching for.
If Bitcoin only gives me 50,
every percent gold goes up,
Bitcoin goes up 150 basis points,
that tells me, great, I want to be a little bigger.
But that doesn't tell me go way bigger gold
to get to me where it was.
That just tells me something's changing.
A number of things that could be.
but I think I still really like especially I mean for myself I generally run with this but for the
average investor out there 25 cash 25 gold bitcoin 25 real estate 25 equities and and I think each
of those you know bitcoin I'm over that now golden bitcoin I'm slightly under that cash
i in i think the important thing is i sort of lay out some of these just sort of stream of
the things we've talked about it's not doomer or not doomer right the the optimists you know come
you know the the pessimist complains about the win the optimist expects it to change the realist
changes you know adjust the sales yeah and so it's just that you when you've got if you're
laid out like that the jacob fuger portfolio and 25 25 25 25 it's easier to adjust the sales
um nothing is going to kill you right you're you are from a financial standpoint you make yourself
very hard to kill hyperinflation doesn't kill you hyper deflation doesn't kill you okay if those two
things don't kill you then like you're in a good spot you're in a good spot and and the reason i
lay all that out before, some of which is depressing, is you don't hear about this stuff a lot.
I learned 30 years ago in this business, if you talk about the same stuff that everybody else
talks about, your kids aren't going to eat. It's a fact. I've been on a straight commission my
whole career. If I was the 30th guy calling a big hedge fund in New York to tell them about
target earnings in 1998, my kids would have starved to death. My kids are never going to
starve to death. So it's important to look at things differently than everybody else. And I do
that, I think most of the time, and at least a lot of the time. And so some of this stuff might
be depressing, but it also is happening. It's also reality. And you can ignore reality, but you can't
ignore the consequences of ignoring reality. And there's such a wide array of things that could
happen, it ties back to the allocation of like, okay, where do I want to be? Look, like 45% Bitcoin,
like for me, that's a lot. Like I'm a 51-year-old man. You don't want to hear mine.
You're a younger man than me. So you're younger. And the other thing too is understanding. You
understand Bitcoin better than me. Like if I, position sizing is
One of the things that a critical input is your understanding of it I understand it well enough Like you could have a thousand people sitting in this seat that I would dare not talk about Bitcoin
with because they, they've forgotten more than I know. And it's probably more than a thousand.
And I'm okay with that. That's ultimately just a position sizing thing, right? That is a,
I'm at 45%. I'm up big. Okay. I, I'm going to get smaller. I either need to learn a lot more
or I need to get smaller.
And if I need to learn a lot more,
I got to go all Bitcoin all the time.
And I didn't want to do that.
Not for any reason,
other than it's not where my interests are.
And that's, so it's just, it's just a decision.
So yeah, that's what I mean about like,
like some of it's your age, right?
Like you get older, you can't take the vol
or you don't want to take the vol.
Some of it's your understanding.
Some, some of it's your like,
some of you get people here
and I'd be happy to have debates with those people.
They'd look at some of the things I'm looking at
and like, well, I interpret what you're seeing
as this or that.
And that's fair.
Like there's two ways of looking at a lot of the things I'm describing.
We'll see.
That's what markets are supposed to do ultimately, right?
Is who's right, who's wrong, or who's review of what's happening more accurate or not relative
to what was expected, which is the other thing, right?
Where are expectations, right?
And that's pretty easy to tell in the Bitcoin community.
Yes, 100%.
I think the thing we probably both agree on is zero is the wrong percentage.
zero is the wrong percentage. And like, someone asked me like, when you sold, did you know you
were going to be right? I'm like, yeah, they're like, how I said, because one of the advantages
of having a big X account is having a thousand randos get on and mother F you all day, every day
when it goes public that you sold. This is like, if that's the reaction, knowing what I think I know,
I'm going to be fine. I'm not going to, I'm not going to have to buy it back at, you know,
whatever. Now, sentiment is changing quite a bit, right? We got sailors selling Bitcoin. We got a
lot of Bitcoin treasury companies being forced to sell. These things get me interested. There's a
lot of bomb signals right now. Yes. This is where, this is where I, you know, like there's not blood
in the water, but there's, you know, there's a few split lips. Yep. And okay. Now I'm, that's why
I say I might be being too cute. Like we might sit down and have another conversation, you know,
whatever, and six, 12 months and, you know, Luke, you got too cute. I'd be like, that's okay. Like,
Well, it seems certain you're not going to buy back higher.
It depends on events.
That's the thing.
One of my mentors, a long time ago, he said,
Luke, I've never seen someone change their mind as fast as you.
I go back to when I had already for a long time.
I've owned Bitcoin since 2013.
A little bit, not nearly enough.
I know.
And in 2020, I ran up 2017, crashed back down.
It's like, okay, right?
They launched futures.
And I was like, I mean, you can find my old tweets.
It was like, hey, having been experienced in gold, Bitcoiners, I know you're excited about futures being launched, but this isn't a good thing for you guys.
I was so excited then.
And that was like marked the absolute top pretty much.
And sure enough, it was like, right?
So, and I thought, okay, that was it.
It was a bubble.
I've seen this before.
I saw this with gold and 11.
and I sell this NASDAQ I sell this that's all right and then 20 2019 picks up whatever okay
2020 it takes off back through 20,000 like a hot knife through butter and I look at my wife I go
this is this wasn't a bubble this is a currency thing we are like I'm totally wrong
and I am buying everything back and then some even though I'd sold a bunch at you know whatever
i had bought and traded around right so i'd bought a bunch and sold a bunch like 10 12
probably sold something 14 or something whatever yeah and i was like i'm wrong and i bought way
more than i ever did 20 21 24 26 30 and you know i sold a bunch really well at like 52
and i started buying some back at like 60 50 40 30 and i bought a ton under 30 and a ton under 20
so like i if if if if facts change i will change my mind so fast so fast uh facts as i interpret
them they should be facts but you know the the the fundamentals as i see them and something and i say
that because there's there's sentiment there's what have you right and there's multi this is a
multi-pronged thing look if sentiment completely gets wiped out if and there's a lot of different
ways that can happen great price price there's numbers in my mind where if it were traded there
i would be a big buyer almost without question um you know with the asterisk of like hey as long as
it wasn't like you know some crazy you know of course quantum all yeah yeah quantum has broken
all of it right then then okay that is but i don't think it's gonna happen um anyway that's that's
i'm trying to just kind of share the thought process of just like this is what's going on up
here basically every waking moment of my life.
I love it.
I'm excited.
you buy back, Luke. We've talked about a lot there. Is there anything we didn't talk about
that you wanted to cover? No, I think that covers it.
It's been awesome. Thank you for having me. You made me come out to Cleveland and it's been nice.
I've not been here very long, but it's been good. Thank you for insisting. It's a beautiful place.
It is the nice weather capital of the world for about another 12 hours.
No, it's beautiful this time of year. Cleveland's great May to October.
and then after October
we get into the winter stuff
and there's, you know,
if you said, hey, can I come see you in February?
I'd be like, no, don't, don't.
Don't do it to yourself.
Don't.
It's, yeah, you just, it's like nuclear winter.
It's great.
It's cold.
No fun.
Well, I appreciate you.
Thank you for doing this.
Always better to do it in person.
Oh, thanks.
Thanks for having me.
All right.
I'll put the newsletter in the show notes.
It's one of the ones that I'd never miss.
Thank you.
I appreciate you, Luke.
Thank you.
Absolutely.
Thank you.