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The only way the Fed can get the U.S. out of fiscal dominance is if they cut rates to

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zero and they partner with Treasury.

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So Treasury issues all the bond issuance at the front end at zero rates, which is kissing

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cousin of printing money to finance a deficit.

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The AI thing unwinds.

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You're going to have a very big stock market problem.

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You're going to have a recession.

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You're going to have a rise in unemployment.

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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.

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Fundamentally, I think what's happening with the fiscal situation is unfixable by anything other than significant devaluation.

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Warsh isn't going to cut aggressively without a crisis.

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And I think the crisis could show up as Warsh raising 25 basis points.

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Look, if you have a long term view, you're probably going to be buying Bitcoin now.

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I, you know, like I said, I'm probably being too cute.

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I think I can get it cheaper.

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Right, Luke, I've got so much I want to get into with you today.

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Beautiful.

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I think we should start,

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and we talked about this last time we're on the show,

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on Bitcoin, because you sold all your Bitcoin.

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Almost all.

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Almost all your Bitcoin.

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Around 90 something thousand, was it?

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96, 95, 96.

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And again, I told you this last time,

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but I thought you'd made a mistake.

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You clearly hadn't.

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But the question is, when you buy back,

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Like that's how you make this trade a full, like a good trade.

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And how are you looking at that now?

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Sure.

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I am looking at it.

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So strategically, I want to buy it back.

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I still think it's an energy link neutral reserve asset for the people and very attractive

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because I still fundamentally think what's happening with the fiscal situation is unfixable

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by anything other than significant devaluation of the currency.

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and really all fiat currencies, to be clear. Tactically, I'm getting closer, but I still

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haven't bought it back yet. And the reason is fewfold. Number one, you've got the Fed.

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And right now, if the Fed starts cutting rates aggressively, I'm going to have to chase it,

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I think yeah to be to be blunt so I but I that then feeds into where why I haven't started buying

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it back very aggressively at any yet which is Warsh seems like he will eventually do what

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Powell and Yellen and Bernanke did but he needs a crisis to do it he needs political cover

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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,

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but others in terms of the valuations, the rate of growth are slowing. That's an issue for me as

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it relates to Bitcoin. Because I think, A, I think Warsh isn't going to cut aggressively without a

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crisis. And I think the crisis could show up as Warsh raising 25 basis points and then Chinese

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competition beginning to raise questions about AI? Because that's the thing. I don't have the

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training, the background, the intellectual chops, to be honest, to have a debate about

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is the Chinese low-cost open AI model better? Is it going to overtake the US models? Is it not?

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I don't. But I have 30 years of experience in markets and investing. And what I can tell you

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is the US AI segment broadly is a debt financed and be valued like there are no issues and can be

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no issues. And the very fact that we can actually have serious people who do have the intellectual

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chops to debate US versus Chinese AI, et cetera, tells us the Chinese stuff's an issue. Maybe

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technically it's not an issue immediately today, but the very fact there's a debate is there's an

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issue. And this segment can't have issues. And it's valued as if it's never going to have any

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issues. So this is an issue in a sector that's valued like it can't have issues, will never have

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issues. And thus far this year, part of the reason I sold most of my Bitcoin was it was increasingly

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trading like a tech stock and tech was making me increasingly nervous. And fast forward today,

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I've got a Fed chair who thinks he thinks that Powell, he could have done Powell's job better.

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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

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away and take the pain and put the country in a better place. I've been very vocal about that.

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Warsh thinks he overinflated. And so to my eyes, Warsh thinks he can be inflation tough guy.

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He can raise rates 25 basis points or more. And I don't have a strong view for this week, but

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And I think that could very well kick the legs out of what's happening in AI.

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And when I then look at that as relative to Bitcoin, what I see this year is Bitcoin has

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led tech. So it started down way more than tech in the first half of the year. In the last two,

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three, maybe four weeks, Bitcoin's actually outperformed tech on the downside. In other

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words, tech has kind of caught up a bit after running away from Bitcoin a little bit, mainly

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by Bitcoin falling.

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But I'm still noticing on days where tech's down, Bitcoin's down.

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On days where tech's up, Bitcoin's up.

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And so I just look at this.

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I might be being too cute by half.

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My view of it is that I think Warsh has put himself in a position where he has to tighten

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to try to establish his inflation-fighting credentials.

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I think he needs, and by the way, he let himself an out last week to Congress.

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He's like, well, if we have a crisis, then we need to make sure to, what did he say,

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fix market prices or make sure to establish a fair market price.

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Which means print money.

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Which means print money, right?

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So he's the same.

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You're going to see from me at some point, spoiler alert, sometime in the next six to

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12 months, you're going to get the Dennis Green meme from me on X, right?

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They are who we thought they were.

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So he is what we thought he is.

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But for now, I think he's going to try to tighten.

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I think he thinks he could use a political cover to do some of the things he wants to do.

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And I think Bitcoin will go lower if tech gets hit, which is a long-winded way of saying that.

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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.

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for if you believe that or not.

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Yeah, so much to unpack there.

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Just quickly before we get into it,

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your long-term thesis on Bitcoin hasn't changed yet.

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No.

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Good.

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No, I want to be long energy in dollar terms

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at the end of the day.

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And I want, right?

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So I've owned solar panels.

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I just bought new solar panels.

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I bought a lithium ion battery pack.

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That's long energy in dollar terms.

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That's like a bond whose coupon is going to go up over time.

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And I look at Bitcoin as energy.

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It's essentially a tie.

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A lot of the things that Saylor and others have said about it as it relates to energy,

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a neutral reserve asset with an energy tie.

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I like that.

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Gold is a neutral reserve asset with an energy tie.

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That's what I want to be long.

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And there's a lot of different ways you can do that.

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Companies take energy, convert it into things,

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et cetera, et cetera.

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So these aren't the only two ways,

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but as far as a currency goes,

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I want my currency to have an energy tie.

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Yeah, okay, good.

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So let's get into the Fed stuff then,

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because I think Walsh has said a lot of interesting things.

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He probably came out more hawkish

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than I think everyone imagined.

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And I've kind of always thought that that's just

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because he doesn't want to look like a puppet to Trump

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and just that he's going to do whatever he says.

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But you said he wants to be an inflation tough guy.

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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?

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He probably has. He probably has in the same way that his statement last week of, well,

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I want to fight inflation unless there's a crisis, in which case,

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then I'll do whatever it takes to. And I think that ultimately that I'll do whatever it takes

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is to make sure there's fair prices or whatever, which is he's referring to the treasury market.

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Yeah. And so I go, we've been saying for ever since Powell really coined the phrase for us,

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the treasury market functioning since 2021, the Fed's shadow third mandate really since 2019

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with the repo rate spike. But the Fed's shadow third mandate has been treasury market functioning.

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Nothing can interfere with that. And if they have to inflate, then they inflate. If they have to,

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you know, well, cutting, cutting jobs, that doesn't really help with treasury market functioning. So

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So it's really given a choice between inflation and treasury market functioning, the Fed has

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100% of the time in the last seven years chosen inflation.

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And I think he's going to be the same thing.

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If you hold Bitcoin long enough, there's going to come a time when you need some dollars.

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It might be a tax bill a business expense life getting in the way but whatever it is it might come at a time when you don want to sell your Bitcoin That where Ledin comes in Ledin lets you borrow against your Bitcoin instead with tiered rates that go as low as 9 So you don have to sell your stack if you don want to

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and have originated over $11 billion in loans.

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145
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in the same way that you do with Bitcoin.

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156
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00:13:07,766 --> 00:13:10,666
How do you sort of weigh up how much the Fed matters in these decisions?

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Because like Lynn Alden, who's been on the show a ton of times,

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always talks about how we're just in fiscal dominance

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and the Fed is becoming less and less impactful.

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How do you weigh those two things up?

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I think I agree with her 100%.

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The US is in fiscal dominance,

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which then significantly reduces the Fed's ability to adjust.

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The only way the Fed can get the U.S. out of fiscal dominance is if they cut rates to zero

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and they partner with Treasury.

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So Treasury issues all the bond issuance at the front end at zero rates,

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which is kissing cousin of printing money to finance a deficit, then the Fed would have a

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high degree of influence. Because basically, if they did QE through that, that would basically,

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if you have the Fed buy the bonds by printing cash at zero while the government spends the money,

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00:14:20,346 --> 00:14:28,346
the U.S. will get out of fiscal dominance. Now, astute listeners will say that's literally

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00:14:28,346 --> 00:14:33,106
exactly what the Reichsbank did after World War I. You're exactly right.

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And it would be really tough because some of your obligations, like the entitlement portion of all

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00:14:39,426 --> 00:14:43,886
of this, is cost adjusting. So the more you do that, the more cost of care is going to go up,

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the more you have to print. And so the Fed could get out of fiscal dominance by doing that for a

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period of time. And the proof of that is in what happened from 2020 to 2022. If we look at

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COVID happened, deficit blows out, Fed's rates start going up in the worst recession,

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worst crisis in forever. That had never happened before. Fed comes in, starts buying, what was it,

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$600 billion a month in treasury bonds, I think it was off the top of my head.

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00:15:14,486 --> 00:15:18,486
And then the government does stimmies, right?

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So you are doing fiscal stimulus.

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You're handing money to people and being financed, money financed, tax cut, as Bernanke called it.

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This was true helicopter money.

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And what happened?

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00:15:29,326 --> 00:15:46,548
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

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money or they were going to default. They didn't have the tax receipts to cover interest and

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entitlements. So they printed. Inflation takes off. Rates don't because the Fed's buying it all,

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essentially helped by the banks. And what happens at true interest expense? It goes from 120%

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down to 85% by the end of 21. The dollar goes from whatever, 103, 105, wherever it was, down to

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81, if I recall correctly. So the Fed can absolutely do something about fiscal dominance.

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Nobody likes to hear what it is, right? There's nothing a brief period of extremely high inflation

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and currency to value can't get you out of.

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And does it need to do that?

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Yes.

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It's ultimately going to have to do that.

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So I remember you coming on the show a long time ago

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when Peter was still doing it.

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And you talking about a short period of very high inflation,

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talking maybe even triple digit inflation.

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That's what would work.

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I don't know.

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It's the more they delay,

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that's what's going to have to happen.

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But it seems crazy to think about.

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Do you think that could realistically happen?

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What probability would you put on that happening

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at these, you know, in the next 20 years?

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Well, let's take the alternatives.

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You have to slash defense spending by, I don't know, probably, let's just say it's

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three, 4% of GDP.

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Let's just say it's 3% of GDP.

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That's a trillion dollars.

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So we need to cut defense, which was like a trillion one last year by 90%.

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Never happening.

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Never happening.

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And by the way, it has to happen.

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And even if you did it, you take 3% of GDP out of a country that's growing, what, one

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and a half real right now?

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You're in recession.

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The deficit's actually going to rise 600 to 1,000 basis points of GDP in any recession.

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You're done.

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So, okay, take that off the table.

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Next option.

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Boomers.

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Trillion dollars out of, so they got to cut Medicare, Medicaid by 30 to 35%.

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percent immediately permanently forever without a recession without boomers then going oh well

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we also have 70 trillion dollars in stocks and bonds and real estate we'll just start selling

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that well what happens then stocks market is the economy consumer via consumer spending link

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receipts boom recession same problem you if you could come up with some magic thing where

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like the sickest half of the boomers all died by next Tuesday, that would fix the problem.

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I'm not hoping for that. But again, let's just, this lays out. And option number four is

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cut rates to zero, run the stimulus, inflate the heck out of it for six months, and that's it.

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Or the equivalent, which is you could do, if you let gold really, really rip,

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Yeah. And 20,000, 30,000 ounce, something like that. You basically just take the yuan price of

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30,000 and move it over to America, $30,000, and then have Besant instruct Warsh to revalue the

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gold, creates a TGA deposit, buy back a ton of the debt. And now you're out of fiscal dominance.

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You can get out fiscal dominance that way without, you wouldn't have 100% inflation,

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triple digit inflation. And you would have significant inflation, but you would then

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have taken the debt to GDP from 120 to 80, 60, 50, depending on the gold price. And now the Fed's

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right back in the game. Now they can actually raise rates without adding to inflation because

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everyone's getting more interest on their bond portfolio and without pushing interest over

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receipts. And so I guess the odds, when you look at it through those options, the first three are

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not possible. And then you're left with either sort of a brief period of really high, even triple

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digit inflation or some sort of gimmick. It's basically the platinum coin, except it's provided

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for in the financial accounting manual for Federal Reserve Banks. That's clearly the best option.

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And now there's probably a sixth option, which is, hey, if we can go to war and, you know,

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that doesn't cost us a lot and happens really fast and doesn't kill many Americans and tips over

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Russia and China at the same time, and we get control of their resource and factories,

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then yeah, that's not going to happen either, right? So there's another option.

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So the only ways out are option A or option B, really high inflation for a brief period,

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or run up gold, buy down the debt, and get the Fed back in the game to get the US,

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which is just another way of devalue on the dollar. But when you see the pieces that

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that Bessent and Walsh and Trump

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are putting into place.

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Is that what you think they're doing?

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I don't know.

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I think strategically,

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this administration has a pretty good idea

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of what it's doing.

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I think tactically, I think they are just like making a dog's breakfast of everything

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because they're getting pulled in a lot of different directions.

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And what I say strategically, this commentary by Warsh about Hamiltonian economics, excuse

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me, by Besson about Hamiltonian economics, I thought was super interesting for a number

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of reasons.

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What does that mean?

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Hamiltonian economics is essentially high trade barriers, capital controls, subtle deficits

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in gold.

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Okay.

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And that's an oversimplification, but not that much.

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It's essentially we need to produce a lot more of our own stuff based on Alexander Hamilton,

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of course.

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And Besson gave a speech at the New York Economic Club about five weeks ago, June 23rd.

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And just in case people thought, which is sort of all of the bigwigs, there was a 250th

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America 250 gala, right?

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So anyone who was anyone from a policy standpoint is there.

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And he rolls this out.

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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.

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Trump's economic policies or Hamilton drives, Hamiltonian economics drive Trump's statecraft, something like that.

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You can find it.

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That's what he believes.

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Go back to before this whole Iran debacle.

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And U.S. Trade Representative Jamison Greer gave a speech at Davos.

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this year. He flat out said America is moving to Hamiltonian economics. He said that the

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Bruton brought up Bretton Woods, brought up that probably would have been a better idea if we had

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had a neutral reserve currency, as Keynes advised. But because we were running surpluses at the time,

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we decided we didn't want that. And everyone else was flat on their back. So they had no say.

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So that's interesting, especially with either the Times or the Journal saying that Greer is driving

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much more of the Trump administration's economic policy. They just wrote that two, three, four weeks

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ago. You go back to Trump sometime last year, I believe it was January. He said, I want to take

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us back to when America was richer and more powerful than ever before. Something Trump said

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over and over. Goes on to say 1870 to 1913, U.S. had the highest tariffs it's ever had,

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protecting our industry. And he said, we were taxing foreigners to pay for America's growth

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rather than taxing Americans to pay for foreigners' growth. Hamiltonian economics.

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And Trump's famous for that, right? He gets the concept. He talks about it differently in his own

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unique way. J.D. Vance, February last year in Europe, referred to the stupid Washington

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consensus that de-industrialized America as being over, done with. And so the chapter and verse,

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you've got Hamiltonian economics, Hamiltonian. So what does that imply? Higher tariffs,

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protecting American industry, reshoring, inflationary, net settling gold, right? What's

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been America's biggest export eight of the last 10 months? Gold. Bigger than jet engines, bigger

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than oil, bigger than gas, bigger than pharmaceutical preparations. So it seems like

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that leaves me really encouraged because that's a really good thing for America. It's terrible

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for bondholders. So what? Who holds the bonds? The boomers. Guess what? They have underpaid for

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everything their whole lives. Everything has been slanted to help them. And I have boomer parents,

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I love them dearly. I love the boomers of the generation, most of them. And the reality is,

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my children need a chance. My children's generation, you need to do, and that is only

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fair. Yes, they paid into social security and they are using way more than they ever paid in.

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They are using way more in Medicare and Medicaid than they ever paid in.

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You can't raise taxes on them.

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How do you get them to pay?

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You load them up with the bonds, and then you devalue the crap out of them by implementing

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Hamiltonian economics, which is going to send inflation up.

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It's going to send wages up for the younger generation, and so on and so forth.

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That's the encouraging thing.

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That's what I think the economic plan is.

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Now, there have been a lot of distractions so far here to date.

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There have.

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I mean, I don't know how many times the Iran war has stopped and started.

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But on the Hamiltonian economics thing, it sounds like, and I could be oversimplifying

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this, it's essentially going from the US being a hyper-financialized economy to being an

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industrial economy again.

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And I've read enough of your work that you're kind of bearish on the idea of reshoring actually

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working.

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So how does that play out?

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I wouldn't say I'm bearish on the idea of it actually working.

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I'm bearish on this idea that we get sold by so many people that it's going to be fast

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and easy.

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Okay.

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and cheap and buy bonds because America is going to reshore like buy bonds are you high like no

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no I just have an interest in my my clients not being the ones who get fleeced yeah as I do think

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we are moving inexorably in that direction right like the the you know Martin Luther King the arc

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of the arc of society over time moves towards justice the arc of our economic policy is moving

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toward reshoring and I say that because Trump started with the trade war Biden basically ran

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you know Trump economic policy except as a doddering old man instead of as sort of a bombastic leader

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So we're moving toward reshoring.

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All I'm saying is, don't piss down my back and tell me it's raining and buy bonds because

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America is coming back as industrial power, and we're going to be producing rare earths

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in two years and refining them.

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And we're going to be making all this stuff in two years.

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I think I wrote last week.

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there's an old saw in producing things right in manufacturing you can have it fast cheap and done

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well pick two well we need it done fast because we're losing to china yeah or at the very least

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our margin of in certain areas we are losing but in some critical ones our margin of winning is

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shrinking more than leaves us feeling comfortable and we need it done cheaply because otherwise the

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bond market blows up. Well, we have to have it done well. There's no point in doing it at all

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because we'll still lose three. Right. So we have a trilemma. We need it done fast, well, and cheap.

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And it's not going to be done that way. It's not, especially when you look at sort of the

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45 years of de-industrializing. We don't have the labor. We don't have the engineering. We don't

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have any of these things. We might, and AI could certainly help that in some ways. And it's going

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to cost a lot of money. And so that to me, it's less that I'm bearish on that. And I'm bullish

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on the ability to do it. I am bearish on the ability to do it fast and cheap. We're going to

379
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do it. It's going to take longer. We think it's going to be more expensive. Stay the heck away

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from long-term bonds because the real value of them, if you think America is going to compete,

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let alone win, let alone get back to making stuff, you can't be anywhere near long-term bonds. They're

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going to get destroyed on a real basis. They have to. So if this is going to take a long time,

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is the next few years, maybe that's up to a decade. I don't know your sort of timeline,

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but is that basically the most chaotic time we've ever gone into in terms of the economy?

385
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It's going to be right up there. It's going to be right up there because it's

386
00:28:04,948 --> 00:28:14,108
it's hard because on some level you need to do some very Chinese things in a society that

387
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knows it needs to do Chinese but is afraid to do them because it is you know it's like it's like

388
00:28:21,068 --> 00:28:28,328
it's like asking a hardcore Catholic to be Protestant and and realistically there's not

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that big a difference between the two you know to the I mean certainly like you know the Buddhist

390
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or the Muslim would say what's the difference I guess but if you're a hardcore believer and

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that's what you have. You've got the free market people and they think this is all a free market,

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this and that, and we are not like China. And then there's people like, we need to build as

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fast as we can and whatever it takes. And that fight is happening as we speak all the time.

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What's the Chinese thing that America need to do?

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It's ironic because actually Chinese did the Hamiltonian thing, right? Which is,

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I wrote about this this week. Hamilton encouraged everyone to steal intellectual property from the

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Brits and the Europeans and bring it here. And they put up high tariffs and all that. And guess

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what the Chinese have done, right? They take an IP and same thing. And then they improve upon it

399
00:29:18,668 --> 00:29:26,648
and what have you. Same thing. It was the same playbook. So yeah, what we need to do is essentially

400
00:29:26,648 --> 00:29:33,908
close the capital account except for gold, like the Chinese. The Chinese capital account is open

401
00:29:33,908 --> 00:29:40,348
on an unlimited basis through gold. But think about what that means, right? I said this the

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00:29:40,348 --> 00:29:48,348
other day. Everything is downstream of this capital account. Raja, he and I found each other on X. He

403
00:29:48,348 --> 00:29:54,248
had great points. I refuse. And this is a point that Brad Setzer and Michael Pettis in particular

404
00:29:54,248 --> 00:29:58,048
make over and over and over. Essentially, America is the victim of our open capital account

405
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from the Chinese. And Raj was like, I refuse to say the most powerful country in the world with

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an open capital account and the reserve currency is a victim because it can't control its own

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capital account. And he's exactly right. These are all choices. They're all trade-offs. In other

408
00:30:15,328 --> 00:30:20,388
words, if you don't like what the Chinese are doing, all you got to do is close your capital

409
00:30:20,388 --> 00:30:25,868
account. What does that mean, Luke? That means the whole world stops recycling their money into

410
00:30:25,868 --> 00:30:33,208
stocks and bonds. They have to go to gold. There's precedent for this. No less a U.S. eminent

411
00:30:33,208 --> 00:30:41,368
policymaker than Henry Kissinger in the 70s was discussing the same problem. They had a different

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version of the same problem. In the 70s, because oil had risen up so much because we had devalued

413
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the dollar and gone off gold, you had all these petrodollars, right? And they were being recycled

414
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Well, OPEC Arabs are no dummies.

415
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They're in there buying up companies

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00:30:56,088 --> 00:30:58,088
of these valuable properties left and right.

417
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It's all free, right?

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I'd cheap money.

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00:31:00,088 --> 00:31:03,088
And so they had a problem of Arab,

420
00:31:03,088 --> 00:31:04,088
this is Kissinger's words, not mine,

421
00:31:04,088 --> 00:31:25,984
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

422
00:31:27,084 --> 00:31:34,664
So basically, it protects our industry from being controlled then by Arabs, now by Chinese.

423
00:31:34,664 --> 00:31:41,824
they get protected because they have absolute national control their words not mine of their

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00:31:41,824 --> 00:31:47,544
reserves in physical gold in their borders and it's inflation protected their words not mine

425
00:31:47,544 --> 00:31:55,984
same problem same problem and so that's why i say like oh the chinese no they're just playing the

426
00:31:55,984 --> 00:32:02,404
game that's been dealt to them and the game is buy up american industry with the dollars

427
00:32:02,404 --> 00:32:05,744
Americans don't like it. Close your capital account. Why won't we do that? What would happen

428
00:32:05,744 --> 00:32:10,684
to stocks if you came out and said, everybody but Americans can't buy stocks anymore, can't buy U.S.

429
00:32:10,724 --> 00:32:16,584
bonds anymore. They got to do it through gold. The gold to Dow ratio would go to one like it did in

430
00:32:16,584 --> 00:32:22,444
1980, like it did in 1933. And why do they care so much about saving? I understand the bond market,

431
00:32:22,504 --> 00:32:26,464
but why do they care so much about saving the stock market? Well, now because it's the economy,

432
00:32:26,464 --> 00:32:31,964
but also it's their source of wealth, right? This is ultimately a Game of Thrones. This is about

433
00:32:31,964 --> 00:32:39,884
corporate America loved China. They still love China. You even saw it last week. So we're in

434
00:32:39,884 --> 00:32:47,524
the midst of all this. So we've gotten to this point. Micron stock is soaring because of the AI

435
00:32:47,524 --> 00:32:52,224
boom, the demand for memory. Prices of memory are going through the roof. What's Apple doing?

436
00:32:52,784 --> 00:32:56,424
Buy memory, I imagine. They are. But this week in Washington Post, they come out,

437
00:32:56,424 --> 00:33:00,724
they are actively lobbying Trump to let them buy Chinese memory.

438
00:33:01,924 --> 00:33:05,084
Because the price of memory is going up to an American company.

439
00:33:05,264 --> 00:33:08,704
God forbid an American company is making a lot of money in memory.

440
00:33:09,044 --> 00:33:12,864
And if they can buy from the Chinese, they can knock prices down for the American.

441
00:33:13,784 --> 00:33:15,824
And they can keep Apple's margins okay.

442
00:33:19,044 --> 00:33:20,604
Whose side is Apple on?

443
00:33:21,644 --> 00:33:24,024
But it's an American company, ostensibly.

444
00:33:24,024 --> 00:33:25,564
But this is the fight.

445
00:33:26,424 --> 00:33:30,664
It is ultimately corporate elites have,

446
00:33:30,984 --> 00:33:33,184
what percentage of CEOs and execs

447
00:33:33,184 --> 00:33:34,864
have their money in the stock, you think?

448
00:33:34,964 --> 00:33:35,604
Their stock.

449
00:33:35,904 --> 00:33:36,604
It's a big number.

450
00:33:36,724 --> 00:33:37,004
Everyone.

451
00:33:37,204 --> 00:33:38,184
It's a big number.

452
00:33:38,284 --> 00:33:38,444
Yeah.

453
00:33:38,984 --> 00:33:42,464
So what happens the day you say foreign money's out?

454
00:33:42,844 --> 00:33:44,004
We're closing the capital account.

455
00:33:44,384 --> 00:33:45,304
Do you think they want that?

456
00:33:46,284 --> 00:33:47,384
Do you think they want their margins?

457
00:33:47,604 --> 00:33:49,684
Corporate profit margins are at all-time highs.

458
00:33:49,824 --> 00:33:51,904
Corporate profit margins would come down initially.

459
00:33:53,704 --> 00:33:55,204
Wages would come up initially.

460
00:33:56,424 --> 00:33:59,964
And then ultimately, you begin to produce more of your own consumption.

461
00:34:00,104 --> 00:34:02,584
Now you build a consumer base that's in America, right?

462
00:34:02,984 --> 00:34:04,064
That's not based on credit.

463
00:34:04,284 --> 00:34:05,844
Oh, by the way, you're taking away the need for credit.

464
00:34:05,904 --> 00:34:06,704
You're bolstering wages.

465
00:34:06,864 --> 00:34:07,864
You're bolstering inflation.

466
00:34:08,324 --> 00:34:09,184
Banks don't want that.

467
00:34:09,384 --> 00:34:10,564
Bond market doesn't want that, right?

468
00:34:10,564 --> 00:34:15,364
So what you end up with is Wall Street and multinational corporations hate that idea.

469
00:34:16,204 --> 00:34:20,464
So many of these questions come down to like what they should do and then what they're

470
00:34:20,464 --> 00:34:21,524
actually going to be able to do.

471
00:34:21,624 --> 00:34:23,084
Is this another thing that they should do?

472
00:34:23,464 --> 00:34:24,224
Well, forget about should.

473
00:34:24,224 --> 00:34:28,104
This is so similar to pre-Civil War.

474
00:34:28,724 --> 00:34:31,884
Do you know 60% of the wealth in this country was in the South before the Civil War?

475
00:34:32,044 --> 00:34:32,384
I didn't.

476
00:34:32,704 --> 00:34:33,084
It was.

477
00:34:33,584 --> 00:34:34,904
They were the original globalists.

478
00:34:34,904 --> 00:34:37,384
They wanted open trade, no tariffs.

479
00:34:37,524 --> 00:34:37,724
Why?

480
00:34:39,244 --> 00:34:40,124
Slave labor.

481
00:34:42,444 --> 00:34:48,144
And they're selling cotton and tobacco and crops to Europe.

482
00:34:48,144 --> 00:35:01,324
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.

483
00:35:02,044 --> 00:35:06,184
And their fledgling industries couldn't produce without tariff protection.

484
00:35:08,204 --> 00:35:12,844
Well, we need a way to, you know, globalists against the nationalists.

485
00:35:12,844 --> 00:35:19,064
Well, no one's going to go die for economics, so we need a useful social issue.

486
00:35:19,184 --> 00:35:25,744
Any useful social issues we could highlight in the 1860s to get 600,000 Americans to die?

487
00:35:26,404 --> 00:35:27,684
Oh, slavery.

488
00:35:29,844 --> 00:35:32,124
The same fight's happening right now.

489
00:35:32,484 --> 00:35:33,964
Nationalist, globalist.

490
00:35:35,424 --> 00:35:41,004
And it's interesting because the divisiveness of this country, Peter Turchin, who studies these things,

491
00:35:41,004 --> 00:35:49,484
said that in his book End Times, you've got elite overproduction and wealth inequality

492
00:35:49,484 --> 00:35:52,564
are your two drivers to domestic political instability.

493
00:35:53,124 --> 00:35:55,404
They're the highest now in America since 1855.

494
00:35:56,404 --> 00:36:00,124
So should is a political question.

495
00:36:01,564 --> 00:36:03,884
What will they do?

496
00:36:05,204 --> 00:36:06,124
I don't know.

497
00:36:06,684 --> 00:36:07,384
I don't know.

498
00:36:07,384 --> 00:36:11,124
And it's a highly contentious political issue.

499
00:36:12,744 --> 00:36:15,944
As an American, I think what's best for America

500
00:36:15,944 --> 00:36:35,580
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

501
00:36:35,580 --> 00:36:42,980
to control the capital account, redirect some of those flows away from the Plutarchs

502
00:36:42,980 --> 00:36:44,720
into domestic production.

503
00:36:46,220 --> 00:36:47,400
That makes more sense.

504
00:36:47,560 --> 00:36:48,340
What should they do?

505
00:36:49,440 --> 00:36:50,820
I'm not in government.

506
00:36:50,820 --> 00:36:53,620
You wouldn't reuse a Bitcoin address.

507
00:36:53,660 --> 00:36:56,620
So why does your phone broadcast the same identifier for life?

508
00:36:56,660 --> 00:37:02,220
Every SIM has a static ID and carriers, ad networks and bad actors all use it to track you.

509
00:37:02,260 --> 00:37:05,780
The big carriers have been caught selling that data over and over again.

510
00:37:05,820 --> 00:37:08,620
Cape is America's privacy first mobile carrier.

511
00:37:08,660 --> 00:37:12,420
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512
00:37:12,460 --> 00:37:15,220
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513
00:37:15,260 --> 00:37:17,020
And SIM swaps are off the table.

514
00:37:17,060 --> 00:37:20,620
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515
00:37:20,620 --> 00:37:25,720
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516
00:37:26,120 --> 00:37:29,880
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517
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518
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519
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520
00:37:44,680 --> 00:37:49,080
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521
00:37:49,080 --> 00:37:50,720
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522
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523
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524
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525
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526
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527
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528
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529
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530
00:38:06,200 --> 00:38:08,040
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531
00:38:08,040 --> 00:38:11,040
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532
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533
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534
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535
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536
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537
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538
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539
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540
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541
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542
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543
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544
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545
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546
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547
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548
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549
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550
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551
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552
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553
00:39:17,040 --> 00:39:20,400
And like the wealth inequality in America, I travel a lot.

554
00:39:20,760 --> 00:39:24,220
And in sort of the Western world, I think it's probably the highest that I see.

555
00:39:24,640 --> 00:39:30,060
And it seems like everything that they are doing and going to do is only going to create a bigger divide.

556
00:39:31,680 --> 00:39:34,060
That is only going to lead down a really bad path.

557
00:39:34,680 --> 00:39:40,720
And it's hard because when we talk about these topics, it's very hard to be optimistic about the future.

558
00:39:42,020 --> 00:39:46,540
And I'm a very optimistic person generally, but it just seems like we're going down a really bad path.

559
00:39:47,040 --> 00:39:58,360
these things happen. I mean, at the end of the day, humans are, you know, humans are products

560
00:39:58,360 --> 00:40:03,700
of nature, right? And you go through these cycles of, you know, look, you go around here, you know,

561
00:40:03,700 --> 00:40:06,720
there's this beautiful, we're here recording this here in Cleveland, there's beautiful, we have

562
00:40:06,720 --> 00:40:12,280
metro parks, right? So there's a, literally, it's about a mile wide swath. Most of it has a river

563
00:40:12,280 --> 00:40:15,660
through it, or much of it's on the west side, certainly, actually on the east side, different

564
00:40:15,660 --> 00:40:23,000
River. But you can literally mile wide swath parks, centuries old trees from the from the lake on this

565
00:40:23,000 --> 00:40:29,380
side, all the way around the west side, down south, back up through the east side, up to the lake on

566
00:40:29,380 --> 00:40:36,120
the other side. They call it the emerald necklace. And due to the development of this country or

567
00:40:36,120 --> 00:40:42,900
country of the state, most of the natural predators of deer were killed centuries ago. And so over a

568
00:40:42,900 --> 00:40:48,820
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

569
00:40:48,820 --> 00:40:54,980
like literally everywhere you drive you're trying not to hit a deer why why are there so many deer

570
00:40:54,980 --> 00:41:00,840
take away the natural predators they become victims of their own success they eat up everything and

571
00:41:00,840 --> 00:41:05,200
and now there's way too many deer and then you have a you know deer disease or they eat all the

572
00:41:05,200 --> 00:41:10,220
plants and they start whatever it's natural cycle of nature and i think these economic cycles

573
00:41:10,220 --> 00:41:12,860
unfortunately, we're products of nature as well.

574
00:41:12,860 --> 00:41:14,760
We're victims of our own success.

575
00:41:14,760 --> 00:41:19,520
And I'm optimistic about the future.

576
00:41:19,520 --> 00:41:21,100
I'm just realistic about it as well.

577
00:41:21,100 --> 00:41:23,560
Like where we are, what that implies,

578
00:41:24,500 --> 00:41:26,900
what that possibly implies, what are good things,

579
00:41:26,900 --> 00:41:29,380
what seem to be good moves, bad moves,

580
00:41:29,380 --> 00:41:31,680
what are good ways this can, and then accelerants, right?

581
00:41:31,680 --> 00:41:32,680
There are things that are accelerants.

582
00:41:32,680 --> 00:41:34,940
And I think, you know, technologists would tell you,

583
00:41:34,940 --> 00:41:39,960
oh, well this technology bifurcates the economy into case shapes

584
00:41:39,997 --> 00:41:48,657
anyway. It does. They're right. And that doesn't necessarily change the outcome, right? Like some

585
00:41:48,657 --> 00:41:52,517
of them are saying, well, fine, I'll just buy a bunker or I'll move to New Zealand or whatever.

586
00:41:52,517 --> 00:41:56,717
And I guess that's one way to deal with it, but I think it's a little antisocial, but I get it.

587
00:41:57,997 --> 00:42:05,177
So I don't know. That's sort of a, I don't know. I don't know exactly that that tells us anything

588
00:42:05,177 --> 00:42:10,457
other than I just, I don't think there's any avoiding the natural cycle. Like you can delay

589
00:42:10,457 --> 00:42:16,417
it for a while, but you can't stop it. And so then if you can't stop something, then it's about

590
00:42:16,417 --> 00:42:24,857
preparation and understanding and trying to do what you can in your own little way to get us to

591
00:42:24,857 --> 00:42:29,917
a better outcome that might otherwise have been achieved. Buy Bitcoin and gold and think very

592
00:42:29,917 --> 00:42:34,857
carefully about where you're going to live. AI, like you say, is obviously going to be hugely

593
00:42:34,857 --> 00:42:40,697
instrumental over the next decades. But for now, do you think it's in a bubble? And what kind of

594
00:42:40,697 --> 00:42:46,477
bubble? Because like the obvious most recent examples are like, is this 2001 or is this 2008?

595
00:42:49,337 --> 00:42:50,797
Yes, I think it's a bubble now.

596
00:42:53,817 --> 00:42:56,917
And I think it's going to be a situation where the early bird gets the worm,

597
00:42:56,917 --> 00:43:05,677
but the second mouse gets the cheese. Which is to say, for a long while, myself included,

598
00:43:06,497 --> 00:43:14,437
I didn't really write or talk this way, but it was in my mind. Whether AI was a bubble

599
00:43:14,437 --> 00:43:20,397
and whether the AI companies were a bubble were inextricably linked. In other words, there was only...

600
00:43:22,157 --> 00:43:25,297
And now I think the companies are bubbles, but I don't think the technology is a bubble.

601
00:43:25,297 --> 00:43:27,817
I think we're in the early days of those things separating.

602
00:43:27,997 --> 00:43:31,217
And that's what I mean about the, you know, the early bird gets a worm and the second mouse gets the cheese.

603
00:43:32,477 --> 00:43:34,777
Rails were enormous bubble, railroads.

604
00:43:34,977 --> 00:43:42,897
And they were an enormously productive technology that changed this country and changed every country and are still in use today.

605
00:43:44,937 --> 00:43:47,457
I was at a conference 18 months ago.

606
00:43:47,557 --> 00:43:49,057
There was a guy there who was extremely wealthy.

607
00:43:49,117 --> 00:43:49,557
Nice guy.

608
00:43:50,917 --> 00:43:55,077
He made his money by buying up telecom fiber for pennies on the dollar.

609
00:43:55,297 --> 00:43:57,577
after 02 when it all went bankrupt.

610
00:43:58,257 --> 00:43:59,857
It's all still being used.

611
00:44:00,337 --> 00:44:02,217
The internet, wildly useful.

612
00:44:02,617 --> 00:44:03,597
And we saw that, right?

613
00:44:03,677 --> 00:44:05,517
The Pets.com and all these crappy companies,

614
00:44:05,557 --> 00:44:05,977
they went away.

615
00:44:06,277 --> 00:44:08,117
And the internet is every bit as big

616
00:44:08,117 --> 00:44:08,857
as we thought it would be.

617
00:44:09,597 --> 00:44:11,277
And I think we're in the early days

618
00:44:11,277 --> 00:44:14,457
of that being recognized.

619
00:44:17,897 --> 00:44:19,757
And that's one catalyst of the ball

620
00:44:19,757 --> 00:44:20,837
where there's just this recognition.

621
00:44:21,457 --> 00:44:23,197
But I think that, and that's being recognized,

622
00:44:23,277 --> 00:44:24,557
I think because some of the financing stuff,

623
00:44:24,557 --> 00:44:30,557
some of the same shenanigans that we saw in telecom and Enron and all that, the sort of

624
00:44:30,557 --> 00:44:37,017
circular vendor financing stuff that is being openly discussed and questioned for good reason.

625
00:44:37,517 --> 00:44:44,317
The thing that actually is different this time as it relates to either 2000 or 2008 is

626
00:44:44,317 --> 00:44:49,497
the Chinese are competing. We were talking about this earlier, which is we're having a debate,

627
00:44:49,637 --> 00:44:52,737
are the Chinese better? Are they not? It doesn't matter. They're there. They're only going to get

628
00:44:52,737 --> 00:45:00,597
better. And American technologists don't know what to do because they haven't had to compete

629
00:45:00,597 --> 00:45:05,597
with another country's technology since probably, what, 86, 87 with the Japanese?

630
00:45:06,817 --> 00:45:09,857
A lot of these guys weren't even born yet. If they were, they were in diapers.

631
00:45:12,697 --> 00:45:18,517
And we were talking about before we went live, this is the Rust Belt. Cleveland had four of the

632
00:45:18,517 --> 00:45:24,097
seven richest cities in our, excuse me, Ohio had four of the seven richest cities in America

633
00:45:24,097 --> 00:45:30,397
in the early 60s. Maybe it was in, maybe it wasn't as late as early 50s, but the point stands like in

634
00:45:30,397 --> 00:45:36,197
one human life for the seven wealthiest cities in this entire country, the wealthiest in the history

635
00:45:36,197 --> 00:45:45,577
of the world were in this state. You know how many are now in the top 10? Zero. Zero. Zero as Steve

636
00:45:45,577 --> 00:45:54,197
I know how this can go. I've seen it. I watched it in my lifetime. The tech guys don't get it yet.

637
00:45:55,237 --> 00:45:59,017
The fact that the tech guys are going to Washington and asking for a savior from

638
00:45:59,017 --> 00:46:05,797
China, for protectionism. Not very American.

639
00:46:07,697 --> 00:46:12,637
Well, it isn't. It isn't. It's kind of Hamiltonian, but it's definitely changing the

640
00:46:12,637 --> 00:46:17,297
rules versus before. And there's a different set of rules to that. But, right, there's nothing

641
00:46:17,297 --> 00:46:21,797
more American than Hamilton, right? It's been on Broadway for what? How many years now? What did

642
00:46:21,797 --> 00:46:29,197
he do? Hamilton did what the Chinese have done the last 20 years. It's all one big, you know,

643
00:46:29,217 --> 00:46:32,677
it all happens over and over. It is interesting though, because obviously the news broke a couple

644
00:46:32,677 --> 00:46:38,817
of weeks ago about Kimmy K3 coming out. And like you, I'm not deep in the world of AI, but you see

645
00:46:38,817 --> 00:46:44,037
some of the benchmarks is at least competitive with the biggest frontier labs and a fraction

646
00:46:44,037 --> 00:46:57,733
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

647
00:46:57,733 --> 00:47:02,933
why would the US save them? Because otherwise, I want to say this so everybody hears it,

648
00:47:03,653 --> 00:47:07,333
because if they don't, the whole system is at risk of coming unwound.

649
00:47:08,853 --> 00:47:14,133
There was a great sub stack. If you haven't read it yet, and you'll have seen it from my work.

650
00:47:14,133 --> 00:47:19,273
I don't know who the guy is. Groundbreaker is the name of the sub stack. Go read it. It was

651
00:47:19,273 --> 00:47:26,173
published July 2nd. I read it and it was funny. I was reading it on our patio. My wife can always

652
00:47:26,173 --> 00:47:31,253
tell. Mrs. FFTT can always tell when something's blowing my mind because I'm rubbing my head.

653
00:47:31,253 --> 00:47:34,293
I'm reading and I'm rubbing my shit like, wow, what are you reading?

654
00:47:34,293 --> 00:47:44,253
and he lays out that the 08 crisis was not a,

655
00:47:45,913 --> 00:47:48,253
the popular understanding is once home prices turned down,

656
00:47:48,333 --> 00:47:48,953
everything came unwell.

657
00:47:49,153 --> 00:47:50,833
But when you look at the actual facts,

658
00:47:50,853 --> 00:47:52,193
which he puts right in front of you,

659
00:47:52,593 --> 00:47:54,873
it wasn't when home prices turned down year over year.

660
00:47:54,973 --> 00:47:56,513
It was when the rate of growth,

661
00:47:57,593 --> 00:47:59,533
the second derivative of growth of home prices,

662
00:47:59,533 --> 00:48:01,153
they were still rising, there was still demand.

663
00:48:01,153 --> 00:48:07,093
when they slowed, that's when default started rising because it wasn't that home prices fell.

664
00:48:07,353 --> 00:48:11,253
It was that they just slowed so that the refinancings couldn't occur. And after that,

665
00:48:11,353 --> 00:48:16,213
everything came unwound. And he lays out that people are evaluating his cases that

666
00:48:16,213 --> 00:48:21,633
people are evaluating the AI as a tech play. It's not, it's a real estate play. And he says,

667
00:48:21,693 --> 00:48:27,233
in real estate, you got boom bust because number one, they don't derate gently. They derate

668
00:48:27,233 --> 00:48:33,093
violently. And he's absolutely right. And he said, number two, real estate things don't blow up.

669
00:48:33,213 --> 00:48:38,013
They're very rarely blow up with demand declining. It almost is always up. It's just that second

670
00:48:38,013 --> 00:48:44,273
derivative. And he runs through and he points out basically chapter and verse, open AI is ground

671
00:48:44,273 --> 00:48:50,053
zero in this whole thing in his view. And I have no reason to disagree after it's a very, it's

672
00:48:50,053 --> 00:48:55,873
probably took me 45 minutes to read through and I read fast. And it just lays out the different

673
00:48:55,873 --> 00:49:03,413
cross financings, the amount of debt, how they have gone from basically 0% of cash flows to 100%

674
00:49:03,413 --> 00:49:11,393
of cash flows going into new capacity, then borrowing, who's guaranteeing it, what's therein,

675
00:49:11,393 --> 00:49:19,993
what's happening with Oracle CDS, Microsoft CDS all starting to rise. And that is why I think the

676
00:49:19,993 --> 00:49:24,833
government is nervous. And they should be nervous. The US government should be nervous about this

677
00:49:24,833 --> 00:49:31,333
because when you then tie it into capital flows,

678
00:49:31,453 --> 00:49:34,593
there's huge inflow of capital from abroad,

679
00:49:35,673 --> 00:49:38,413
all heavily tied to AI.

680
00:49:39,173 --> 00:49:40,653
I lived through the 2000 bubble.

681
00:49:40,713 --> 00:49:41,353
I remember what happened.

682
00:49:41,433 --> 00:49:43,353
The dollar kind of went up a little bit more

683
00:49:43,353 --> 00:49:47,453
and then it fell like 40% in six years

684
00:49:47,453 --> 00:49:49,113
after the tech bubble burst.

685
00:49:49,433 --> 00:49:50,653
So they have those issues.

686
00:49:51,813 --> 00:49:53,033
The tax receipts.

687
00:49:53,893 --> 00:49:54,693
Oh my God.

688
00:49:54,693 --> 00:49:57,473
Do you know what happens to tax receipts if the tech bubble bursts?

689
00:49:58,273 --> 00:50:00,953
We're already at 100% right now.

690
00:50:01,033 --> 00:50:09,353
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.

691
00:50:09,593 --> 00:50:13,173
With receipts and capital inflows inflated by this AI bubble.

692
00:50:14,973 --> 00:50:19,293
And the one thing underpinning, as this groundbreaker says, is OpenAI.

693
00:50:19,453 --> 00:50:22,533
If OpenAI just slows the next round.

694
00:50:22,533 --> 00:50:27,333
so they came out at the end of june and they delayed their ipo possibly and that was and then

695
00:50:27,333 --> 00:50:31,913
they also offered remember about a week later they it was reported that they were floating since

696
00:50:31,913 --> 00:50:37,313
denied floating possibly giving the trump administration a five percent stake i saw that

697
00:50:37,313 --> 00:50:41,813
now how many of these tech billionaires have you seen offer out of the goodness of their hearts

698
00:50:41,813 --> 00:50:46,513
a government five percent stakes is that literally just i mean i don't want to use this word too

699
00:50:46,513 --> 00:50:51,913
liberally but a bribe to be like keep us alive yes i think it is i mean i hear i heard credible

700
00:50:51,913 --> 00:50:57,893
rumbling six to nine months ago that the discussion around what does an AI bailout look like had

701
00:50:57,893 --> 00:51:05,373
already been broached in Washington. Do you think that's why China are pushing the open source AI

702
00:51:05,373 --> 00:51:11,553
so hard? Is it an attempt? Is it like essentially economic warfare? Whether it's intentional or not,

703
00:51:11,593 --> 00:51:16,473
I don't know. I think they are absolutely aware of the implications of it. I think they're

704
00:51:16,473 --> 00:51:21,013
absolutely aware. They would have to be stupid not to. And they're very good at this. They're

705
00:51:21,013 --> 00:51:25,093
better at the second and third derivative thinking than our policymakers seem to be, in my opinion,

706
00:51:25,453 --> 00:51:29,293
for a number of different reasons. But that's why I think the government's worried about it.

707
00:51:29,553 --> 00:51:35,053
Open AI, can't price, boom, then this, then the debt. The debt starts, okay, who owns the debt?

708
00:51:35,153 --> 00:51:40,853
I don't know. Okay, sell them all. Okay, now, and oh, by the way, 80, 90%, depending on who you read,

709
00:51:40,853 --> 00:51:45,213
80, 90% of GDP growth in this country over the last 12 to 18, 24 months has been driven by AI

710
00:51:45,213 --> 00:51:51,753
related spend. Uh-oh. Now what? Now you're in a recession. Now what happens to the deficit?

711
00:51:51,753 --> 00:51:57,873
Remember we just said before, up 600 to a thousand basis points of GDP. Well, GDP is 30 trillion for

712
00:51:57,873 --> 00:52:12,869
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

713
00:52:12,869 --> 00:52:17,909
go up on this because in the dot-com bubble, we were running a surplus, a fiscal surplus,

714
00:52:18,129 --> 00:52:20,769
not a 6% deficit. I think that's the last time there was a surplus, right?

715
00:52:20,769 --> 00:52:26,069
Right. And so now you've got, it just came out last week, Google went cashflow negative,

716
00:52:26,069 --> 00:52:31,409
first time in its history. So you've got all these guys competing. They'd be competing more

717
00:52:31,409 --> 00:52:35,429
to borrow more money to keep things going. At the same time, US deficit would be blowing out three.

718
00:52:35,829 --> 00:52:41,669
So you're going to have a risk. If the AI thing unwinds, you are going to have a recession

719
00:52:41,669 --> 00:52:49,349
and a stock market event where you're going to have a weak dollar, probably not initially,

720
00:52:49,529 --> 00:52:52,989
dollar will strengthen initially. So let me do it in order. You're going to have a very

721
00:52:52,989 --> 00:52:57,209
big stock market problem. You're going to have a recession. You're going to have a rise in

722
00:52:57,209 --> 00:53:02,329
unemployment. You're going to have a significant rise in interest rates in a recession, which no

723
00:53:02,329 --> 00:53:11,669
American alive has really seen since probably the 70s. And even then, it'll be much more emerging

724
00:53:11,669 --> 00:53:16,549
market, which the 70s was, of course, sort of. So I guess that's probably the last time anyone

725
00:53:16,549 --> 00:53:25,889
would have seen it. But if you were 30 in 1974, you're 82 now. Not a lot of them around. So not

726
00:53:25,889 --> 00:53:30,689
a lot of people have seen this. And oh, by the way, the rise in rates will then force, and that's

727
00:53:30,689 --> 00:53:36,449
where I think the dollar rises on that initially. But go back to Warsh, we started. What did he say?

728
00:53:36,529 --> 00:53:42,689
I'm not going to let the market set the price for treasury bonds in a crisis. Okay. What are you

729
00:53:42,689 --> 00:53:47,469
going to do? Check to you, buddy. And it might be as little as a 25 basis point height that could

730
00:53:47,469 --> 00:53:54,509
trigger all this. But I think they are absolutely aware of it and concerned about it. And I think

731
00:53:54,509 --> 00:54:00,009
the Chinese are too. So now you go to the game theory, you're China. And you got a lot of tough

732
00:54:00,009 --> 00:54:04,769
guys saying, we're going to choke off China's oil. What are they going to do about it? Oh, look,

733
00:54:04,769 --> 00:54:08,309
China didn't put troops on the ground anywhere in the Middle East to fight us. What are they

734
00:54:08,309 --> 00:54:13,769
going to do about it oh we just seized venezuela china didn't do anything about it they're crap

735
00:54:13,769 --> 00:54:22,549
knowing the chinese mentality which is turn the other cheek and wait and then do something very

736
00:54:22,549 --> 00:54:30,909
subtle like oh i'm so sorry what happened what happened open ai oh yeah i think it's exactly

737
00:54:30,909 --> 00:54:35,009
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

738
00:54:35,009 --> 00:54:39,049
to protect it? Because I mean, back to the question, is this 2001 or 2008? It sounds like

739
00:54:39,049 --> 00:54:45,629
it has sprinklings of both. And the problem is like, if they do start to roll over and the growth

740
00:54:45,629 --> 00:54:50,989
slows, like sure, Walsh can, you know, drop rates and he can start buying his own bonds. But like,

741
00:54:50,989 --> 00:54:55,469
does that get into the markets that he needs them to get into? Like, how do you protect it?

742
00:54:55,929 --> 00:54:59,949
And this is why the Iran war was so dumb. If you're actually a multi-level thinker,

743
00:55:00,309 --> 00:55:03,269
you know, the people that are like, oh, this was such a good idea. No, it wasn't.

744
00:55:03,269 --> 00:55:07,849
If you can hold one thought in your head at one time, yeah, it was a great idea.

745
00:55:09,429 --> 00:55:10,909
Because now, where's oil?

746
00:55:11,829 --> 00:55:13,169
We started this little adventure.

747
00:55:13,309 --> 00:55:15,389
10-year treasury yields are 3.95%.

748
00:55:15,389 --> 00:55:19,149
Oil was 55, 65, 62.

749
00:55:20,929 --> 00:55:22,289
Now this thing comes unwound.

750
00:55:22,429 --> 00:55:23,609
Yeah, this thing comes unwound.

751
00:55:23,949 --> 00:55:25,949
Worsh can really aggressively cut.

752
00:55:26,229 --> 00:55:27,149
What's oil going to do?

753
00:55:27,289 --> 00:55:29,969
It goes 75, 80 because you're in a recession, down.

754
00:55:30,309 --> 00:55:30,629
Great.

755
00:55:30,629 --> 00:55:34,629
You start an oil from a standpoint of 85 bucks.

756
00:55:34,629 --> 00:55:36,629
I see what you're saying.

757
00:55:36,629 --> 00:55:41,449
And I know you've said a number of times, like oil at 120, I think it was, is like game

758
00:55:41,449 --> 00:55:42,449
over really for the economy.

759
00:55:42,449 --> 00:55:43,449
It is.

760
00:55:43,449 --> 00:55:48,029
But even more, like we've been very, you know, written it many times over the last four or

761
00:55:48,029 --> 00:55:53,129
five years that 60 to 80, oil is fine.

762
00:55:53,129 --> 00:55:56,469
Oil gets 85, the treasury market starts having problems in fiscal dominance.

763
00:55:56,469 --> 00:55:58,249
We've seen this over and over and over and over.

764
00:55:58,249 --> 00:55:59,249
And is it at the moment?

765
00:55:59,249 --> 00:56:00,249
Oh, absolutely.

766
00:56:00,249 --> 00:56:04,289
I mean, the move index is down at 50, but rates are at 4.7, right?

767
00:56:04,349 --> 00:56:04,969
4.6, 4.7.

768
00:56:05,169 --> 00:56:06,489
Got to 4.7, war off.

769
00:56:06,809 --> 00:56:08,409
Back to 4.6, war back on, right?

770
00:56:08,569 --> 00:56:17,209
So that is the, that's another tricky part of all this.

771
00:56:17,349 --> 00:56:23,349
Oil's at a price where, what do you do if you're worse?

772
00:56:23,529 --> 00:56:25,469
If you start to, AI needs support.

773
00:56:25,809 --> 00:56:26,729
Some of it's competitive.

774
00:56:26,729 --> 00:56:27,789
There's not a lot you can do.

775
00:56:27,789 --> 00:56:35,369
the financing side of it is going to be having a problem. Stocks are going to be heading down.

776
00:56:36,369 --> 00:56:40,269
Meanwhile, you've got the war going on. And so there, yeah, there's some element of downward

777
00:56:40,269 --> 00:56:45,849
pressure on oil, but ultimately, what do you think the Chinese are going to do? Right? They ran down

778
00:56:45,849 --> 00:56:52,329
all their oil. They ran down some unknown amount of a very large oil SPR is the accurate way to say

779
00:56:52,329 --> 00:56:56,809
that so say oil goes from 85 to 70 what do you think the chinese would be doing

780
00:56:59,529 --> 00:57:03,849
let's put it right there guys yep so oil's not going to come down that much if at all

781
00:57:03,849 --> 00:57:06,809
when worse is going to have to be printing money to figure this thing out

782
00:57:06,809 --> 00:57:29,206
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

783
00:57:29,206 --> 00:57:35,046
Bond markets have taken down more governments than howitzers. He gets it. He gets it. Even if I don't

784
00:57:35,046 --> 00:57:40,806
think he has the ability to kind of say, hey guys, the Iran war, let's not. I don't think that was his

785
00:57:40,806 --> 00:57:47,266
call. This might be a silly question, but is it possible to think they might be as avert as

786
00:57:47,266 --> 00:57:54,106
doing money printing and actually stepping in to the stock market and propping up strategic markets?

787
00:57:55,626 --> 00:57:59,326
Well, they're kind of already been doing that, right? When you're making investments. And just

788
00:57:59,326 --> 00:58:08,386
here too, it's this dichotomy or this two-faced, the yin and yang of it. On some level, you need to

789
00:58:08,386 --> 00:58:13,606
do that right i mean that's what we're talking about hamiltonian economics is protecting your

790
00:58:13,606 --> 00:58:18,846
domestic industry um that you've that you've been allowing to be hollowed out

791
00:58:18,846 --> 00:58:26,146
so on some level you need to but you don't want to do it because in an emergency you want to be

792
00:58:26,146 --> 00:58:31,186
strategic about it this will be the antithesis of strategic yeah it'll be because you're trying

793
00:58:31,186 --> 00:58:46,846
to put out a fire. So yeah, they stepped in it, right? There's almost like an ideological

794
00:58:46,846 --> 00:58:51,846
problem with some of this in that like America is about supposedly about free markets and it feels

795
00:58:51,846 --> 00:58:57,806
like to beat China becoming more like China is a mistake. But are you saying you think that's

796
00:58:57,806 --> 00:59:03,406
they're going to have to do. I think the first step is admitting we don't have free markets.

797
00:59:04,126 --> 00:59:11,886
You can't sit there and say, we can't do these policies because we need to have free markets.

798
00:59:11,886 --> 00:59:16,366
When you have the Fed chair saying, I will only allow a free market and treasury bonds when I

799
00:59:16,366 --> 00:59:21,006
like the price, when the rate is not at a level that doesn't bankrupt my government.

800
00:59:21,006 --> 00:59:26,126
That is not a free market. And he said it last week to Congress. He stood up and said, America

801
00:59:26,126 --> 00:59:31,226
does not have free markets. He just used words that, you know, because everyone's still enamored

802
00:59:31,226 --> 00:59:38,846
of him, you know, give it a, give it a couple of years. He's going to be Powell. Um, that to me is

803
00:59:38,846 --> 00:59:47,626
the first step you have to take. Like, let's be honest. What free markets, what was free about

804
00:59:47,626 --> 00:59:54,506
Oh eight? What was free about COVID? What was right? So we need to actually decide, Hey,

805
00:59:54,506 --> 01:00:00,266
these industries have strategic value beyond I can make money on it this quarter.

806
01:00:02,006 --> 01:00:04,306
And that's the challenge.

807
01:00:06,786 --> 01:00:09,746
The Apple Micron example before.

808
01:00:10,806 --> 01:00:12,286
Micron's minting money.

809
01:00:13,266 --> 01:00:14,746
Stock's outperforming Apple.

810
01:00:15,746 --> 01:00:17,346
Memory prices are soaring.

811
01:00:17,766 --> 01:00:18,306
It's a commodity.

812
01:00:18,486 --> 01:00:21,146
It's no different than if coal prices or oil prices are soaring.

813
01:00:22,806 --> 01:00:24,406
And Apple doesn't like it.

814
01:00:24,506 --> 01:00:26,686
Where's Apple's margins relative to all time?

815
01:00:26,806 --> 01:00:27,086
Where's right?

816
01:00:27,566 --> 01:00:29,746
So like, it's a mindset.

817
01:00:30,926 --> 01:00:36,786
You need to have the upper shape of the K, the upper leg of the K, both in corporate

818
01:00:36,786 --> 01:00:44,846
and as individuals say, here's where I want my country to be.

819
01:00:45,386 --> 01:00:50,326
In 10 years, 15 years, we can be ripping each other apart.

820
01:00:50,326 --> 01:00:57,646
or the bottom half will have starved one way or metaphorically or literally,

821
01:00:57,826 --> 01:01:02,046
and I won't have to deal with it because I will be in a walled garden of my own construction.

822
01:01:04,026 --> 01:01:06,446
Or I want my country to be thriving.

823
01:01:06,446 --> 01:01:10,306
And to get there, I need to take lower margins.

824
01:01:11,306 --> 01:01:16,546
And I need to somehow sell that to my shareholders with a K-Shiller PE at 42,

825
01:01:16,546 --> 01:01:23,566
pricing no margin nothing but margin expansion forever more because you know unicorns rainbows

826
01:01:23,566 --> 01:01:31,586
and skittles for everybody that's the issue that's the decision and i see it from some people

827
01:01:31,586 --> 01:01:37,426
i don't see it from others and i definitely don't see agreement about it and and the challenge is

828
01:01:37,426 --> 01:01:42,066
like that's not the mainstream discussion right like it would be much more encouraging to me if

829
01:01:42,066 --> 01:01:46,106
That was the discussion we were having as a society.

830
01:01:46,306 --> 01:01:49,806
But instead it's, you know, what's a boy?

831
01:01:50,106 --> 01:01:50,986
Can I date a tree?

832
01:01:51,626 --> 01:01:53,506
You know, can I wear a furry tail to class

833
01:01:53,506 --> 01:01:54,926
like some of the kids at school,

834
01:01:55,026 --> 01:01:56,686
at university with my kids?

835
01:01:56,806 --> 01:01:59,246
Like, okay, great, right?

836
01:01:59,246 --> 01:02:01,646
That's more Weimar vibes of like, you know.

837
01:02:04,226 --> 01:02:05,926
I mean, that's insane.

838
01:02:07,606 --> 01:02:08,786
Your words, not mine.

839
01:02:08,786 --> 01:02:13,286
Is this like an existential threat to the US

840
01:02:13,286 --> 01:02:15,326
as a global superpower?

841
01:02:16,466 --> 01:02:17,846
Oh yeah, absolutely.

842
01:02:17,846 --> 01:02:19,226
It already is.

843
01:02:19,226 --> 01:02:22,106
I mean, look at the headlines this weekend.

844
01:02:22,106 --> 01:02:23,046
We don't have the missiles.

845
01:02:23,046 --> 01:02:25,026
We don't have the air defense missiles.

846
01:02:25,026 --> 01:02:28,966
And so, right, so we are the global superpower

847
01:02:28,966 --> 01:02:29,946
whose most powerful

848
01:02:29,982 --> 01:02:34,522
powerful military in the history of the world ultimately backs the dollar along with the 13

849
01:02:34,522 --> 01:02:40,242
aircraft carrier battle groups that we have, right? How often have we heard that? Except when

850
01:02:40,242 --> 01:02:47,182
the missile started, those carriers in the Gulf went a thousand kilometers further away because

851
01:02:47,182 --> 01:02:52,762
they knew what would happen if they stayed too close or could happen. We ran out of air defense

852
01:02:52,762 --> 01:02:59,482
missiles. Our naval base at Bahrain got trashed. We evacuated many of our people from the Middle

853
01:02:59,482 --> 01:03:05,482
least. The Russians were helping target our guys, helping the Iranians target our guys.

854
01:03:06,602 --> 01:03:11,562
We can only go to war when the markets are closed and when the 10-year treasury yield is below 4.7%.

855
01:03:12,102 --> 01:03:18,682
So we are still the global hegemon. As terms and conditions apply.

856
01:03:19,422 --> 01:03:22,202
As long as a 10-year, you want the guy at the end of it, we're still the global hegemon.

857
01:03:22,542 --> 01:03:26,242
As long as a 10-year yield is below 4.7%, as long as the S&P is not down more than 5%,

858
01:03:26,242 --> 01:03:31,022
as long as oil is below 85, as long as it's a weekend, and as long as we have enough Patriot

859
01:03:31,022 --> 01:03:36,382
missiles, which we are currently on backlog for two years. Talk to your representative for further

860
01:03:36,382 --> 01:03:43,402
conditions. I mean, with those caveats, then, is it already over? It's already in the state of change.

861
01:03:45,142 --> 01:03:52,682
We can always come back. We can always come back, right? And look, I agree with Warren Buffett. Hey,

862
01:03:52,682 --> 01:03:56,302
for 250 years, it's been a bad idea to bet against America.

863
01:03:56,422 --> 01:03:56,662
Yep.

864
01:03:57,002 --> 01:03:57,222
Right.

865
01:03:58,122 --> 01:04:04,342
And what I never hear Americans still say yet is that I bet you in 1850, there were people

866
01:04:04,342 --> 01:04:08,482
saying in Mandarin for 1500 years, it's been a bad idea to bet against China.

867
01:04:09,142 --> 01:04:17,182
And yet, eventually, they made enough stupid decisions and had enough outside forces, one

868
01:04:17,182 --> 01:04:19,422
of which is a widespread opium addiction.

869
01:04:21,282 --> 01:04:21,522
Hmm.

870
01:04:22,682 --> 01:04:26,342
You know, they have a name for it in certain areas around here.

871
01:04:26,422 --> 01:04:27,122
It's called Fentwalk.

872
01:04:27,262 --> 01:04:29,362
I don't know if you ever heard the phrase Fentwalk?

873
01:04:29,502 --> 01:04:30,002
No, not Fentwalk.

874
01:04:30,062 --> 01:04:31,542
Is this where people like drooped over?

875
01:04:31,542 --> 01:04:31,902
Correct.

876
01:04:32,022 --> 01:04:32,122
Yeah.

877
01:04:32,222 --> 01:04:32,382
Yeah.

878
01:04:32,402 --> 01:04:34,302
We could take you to areas where there's Fentwalk around here.

879
01:04:35,422 --> 01:04:36,742
So it's not over yet.

880
01:04:38,302 --> 01:04:46,002
But, you know, it's getting later innings where we need to be having the discussion of

881
01:04:46,002 --> 01:04:56,062
do i as a plutarch of this not i i metaphorically not i specifically as a plutarch

882
01:04:56,062 --> 01:05:01,442
as a ceo of a multinational as one of the wealthiest people in this country as a member

883
01:05:01,442 --> 01:05:10,122
of the upper shape of the k want where do i want my country to be in 10 years 20 years like

884
01:05:10,122 --> 01:05:13,822
And there's other like warning signs about it.

885
01:05:14,382 --> 01:05:18,422
You know, I have a friend of mine who has the monopoly contract, right?

886
01:05:18,442 --> 01:05:34,262
So he's the only provider for the medical examiner pickups in two major second tier US cities.

887
01:05:34,262 --> 01:05:41,882
and what that means in plain English is anybody who gets murdered commits suicide overdoses

888
01:05:41,882 --> 01:05:48,262
accidental or otherwise or suffers an accident dies in an accident he picks up he's the only one

889
01:05:48,262 --> 01:05:56,622
who gets his his his companies and they said something a couple weeks ago man we have never

890
01:05:56,622 --> 01:06:03,462
been this busy we are busier now than we were at the depths of the COVID when people in this country

891
01:06:03,462 --> 01:06:07,222
were killing themselves, overdosing themselves, drinking themselves to death when they were

892
01:06:07,222 --> 01:06:07,682
locked down.

893
01:06:08,322 --> 01:06:08,442
Wow.

894
01:06:08,702 --> 01:06:09,042
Bleak.

895
01:06:09,582 --> 01:06:10,402
Very bleak, right?

896
01:06:10,422 --> 01:06:17,322
So there's something happening, right, where in the context of this K discussion that we

897
01:06:17,322 --> 01:06:21,562
need to be having, and look, maybe that's the plan.

898
01:06:21,902 --> 01:06:24,882
Maybe that's a plan for the upper half of the K, at least the ones that are controlling

899
01:06:24,882 --> 01:06:31,642
the strings, which is build a wall and just let those ones overdose and kill themselves.

900
01:06:31,882 --> 01:06:32,762
It's the permanent underclass.

901
01:06:32,762 --> 01:06:33,962
And we spoke about this in Nashville.

902
01:06:34,102 --> 01:06:35,522
It's like, it's the economy of despair.

903
01:06:35,722 --> 01:06:38,842
Like if AI does end up replacing a number of jobs,

904
01:06:38,902 --> 01:06:40,402
like what do you think is going to happen to those numbers?

905
01:06:40,762 --> 01:06:43,062
Like bullish on his company in a horrible way.

906
01:06:43,082 --> 01:06:44,182
It's an enormous, it's enormous.

907
01:06:44,382 --> 01:06:46,322
I mean, there's actually a shortage of funeral directors

908
01:06:46,322 --> 01:06:47,302
in the state of Ohio right now.

909
01:06:47,342 --> 01:06:47,742
Do you know that?

910
01:06:47,942 --> 01:06:48,882
And a number of other states.

911
01:06:50,582 --> 01:06:51,722
Some of it's an age thing.

912
01:06:52,002 --> 01:06:53,062
There's very few young ones,

913
01:06:53,262 --> 01:06:56,842
but it's so much so that they are able to,

914
01:06:57,142 --> 01:06:58,482
they've changed the rules.

915
01:06:58,482 --> 01:07:02,942
before you had to have at least an undergrad degree.

916
01:07:04,202 --> 01:07:08,042
And then you would have to go to mortuary school for two years.

917
01:07:08,382 --> 01:07:10,862
Or you could go right to mortuary school.

918
01:07:10,862 --> 01:07:23,642
Or you could get a degree and apprentice under an established senior funeral director for two years after your degree.

919
01:07:23,642 --> 01:07:28,222
they're in such dire straits they actually have changed the rules so that as long as you will be

920
01:07:28,222 --> 01:07:34,362
done with your undergraduate degree by the time you are done um by the time your apprenticeship

921
01:07:34,362 --> 01:07:47,405
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

922
01:07:48,585 --> 01:07:51,265
So I think some of it is around how you feel about that

923
01:07:51,265 --> 01:07:53,925
for when they're young people.

924
01:07:54,065 --> 01:07:54,925
Yeah, it's horrible.

925
01:07:57,245 --> 01:08:03,685
And, you know, some of it is a demographic, right?

926
01:08:03,685 --> 01:08:07,125
Wherever the boomers have been, you cater to the boomers

927
01:08:07,125 --> 01:08:07,965
and you do well, right?

928
01:08:08,045 --> 01:08:10,025
And wherever they've been in their lifespan, right?

929
01:08:10,565 --> 01:08:12,025
When they went into the workforce,

930
01:08:12,165 --> 01:08:13,265
number of workforce went up

931
01:08:13,265 --> 01:08:14,845
and then inflation picked up

932
01:08:14,845 --> 01:08:15,785
when they're buying houses,

933
01:08:16,165 --> 01:08:18,005
when they, you know, vacation houses,

934
01:08:18,345 --> 01:08:19,005
vacations, whatever.

935
01:08:20,565 --> 01:08:21,785
And what are the boomers doing now?

936
01:08:21,865 --> 01:08:24,245
Like if you do high-end service, right?

937
01:08:24,305 --> 01:08:26,685
So pools, landscaping,

938
01:08:26,885 --> 01:08:29,685
high-end service and death care, boom.

939
01:08:30,505 --> 01:08:31,305
Some of it's just boom

940
01:08:31,305 --> 01:08:32,225
or some of it's just demographics.

941
01:08:32,425 --> 01:08:33,965
So I don't want them to make you think

942
01:08:33,965 --> 01:08:36,005
it's all opiate and stuff related,

943
01:08:36,005 --> 01:08:42,205
But there is some signal there around a warning sign of this discussion we need to be having,

944
01:08:42,265 --> 01:08:45,025
we should be having, of where do we want to be?

945
01:08:45,385 --> 01:08:48,265
And that's where I think, look, I do think the Chinese do that better than us, right?

946
01:08:49,265 --> 01:08:51,785
People say, oh, China's housing is in the trash.

947
01:08:51,805 --> 01:08:53,005
Yeah, or in the tank.

948
01:08:53,565 --> 01:08:54,005
It is.

949
01:08:54,905 --> 01:08:58,725
And Xi came out and said, houses are for living for, not for speculating.

950
01:08:59,265 --> 01:09:01,085
And that was like the absolute peak.

951
01:09:01,185 --> 01:09:04,225
Like they basically went in the, like they tanked their own housing market.

952
01:09:04,225 --> 01:09:04,545
Why?

953
01:09:04,545 --> 01:09:10,365
Why? Because then the capital flowed into investing. That was a plan. Now, that has its own

954
01:09:10,365 --> 01:09:14,985
offshoots, right? That's going to weigh on profitability of firms in that. You've got to

955
01:09:14,985 --> 01:09:20,665
compete. Wait, high degrees of compete? Isn't that capitalist?

956
01:09:20,665 --> 01:09:21,805
It certainly sounds like it.

957
01:09:22,345 --> 01:09:29,025
Interesting. But I think they have the structure, luxury, culture, history ability to say, look,

958
01:09:29,025 --> 01:09:35,385
we would like to not be in a revolution in 10 years. And a good way to contribute to that,

959
01:09:35,685 --> 01:09:41,065
especially with AI taking jobs in our country and everywhere, is to jack the price of housing

960
01:09:41,065 --> 01:09:45,045
to the moon. So not only do young people not have jobs, but they can't afford houses and

961
01:09:45,045 --> 01:09:50,125
their healthcare is up and they're educated. That's how you end up with Mamdani. You're

962
01:09:50,125 --> 01:09:54,005
going to end up with a Mamdani in every country in the city. So what do you want?

963
01:09:54,005 --> 01:09:58,325
So it's almost like the perverse incentives of crony capitalism.

964
01:09:58,325 --> 01:10:02,165
I think that's exactly right. Right. Like once upon a time in this country,

965
01:10:02,165 --> 01:10:05,605
what did, I think it was Nixon who said, right? Hey, these guys are too big to fail. Nixon said,

966
01:10:05,605 --> 01:10:11,125
well, tell them to get smaller. Perfect response. Perfect response. Get smaller. Oh, wait,

967
01:10:11,125 --> 01:10:15,605
it was a very simple response. Break up the big banks, send the ones that committed crimes to jail,

968
01:10:15,605 --> 01:10:20,485
wipe out the equity, let the bondholders take over the company. Why didn't we do that?

969
01:10:20,485 --> 01:10:26,265
crony capitalism. And if the government in some form step in and try and protect these AI companies,

970
01:10:26,265 --> 01:10:33,745
like that's maybe the most egregious form of crony capitalism. Yeah. And it's, you know,

971
01:10:33,745 --> 01:10:36,745
it's going to, I've had people say it's going to be like the Soviet union, right? Like I have a

972
01:10:36,745 --> 01:10:41,225
friend who lived in East Germany. He's like, that's, you know, you, you guys let markets work

973
01:10:41,225 --> 01:10:45,645
and you get all nice stuff. And you know, we didn't, and we had all the crappy stuff. And so

974
01:10:45,645 --> 01:10:51,345
we're going to have you know expensive crappier evs and expensive crappier solar panels and

975
01:10:51,345 --> 01:10:57,265
expensive crappier electronic stuff and the china like there's electronics that i've had people show

976
01:10:57,265 --> 01:11:03,205
me over there we don't even have access to way more than byd cars like i'm like wait what and

977
01:11:03,205 --> 01:11:12,045
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

978
01:11:12,045 --> 01:11:17,485
and it's a time not to be using black and white labels right yeah right like chinese are doing

979
01:11:17,485 --> 01:11:21,885
some very capitalist things and americans have done some very communist socialist things

980
01:11:21,885 --> 01:11:26,385
for certain classes of people right it's like animal farms some animals have been more equal

981
01:11:26,385 --> 01:11:33,085
than other animals and that's fine but you know when you end up you know when you take a road

982
01:11:33,085 --> 01:11:37,665
somewhere don't be surprised when you get to your destination so what should like if people are

983
01:11:37,665 --> 01:11:40,945
listening to this what's the actionable advice what should people be doing to prepare for this

984
01:11:40,945 --> 01:11:49,425
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?

985
01:11:50,505 --> 01:11:55,725
Look, I think it's about simultaneous protection and optimism, right?

986
01:11:56,085 --> 01:11:57,865
There's the yin and the yang to this.

987
01:11:57,925 --> 01:11:58,805
This can go really well.

988
01:11:58,845 --> 01:11:59,705
This can go really badly.

989
01:11:59,945 --> 01:12:07,405
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.

990
01:12:07,505 --> 01:12:09,885
But there's going to be winners and losers at all times.

991
01:12:09,885 --> 01:12:13,045
So look, we're not going to be able to reshore fast enough.

992
01:12:13,165 --> 01:12:13,965
It's not going to happen.

993
01:12:14,205 --> 01:12:16,585
Okay, well, guess who's going to get a lot of that business?

994
01:12:16,705 --> 01:12:17,005
Japan.

995
01:12:17,745 --> 01:12:20,185
Okay, well, tell me about Japanese industrial equities.

996
01:12:20,385 --> 01:12:20,525
Okay.

997
01:12:22,045 --> 01:12:26,425
Electrical, you know, is we're going to reshore of something, you know, some degree.

998
01:12:26,525 --> 01:12:27,465
We're going to have more electricity.

999
01:12:27,685 --> 01:12:33,005
It's easy because we, as a country, we have not grown our electric grid in 20 years.

1000
01:12:33,345 --> 01:12:33,905
It's astonishing.

1001
01:12:34,485 --> 01:12:37,005
It tells you a lot of the GDP growth is inflation.

1002
01:12:38,345 --> 01:12:38,705
Fiction.

1003
01:12:38,705 --> 01:12:39,185
Yeah.

1004
01:12:39,425 --> 01:12:39,785
Fugazi.

1005
01:12:39,885 --> 01:12:44,885
Great, electrical infrastructure equities.

1006
01:12:44,885 --> 01:12:47,885
We're going to devalue the currency.

1007
01:12:47,885 --> 01:13:00,608
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

1008
01:13:01,828 --> 01:13:05,468
I still have probably a 3%, 4% position in Bitcoin and Bitcoin-related stuff.

1009
01:13:05,948 --> 01:13:09,148
I'm not flying fully out of the trade.

1010
01:13:09,248 --> 01:13:10,388
I'm not short.

1011
01:13:10,748 --> 01:13:15,868
I'm just underweight what I think, because I think ultimately they are going to have to

1012
01:13:15,868 --> 01:13:18,788
get much more aggressive and much more obvious about devaluing printing.

1013
01:13:18,788 --> 01:13:25,348
And Bitcoin has demonstrated an ability to be the fastest horse relative to, I don't

1014
01:13:25,348 --> 01:13:28,928
like playing any altcoins, anything like that.

1015
01:13:28,928 --> 01:13:29,928
That's my limit, right?

1016
01:13:29,928 --> 01:13:30,928
Of-

1017
01:13:30,928 --> 01:13:34,288
When the tide does turn and you're ready to get back into Bitcoin in a bigger way, what

1018
01:13:34,288 --> 01:13:43,128
is your ideal allocation?

1019
01:13:43,128 --> 01:13:50,148
So the last time I was probably 10, 15% and at the highs, it was like 47, 48%.

1020
01:13:50,148 --> 01:13:50,788
Oh, wow.

1021
01:13:51,288 --> 01:13:51,488
Yeah.

1022
01:13:52,308 --> 01:13:57,988
It was so big, it was occupying way too much of my mind space.

1023
01:13:59,388 --> 01:14:00,208
And so-

1024
01:14:00,208 --> 01:14:00,708
No such thing, Luke.

1025
01:14:02,328 --> 01:14:02,948
For me.

1026
01:14:03,288 --> 01:14:03,748
So exactly.

1027
01:14:03,828 --> 01:14:06,348
There's a lot of maxis out there going, see, that's why I hate him.

1028
01:14:07,208 --> 01:14:08,008
No such thing.

1029
01:14:08,408 --> 01:14:08,768
No.

1030
01:14:10,168 --> 01:14:11,328
It's the same Nixon thing.

1031
01:14:11,448 --> 01:14:12,128
Get smaller, right?

1032
01:14:12,208 --> 01:14:12,968
Tell him to get smaller.

1033
01:14:12,968 --> 01:14:22,428
get smaller. So I got smaller. But to answer the question, I think some of it depends on

1034
01:14:22,428 --> 01:14:31,148
events. But look, I don't see any reason why I wouldn't want to be at least 25% golden Bitcoin

1035
01:14:31,148 --> 01:14:38,788
over the next five years on average aggregate. And I think it's very dependent.

1036
01:14:38,788 --> 01:14:45,668
look I think you always want to have some gold I think how you structure that is dependent on

1037
01:14:45,668 --> 01:14:55,028
your age because fact bitcoin's way more volatile than gold yep in the last two years

1038
01:14:55,028 --> 01:15:03,108
when you adjust when you vol adjust the returns gold is much more attractive that should change

1039
01:15:03,108 --> 01:15:07,308
when they print, whenever that is, again.

1040
01:15:07,808 --> 01:15:09,208
But that's something I'll be watching for.

1041
01:15:09,848 --> 01:15:15,048
If Bitcoin only gives me 50,

1042
01:15:15,288 --> 01:15:17,448
every percent gold goes up,

1043
01:15:17,508 --> 01:15:19,368
Bitcoin goes up 150 basis points,

1044
01:15:19,628 --> 01:15:23,008
that tells me, great, I want to be a little bigger.

1045
01:15:23,048 --> 01:15:24,688
But that doesn't tell me go way bigger gold

1046
01:15:24,688 --> 01:15:25,548
to get to me where it was.

1047
01:15:25,628 --> 01:15:26,968
That just tells me something's changing.

1048
01:15:26,968 --> 01:15:28,568
A number of things that could be.

1049
01:15:28,568 --> 01:15:37,708
but I think I still really like especially I mean for myself I generally run with this but for the

1050
01:15:37,708 --> 01:15:45,788
average investor out there 25 cash 25 gold bitcoin 25 real estate 25 equities and and I think each

1051
01:15:45,788 --> 01:15:52,508
of those you know bitcoin I'm over that now golden bitcoin I'm slightly under that cash

1052
01:15:52,508 --> 01:16:01,948
i in i think the important thing is i sort of lay out some of these just sort of stream of

1053
01:16:01,948 --> 01:16:08,528
the things we've talked about it's not doomer or not doomer right the the optimists you know come

1054
01:16:08,528 --> 01:16:12,548
you know the the pessimist complains about the win the optimist expects it to change the realist

1055
01:16:12,548 --> 01:16:18,588
changes you know adjust the sales yeah and so it's just that you when you've got if you're

1056
01:16:18,588 --> 01:16:25,808
laid out like that the jacob fuger portfolio and 25 25 25 25 it's easier to adjust the sales

1057
01:16:25,808 --> 01:16:32,088
um nothing is going to kill you right you're you are from a financial standpoint you make yourself

1058
01:16:32,088 --> 01:16:38,188
very hard to kill hyperinflation doesn't kill you hyper deflation doesn't kill you okay if those two

1059
01:16:38,188 --> 01:16:44,628
things don't kill you then like you're in a good spot you're in a good spot and and the reason i

1060
01:16:44,628 --> 01:16:50,368
lay all that out before, some of which is depressing, is you don't hear about this stuff a lot.

1061
01:16:51,148 --> 01:16:55,068
I learned 30 years ago in this business, if you talk about the same stuff that everybody else

1062
01:16:55,068 --> 01:17:00,688
talks about, your kids aren't going to eat. It's a fact. I've been on a straight commission my

1063
01:17:00,688 --> 01:17:05,588
whole career. If I was the 30th guy calling a big hedge fund in New York to tell them about

1064
01:17:05,588 --> 01:17:12,528
target earnings in 1998, my kids would have starved to death. My kids are never going to

1065
01:17:12,528 --> 01:17:18,688
starve to death. So it's important to look at things differently than everybody else. And I do

1066
01:17:18,688 --> 01:17:22,968
that, I think most of the time, and at least a lot of the time. And so some of this stuff might

1067
01:17:22,968 --> 01:17:30,568
be depressing, but it also is happening. It's also reality. And you can ignore reality, but you can't

1068
01:17:30,568 --> 01:17:36,628
ignore the consequences of ignoring reality. And there's such a wide array of things that could

1069
01:17:36,628 --> 01:17:43,648
happen, it ties back to the allocation of like, okay, where do I want to be? Look, like 45% Bitcoin,

1070
01:17:43,948 --> 01:17:48,648
like for me, that's a lot. Like I'm a 51-year-old man. You don't want to hear mine.

1071
01:17:50,328 --> 01:17:56,708
You're a younger man than me. So you're younger. And the other thing too is understanding. You

1072
01:17:56,708 --> 01:18:01,608
understand Bitcoin better than me. Like if I, position sizing is

1073
01:18:01,608 --> 01:18:16,011
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

1074
01:18:16,011 --> 01:18:19,231
with because they, they've forgotten more than I know. And it's probably more than a thousand.

1075
01:18:19,551 --> 01:18:22,931
And I'm okay with that. That's ultimately just a position sizing thing, right? That is a,

1076
01:18:22,931 --> 01:18:29,991
I'm at 45%. I'm up big. Okay. I, I'm going to get smaller. I either need to learn a lot more

1077
01:18:29,991 --> 01:18:31,271
or I need to get smaller.

1078
01:18:31,331 --> 01:18:32,331
And if I need to learn a lot more,

1079
01:18:32,351 --> 01:18:33,591
I got to go all Bitcoin all the time.

1080
01:18:33,611 --> 01:18:34,451
And I didn't want to do that.

1081
01:18:34,591 --> 01:18:35,351
Not for any reason,

1082
01:18:35,371 --> 01:18:36,591
other than it's not where my interests are.

1083
01:18:36,751 --> 01:18:38,631
And that's, so it's just, it's just a decision.

1084
01:18:38,931 --> 01:18:43,051
So yeah, that's what I mean about like,

1085
01:18:43,091 --> 01:18:44,571
like some of it's your age, right?

1086
01:18:44,571 --> 01:18:46,211
Like you get older, you can't take the vol

1087
01:18:46,211 --> 01:18:47,231
or you don't want to take the vol.

1088
01:18:48,691 --> 01:18:49,871
Some of it's your understanding.

1089
01:18:50,071 --> 01:18:51,371
Some, some of it's your like,

1090
01:18:51,371 --> 01:18:52,991
some of you get people here

1091
01:18:52,991 --> 01:18:54,631
and I'd be happy to have debates with those people.

1092
01:18:54,731 --> 01:18:55,911
They'd look at some of the things I'm looking at

1093
01:18:55,911 --> 01:18:58,031
and like, well, I interpret what you're seeing

1094
01:18:58,031 --> 01:18:58,911
as this or that.

1095
01:18:58,911 --> 01:19:00,671
And that's fair.

1096
01:19:00,991 --> 01:19:04,471
Like there's two ways of looking at a lot of the things I'm describing.

1097
01:19:05,611 --> 01:19:06,171
We'll see.

1098
01:19:06,611 --> 01:19:09,411
That's what markets are supposed to do ultimately, right?

1099
01:19:09,431 --> 01:19:15,171
Is who's right, who's wrong, or who's review of what's happening more accurate or not relative

1100
01:19:15,171 --> 01:19:19,171
to what was expected, which is the other thing, right?

1101
01:19:19,231 --> 01:19:21,351
Where are expectations, right?

1102
01:19:21,431 --> 01:19:23,571
And that's pretty easy to tell in the Bitcoin community.

1103
01:19:24,051 --> 01:19:25,691
Yes, 100%.

1104
01:19:25,691 --> 01:19:28,611
I think the thing we probably both agree on is zero is the wrong percentage.

1105
01:19:28,911 --> 01:19:34,231
zero is the wrong percentage. And like, someone asked me like, when you sold, did you know you

1106
01:19:34,231 --> 01:19:39,291
were going to be right? I'm like, yeah, they're like, how I said, because one of the advantages

1107
01:19:39,291 --> 01:19:47,231
of having a big X account is having a thousand randos get on and mother F you all day, every day

1108
01:19:47,231 --> 01:19:54,271
when it goes public that you sold. This is like, if that's the reaction, knowing what I think I know,

1109
01:19:54,951 --> 01:19:58,231
I'm going to be fine. I'm not going to, I'm not going to have to buy it back at, you know,

1110
01:19:58,231 --> 01:20:02,211
whatever. Now, sentiment is changing quite a bit, right? We got sailors selling Bitcoin. We got a

1111
01:20:02,211 --> 01:20:06,191
lot of Bitcoin treasury companies being forced to sell. These things get me interested. There's a

1112
01:20:06,191 --> 01:20:11,091
lot of bomb signals right now. Yes. This is where, this is where I, you know, like there's not blood

1113
01:20:11,091 --> 01:20:16,871
in the water, but there's, you know, there's a few split lips. Yep. And okay. Now I'm, that's why

1114
01:20:16,871 --> 01:20:20,611
I say I might be being too cute. Like we might sit down and have another conversation, you know,

1115
01:20:20,651 --> 01:20:27,891
whatever, and six, 12 months and, you know, Luke, you got too cute. I'd be like, that's okay. Like,

1116
01:20:27,891 --> 01:20:29,851
Well, it seems certain you're not going to buy back higher.

1117
01:20:31,171 --> 01:20:33,211
It depends on events.

1118
01:20:33,531 --> 01:20:34,191
That's the thing.

1119
01:20:35,771 --> 01:20:40,131
One of my mentors, a long time ago, he said,

1120
01:20:40,171 --> 01:20:44,571
Luke, I've never seen someone change their mind as fast as you.

1121
01:20:48,291 --> 01:20:52,251
I go back to when I had already for a long time.

1122
01:20:52,251 --> 01:20:55,151
I've owned Bitcoin since 2013.

1123
01:20:55,631 --> 01:20:56,851
A little bit, not nearly enough.

1124
01:20:57,211 --> 01:20:57,391
I know.

1125
01:20:57,891 --> 01:21:05,711
And in 2020, I ran up 2017, crashed back down.

1126
01:21:06,011 --> 01:21:07,071
It's like, okay, right?

1127
01:21:07,131 --> 01:21:08,391
They launched futures.

1128
01:21:08,571 --> 01:21:10,231
And I was like, I mean, you can find my old tweets.

1129
01:21:10,291 --> 01:21:16,351
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.

1130
01:21:16,351 --> 01:21:17,491
I was so excited then.

1131
01:21:17,591 --> 01:21:19,831
And that was like marked the absolute top pretty much.

1132
01:21:20,011 --> 01:21:21,731
And sure enough, it was like, right?

1133
01:21:21,871 --> 01:21:24,191
So, and I thought, okay, that was it.

1134
01:21:24,251 --> 01:21:24,671
It was a bubble.

1135
01:21:24,811 --> 01:21:25,451
I've seen this before.

1136
01:21:25,551 --> 01:21:27,251
I saw this with gold and 11.

1137
01:21:27,251 --> 01:21:33,271
and I sell this NASDAQ I sell this that's all right and then 20 2019 picks up whatever okay

1138
01:21:33,271 --> 01:21:40,611
2020 it takes off back through 20,000 like a hot knife through butter and I look at my wife I go

1139
01:21:40,611 --> 01:21:46,991
this is this wasn't a bubble this is a currency thing we are like I'm totally wrong

1140
01:21:46,991 --> 01:21:52,871
and I am buying everything back and then some even though I'd sold a bunch at you know whatever

1141
01:21:52,871 --> 01:21:58,271
i had bought and traded around right so i'd bought a bunch and sold a bunch like 10 12

1142
01:21:58,271 --> 01:22:03,931
probably sold something 14 or something whatever yeah and i was like i'm wrong and i bought way

1143
01:22:03,931 --> 01:22:12,131
more than i ever did 20 21 24 26 30 and you know i sold a bunch really well at like 52

1144
01:22:12,131 --> 01:22:20,651
and i started buying some back at like 60 50 40 30 and i bought a ton under 30 and a ton under 20

1145
01:22:20,651 --> 01:22:31,171
so like i if if if if facts change i will change my mind so fast so fast uh facts as i interpret

1146
01:22:31,171 --> 01:22:36,451
them they should be facts but you know the the the fundamentals as i see them and something and i say

1147
01:22:36,451 --> 01:22:40,991
that because there's there's sentiment there's what have you right and there's multi this is a

1148
01:22:40,991 --> 01:22:47,031
multi-pronged thing look if sentiment completely gets wiped out if and there's a lot of different

1149
01:22:47,031 --> 01:22:52,491
ways that can happen great price price there's numbers in my mind where if it were traded there

1150
01:22:52,491 --> 01:22:58,531
i would be a big buyer almost without question um you know with the asterisk of like hey as long as

1151
01:22:58,531 --> 01:23:04,131
it wasn't like you know some crazy you know of course quantum all yeah yeah quantum has broken

1152
01:23:04,131 --> 01:23:09,691
all of it right then then okay that is but i don't think it's gonna happen um anyway that's that's

1153
01:23:09,691 --> 01:23:14,551
i'm trying to just kind of share the thought process of just like this is what's going on up

1154
01:23:14,551 --> 01:23:18,151
here basically every waking moment of my life.

1155
01:23:18,691 --> 01:23:19,251
I love it.

1156
01:23:19,451 --> 01:23:19,951
I'm excited.

1157
01:23:19,993 --> 01:23:23,653
you buy back, Luke. We've talked about a lot there. Is there anything we didn't talk about

1158
01:23:23,653 --> 01:23:28,273
that you wanted to cover? No, I think that covers it.

1159
01:23:28,553 --> 01:23:32,833
It's been awesome. Thank you for having me. You made me come out to Cleveland and it's been nice.

1160
01:23:32,993 --> 01:23:36,453
I've not been here very long, but it's been good. Thank you for insisting. It's a beautiful place.

1161
01:23:36,513 --> 01:23:40,513
It is the nice weather capital of the world for about another 12 hours.

1162
01:23:41,373 --> 01:23:44,913
No, it's beautiful this time of year. Cleveland's great May to October.

1163
01:23:44,913 --> 01:23:46,593
and then after October

1164
01:23:46,593 --> 01:23:48,573
we get into the winter stuff

1165
01:23:48,573 --> 01:23:49,613
and there's, you know,

1166
01:23:49,653 --> 01:23:51,513
if you said, hey, can I come see you in February?

1167
01:23:51,613 --> 01:23:53,733
I'd be like, no, don't, don't.

1168
01:23:53,753 --> 01:23:54,473
Don't do it to yourself.

1169
01:23:54,713 --> 01:23:55,033
Don't.

1170
01:23:55,133 --> 01:23:58,433
It's, yeah, you just, it's like nuclear winter.

1171
01:23:58,533 --> 01:23:58,913
It's great.

1172
01:23:59,073 --> 01:23:59,493
It's cold.

1173
01:23:59,913 --> 01:24:00,333
No fun.

1174
01:24:00,713 --> 01:24:01,493
Well, I appreciate you.

1175
01:24:01,593 --> 01:24:02,333
Thank you for doing this.

1176
01:24:02,553 --> 01:24:03,613
Always better to do it in person.

1177
01:24:03,853 --> 01:24:04,413
Oh, thanks.

1178
01:24:04,553 --> 01:24:05,833
Thanks for having me.

1179
01:24:06,073 --> 01:24:06,433
All right.

1180
01:24:06,593 --> 01:24:09,453
I'll put the newsletter in the show notes.

1181
01:24:09,553 --> 01:24:10,993
It's one of the ones that I'd never miss.

1182
01:24:11,473 --> 01:24:11,853
Thank you.

1183
01:24:11,993 --> 01:24:12,793
I appreciate you, Luke.

1184
01:24:12,813 --> 01:24:13,193
Thank you.

1185
01:24:13,453 --> 01:24:13,813
Absolutely.

1186
01:24:13,953 --> 01:24:14,273
Thank you.

1187
01:24:14,913 --> 01:24:44,893
Thank you.