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You've had a dynamic where money has become freer than free.

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We talk about a Fed just gone nuts.

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All the central banks going nuts.

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So it's all acting like safe haven.

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I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins.

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In the world of fiat currencies, Bitcoin is the victor.

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I mean, that's part of the bull case for Bitcoin.

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If you're not paying attention, you probably should be.

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Mr. Broad, welcome back to the show.

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Thanks, Marty. Great to be here.

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What a week. What a week.

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Thinking about I've had a lot of time to prepare for the show today because we thank you for the last minute agreeing in this morning where you are.

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night where I am. We agreed to this recording early in the morning for me. You have since gone

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to bed, woken up, gotten your day started, and here we go. And I think to start off,

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this phrase has been in my mind for the last few days because my partner at 1031, John Arnold,

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He writes our newsletter. And on Saturday, the sort of line he ran with was the Warren Buffett line, price is what you pay, value is what you get.

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And I think we're in a market environment where people really need to dig into that first principle and understand where the value is, despite where prices may be, especially as it pertains to Bitcoin.

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And you had that incredible tweet you sent out, I believe, yesterday or the day before about Bitcoin.

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You've had some commentary on Warsh.

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And I think this is a good sort of framing to jump into.

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Well, where are prices and where's the actual value in your mind out there?

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Yeah, so I think that's a key question for any investor.

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So many people say to me, you know, where do you think the market is going?

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Or where do you think gold is going?

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Where do you think Bitcoin is going?

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And and when they ask it, they mean the next move.

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I mean, where's it going to be tomorrow?

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Where's it going to be next week?

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Where's it going to be next month?

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And and the answer is, I don't know.

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Nobody knows.

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Like, I never know whether the next 10 or 20 percent is up or down.

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And people who claim they know, you know, it's it's sort of like that old broker's trick

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where they send, you know, half the people something saying buy the stock and the other

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half sell the stock.

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And then, you know, the half that it works with, they send them something else, buy the stock, sell the stock and they do it.

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And, you know, at some point they've given two or three good recommendations in a row to somebody.

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But it's not really predictive.

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And so, you know, the question that I ask them with things like gold and silver and Bitcoin and these long term hard assets, I say to them, where do you think it's going to be five or 10 years from now?

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Because I'm prepared to hold for a really long time.

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And that's that's how you make a ton of money. That's how, you know, you start to make returns in the hundreds of percent rather than trying to scalp the next five or 10 percent.

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And I think that's a key thing. And in the case of, you know, Bitcoin in particular, it reacted really badly to the Walsh nomination.

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I mean, in fairness, gold and silver did, but they've recovered, you know, for the most part, Bitcoin hasn't yet.

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And I think the Warsh nomination was really interesting.

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First of all, the president surprised people.

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They were expecting an ultra-dub with good reason.

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I was too.

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Based on his commentary, that's what you would expect.

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The market generally doesn't like surprise, Marty.

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I mean, you know, you've seen it.

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When the market is surprised, even it's a good surprise,

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and they don't like something they weren't expecting, right?

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Right. And so there was this narrative, which I disagree with. But let's let's start with the narrative.

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The narrative was Warsh is a hawk. He's going to raise rates. And in doing so, you have a higher yielding dollar against zero yield hard assets, gold, silver, Bitcoin that don't have a yield, but have a lot more value long term because they're not debased on an annual basis.

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And so the thinking is, well, wait a minute, if Warsh is going to raise rates, he's going to be a hawk.

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Then that's the place where fiat has an advantage over zero yield hard assets.

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And it'll extend that advantage. And so you add people that were selling hard assets, again, gold, silver, Bitcoin and buying dollars.

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Right. That's an effectively what they were doing. And I disagree.

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So that is what was happening. And then you had rounds of deleveraging. So a lot of people had derivatives products where they were very, very leveraged. There's a huge paper silver market. There is a paper gold market. A lot of the people in Bitcoin now are using financial derivatives that effectively increases the tradable supply of Bitcoin and allows them to push the price around. But they're on margin too.

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And so when prices drop, collateral is lower and margin requirements get tightened and people have forced selling.

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They have non-discretionary selling.

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And so when you're talking about price and value, you had people selling regardless of the value, regardless of the price.

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It was you need to raise capital today.

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And so they sell.

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And then, you know, in what George Soros used to call reflexivity, that selling causes prices to drop.

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and then people will in turn say, oh no, I have another round of margin calls. And so there's

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more forced selling. And so the more forced selling and deleveraging there is, the lower

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the price will drop, the more forced selling there will be. And that continues until there's either

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capitulation where new money comes in, or you just like people are deleveraged enough that they don't

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have to keep selling on a regular basis. And that's where you hit your bottoms.

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Um, now the reason I think the, the Warsh take by the market was wrong, first of all,

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Warsh is not a hawk.

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He has come out publicly and said, Hey, I favor lower rates.

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And as soon as he was nominated, I wrote a piece, I put it, you know, in our weekly five

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things, I put it on the DKI blog.

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But I basically said, look, Warsh wouldn't have gotten the job if he wouldn't have promised

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President Trump lower rates.

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because it wasn't going to happen.

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And then it turns out last week,

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the president spoke with NBC News and said,

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yeah, Warsh told me lower rates.

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I wouldn't have given the job otherwise.

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And so somebody might say, well, of course,

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of course he said that to the president.

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He wanted the job, but he doesn't really mean it.

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But Marty, what do you do in a situation

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where somebody's public comments

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match their private comments?

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Like that's if their public comments

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match their private comments,

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you have a pretty good idea of where they stand. So that's point number one.

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Point number two, Warsh may be sitting in the big chair, but he's not the whole Federal Reserve Open Market Committee.

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He's got one vote. So if Warsh is a hawk and the other 11 members are pretty dovish, and they are, he can't outvote them.

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He can only try to persuade them. He can't move the whole room. He just gets to sit in the big chair.

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But at the end of the day, when they vote, he only has one vote.

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And then the final thing, I don't know that there's a whole lot the Federal Reserve can do to really move long term rates.

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You know, this is one area where I do disagree with the president.

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President Trump is saying, hey, I want the Federal Reserve to lower rates.

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But that that doesn't work.

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The Fed only controls the overnight rate.

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The bond market controls the rest of the yield curve, everything from one week to 30 years.

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And so for people who don't follow this on a daily basis, let's just give the best, clearest, most recent example.

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The Federal Reserve started cutting in September of 2024.

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And over the last 16, 17 months, they've cut 175 basis points.

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That's just a fancy finance way of saying 1.75%, just under 2% of overnight rate cuts.

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And yet the yield on the 10-year rose.

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Now, granted, it's come down a bit since then, but over that time, the yield on the 10-year treasury actually increased.

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And so, you know, somebody might say, well, wait a minute.

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Why is this happening?

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The Wall Street Journal even said somehow, right, somehow we're getting higher rates.

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It's not somehow.

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The bond market is correctly pricing in higher long-term inflation.

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That's exactly what's happening.

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So the president can put Warsh in.

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Warsh can say, I want to cut. Warsh can cut. The Federal Reserve can cut. But the bond market is saying, we don't believe you. And we're going to, you know, set the real borrowing rate where the five year is. That's where corporates get priced. The 10 year, that's where mortgages get priced. Right. That gets priced off of future inflation projections.

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So there just isn't that level of control anymore. Now, the one place where I think the Bitcoin bears have made a valid point is they've said, yeah, but, you know, Warsh is in favor of QT. OK, fancy way of saying quantitative tightening, which, again, that's just a finance way of saying they're going to reduce the money supply.

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So what happened was the Federal Reserve had a balance sheet of about $3 trillion.

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They do need a certain amount for liquidity.

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$2-3 trillion is what people generally think would be normal or reasonable.

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Let's just accept that number is true.

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During COVID, that number ballooned to $9 trillion, including trillions of dollars of mortgage-backed securities, which the Federal Reserve is not legally allowed to hold.

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Anyone wants to know why housing prices are so expensive?

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look to the Federal Reserve, right? It's not your greedy broker. They're not taking that much money.

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So what happened then was Powell's Fed started to cut on a monthly basis. And I was skeptical

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that they would cut very much. But to their credit, they took a good $2, $3 trillion

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out of that total. And right now the Fed balance sheet is a little over $6 trillion.

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Okay, that was real progress. Now, to the people who are saying, well, wait a minute,

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Warsh is going to engage in quantitative tightening. He's going to tighten the money supply. That's bad for Bitcoin.

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OK, fair enough. But over the last two years, Powell's Fed has cut almost three trillion dollars off the balance sheet.

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We got record equity prices, record gold prices, record silver prices.

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And just last October, which is only a few months ago, record Bitcoin prices.

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Clearly, it's not everything. And then the final point I would make about that is let's say Warsh comes in and he cuts three trillion dollars.

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off the Fed's balance sheet on day one. Now, that's a ridiculous example, and I'm deliberately

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being extreme. But let's say that happens. OK, that's one year of congressional overspending.

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Give it 12 months and M2 will be right back where it was. Right. So the most he can do

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is offset one year of congressional overspending. And look, if you're trading Bitcoin, if you care

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where the next 10 or 20%, which direction that's going to be, that matters. But if you're somebody

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with a long-term timeframe, if you're looking out five, 10 years and you own Bitcoin because it's a

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better option than constantly debased fiat, right? Or the dollar, the yen, right? Fiat is a government

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currency. If that's why you own it, then wait 12 months. And for real Bitcoiners, that's nothing,

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right we've we've been through worse than that together that is a blip on the radar in the the

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yeah on the large scale of things and i wanted to um touch back on the 10 year and the fact that

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you have the bond market pricing in uh inflation elevated inflation and obviously with qt if it's

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still on the table. Many people are saying like, why does the market think that inflation is going

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to be high? What do you think are the drivers of that inflation? Is it this mad dash for AI

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infrastructure having an effect on electricity prices, which is the raw input, is this

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re-industrialization, tariff regime, a sort of implicit acknowledgement that at some point

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there may be a liquidity crisis that forces the Fed's hand and Treasury's hand to really

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turn on the monetary spigots. What do you think the market's seeing right now in terms of inflation?

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All right. So we've got the proposed ideas. Let's take them all here. Tariffs, AI, electricity.

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What were the other things you mentioned?

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um ai tariffs electricity re-industrialization um potential liquidity crisis that forces the feds hand

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what do you what do you think the market's trying to say all right so i have an opinion on this but

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let's take these things one at a time right let's let's approve or debunk each one of those um

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So tariffs, it's clearly not that, right? You remember Liberation Day last April,

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all the fiat economists went crazy. Oh, no, he's going to crash the global economy.

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That didn't happen. Oh, no, he's going to crash the economy of the United States.

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That didn't happen. Oh, no, we're going to have a huge resurgence of inflation. Now, listen,

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I think inflation is too high. I think the CPI is understated. But when you look at the durable

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goods numbers, inflation did not spike. None of this happened. And then, you know, to the credit

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of the fiat economists, they came out over the summer and they said, well, there's supply chain

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issues. It'll take some time. We really won't know until September or October. Okay. You know what?

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That was a fair prime, right? Like to say, it'll take a while for this to work its way through the

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system. You'll start to see higher prices. Well, guess what? That still hasn't happened. And it's

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been almost a year. And if these fiat economists had any integrity at all, they would simply say,

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I was wrong. But they haven't done that. Where's Paul Krugman coming out and saying,

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I got it wrong. They don't do that. And listen, Marty, at Deep Knowledge Investing,

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we don't get a lot of stock picks wrong. But when I do, you better believe I write to my

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subscribers in very clear language. I was wrong. This is why I was wrong. I apologize for the error.

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Right. We lost money. I screwed up. And and you have to own that mistake or you don't learn from it.

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But these Keynesians, these fiat economists, like they haven't admitted they were wrong about tariffs.

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And so, you know, we can talk about the reasons why tariffs haven't caused inflation.

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And I have opinions on that. I actually think Pompliano put out a great piece on it last year.

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Like there's there are reasons to believe that it wasn't going to cause a problem.

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That was my opinion, and it didn't. And people should admit it on the electricity thing.

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I think that's a really big deal to families. I think, you know, when you own a home and all of a sudden your electric bill is up three hundred, five hundred, six hundred dollars a month, you know, over where it was a year ago.

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And it's because, you know, Amazon and Google have bought up all the power in your area because they don't care how much they pay.

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And they have, you know, they have a bigger balance sheet than any of us do.

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I think that's really hard.

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I think that's brutal.

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But I also don't think that's been an inflation driver.

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And because take a look at overall energy prices.

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They have been rising.

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And, you know, gas is insanely cheap right now. Right. So a lot of these prices have come down. And so, yeah, it's unpleasant to have a high electric bill. But the gas bill for your car to commute to work is down as well.

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So I don't know. I think long term, what we're going to have is a gigantic increase in energy production capacity.

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I think we're entering a new golden age for nuclear power.

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The president has done two things. One is allocated a billion dollars for 10 Gen 3 nuclear plants.

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Those are the big ones. We're also recommissioning three decommissioned reactors in the Midwest.

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That's never been done before. And then I own a ton of uranium and also, you know, an SMR company, a small modular reactor company.

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The ability to start to build small nuclear reactors very quickly and roll them out and start to produce a lot of power is there.

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Now, is that going to happen right away? No.

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But long term, I think, you know, as long as we keep building power generation and I'm hoping nuclear is the answer there, I think we'll be all right.

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Industrialization, completely not worried about that.

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And the reason is the economy that we've had over the last 40, 50 years has involved outsourcing everything.

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In the United States, we no longer make things.

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Except for Intel, we don't have the ability to make our own semiconductors.

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We don't make our own pharmaceuticals.

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We can't build ships. More and more cars are being built overseas.

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Even the cars we are building in the United States, we're getting whole components, not just parts, like entire systems being shipped from overseas.

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There's a lot we used to be able to make that we can't make anymore.

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I think we need to reverse that.

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I think having a country where you know we only export dollars in financial services that not going to work It not going to work for most of the country and it certainly not going to work

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for the rest of our lives. That's not a long-term plan. You need to be able to produce things. So

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listen, even if that creates inflation, you do have a situation where people will have better

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wages because of it, and the quality of life won't drop. So the thing that I'm left with,

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I do think we're facing a lot of inflation, but it's all related to congressional overspending. And unfortunately, that's not a partisan issue. We can't vote our way out of it. Both parties overspend. Democrats overspend and Republicans run for office saying, this is crazy. These Democrats are spending like crazy. We're the adults in the room. Elect us. We'll be fiscally responsible.

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And Marty, do they ever cut spending or do they take the crazy Democrat budgets and say, oh, that's our baseline.

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We're going to spend more money from here.

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The latter, even if even if it becomes apparent that a lot of the spending is overt fraud, which has happened over the last few months.

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And and I think people understand that it's wrong. But what I really like and what I'm trying to do is help people understand how that theft, that wasteful spending affects our quality of life.

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And it's really easy to say, well, you know, we should have pensions and Social Security.

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OK, yeah, fair.

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OK, good.

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Right.

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But, you know, we also need to have free health care for everybody.

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OK.

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And now, you know, we're going to pay for everyone's housing and everybody's food and, you know, welfare payments.

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And it's really easy for people to say, well, you heartless monster, you horrible, heartless monster.

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Why?

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You know, why are you against all of that?

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And you don't have to be for it or against it.

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What you have to do is tie it so that people understand that that spending and the government waste and the fraud and the theft.

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You if you're listening to this, you are paying for that and you're paying for it through inflation.

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You're paying for it through higher prices. You're paying for it through housing that's not affordable, which leads to a lower merit rate, which leads to a lower birth rate.

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Right. Our whole society is experiencing cataclysmic changes simply because of this.

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And if you want to say, well, hey, I'm still in favor of it. I still think we need all of these government programs and we need to spend six trillion dollars a year.

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You know, I think it's five trillion on balance sheet and another three or four trillion off balance sheet.

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Right. And we should take care of everybody and pay for everything. And you're a heartless monster if you disagree.

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OK, cool. But then own it and explain to every young person, just so you know, you're not going to be able to buy a house because we're paying for these programs.

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That's why everything is so expensive. And we're going to keep debasing the currency and make it impossible for people to save in dollars.

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So now everybody needs, Marty, the same skill set that you and I have or in the absence of developing that skill set.

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And in my case, you know, it came working 80, 90, 100 hours per week for years and years and years and working every weekend and studying and learning like that.

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That financial education doesn't come cheap. Right.

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And so, you know, what we have instead is all kinds of insane gambling behavior.

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People say, why are these people throwing money at, you know, at crypto, not Bitcoin, crypto, right?

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Why are they buying Dogecoin, which was set up as a joke?

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Why are they all on, you know, sports betting or prediction market betting?

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And the answer is because it's a casino, because people understand that the existing system doesn't work for them, that they're not able to build wealth in it.

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They can't save in dollars.

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and so you know it's kind of like you know win big or die trying and it's turned everybody into

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a bunch of gamblers and that's that's not what you want you don't want a bunch of young people

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who are gambling you want people who are working and building and saving and investing when i talk

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about these things these are not just financial changes these are societal changes and again i

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I can see it in the comments already.

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Hey, you're a heartless monster.

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No, I'm not.

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But own the consequences.

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Explain to people, your lives have changed for the worse because we think this is worth doing.

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Explain it like there are tradeoffs because there are.

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These are all tradeoffs.

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You can't have guns, butter, bread, circuses, and sound currency.

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Can't exist.

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People need tough love.

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Tough love is not a bad thing.

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It is a form of love.

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It's abrasive to some people, but it's all out of love.

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You have to ask the hard questions.

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And I had a good friend describe the economy you just articulated well, the high-velocity trash economy.

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That is what we've gotten to, enabled by fiat, where I'm sure you've seen the meme.

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But everybody and their mother, particularly, particularly if you're a younger millennial or Gen Z, they're all speed running to to escape the permanent underclass with the emergence of of A.I. taking over, taking over the world right now.

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you know what marty i you're completely right and and let me like give you an example one of my

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friends he is a you know talented guy in his 30s he's smart well educated has a really good

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technical skill set very disciplined you know he's a regular at the gym he develops new skills he's

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charismatic you know socially adept um this is somebody you know he's got a real job and he has

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the whole thing together. But it's so hard for him to build wealth that he's busy buying zero

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data expiration options. And I've spoken to him. He doesn't know anything about finance.

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He took like a few thousand dollars. I think like five thousand dollars, ran it up to one hundred

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sixty thousand dollars. Like, OK, wow, that that's that's incredible. That's impressive.

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And I said, well, then what happened? He said, oh, yeah, I lost it all.

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okay and and and he doesn't know why he doesn't know why he made money he doesn't know why he

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lost money he just knows he was in the the financial market casino and he's not thinking

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about how do i invest over the next 10 20 or in his case you know 50 years he's thinking about

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00:25:24,808 --> 00:25:29,848
how do i make you know 40 percent in the afternoon so freaks if you've been listening for a while

274
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It's very pervasive. You see now with the prediction markets,

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in the open claw AI bot craze that's taken over the internet over the last few weeks,

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people are immediately like first thing they go build is a trading bot that can scour poly market

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for markets that have large arbitrage opportunities and trying to automatically flip these prediction market bets.

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00:27:44,528 --> 00:27:49,208
Oh, they're buying a pie market and selling on Kalshi, something like that?

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00:27:49,408 --> 00:27:51,148
Well, that is like, there's like weather markets.

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Like they're basically betting on the weather, what the actual temperature in Milan will be at 12 p.m. tomorrow.

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And they have AI running the strategies for them.

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But again, to your point, the economy and the individuals within the economy are forced to think like this.

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And it's incredibly acidic to social cohesion and society at large.

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And it's something that is becoming more and more apparent and more and more confusing.

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Maybe the fact that this environment exists isn't more confusing, but the way out, a clear way out is becoming more and more confusing,

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especially, again, once you layer on AI specifically and the potential job disruption that can come if it is successful at replacing humans for white collar jobs.

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And that's one thing you wrote in your weekly letter this week was highlighting the CapEx spend that's planned for these hyperscalers specifically.

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And it's funny, I was actually talking about it earlier today with John from our team.

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And it's Meta, Microsoft, Google, or yeah, Google and Amazon.

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Just the four of those based off their most recent earning calls from earlier this month,

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600 plus billion in CapEx expenditure for this year alone.

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Insane numbers.

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Yeah, yeah, more than half a trillion dollars.

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and you know here's the really interesting thing i i think help me out of this i think it was was

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harrison kupperman cuppy um who pointed this out i think he was the one who called a bunch of people

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running these ai data centers and said what's your business model how are you going to make

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money on this and all of them said we have no idea this doesn't make sense to us but everybody's

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doing it so we just figured somebody else had figured it out and this was the thing to do

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and you know it reminds me you know it's weird that in general the hedge fund business tends to

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be guys who do a ton of work they know their positions very well but every now and then i

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find something where you know i talk to a bunch of you know hedge fund guys and they're all buying

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something and the thesis is just wrong it doesn't make sense basic research would have uncovered

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it doesn't work. And it's not what they thought it was, but they're all counting on each other.

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It's basically Fund A is saying, well, I know we're good because Fund B bought it and they're

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really smart. And they're saying, well, we bought it because Fund C bought it and they're really

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smart. And Fund C is really smart. And then Fund D says, well, Fund A bought it and they're really

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smart. And it ends up being a circular thing where if you basically research your way down

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to the bottom of it, you find out that it was some like 23 year old analyst at one of these funds

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who, you know, who's smart and hardworking, but misunderstood something. They got one wrong piece

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of information out there and everybody is counting on everybody else to do the work.

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And I find these situations on occasion and then you want to take the other side of it.

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I think the same thing happened in the AI data center space where everybody's saying, well,

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this doesn't make sense to me, but everybody else is doing it. They must be right.

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Right. The people that matter are saying, well, Google's doing it. Google's saying Microsoft is

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doing it. Right. That Microsoft is saying, well, it's working in Amazon, but is it really working?

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You know, the thing that I find remarkable about this is these guys, they're not only spending

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hundreds of billions of dollars without a business plan to earn a return on that.

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it's not just that, Marty. It's that the spending has to keep going. It's, you know, back in the

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90s, there was this really interesting thesis on the companies that built out the infrastructure

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for the internet, like the cable companies running fiber everywhere. And the bulls were saying,

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look, this is incredibly valuable. They own these assets. The bears were saying, yeah,

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but they have to keep paying to roll it out. But the answer was, once you rolled out fiber to a

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neighborhood, then you had that market, right? You owned the fiber to that neighborhood. You

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didn't need to keep spending for it. The issue with AI is every six months, it's a completely

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new product, right? Things move two, three months at a time. And so if you spend $500 billion,

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dollars, half a trillion dollars on AI, you have to keep spending or your model is irrelevant

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within six months, right? Anthropic will just take over. And the thing that really worries me

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for the equity markets, and this I think is maybe the biggest risk to the equity markets today,

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we've all seen how much of the stock market return has depended on six or seven companies

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over the past few years. It's been our returns have been incredibly concentrated. So let's take

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a look at what's going on at OpenAI. First of all, they came out and said that they expected to lose,

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I think it was $125 billion over the next four years-ish. Okay. Well, they don't have $120

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billion, but that's not really the problem because if somebody wants to say, well, come on,

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They can do an equity raise. They can they can raise one hundred twenty five billion dollars.

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My answer to that is sure. Yeah, I I believe that. I believe they can.

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But, Marty, they have taken on one point four trillion dollars of of liabilities, of promises to Oracle, to NVIDIA, to Microsoft.

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up out, right? So they need $1.4 trillion plus another $125 billion of losses. They need $1.5

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trillion of cash to do what they've said they're going to do. And if they don't deliver,

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then you're going to have slowing growth rates at places like NVIDIA, which could literally take

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down the entire stock market. Or you have situations, Oracle right now, they're spending

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real cash to build up data centers for open ai well if open ai doesn't have the money to pay oracle

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00:34:18,868 --> 00:34:25,428
that's going to be a problem right because the money is spent and so you know listen i i pay my

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20 a month um for um for chat gpt but that's that's not going to get them 125 billion dollars

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and it's certainly not going to get one and a half trillion dollars so i don't know where these guys

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are going to earn a return on any of this.

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It's like the numbers are insane.

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Just thinking back to like TARP

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and the bailout of 2008,

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like what was it, 700 billion, 800 billion bailout

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was unfathomable back then.

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And then you have these private companies

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that are 1.5 trillion in the hole.

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It's like, yeah, we'll get to it.

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And to your point about a workbook too.

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00:35:06,868 --> 00:35:08,268
Obama was talking,

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00:35:08,268 --> 00:35:11,888
He was talking about bailing out the whole economy with a trillion dollars of shovel-ready projects.

380
00:35:12,968 --> 00:35:13,128
Right?

381
00:35:13,308 --> 00:35:15,968
The trillion-dollar coin was a meme.

382
00:35:16,168 --> 00:35:18,148
Like, that's all we need to do is print the trillion-dollar coin.

383
00:35:18,608 --> 00:35:19,088
Sup, freaks?

384
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This rep was brought to you by our good friends at Ligos Finance, Celsius, BlockFi, FTX.

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They took your Bitcoin and gambled it away.

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Ligos can't because they never hold it.

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Non-custodial lending on Bitcoin's base layer.

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Sup, freaks?

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When you take Bitcoin seriously, you start with custody.

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You want to control your keys, avoid single points of failure,

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and make sure your savings cannot disappear because you or someone else screwed up.

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397
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398
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399
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400
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401
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402
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405
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406
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408
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409
00:36:43,648 --> 00:36:55,488
It's insane, but to your point about these hyperscalers, specifically in Oracle, that's the one, because it's weird.

410
00:36:55,488 --> 00:36:59,968
again it's like this like i said it's very unclear what the other side looks like because i can squint

411
00:36:59,968 --> 00:37:03,808
and can see them maybe being able to thread the needle like i was telling you before we hit record

412
00:37:04,528 --> 00:37:10,528
i've been using we've been using ai here at tftc and it's helped our productivity immensely but as

413
00:37:10,528 --> 00:37:17,248
you said these models aren't perfect it can give you uh a objectively wrong answer with confidence

414
00:37:17,248 --> 00:37:41,476
And what I come to find is if you like what makes we use Claude predominantly what makes it very efficient and product productive for us specifically is knowing how to feed a context to pull from Like when we doing things it like OK I want you to pull from this source this source and this source specifically Don deviate from these things

415
00:37:41,476 --> 00:37:44,236
and help us do the work focused on these things.

416
00:37:44,236 --> 00:37:46,036
And it's very productive there.

417
00:37:46,156 --> 00:37:48,176
But I had a conversation with Mel Madison

418
00:37:48,176 --> 00:37:53,836
talking about what could sort of perturb this AI wave.

419
00:37:53,836 --> 00:37:56,716
And it's just people simply not knowing how to implement it.

420
00:37:56,716 --> 00:38:10,716
And so I think that's a big problem that they have either not knowing how to implement it or just not trying to because they understand that if they do it successfully, it could replace their job at the end of the day.

421
00:38:10,716 --> 00:38:17,496
So you have this sort of psychological and implementation problem on one side, too.

422
00:38:17,836 --> 00:38:24,336
And if those are solved, could lead to the revenue that could get a return on invested capital for them.

423
00:38:24,416 --> 00:38:31,176
But it seems like it is a needle that needs to be threaded, a very, very thin hole, too.

424
00:38:32,436 --> 00:38:37,256
Yeah, the other day, somebody asked me if I thought my job was going to be replaced by AI.

425
00:38:37,256 --> 00:38:45,156
and look at you know everybody may be one day but um you know first of all the way i make money

426
00:38:45,156 --> 00:38:51,096
is by taking the same information everybody else has and seeing it differently that that kind of

427
00:38:51,096 --> 00:38:57,936
vision as of today is unique to human beings i mean could ai see patterns differently eventually

428
00:38:57,936 --> 00:39:03,776
maybe you know but the key thing is it's all right to use it for analysis but you need to know

429
00:39:03,776 --> 00:39:11,856
where to check. And this issue of giving wrong answers with confidence is it's a really big deal.

430
00:39:11,856 --> 00:39:19,896
And, you know, I had a situation a few months ago. I was in Spain. I was in actually Ibiza and I

431
00:39:19,896 --> 00:39:28,116
wanted it or Ibiza as they pronounce it, you know, and I was racing to get the ferry to Mallorca.

432
00:39:28,116 --> 00:39:31,416
and, you know, I was running a little bit late

433
00:39:31,416 --> 00:39:34,076
and the harbor is really large.

434
00:39:34,296 --> 00:39:35,856
You know, it curves around.

435
00:39:35,936 --> 00:39:37,516
You have to find the right spot.

436
00:39:37,936 --> 00:39:39,936
And so I go to ChetGVT and I say,

437
00:39:39,976 --> 00:39:42,456
hey, give me a Google map length.

438
00:39:43,096 --> 00:39:44,376
Which direction is it?

439
00:39:44,376 --> 00:39:46,536
Because that harbor is really big.

440
00:39:46,956 --> 00:39:49,236
And it gives me a length and I'm following it.

441
00:39:49,296 --> 00:39:50,316
And then like I take a look,

442
00:39:50,616 --> 00:39:51,916
it's in the middle of the ocean.

443
00:39:52,916 --> 00:39:55,256
I'm like, okay, I idiot.

444
00:39:55,436 --> 00:39:57,396
I just told you I'm running late.

445
00:39:57,396 --> 00:40:03,376
you like, I don't care how you got it wrong. But if you give me a map link in the middle of the

446
00:40:03,376 --> 00:40:09,596
ocean, that's clearly not the right place to go, right? That's the boat is not loading passengers.

447
00:40:09,956 --> 00:40:15,216
The port, the harbor is not in the middle of the ocean. So, you know, you get stuff like that. And

448
00:40:15,216 --> 00:40:21,296
then you also get like weird things. There's a whole agentic issue, which hopefully will be solved

449
00:40:21,296 --> 00:40:26,636
one day. But, you know, I'll say, hey, I'm looking for a place to stay. And I'm, you know,

450
00:40:26,636 --> 00:40:28,416
I'm going to go to this place for the weekend.

451
00:40:28,956 --> 00:40:31,956
And it'll say, well, here are the three or four places that I think are best.

452
00:40:32,056 --> 00:40:32,816
OK, that sounds good.

453
00:40:32,836 --> 00:40:39,416
And it'll say, would you like me to email each of those places and see if they have availability

454
00:40:39,416 --> 00:40:40,916
and what their rates are for the weekend?

455
00:40:41,556 --> 00:40:42,496
Yeah, that would be great.

456
00:40:43,156 --> 00:40:47,516
And then it'll end up saying, OK, well, you know, or would you like me to call them?

457
00:40:47,556 --> 00:40:48,076
Yeah, go ahead.

458
00:40:48,176 --> 00:40:48,636
Call them.

459
00:40:48,776 --> 00:40:49,556
Go do that.

460
00:40:50,096 --> 00:40:52,936
And then it'll say, well, I can't actually do that.

461
00:40:52,956 --> 00:40:54,416
But if you want, I can give you the phone number.

462
00:40:54,416 --> 00:40:58,696
I can't actually send an email, but if you want, I'll give you the email address.

463
00:40:59,076 --> 00:41:01,236
I'm like, that's not it.

464
00:41:01,296 --> 00:41:10,816
It reminds me of that really old Seinfeld episode where Kramer's phone number ends up being very similar to the number people called like movie phone.

465
00:41:11,516 --> 00:41:14,836
Right. You know, if you want this movie, press one.

466
00:41:14,916 --> 00:41:16,016
If you want this movie, press two.

467
00:41:16,056 --> 00:41:18,176
And then people would press the button and he wouldn't know what it was.

468
00:41:18,176 --> 00:41:22,436
And he would end up saying, why don't you tell me the name of the movie you want to see?

469
00:41:22,436 --> 00:41:28,576
like that's i feel like i'm in the middle of a 90s seinfeld episode when i'm talking to chet gpt

470
00:41:28,576 --> 00:41:35,016
yeah i will say though the agentic stuff is getting better like i i spun up one of these

471
00:41:35,016 --> 00:41:41,236
agents a few weeks ago i gave it its own email and it can successfully send emails on command or

472
00:41:41,236 --> 00:41:48,376
i'll cc it on emails and it's able to basically um give me a synopsis i'll cc it on emails and

473
00:41:48,376 --> 00:41:52,696
at the end of the day be like okay what do i need to respond to and it does a good job of highlighting

474
00:41:52,696 --> 00:41:58,776
that so it is getting better into the point of threading the needle and the capex spend like

475
00:41:58,776 --> 00:42:02,616
that's the thing they need to spend more to your point because these models are progressing at such

476
00:42:02,616 --> 00:42:07,736
a rapid pace and i think that's the big question and everybody's buying like when do we get to a

477
00:42:07,736 --> 00:42:12,536
point where the models are good enough to do everything and you can have confidence that

478
00:42:12,536 --> 00:42:24,516
you can build out infrastructure and acquire a sort of GPUs, a number of GPUs with a certain

479
00:42:24,516 --> 00:42:29,756
firmware, hardware, or a certain caliber, and have confidence that you'll be able to plug that in and

480
00:42:29,756 --> 00:42:37,116
run it successfully and profitably into the long run. And I have no idea when we're going to reach

481
00:42:37,116 --> 00:42:40,596
that point, but I think that's the big question that needs to be answered. But going back to your

482
00:42:40,596 --> 00:42:47,076
point on Oracle, that is the one chart I've seen floating around that does give me pause and makes

483
00:42:47,076 --> 00:42:53,276
me think that the potential for dot-com like blow up in this, um, this part of the market is, is,

484
00:42:53,276 --> 00:43:02,896
um, a serious possibility is the, the CDS value of, uh, Oracle's, um, debt. So it looks like that

485
00:43:02,896 --> 00:43:08,456
spike in the yields on that debt spiking pretty high, almost at dot-com levels as well, which is,

486
00:43:08,456 --> 00:43:15,576
would not be good so i i agree with you and i actually think the problem is worse and here's why

487
00:43:15,576 --> 00:43:21,896
if oracle has problems because they spent money building out data centers and open ai doesn't have

488
00:43:21,896 --> 00:43:28,336
the money to pay for those data centers um that means open ai doesn't have the money to pay nvidia

489
00:43:28,336 --> 00:43:35,176
for the next x number of you know blackwell processors or you know whichever one comes next

490
00:43:35,176 --> 00:43:44,776
what happens to not only the valuation of NVIDIA, but the entire market index,

491
00:43:45,276 --> 00:43:51,096
if the growth rate at NVIDIA slows and people have to start reducing estimates, you know,

492
00:43:51,096 --> 00:43:56,816
we're used to these guys coming out like, yeah, we beat revenue from last year by, you know,

493
00:43:56,836 --> 00:44:02,396
a hundred percent, we'd be revenue by last year by 90%. And we're raising estimates, right? Where,

494
00:44:02,396 --> 00:44:06,476
you know, your guide, your numbers are too low. We're raising guidance. And that's, that's why

495
00:44:06,476 --> 00:44:11,736
Nvidia has such an incredible market cabin to their credit. You know, they build incredible

496
00:44:11,736 --> 00:44:17,636
product and they've identified a segment of the market where there's a ton of growth and they are

497
00:44:17,636 --> 00:44:23,716
the unquestioned leader. It's an amazing company. But if all of a sudden they get on a conference

498
00:44:23,716 --> 00:44:28,456
call and they say, you know, our growth rate is slowing to 45%, which would still be incredible.

499
00:44:28,456 --> 00:44:33,956
and we're lowering guidance you know marty here's the question what happens to nvidia stock

500
00:44:33,956 --> 00:44:42,416
and then microsoft and google and amazon and once that whole um pyramid collapses

501
00:44:42,416 --> 00:44:51,776
what happens like at that point everything gets sold intel amd oracle um you know all of these

502
00:44:51,776 --> 00:44:57,056
companies and the tech sector once that implodes you know everything but deep value is going to go

503
00:44:57,056 --> 00:45:01,976
down with it now permanently no but that's going to be a really unpleasant two or three days

504
00:45:01,976 --> 00:45:07,376
is that how long you think would last and then the fed would step in say hey we're gonna make sure

505
00:45:07,376 --> 00:45:13,236
that's the other weird thing about this ai conversation too is that it um it seems to be

506
00:45:13,236 --> 00:45:18,096
existentially important to the current administration um i think they've implicitly

507
00:45:18,096 --> 00:45:24,316
single signaled like we will we will not spare any cost to make sure that we win this ai race

508
00:45:24,316 --> 00:45:28,316
And so like a bailout of that sector seems very much on the table.

509
00:45:29,316 --> 00:45:34,916
Yeah, so that's something that Alex McCrease has written about a lot.

510
00:45:35,076 --> 00:45:37,236
And the two of you share the same opinion.

511
00:45:37,376 --> 00:45:38,556
I agree with both of you.

512
00:45:39,476 --> 00:45:43,476
The administration has said we've got one bet, right?

513
00:45:43,556 --> 00:45:47,096
We don't we're getting killed on the industrialization side.

514
00:45:47,576 --> 00:45:49,256
China makes a ton of things.

515
00:45:49,416 --> 00:45:52,356
We're not making a whole lot here except for dollars.

516
00:45:52,356 --> 00:45:59,896
there is that sense that the next thing is going to be AI. We have to win. And, you know,

517
00:45:59,936 --> 00:46:06,416
in fairness right now, we have the best companies in the world designing here in the United States.

518
00:46:06,416 --> 00:46:12,536
I think, you know, the U.S. companies are by far the best in the world. But, you know, China has

519
00:46:12,536 --> 00:46:18,616
one gigantic advantage, which is they've built out their power infrastructure and are doing so

520
00:46:18,616 --> 00:46:24,176
really quickly. And we're falling behind in that area. And I think that's a place where the Trump

521
00:46:24,176 --> 00:46:29,536
administration is correctly throwing a lot of assets at, you know, wait a minute, you know,

522
00:46:29,536 --> 00:46:34,836
we not only need to win this AI war, but to do it, we're going to need real infrastructure,

523
00:46:34,956 --> 00:46:40,596
not just bits, right, but actual power plants, actual nuclear generators, things like that.

524
00:46:42,356 --> 00:46:48,556
So I, you know, I think that's going to be a huge part of it. I also think your point,

525
00:46:48,616 --> 00:46:53,296
on the Fed is really important. I was having a conversation with a friend of mine the other day,

526
00:46:53,356 --> 00:46:59,996
really smart person, but not, you know, a finance person. And he said, you know, I can't figure out

527
00:46:59,996 --> 00:47:03,576
if we're going to have, you know, when there's a problem, if we're going to have inflation,

528
00:47:03,576 --> 00:47:12,276
or we're going to have basically so much debt wiped out of the system in a depression,

529
00:47:12,276 --> 00:47:19,616
not a recession, a depression, that you end up with deflation, right? Kind of like the 1929,

530
00:47:20,316 --> 00:47:27,096
you know, you can buy this, you know, brand new expensive car for $100, right? We've all seen

531
00:47:27,096 --> 00:47:34,396
that picture, all right? $100, we'll buy this car. And I think, you know, the government,

532
00:47:34,576 --> 00:47:39,796
the Federal Reserve, they've given us the answer long before we get to that point.

533
00:47:39,796 --> 00:47:47,436
They will go to, you know, they'll all become helicopter men and start just spraying stimulus into the economy.

534
00:47:49,356 --> 00:47:54,816
We will end up with nominal growth, but real negative growth.

535
00:47:54,976 --> 00:47:59,216
And in a situation like that, Marty, what do you want to own?

536
00:48:00,056 --> 00:48:06,876
Right. Let's start with Bitcoin and then gold and then silver and then, you know, maybe a little bit of oil,

537
00:48:06,876 --> 00:48:10,016
although energy prices will be down in that scenario.

538
00:48:10,556 --> 00:48:13,816
But in a situation like that, you want to own hard assets.

539
00:48:15,036 --> 00:48:15,116
Yeah.

540
00:48:15,756 --> 00:48:21,436
And that's a good addition to the Warsh commentary too,

541
00:48:21,536 --> 00:48:28,296
because that's another thing I think sort of flew under the radar of his nomination specifically

542
00:48:28,296 --> 00:48:35,036
is that obviously Bissendt's been talking about being in this position of Secretary Treasury

543
00:48:35,036 --> 00:48:37,376
because he wants to be sort of behind the wheel.

544
00:48:37,936 --> 00:48:39,856
We were going through a monetary reordering,

545
00:48:40,016 --> 00:48:43,976
and then in parallel you have Trump saber-rattling the Federal Reserve,

546
00:48:44,236 --> 00:48:46,856
saying, I want more control over it.

547
00:48:46,856 --> 00:48:51,136
I want the Treasury specifically to work in tandem with the Federal,

548
00:48:51,336 --> 00:48:51,756
or vice versa.

549
00:48:51,876 --> 00:48:56,296
I want the Federal Reserve to basically go along with what the Treasury says it wants to do.

550
00:48:56,896 --> 00:49:02,356
And then you have Warsh, who is an acolyte of Stan Druckenmiller,

551
00:49:02,356 --> 00:49:09,996
as is Scott Pesant. And there's this sort of theme emerging that people are getting put in

552
00:49:09,996 --> 00:49:17,636
positions that have worked together in the past or are very similar or share very similar worldviews

553
00:49:17,636 --> 00:49:24,896
on the economy and where it needs to go so that they will have that sort of conducive

554
00:49:24,896 --> 00:49:29,796
cooperation between the Fed and the Treasury as well. And so I think Warsh is

555
00:49:29,796 --> 00:49:37,756
uh basically being put there because it's like okay you and scott basically came up

556
00:49:37,756 --> 00:49:43,876
uh through the ranks via um via the same route working with the same people with the same

557
00:49:43,876 --> 00:49:48,396
perspective of market and so you're gonna get in here and you guys are gonna go to work together

558
00:49:48,396 --> 00:49:55,396
yeah and i think that's right and the thing that's really interesting to me is all these

559
00:49:55,396 --> 00:49:59,496
people saying, oh, no, you know, the White House is meddling at the Fed. The Fed has lost its

560
00:49:59,496 --> 00:50:05,396
independence. You know, we've lost faith in the financial markets. OK, let's let's take that

561
00:50:05,396 --> 00:50:12,636
apart. First of all, why anyone had faith in the financial markets a year ago is beyond me.

562
00:50:12,636 --> 00:50:17,016
Why? Why would anyone have faith in the U.S. government or the dollar?

563
00:50:18,976 --> 00:50:24,936
The dollar is being debased into oblivion as all fiat has been through history. No fiat has ever

564
00:50:24,936 --> 00:50:32,716
survived, right? 775 of them in history, they all go to zero. This is the nature of the world.

565
00:50:33,336 --> 00:50:38,976
You know, why anybody looked at a US government with now $38 trillion in on-balance sheet debt

566
00:50:38,976 --> 00:50:43,516
and another $200 trillion of off-balance sheet? Let's do the math on that. We're talking about

567
00:50:43,516 --> 00:50:49,336
almost a quarter of a quadrillion dollars of liabilities, right? And people were saying,

568
00:50:49,336 --> 00:50:54,536
now we've lost faith in the system. Where were you last week, right? Why did you have faith in

569
00:50:54,536 --> 00:50:59,816
this last week, nobody's paying a quarter of a quadrillion dollars. Zimbabwe wasn't paying a

570
00:50:59,816 --> 00:51:07,296
quarter of a quadrillion, whatever they, you know. This is insane. The whole thing is completely

571
00:51:07,296 --> 00:51:12,636
insane. Beyond that, right, people are saying, oh, no, President Trump, he was acting outside

572
00:51:12,636 --> 00:51:17,756
of democratic norms. We've never seen meddling like this before. You know, we've lost faith in

573
00:51:17,756 --> 00:51:22,496
the Fed. This is going to kill the markets. What are you kidding me? This has been going on since

574
00:51:22,496 --> 00:51:26,756
the creation of the Federal Reserve, President Trump has done only one thing different, which is

575
00:51:26,756 --> 00:51:32,376
he's had these arguments in public. He does it in a way that we can all see, right? That old

576
00:51:32,376 --> 00:51:37,716
expression, you know, never look at how the sausage is made, right? Especially in regard to

577
00:51:37,716 --> 00:51:43,416
legislation. The only difference is he's doing what had always been done behind closed doors

578
00:51:43,416 --> 00:51:49,656
in public. That's it. That's the only difference. And people who are saying, oh, no, you know,

579
00:51:49,656 --> 00:51:56,056
the White House wants control of the Fed. What do they think FDR had? Right. He literally insisted

580
00:51:56,056 --> 00:52:01,336
that his Treasury secretary also be chairman of the Federal Reserve. And the whole country went

581
00:52:01,336 --> 00:52:07,836
along with that for decades. You know, you had Lyndon Johnson slamming Arthur Burns into a wall,

582
00:52:08,076 --> 00:52:11,656
literally picking him up, slamming him into a wall. And they're saying, oh, no, you know,

583
00:52:11,716 --> 00:52:16,916
President Trump said mean things about Jerome Powell on social media. How will the Republic

584
00:52:16,916 --> 00:52:21,776
it survived. Well, how did it survive the Fed chairman literally being strong armed and shoved

585
00:52:21,776 --> 00:52:27,076
into a wall by the president saying, I want lower rates? President Nixon, you know, same thing. He

586
00:52:27,076 --> 00:52:33,096
strong armed his, you know, again, it tried to put pressure on the Federal Reserve for lower rates.

587
00:52:33,136 --> 00:52:39,276
That didn't work out well for the rest of the 1970s. Right. Janet Yellen shortened the duration

588
00:52:39,276 --> 00:52:46,136
of Treasury securities. The reason we've had such large Treasury security auctions this year

589
00:52:46,136 --> 00:52:51,816
is because Yellen was stacking the deck for her teeth, right? Saying we're going to take the lower

590
00:52:51,816 --> 00:52:57,436
short-term rates and not do as much long-term financing, even though rates were relatively low.

591
00:52:58,016 --> 00:53:05,596
That was to help the Democratic Party try to win the 2024 election. Okay. You know, I get that.

592
00:53:06,396 --> 00:53:10,696
The point is, and again, I can see in the comments, somebody's going to say,

593
00:53:10,696 --> 00:53:16,696
oh, he's OK with his meddling. No, I'm not OK with it. It's never been OK, but it is going to

594
00:53:16,696 --> 00:53:20,476
continue until we get rid of the Federal Reserve. And if somebody wants to point out that's never

595
00:53:20,476 --> 00:53:26,896
going to happen. OK, great. Got it. Then you should also expect that the meddling will never

596
00:53:26,896 --> 00:53:34,636
stop either. This is the Federal Reserve was created for this exact purpose. So, you know,

597
00:53:34,656 --> 00:53:39,936
if somebody wants to say, well, you know, the the Fed will never be eliminated. Stop whining about

598
00:53:39,936 --> 00:53:45,296
it, okay, then the White House will never stop meddling with the Federal Reserve. Stop whining

599
00:53:45,296 --> 00:53:51,516
about it. They were always tied together. The only difference is we're now getting the show

600
00:53:51,516 --> 00:53:57,596
on social media instead of being reported a decade later by some staffer who happened to be in the

601
00:53:57,596 --> 00:54:01,976
room at the time, and they write their memoirs. Yeah, and I think the FDR example is the best

602
00:54:01,976 --> 00:54:08,196
because it just highlights the hypocrisy. He's vaunted as this hero of people that like social

603
00:54:08,196 --> 00:54:15,516
welfare programs. And he was, I think, before Trump, probably the most egregious of with this

604
00:54:15,516 --> 00:54:22,136
meddling specifically. He came in, said, here's what we're doing. You know, you're right. I also

605
00:54:22,136 --> 00:54:27,116
think it's really interesting that, you know, Democrats spent the last two years of the Biden

606
00:54:27,116 --> 00:54:33,436
administration screaming, we need lower rates. Elizabeth Warren, right? She was constantly saying

607
00:54:33,436 --> 00:54:38,016
we need lower rates. The Federal Reserve has to lower rates. OK, well, now we have a president

608
00:54:38,016 --> 00:54:42,276
who's trying to strong arm the Fed into lowering rates, which, by the way, I disagree with the

609
00:54:42,276 --> 00:54:48,596
strong army and I disagree that, you know, that the Fed should lower rates. But the whole point is

610
00:54:48,596 --> 00:54:54,056
Warren is now getting what she said she wanted, but she doesn't seem happy. Why does she never

611
00:54:54,056 --> 00:54:59,776
seem happy, Marty? Yeah, because she's a miserable old woman. What are the people in Massachusetts

612
00:54:59,776 --> 00:55:05,136
doing? That's what I want to know. That's my question with Elizabeth Warren. How can you keep

613
00:55:05,136 --> 00:55:08,876
voting her back in, but I don't think we're going to solve that in this discussion.

614
00:55:09,136 --> 00:55:16,656
I don't know. Right. But the point of all this is this was never about policy. It was about

615
00:55:16,656 --> 00:55:22,056
partisan politics, you know, and and that's like that's fine. But then admit, you know,

616
00:55:22,096 --> 00:55:26,996
you're cheering for Team Red or Team Blue and, you know, you're you're cheering for your team's

617
00:55:26,996 --> 00:55:31,816
colors and that's fine. But, you know, if we're going to go to real policy, the Federal Reserve

618
00:55:31,816 --> 00:55:37,316
has never been independent. It shouldn't exist. It's never going to be independent. I don't like

619
00:55:37,316 --> 00:55:41,976
that, but that's the way it is. But nothing has really changed now. And the same people who two

620
00:55:41,976 --> 00:55:48,356
years ago were screaming for lower rates. Now that you have a president who's agitating for lower

621
00:55:48,356 --> 00:55:54,976
rates, again, something I disagree with, they're not happy with it. So I can only draw the conclusion

622
00:55:54,976 --> 00:55:59,916
that this has nothing to do with policy. These are not people who understand finance and are

623
00:55:59,916 --> 00:56:03,476
trying to make a good decision. They just want to score points for their team. And again,

624
00:56:03,896 --> 00:56:08,416
they're entitled to do that, but I'm also not going to take them seriously.

625
00:56:09,336 --> 00:56:16,996
Yeah. Another policy that I'm interested to get your thoughts on, shifting gears a bit, but

626
00:56:16,996 --> 00:56:33,004
I was thinking about it earlier today the Trump children equities accounts or the investment accounts what are your thoughts on this this is like a is this like a sly like semi bailout of equity markets

627
00:56:33,004 --> 00:56:39,124
or is this like a good um good product for american citizens that that we should be happy about

628
00:56:39,124 --> 00:56:45,404
so you're you're talking about the um the idea that every newborn is going to get a

629
00:56:45,404 --> 00:56:48,984
basically a stock market account paid for.

630
00:56:50,264 --> 00:56:57,444
You know, he makes it seem like paid for by President Trump, but but it's not as paid for by the American taxpayers through inflation.

631
00:56:57,444 --> 00:57:04,704
Right. That's. So, look, I have mixed feelings about this.

632
00:57:05,184 --> 00:57:14,244
Big picture. I am against it. Everybody at first of all, he shouldn't act like the Trump account or like, you know, Obamacare.

633
00:57:14,244 --> 00:57:23,564
Like these guys act like they're paying for it. You have your your, you know, 401k account or you have your kids trust fund account or your health care.

634
00:57:23,684 --> 00:57:28,564
It's because of the guy. Right. It's the same thing. I'm in Thailand right now.

635
00:57:28,624 --> 00:57:32,584
The first time I came here, somebody was telling me how much they love.

636
00:57:32,664 --> 00:57:37,324
This is this is more than 20 years ago. They were telling me how much they love the king because he built them this wonderful highway.

637
00:57:37,324 --> 00:57:50,604
okay you know um but but at any rate they act like i i personally have bequeathed to you

638
00:57:50,604 --> 00:57:57,984
this you know this this wonderful largesse now it is being paid for by the rest of the country

639
00:57:57,984 --> 00:58:04,644
through inflation in general i'm against these things now i know i said mixed feelings and

640
00:58:04,644 --> 00:58:12,224
here's why I have mixed feelings. Almost all of our spending now is for consumption. And that is

641
00:58:12,224 --> 00:58:20,304
a terrible thing. You know, Rudy Havenstein, the pseudonym for one of my favorite X or Twitter

642
00:58:20,304 --> 00:58:26,524
accounts, constantly will write, where's our Hoover Dam? And what he means by that is the

643
00:58:26,524 --> 00:58:31,764
government is spending, you know, $5 trillion a year. But where's the infrastructure for that?

644
00:58:31,764 --> 00:58:38,524
Where's the investment? And the answer is we're not building infrastructure. We're not building investments.

645
00:58:38,524 --> 00:58:43,464
We're spending it on consumption and pretending that's an investment.

646
00:58:43,644 --> 00:58:54,424
And so the one thing, the only thing I like about this stuff is at least this spending is actually for long time duration investments.

647
00:58:54,424 --> 00:59:09,004
And I think, listen, our government spends too much and acting like you per you, Marty, you're getting something because I, the president and bequeathing it to you, whether it's, you know, a Democratic president or Republican president.

648
00:59:09,504 --> 00:59:12,184
I don't think that matters so much.

649
00:59:12,284 --> 00:59:14,224
You know, I don't think that's the right way to go.

650
00:59:15,364 --> 00:59:20,284
But at a minimum, at least this spending is for investment instead of for consumption.

651
00:59:20,284 --> 00:59:23,744
So it's better than anything else they're doing with our money.

652
00:59:24,424 --> 00:59:31,584
Yeah, that's a good point. As somebody with three young children, I mean, if they're going to offer it, I'm going to take it, I'm going to sign them up, fill out that form.

653
00:59:32,784 --> 00:59:34,344
You might as well. You're going to pay for it.

654
00:59:34,684 --> 00:59:38,024
Yeah, exactly. Might as well get some benefit from it, at least for my kids.

655
00:59:38,024 --> 00:59:43,484
And speaking of that, oh, God, you know, just one other thought, too.

656
00:59:43,484 --> 00:59:55,224
We were talking earlier about how our constantly debased, untrustworthy currency is leading young people to treat their financial lives like casinos.

657
00:59:55,984 --> 00:59:58,804
And, you know, I want to be clear on something.

658
00:59:59,804 --> 01:00:01,364
I don't blame them for it.

659
01:00:01,384 --> 01:00:07,284
I think it's a bad decision, but they're facing pressures that don't make sense.

660
01:00:07,524 --> 01:00:09,484
And they don't see a system that's working for them.

661
01:00:09,484 --> 01:00:22,564
If these these basically trust fund accounts lead to less of that behavior 20 years from now and people say, OK, you know, I own stocks, I see the value of long term investing.

662
01:00:25,044 --> 01:00:33,724
Then maybe we get less casino behavior from our young people because they'll see it through the course of their lives.

663
01:00:33,724 --> 01:00:38,124
And maybe 20 years from now, we end up with people making better financial decisions.

664
01:00:38,124 --> 01:00:44,984
You know, on a personal note, do I do I have time to tell you a personal story on why this matters?

665
01:00:45,584 --> 01:00:52,144
Yeah. So years ago, I was starting a hedge fund called the Key to Capital with a partner.

666
01:00:52,524 --> 01:00:55,584
And we agreed we wouldn't have any outside positions.

667
01:00:56,004 --> 01:01:00,764
And I had, you know, Atlantic Richfield stock that my dad had bought me when I was six months old.

668
01:01:00,764 --> 01:01:09,304
and um i went and i took a look and um you know i contacted atlantic richfield i said hey i need

669
01:01:09,304 --> 01:01:15,564
like the history of this account and my dad had bought me 19 shares right this was you know six

670
01:01:15,564 --> 01:01:21,824
months after i was born i looked at that that's really weird and i'm just staring at the screen

671
01:01:21,824 --> 01:01:27,384
what what what really happened i would have understood 20 because it's a round number

672
01:01:27,384 --> 01:01:36,484
You know, people think in terms of 10, I would have understood 18 because I'm Jewish and 18 corresponds to the letter high, which means life.

673
01:01:36,604 --> 01:01:39,944
It's gifts are frequently multiples of 18.

674
01:01:40,584 --> 01:01:43,444
Right. Like here's like something to celebrate life.

675
01:01:43,724 --> 01:01:46,304
But 18, it was weird staring at it.

676
01:01:46,304 --> 01:01:47,304
And then I saw it.

677
01:01:47,464 --> 01:01:50,504
It was two hundred forty eight dollars.

678
01:01:50,504 --> 01:01:55,724
and all of a sudden I saw my dad is 27 year old young man with the weight of the world on his

679
01:01:55,724 --> 01:02:02,984
shoulders and a house and a young wife and a baby at home and he had 250 dollars he didn't have

680
01:02:02,984 --> 01:02:08,264
enough money for that 20th share and I called my dad and I said dad this is what I saw and he's like

681
01:02:08,264 --> 01:02:14,204
oh yeah that's exactly what it was he said I still remember where on the credenza behind my desk

682
01:02:14,204 --> 01:02:20,364
that paperwork was sitting he's like I didn't have more than I didn't have enough money to buy that

683
01:02:20,364 --> 01:02:30,144
20th share. But over time, that $248 investment when I sold it grew to $15,000. Holy crap.

684
01:02:31,044 --> 01:02:37,384
Right. Okay. And by the way, this was Atlantic Richfield. It wasn't like my dad randomly fell

685
01:02:37,384 --> 01:02:46,664
into Apple stock or Amazon at the beginning. It was just a normal energy stock. It was just an

686
01:02:46,664 --> 01:02:56,304
oil and gas company. And so look, I am generally against government largesse. It doesn't go well.

687
01:02:56,924 --> 01:03:02,804
But let's, you know, let's actually put on our compassionate hats for a minute and think about

688
01:03:02,804 --> 01:03:08,744
the potential impact on young people who have thousand dollar accounts instead of $248 accounts

689
01:03:08,744 --> 01:03:14,904
when they're two months old. And then two or three decades later, they take a look and they see,

690
01:03:14,904 --> 01:03:22,664
oh wow this is fifty thousand dollars you know and like maybe that's a down payment on a house

691
01:03:22,664 --> 01:03:31,224
or maybe that's the ability to pay rent um or at a minimum maybe it's just a really big reminder

692
01:03:31,224 --> 01:03:34,864
right we're not talking about generational wealth and it's not like nobody's going to work

693
01:03:34,864 --> 01:03:40,064
because they've got fifty thousand dollars but it certainly would be a generational reminder wait a

694
01:03:40,064 --> 01:03:46,884
minute. If I invest and I'm patient, I can grow real wealth. If I think across decades,

695
01:03:47,444 --> 01:03:53,024
I don't have to treat my financial life like a casino. And so there's a non crazy universe

696
01:03:53,024 --> 01:03:59,544
where it actually leads to better decisions being made by young people because it forces them to see

697
01:03:59,544 --> 01:04:05,984
the value of patient. I love that. And you can see it paying off to maybe I could start a business,

698
01:04:05,984 --> 01:04:07,864
with the proceeds.

699
01:04:09,484 --> 01:04:11,864
Hey, the guys at Hewlett Packers started with less.

700
01:04:12,544 --> 01:04:12,704
Yeah.

701
01:04:13,324 --> 01:04:14,624
I'm going to sign my kids up tomorrow.

702
01:04:14,984 --> 01:04:15,504
I'm going to do it.

703
01:04:16,744 --> 01:04:22,084
I know we've got to wrap up, but you said when we were talking about this,

704
01:04:22,104 --> 01:04:24,324
you said long-duration investments.

705
01:04:24,464 --> 01:04:26,944
It reminded me of something we missed during the ad conversation.

706
01:04:27,084 --> 01:04:29,844
I'm not sure if you saw it today, but Google putting out there

707
01:04:29,844 --> 01:04:31,944
that they're thinking about issuing a 100-year bond,

708
01:04:31,944 --> 01:04:42,024
which is just another signal that may not be as well as being reported on the financial side for the AI hyperscalers specifically.

709
01:04:42,764 --> 01:04:53,324
So in other words, the Google CFO department has figured out, one, inflation is going to be higher than people think it is.

710
01:04:53,324 --> 01:05:03,624
and two, they may not get the return on all of that, you know, half trillion dollars or 200 billion dollars this year of AI spending.

711
01:05:03,964 --> 01:05:10,604
And if their credit rating drops, it'll be more expensive to issue that the following year or five years from now.

712
01:05:11,064 --> 01:05:16,384
Right. Like if you were a Google CFO and the market would buy a hundred year paper, wouldn't you?

713
01:05:17,264 --> 01:05:19,584
Wouldn't you vomit that out? Yeah.

714
01:05:20,364 --> 01:05:21,644
It's not a great sign, though.

715
01:05:21,644 --> 01:05:30,244
no no the del position we're thinking long term this is uh this is a humanity scale project a

716
01:05:30,244 --> 01:05:35,644
technology that will shift the the tide of humanity if we need to make this long-term

717
01:05:35,644 --> 01:05:41,924
investment and i want to be clear like i'm very bullish on ai whether or not um the spending and

718
01:05:41,924 --> 01:05:46,604
the capital outlay that we've seen over the last few years is sustainable i think it's the biggest

719
01:05:46,604 --> 01:05:55,924
question out there yeah i it's they're gonna need to earn a return at some point um you know one

720
01:05:55,924 --> 01:06:00,884
thing one thing where i did disagree with people a couple years ago and i'm not sure i was right

721
01:06:00,884 --> 01:06:08,344
i'm not sure they were wrong people were overlaying the nvidia chart over the 1990s 2000

722
01:06:08,344 --> 01:06:15,444
cisco chart and saying boy these look similar and i said you know i'm not buying that comparison

723
01:06:15,444 --> 01:06:20,064
because, you know, Cisco was selling to pets.com

724
01:06:20,064 --> 01:06:22,584
and, you know, other internet companies

725
01:06:22,584 --> 01:06:24,564
that had negative free cashflow

726
01:06:24,564 --> 01:06:26,924
where NVIDIA is selling to, you know,

727
01:06:27,004 --> 01:06:28,524
Google and Amazon and Microsoft.

728
01:06:28,944 --> 01:06:29,904
And, you know, listen,

729
01:06:30,004 --> 01:06:32,064
if these companies waste a trillion dollars,

730
01:06:32,224 --> 01:06:34,984
then they're not going out of business.

731
01:06:35,504 --> 01:06:37,504
And so I said, this is completely different.

732
01:06:37,504 --> 01:06:39,764
And then, you know, we get to this last year

733
01:06:39,764 --> 01:06:41,624
and you start to see these, you know,

734
01:06:41,744 --> 01:06:44,484
1990s style circular deals

735
01:06:44,484 --> 01:06:51,224
where, you know, NVIDIA says, OK, well, we're going to invest in OpenAI.

736
01:06:51,824 --> 01:06:57,084
And OpenAI says, oh, we're going to take NVIDIA's investment and buy NVIDIA GPUs.

737
01:06:57,084 --> 01:07:02,584
And I'm thinking, OK, so you're buying GPUs with your own money and marking that as revenue.

738
01:07:02,584 --> 01:07:05,004
And that does look really similar.

739
01:07:05,004 --> 01:07:10,464
So somebody is going to have to figure out an actual business model at some point.

740
01:07:10,464 --> 01:07:16,524
you know and and maybe it'll help when the market shifts more from training to inference that is

741
01:07:16,524 --> 01:07:23,724
cheaper but you know we're not there yet yeah i think i i mean i feel blessed being able to

742
01:07:24,844 --> 01:07:31,664
basically run these models ragged on the inference side for as cheap as they're offering them it's

743
01:07:31,664 --> 01:07:38,624
like i mean it's it's very manageable i would pay more for it and that's i think that's the

744
01:07:38,624 --> 01:07:43,904
big question out there is like you're gonna have to charge for the compute the cost of the compute

745
01:07:43,904 --> 01:07:48,764
at least that's actually um that people are actually using because it's highly subsidized

746
01:07:48,764 --> 01:07:55,284
right now so marty you're right and and can i just insert one additional thing that people should be

747
01:07:55,284 --> 01:08:03,884
concerned about on that so the place where this stuff is going to the ai is really going to have

748
01:08:03,884 --> 01:08:08,224
an impact on people isn't just like the vibe coding that you're talking about which i do think

749
01:08:08,224 --> 01:08:13,264
matters. I think the ability of non-technical people to design their own apps, their own

750
01:08:13,264 --> 01:08:21,744
websites is huge. Where people are really going to use it is agentic AI. Like you talked earlier

751
01:08:21,744 --> 01:08:26,024
about, can it send emails for you? Right. I talked earlier about, can it, you know,

752
01:08:26,284 --> 01:08:30,584
make a hotel reservation for me or, you know, contact somebody or do something like that.

753
01:08:30,884 --> 01:08:35,964
And the issue with that is that is going to be the thing that will cause people to say,

754
01:08:35,964 --> 01:08:40,304
yeah, I'll pay $20 a month for this or $50 a month for this or, you know, order my groceries for me.

755
01:08:42,004 --> 01:08:50,104
But you're also going to run into huge issues with potential bad behavior. And, you know,

756
01:08:50,124 --> 01:08:56,844
you could have bad actors using those agents to run up credit card bills on other people to buy

757
01:08:56,844 --> 01:09:04,224
things, to send malicious code or send, you know, malicious photos or, you know, things like that.

758
01:09:04,224 --> 01:09:15,624
And so what we're going to need to make all of that work is some sort of security that will authenticate those AI agents.

759
01:09:15,804 --> 01:09:24,964
And when we talk about security, like right now, you know, everybody's thinking, OK, username, password, the better actors are starting to use biometric security.

760
01:09:24,964 --> 01:09:33,824
Right. Think about like face ID, but working at a much higher level, much, much more accurate instead of one in one hundred thousand error rate.

761
01:09:33,824 --> 01:09:37,704
one in a billion error rate, which is what you need for that.

762
01:09:37,764 --> 01:09:42,404
But now they're also going to have to authenticate these AI agents

763
01:09:42,404 --> 01:09:47,704
because if they have access to your email, your contacts, your photos,

764
01:09:47,924 --> 01:09:52,004
your text messages, your credit card, oh boy, you know,

765
01:09:52,084 --> 01:09:55,324
like somebody takes control of that, something bad really can happen.

766
01:09:55,964 --> 01:09:56,084
Yeah.

767
01:09:56,724 --> 01:10:02,004
It's almost like they need a digital identity built on an open protocol

768
01:10:02,004 --> 01:10:06,904
that runs on private public key cryptography to authenticate.

769
01:10:07,624 --> 01:10:08,224
No, it's crazy.

770
01:10:08,684 --> 01:10:12,344
And I think Bitcoin plays into it here, bringing it back,

771
01:10:12,464 --> 01:10:16,384
wrapping up with a callback to the beginning of the episode,

772
01:10:16,464 --> 01:10:18,344
where's the value for Bitcoin specifically.

773
01:10:18,344 --> 01:10:22,544
I thought it was extremely poetic that the price was dumping

774
01:10:22,544 --> 01:10:25,704
as hard as it was last week as I was exploring

775
01:10:25,704 --> 01:10:29,864
how far I could push my agent that I spun up a few weeks ago.

776
01:10:29,864 --> 01:10:35,244
I was literally in the process of seeing if it could spin up its own Bitcoin wallets.

777
01:10:35,404 --> 01:10:45,724
And then to your point about authentication, there's a protocol on Bitcoin's lightning network called LNURL auth.

778
01:10:45,844 --> 01:10:51,364
So it's basically like a sign in with Google or sign in with Apple, sign in with GitHub.

779
01:10:51,724 --> 01:10:55,264
But you sign in with the private key attached to your lightning node.

780
01:10:55,264 --> 01:11:10,864
So I was successfully able to get my agent to figure out how to spin up a Bitcoin node, attach it to the lightning network or understand that it has a private key and then sign into a website using the private key in its lightning server.

781
01:11:11,604 --> 01:11:15,984
And then I topped up a balance with a little bit of Bitcoin.

782
01:11:16,464 --> 01:11:23,444
And so there's a Bitcoin trading website called LN Markets that lets you authenticate with LN URL auth.

783
01:11:23,444 --> 01:11:25,584
I was like, all right, send Bitcoin to this and put in a trade.

784
01:11:25,684 --> 01:11:26,504
Let me see if you can do this.

785
01:11:26,524 --> 01:11:27,424
And it did it successfully.

786
01:11:28,364 --> 01:11:29,064
It worked?

787
01:11:29,524 --> 01:11:30,064
It worked.

788
01:11:30,304 --> 01:11:30,564
Yeah.

789
01:11:31,124 --> 01:11:33,024
I'll show you when we're done recording.

790
01:11:33,084 --> 01:11:34,164
I'll show you what this thing's doing.

791
01:11:34,524 --> 01:11:35,724
But I am Marty.

792
01:11:35,784 --> 01:11:36,384
That's amazing.

793
01:11:36,424 --> 01:11:38,224
But I got to ask you, right?

794
01:11:38,464 --> 01:11:40,684
Were you able to use it to buy coffee?

795
01:11:40,684 --> 01:11:45,024
Because as everybody knows, that is the trigger test of any currency.

796
01:11:45,564 --> 01:11:48,524
It's not a currency unless you can buy coffee with it.

797
01:11:49,084 --> 01:11:52,124
I bought I bought I bought a beer with it last week in New York at PubQ.

798
01:11:52,124 --> 01:11:53,684
Did you really?

799
01:11:54,284 --> 01:11:54,604
Yeah.

800
01:11:55,484 --> 01:11:56,384
All right, that counts.

801
01:11:56,884 --> 01:11:57,244
It does.

802
01:11:57,404 --> 01:11:58,424
So Bitcoin is a currency.

803
01:11:58,884 --> 01:11:59,304
It is.

804
01:11:59,384 --> 01:11:59,724
It is.

805
01:11:59,804 --> 01:12:00,224
It's money.

806
01:12:00,444 --> 01:12:00,844
It's money.

807
01:12:01,564 --> 01:12:04,444
But the point being is like price is crashing.

808
01:12:04,584 --> 01:12:05,364
Price is the way you pay.

809
01:12:05,444 --> 01:12:06,024
Where's the value?

810
01:12:06,124 --> 01:12:09,664
And it's like, oh, the agentic economy is emerging.

811
01:12:09,964 --> 01:12:11,884
Like Bitcoin is a good currency for that.

812
01:12:12,024 --> 01:12:18,844
And not only is it a good currency for it, but the private, the nature of the private public, he pairs.

813
01:12:18,844 --> 01:12:25,204
It actually does set it up for interesting authentication credentials in the sogenanatic world.

814
01:12:26,484 --> 01:12:27,084
Interesting.

815
01:12:27,824 --> 01:12:30,264
That's great. It's phenomenal. You were able to do that.

816
01:12:31,304 --> 01:12:37,004
And now, like, think about the expertise and the different ways you had to cobble that together.

817
01:12:37,004 --> 01:12:44,444
you know somebody who's like the the more technically advanced version of us is going to

818
01:12:44,444 --> 01:12:51,304
find a way to wrap that up like in one api one you know one package where somebody says okay

819
01:12:51,304 --> 01:13:00,304
here's my sign in here's my wallet and it it does that for them right it you built it piece by piece

820
01:13:00,304 --> 01:13:05,164
somebody's going to piece it together where it'll just be a download this app and it'll work kind of

821
01:13:05,164 --> 01:13:07,604
Yeah, it's a brave new world.

822
01:13:07,944 --> 01:13:09,924
Gary, thank you for your time.

823
01:13:10,224 --> 01:13:12,164
It's been a pleasure as always, sir.

824
01:13:13,284 --> 01:13:14,004
Thank you.

825
01:13:14,184 --> 01:13:15,504
I appreciate it.

826
01:13:15,564 --> 01:13:17,564
I always like filming these with you.

827
01:13:17,624 --> 01:13:19,464
The conversation is always entertaining for me.

828
01:13:20,164 --> 01:13:23,124
Well, like we said before we hit record, we'll have to do it more often.

829
01:13:23,284 --> 01:13:25,704
So we'll check in in a couple of months.

830
01:13:27,204 --> 01:13:27,944
Happy to.

831
01:13:27,944 --> 01:13:35,004
And by the way, for your viewers who are interested in deep knowledge investing,

832
01:13:35,004 --> 01:13:42,504
we've got a coupon for your people um tftc we'll get them 25 off of a deep knowledge of

833
01:13:42,504 --> 01:13:49,624
sda subscription go check it out i've been reading every week and uh it is deep knowledge and your

834
01:13:49,624 --> 01:13:56,804
analysis is um very very much appreciated by me personally because i think it is uh

835
01:13:56,804 --> 01:14:02,384
not like contrarian for contrarian sake but when you see the market like warsh particularly um

836
01:14:02,384 --> 01:14:04,844
misreading something. You're not afraid to call it out.

837
01:14:06,024 --> 01:14:08,744
Thank you. All right. Peace of love, freaks.

838
01:14:09,304 --> 01:14:14,184
Thank you for listening to this episode of TFTC. If you've made it this far,

839
01:14:14,364 --> 01:14:19,084
I imagine you got some value out of the episode. If so, please share it far and wide

840
01:14:19,084 --> 01:14:22,304
with your friends and family. We're looking to get the word out there.

841
01:14:23,144 --> 01:14:26,444
Also, wherever you're listening, whether that's YouTube, Apple,

842
01:14:26,684 --> 01:14:30,424
Spotify, make sure you like and subscribe to the show.

843
01:14:30,424 --> 01:14:35,164
And if you can leave a rating on the podcasting platforms, that goes a long way.

844
01:14:35,704 --> 01:14:46,004
Last but not least, if you want to get these episodes a day early and ad free, make sure you download the Fountain podcasting app and go to fountain.fm to find that.

845
01:14:46,764 --> 01:14:53,604
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846
01:14:54,204 --> 01:14:57,804
So please consider subscribing via Fountain as well.

847
01:14:57,804 --> 01:15:00,704
thank you for your time and until next time