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mil madison welcome back to the show sir well thank you for having me marty i appreciate it

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yeah well we're going to talk about a lot of things today ai is it real is it hype

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is a mixture of the two we got the fed obviously warsh has taken the helm since we last spoke

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uh we've got some micro stuff to talk about in terms of individual memory stocks that that you're

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following and then we can get into the fiscal side of things, how much debt the U.S. federal

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government is and how they can sustain that debt and all the entitlement programs that they build

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up and then probably ending it with Scott Bissent's call for a new economic regime at the

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New York Economic Club a couple of weeks ago, which has been a hot topic in my circles.

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We covered it this morning on the weekly show I do with my partner, John Arnold at 1031.

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And I'd love to get your thoughts on that.

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But I think just starting with the hottest chick in the room right now, which is AI.

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How are you reading this?

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Well, AI is definitely one of two main forces that I see driving markets, right?

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I think it's AI.

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And then what I want to just kind of encapsulate, because there's a lot of interplay, it's just kind of geo macro stuff.

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And, you know, that's Iran.

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That's Ukraine.

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That's the Fed.

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That's fiscal deficit.

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And those are things that the reason I categorize those together is because they're not related to like earnings.

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Right.

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So another simple way to say it is what's going on in the broad market, like broad macro.

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and what's going on with earnings and company specific.

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And earnings are all about AI.

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And I just cannot see a way that AI is going away.

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Like, I think there's a lot of people out there

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that are talking about, you know,

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who's going to be the winners,

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who's going to be the losers.

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And I do agree, that's not the easiest game to play.

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But I do think there are certain segments

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that it's very hard to argue.

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like for example why sk hynix at four times pe should be trading cheaper than it is like like

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if you say mel what's what's the base case where micron at like seven times forward earnings is

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just the earnings are going to fall off the cliff cliff between now and the end of the decade

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and i just can't picture that case because it's like okay is it going to be open source or closed

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source, who knows. But at the end of the day, if compute demand is going to just go up exponentially,

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it's going to need memory unless you're stipulating that there's going to be some newfound

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memory breakthrough. And I think if your hurdle rate for investing in something is that it's

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impossible for some black swan new technology to take it out, then there's literally nothing to

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invest in? Like, you know, I mean, are you going to invest in Bitcoin? Well, quantum could come in.

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Are you going to invest in U.S. treasuries? Well, the government could collapse and all of a sudden

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Congress could say we're not going to raise the debt ceiling. Are you going like if you literally

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want to say there's no black swan impossible downside, then you can't invest in anything.

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So I will grant you there could be some big memory breakthrough.

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But absent that, you have companies like Micron signing a multi-year agreement, trading at six, seven times earning.

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You have capacity growing at two, 300 percent a year, not capacity, demand of what people want growing at two, 300 percent a year.

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While capacity is only growing at 20, 30 percent a year.

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And you have companies like Apple saying we've got to raise prices.

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You've got I mean, if if if there's not truly a memory shortage, if there's an Ed Zitron, you know, false narrative out there that this is all BS, then why is Apple raising prices?

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Like because then there's no demand like there's no problem.

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Why? Why would Apple want to raise prices if if this is all just going to collapse in the next three months?

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And I just can't see it.

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And I think Ken Griffin put out a post the other day about like the days of like hedge funds monitoring pocket or parking lots and saying I'm betting on this quarterly earnings.

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Like that's the old alpha.

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The new alpha is like looking at this stuff and taking longer term views.

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And I don't know if Micron is going to be $800 or $1,200 a month from now, but I'll bet it hits $3,000 in the next 12 months.

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I'll just bet it does because it's just too cheap.

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It's just too cheap not to double or triple from here.

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And I think people that think, oh, it can't do it.

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You know, what has Bitcoin done?

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What did gold do between 1980 and 19, excuse me, 1979, 1971, when it was, we were taken

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off the gold standard in 1980, it went up 25 X.

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And so I think people that think like these things have run their course, they have to

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to look at the fundamentals and micron at seven times sk hynex at four times uh the korean stock

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market which is collapsing in the last 24 hours and nine percent down is now trading at the cheapest

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fee multiple it has in like the last 48 months like everything just keeps getting cheaper

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and people just want to say you got to sell because it's all a big bubble and i just don't

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yeah i mean the the ed zitron call out it's funny because i've seen his commentary and him

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do the sort of the the cycle of going through cnbc bloomberg and getting clipped out on x and

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he's saying there's nothing there nobody wants these things and then i'm juxtaposing that to my

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usage of it which has gone up i think personally exponentially if you're just looking at all the

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agents and subagents we're running here and then you project that forward of more people adopting

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this, particularly agents. And we're definitely not even at the 1% adoption threshold of everyday

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people. And then you think of like robotics and self-driving cars and all the computers.

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And the memory demand there is like exponentially more. Like it's ridiculous. And Ed, I've listened

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to, I'll be honest with you, I've probably listened to 30 to 40 hours of my podcast because I do not

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want to listen to a bunch of bulls telling me how great AI is and just buy Micron. I want to listen

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to the people that are saying, here's the problem with the story. And he has certain points.

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But the thing about him is one thing I'll say about him, he's one of the cleverest

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speakers I've ever heard. He is so quick and fast with the remark, but he's so quick and fast

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with the remark that often you'll listen to him and you're not really processing what he's

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logically saying because if you really break down logically what he's saying it really doesn't make

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any sense like he basically says stuff like well anthropic and a open ai can never be profitable

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that that's one of his key arguments that it it's all a subsidized good there'll never be the demand

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for it it's never going to be profitable they're the only buyers of compute but then at the same

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time he'll talk about how like open source models are much cheaper. People want to use them. Well,

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if AI actually has a use case, even if it is open source models, it still requires compute.

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It still requires the hardware. It still requires memory. Does that mean that open AI is going to be

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a $4 trillion company. I honestly don't know. He might be right. OpenAI might not be the best buy

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right now, right? I mean, like if I was a private investor and that's what I did for a number of

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years was basically secondary market investments in large private companies, would I be telling

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people go into OpenAI and Anthropic right now? No, I wouldn't. But does that mean that AI is

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not going to happen? And I think if you go back and people love to compare it to the dot-com boom,

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So let's compare it to dot com. Did pets dot com, you know, blow up? No. But did the Internet? I mean, blow up meaning become a huge success. But did the Internet become a huge success? Yes. And and and look at the top companies in the quote unquote Mac seven. You had Apple and went public in like the 80s. Microsoft, same thing. These things went through that. They had huge market caps. They came out of it.

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You also had companies like Google that weren't even public until after the dot-com boom.

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Tesla, same thing.

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And so the internet and everything that happened there was real.

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And it was a huge thing.

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And it became a big deal.

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Did we have a huge blow-up top and then a collapse?

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And then even a slow but steady rise to even greater market?

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I mean, what was the Nasdaq when it collapsed?

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I think it was like 4,000, like 30,000 today.

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Okay.

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So like you're, you're telling me like, oh my God, look at the.com.

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You could have bought the NASDAQ at the very top of the.com boom and left it in your IRA.

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If you're a 30 year old guy and you're coming back and you're 50 right now, you still got

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10 years before you can access it.

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And it's up like, you know what?

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Almost 10 X.

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So I think if you zoom out and you look at what's going on, AI is not going away.

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Crypto is not going away.

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Bitcoin is not going away.

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The fiscal mess we're in is not going away.

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It's getting worse every day.

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That debasement trade that was so hot last year that let gold get over $5,000 an ounce,

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Bitcoin over $120,000, silver over $100,000, that's not going away.

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it's just we're going through all these micro rotations and every time something happens like

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meta says oh we're cutting back on compute and then it you know skyrockets you know 20 percent

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in the next two trading days which is what meta did um you know it's it's it's the money's rotating

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and the thing is is the money's got to go somewhere and the money just keeps building

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It's the 401ks. It's now the Trump accounts. It's the fiscal deficit. It's the whole merry-go-round that has led the S&P to go from 666 in 2009 at the GFC lows to over 7,600.

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today, it's going to keep happening. And if you let yourself get shaken out every time there's a

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20, 20 or 15% pullback, I think you're just missing the big picture. Yeah. I mean, before we get in

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the Trump accounts, which I know you want to cover with those passive flows that many people aren't

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talking about. And I've said this multiple times over the last six months, like this seems like

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there's like an equity market, not like a bailout, but like a mechanism to produce passive flows.

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But before we get to that, the Ponzi needs more sources.

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Yeah. And that's a good one.

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Yeah. And that's a great.

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We're going to keep doing it.

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So yeah, fight it. Go ahead.

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But like bring it back to like Zitron and some of his criticisms,

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like one of which being a lot of these companies, particularly

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the hyperscalers, have gone from buying back stock

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to hitting the ATM, the issuing stock, raising equity

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and even going into more debt.

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So they're highlighting that as like, oh, this is the end.

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And I've been thinking about this a lot, too, because

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you do want to check your priors and be like, okay, where, where, where am I maybe having a

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blind spot here? But like, when I see that, it's like, you could take that signal that way,

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which is like, these companies are desperate. They're diluting equity holders to raise cash to

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keep piling money into a loser is what Zitron would say. But the other one is like, well,

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maybe there was just a period of time post 2008 where the allocation of capital warranted the sort

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risk matrix that these companies have warranted like hey we just buy back stock try to choose eps

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and now there's finally an opportunity to to deploy capital into not only deploy capital but

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deploy capital at scales that we haven't seen that makes sense to do this so like just trying

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to get in the mind of like the boardrooms of the hyperscalers specifically and that decision around buying stock back or hitting the ATM raising debts And does the opportunity of the AI infrastructure build out

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Is it is it so large that it warrants these types of actions?

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I mean, everybody used to complain when they were doing all these buybacks, like they have nothing to invest in.

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And it's a bad sign because they're buying back stock.

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And now it's like, oh, no, well, they're not buying back stock anymore.

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And so, look, I mean, Apple, to me, just hitting new highs today and it's up over 50 percent in the last year.

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I mean, like that's something I want to stay away from.

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Like we just keep going through this micro rotation and it's like, OK.

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Apple is going to have to raise prices.

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It's up over 50 percent in the last 12 months.

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It's at an all time high.

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Like maybe I want to go into other things.

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About a month ago, I basically said, I think this sell the suppliers narrative is overdone and look to buy Amazon, Meta, Google and Microsoft.

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And they're breaking out. I mean, you know, these stocks have not made a new high since October.

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They're still not at new highs. So I do a little tweet once in a while.

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That's essentially just a basic basket of the four hyperscalers.

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hyperscalers and look at where they're at. And they are up well over 10% from the lows just like

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10 days ago. They are not yet breaking out. And I think that there's two things that I think

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Zitron has wrong. And I think the market gets concerned about that they shouldn't.

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One is debt. I did a post a few weeks ago where I basically said, how long would it take for each

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of the hyperscalers to pay off all of their debt off of cash flows if they stopped AI spent.

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And every single one of them could pay off every dollar of debt they've raised within two quarters

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with free cash flow. Meaning if all of a sudden AI is a bubble, AI is stupid, it all sucks,

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and we're going to essentially, we're Google, we're Amazon, Meta, we've raised some debt.

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how long would it take from free cash flow, essentially our paycheck, if we were employees,

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to pay off our credit card bill? The average is like 3.2 months. And they could all pay them off

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within less than six months. Now, what happens after six months when they're now debt free?

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Now they're going to trade at price to earnings. And then you look at a meta and you say, oh,

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it's trading at 18 times, 20 times. And now they have no more AI spend to do. They have no more

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debt to pay. They have no interest expense. And that's if AI fails. So if Zitron's right,

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and AI is this big nothing burger, and the big, everybody's going to, he said things like,

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we're going to look back in a few years and say, what the hell were we doing building all this

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compute? Well, then number one, you got to take away the threat, right? You got to say, well,

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there's no threat to Google because people might say, well, Google's, no, if AI is a nothing burger

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and it's going away, then Google's going to still have its moat.

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Amazon's going to have its moat.

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Microsoft's going to have its enterprise software moat.

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So if AI is truly a nothing burger, as Zitron says,

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then there's no threat to the business model of the hyperscalers.

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If AI is truly a nothing burger and they can literally pay off all their debt

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and go back to these free cash flow monsters,

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buying back their stock with both hands within six months,

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then what is the risk buying meta below a market multiple like there is no risk then if that's the

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narrative he paints now he doesn't really talk about another narrative which i actually think

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could be the actual narrative that plays out which is that ai is going to become this ubiquitous

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huge force greater than the internet greater than you know the typewriter the word processor a lot

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of the recent big inventions, maybe even greater than radio or TV.

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Going back to the railroads, I think is what a lot of people think is the best analogy.

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If it really is the greatest technology since the 1800s in the railroads, and the railroads

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became huge, and they became huge money makers, but there were boom towns, huge boom towns.

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I was in Colorado hiking last month, and there are these ghost towns, and they spring up,

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and they existed for like 10 years because you know the railroad went through they they mined

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out all the silver or lead or copper that was there um and then they disappeared because it

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was mined out or um you know the population just gave up of being there but during that 10-year

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period i mean people made fortune and so do i think like you can just buy micron and hold it

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for the next 40 years and retire?

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No.

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But do I think Micron's got a longer window

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of seller returns than six months to a year?

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Yes, I think it's got a multi-year time horizon

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for outperformance.

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And I think a lot of these AI names do.

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I think a lot of these chip stocks do.

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I think if you look at the Korean market,

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which has been selling off, it does.

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But you look at the Korean market,

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It's 50% of the Korean market is two stocks.

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It's SK Heineck and Samsung.

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The average stock in the S&P 500 trades within a 50% band every year.

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Well, if two stocks make up half of your index, and they're actually a little more volatile

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than your average stock, they're going to trade in the 60, 70, 80% band over the course

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of the year.

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That's going to drive 30, 40% fluctuations in the index.

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That should be expected.

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but what do investors get in return for increased volatility and risk?

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They get return.

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And I think,

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I think people that are looking at micron hitting the 50 day and buying it at

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nine,

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10,

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they might not be happy.

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They did that a week from now.

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I think they're going to be very happy.

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They did that six months now.

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And so I'm not here to say,

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look,

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this is what's going to happen.

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But if I had to do a short term bet,

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I think what these stocks are waiting for is,

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mega cap earnings coming in the next two weeks and they want to hear that but shy they want to

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hear jassy they want to hear these people say we're still going to be spent and they are because

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they'd be shooting themselves in the foot if they came out and said you know what this whole ai thing

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was a waste but they might say things like look we're experiencing some supply constraints on

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power or, you know, there's some pushback on data center build out. And so our CapEx might actually

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not increase that much, might even decrease a little bit. Initial market reaction might be,

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oh my gosh, it's all over. But I think what people are going to realize is this is just not going

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away. Like it's the spending's not going away. They've been worried about it since 2022 when

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this whole thing started. It goes through these micro rotation. And then all of a sudden,

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it's like oh my gosh there's open claw oh my gosh there's you know anthropic is cash flow or

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heading into profitability but oh no they're not because actually you know colossus they gave

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i mean all this stuff keeps going on and it's just meanwhile the valuations keep going up the

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The profits keep going up.

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And I think waiting and trying to call the top has just been the dumbest thing you could

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possibly do because it is going to top.

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And I've had some thoughts that that's probably not too far away.

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I don't think it's necessarily five years away.

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It could be two, three years away.

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I think it's going to have to do more with fiscal concerns than the AI thing.

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But look, market's not going to be going up 25, 35% a year forever.

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And there's probably going to be a 30, 40% pullback, I think, by the end of the decade.

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But I just don't see it happening this year.

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And I think the earliest it could possibly happen is going to be next year because the spending is just in place.

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I mean, the gears are going and you can't stop the train to kind of borrow an Alden phrase.

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You can't stop the AI train on a dime.

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It could stop eventually, but you can't stop it next quarter.

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It would be a multi-year phase out of it.

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And I think, you know, in the meantime, earnings are just, you know, they're at unbelievable record paces.

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We're going to do over $400 in earnings in the S&P 500.

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The PE is cheaper now on the S&P than it was at the beginning of the year.

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You've got companies like Samsung, which I know isn't in the S&P, but it's going to do over $200 billion in profit this year.

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And people are saying, why is this a trillion dollar company?

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Well, I mean, if I told you, look, I can make $100,000 a year the next five years in a row,

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I will give every single dollar to you.

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And then at the end of it, you're also going to own every single dollar I make after that

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for the rest of my life.

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I think a million dollars is, I mean, $500,000 is a pretty cheap price to pay.

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And that's what people are paying.

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I mean, I think some of the cheapest stocks I've ever seen in my life are these Korean memory names.

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I mean, it's just I just don't understand.

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How like three times earnings.

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Growing at 65, 70 percent.

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And that's what I mean, they've been growing well over that.

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But this is what's forecast for fiscal year 27.

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these peg ratios are ridiculous and people are selling it and saying it's a bubble because they

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believe what that somebody's going to come out and there's going to be a memory fairy that figures

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out or look anthropic and open ai can blow up that that's not going to hurt micron or sk hynix

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samsung in the medium the long term in the short term yes open ai oh ai blew up it's going to hurt

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it. But AI is not going away. It requires memory. That's like saying, you know, when I was a kid,

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a big computer was the Commodore 64. If the Commodore 64 blows up and nobody wants to buy

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another Commodore 64 or another Atari 2600, then the whole video game industry is dead.

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It's like, I mean, no, that's not the case. These were the biggest two companies when I was a kid.

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they dominated it. Commodore 64, Jungle Hunt, you know, Atari 2600, Pac-Man. I mean, these were the

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games, the cartridges dominated video games. If you said those companies are going to be

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jacked S, you know, within a matter of years, therefore get out of all the video game suppliers.

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I mean, how did that go for you? And that's what people are saying. That's what Citron saying.

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open AI and Anthropic are shit companies. Those are the word he likes to use. He basically says

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they're scams. He says they're never going to be able to make a profit and they're going to go away.

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And because of that, the entire basically financial system is going to blow up

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and all of this debt of the hyperscalers is going to go away. He even referenced in a recent podcast,

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the possibility of NVIDIA going bankrupt. Like literally, like he's talking about NVIDIA

299
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possibly going he said it was unlikely but he said it's possible nvidia is going to go bankrupt

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i mean marty this amount of fear-mongering and then it's played into you listen to the kids

301
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booing at college like there's this ai a lot of people have talked about sam aldman and dario

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modai being like though you know it's like mussolini and hitler like they're they're very

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bad spokesman. Nobody likes these guys. They come across as arrogant. They come across as

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condescending. They're not relatable. And the stuff that they say a lot of the times,

305
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it just puts people off the wrong way. And I think there's this whole thing where

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This is not going to necessarily end in OpenAI being a trillion company I don know if it does But even if OpenAI eventually becomes a lucent technology that doesn mean that there not going to be

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a Microsoft and an Amazon emerging from the internet slash now AI ecosystem. And I just

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I just think trying to pick the exact time that this is going to happen, like, okay, next week,

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you know, they're going to say CapEx is over and it's going to crash. I think you just want to,

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you want to stay invested, stay for the long term. But I think you also want to really stay

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diversified and not have everything in chips and AI. You want to have emerging market,

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like not just Korea, but things like Brazil. You want to have Bitcoin, want to have gold.

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you want to have a material sector you want it you don't want to put all your money in chips

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it's number one it's too volatile you'll get blown out and number two the rotation is going to

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continue and i think we're just you know probably on the verge of getting started uh back into the

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whole gold basement well that's a good segue into the next topic which is the fed in macro

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As you were discussing before we hit record, a lot of people are beginning to price in rate hikes later this month.

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I think it's at 50-50 right now.

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If you look at the probability of there being a rate hike or them holding it steady, what's your take on this, Warsh?

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Again, coming in between now and our last interview, and how are you viewing all of this, Warsh, at the helm?

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I do not think there's going to be any rate cuts.

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Um, somebody who, you know, I respect, I've referenced many times, he's talked about a

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potential for Warsh to hike actually in July and do a surprise hike.

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This would essentially like cert fendent independence, but then talk it down and say,

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that's it.

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Um, so like a 25 basis hike possibly, but nobody is even talking about like a major

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hiking site.

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And if you listen to Warsh, I think he comes off a little conceited sometimes, too.

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I think he probably needs a better haircut.

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But he just does not strike me as someone who's oblivious to the broader macro concern.

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As an example, in his first press conference, he was asked kind of a leading question about are financial conditions loose?

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and it was kind of a left-leaning journalist that wanted him to somehow argue they're not.

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And he basically came back right away. He said, look, in housing, no, financial conditions are

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not. If you're a hyperscaler looking to borrow debt and spreads are at all-time height, then yeah,

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financial conditions are, excuse me, financial conditions are not very light. It's pretty easy

336
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to borrow right now. And so we have this tale of two economies. We have a housing market,

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which has been the primary driver of the economy about half of the time, right? If you look at,

338
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okay, what happened when the dot-com boom bust? Housing took over. And then we had like a five,

339
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six year housing bubble. If you look at net worth of Americans, it's still mostly in real estate.

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So the biggest market in this country for your average American is real estate. It's the house. And that has just done nothing in recent years. There have been certain markets that are extremely supply constrained with kind of blue political leanings where they like a New York where like, you know, they're just not building anything.

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and, you know, rents are, I think rents are over $5,000 a month right now for an average bedroom.

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And, you know, yeah, prices have gone up in places like that.

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But if you live like where I do in North Carolina, I mean, you know,

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a house has not moved up or down more or less for years.

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You know, you got to go back to the last World Cup, you know, to see, you know,

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house prices cheaper or more expensive than they are right now. I mean, like housing just has not

347
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moved. And at the same time during that period, earnings, nominal earnings, and I'm using nominal

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because housing prices that move are up like over 20%. So for your average American, if you want to

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buy a house in Durham, it's 20% cheaper now than it was four years ago. People say, well, what are

350
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talking about 20% cheaper because houses have not moved. Nominal earnings are up that

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compounded over the last four years. And I can, I can go down my street and look at Zillow and look

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at like, what did a house sell for in like September, 2022? And you put a house on the

353
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market right now, it's going to sell for the same thing. And then if you look at what is the average,

354
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you know hourly earnings increase nominal terms not real um it's up over 20 percent

355
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compounded over the last i mean that's a 20 reduction in housing and that's basically the

356
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biggest segment of wealth in the entire economy and the most directly interest rate sensitive

357
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segment. So if you're Warsh and you're saying, okay, if I raise rates, what am I going to do?

358
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I'm going to hurt housing. That's going to hurt construction spending. That's going to hurt

359
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Josh Mo American where most of their wealth is in housing. Is it going to stop OpenAI from spending?

360
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Is it going to stop ETA from borrowing because their interest rate on their, it just went up 25 basis points?

361
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No, it's not.

362
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And so I think Walsh recognizes that the Fed's interest rate tool is a very blunt tool.

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And that by raising rates, he's not going to stop, you know, electricity inflation because of AI.

364
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Like that's on a course that's absolutely separate from whatever, you know, the two year yield is.

365
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And so all he's going to do is hurt the average person and also stymie bank lending, which I think he wants to stimulate.

366
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And that and that goes into Besson and Besson's speech about, you know, tokenization, about deregulation.

367
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And so there's this big strategic narrative that I think the Trump administration has right.

368
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And then at the same time, we're fighting this big tactical narrative that I think the Trump administration has wrong.

369
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So they keep making these tactical mistakes, these fumbles, but their long-term strategic vision of embracing digital assets, embracing deregulation, letting AI, letting America compete, bringing back manufacturing, all these broad strategic goals, you know, one big beautiful build, appreciation, tax cuts, all these are huge strategic tailwinds.

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but then at the same time we keep getting these huge tactical headwinds whether it's tariffs

371
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brand war whatever and this is the wall of worry the market keeps fighting and we keep getting the

372
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ups and downs we keep getting the rotations and then at the end of the day you look back and you

373
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say oh my gosh apple's up 50 in the last 12 months yeah well let's talk about the big strategy from

374
00:34:10,356 --> 00:34:16,496
dissent and trump administration what they're getting right long term and then follow that up

375
00:34:16,496 --> 00:34:22,696
with what they're getting wrong and how they can maybe right course there yeah i think you know

376
00:34:22,696 --> 00:34:29,756
what like i said what they're getting right is you know deregulation i think one thing that has not

377
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been understood enough is um the relationship of the balance sheet to interest rates what works

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effect. So I think this is where the market has been getting it wrong. The market looked at Warsh.

379
00:34:45,536 --> 00:34:51,456
They see him as a hawk. They think he's going to decrease the balance sheet. That's going to

380
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decrease money supply. The inflation and inflationary aspects are primarily driven by money supply.

381
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Money supply does not necessarily need to be increased by the Fed balance. It can be increased

382
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by bank lending. It can be increased by the velocity of money. And those are the things

383
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that Warsh really wants. He wants to start, and this is already starting, move back more lending

384
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from banks and less from private credit. Why is that important? If I'm a millionaire and I've got

385
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$100,000 I want to put into a bond issue. And I do it through private credit. I take that $100,000.

386
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It essentially gets withdrawn from the economy and it lends it to the company. Net-net, it's zero.

387
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I had $100,000 spending power. I now lose that $100,000 spending power. I loaned it to a company.

388
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they got $100,000 of spending power.

389
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If a bank says, I want to loan you $100,000,

390
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they credit your account, $100,000,

391
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and then they debit their liabilities, $100,000,

392
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there's no decrease.

393
00:36:09,516 --> 00:36:10,476
It's money printing.

394
00:36:11,736 --> 00:36:13,776
There have been so many people fed,

395
00:36:14,176 --> 00:36:15,856
you know, I'm a big central bank guy.

396
00:36:16,236 --> 00:36:19,676
The biggest printers of money are not central banks,

397
00:36:19,676 --> 00:36:20,776
commercial banks.

398
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The commercial banks, the reason they're regulated the way they are, the reason there's the OCC, the reason there's the FDIC, the reason there's the Fed is they can literally make credits on their balance sheet, excuse me, debits on their balance sheet for their own liabilities and credit you with an asset.

399
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That's money printing, money creation.

400
00:36:43,696 --> 00:36:47,416
We had so much money being created through private credit.

401
00:36:47,976 --> 00:36:54,676
That's essentially, you know, putting a ceiling on M2, right?

402
00:36:55,336 --> 00:37:01,036
And so we don't need the Fed's balance sheet to expand if commercial banks start lending.

403
00:37:01,896 --> 00:37:05,136
This is what wars, the deregulation.

404
00:37:05,816 --> 00:37:07,476
This is all part of the investment plan.

405
00:37:08,796 --> 00:37:14,336
This is, you know, we don't need to raise interest rates every time growth comes up.

406
00:37:14,336 --> 00:37:17,396
We don't need to have a huge Fed balance sheet.

407
00:37:17,416 --> 00:37:23,136
We can absorb treasury supply through stable coins or tokenization.

408
00:37:23,556 --> 00:37:23,836
We can.

409
00:37:24,496 --> 00:37:33,416
So there is this big broad strategic plan that I believe is out there that I think is going to be necessary.

410
00:37:33,416 --> 00:37:49,136
Because if you do not address, and we're already at over $800 billion, that interest expense this fiscal year, and we still got the rest of July, August, and September fiscal year.

411
00:37:53,996 --> 00:38:00,896
People are worried about $80 billion in Google equity raise.

412
00:38:00,896 --> 00:38:06,736
I mean, like, look, this net interest expense is over 10 times that already this year.

413
00:38:06,936 --> 00:38:08,316
And it's just growing.

414
00:38:08,576 --> 00:38:11,316
And this is the thing that is a nasty little secret.

415
00:38:11,476 --> 00:38:24,076
This is what my big concern is longer term, is that almost all the expense of health care for an individual comes in the last 24 to 36 months.

416
00:38:24,076 --> 00:38:31,436
and we are just now getting into what I would call an accelerated death rate,

417
00:38:32,356 --> 00:38:37,716
baby boomers, where if you look at, you know, when was World War II over?

418
00:38:37,996 --> 00:38:38,556
I'd say 40.

419
00:38:39,056 --> 00:38:46,096
So the first boomers, let's say born in 46, were now exactly 80 years, right?

420
00:38:46,756 --> 00:38:49,296
So the oldest baby boomers are now 80.

421
00:38:49,296 --> 00:38:53,456
I don't know about you, but most of the people I know,

422
00:38:53,456 --> 00:38:56,136
they do pretty good in their 70s.

423
00:38:56,136 --> 00:39:11,784
I mean there always exceptions for cramps But really where the health problems start cropping up for most of the older adults that I know is in their 80s And boomers this is the first year the oldest boomers are just hitting 80s

424
00:39:12,404 --> 00:39:18,844
And if you look at fiscal projection for Medicare health spending, it's going to blow up.

425
00:39:19,364 --> 00:39:22,784
And so we're getting interest expense blowing up.

426
00:39:22,784 --> 00:39:32,924
At the same time, we're going to have health care spending blow up because boomers are hitting what I would call peak medical carry.

427
00:39:34,024 --> 00:39:36,144
And that's not going to end anytime soon.

428
00:39:36,504 --> 00:39:38,204
And it's just going to get worse.

429
00:39:39,404 --> 00:39:52,004
And so if you look at the we're going to hit $40 trillion in U.S. debt coming month, we're going to hit over a trillion dollars in interest expense year to date.

430
00:39:52,784 --> 00:39:57,344
in a couple months, how you can look at the US dollar

431
00:39:58,624 --> 00:40:02,424
and not say, I wanna own gold, I wanna own Bitcoin,

432
00:40:02,424 --> 00:40:03,964
I wanna own silver,

433
00:40:05,044 --> 00:40:07,884
in the same way that people thought was so smart

434
00:40:07,884 --> 00:40:09,504
12 months ago.

435
00:40:09,504 --> 00:40:11,684
And the debasements, you know,

436
00:40:11,684 --> 00:40:13,904
guys from Morgan Stanley coming on Bloomberg,

437
00:40:13,904 --> 00:40:18,904
debasement trade, and now it's like, oh, look,

438
00:40:19,164 --> 00:40:21,704
AI stole a little bit of thunder from me.

439
00:40:21,704 --> 00:40:24,064
I mean, look, there's no question about it.

440
00:40:24,444 --> 00:40:26,484
Stuff's going up four or five times.

441
00:40:26,764 --> 00:40:30,344
But people are starting to see the easy money days are over.

442
00:40:31,804 --> 00:40:37,404
You know, Micron, I think, like I said, it could be $3,000 a share in the next 12 to 24 months.

443
00:40:37,984 --> 00:40:40,304
But that's not what it did in the last 12 to 20.

444
00:40:41,204 --> 00:40:46,964
And I think once people start to recognize and once people see the plan,

445
00:40:46,964 --> 00:40:54,684
the the the OCC the office of the control of the currency which largest bank regulate on CNBC today

446
00:40:54,684 --> 00:41:00,664
talking about how he just approved circle to be a bank you know like this this stuff is starting to

447
00:41:00,664 --> 00:41:11,924
happen where crypto um bitcoin they're they were fighting like up a river for four years under by

448
00:41:11,924 --> 00:41:20,024
He basically said, like, Carl Quintanilla asked, like, aren't you worried about giving Circle a bank license?

449
00:41:20,364 --> 00:41:26,904
He's like, look, all I'm doing is following the statutes and the laws as they're written.

450
00:41:26,904 --> 00:41:44,204
And I can speak from firsthand experience that until recently, if you mentioned crypto to a regulator, you were like, you know, it was, you just didn't do it.

451
00:41:44,324 --> 00:41:49,344
I started three different broker dealers, TechFi Security, Equity Security, Invested Security.

452
00:41:49,744 --> 00:41:50,504
They're all broker check.

453
00:41:50,564 --> 00:41:51,844
People want to start them as a CEO.

454
00:41:52,384 --> 00:41:55,504
I went through the whole FINRA application process of all three.

455
00:41:55,504 --> 00:42:00,484
two is new broker dealers one is a continuing application buy a broker

456
00:42:00,484 --> 00:42:08,984
every single time and we had the best manhattan attorneys that advised

457
00:42:08,984 --> 00:42:11,804
and guys

458
00:42:11,804 --> 00:42:20,884
every single time they would tell us don't mention crypto like once you mention that

459
00:42:20,884 --> 00:42:24,524
you're going to be persona non grata you're going to go to the back of the list

460
00:42:24,524 --> 00:42:32,064
if you have to mention it, but otherwise allude to you might go into other aspects of business.

461
00:42:32,724 --> 00:42:39,884
And there was no legislative statute law in the books that said, if you're involved with

462
00:42:39,884 --> 00:42:45,484
cryptocurrencies, you can't have a broker dealer or you can't have a bank. There's no law prohibiting

463
00:42:45,484 --> 00:42:50,684
it. It was just a stance that the regulators took because they were essentially in the back

464
00:42:50,684 --> 00:42:56,864
pockets of the big bank. And it was a threat to the big banks, and it is a threat. This is the

465
00:42:56,864 --> 00:43:03,804
whole reason why the Clarity Act hasn't been passed yet. Because the banks do not want stable

466
00:43:03,804 --> 00:43:11,424
coin issuer like Circle basically paying out interest and not being regulated like a bank.

467
00:43:11,604 --> 00:43:16,704
Well, guess what? Now Circle's a bank. So we're going to get through these hurdles,

468
00:43:16,704 --> 00:43:18,264
and we're going to get over this.

469
00:43:18,404 --> 00:43:21,984
We had Securitize, SECZ is the ticker,

470
00:43:22,524 --> 00:43:25,464
go public via SPAC a week or so ago.

471
00:43:26,884 --> 00:43:29,144
You know, it traded down quite a bit

472
00:43:29,144 --> 00:43:33,024
and I actually bought some late last week, some today.

473
00:43:34,364 --> 00:43:36,104
I'm not making an investment recommendation,

474
00:43:36,384 --> 00:43:38,364
but, you know, it went public with SPAC,

475
00:43:38,684 --> 00:43:43,984
traded up to like 14 and got down to $6.66 last week.

476
00:43:43,984 --> 00:43:50,144
And, you know, this is a tokenization company, you know, blockchain.

477
00:43:51,424 --> 00:43:56,944
Again, to reference Jordy Visser, he likes to talk about agents, the agentic economy.

478
00:43:57,124 --> 00:43:59,704
It's going to be, you know, they're not going to be using dollars.

479
00:44:01,024 --> 00:44:07,044
Once people start to realize this, they're going to say, oh, my gosh, I need to be there.

480
00:44:07,564 --> 00:44:13,544
Just like a year ago, people were like, oh, my gosh, the basement trade.

481
00:44:13,544 --> 00:44:15,724
I need to be there in gold and silver.

482
00:44:15,844 --> 00:44:20,024
Then it ramps up, you know, 150% sells off.

483
00:44:20,124 --> 00:44:21,564
Everybody hates it for six months.

484
00:44:21,784 --> 00:44:23,864
And then it starts again.

485
00:44:24,504 --> 00:44:28,604
And so I think the same thing is happening right now with some of these chip stocks.

486
00:44:29,344 --> 00:44:37,664
And what was hated, some of the hyperscalers, like I said, I mean, they're having amazing returns.

487
00:44:37,664 --> 00:44:42,384
I mean, look at something really quick, like a meta.

488
00:44:42,384 --> 00:44:52,004
I mean, this thing was literally 540 bucks a share like five, six days ago.

489
00:44:52,684 --> 00:44:54,704
And today it hits 675.

490
00:44:55,644 --> 00:44:59,624
But yet if you hear people talk about, oh, meta hyperscalers, what a dog.

491
00:45:00,144 --> 00:45:03,084
Well, look, these things are in ranges.

492
00:45:03,084 --> 00:45:04,644
They're trading around.

493
00:45:04,884 --> 00:45:06,024
The money is moving.

494
00:45:06,024 --> 00:45:16,044
um and i think at the end of the day if if you're gonna argue maybe this could be our last quick

495
00:45:16,044 --> 00:45:22,004
topic would be like the trump accounts like what's going to keep this party going it's just an

496
00:45:22,004 --> 00:45:29,444
endless stream of passive there's a michael green argument it's you know pees can blow up

497
00:45:29,444 --> 00:45:50,764
They don't need to stay at 25. It could go to 30, 35, like because the passive bid is not going away and is only getting augmented by the tune of hundreds of billions of dollars a year in perpetuity just from one law going into effect on July 4th, which is the Trump accounts.

498
00:45:50,764 --> 00:45:52,964
yeah so let's jump into that

499
00:45:52,964 --> 00:45:54,184
I mean

500
00:45:54,184 --> 00:45:57,184
what should we follow

501
00:45:57,184 --> 00:45:59,264
there in terms of adoption

502
00:45:59,264 --> 00:46:00,764
to then try to

503
00:46:00,764 --> 00:46:03,364
port to the flows

504
00:46:03,364 --> 00:46:04,364
that you just described

505
00:46:04,364 --> 00:46:07,204
because everybody

506
00:46:07,204 --> 00:46:09,264
has access to a Trump account you have to physically

507
00:46:09,264 --> 00:46:10,724
go out and get them for your kids

508
00:46:10,724 --> 00:46:15,404
how's this going to play out in your mind

509
00:46:15,404 --> 00:46:19,024
I think it's being way

510
00:46:19,024 --> 00:46:20,444
underestimated

511
00:46:20,444 --> 00:46:27,804
by the market because I don't think people fully understand the tax advantage of these.

512
00:46:28,464 --> 00:46:30,604
And it's not just $1,000.

513
00:46:32,224 --> 00:46:41,664
It's the ability for anybody to give to a kid that, and it's $5,000 and it's available

514
00:46:41,664 --> 00:46:43,724
to every single person under 18.

515
00:46:43,724 --> 00:46:52,684
so every american under 18 can go create or their parents can go create a trump again

516
00:46:52,684 --> 00:46:59,444
not if you're 16 you're not going to get a thousand dollars so it's like you have to be

517
00:46:59,444 --> 00:47:06,504
born i think since trump took office or something like 2025 2026 there there's a there's a there's

518
00:47:06,504 --> 00:47:10,704
a lower age range where you get the thousand dollars and then there's other people making

519
00:47:10,704 --> 00:47:19,564
big gifts like Michael Dell, Brad Gerstner, different people that are, Gerstner's just

520
00:47:19,564 --> 00:47:20,104
doing the video.

521
00:47:20,404 --> 00:47:28,864
But the big thing is the tax advantage is that, okay, I talked about boomers turning

522
00:47:28,864 --> 00:47:29,224
80.

523
00:47:29,784 --> 00:47:33,284
We all know boomers have 70 plus trillion dollars.

524
00:47:33,284 --> 00:47:41,444
they can put $5,000 a year for each of their grandkids into this account,

525
00:47:41,864 --> 00:47:45,184
and it's going to grow for their grandkids tax-free.

526
00:47:46,364 --> 00:47:55,724
When they're 18, the kid wants, they can roll this over into IRA,

527
00:47:56,124 --> 00:48:00,724
and then when they're 59, they can take it out tax-free.

528
00:48:00,724 --> 00:48:09,724
There have been some studies showing that if a kid that's born now for the next 18 years,

529
00:48:09,724 --> 00:48:13,144
$5,000 is contributed, which ran it.

530
00:48:13,144 --> 00:48:15,244
That's a lot of decent amount of money.

531
00:48:15,244 --> 00:48:17,884
It's less than a hundred thousand dollars though.

532
00:48:17,884 --> 00:48:26,084
That should the markets perform as they have, um, by the time that kid is 59 and a half

533
00:48:26,084 --> 00:48:30,064
and could withdraw it, it should be between 13 and $15 million.

534
00:48:30,724 --> 00:48:32,744
because you're starting that early.

535
00:48:32,844 --> 00:48:34,224
This is the power of compounding.

536
00:48:34,284 --> 00:48:36,164
It's the same thing that AI guys talk about,

537
00:48:36,224 --> 00:48:37,824
how humans think linearly.

538
00:48:38,184 --> 00:48:40,144
We don't speak exponentially.

539
00:48:41,004 --> 00:48:43,604
Or Einstein talking about compounding

540
00:48:43,604 --> 00:48:45,404
the most powerful force in the universe.

541
00:48:45,884 --> 00:48:48,064
And you're like, you know, is that really right?

542
00:48:48,204 --> 00:48:52,084
Like put $90,000 into its account at 13.

543
00:48:52,084 --> 00:48:54,884
And well, yeah, because of compounding,

544
00:48:54,964 --> 00:48:58,484
because it's that many, 60 years.

545
00:48:58,624 --> 00:49:00,504
We're starting from year zero when the kid's born.

546
00:49:00,724 --> 00:49:03,564
to 59 and a half, so it's called 60 years.

547
00:49:05,144 --> 00:49:07,804
Nominally, S&P is up 10, 11%.

548
00:49:07,804 --> 00:49:10,024
You're putting that money in.

549
00:49:11,364 --> 00:49:13,824
And so whether that's going to happen or not,

550
00:49:14,244 --> 00:49:15,664
that can be up for debate.

551
00:49:16,244 --> 00:49:18,384
What I don't think is going to be up for debate

552
00:49:18,384 --> 00:49:21,384
is that there's going to be a lot of well-off grandparents

553
00:49:21,384 --> 00:49:23,484
putting money in accounts.

554
00:49:24,304 --> 00:49:26,404
Now, what has to happen with that?

555
00:49:26,944 --> 00:49:30,364
It's in the S&P 500, and it can't be sold, right?

556
00:49:30,364 --> 00:49:34,424
I mean, the kid can't, oh, I put it into my six-year-old grandchild.

557
00:49:34,564 --> 00:49:35,824
I just put $5,000 in.

558
00:49:36,324 --> 00:49:37,884
Next month, I'm going to sell it.

559
00:49:38,044 --> 00:49:38,164
No.

560
00:49:38,844 --> 00:49:40,424
It's a passive bid.

561
00:49:41,144 --> 00:49:45,544
It's an unstoppable passive bid because every year there's new kids born.

562
00:49:46,344 --> 00:49:49,684
So I think it's three and a half million kids born.

563
00:49:50,504 --> 00:49:55,664
Some of these numbers were gone through on our recent All In podcast with Brad Gertz.

564
00:49:57,104 --> 00:49:59,184
It really spells all this out well.

565
00:50:00,364 --> 00:50:04,684
And, you know, they don't tie it necessarily to S&P terms.

566
00:50:04,844 --> 00:50:06,464
They just talk about the great tax savings.

567
00:50:07,124 --> 00:50:20,504
But I think if you combine what they're talking about, the tax savings, combine that with Michael Green's passive bid thesis, combine that with the fiscal deficits and that we literally can't clamp down on inflation.

568
00:50:20,504 --> 00:50:31,284
Like we can't just start raising interest rates when the government is primarily funding itself through U.S. Treasury bills and start hiking up those rates when we're running over a trillion dollars a year.

569
00:50:31,404 --> 00:50:36,104
Like Lou Grohman, you know, what are you going to do, sacrifice the currency or bonds?

570
00:50:36,304 --> 00:50:42,104
Right. I mean, like, are we either going to let the bond market blow up or are we going to sacrifice the currency?

571
00:50:42,224 --> 00:50:45,744
In other words, inflation. We're going to have that.

572
00:50:45,744 --> 00:50:50,524
Now, there's going to be counterproductive or counter forces with productivity.

573
00:50:51,304 --> 00:51:01,424
But at the end of the day, this whole market fear, oh, my gosh, we've got the second coming of Paul Volkner in the Fed chair seat.

574
00:51:01,764 --> 00:51:12,204
And he's just going to start hiking rates because inflation is at 3.2%, which I wouldn't be surprised if tomorrow, and it's always risky making a call less than 24 hours before a number comes out.

575
00:51:12,204 --> 00:51:15,544
I wouldn't be surprised if we're well below expectations.

576
00:51:15,744 --> 00:51:20,824
and even more low next month.

577
00:51:21,124 --> 00:51:24,664
And I think we could have some deflationary prints,

578
00:51:24,944 --> 00:51:27,824
like literally negative numbers,

579
00:51:28,044 --> 00:51:30,844
especially if the Trump administration

580
00:51:30,844 --> 00:51:33,604
would get out of its way a little bit with Iran stuff

581
00:51:33,604 --> 00:51:37,724
because those are the tactical headwinds I talked about.

582
00:51:37,724 --> 00:51:41,684
But when you had oil go from $120 a barrel

583
00:51:41,684 --> 00:51:44,444
down to a six-handle,

584
00:51:44,444 --> 00:51:46,644
in a matter of weeks,

585
00:51:47,284 --> 00:51:49,644
I mean, that's going to be good for reducing inflation.

586
00:51:49,644 --> 00:51:53,044
So I think, you know, all of these signs,

587
00:51:53,224 --> 00:51:55,284
like there's so much noise out there,

588
00:51:55,884 --> 00:51:57,284
a lot of volatility,

589
00:51:57,984 --> 00:52:02,084
but like you just can block that out and say,

590
00:52:02,184 --> 00:52:04,964
look, I think I want to have...

591
00:52:04,992 --> 00:52:06,652
of a 4% allocation,

592
00:52:07,732 --> 00:52:08,012
memories,

593
00:52:09,732 --> 00:52:12,172
12% allocation to gold,

594
00:52:13,032 --> 00:52:14,532
8% allocation to Bitcoin,

595
00:52:14,672 --> 00:52:16,592
whatever those allocations are right for you,

596
00:52:17,272 --> 00:52:18,572
hold on to them.

597
00:52:18,972 --> 00:52:20,632
You're going to be very happy

598
00:52:20,632 --> 00:52:22,232
with where you're at six months,

599
00:52:22,312 --> 00:52:23,192
12 months from now.

600
00:52:23,892 --> 00:52:25,572
And I just mentioned that

601
00:52:25,572 --> 00:52:26,932
because there are a lot of

602
00:52:26,932 --> 00:52:28,092
doomer voices out there.

603
00:52:28,532 --> 00:52:29,572
There are a lot of people saying

604
00:52:29,572 --> 00:52:31,152
this AI thing is going to blow up.

605
00:52:31,672 --> 00:52:33,092
I think credit is going to blow up.

606
00:52:33,092 --> 00:52:39,312
you know uh ram war is going to send oil to 200 there are a lot of people that i think could be

607
00:52:39,312 --> 00:52:43,412
scaring people into saying oh my gosh i need to take my money out of all risk assets and put it

608
00:52:43,412 --> 00:52:52,852
into a cd um i think that's going to be the wrong decision i could always be wrong but i mean i i'm

609
00:52:52,852 --> 00:52:59,612
i'm about as bullish as i've i've ever been i think i think 15 000 by the end of the decade on

610
00:52:59,612 --> 00:53:02,232
probably

611
00:53:02,232 --> 00:53:05,772
yeah you've always been very bullish

612
00:53:05,772 --> 00:53:07,232
on the show and

613
00:53:07,232 --> 00:53:09,552
it seems like

614
00:53:09,552 --> 00:53:11,852
let's see I mean the AI

615
00:53:11,852 --> 00:53:13,532
stuff like when I hear Ed Zitron

616
00:53:13,532 --> 00:53:15,712
I have to wonder like is there

617
00:53:15,712 --> 00:53:18,172
some sort of nefarious

618
00:53:18,172 --> 00:53:19,792
incentive driving it

619
00:53:19,792 --> 00:53:22,052
or is he not using it

620
00:53:22,052 --> 00:53:23,852
or is he not using it the right way because you can

621
00:53:23,852 --> 00:53:26,072
he just sells his research he makes money on

622
00:53:26,072 --> 00:53:27,172
that yeah

623
00:53:27,172 --> 00:53:29,032
but as a research kit

624
00:53:29,032 --> 00:53:30,472
because I'm using the stuff

625
00:53:30,472 --> 00:53:33,272
we've basically automated a ton of

626
00:53:33,272 --> 00:53:34,992
the back end stuff, the TFTC

627
00:53:34,992 --> 00:53:37,232
and like I said, my token usage

628
00:53:37,232 --> 00:53:39,172
is going up exponentially

629
00:53:39,172 --> 00:53:41,092
it feels, particularly with the new frontier

630
00:53:41,092 --> 00:53:43,072
models launching, we're hopping on them right away

631
00:53:43,072 --> 00:53:45,092
and it's

632
00:53:45,092 --> 00:53:45,852
undeniable

633
00:53:45,852 --> 00:53:48,152
objectively, just looking at my

634
00:53:48,152 --> 00:53:50,392
micro situation, looking at my business

635
00:53:50,392 --> 00:53:52,072
it is helping us be

636
00:53:52,072 --> 00:53:54,192
crazy productive

637
00:53:54,192 --> 00:53:56,312
it is a multiple and productivity

638
00:53:56,312 --> 00:53:59,592
the costs are manageable for us as a small team.

639
00:53:59,852 --> 00:54:01,172
Maybe that's different for enterprises.

640
00:54:01,572 --> 00:54:05,192
And it does seem like enterprises are trying to figure out

641
00:54:05,192 --> 00:54:06,892
how to manage token spend

642
00:54:06,892 --> 00:54:08,772
and what the right mix of frontier models

643
00:54:08,772 --> 00:54:10,052
and open source models is.

644
00:54:11,052 --> 00:54:15,172
But I think to flatly say that this is a bubble

645
00:54:15,172 --> 00:54:19,112
built on idiotic technology that hallucinates.

646
00:54:19,112 --> 00:54:20,812
Yeah, he claims it's nothing.

647
00:54:21,132 --> 00:54:22,852
He doesn't even make the claim

648
00:54:22,852 --> 00:54:28,232
that like open AI and Anthropic are, you know, insecure business models.

649
00:54:28,232 --> 00:54:32,752
Like he literally makes the claim that we're going to look back on this period and say,

650
00:54:32,752 --> 00:54:34,292
this was the biggest waste ever.

651
00:54:34,572 --> 00:54:38,712
And we're going to be like massively oversupplied with compute.

652
00:54:39,032 --> 00:54:43,312
And I would, I like will grant him that there's no guarantee.

653
00:54:43,312 --> 00:54:46,952
Like I said, that open AI becomes a $10 trillion company one day.

654
00:54:47,032 --> 00:54:52,592
In fact, I kind of doubt it ever does, but that does not mean that AI, that data

655
00:54:52,592 --> 00:54:54,352
that are built outs are worthless.

656
00:54:55,352 --> 00:54:57,692
That, you know, meta,

657
00:54:57,892 --> 00:55:00,052
like I made this argument months ago

658
00:55:00,052 --> 00:55:01,332
where I was basically like,

659
00:55:01,412 --> 00:55:04,272
look, everybody's talking about shortages of compute.

660
00:55:05,292 --> 00:55:07,072
The hyperscalers own compute.

661
00:55:07,472 --> 00:55:09,372
Microsoft owns compute with Azure.

662
00:55:09,372 --> 00:55:12,372
You know, Amazon with AWS.

663
00:55:12,972 --> 00:55:14,892
Meta with what they built out for themselves,

664
00:55:15,032 --> 00:55:16,012
which is now selling.

665
00:55:16,672 --> 00:55:18,972
Google with Google Cloud

666
00:55:18,972 --> 00:55:20,292
and what they built out for Gemini.

667
00:55:20,492 --> 00:55:21,732
They own compute.

668
00:55:21,732 --> 00:55:27,572
if there's a need for compute it doesn't matter if it comes through open ai anthropic

669
00:55:27,572 --> 00:55:35,452
rock uh glm you know kimmy minimax like it doesn't matter when the the baba model like

670
00:55:35,452 --> 00:55:42,292
if it needs to be computed it needs the hardware and the hardware is going to be valuable because

671
00:55:42,292 --> 00:55:49,052
that demand is going up crazy and like you talked about and mentioned earlier we're not even getting

672
00:55:49,052 --> 00:55:50,052
into robotics.

673
00:55:50,052 --> 00:55:53,292
I mean, we're not even getting into all this stuff.

674
00:55:53,292 --> 00:55:56,172
And like, is a lot of that stuff going to be on the edge?

675
00:55:56,172 --> 00:55:57,172
Yes.

676
00:55:57,172 --> 00:56:00,292
But guess who's going to make the memory for the robots, right?

677
00:56:00,292 --> 00:56:05,572
Is that, so it's like, you know, mind the miners, you know, this is, this is the, the

678
00:56:05,572 --> 00:56:06,572
railroads, man.

679
00:56:06,572 --> 00:56:18,140
I mean it was like the same thing picks and shovels mind the miners You know like I said honestly I would not invest in Anthropic or OpenAI right now

680
00:56:18,240 --> 00:56:19,120
I just wouldn't.

681
00:56:19,220 --> 00:56:20,600
I mean, not anything significant.

682
00:56:22,600 --> 00:56:29,180
And I think we've seen SpaceX, you know, not have that great of a reaction in the market.

683
00:56:29,180 --> 00:56:36,540
um but i think there's a valid criticism that when people are willing to draw out like where

684
00:56:36,540 --> 00:56:41,780
spacex is going to be in 15 year like who the heck knows where spacex is going to be

685
00:56:41,780 --> 00:56:47,320
and so that deserves a pretty heavy discount even if you grant that it's going to access

686
00:56:47,320 --> 00:56:53,180
this 24 trillion dollar tam and it's like granted at all but you got a discount the hell out of that

687
00:56:53,180 --> 00:57:04,140
but was it a big leap once the automobile was invented to say automate autos are going to be

688
00:57:04,140 --> 00:57:10,040
a big thing didn't know if ford was going to be great studebaker a lot of companies went bankrupt

689
00:57:10,040 --> 00:57:17,360
a lot of railroad roads went bankrupt a lot of dot-coms went bankrupt but at the end of the day

690
00:57:17,360 --> 00:57:20,180
hey, this was a transformational technology.

691
00:57:20,760 --> 00:57:23,860
I just don't see how, and Zitron argues this a lot of the times,

692
00:57:24,160 --> 00:57:26,940
he basically says AI is not a transformational technology.

693
00:57:27,440 --> 00:57:29,080
Like it's not good.

694
00:57:29,160 --> 00:57:30,020
It doesn't do anything.

695
00:57:30,300 --> 00:57:31,180
It hallucinates.

696
00:57:31,280 --> 00:57:34,780
It's like, look, it's getting better every month.

697
00:57:35,080 --> 00:57:36,800
It does a lot of stuff.

698
00:57:37,400 --> 00:57:38,400
I mean, I'll tell you what,

699
00:57:38,400 --> 00:57:41,880
you could make the same argument about a word processor.

700
00:57:42,580 --> 00:57:44,220
You could be like, oh, what's a computer?

701
00:57:44,660 --> 00:57:45,380
It's a keyboard.

702
00:57:45,540 --> 00:57:46,560
I already have a typewriter.

703
00:57:46,980 --> 00:57:47,880
It's not transformation.

704
00:57:48,680 --> 00:57:52,460
I mean, sometimes the differences don't even have to be that huge.

705
00:57:52,740 --> 00:57:57,200
Just the fact that you can now talk to computers is huge, right?

706
00:57:57,320 --> 00:58:08,060
I mean, before the big LOMs, the best talking, you know, back and forth was like Alexa and Siri, and they all suck.

707
00:58:08,340 --> 00:58:14,040
And now, like, I'm like, you know, you start talking to these models and they're picking up on slang.

708
00:58:14,040 --> 00:58:21,020
you're picking up on, like, that is just a huge, huge leap. I mean, it's so easy to, you know,

709
00:58:21,200 --> 00:58:27,900
imagine like glasses and, you know, automatically, you know, translating and all the stuff that these

710
00:58:27,900 --> 00:58:33,580
things have already proven they can do are huge. They just haven't been fully implemented in society

711
00:58:33,580 --> 00:58:38,700
yet because people don't change as fast as the technology, but they will get implemented.

712
00:58:38,700 --> 00:58:43,780
just like, like I'm old enough that when I was a kid, we had a radio,

713
00:58:44,280 --> 00:58:49,900
had a rotary phone and we had a dial black and white TV with an antenna.

714
00:58:50,120 --> 00:58:57,160
Okay. That was the like epitome of electronics in like a 1981 household.

715
00:58:57,480 --> 00:59:02,620
There were people that first got VHSs. They got betas.

716
00:59:02,760 --> 00:59:05,800
My dad didn't like that stuff. There were people that got cable.

717
00:59:06,200 --> 00:59:07,520
I just didn't like that stuff.

718
00:59:07,520 --> 00:59:15,340
there were kids that got video games i mentioned the commodore 64 the atari 2600 my dad didn't like

719
00:59:15,340 --> 00:59:20,980
that stuff he bought a new video game console called the atari 400 which even though it was

720
00:59:20,980 --> 00:59:26,020
less than the atari 2600 was actually more expensive but it was a better computer but

721
00:59:26,020 --> 00:59:31,880
nobody liked it everybody liked the 2600 so like all this stuff happened all this stuff happened

722
00:59:31,880 --> 00:59:41,940
And then these companies came and went, but they have literally just transformed the world over what is a relatively short period of time.

723
00:59:41,940 --> 00:59:46,820
I mean, it's not like the iPhone's been around for even a decade, right?

724
00:59:46,980 --> 00:59:48,800
I mean, it came out 2007.

725
00:59:49,400 --> 00:59:51,160
I mean, excuse me, for 20 years.

726
00:59:51,920 --> 00:59:54,260
You know, it hasn't been around for 20 years.

727
00:59:55,620 --> 00:59:58,640
I mean, that's that is not a long time.

728
00:59:58,640 --> 01:00:05,640
that that's yeah I that pairs of socks older you know been around longer than

729
01:00:05,640 --> 01:00:11,720
iPhone like this stuff changes the world and AI is gonna change the world

730
01:00:11,720 --> 01:00:28,448
that not gonna end does that mean you know SpaceX and trade down to a share in the next 24 months Sure it can I actually don think it will But yeah I mean that thing got barely any revenue not profitable

731
01:00:29,368 --> 01:00:33,308
You know, I'm just saying like, would I want to put a bunch of money into SpaceX?

732
01:00:33,468 --> 01:00:34,808
No, I own some shares.

733
01:00:35,288 --> 01:00:39,328
I got a little allocation on the IPO and I bought some the very first day.

734
01:00:40,148 --> 01:00:40,948
Small amount.

735
01:00:41,308 --> 01:00:43,228
And I just put it away.

736
01:00:43,288 --> 01:00:46,628
because I do believe in the potential of it.

737
01:00:47,508 --> 01:00:51,968
But I'm not going to be a SpaceX maxi.

738
01:00:52,348 --> 01:00:53,748
Let me put it all into that.

739
01:00:53,748 --> 01:01:03,048
And I think a diversified portfolio, crypto, Bitcoin, gold, silver, equities,

740
01:01:03,868 --> 01:01:07,068
emerging market equity, everything except for bonds.

741
01:01:07,068 --> 01:01:35,268
I just don't like bonds because I just don't see a way for the fixed income return to keep up with the inflation that's going to be necessary to handle the fiscal issues that every major developed country, Japan, the UK, France, even China, just swamped in it.

742
01:01:35,268 --> 01:01:38,648
and basement trade's not hot right now,

743
01:01:39,048 --> 01:01:40,288
that doesn't mean it won't be.

744
01:01:42,528 --> 01:01:43,728
Yeah, it's not hot.

745
01:01:43,768 --> 01:01:45,008
It's the best time to allocate typically.

746
01:01:45,508 --> 01:01:46,028
It is.

747
01:01:47,028 --> 01:01:49,848
Every single time, people hate the hyperscalers.

748
01:01:50,968 --> 01:01:52,848
It's ridiculous how many times

749
01:01:52,848 --> 01:01:56,488
when everybody thinks it's the smartest thing to do,

750
01:01:56,808 --> 01:01:58,828
that's when everybody's invested in it

751
01:01:58,828 --> 01:02:00,488
and it's got nowhere to go but down.

752
01:02:01,048 --> 01:02:02,908
Like about four weeks ago,

753
01:02:03,008 --> 01:02:03,708
everybody's like,

754
01:02:03,708 --> 01:02:11,748
you got to bet on the um the the builders you know you don't bet on the spenders get out of

755
01:02:11,748 --> 01:02:17,348
the hyperscalers everybody was saying that hyperscalers knocking the socks off of the um

756
01:02:17,348 --> 01:02:24,648
you know uh quote unquote you know the picks and shovel plays um in the last three or four weeks

757
01:02:24,648 --> 01:02:32,348
because it just gets overdone and the narrative gets old and now you've got micron down 200 bucks

758
01:02:32,348 --> 01:02:38,748
and you've got meta up 80 bucks in the last couple of years and people are saying what the

759
01:02:38,748 --> 01:02:42,788
hell happened like i thought a month ago you were supposed to buy micron and sell meta

760
01:02:42,788 --> 01:02:50,708
oh actually a month ago you were supposed to sell micron and buy meta um and it's like

761
01:02:50,708 --> 01:02:57,928
longer term i think you just be diversified because it's hard to pick the perfect okay i

762
01:02:57,928 --> 01:03:02,948
I mean, when am I going to pick that perfect day that Meta stopped, Micron stopped?

763
01:03:03,868 --> 01:03:07,288
And I think you just want to be involved in these long-term themes.

764
01:03:07,808 --> 01:03:19,728
And this is why even when Bitcoin and gold were ripping last year, and I did once in a while go on a podcast and someone would say, no, you believe so much in gold and Bitcoin and the debasement trade.

765
01:03:19,888 --> 01:03:20,768
Why do you own equity?

766
01:03:20,768 --> 01:03:27,188
I'm like, it doesn't mean that the basement trade is always going to be, you know, doing what I think it's going to be.

767
01:03:27,748 --> 01:03:32,868
Do I think gold and Bitcoin will outperform the S&P 500 over the next 10 years?

768
01:03:33,328 --> 01:03:34,128
Yes, I do.

769
01:03:34,268 --> 01:03:35,048
And I still do.

770
01:03:35,508 --> 01:03:37,248
But it's not happening this year.

771
01:03:38,408 --> 01:03:39,408
And you know what?

772
01:03:40,588 --> 01:03:42,188
It's good to have that diversity.

773
01:03:42,368 --> 01:03:43,548
There's an old saying in investing.

774
01:03:43,548 --> 01:03:48,408
The only free lunch in investing versus that increases your Sharpe ratio.

775
01:03:48,748 --> 01:03:49,728
This is volatility.

776
01:03:50,768 --> 01:03:52,008
increases your expected return.

777
01:03:53,288 --> 01:03:56,128
And that's why I've never been a fan of like,

778
01:03:56,628 --> 01:03:58,188
just put every dollar you own,

779
01:03:59,008 --> 01:03:59,768
put it all into,

780
01:04:00,068 --> 01:04:01,788
put it all into gold,

781
01:04:01,988 --> 01:04:04,028
put it all into the NASDAQ,

782
01:04:04,208 --> 01:04:05,428
put it all into monster,

783
01:04:05,988 --> 01:04:06,348
biddy,

784
01:04:06,488 --> 01:04:07,128
strategy.

785
01:04:07,768 --> 01:04:09,928
I do believe in diversification

786
01:04:09,928 --> 01:04:12,468
and want to take short-term bets,

787
01:04:12,548 --> 01:04:13,508
take short-term bets,

788
01:04:13,688 --> 01:04:15,448
but I do,

789
01:04:15,848 --> 01:04:17,728
but I do it with all per,

790
01:04:18,988 --> 01:04:19,908
most of it is a,

791
01:04:19,908 --> 01:04:33,376
I think that sage advice Any predictions between now and the next time we meet after q3 um what what it let me see if i can come up with a shocker for you

792
01:04:33,376 --> 01:04:36,816
already well you're my favorite person to talk to um

793
01:04:40,496 --> 01:04:44,016
uh i don't know if i have anything that's actually

794
01:04:44,016 --> 01:04:46,356
two out of consensus.

795
01:04:46,956 --> 01:04:51,296
I do think that with gold,

796
01:04:51,996 --> 01:04:53,536
right around $4,000,

797
01:04:53,996 --> 01:04:56,716
Bitcoin not too far away from $60,000,

798
01:04:57,716 --> 01:04:59,296
that next time we meet,

799
01:05:00,476 --> 01:05:04,856
I would wager that gold and Bitcoin

800
01:05:04,856 --> 01:05:10,856
outperform relative to equity.

801
01:05:10,856 --> 01:05:14,296
even some high-flying

802
01:05:14,296 --> 01:05:17,976
I would much rather invest

803
01:05:17,976 --> 01:05:19,236
in big gold right

804
01:05:19,236 --> 01:05:21,836
micron

805
01:05:21,836 --> 01:05:23,916
doesn't mean I don't think they're

806
01:05:23,916 --> 01:05:25,776
not good

807
01:05:25,776 --> 01:05:27,736
I just think that

808
01:05:27,736 --> 01:05:29,336
especially by the end of the year

809
01:05:29,336 --> 01:05:33,656
we could be looking at some

810
01:05:33,656 --> 01:05:34,256
really

811
01:05:34,256 --> 01:05:38,436
I think this was before we came on

812
01:05:38,436 --> 01:05:40,396
but we're like three months away

813
01:05:40,396 --> 01:05:43,216
from the four-year anniversary of the FTX low in Bitcoin.

814
01:05:45,156 --> 01:05:49,556
October 2022, 16,000, four-year cycle.

815
01:05:50,196 --> 01:05:52,436
I wasn't a believer in four-year cycles,

816
01:05:52,656 --> 01:05:53,416
but you know what?

817
01:05:53,536 --> 01:05:55,356
We seem to be following well.

818
01:05:56,296 --> 01:05:59,996
And we're going to bond four years after the last bottom.

819
01:06:00,976 --> 01:06:02,016
That's October.

820
01:06:02,656 --> 01:06:03,916
We're in the middle of July.

821
01:06:05,036 --> 01:06:07,516
Basically, if people have said,

822
01:06:07,516 --> 01:06:09,896
okay, Bitcoin winner, like, well,

823
01:06:11,136 --> 01:06:12,636
winner's getting ready to end.

824
01:06:13,096 --> 01:06:15,056
Because, you know, if we're bottoming

825
01:06:15,056 --> 01:06:16,396
in the next couple of months,

826
01:06:17,056 --> 01:06:20,036
you know, I think you need to start adding now.

827
01:06:21,116 --> 01:06:27,636
And to me, Bitcoin, 57,000,

828
01:06:27,756 --> 01:06:28,916
whatever it hit last week.

829
01:06:31,616 --> 01:06:33,036
I mean, that's a gift.

830
01:06:33,036 --> 01:06:36,936
Gold at 4,000, silver, 60.

831
01:06:37,516 --> 01:06:41,716
Now is the time to be buying those.

832
01:06:43,316 --> 01:06:43,676
Not.

833
01:06:47,676 --> 01:06:48,536
The hottest.

834
01:06:50,416 --> 01:06:51,636
And not SpaceX.

835
01:06:52,376 --> 01:06:52,896
Yeah.

836
01:06:54,296 --> 01:06:54,996
It is funny.

837
01:06:55,196 --> 01:06:57,436
The four year cycle does seem to be repeating.

838
01:06:57,916 --> 01:07:00,936
And it's always good to zoom out with you, Mel.

839
01:07:00,936 --> 01:07:03,856
I think this was like the most dense.

840
01:07:03,856 --> 01:07:05,416
high signal.

841
01:07:06,696 --> 01:07:08,076
We've ran through all this

842
01:07:08,076 --> 01:07:10,296
in an hour and eight minutes here now.

843
01:07:10,576 --> 01:07:12,836
So thank you for coming on.

844
01:07:13,236 --> 01:07:14,836
Let's catch up in the fall

845
01:07:14,836 --> 01:07:17,756
when Q3 is over.

846
01:07:18,036 --> 01:07:19,876
And I'm always looking forward

847
01:07:19,876 --> 01:07:22,596
to our end of year retrospective

848
01:07:22,596 --> 01:07:23,936
and predictions for the following year.

849
01:07:24,256 --> 01:07:25,336
So it's going to be a fun one.

850
01:07:26,016 --> 01:07:26,436
I'm too.

851
01:07:26,636 --> 01:07:29,196
And I've got a few that I'm actually thinking

852
01:07:29,196 --> 01:07:30,676
could still come to fruition

853
01:07:30,676 --> 01:07:31,816
that nobody thought.

854
01:07:31,816 --> 01:07:35,816
One of them was Mag7 outperforms S&P 500.

855
01:07:38,416 --> 01:07:41,116
I had Bitcoin outperforming gold.

856
01:07:42,096 --> 01:07:49,556
I had some things that didn't seem to make sense back in January that I predicted at the end of the year.

857
01:07:50,096 --> 01:07:52,656
And they still don't make sense, to be honest with you.

858
01:07:52,776 --> 01:07:57,436
But I think there's still plenty of time left in the year for some of those things to come full circle.

859
01:07:57,436 --> 01:08:03,396
and I think a lot of people that kind of gave up on the mag seven early in the year gave up on

860
01:08:03,396 --> 01:08:10,056
Bitcoin and thought gold was the bee's name um as it hit 5600 there's no way Bitcoin's gonna

861
01:08:10,056 --> 01:08:16,436
outperform it um I still think Bitcoin's gonna offer gold for 2026 and I

862
01:08:16,436 --> 01:08:21,456
clip it and send it to Peter Schiff freaks

863
01:08:21,456 --> 01:08:27,936
no we'll uh we'll catch up in the fall brother enjoy the rest of your summer

864
01:08:27,936 --> 01:08:30,676
i think peace and love freaks