Transcription
Welcome back to Real Vision Pro and our monthly round table of institutional crypto investors and analysts discussing the crypto macro nexus. I'm your host, Dr. Sebastian Purcell, the CEO and CIO of 102 Capital. I also hosted the Art of the Bubble, which is a crypto academy course my firm created with Real Vision. Today, I'm joined by some familiar faces, Raam Aluwalia, the founder and CEO of Lumida, uh Seth Gins, CEO at 250 Digital Asset Management, and Jeff Dorman, co-founder and CIO of Arca. Gentlemen, uh welcome back to Real Vision.
There is a lot to discuss, but let's start out with our normal tour de table. Um I'll use my host's prerogative. Raam, you're first on my screen, so what's top of mind for you?
>> Well, we you know, we've exited uh a few months of a lot of geopolitical risk. Uh we have midterms uh in the horizon. We've got the American bicentennial also not too far off into the future. Uh and yet the sentiment out there's still very dour across quite a few sentiment surveys. Uh earnings growth looks strong. We're talking about 20% plus year-over-year earnings growth looking ahead. We're seeing commodity price inflation come down. You see that in the price of oil and other commodities. So, overall, I I believe things are looking quite good. I think we're in a in a bull market that that continues.
All right, yeah. We started the year that way. Everyone thought this would be a good year, and then we had a few surprises after all. Um Seth, what's top of mind for you?
>> You know, one of the things that's top of mind is just how quickly uh the altcoin complex has bounced off of the lows, and there's kind of a um two dates that that were the lows, either June 6th or June 10th. But we were looking at this uh this morning and a long list of names. Many of them still down month-to-date, but a long list of names with varying degrees of fundamental catalysts and drivers um that are up anywhere from uh 15 to 80%. Um over either a 10-day period or a 6-day period um with Bitcoin up um I I think it was 9% at the time, maybe a little bit less now from its uh intra-month closing low.
Yeah, so which shows I think that that supports Rama's point. Um if it's a bullish market, we should seek some quick turnarounds here. Uh Jeff, what's top of mind for you?
>> Sure. First of all, sorry, I got to get this out of the way. These views are my own and should be provided for informational purposes only. Nothing I say is investment advice. Um you know, look, I I think Rama's 100% right. This is a earnings-fueled rally. Uh the war was a distraction. There's no history for the last 50 years of a Middle East war ever having any long-lasting effects on markets. So, you know, now that the war is quote-unquote over, it's like, okay, but it didn't matter anyway, right? Outside of oil prices, equities were screaming and you know, maybe there's a little pressure on the bond market, but for the most part, these things come and go and and and are not long-lasting. But the earnings growth is. I mean, this has been nothing short of a spectacular earnings boom. Um revenues are growing, uh earnings are growing as a result, margins obviously growing. Um that's what's uh uh sparking this equity rally. And if you go into the crypto markets, um only a handful of tokens are equity-like tokens that have strong revenues and cash flows and actually use those cash flows um in a way that benefits the token. And are the ones that are rallying as well. So, I I think that continues, um, and uh, there's really nothing that I see, um, in in the in the next 6 to 12 months outside of something that, you know, comes out of left field, that's going to slow the earnings momentum.
Yeah, how are you thinking about the earnings momentum? Are you just clocking it as uh, well, okay, how about this? The suspicion is it's AI capex fueled. So, it's growth, but it's it's debt growth. Is that how you're thinking of it? Not that it not that it's not growth, but it is debt growth.
>> Well, I think of it more as, um, every single person in our company uses AI in some way, shape, or form. None of us are less productive now than we were a year ago. We are all incredibly more productive at what we do, um, with less time, and that gives us more time for other projects or spending or other things that you would do in your normal day-to-day life. I think that's true in every industry right now. Yes, AI might, um, eventually take over some, you know, blue-collar jobs and and some other I guess white-collar jobs and and some other things, but for the most part it's just making every company and every business and every person, um, more productive, which lowers your costs and increase your revenues, which is what you're looking for for, uh, an earnings boom.
Yeah, so so you're seeing it on the actual on the utility side. Um, and it's definitely happened in some areas. Just just to note to the audience, I don't I don't know, I'm skeptical. I just read that MIT report which still said five-ish percent ROI in most cases. Of course, the other caveat there is it's hard to know how to measure this. Right? It's really cuz I think what you're saying, Jeff, is we have more time to do other things. Do you count that as productivity relative to the existing baseline or something? It becomes tricky, right?
>> Yeah, I agree. I think it's hard to measure, but I think again, anecdotally, there's not a single person in my life who isn't more productive and has more time on their hands right now than they were a year ago, 5 years ago, 10 years ago. Um and and like I said, it's showing up in the numbers as well.
Yeah. Yeah, for sure.
>> Sebastian, there was a really interesting uh article over the weekend about um the high cost per token of um the Frontier models, particularly Fable, and this was um before Fable was cut off and it there there was a great chart in there showing the drastic uh difference between open-source models, many of which are Chinese open-source models, cost per million tokens, and um uh Fable, which is the highest at uh $50 per million tokens. Many of the open-source Chinese models, which are quite performant now, and remember all of these are materially more performant than they were a year ago or 2 years ago, but you're talking about a 50x difference in in cost, and and that just compounds that productivity dynamic that that Jeff was talking about. As you get tooling, rather than just using um the coding or co-work platform of choice, but as you start to see people get more discerning around which tasks require a combination of open-source versus going with the um the the latest, most expensive closed-source tokens, um incredible ROI-enhancing dynamic, right? But it depends on where you're measuring ROI and to whom, right?
>> No, total agreement on that end. Um there's I think a threshold argument. Some tasks simply don't require soda state like soda LLMs, the state-of-the-art uh LLMs. They just don't. Uh a lot of it you can do really well by compressing it into SLMs, but I was looking at benchmark data on Kimi, like 2.6 and that is pretty good for most things. It would have been better than the last It's basically, you know, a cut above the last gen from the soda hyperscalers. Um and so much cheaper. So, so much cheaper. We was We were I was I was cuz we have a venture studio, right? And I was talking to a firm that was trying to put in the LLMs or AI into readers on water monitors, right? And that was the prohibitive measure was how much they're spending per token. Uh and the fix is just throw it on to an SLM stack, a small language model stack, and your cost drop more than 90% and they have something viable there. So, total agreement. Um and I also think that this just shows that we're not quite there on how to measure the ROI. On the other hand, um another thing I don't know how to measure, SpaceX. Okay, it's dominating everything right now because it just keeps going up. I was looking at the 5-minute chart on this because it's only been out so many days. And uh yeah, Ron, we were joking before the show. This is just, I don't know, take uh Benjamin Graham's book and throw it into the garbage sort of moment. I I don't I I didn't want to do this myself personally at any level because I couldn't understand it. Uh Jeff, I gave you the last uh point last last time around. I don't know if you have anything to say about SpaceX, how you think it affects the macroeconomy or like the the digital asset space.
>> Well, I I think there's three main takeaways on SpaceX. Um one is obviously the IPO market is open and uh thriving and, you know, you're going to see a lot more IPOs. Uh you know, the number of public companies relative to private companies has obviously been shrinking for, you know, better part of a decade, maybe more. Um so, this could open that up again, which which obviously uh would be good for public markets and and and shows again the health and strength of the markets right now. Um two is just the uh uh influence and impact that retail investors are now having on IPOs, right? The fact that, you know, what went from, you know, a Robinhood or an E-Trade begging for allocations to a hot IPO to now them basically trying to change the rules so that they can become underwriters and book runners themselves so that they can actually get a placement fee. Um, just a just a huge um source of new um investors and and and wealth coming into these IPOs, which is going to continue to to make these trade pretty well in my opinion. And third, probably, you know, the only thing that's really crypto-related um is, I mean, look, we all spent eight years understanding the dynamics of low float high FDV tokens and how these things trade in the first few weeks. Like, that's all this is, right? And then you have, you know, it's no different than what crypto investors have seen for eight years where these things have, you know, limited float and a lot of attention and it skyrockets before it comes back down to earth and in six months we'll figure out what the actual, you know, Graham and Dodd fair value of this is, but right now it's just a trading vehicle.
Yeah. Yeah. Yeah, okay, fair. I and I think that is it is a familiar lesson to people in the digital asset space, for sure. Uh, Seth, what are your thoughts?
>> I mean, look, I I grew up in the the growth investing world and at a Genesis and Associates where where I was um over a decade ago um during the early days of Tesla being a public equity. Um, we we lived through we were large shareholders and and lived through a period of time where um Tesla had and and I think still has a lot of controversy around it from a public equities perspective. Um, there are the the firm believers or the people who are skeptical. I think the skeptics have realized that they should not be shorting the stock and certainly not shorting it with um 30% of the float being short, which is what um you had for a lot of the back half of last decade. Um but there there a lot of really interesting dynamics here. I obviously Elon is an amazing entrepreneur, the the entrepreneur of this uh generation probably of uh the generation before and after as well. And um you you see it in kind of the two announcements from the last 2 weeks. Right? You had Anthropic renting out Colossus 1, Google renting out Colossus 2, and right there um an extra um 20 to 25 billion of revenue um for the call it uh 12-month period from uh August-September going out. So, um we're we're talking almost like a a different um playing field from a dollar value perspective when you're getting into the hyperscalers and the people that are on the critical path of um of AI. And I I'm not sure that um that that there's anything massively irrational about the the space sex valuation right now. I think um there's a lot of dreaming, and and we'll see how much of that comes true and how much of it doesn't. Um but but there is a lot of potential to to drive monetization that justifies um a valuation like this if they maintain uh and continue to grow on the critical path for AI.
Yeah. I know. I think uh and that that is one of the key features. There's a There's the complaint runs both ways that Elon is just putting his firms together to cover bad debt. That's the complaint. The other way is that actually there's synergies among the the firms and that he's realizing that in this way. Uh Ultimately, that's empirical question that will be resolved over time. Right? You You can't armchair that one. We'll just figure it out. Um Ron, what are your thoughts about SpaceX?
>> First off, like yes, of course Elon is an extraordinary generational entrepreneur. There's a difference between being a wonderful entrepreneur and a business and a great investment. And SpaceX is not a great investment. It's just This is a retail market, absolutely. It's a retail sentiment-driven market. Um it's at 130 times price-to-sales, which is bananas. It's insane. See, in the AI market, you have real end demand from consumers, enterprise, government, defense firms. They're willing to pay. You actually have a legitimate value chain of high-quality end market customers with big tabs that are going to keep feeling the growth. SpaceX doesn't have that yet. And if you look at every business line, you know, Starlink's got competition. Uh the taking rockets up into space has competition from from Bezos. Rocket Lab was just included into Nasdaq. Uh when this unlock starts to come into view, this name is going to top and I don't think it's going to end well for investors. Like Whenever you have these blockbusters blockbuster IPOs, the vast majority of the time, the vast My bad. That I mean like 80% plus, they lag and underperform. That was true for the original Tesla IPO, which came in at a much lower valuation than today. It was true for Coinbase. It was true for the Blackstone IPO in 2007. Um it was true for all sorts of debts and IPOs that we saw last summer, including Circle. Um and I believe it's also true here. The quality of investors getting involved here also just bad. Just my interaction with I can't I mean I'm at an airport terminal. The guy next to me he's talking to his wife about buying SpaceX stock. He's not a real investor. My admin in the office talking about buying SpaceX stock. She's not an investor either. I don't want to be in that boat. So I wouldn't I wouldn't chase here.
Yeah. Yeah, and I think that that's a good point is that there's a difference between finding a yeah a good investment or trade and and maybe a successful firm. And they're just two different timelines, two different things. Yeah. Yeah, some some of our GPs were in early on in SpaceX years ago. That's a that's the good investment, right? But not not at this point. Right. So and we haven't seen those unlocks yet. They're they're coming. They're absolutely coming. And I will say it's certainly drawn a lot of attention away from other things in the space. We we have to talk a little bit about AI, of course. You know, I have a recurring segment that AI is macro now for two reasons. One, it takes all the capital from everything. And two, it's I don't know the only thing making sense of GDP growth right now.
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