Transcription
And the reason I'm buying Bitcoin is because I think when we get through the all-time highs again and basically get rid of this 4-year cycle belief, now there's no imaginary place for people to ever again care about. And that's normally what happens in equity markets. And oh, by the way, 2017 was the end of the Donald Trump tax cuts. We've had tariffs this year. We've had bad stuff happened this year. The equity market in '18 was bad. At one point, it was down 20% year-to-date in December. In 2022, the equity market was down. So, the one thing about the Bitcoin having cycle, it seems to have been trading.
What's going on, guys? Today, we got a great episode with Jordy Visser. In this conversation, we break down Bitcoin, the banking crisis, the credit contraction, what's going on in markets, why people are so fearful, whether Jordy is worried. What is he buying? Is he buying Bitcoin, stocks, something else? Are aliens real? Should we be worried about the breakthroughs at OpenAI and all the new AI models? We get through a bunch of stuff fast and furious trying to keep you informed. Here's my latest conversation with Jordi Visser.
All right, Jordy, we got to talk because the panics are back. These people are screaming and yelling. They're saying that the market's going to crash. The world is over. I'm surprised we haven't heard calls for the Great Depression. Andrew Ross Sorkin wrote an amazing book about 1929. That is fueling even more people saying it's all over. Go home and asset prices are going to get hurt. What are you doing in your portfolio? I heard you're buying Bitcoin.
I'm hiding.
You're hiding? Yeah. I think I think this... You know what's funny is, um, I remember when Twitter first entered my world of like, wow, in the markets, you got to pay attention to this thing. Like, you're you're you're getting news that isn't coming across my Bloomberg at the same time. Even if it's rumors, you're catching stuff. So, here we are now. You fast forward, it's probably a decade later. And back then, and there's still some hedge funds that can't use Twitter, at least banks and things like that. The panic just grows quickly. But it's this thing that has shocked me that you and I have gone through this year, which is if we laid back and said all of the panics that have occurred. And I said last week that, hey, you're kind of at nighttime. I'm warning my son like there's deer out there when it's dark.
You nailed it. You were like 3 hours early.
So all and that all that took was a tweet. Um, AI bubble. People are, I mean, they're all over this AI bubble. And just so people hear this, there are always bubbles in the market. Just like Jim Cramer likes to go on TV, there's a bull market somewhere. If a market is going up, there's a bubble somewhere. So define a bubble as zero revenue companies are trading at high valuations. So whether it's Ollo, whether it's Fermy, whether it's a lot of these energy names, which don't have revenues right now, you can categorize those as bubbles. They're not, they're not the entire market. What dominates what happens in the market is nominal GDP inflation. So you get back to real and you get to a scenario where earnings follow nominal GDP. So everything is everything is fine. But to get back to your point about Bitcoin, whenever this kind of situation happens that everyone's panicking and it's something that should be expected. China and the US have to come to a deal. I'm going to say this again and again. Rare earths are the most critical factor in the world. It has been all year. We've watched tariffs be a fear. We've watched tagflation be a fear. We've watched inflation be a fear. I can't even remember everything that we've had to talk about here as fears. But now we have bubbles and we have credit risk and the world's going to end. For Bitcoin to actually have a sustainable move higher, I learned a very valuable lesson this year. The boogeyman of the four-year cycle, which you can tell me about 'cause I'm not smart enough to understand this whole, "Oh, this is going to be a a a crash that happens." Then I go back and look and I see, well, in 2017, it right around this time period, it was the peak. 2021. Oh, I get it. Um, so that's two data points. I don't really live off two data points. And maybe there's one in '13. I didn't go back to look. It was still too new. But if you can tell me in front of everyone watching right now why I should be worried about the four-year cycle, and then I'll give you a reason why I'm buying it aggressively every day right now.
So you're buying Bitcoin aggressively?
I'm buying Bitcoin all the way down to 100. They have bids under 100.
Okay, there's three things that people will say about the cycle. Um, and I, I do think that this is the like multi-trillion dollar question. Is the four-year cycle going to hold or not? I don't have a strong opinion, which scares the hell out of me. And I've been asking every single person I've talked to, if you've talked to me the last four weeks, I'm like, what do you think? Is it going to hold? Is it not going to hold? The first thing people will say is that the having creates this four-year cycle. So, you get the having, 18 months later, you get a peak, and it's basically a supply shock. You get the demand shock that follows, and that leads to this kind of four-year cycle. The second thing is, uh, people think that there's a four-year cycle, so they start taking profits around, you know, Q4 of, uh, each of these years. The third thing that people will say is that there is some sort of, uh, maybe we can call it, uh, woo-woo overlap between the four-year Bitcoin cycle, the four-year liquidity cycle in the macro environment, and the, uh, four-year monetary policy, you know, kind of all lining up. And so every four years, I think Michael Howell has this great chart where he basically has it, you know, kind of every four years there is expansion and collapse and monetary policy decision. Maybe we're living in a simulation. I don't know. But that chart looks pretty good when you look at it. So those are the three things I would say people would say.
Q4, this is going to be the peak.
All right. So two things you said there which I, one of them is just like, tra-fy. So in my trying to understand, so when I have a view and it is, and it doesn't happen, and I thought we'd be much higher in Bitcoin right now given all of the things that I expected in terms of the bene, the expansion of kind of the network effects this year. We've seen stablecoin market cap go higher, and Bitcoin's not going higher. Bitcoin's like the same price it was in December, to give you an idea of how little it's gone. We've got gold going higher. So we've had this year, we've got money supply growing. You've got everything that you would expect happening, including the stock market going higher. And Bitcoin has just not had the normal beta that it's had. But the tra-fi world always has this thing that it comes into beliefs, whether it's before presidential cycle, you'll see all these seasonals come out and people believe them. And seasonals work until they don't work. And if too many people are worried about the seasonals, what normally happens is they sell in front of it. And in September and early October, it was October. It was very clear to me in the people I was talking to in the space that there were a lot of whales, people that have made a lot of money that were selling. And it would kind of make front, make sense in the four-year cycle. But you said something very important. I just want to make sure people hear this. So my job in coming over from the traditional finance world as a macro person is to think about what I think the equity markets are going to do next year. So I believe that a lot of people think there's an AI bubble. There's not even a question. It's all day long. It's non-stop. I will continue to tell people if you want to make the mistake of believing that AI is a bubble and then lose money, just, I don't, I don't give a crap. Um, this year for everyone who's bearish AI and is thinks it's a bubble, the only thing that has saved them is one thing. I'm long gold.
Give me gold.
And that's been, if they're bearish AI, the thing that has saved them this year is to be long gold. So my gut tells me...
Crazy uncle market.
Yeah, exactly. So, my gut tells me the pain trade for next year is gold doesn't work and the AI doesn't bubble, and then everyone has to go pick something to buy. I thought that was going to happen this year, not with the gold part 'cause I think gold long-term is going to go higher, but a China-US deal is critical to this whole situation. So, what has led me to believe is that I do believe people were selling Bitcoin ahead of the four-year cycle. Great. So then the way I deal with everything in the traditional finance world, just like it was before, you know, any period that people believe, if you take out the highs before that. So now 126 has been set in stone. The reason I'm buying Bitcoin is because I think when we get through the all-time highs again and basically get rid of this four-year cycle belief. Now there's no imaginary place for people to ever again care about. And that's normally what happens in equity markets. And oh, by the way, 2017 was the end of the Donald Trump tax cuts. Well, we've had tariffs this year. We've had bad stuff happen this year. The equity market in '18 was bad. At one point, it was down 20% year-to-date in December. In 2022, the equity market was down. So, the one thing about the Bitcoin having cycle, it seems to have been trading with traditional finance markets. So, when you say that Bitcoin's four-year cycle is going to play out next year, you're also embeddedly saying you don't believe in AI and you don't believe profit margins are coming and you don't believe the earnings are going to be higher and the S&P is going to go higher.
And you don't believe the Fed's going to cut interest rates.
Yeah, exactly. The Fed's going to cut rates. And for all the dot bubble people out there, just remember the Fed, the Fed was raising rates into the dotcom bubble. Every, for some reason, everyone highlights the fact that the Fed cut rates in '98, but they had to turn around and raise rates going into 2000. And we had the Y2K problem. So, there's a lot of things with the dotcom bubble that just don't hold. So, you know, that's how, uh, Keith Boy, uh, he had this great tweet in November of 2021. He, uh, said something about, you know, like top or something. And I think it was a reporter in the replies was like, "Are you calling the top?" And he just responded with, "Yes." And I remember reading that being like, "Oh my god, I love Keith. Keith's amazing." I was like, "This is black and white. I hope to God he's right." He was off by like 12 hours.
Right? And so later I was talking to him and I was like, "How did you know?" Like, where's the crystal ball, right? Like, give me one. And he was like, "No, in 2000 they raised rates. Rates led to the market crash as soon as they started talking in November '21 about the fact that they were thinking about raising rates." He said the talk markets are forward-looking, starts to come down. Like, so he had learned from 2000 and, you know, to his credit, in particular,
He waited 20 years to to apply the knowledge, but he freaking nailed it, right? And so I do think that there's this very interesting dynamic right now where if they are going to cut rates, which it looks like they're going to have to cut rates, um, and you have an acceleration globally of AI, the central banks are buying gold because I believe that they all see what is happening to the debasement. They see what's happening with the inflation. Like, like they are all believing, hey, this is forward-looking, here's what's coming. The Bitcoin thing still is not part of their, uh, portfolio. So actually, in a weird way, Bitcoin was adopted by individuals first, and then it has kind of moved up. But usually the central banks and the big financial institutions, they lead on macro decisions, and then it is the retail folks that follow. So it's a very interesting dynamic that we're watching play out right now.
Yeah, I, so, you know, Michael Sible, who, who has a free podcast and a free write-up. He, he did this whole thing on gold and central banks. And he, and he made this, this great point, which again, just shows that you can create a story out of whatever rumors you want. It gets back to the central bank thing. And this is not to say that central banks haven't been buying, but when you do central bank gold reserves as a percentage of reserves, it shows them going up, but it doesn't adjust them for the gold price. So their percentages have gone higher, but that's because when gold's up 60% plus in a year, well, then no other currency reserves are moving that much. So there's a part of that, and a good portion of it has been the rise in gold, which means a lot of the buying that's happened in gold is not just central banks.
It is absolutely positively wealthy people. And when Donald Trump put the tariffs in, I think, you know, whether it was Russell Napier, whether it was all these people that did this whole capital flow argument, it made sense to me. It still does. And so that's why I don't think gold prices are going to go down. And there is a chance that if China and the US come to a deal, that gold prices go higher. But I think it's more likely that people are going to be very, very, um, angry with gold by the time we get a year from now. And it's not that I think it's going to collapse. It's just that a lot of this is retail. A lot of this is momentum. So, you can't have it both ways. You can't say there's a bubble in AI, look at these charts going parabolic, and go, "But gold's not in a bubble. It's not the same." The reality is there's all this stuff going on. And when the Fed cuts rates, if people want to say, "Well, that's good for gold." I think they should go back and look at 2010 to 2016 because QE was happening. We had negative yields around the globe. And if you owned gold from like 2010 to 2016, it was a horrible asset to own, even though we had negative real rates, even though we had QE going on. It every time. I think people need to focus on stocks from an earnings perspective. And I would say the non-MAGA 7 stocks because profit margins are going to explode next year. And the infrastructure names of AI are going to continue to explode. And I think they are just going to have to realize that the four-year cycle also was the stock four-year cycle.
Last thing I want to talk about, Bitcoin. Do you buy into this, uh, gold runs and 100 days later Bitcoin runs? Like the data definitely suggests that. Do you think that there is some relationship or or correlation there between gold kind of gets out ahead and then we will see Bitcoin rise afterwards and they're tied together in some way?
I, I do think there's there's a, um, a connection. And the reason is, when people do buy gold, there's no doubt that it's a fear trade. So this year, aside from the things I mentioned, the stagflation, the inflation, there's also been the, the government's going to default. So JGB yields have been very correlated to gold over the last three years, and they've just gone higher. And JGB 30-year yields are actually doing something interesting right now. I'm a big fan of when you get news that's supposed to continue a trend, and it actually be news that stops a trend. Right now, JGB 30-year yields have gone back down. They gapped higher and everything kind of went in when the election situation went in, but now all of a sudden it's gone back down. I, I think this is a characteristic of the fears coming down. And I'm, I, I, I'll say this repeatedly. I'll tweet about it. I'll do everything. Can I say tweet? Is that still...
You can say whatever you want.
Okay, I can do whatever I want.
You called the... You called the market crash last Friday. This Friday it's your show.
The China, the China-US deal is far more important when it occurs. And I do believe it will occur, whether it's in November or whether it's in December. When it occurs, I think people have to sit back and take a look at what this agreement is going to mean because for this year, we've had a lot of problems. The Chinese export numbers came out over the weekend. They were up 8% year-over-year. Chinese exports to the US were down 27% year-over-year. A year. This has never happened before. So this has been a year where China has been kind of redirecting flows. They haven't bought any soybeans. On the import side, they haven't done it. This is a trade negotiation which has left a lot of people kind of worrying about what's actually happening. There's a lot of businesses in this country that get stuff from China and they can't get them right now, um, without tariffs. And so, you've had this kind of disconnect. A deal happens. This is a major event for the world because it basically is going to mean a lot of things that I think people have been worried about. And gold is a worry thing. So where Bitcoin fits in is if people aren't worrying as much, then Bitcoin goes with the other side, which is stocks. And that's why I'll say again, I believe stocks will be higher next year because the AI situation that people are going is not only accelerating, it's picking up pace. And all of the tea leaves that I've read over the last three weeks in podcasts are people are not underestimating where we are in AI today. They're too focused on where it was in the past.
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All right. Um, you're talking about this, uh, US-China negotiation. I want to unpack a couple of things. First is the US has, uh, levied tariffs, brought them down, threatened them again, walked them back. Uh, we kind of, you know, if you go on the street right now and you ask people what are the tariffs on China, I actually don't think anyone knows because there's been so much movement. Um, I think that the MAGA crowd, uh, rightfully so, has believed that tariffs were going to be good for the United States. That we have a surplus in September again. Uh, we have not seen the sky-high inflation that was promised. There was not a big market correction, um, in terms of a recession or a depression, you know, empty shelves, all that stuff. Now, I think the part that if you go back and you look at the way a lot of people discussed this is, uh, there was almost a belief like this US was going to steamroll a bunch of these countries. And to be fair, like there were some quick deals that were made. And so there was, I don't want to call it steamrolling, but it was definitely like, hey, the United States showed up, knocked on the door, you open the door, you negotiate, you sign the deal. Whoever's kind of first to sign the deals gets somewhat of a better deal, right? China, I think, has hit back very hard. And I think that there are people saying, "Oh, you know, if we don't get a deal here, this could get really ugly because both countries are going to dig their heels in and could do all kinds of things." So the soybean thing is one, and obviously the farmers in America are all, uh, up in arms about this. Uh, Trump is talking about trying to find ways to relieve that. But I think the rare earths seem to be the thing that has been the, the big trigger where now all of a sudden I see Trump, I see, uh, Powell, I see Besson, I see all of them starting to talk about this, insinuate things, threaten things, etc. Let's start with what is a rare earth because I don't think a lot of people realize they're not rare. Right.
So walk us through a little bit, like why is this important? Why is this the thing that is the final trigger point?
All right. So rare earth minerals are critical to pretty much everything that people deal with in the modern world. So let's just start with the simple thing. It's in anything that has semiconductor chips in it, which is even washing machines and cars, like everything has some form of rare earth mineral that is in it. The, and just on this point, there is electronics, you know, phones, all that kind of stuff, to your point, washing machines, etc. I don't think people realize LED lights, right? I mean, just like literally anything that is electronic or, uh, kind of quote-unquote technology has this.
And cars. I mean, everything that you own that has become in some way digitized through electronics, which is everything, uh, that we're involved in, involves rare earth. But it's also part and an important part of military, um, weapons, especially the modern day ones, of drones and everything like that, of humanoids coming up. Like, it's critical. And the problem is, the US outsourced this to China, as did the rest of the world. Now, the irony is, the reason it was outsourced to China to mine for these is incredibly toxic. I mean, so where are you going to do this in the US? So whenever they go, "Well, we'll just do it in the US." Not an easy thing, especially when there's states and there's regulations.
They won't even let us build a pipeline in the US. So I mean, rare earth is toxic. So China has been like, "Yeah, we'll do it." And so they've done it for the world.
And they have big deposits.
And they have big deposits. And there's quotes from as early as like 1980 from Deng Xiaoping that they were going to do this for exactly the reasons that have come up. We'll do it for this reason. So the Chinese always get talked about that they think and they make plans 30 years in advance. Well, this was a 30-year plan knowing that it would be in this position. Now, they didn't know when someone like Donald Trump would come, when the US would be in a fiscal situation. Because remember, when you think of the tariffs, you think of the trade negotiations, you have to remember this goes beyond this. This is NATO. This is everything. The world is becoming more independent. It's breaking up and it's becoming less centralized. And the US was the dominant feature. The dollar was the dominant feature. So rare earth is the bargaining power of China. And it's really important because there's no way for the US to get the supply even if they fast-track it and they, you know, JP Morgan said we'll put a $1.5 trillion. The Pentagon said they're going to put a billion dollars into this, everything. They've invested in companies. There's no way listening to every single expert on on on rare earth that the US can come up with enough of it in the next three years to deal with the problems they have. Is there enough for the next six months? Everyone has kind of front-loaded. They bought things, they got what they needed from what I hear, but they will run out. So this becomes an issue. So this is China's bargaining power. Now, the good thing is, if the US can get what it needs in three years, either internally or in other countries that are also worried about China, because it's a global issue, what they did, Chinese lose their bargaining power fairly soon. Like, so they're either using it for military reasons like they're going to go invade Taiwan, which I think is highly unlikely, or this is part of the trade side and they're dealing with Donald Trump the way that you need to deal with them. As a reminder to everyone, 'cause when you hear China, you think of country and so people get the numbers. The US economy is close to $30 trillion. The Chinese economy is close to $20 trillion. The next economy below that, guys, we're dropping all the way down into the low single digits. So this is the pound-for-pound heavyweight fight. So he can't just walk in, and that's what China is saying. You can't just walk in and put tariffs on and go through it. So if you ask me what's likely to happen, there will be a deal. I've tried to figure out how it can end up that Donald Trump doesn't look bad and the Chinese are able to get what they want. I think almost no tariffs on China, believe it or not, almost no tariffs with a large investment into the US in something and purchases of soybeans and all this stuff. So he can say he got investment dollars and this happened. And then everyone can go figure out how to deal with things on their own for the next three years as part of this divorce process of the coupling. The one thing I want to remind people that I fully believe and it's part of my Bitcoin thesis. China has decided that they will back their yuan in gold. So they're looking at gold in yuan terms. So they have reserves. On the US side, we've chosen stablecoins. These are the two kind of new worlds that are going on. China's not too happy about the stablecoin thing. Europe's not too happy about the stablecoin thing. This just means that the capital flow argument that all of these great historians have said is taking shape with the old framework of gold and the new framework of stablecoins. And this is why Bitcoin is going to be a major, major part once the deal is done because then we've set the table between gold and stablecoins.
So, there's this great article, uh, that you sent me from, uh, Patrick Springer, who, uh, uh, writes, "Beijing activated stage two of a strategic export control campaign, expanding rare earth export controls in a way that structurally increases geopolitical risk across global manufacturing." And I thought that was interesting because, uh, it doesn't increase risk for China necessarily, right? They have access to this stuff. Uh, but what it does do is this, to me, is them tipping their hand. This is probably, other than a kinetic war, this is probably the thing that is kind of the, like, smash glass in case of emergency. Is we're going to start to play with the exporting of, uh, rare earths around the world. We saw in the US treatment of Russia, sanctions, going after the oligarchs, etc. That was the US kind of tipping their hand. And that was our smashed glass in case of emergency. We know central banks saw that all around the world, allies and foes, and said, "Oh, no, no, no, no, no, no. That's what that's the emergency thing that you're willing to go to. We are going to go, we're going to put gold in our reserves. We're going to diversify. We are going to significantly reduce the risk of your sanctions in the future." What do you think the rest of the world will do now that China has kind of shown, you know, their smash glass strategy? Do we all just go start digging up rare earths? Do we start getting alliances? You know, it's not like, hey, just do a deal with China and that's the end of the chess game. It does feel like now the rest of the world is like, oh my god, like that we actually are beholden to them to some degree.
Yeah. So, I view this is very positive for the rest of the world. In the same way that Donald Trump got rid of this connection between, "Okay, you guys buy our military stuff. We are supportive of NATO. We contribute most of this." He's tried to rebalance that. The manufacturing side is going to overbuild around the globe. So the one thing I, I do agree with, we are going to globally spend a lot of money building out things, which may eventually cause problems down the road in terms of, uh, a lot of resources that were, let's just say, uh, bad money spent building out things. But that process is going to take years. Whether it's data centers, whether it's, you know, fighting with military and believing that this military is going to be here in three years, uh, everyone now has to build their own manufacturing. They can't depend on China. The supply chains isn't kind of depending on, you have to be reshoring. And everyone's doing that. Germany announced that they're going to do it with their military. The US is obviously doing it. Every country is kind of, you know, at the big side. And it's really Europe. And to go back to that $110 trillion global economy, China, US, and Europe combined as a group, I mean, that's 65% of it. So every other country broken up, it's small. Europe's going to reshore, China's going to reshore, and the US is going to reshore. So that manufacturing side, what the rare earth has done, the same way that the tariffs have done China, it is China's version of the tariffs. That's exactly what it is. You can't actually build anything for the next three years 'cause you don't have rare earth. And oh, by the way, you know what we're going to do? We're going to put a tariff on all of you. If you want to use rare earth in anything, we need to know what it is and we have to give the clearance before you can do it. And that's what this whole thing is about. I don't think that that's something that can happen. And for people who want to go through, because I think Patrick covered this too, they did this to Japan in 2010, and it eventually went to the WTO and was ruled that it couldn't happen, and they gradually kind of took them off or at least reduced them. So I think this thing is not going to go to that extreme because I think this is a bargaining shift that they're going through. But they have set the precedent that they have done it before. And that's the reason why the US reacted so badly right after we spoke last week. Is all of a sudden Trump freaked out. And I mentioned it, so it wasn't like it was new news. It had happened the day before, but the markets didn't care about it. And so the markets started to freak out. What we talked about last week, if you go back, it wasn't just the rare earth and how important it was, but I also talked about the fact that the financial markets were kind of showing a lot of credit risk. We were seeing private equity stuff. We had the First Republic. We had the Tricadia. Well, now this week, you get into it. You not only have the China thing, everyone freaking out about that stuff, too. And it reached a level where we're clearly getting closer and closer to where the Fed's going to have to do something.
You think we can get an emergency rate cut?
No. Um, that doesn't need to happen.
I agree.
This... They should have emergency rate cut earlier this year, but I agree. They're, they're, they're going to cut. And it's going to help. But like during, during the, um, during the hangover that occurs when kind of markets start to go down for a little period of time, I just want to highlight to people, we have tenure rates below 4%. Gas at the pump is probably going to break below three this weekend. So for everyone out there, gas at the pump peaked recently at around $3.20. If it breaks below three, you're talking about close to a 10% fall. I can tell you right now, the CPI number is going to be a positive for the markets when it comes out with gas down here. I've highlighted in every one of my videos, until gas at the pump goes higher, you're getting another boom for the stock market. So you're getting lower rates, you're getting the Fed cutting rates, you're getting all of this, which is being helped by this plumbing situation. But, so people understand, this is part of fiscal dominance. This is what you have to understand. Uh, I don't even know the best way to describe it because there's a lot of terms like SOFR, the standing repo facility. Let's just say you're a homeowner and all of a sudden you have a lot of bills coming at the same time and you're scrambling to get cash 'cause you don't have enough cash sitting around. That's kind of where the financial system is right now in the US. There's a certain threshold level of where bank reserves need to be. And if it goes below that, the banks will have to kind of rush for cash and go through it. So there's been this pressure, which normally happens every quarter end, but it's happened now. And I think part of the reason it's happened now is because of the First Republic and Tricadia, which when you're really tight to the level, you end up with a lot of kind of people scrambling around. So all of a sudden SOFR, which has to do with overnight, let's say collateral-backed securities, the spread has gotten extremely high, which says there's problems going on. Jerome Powell said this week, we're probably going to have to stop QT. So for everyone out there that's...
Got them.
Freaking out. The problem is, guess what?
Checkmate.
You got the Fed QT. They're buying the bonds from the Treasury, and the Treasury needs to issue lots of debt because the debt didn't get any better this year. So remember when we started the year, there's a debt deficit, you know, problem. We did Doge, all this stuff. Nothing has solved the problem. And so we have these revenues coming in on the tariff. That's all well and good, but we still have the Treasury issuing lots. And this gets back into the Michael Howell thing, which is we have a lot due this year. We have a lot due next year. And so this puts pressure under the Fed, and that's why they can't let the runoff happen anymore. And that just means that they're going to be in the market easing liquidity whenever these happen. So I don't think this is a one-off shock because what's causing the First Republic and Tricadia? It's the K-shaped economy. We have a problem, guys. And unless the labor market gets better, which is not going to happen with AI, into the midterm elections, they're going to have to juice the system. Another reason to be positive on Bitcoin.
So, regional banks seem to be, uh, in the crosshairs. Um, if I go and I listen to, uh, certain people on the internet or even in the mainstream media, they'll have some story about, "Credit market is showing cracks. The stock market, it'll show up later. We are now in a market downturn. All the economic policies have broken the system. Massive issues. Watch out below." The regional banks have sold off aggressively this week. Um, some of it has to do with the credit issues that you were talking about. How do you read those banks? I mean, some people look at them as canary in the coal mines. Other people look at them as, uh, they're just one of many sectors to, to kind of pay attention to.
So, Zion's Bank Corp and Western Alliance disclosed that they have some losses. Okay. Um, this is not a systemic problem. And if people want to go back to the, what happens if there's anything even close to a systemic problem, just go back and type in Silicon Valley Bank and go look what comes up.
I wasn't going to say it. I'm glad I did.
I was going to say, remember Bellagio with the billion dollar Bitcoin bet? He was showing the charts and he was like, "These guys are underwater, but they don't have to say it." Um, I, the, the rule is, um, if you're worried about a systemic issue, just like it was with the tariffs, I'm going to say this again and again. Unfortunately, we're in a situation where the economy has been financialized. If the stock market is allowed to fall, we will go into not a recession. We'll go into something much bigger because the only thing keeping the economy up is the spending on the data centers and the spending by the high net worth individuals who own the stocks related to the data centers, plain and simple. And whether you don't have to like it, it is, I admit it, it's, it's not a fair place right now. But innovation has caused the government to use their transfer mechanism and mommy and daddy come out with money whenever they need it, especially in an election year. So to take what is happening in two small banks that has taken the stocks down somewhat, to worry about where Jeffree's stock price is, to worry about where anything is on these things, I think you're underestimating what ends up happening once this goes through.
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So there's two movies that came out over the last, uh, 15 to 20 years that I think define, uh, financial markets. Uh, one had a positive impact, one had a negative. The positive is The Social Network. The Social Network basically convinced a bunch of people about technology, Silicon Valley, uh, the fact that you could go and write software code and you could build something that could change the world. Uh, there are negative side effects to so many people seeing that because a bunch of people thought they could be angel investors and they basically lit money on fire, etc. But for the most part, I think it was a net positive. You convince an entire generation technology is good, software is good, and you can get rich. And it kind of put the, uh, incentive out there and kind of people went west. They went from Wall Street to Silicon Valley.
The second movie was highly destructive to investor psyche, is The Big Short.
Mhm.
These people are running around thinking that they're Michael Bur, and everyone wants to call a bubble every five seconds. And they will basically take any single little issue and extrapolate it out and, uh, immediately go to, "It's a systemic thing." If you thought that you were Michael Bur or any of the Big Short investors, you got your butt handed to you over the last 15 years or so because stocks just went up and to the right. Sure, there were market corrections here and there, but, uh, if you look at both the pandemic and in, uh, 2025, the drawdowns were what, a couple of weeks?
Yep.
Like, are you tactically good enough to call the top, sell, buy back at the bottom, and ride it? Come on. Stop.
Mhm.
So in a weird way, those two movies to me define tech optimism. And Wall Street became filled with pessimists because there was like glory attached to being the person to call the top, being the person to short the market. And it just feels like everything that we're seeing right now, all this fear, all this, is just like that on steroids 'cause people are saying, "Oh, two regional banks, there must be, you know, there, there's dead bodies that'll float up to the top of the water later." Like, this is the language people are using, uh, for something that just doesn't really seem that big of a deal.
So the interesting thing about the, the, the two of us, um, so when, when you mentioned The Big Short, you were young when that whole event occurred.
I was a young pup.
Yeah. Um, you were, I mean, that was that was 18 years ago when the whole thing started. I was managing a billion dollar fund and, and, and I was, I was heavily involved in the housing scenario.
Big dog in the house.
And I do remember vividly all of the Michael Bur thing. Now, when we came out of that, I was kind of one of those people before. Meaning, if you would have met me, I started my career trading Mexico in '94. They had a devaluation two months after I took over the book for Morgan Stanley. Then I moved to Brazil in '97. They had a devaluation in '99. I traded a bare market there. Then I came back to the US. I took over the S&P options book for Morgan Stanley. Bam.
At the end of '99 and we had the crash there. I was kind of a doom and gloomer. And when I got...
Hey, get out of Bitcoin, man.
No, see, this is the good part. This is what changed. And Bitcoin was right around the same time. I believed and I had moved a very, very high majority of my money into gold and had been one of those people that took my money and said, "All right, what's the, uh, what am I guaranteed in the banks? What's the FDIC? Where, where, okay, so $250,000 in all your banks." Like, everything was dispersed into many, many banks so that I could be sure. I thought the banking system was going under. So beginning in the time when the bottom was made, and before the bottom was made, S&P bottom famously was at 666 in March. But in October, I started becoming a perma-optimist. And when I say perma, I was scared during the EU Greece situation.
But when that ended in August of '12, I went to Singularity University in June of '23, or I'm sorry, in June of '13. And that was to answer my question of how Amazon wasn't a bubble. How is this stock not a bubble? So everyone that calls AI a bubble, I already went through the journey. You should go through. But they have no.
need to, cuz most of the people that say this in social media, they're either just dark individuals or they've made a lot of money and they actually want to be right about this one thing because they believe the system is a Ponzi scheme. I will say on our show, watched by many, many people, the fiat system is a Ponzi scheme. It is, of course.
But the government was 7 trillion of debt in 2007 when Michael Bur challenged the system. When George Suros challenged the system, or Draim Miller challenged the system, they were big relative to the system. Now the government is $37 trillion. It's 120% of GDP. They can't allow it to go under, and they have tools that were created. We still have QT. We weren't supposed to have QE for more than a year after we did it. Bernani told us it wouldn't be here. So for everyone kind of going through this, unfortunately for all of you, it is not only a Ponzi scheme, but the endgame is not at crashing. The endgame is it being replaced by the new system. The new system is stable coins. The new system is Bitcoin. The new system is tokenization. All of this is coming, and next year is going to be a boom year for all of those things.
You know, the uh uh mental framework that I have is uh when you have a balloon, you can pop the balloon. And I think that's what everyone thinks is the end of the fiat system. Like you pop it, bam. Uh, you can also deflate, you know, you just slowly let the air out. And that to me feels like not actual like deflation in the sense of uh thing, but like you're just slowly allowing the old system to kind of move into the past, and that new system is showing up. And so I think that it is uh the like anticlimatic aspect of I want the pop. It's not really that. Almost never in history. Yes, there are certain things where there has been, you know, massive devaluations, or there's been, you know, like very severe financial crashes, but in terms of these regime changes, even, you know, Radalio, anybody go read, they are very kind of uh sequential in nature.
And so it then brings us to this question of, okay, if you're a retail investor today, I think more than ever, you got more information, you have more access to the market, you can trade 24/7. You have things like uh prediction markets, you have stocks, you have access not only to the US stock market, you got access internationally as well. There seems to be this belief that retail investors can take their capital, put it in the market, they're going to benefit from this stuff. There's an article in the Wall Street Journal recently that said uh the bottom 50% of Americans have more exposure to the stock market than ever before. Uh, since 2020, the equity values of that, the collective equity value has gone up almost 500% since 2020. So they're putting more money into the market, which is a good thing. But then there's this uh now infamous uh article in the Economist from the former chief economist of the IMF. I'm sure she's a nice lady. Uh, who basically made the argument that when the stock market crashes, it is going to be bad for the world because too many people have stocks. So I don't know how we can say, hey, not enough people own stocks, or rich people own all the assets, like this is bad, you know, we need to do financial education, get more people. But then the economists are literally saying that no, people own too much stocks. What should retail people do? And like, do you think that there is concerns about how retail investors are allocating to uh to the stock market?
Retail should keep doing what they're doing. I, it's been my absolute pleasure to to deal with that world more and more every day. And I mean that sincerely. I mean, I I hope the content that I do helps people because I'm trying not to be sensationalized and all this, and I'm trying to give people help in terms of what the long-term view is. But there's two important events that have allowed retail to challenge the old institutional framework of Wall Street and particular asset managers. Actually, I'll say three. Number one is the democratization of information. So when you say social media, when you say not only X, but Reddit, Discords, anything that they're involved in, I love putting on X and there's a I I can just jump on any spaces and listen to something, even if it's for 10 minutes while I'm kind of walking around or cooking or whatever, and just hear what retail is talking about at that point. Um, they're intelligent. They have information. The democratization of information is really powerful. It didn't exist in the 1999 in the '90s, and it barely existed in the 2000s until we started to get social media rolling out.
The second thing is the democratization of intelligence. They have the ability now of using AI. And here's the advantage. People my age don't use it. They're scared of it. I'm giving presentation after presentation and doing consulting work. It is really painful to watch people not use it. Partly because, in fairness to them, they're working at these jobs and they don't have the time, but they also don't have the curiosity and they don't have the desire to look stupid. So it's just part of it. The third thing, which is really important, and retail needs to hear this. Traditional Wall Street, and this is going to sound funny from where we started the conversation, it's based on cycles. So a hedge fund manager has there's a PM and let's say two to three analysts. Those analysts go out and they come up with ideas. They don't come up with ideas today. They do work. They go through it. Well, embedded in that whole process is an assumption that you have the time to do that work. The market moves much faster now. And that's the thing about Bitcoin that has trained retail really, really well. The time you could have a stock, which we've seen, go from 3 to 38, to go from 5 to 15. The one thing I will tell you is an analyst comes back to a PM and goes, I really like EOS. Looks good at 18. Where were you? The thing was five. He's getting thrown out the door. They're not buying that stock. Retail's like, "Huh, momentum. It's good. Let me go into the Discord. Let me ask some people. We still got more upside on this. Okay, I'm in." They don't care about the revenues. They don't care about the fundamentals. Wii, which just real quick, the GOAT Stanley Ducken Miller, famous buy and then research. He, he might be the ultimate retail investor. He's he's ahead of his time in terms of making sure that if something comes at him and it resonates with him, buy first because he can always get out. And that's the thing is he doesn't become married to his ideas.
When people ask me how people can still be negative on Alon Musk, I mean, of all of the things in modern day, the fact that anyone can challenge this man's, I mean, it's unbelievable. You have to really think about the fact that people actually hate Elon Musk. And he's even before the politics, like it a guy who's done, he's flying ships up, catching them. He's building electric cars, autonomous cars, humanoids. He's got the biggest AI data center. Didn't you hear his dad had a diamond mind? The whole thing is insane. And I, people ask me, he didn't start Tesla. Yeah. In fact, that's a perfect way to say it. That's the AI bubble, people. Elon Musk is a bubble that can't last. That's the best way I can say. And once people make that statement, they never change their mind. He, he um, I did the math at one point for 30 years, he has averaged every 5 years a multi-billion dollar company. Right? I mean, just think of how crazy that that is a generational run. Who, I don't know if there's ever been anyone in history who's been able to do that over and over and over again. Even if you, you know, inflation adjusted, whatever, how many people could say they've created six or seven different multi-billion dollar companies that are the category creators/leaders in their industry? Yeah, it's, it's crazy. It's crazy. And more importantly, I don't like his tweets. I, I'm just fascinated by the anger towards him. I, I just really am. I think it is a, it is the modern-day situation of what you said.
And I want to bring up one thing just so people hear this because you did make a statement. I, I do think historically, to be fair to people, when we've had situations like this, they do normally end in some sort of revolution. So, I do think when you have a stock market that's gone up relentlessly without any kinds of like sustainable down periods, meaning we make new all-time highs within a year constantly, I do think historically this has been a period where it's too easy. So, there needs to be a cleansing of the system. I have lots of reasons why this one to me is the endgame of capitalism, which is a different topic. But I do think people need to realize one thing. I lived in Brazil. Brazil is in a perma K-shaped economy. Incredibly high net worth. And the US has become an emerging market to some degree, both in the debt level, but also in the K-shaped economy. I think the way this is playing out, it's good for retail, it's good for the K-shape. I think they're going to get what they want because I think AI is going to drive people out of crappy jobs. Mhm. If you're losing your job at a big Fortune 500 company, I'm telling you, as painful as it is, go use AI for 6 months and then go get a job, started at a smaller company, you'll be in better condition. This transition that's going to take where people are in job sitting at work. If they're not allowing you to use use AI, you're in a bad seat. You need to leave and go use AI because the future is about being able to utilize AI and know how to do it. And you can do it at home. You can do it at a job. But I think the world is going through a massive transition and the next two years is kind of this final two years of just AI accelerating. The job situation get more unstable. The K-shaped economy continues to worsen. The government has to cut rates and at the same time the deflationary pressures are coming, which means we're getting closer to a world of abundance. And that's where the disruption and everything fits in with rates being lower, Bitcoin going higher, and more and more people looking for an alternative for saving their money.
I have two questions before I let you go. The first is uh Sam Alman did this interview with A16Z. Uh he basically made an insinuation that they have had a a development, you know, some sort of improvement internally. Then we've got two tweets here. One is from a pseudonymous account that says, hearing multiple independent whispers that OpenAI just had a breakthrough too big to announce casually, something emergent. People inside calling it phase two. Others saying level four. I don't know if that's true or not, but obviously that'll get the people going. And then there's another one that says, "We're doing all kinds of stuff with these models the public isn't even thinking of yet." And that one obviously uh did very well. Are you excited or worried if OpenAI is making big breakthroughs and we don't know about them yet? I, I listened to the interview. It, it's, it's on the A16Z podcast and the words, the specific words he used, which I'll be showing in my video this week, are capacity overhang. And what he, what he actually said was they've run into this issue where the models are always in front of what they've released to the public. And part of that you can see with Sora and everything else. They just don't have enough compute for it. But he made it clear that the exponential movements of the models are getting so far ahead that the problem is the compute is still moving at a linear pace. Even with all the spending and everything, you don't flip that switch on. Like, it's going to take a while for the compute to match up. Um, Dave Blondon, who's one of the the people on the Weekly Moonshots podcast, which we talk about a lot, he also was interviewed this week and it was a great podcast. Everyone should listen to it. I think it was called The Next Great Idea. Um, but you never get to hear him talk in a long form. And again, he he talks about his story. He talks about being at MIT in the 80s and going there because of Marvin Minsky and all of these different things, the godfather of AI. But what he talks about was the exact same thing Sam said. And he said he was at OpenAI twice this summer. This is why I wrote a Substack this week on how podcasts are the place to get real-time information. There's so many nuggets. So to match up with what Sam Alman, what Dave said was, I was there and and we're already at a point where OpenAI is is has bottlenecks. And he insinuated that this has to do with them already hitting recursive learning. And so people start to hear this. And I made this mistake once. I'll I'll do it again. Um, at this point, you can pause, go to chatpt, look up recursive learning, then come back to us. Okay? No, nobody in this room likes to hear that when I tell people to do that, but I even do it on my own video. Recursive learning, where computers are learning on their own, is a very powerful thing because then you're not depending on human knowledge. You're actually they're going through and they're learning on their own. That is when you're getting closer to AGI. What these guys are all saying is that we're much closer to AGI. And Dave London goes further when asked when do you think we'll hit AGI? And he basically says in some form next year. This is really critical to people because this means so many things for our world and so many things. And that's why for people who are bearish on AI, the profit margins accelerate with recursive learning. The data centers explode in terms of dollars. You are crazy. And he can raise as much money as he want because these models are what he's showing the people for these cyclical exchanges of cash. Like he's showing them what they have. And I think the other quote, and I could be wrong, but Google DeepMind said the same thing this week. Like there's a quote out there which I'm going to show where it said, if people could see what we can do right now with the models, would blow their mind. And they had a cancer release in terms of making progress on that. Like everything that's going on is just going to blow people's minds in terms of longevity, in terms of the sciences. We're entering a new period. This is stage two of AI, which is the biggest part of the bubble to me.
My last question for you, I know we only have two minutes. Um, do you think aliens have come to Earth? There's all these revelations now. Uh, there's this big documentary that's coming out where they have Marco Rubio, they have, you know, people inside the government who are basically saying there is something that we don't understand that is hovering over some of our uh nuclear facilities. There are, you know, uh people who are coming out and saying, I've seen them. I've seen the non-earth crafts, or uh in some cases living uh organisms, etc. I'm fascinated by it just cuz it would be, you know, a huge development. Something that's been rumored for a long time, but like, does that have any impact on markets? Like, like if all of a sudden they were like, "Oh no, aliens are real. Like, here's one of the crafts." What do you think? I, I do know one thing. There's no such thing as aliens are true. And the market goes up. Okay. Really? Yeah. I don't think anyone's going to be like, "Oh, there's aliens. Excellent. I'm going to go buy I don't know, man. Maybe there's like some energy source that they have that all of a sudden the data centers can now uh be like way more uh powerful and AI all of a sudden is like uh superhuman and now now you're sounding like a traditional finance analyst has gone and done the work. I think the first reaction, the knee-jerk would be, I'm going in the basement, lock the doors. Every movie I've ever seen, this is a bad ending. Okay. So I, I will say this, uh shortest answer I'll ever give on on on on this interview. Uh, number one, do I think aliens exist? I, I think my brain always assumes that we're not the only living creatures on the planet and that somewhere in the expansive universe, there are other living creatures. So, I'll say that. Uh, number two, whether or not that is China hovering above us in something we don't know that's invisible cuz they've created some technology, I don't think we know. And it doesn't make me think about it for more than 5 seconds. Well, China doesn't have any uh crazy stuff because they still just put the balloons over America, right? Like, why do you need state-of-the-art technology? Just use the balloon. We ain't going to shoot it down anyways. All right. Thank you very much. We will do this again next.