Transcription
Will markets finish positive or negative by the end of the year? Well, that's the question on everybody's minds every single day, pretty much in any given year.
Today, we're going to do a little deep dive on the key drivers of the S&P 500 towards the end of the year for the last two quarters of 2026. Will it be the Fed? Will it be monetary policy? Will it be interest rates? Will it be the AI trade? Will it be Iran? We're going to find out with our next guest, Jim Biano, president of Bienko Research. He's going to give us his take on not only the direction of the markets, but which assets to focus on, which assets to stay away from, and most importantly, what drives the markets for the remainder of the year.
Jim's been spot on about bond markets, and right now with Kevin Walsh at the helm of the FOMC, uh, everyone's talking about potential rate hikes. This was brought up several times at the FOMC conference earlier this week. We'll be visiting that topic with Jim today.
This video is brought to you by Kowi. It's the largest prediction market in the United States. Unlike a sports book, you're trading peer-to-peer on real-world events from economic data to political outcomes. And the price moves based on public opinion, not a house. Go to the link in the description down below or scan the QR code here to get started. And use my code, Lynn, L I N. New users who use my code will get $10 when you trade $10. Right now, there's a 78% chance that the S&P will finish positive this year, according to traders on Koshi. This is the question I opened with, and this is the question we'll be addressing, the central question we'll be addressing with Jim. We're going to get Jim's take on how high the S&P will go and where it's going to go, and whether or not he agrees with Koshi traders on the 78%. If you put $50 down on this particular trade and you turn out to be right, you could get $63.
Jim, welcome back to the show. Good to see you.
>> Yeah, thanks for having me.
Jim, let me start with a question that everyone of all walks of life would like the answer to, which is we're speaking the day after the FOMC conference yesterday. uh Kevin Walsh has removed forward guidance although I think nine governors were nine members of the FOMC have indicated they want rate hikes. Immediately after that particular conference the um CME fail watch tool updated its probability of rate hikes to um pretty much 85% of at least one hike by the end of the year. So my question is how high will interest rates go? Let's start there.
>> Yeah, you know, I think that they're going to go up. I think the Fed is going to be raising rates at least one time, probably October at this point. Um, bear in mind that we are already in a global hiking cycle. The Bank of Japan started hiking rates in 2024 and they've raised hiked rates five times. The Bank of Australia started raising rates in January. They've raised rates three times. The ECB hiked last week for the first time. Now you're talking about the Fed rate potentially hiking rates. We've been rumoring the Bank of England's going to do it, although they didn't pull it off today. Uh, you know, they're still in the in the mix for the rest of the year. Bank of New Zealand might be raising rates. We're in a rake hiking cycle. Um, so I do think that rates are going to go higher. Um, I think that we're probably going to see the 10-year yield, which is around a little under 450 right now, around 442 or so. It's probably going to trend towards 5%, I think, by the end of the year. Now, why are we doing it? We've got inflation. We've got an inflation issue. We're 63 consecutive months now above 2% inflation. We're not getting anywhere near it. We've got the headline inflation above 4%. All right. Well, maybe that's energy driven and Trump signed a deal and that's going to bring down the price of gas. Core inflation, if you use the Fed's favorite metric of uh core PCE, that's 3.4%. That's unacceptable for a Federal Reserve that to have that rate be there and that, you know, especially considering that they've got the funds rate now at 3.6 that that would give you about a zero real funds rate. I think that you're probably going to see the Fed moving rates up.
>> Is it necessarily true that the 10 year and the 30-year will follow? We know that the short end of the curve will most likely follow, but what about the rest of the bond curve?
>> They'll follow to some degree. Uh, but I do think you'll see cur the yield curve flatten. In other words, short-term interest rates will go up faster than long-term interest rates. There's an old saying, an old adage, I've been using this quite a bit lately in the bond market that as a bond investor, I can stop panicking when the Federal Reserve starts panicking. And what do I mean by that? Let me go back to 2022. We hit 9% inflation in 2022. Mhm.
>> What was the highest 10-year yield we hit the entire year? It was 4.23%. And today we're at 442. Why didn't we get 10ear yields much higher when we had 9% inflation? Because the Fed was raising rates 75 basis points every meeting. When the Fed starts panicking, I can stop panicking. Why are we pushing for 70 now? Why are we pushing for 42 now? um you know on the 10 year. Why did we hit 520 on the 30-year yield in May?
>> Because we've hit 4% inflation and the Fed's not panicking. So the fastest way to get long-term yields down or at least hold them steady is to raise short-term rates.
>> So you believe bond vigilantes would have acted >> if if Fed chair Worsh hadn't done what he said yesterday?
>> I think if he would have made the noise, you know that um by the way, what was the one word that we did not discuss yesterday? And that word was sock puppet. Remember, he was called a sock puppet during his uh confirmation hearings. But if he acted like a sock puppet yesterday and said, "Look, I'm here to cut rates and we're going to cut rates." I think the bond the bond market would have just collapsed on itself and yields would have went went soaring.
Just as a thought exercise, just as a thought exercise if he had announced a rate cut, which by the way, nobody priced in yesterday. What would have happened to markets?
>> I think that the 10-year yield would have collapsed. I think the 30-year yield, I mean, the prices would have collapsed.
>> The yields would have gone the yields would have gone straight up because again, you're not panicking about 4% inflation. And if you're going to cut rates in that environment, I don't want anything to do with your bond market.
>> That's interesting.
>> Yeah. If the rate Yeah. If the Fed funds rate goes down and the 10-year yield goes up that what happens to stocks anyway, this is this is a mood point because it didn't happen. I'm just thinking out loud here,
>> right?
>> Scenario,
>> but you know the as far as the stocks the stock story goes, um I you know I said that the 10-year yield is going to trend towards five and I know there's people listening going, "Well, that's going to kill the stock market." Not necessarily. And the reason I say that is Trump has done a really good job of making everybody think like a real estate guy because he's a real estate guy. And that is down on interest rates is always good. Up on interest rates is always bad. That's how every real estate guy thinks of it. The perfect interest rate is zero. It's how every real estate guy thinks.
But interest rates are a lot more nuanced than that. If they're too low, you create speculative bubbles and you have problems. If they're too high, you choke an economy's growth. So, you want them to kind of be in a fair value range. And as long as they're in that sweet spot, you get the most efficient growth. I think that that fair value range is moving up because we've got more inflation. So, they should drift towards five and it should be fine. If they go higher than that, meaningfully higher than that, then we'd have to worry about them choking the economy. But I don't think that that would be the case. Now you understand that everybody will tell you the narrative that higher rates is always bad because they think like real estate people and lower rates are always good but I don't think that that's necessarily the case. So if they drift towards five I think that like equities will be fine in that environment.
Before we talk about market implications and uh what people can expect for the higher interest rate environment. Let's talk about the straight of hormuz. You've called uh this the straight of hormuz war on X. You said that the war of Iran uh the Iran war rather was over as of March. It was a straight of Hormuz war. Now that the straight of Hormuz is reopened, let's see how long it stays reopened after a peace deal and aou was signed at Versailles, by the way, which you've also commented on X. But the the the oil price has fallen by the or by an order of let me just get an exact number so I don't make this up. Um it fell from pretty much 9 yeah 95% $95 rather on June 8th all the way down to now $75 uh on June 18th today. So in a matter of a week and a half it fell 20 bucks. Now it is central bank policy to tighten around the world which you've pointed out a mistake meaning that the oil price inflation that has occurred is now probably going to subside.
>> Well two things. First of all, you you you mentioned that the what I said that they signed the the treaty or he signed the memorandum of understanding at Versailles. If you if you're not familiar with your history, that's where people go to surrender is you go to Versailles to to signed a surrender treaty and he signed that document there yesterday. So bad optics on the White House's part to pick Versailles. They could have gotten on the train and gone to Paris to do it, but instead they decided to do it there. Um I will go back to what I said earlier to answer your question about is it a mistake to raise rates. Core inflation is above 3%. That's what I think is moving the N needle. That is what Walsh put in the statement. Yesterday's statement was very interesting that he mentioned high inflation and that they're going to do something about high inflation and mentioned nothing about the labor market. So, I really think that if you look at the inflation scenario that we have, it's way more than gasoline prices. It is 3-ish% core. Add gasoline prices onto it and you're pushing four. And those numbers are just too high. So, in that environment, I don't think it is a mistake to be raising rates. Interesting. I bring this up because the ECB uh looking back in history have made a mistake in 2008 when they raised rates with oil prices went up in the summer right before Leman collapsed. In retrospect that was a mistake but they were looking at only inflation. What's your response?
>> Right. Yeah, that's exactly right because the ECB is a single mandate central bank and what I mean by that is their job is to get the inflation rate to two and when the inflation rate's not at two above two raise rates. That's it. They're not allowed to consider. They don't have a mandate to consider employment or financial stability or anything else like the Fed does.
Now, not every central bank is a single mandate central bank. There are some multimmandate banks, the Fed, but the interestingly the other ones are the Bank of Japan and the Reserve Bank of Australia, and they've both hiked rates already this year. So, you know, that's where I think that the the dynamic comes in that what Worsh was doing by not comment not only did he not comment on um unemployment or employment when he was asked in the presser he referred to the employment report as an echo of the past which is only good on the third release. The third release is 18 months after the monthly report comes out. So he basically told you you, you know, you could schedule a vacation on the first Friday of m of the month because he's not paying attention to the payroll report. Maybe you shouldn't be paying attention to the payroll report. And then he put up these, he wants these task force to try and find better measures to look at. Um I I think that's a great idea. I hope that they find some better measures that they can look at um as well. So I do think that this is really about inflation and there is a real inflation problem. I want to come back to something else. 63 months we've been above 2%. We were only above 2% from 2010 to 2020 like four months. That was it. And now we've been 63 straight months. For those that talk about in you know technology with AI is going to be deflationary that you know we're in a long-term deflationary pull. That's over. That is over. This is a different inflation cycle. You cannot expect us to go back to that other cycle that we had from 2010 to 2020 because we're not showing any indications of that. And now we're starting to move back up with inflation again. That's why I said 442 on the 10ear that drifts towards five. Not anything out outrageous. Another four, you know, 50 basis points or so in yields.
Well, it appears that the Fed funds rate uh started falling be uh long after the inflation rate has stayed above 2%. At what point did the Fed start pivoting and realize well like literally pivoting and realize um inflation uh is no longer a concern and we can start lowering rates? Or perhaps another theory was this was all political right before Trump was elected. uh POW started started uh lowering rates to to to curry favor with uh with with with the American people um and f for the Democrats. That's another theory. I'll let you comment.
>> Yeah, that there there's there's good arguments to that. Remember that the chart you're looking at when they started cutting rates, they started with a 50 basis point cut in September of 2024. 50. They So they went they went a double like a double cut. They did that after Labor Day in an election year. If you go back and look at the Fed, the Fed to change course after Labor Day in an election year, they've only done it in the last 70 years twice and that was 200 uh that was uh 2008 during the financial crisis and in 1980. Now, let me be clear. I said change course. So if the Fed was hiking into Labor Day of an election year, they keep hiking. If they were cutting, they keep cutting. If they were holding, they keep holding. What they did was they were holding and then they decided to change course and start cutting.
And so there was an argument to be made that that was at least politically it looked very much like like they timed it that way. Uh and then they did cut again, you know, um last year as well too. But it also became clear with that September 24 cut that they were responding to higher unemployment and then the minute they cut that spike in unemployment disappeared and went away. They got spooked by a couple of bad numbers. They were thinking that the the market the uh the labor market was in trouble but it wasn't. And so that's what you have to be careful of. And that's what worships is trying to change is that the Fed is not very good at predicting these things and that they need to stop with this forward guidance and they need to stop with these models based on data that's old. And that's what they that's what got them in trouble in 21 when he said transitory and got them in trouble in 24. Trouble that they cut rates thinking that there was an employment problem and like I said there wasn't one at that point.
Okay. Well, now that we have a rising interest rate environment, can we rule out bonds as a good play for an investment? I mean, is the era of the spec secular bull market for bonds over for good now?
>> Yes and no. Yes, the era is is over for the secular bull market and bonds and it ended in August of 2020 when the 10-year yield hit 50 basis points. But no, you don't want to rule out bonds. Here's the biggest issue,
and I'll say it bluntly. Investors have become entitled. They've become entitled over the last couple years that they think that a randomly picked investment should give them 20% return a year. Whether it's stocks, it's gold, it's crypto, I'm owed something that's going to go up 20% every year. This year it might be AI. So their belief is if you don't have an idea that's going to return me 20% or more, I don't want to hear it. I think that that's an unrealistic expectation going forward. I've actually made two arguments on that side. One, I've argued that the stock market it might have it might now be two asset classes. It might be AI stocks and not AI stocks. AI stocks are 48% of the S&P 500. The last time it was that concentrated was the late 19th century under railroads concentrated under one unified theme was railroads under the late 18th century. And so that's why those stocks tend to operate on their own wavelength and it's half the stock market. Everything else is the other half of the stock market. Yeah.
Now, the other half of the stock market, if you look at cash and you look at bonds and you look at stocks, I've for the last couple of years been using this this moniker, the four, five, six markets. And it's I still think it's working. And what that means is that what should you expect out of your returns? You should expect cash to return you four. You should expect bonds to return you five. You should expect stocks, not AI stocks, to return you six. Now, I don't mean that every single year. I mean over averages. And so, yeah, that's where we're at. So, to answer your question, if bonds are returning you five, if the yield is five and you buy bonds, you get five. If you put them with an active manager, maybe you get a little bit more. That is a perfectly acceptable return. Problem is, everybody turns their nose up and says, "No, I want to buy SpaceX or I want to buy Nvidia and I want 20% 30% 40% returns in the market." Now, in the AI space, you might get that, you might get more, but the problem you got to be careful with that is you might also lose half to twothirds of your money before you realize that the tide has turned and come out. So, it's high risk and it's high reward. And in order to play that space, you have to make two trades. You have to get in, watch them go up, and you have to figure out when to get out because if you stick around long enough, you'll give it back. Now, that's a perfectly fine game for a lot of people to play. But I think for most investors they're really need to understand what is the market going to give you right not what you want. You want 20%. I want 20%. But I think the market's going to give you more like four, five or six.
So this is a uh prediction from uh Kowi prediction market. Will the S&P finish positive this year? I like following prediction markets. Uh traders have a pretty good sense of what's going on and it's usually pretty accurate the closer you get to the actual event date. Anyway, it didn't actually change. the uh the odds didn't actually change after the FOMC meeting. The point I'm trying to make is that traders have been pretty much overwhelmingly very positive on the S&P pretty much all year. 78% now that the S&P will finish positive this year. You tweeted since the war began on April February 12th uh 28th rather. The S&P is up 8 and a half 8.03% between June to June 10th. The S&P 500 corrected 4.5%. The stocks S&P without AI related stocks actually uh rose green arrow. people have thought about uh the S&P like you said between which is two trades X AI uh stocks would have been actually f flat what are you trying to show here with your findings um somewhat non-conensus here I'll let you explain
>> yeah it's two stock markets it it really is two stock markets is the AI stocks as as I what I was trying to point out was that that sell off of about 5% from September 2nd or June 2nd excuse me to about June 11th the stock market fell The S&P fell four and a half%. But what that green arrow shows in the blue line in the bottom of that chart is that the not AI stocks, and by the way, that's over 400 of the 500 S&P companies that those companies rose during that same week that the index was falling 4 and a.5%. Why' the index fall 4 and a half%? Because all the AI stocks, all the big mega cap mag seven type stocks got smashed during that week. And so there's two different markets right now. And that's what I'm what I'm trying to say is that and what was the narrative? Well, the economy is slowing down and we're worried about the price. Well, it had nothing to do with that because the the consumer stocks and the healthcare stocks and the financial stocks and all of those other stocks, the basic material stocks, they were rising during that period that everybody was saying we're worried about the economy slowing down. So, it really is two different stock markets. it is the AI stocks and the not AI stocks.
And so when people say the S&P finished positive this year, how should somebody approach this question? What are the factors that are going to determine if it's going to finish positive or negative this year? And I'm talking about S&P as a collective uh not when you differentiate between AI and nonAI stocks. We've talked about the Fed, we've talked about Iran, we've talked about AI. What actually gets to the heart of the issue, which is what drives the stock market for the remaining two quarters this year, Jim?
>> Yeah. So, you know, it's 78% that it's going to be up in the year, but bear in mind, all right, you know, that we're up about 7% already for the year. So, we'd have to decline 8% for for these Kelchi traders to be wrong. So, they've got a little bit of cush. They got some house money that they're playing with, which is why that number is is pretty high at 78%. I think that really the big driver of the market, as I pointed out, you know, it's been AI stocks. And I and I'm actually pretty bullish on the AI sector um right now. And I still think that there's some room for those stocks to run. Um, but you know, they're high risk, you know, so I could say I'm bullish on that sector and I could go disappear for two days, come back and there'll be 20% lower. That's the risk you take in owning those stocks. But I think that those are that that's really what you're going to wind up doing. Now, the other thing that people need to keep in mind about this market is, well, that's why you buy an index because maybe it's AI stocks or maybe it's healthcare stocks, but you just buy the index, buy everything, and something will will take it higher. True. But what's also happening with the AI stocks is the actual volatility in the market is rising. So, you're going to get used to these bigger and bigger swings in the AM uh in the market because these stocks have bigger and bigger swings to them, especially like the semiconductors and some of those stocks that are affiliated with AI.
You actually tweeted this as well. Uh you've got a you've got a tweet for uh almost everything these days.
>> Jim's got a great Twitter account. people follow should follow X on uh and Jim on X. Anyway, two things can be true at once. AI investments will end in the big bub bubble. We are not there yet. We are actually early. Um I won't read the entire post. I'll I'll encourage people to check out your X account and follow uh this yourself. Uh you were posting a picture of the gardener hype cycle. Uh which part of this cycle are we right now? What is the gardener hype cycle first and foremost? And uh you know where are we right now?
>> Okay. So, the gardener hype cycle is the the traditional pattern that a new technology follows. Yeah. Almost every new technology will have at one point a speculative bubble and a bust. That is the peak of inflated expectations and the trough of disillusionment. But because it's a new technology, even though you have that speculative bust, the technology is very real. So to give you an example, the NASDAQ in 2000 during the internet hype peaked at 5,100 and then the NASDAQ collapsed 83% to its low in October of 2020 uh October of 2002 to around,00 wow wiped out 83%. Did that mean then that that the internet went away? We shut off the internet. No. The internet became every bit as transformative as everybody thought it was. But in order to play that whole cycle, you wound up losing 83% of your money for the next several years, the uh you did not see a new high above 5100 uh on the S&P or on the NASDAQ, excuse me. And then it took off to 25,000 after that. And people are like, "Yeah, yeah, see that's why you got to be an investor for the long run." And I'm going to use some technical language here. you are. If you tell me you got to be an investor for the long run, I want to see the person who I want to see the person who owns the ARK fund that's 50% off the low saying I'm piling more money into it. I haven't made any money in it in 5 years, but I think it's still going to go up 20x. Look, she might go up 20x. Kathy would on it. But it's easy to say after the fact, yes, I should have lost half my money for 10 years and just kept piling into that investment because it's going to go up. That's what happens when you have that bust out. But what I was trying to show with the with the gardener hype cycle is that's the way we're going to go. So where are we? I think we're closer to the technology trigger number one that's showing on the chart. If you want an example from 2000, I think we're closer to 9097 1997 1998 than we are to 2000. But I also warned I think we're going to get there. We're going to get there with a completely overdone market and then we're going to have some real pain. But that doesn't mean that we're going to shut down the data centers and AI is going to go away. It will be every bit as transformative and after we've overhyped it and bust it out. We'll have a long period of sideways action and then those markets will go up. So maybe we've got another year or two, maybe we've got several more months of it, but we're on our way. I just think we're not at that March 2000 absolute peak of inflated expectations, at least yet. The last thing I'll say to you about is I have an attitude that some others do, too. I'm not afraid of a bubble. Bubbles are where you make a lot of money really fast.
But the the thing about a bubble is you also got to get out alive. That's the other problem, too. Yeah. When you hear bubble, people think that means the market's going to crash and could keep going down.
>> That that's not necessarily the case. We're building it right now. We might not be at the peak.
Well, my question is how do we know or do we know that every technological cycle or new technological product or innovation will necessarily repeat the gardener hype cycle what we which is what we see in front of us. Um because if if this is something that we can naturally predict with confidence and with with consistency, I as investor will wait for trough the trough at the uh uh point number three to to get in, right? I or at least wait for some sort of correction after uh after after the peak because we're not we're not there yet. Why would I risk getting in now when things are so highly valuated uh you know, valuations are so high uh when I could just wait for a bit of a pullback first?
>> Well, it's not a bit of a pullback. The profit disillusionment might be five or six years down the road. I mean, you know, so you might be waiting a decade or, you know, close to a decade before you get back in. But what typically happens with every every um hype cycle is you end with a massive overbuild. You know, I there is today in the United States there is 30% less railroad track than there was 120 years ago. there was more 30% more railroad because we so overbuilt the railroads um at that point the internet during the the internet peak of 2000 global crossings which is the the name implies that they were laying fiber optic cable around the planet 90% of their fiber optic cable is still dark it's not been used they laid so much cable that the rest of human history will never use it all um as well so you completely overbuild and that's what gets you the hype cycle that it's going forever
right now in AI the problem is compute there isn't enough compute and that we're struggling with compute and that's why everybody's getting these big bills for token usage and that doesn't sound to me like there is an overbuild in data centers yet I still think we'll get there but instead what you're seeing is you're seeing people saying that what we need is we need more building out. We need more compute. And so it seems like there's an unlimited appetite among some investors to fund some of this stuff. Alphabet $85 billion in a secondary the week the week before the the $75 billion from SpaceX. Super Micro, which is smaller company, did7 billion um as well. And then today, SpaceX is back with a $20 billion debt offering. And earlier this week, Nvidia did an $80 billion debt offering. These are mind-numbing numbers. It's almost like these these companies can say, "I want to borrow infinitity and they can get infinitity." And what they're going to do with infinity is they're going to overbuild it. But that's years down the road. That's what I think is that it's years down the road. I don't think that we've overbuilt it yet. I don't think that we've got too many data centers. I actually think we don't have enough of them. and that um and if we do see a more of a political backlash against data centers, it it's going to be longer before we wind up overbuilding it, but we'll eventually get there because every technology does overdo that. They get too much too many railroads, too many fiber optic cables, and that's when you have the the bust out to the trough of disillusionment.
How do we as investors, not engineers or scientists, discern between a fat and a mega trend? So, a few fads in the tech space happened in the last decade. I'll just name a few at the top of my head. You know, VC fads, VR, there was a time when anyone with a VR uh play in in in their startup would have gotten funding. Uh there was a time when the met metaverse was super hot. Uh you I think I think Mark Zuckerberg's walking back on that now. Uh how do we know if AI is another one of those plays or it's a mega trend that's here to stay? How do we how do we how do we make that discernment?
>> Yes.
Well, you're right. You're right. the the the people that recognize those those trends correctly are usually they own their own planes and the rest of us have to buy plane tickets. And that's the difference between those that do it and those that don't. But um here's where I think that the AI play is it's usually I think it comes down to what is the practical use case and in AI it has a very powerful practical use case and let me lay it out in two minutes. you all of us have a computer, a corporate computer. And on our computer is data. It might be public data. Maybe it's the stock price index or something like that. And it might be private data. Um, and a good example of private data is your inbox. Your e email in your email inbox is is a good example of private data. We pay for software monthly subscription SAS software as a service in order to access this data whether it's Outlook to look at my emails or whether it's Excel to put uh the S&P chart or S&P data in draw a chart of the S&P and there's all kind of other data there's word there's off the whole office suite there's Windows there's customer relation managers things like Salesforce cells there's malware software and everything else and So that's it. The average corporate computer will spend more on software on the computer than the price of the hardware itself. The total is about3 to400 billion dollar a year is spent on SAS. What AI is saying is you don't need all this software. You have the data. All you're going to have is a context window. Just ask it, tell it, type out, or just tell it with a microphone what you want. I want to hear about my emails. I want to see a chart of the S&P. I want you to order my favorite drink from Starbucks. I want you to do all three at the same time. Just tell it what you want and it will produce that data. Right now, what you have to do is you have to open up this and download it in Excel and then spend 20 minutes formatting it and put it into an email and then find their email address and send it. And you have to juggle a bunch of programs that don't talk to each other very well. AI is going to replace all of those. If you want an example of what I'm talking about, uh, you know, here's my here's my phone, and you know, it's an iPhone, just like a lot of us have. Why do I pay $1,100 for a phone that I don't even make phone calls on? Because it's not just a phone. It is an it is a camera. It's a video recorder. It's a stereo. It's a GPS device. It's a flashlight. It's 20 products in one. So, I will happily pay $1,100 for a phone because I don't have to buy a camera and a video recorder and a GPS device, and I roll all that money into it. AI. If AI fills its promise that it can take data on my computer, either public data or private data, and help me get the most out of it,
then at that point, at that point, I think what you're going to wind up having happen is you're going to be replacing that SAS software bill for the AI bill. That's why the SAS stocks have been struggling. That's why AI is doing is is got the hype and got the promise. It's going to unleash the computer. It's going to make it much easier for us. Now, the fear is it's going to make it so easy for us, we're never going to hire any more college graduates. And that's what's got them walking out on commencement addresses and everything else. That is a legitimate concern. I understand that concern, but that's why I think that this is a real thing. There's a real use case. You sit at your computer. I sit at my computer frustrated, pounding away at the keyboard. Why won't this do this, do this, do this? Just tell your computer what you want and it gives it to you. That's what AI will give for us.
My final question and this pertains to market sentiment. Where in this chart is crypto and blockchain technology.
>> Um I think it's it's about at two and three/4ers right now. Um and you know that it's getting near the trough of disillusionment again. And I think the problem with crypto and blockchain technology is it is 15 years old maybe 16 years old right now. the technology. I'm thinking Bitcoin, you know, ETH is maybe about 10 or 11 years old.
And that's enough time that we should have seen something more than a speculative instrument. In other words, yes, it's a store of value or it's a medium of exchange, but they've never really built a financial system around it. We don't, you know, I don't see any of the DeFi protocols competing with a Coinbase, let alone with a Charles Schwab. uh you know I don't see any of the DeFi lenders competing with JP Morgan or anything like that. That's where I think the trough of disillusionment is coming from is that every time crypto gets going it usually starts at summer with the idea that oh it was DeFi summer in 2020 or something like that and everybody gets excited that this is going to lead to an alternate financial system. Okay great let's just run the coin. let's just run the token and the coin prices up so high that we kill off all the all of the development because it's too expensive to do it and then we have another downturn. So I think that the in the trough of disillusionment what brings it out every single time is development invent something on top of the blockchain that is useful that is promising now there are a lot of things that are out there the biggest one is probably stable coins at at this point I'll give you one antidote
>> yes
>> The Venezuelan economy nobody really trades with the bolvar right now they you it's a dollarized economy so if you walk into a store in Venezuela and you say, "I want to buy something. How much is it?" They'll most likely tell you what it costs in dollars. Now, you could pull dollar bills out of your pocket and pay it. But you're most likely going to pay it electronically. And what is the most popular form of electronic payment for a dollar in Venezuela? Tether. You're paying it with Tether is what you're doing. As a matter of fact, if you go if you go to the official uh sites that give you the the Bolvar dollar exchange rate, they quote it in Tether. So, that's a great example. I think the last thing I'll leave you with here is that when it comes to developing a an alternate financial system like stable coins and everything else, most Americans will say to themselves, I don't need that. What do we need that for? It's kind of neat idea. It's a toy. Yeah. Well, you don't live in Venezuela. You don't live in Africa. You don't live in Southern Asia where you where they they really do have a need for that kind of product. And if the crypto universe wants to get back to that and start pushing on the development of that instead of hyping up at uh ETFs that we're going to sell to boomers in Greenwich, Connecticut and tell them that they got to buy it because the price is going to go higher. There's a real long-term promise for crypto. But if they want to just keep overhyping it as just a trading sardine that they want to trick somebody else into greater full theory into buying it buying their bags so that they keep going up then it's just going to keep going up and down 80% all the time like it seems to have been for the last couple of years.
Well, I would like I just came back from an Asia trip a trip to Asia and uh this is not a new concern for anybody traveling abroad, but whenever you swipe your credit card on your phone or Apple Pay with your on your with with your physical card, whatever the case may be, you're getting charged a fee either, you know, through through the local machine or through your bank. So it it it would be nice if one day I could just use stable coins and just convert through stable coins euro what whatever what you know Chinese yang what what whatever it is and I don't have to do that anymore but yes
>> and to give you and to give you one quick example in order to do that you need two things you need the transaction speeds on the blockchains to be orders of magnitude larger like the maybe running in the hundreds of thousands a second or millions of in in a second and then you need a protocol, not just Coinbase, but a protocol where I've got it on my wallet and I could transfer it to your wallet and that's the way that we could pay it.
>> Mhm. Okay, perfect.
>> We sort of got those, but they're not really ready for like normie use in prime time.
Well, we'll see. Hopefully, uh hopefully this will develop. Thank you very much, Jim. Always appreciate your insights. You've you've got an analysis and explanation for pretty much everything that we care about. So, thank you for your time today. Uh where can we follow you? Where can we learn more from you and uh stay up to date with your work?
>> Biancor research uh biancorsearch.com is our website. Biancore Research on Twitter X on our YouTube channel. Um, you can follow me at Jim Biano on LinkedIn and I'll give you one other one too. We do that 456 I was talking about in the five category. We do manage an a total return fixed income index. Uh, you can find out about it at Biano Advisors and our partners at Wisdom Tree have an ETF that tracks our index at WTBN. That's Wisdom Tree Biano Nancy is its ticker symbol.
Okay, good. Thank you very much, Jim. We'll put the links down below. Follow Jim Biano there. Take care for now, Jim. We'll speak next time. And thank you for watching. Don't forget to like and subscribe. And don't forget to sign up to Cos L I N Lin. New users who use my code will get $10 when you deposit and trade $10. link down below or scan the QR code here.