Transcript
0:00 All right, as far as I'm concerned, I'm back in Brooklyn. So, summer for me is officially over. And for everyone else, if it's not yet, it will be. let's go through it. Bessant gets drunk was the big story to start the week. Then you got Wars at Jackson Hole. a bunch of podcasts for the week. I also I got so many people reaching out about Grockbot that I am uploading a a prompt. I highly recommend everyone who gets the opportunity to use it. They've talked about having free trials. I would definitely at least try it to understand the agentic side as that is going to grow. and if you have the ability of finding a way to cut $200 out of your expense for one month and get it for a month so you can play with it for a month, I guarantee you it will be a a special time to learn about what AI agents actually do and how you create things. there are so many good videos out there that you can basically use to make sure that you're getting the most out of it. I will spend time a lot more on the AA crypto macro collision. There's a lot of information and as I've talked about, I will be putting out a video specifically geared towards crypto. in September, late September into October, I'm guessing late September I should have what I want to get done. You guys have seen little bits and pieces of it. I'll go through some more. it's been a big month for crypto and I will go through and just highlight some of the things in there and then the Agentic AI mud trade continues. So, we will go through that.
1:44 I highlighted it last week. I'm going to start showing you guys just like it appears everyone else the disclosure side of trying to make sure you guys understand I'm trying to help you guys educationally andformationally and I'm really trying to give you the opportunity to know that I'm outsourcing or you're outsourcing to me the ability to stay on top of AI and move things. So hopefully you're getting that feel. So let's go through this. it the week started off with Bessant basically saying he could tap the1 trillion dollar general TGA.
2:19 and that was followed up quickly by I'd say the biggest story of the week which was Stanley Ducken Miller basically writing an op-ed. I think the reaction to it was in my opinion off base. Bessant basically the way everyone wrote it is he was blasting Duck Miller was blasting Bessant. I really if you read through it and I happen to agree completely with what Stan is saying on the surface which is the more manipulation especially into something like tenure yields it's the only fiscal disciplinarian the US has left and that's really the key thing is the fiscal disciplinarian line and that's because it's Congress that's the issue this spending problem has been going on for a long time the distribution of wealth problem has gone on for a long time the kshaped economyy's gone on for a long time. and this cannot be resolved with slight interventions into yields and not allowing yields to go higher is definitely going to create other issues. But, and here's the thing that's the most important, we're at around 240 250% market cap to GDP. We're going to be at 300% soon. we're financialized. At the same time, the debt is enormous. So, you can disagree with what's going on, but there really isn't a solution that's easy, other than allowing everything to head towards some sort of recession, which isn't an option. Now, I just want to make sure that you guys see that tenure rates are extremely mispriced relative to what we're doing in nominal GDP. And this is the issue is Donald Trump and Scott Besson have said they want rates lower. They're trying to handle the K-shaped economy. They have a belief that rates should be lower.
4:12 Apparently, both of them do, or at least Donald Trump does. here's where rates used to be. This is tenure rates, the orange line. And you can see that in the 80s, we were above nominal GDP throughout the entire time. And then at this point here in 1997, before the Asian financial crisis when I was in Brazil, that's when they really broke underneath. And they've been underneath since then, except for periods of recession, recession, recession. Other than that, we've basically been at a point where we've been keeping yields below nominal GDP. Well, we not only have nominal GDP right now at six and a half percent, but it's climbing. And so, the reality is for everyone involved, you can make the argument that rates should be at eight and change. They're not. So, this is where it gets into something. And I remember I was at a dinner not that long ago, I'd say two years, David Zervos was hosting it. And actually, I know when it was. It was it was 23. It was right after SVB. And every single time people at the table said this is what the Fed should do.
5:17 This is what the fiscal side should do. And David Zervos would just stop everyone and say that's a normative statement. I don't care about it. The factual statement is what is happening. And that's really important for this stuff. As you read it, you can sit there and have the opinion that Stan Ducken Miller wrote in the article. And this is what I was going through. A a lot of what he's talking about is what should happen. We don't make money on what should happen. We make money based on what the administration is telling us they believe in. So I want to highlight there is another endgame and I actually believe this endgame has a a legitimate chance or is probably a better option if we actually hit this point than the other one. And this gets into the debt and entitlement issue which is based on human time. The debt is based on human time.
6:08 It is the denominator or the the number on top basically as you go through this. You're going to have to find a way, and this is what they're trying to do, is grow yourself out of it, which is highly unlikely, but it's essentially the same debate as the AI infrastructure debt debate. When the hyperscalers are taking all this debt out, they're betting that they're going to get the revenues in faster than the debt is going to destroy them. I think there's less of a chance of this working out well for them in a growth perspective and more likely at the government level because I do think GDP is growing faster than what's reported.
6:46 The question is the tax system is not set up to benefit from it. So, this is where the issue comes in is it's great if you're trying to grow your way out of it. You still have to find a way to get the taxes in. And my guess is, if I'm right about humanoids and what's going to happen five, 10 years from now, 15 years from now, whatever number you want to come up with, we're going to keep kicking the can down the road and see if at some point if humanoids are in there that were taxing corporate profits to pay for this stuff and the debt will grow at a place. But the one thing they don't want to do is have interest rates go higher. So again, it is virtually impossible, I agree, without exponential without thinking exponentially for us to get out of this problem. And that's why I keep saying every week, if you're listening to economists, you're listening to people who only think in human time by definition. They're academics. They've done all this work.
7:40 The problem is if you're not focused on AI and crypto and you're not focused on how quickly things are going to change from a speed perspective, the question is can you outrun the debt clock? And I'm just saying there's no guarantee that you can't. It's part of the probability distribution. It is not zero. And this is what they seem to be attempting to do both the hyperscalers and these guys. So it is a huge bet and I think we just have to follow the facts. So the facts are yen intervention by Bessant late July August 1st. Then the quarterly refunding language changes.
8:20 Then we get the buyback framework in the refunding statement. Then we increase the buybacks. Then he says the buybacks could be bigger on CNBC. And then this week possible TGA use discussed. So I this is a pattern. This is not what should happen. This is basically there. I'll get into WSH in a little bit. But there's a really really big problem with listening to what people are saying as opposed to what they're doing. This is clearly what the administration is trying to do. They did this yen intervention. Are they just letting rates go or is this something they're trying to manipulate? and can the markets for the first time beat out what the Treasury and the Fed wants to do?
9:08 this was a great piece I thought by Andrea Stenol Lararsson. I'm not going to go through the whole thing, but I think it's important to understand that he's bringing up the repo markets a lot in this and heading us towards a situation where we're trying to effectively have the debt at the front end. And this gets back, in my opinion, into the speed side and growing things as opposed to allowing long-term rates where a lot of things are priced around the globe at a level where it doesn't just hurt us, it hurts everyone around the globe if 10ear rates go higher because everything is priced off of it.
9:42 So, it's not just a US situation, it's a global one. But he goes through this and how important the basis trade is in here. You guys have probably at some point, especially when there's an issue, heard about the basis trade. I'm not going to go through every part of this, but if you wanted a visual and you wanted to learn, effectively, Besson is trying to find and making sure that there are buyers for long-term treasuries. The basis trade is one of the demand sides for it. You also have his goal to get stable coins going and getting trillions of dollars that way.
10:11 There's other places that he's trying to do this in. He did it with bank reserves. He's going to do it with everything that he can possibly find, including trying to hopefully have the Japanese not have to sell their treasuries. And that's why he wanted to sit there and get involved with intervention in Japan. We'll see what happens in September. I think until we get to that point, you can expect the market to have back and forth, especially now that after the war, Jackson Hole speech, we're close to 60% chance of a rate hike and the BOJ is gonna tighten rates based on probabilities. What benefit has come if Besson's doing all this work and now Worsh is sending a signal to the market that inflation is his primary focus and they've built in now a 60% chance while the BOJ is trying to do something to stem the yen from falling any longer and the yen is at the weakest level in so far this month post the intervention.
11:10 So if you go through the basis trade you can see where it is. It gives you what to watch out. I just say this as a point. and this is the main thing for me is that I really do believe as people sit there and post when I or respond to me when I post this kind of stuff in X or if I even show it on this videos. You don't have to believe in anything related to AI. I know there's more skeptics than there are believers because people don't use it for much more than chat at this point and they believe that the doom and gloom side is going to happen. I'll get into more of the doom and gloom side, but you have to understand that if humanoids are building things in a decade, which seems legitimate based on what's already happening in China. Let's assume it's a decade. You've got a very different world. And I don't think you can assume that everything is going to play out in some linear fashion of human time again.
12:01 And that's the reason why I keep going through these. I think you have to change your mind and at least open up the probabilities because it will help you make money as opposed to believing that every time that yields go a little bit higher and as I've highlighted the fact that 10 years are up whatever it is this year 40 50 basis points and people are taking this as being the end of the world it's just not they're way below where they should be that's not going to stop growth and it's certainly not going to change the dollar situation if they keep trying to get involved in it. They've sent a message they don't want yields higher. I think that's the most important thing that's going on right now. And I think trying to bet when this is going to collapse and end in a dalio style way, I just don't think that's going to make you money in the near term. And if for any reason rates do back up and you get Besson basically saying, "Okay, no moss." We'll deal with it then and we'll see where it is. Will you catch the top? No. But you're not going to catch the top regardless in terms of the market. The main thing is to figure out whether they're really going to let this thing go and cause a major calamity in in the United States or are they just doing what they've done throughout QE and everything else, which is the economyy's financialized, they can't have stocks fall in any major way. And if yields are the ones causing it, like we saw during the tariff on wine, as soon as yields went higher, they stepped in. They've continued that pattern. So AI is the main pressure point here because the capital needs are enormous. So the government is going to remain under pressure. This fight is not going away regardless of what inflation and jobs do unless we see a significant change in both of them. And right now I highly doubt I don't expect to see big job losses even if we stay on the weaker side. And I certainly don't expect the inflation to just fall off a map and go back down to where it was. Even though it is certainly more tame than the way people are talking about it to give you an idea of the numbers. I mean, this is just the hypers scalers in terms of as a percentage of all IG supply, it's already up to 9%. And we have a doubling from last year. We're still going to be growing. So, the numbers are going to continue to get bigger. and now it's replacing in terms of bond purchases.
14:09 You're getting net foreign purchases more on the corporate side than you are the treasury side. So you're getting this crowding out function in terms of making it harder and harder to find buyers around the globe of treasuries. just to give you an idea, I mean Broadcom goes out and basically you got $70 billion deal that they announced and of course their CDS continues to go out and and all this CDX thing. Remember in the same way that we saw concentration we have about the amount of debt that's being issued by a few companies is enormous. It's all of the quote unquote circular finance companies.
14:49 basically the S&P 500, the rally from the great financial crisis on was dominated by the MAG7. Profit margins dominated by the MAG7. We live in a concentrated world, guys. so whenever you see the CDX, these single name should be going wider while the index should not be. Just think about what's been happening in the V of the equity side. We've seen equity V explode higher while index V hasn't. I think people need to understand this when they're dealing with the credit risk is not telling you a story. It's just because it's so concentrated and because there's a probability this won't work out and they should be buying hedges against it. Nvidia $6 billion to build a open- source model to compete with China. So then we get Worsh concerned about inflation says the bank has has more work to do. Nothing he said was new. I think people either went into this with the belief that if he gave anything inflationary, this wiped out what Besson was doing. I have no idea, but we did see the market respond to go from 35% to 60% chance based on something he said that wasn't new. I'm guessing based on his own words that he made some mistakes in the press conference that the reaction in the market remember two-year rates back in July 29th during the Fed meeting where we where they didn't raise rates.
16:12 He came across as dovish and you saw two-year yields come down. He didn't want that message to come across. So now you have this. He comes out in Jackson Hole and basically as far as I can see that was the no I'm I'm not I want credibility. I am fighting inflation and so you get up to 57%. Again he's saying they want to fight inflation and until they do there's going to be more rate hikes. All right we've one and a half rate hikes. We had over one before the end of the year. So none of that is a major surprise. I think the bigger surprise out of this is when he said he was dovish, we saw yields back up on the long end.
16:54 So now he's going to be hawkish and yields backed up on the long end anyway and we're back up to the level where starting here yen intervention. Okay, intervention, intervention, intervention. We'll see what happens next week, but basically 10ear yields despite him being hawkish. If that was the plan, if you be more hawkish, maybe this will maybe this will help the back end and we'll actually get what we want, which is long-term yields down because you're actually talking hawkish. Well, instead it did nothing. So, for everyone who thought if he just raises rates, long-term yields will go down. I'm not so sure that's the case. If this is being caused by the capital needs of AI and speculators believing that they're kind of caught here, which they are. So, here's what dollar yen did again. and we weaken to 160.
17:37 important video to watch for everyone who's doubting AI. And I'll call this the best macro podcast of the week. Yes, this is Dylan Patel, the head of semi analysis. And this is his roommate, Dark Cash Patel, no relationship, who interviews all of the top Silicon Valley people. the fact that they're roommates mean they talk about this stuff all the time. And so whenever they speak, this is not the first time they've spoken, it's important. And they talk about compute, which I've brought up a bunch of times.
18:10 They talk about the insatiable nature of compute. So let's just go through this. OpenAI and Anthropic are rapidly centralizing global compute. Now, I just want to highlight they don't talk at all in any way about open source being competition. So the first thing and I'll go through this at the end. I just want you to remember they're talking about OpenAI and Anthropic like they've already won. And the reason they've already won is because they basically have the highest margins. So when we go the reverse, oh, we're driving prices lower on the open source. Well, these guys are just collecting more and more money from the people that want to use the best intelligence and groups that are actually there. So this is the enterprises. So all of this stuff about them not getting money that Anthropic has reached a peak, these guys are completely saying the opposite. And I take them more than I I won't even name people in terms of what's going through.
19:09 There is no way to take two companies whose ARR is growing the fastest in the history of the world and start trying to predict when the top of that is going to be when these guys are basically saying it all comes down to who owns the compute. And these guys have the highest margins, which means they can buy the most compute. Makes perfect sense to me. If they're securing all of the compute of the world, they will continue to have the best intelligence and they will continue to be in a position to make money. So what they're talking about is literally concentration of compute by these two companies. And again, I think when you go through this and you realize that why did Jeff Dean leave Google? Why did Demisabus reportedly try to leave Google? These companies are trying to get to AGI.
19:55 Google is trying to find a way to make money. Meta is trying to find a way to make money. Everyone's trying to find a way to make money. They're public companies. They have no choice. Their free cash flows go negative. These are private companies that their entire fundraising and stuff is based not on them making free cash flow. It's on them being in a position to own AGI. So they're basically winning this and they go through the whole thing. They talk about regulation and safety pauses or the main breaks that could hurt the revenue per megawatt. But that's the main story is why can Anthropic pay so much money to XAI for Colossus Compute because their margins are so enormous.
20:33 And so as you go through this they pay more well that makes it more difficult. They talk about how how little Kimmy K in terms of compute. All of these Chinese models they don't have the compute. you have to get the compute from somewhere and if anthropic and open AI can pay the most for the compute and we can't make enough compute relative to the demand then it prices everyone out of actually doing anything. So this is a completely different argument and this was brought up by Darkh on a podcast recently which Gavin Baker thought was interesting. This is them talking about that view. This is why it's so important. The US has pulled far ahead of China in a AI compute deployment.
21:14 Then they start getting into something that I actually think is kind of funny. they start talking about interest rates and how the size of the capex which will go on from 2024 to 2029 will total about 11 trillion dollar 5 trillion of which will be credit and how this is going to create a sovereign debt and interest rate shock. So, this is one way to know that when you're stepping out of your wheelhouse, I like all of this, but when they start getting into this and the interest rate shock, I'm sorry, we are also with AI going to lose a lot of debt. There's going to be a lot of defaults. There's going to be a lot of bankruptcies. There's going to be a lot of closures of companies. not in a disruptive synchronized way, but the reason these companies are winning is because the debt makes AI, which allows startup businesses to grow without taking debt. And we've seen this with the cursors of the world and a bunch of places until they get to the point where they get so big. But for companies that want to grow, they don't need people and they don't need debt. So, you got to be careful when you start stepping into the macroeconomic side of this. Now AI creates a higher return clock for capital. So this is the time disruption.
22:27 This is where we're again getting back into the point where if you can't grow fast enough, if you're not fast enough, then your debt is screwed. You need to have returns coming on this. This is the reason why I said with the government, the hardest thing is going to be is if profit margins are growing rapidly. And that's what we're seeing right now. So GDI versus GDP. GDP and the taxes we get mainly from consumers with a small amount on the corporate side. It's just not going to work unless you go in and what do you end up seeing? Well, let's tax the wealthy and go through the the tax on the 182 trillion that's here.
23:03 Well, that's not working. People are moving out of states and moving into other places. So, you're kind of left where do we get the money from? And the only thing I can see it on is a combination of the entitlement issue becoming less of an issue on Medicare and Medicaid due to the advancements of AI and at the same point finding a way to increase corporate taxes based on profit margins and profits continuing to go out. The old low rate economy gets crowded out and and again that's the crowding out that's going to happen is if you need low rates these guys are forcing rates to be higher and the reason is their margins are so enormous and rates are they're indifferent to the rates. doesn't change their ability to make money because they're paying 5%, 6%, 7% or 8% and they go through that the same way that it doesn't matter to them what the electricity costs are. 50% plus of a of a data center's cost is semiconductors.
23:55 So, it's just not based on the credit side is not going to kill it. and again this is somewhat different for the hyperscalers and things like that where they do need to get the money in from the data centers being built. So higher discount rates crush long duration nonAI assets. AI compresses economic time. The old economy borrowed against future human productivity. AI infrastructure capital offers a faster claim. This gets back in in my opinion back to the drunken miller side. So again, when you go through this and you look at the centralization of labor and compute, I'm not going to read all of this, but basically one lab could hold more labor than humanity, you start getting into a very very AGI into RSI world. And the reason this becomes important is because we're really getting closer to that. And they talk a lot about how the amount of AI labors is growing by the week. It's it's an amazing amount of things that are happening with the agentic side and it's mainly happening right now at the places that have the most sophistication in compute. It's the reason why I want you guys to play around with Grockbot so you can start to understand what it means. the key point Dylan keeps coming back to is that compute will not be evenly distributed.
25:12 It will flow to whoever can monetize it best. That gets back to the margins. Better models create more revenue. More revenue lets them buy more compute. More compute lets them train better models. better models let them monetize comput even higher rate. So again this becomes very circular not in only the financing side but the strongest flywheel ends up lining up here. You don't have to agree with this. These guys are far far more more in tune with what's happening than anybody at the banks than anybody you're reading on X. And they're young enough to basically be spending all their time. I read all the work that these guys do whenever I can and I listen to the podcast. They are very very on top of things based on everything that I've heard this year.
25:56 I've heard them all multiple times. Dylan's counter. Oh, the open source thesis says model weights will commoditize AI. Dylan's counter is that compute doesn't commoditize when it's scarce. I've said repeatedly the most important story in the world is we don't have enough compute. We'll get into that later with the thematic agentic portfolio. So AI is real bottleneck. Open source can commoditize models. Scarce compute does not scarce compute is the key thing. Cheap capital wins the buildout. Higher dollars per megawatt can outbid everyone for compute. So the fact that we are scarce compute is what drives this factor.
26:36 And here's what you get. The demand is growing exponentially. Everything over here, the design permits, all this, the compute side, the supply is growing slowly and these guys models are getting better and better and better and the disruption is taking off. It's just a reality of where we are. So, Vera Rubin getting getting it out there and getting Microsoft talking about using it. This is important. I'm I'm less worried about this from or I think the major story from this so you guys get it is open AAI this chip is developed by AI.
27:16 This is starting to get into the side of where AI starts solving problems. So if you want to take it as a negative on Nvidia good luck on that Nvidia is just so massive and has so much capital and has just built so many of these that to be able to scale this is really the issue to compete. So it's really more to say that there will be future situations where as AGI does come we will be solving even the physical side which is where I start to get into the terminal value the S&P and the fact that I think you will continue to see multiple compression and we will never get that quote unquote bull market that feels like a bull market where things just explode higher and the reality is that's because competition is coming three years down the road for everything. It's that easy to use Grockbot. I again I'm just highlighting the fact that this is becoming more and more of a story. more usage for it in terms of this part of what I'm going to give you is a prompt that will allow you right off the bat to analyze your emails, your calendar, things like that in a safe manner.
28:21 Gavin Baker just talking about how much compute or the spend that he's doing. And then note that it is before Grockbot moves to consumption pricing which will likely create a step function when it happens. At least for me. I completely agree with that. And here's the latest. I showed you guys this last week multiple times. You can see I have a lot more agents than I did last week. I have a lot more routines that are being done every day. I have these two things displace and stride. This is a technical indicator with three agents. This here is a probability it's a research-driven probability of based on earnings how vulnerable they are to AI disruption in a few years. So on a scale of one to 100 give me a level on that.
29:12 So, I built those and this is what you're going to get. So, this will be uploaded to the subscriber site. You guys can read through it, but this is a chief of staff starter pack for Grockbot. The Grock part Grockbot starter pack. and then just again, powering the deficit, AI's massive infrastructure needs now threatened the US national debt. This is becoming a bigger story. This is why again you can't have the rates go higher because of the K-shaped economy. My gut tells me that Kevin Worsh will not raise rates in September even though he may want to for his already legacy and for being an inflation fighter. but I I just think the timing is not right for him to sneak one in at this point while tenure rates are up pressing against while his Treasury Secretary is trying to stop them and they just spent all this time trying to focus on the yen where the be they're trying to get the BOJ to raise rates. So, I think September could be a surprising thing. Is it possible that maybe Japan not only raises rates but then builds in that they're going to do more and they're really going to fight this? At the same time, Wars doesn't raise rates now that it's a surprise and we get a big move. We'll see what happens, but I think the pressure is growing and I think it's worth spending time on. So again, it's virtually impossible to grow your way out of a $40 trillion debt crisis. And although I would happen to agree if there wasn't this exponential innovation side, I do think it's worth keeping in the back of your mind as we get to a critical point leading into the midterms. That is the other thing that I think is important for people. Is it really likely that we're going to take any any risk with the long end at this point ahead of the midterms? Are they really going to let tenure rates break higher and go into the midterms that are already in a vulnerable position in the Senate? I just think at this point you have to heir on the side of thinking what do they really want and this administration does not strive does not move too far away from trying to make sure they get what they want. So again, I wrote this paper. I'm just reminding you this was on August 10th. This was the end signal and AI agent macro nexus point getting back to the point that that's where this whole thing started.
31:31 And the reason I wanted to bring it up is because Pomp did a video with Roman Yumplowski. It's worth listening to. my son had, ironically enough, reached out and said to me, "Have you listened to him speak?" and he sent me a diary of a CEO, one that was old. And it was really about as much about how AGI is going to have a negative impact on the world. And I think he has publicly said 99.99% chance that humanity is destroyed by AI. Now he's a very respected person who is been writing about AI and talking about AI from like 2011 to 2013 from a safety perspective. So it's not surprising that I'm sure his public speaking things he's makes more money and does better if he talks about the negative side. What I thought was interesting was he's the only person I've seen connect as I did in the yen signal one. The AI needs, the AI growth, the capital needs to keep this intelligence going is putting pressure on yields. It's putting pressure on the old system and the old system is cracking. So now we've got not printing QE style but we definitely have twisting and we have using the repo facility and we have them clearly trying to find a way to not let yields go higher and that was the reason why in there I said I think this is the beginning of Bitcoin gold and everything else right after the yen side happened.
33:04 Now when you go through what he said he's not mentioning any of the macro side. This is an AI researcher. If you listen to him, he speaks a language we don't speak. But he eventually gets into the exact same points that I make repeatedly in these videos that eventually because of AI abundance because of the lack of scarcity meaning things that can't be replicated very quickly that as we continue to accelerate in AI and the frontier models are much further ahead than what the public sees, it will fundamentally change labor in the economy. all cognitive jobs become automatable, including new jobs invented afterward.
33:47 And he goes through the reasons why. And then he talks about the only things that'll be left for Bitcoin, waterfront property, and potentially human attention, meaning what has value. So, I didn't realize that he was that as I was listening to it was a Bitcoin person. And he gets into the reason that it is. He goes through the importance of cryptography. And again, this is a safety person. The ability to copy things, how we need it verified. AI acceleration is fundamentally about compressing scientific and technological time. So, he's getting into the time thing the same way I did. So, I picked out the point that I wanted him to spend more time on, which was the AGI part, which is right here. And he talked about it where the implication is technological progress starts operating on a different clock from human society.
34:37 This is the pressure we're seeing. It's not just the debt side again. It's this point that on the one side things are growing insanely fast like anthropic like open AI fact like the AI models in terms of the intelligence side facts like the capex side not just from open AI and them Nvidia spending money Oracle spending money Google spending money Amazon spending money Microsoft is you guys get it these are the winners of the technology world they see this coming they see the models that are already here and so we're getting to the point where accelerating drug discovery, improving our understanding of genomics and pro all of the things that I've written about and talked about and where we are. This creates a widening divide on digital time and physical time. We're in there. So AI acceleration is ultimately the compression of the discovery cycle. The defining threshold is reached when machines no longer merely help humans innovate but autonomously decide what to discover.
35:34 He even gets into the difficult that that will be for companies in general and that you can't compete. and then he gets into the physical bottlenecks such as chip. They're unlikely to permanently stop this process because he's saying as it gets smarter and smarter, we will keep getting more advancements. So the entire loop becomes automated. Now, what I did was that interview that my son sent me to watch had 21 million views. So, I'd never heard of this guy three weeks ago. And then Pomp does an interview. My son had already sent me something. So, what I do is I go compare what he said with Pomp with what he said a year ago and see if anything changed.
36:23 Now, Bitcoin becomes a major theme. It was not even mentioned in his his podcast a year ago. Everything else is kind of in the same, but it's like shifts. Nothing major. Humanoid robots. There's a little time in the in the in the time, but all of these things here are basically major things that he talked about a year ago. So, it's not like he's just saying this now based on what's happening. Now as you go through it and you look at the other parts in here, it's all the same. The shift is the government role has become more aggressive and the open source thing even surprised him in terms of how quickly it it it came. Now what I wanted to do was I released this this week for those of you who didn't see it.
37:11 I've been saying that Bitcoin's been going through an IPO process that in my opinion started right after Donald Trump took over. even though that was not the peak and that's when I believe that the ideologues gave up. the ETF was not a good sign for people who wanted decentralization and not having the two systems merge but especially when the president endorsed it and then created a memecoin. I think that was a signal that this is no longer what people had gotten involved in and you saw a lot of people come out. So what I was saying is that Bitcoin AI and the collision of time and going through what I believe is now happening and why this is the critical moment for crypto and I said compare what I wrote to what he's saying what he just said with Anthony Pompiano. These are all the different points. It's a time disruption human time. These are all things that I wrote about in the paper. Never seeing or hearing this guy. We're in agreement.
38:04 The only reason I bring it up, you can disagree with me. You can disagree with Yman. with Roman Yampolski, but we're from two different worlds. I am not an AI person. I am not someone who just got involved with it 15 years ago from a safety perspective, but we are in heavy agreement on almost everything except for the way it ends the world. That's about the only thing that's not there. Now, for Bitcoin, just I'm going to do some more Bitcoin later on, but I I put this out because the 200 day moving average slope turned up. So, these are the four times in history that we had the 200 day moving average pointed downward for at least 100 days. ironically enough, look at these declining observations.
38:52 Last one took was the exact same amount of time. This one was only off by 13 days. This one was off by 60. Here are the performances for Bitcoin over the next three months, six month, one year and two year. in all cases, we never took out the lows from before that going down. So that would mean around 58,000 would if this holds over history would hold. We got South Korea back in. I've mentioned before that AI had been taking everything in South Korea. Well, we had a volume spike in the crypto world over there. I'm going to remind people the amount of people that basically were bearish at the lows.
39:29 the most famous one being Jeremy Grantham saying it was less worth less than a bucket full of piss. That was at the lows. That was two days from the lows. and and really at the lows. It was basically 59,000ish when it was 58. Jim Kramer sold all his BTC two weeks ago. Mark Cuban went on, I sold most of my Bitcoin. It's lost the plot. more technical things in terms of a different way of looking at it. this is a breakout signal that takes basically the rate of change and puts a zcore on it. And again, you had a big move, not shocking. Japan to start stocks and bonds tokenization development plans this year. They're racing towards moderniz. In Japan, if you go back and just ask what has cha changed in Japan with their views towards Bitcoin tokenization and do the same for South Korea, there is no way you can ignore that this is starting to become a bigger race just like the administration has said. Why AI forces tokenization?
40:38 So why does AI force tokenization? Well, it needs programmable money to be able to go. It it compresses decision time. The tokenized assets become better collateral for AI. The fastest rails attract the capital. This becomes important as I get through with Japan. AI makes settlement speed a national competition competitive issue. So tokenization democratizes capital formation for the AI rebuild. This becomes critical if you want to raise the capital that's needed for AI. Tokenization helps that because if you guys haven't seen it, if the only people that can buy private credit are people that are wealthy, but you want everyone to be able to buy 8% yield bonds on things that are there or have the diversification to go through.
41:22 Tokenization will democratize the ability to raise money from anyone. Why does Japan need to have a stake in the tokenization race? Capital moves towards the best operating system. Japan cannot afford to be slow. Global investors want speed, liquidity, yields are blah. If tokenized US assets trade and settle faster than Japanese assets, capital does not need to panic leave Japan, it can quietly migrate to the market with the better rails. Basically, if you're in a market where your stuff settles in a day while everything else settles in seconds, AI agents will continue to treat you differently. The same way we treat emerging markets differently in terms of wondering if their government is going to confiscate things or go through it if you haven't invested in the best technology. So, this is causing a race. Human time rails while or I'm sorry, tokenization compresses financial time. If Japan assets stay on human time rails, while global capital moves to software time rails, Japan does not just risk missing a technology channel. It risks lossing the marginal capital that sets the price of money. I really do think of Blackberry in this case as an example of something that just could not compete with the iPhone. Forget the iPhone and Android in terms of open source and closed source. Think of just what happened in terms of BlackBerry and not having the apps. tokenization to me and the ability to move things quickly, make decisions, having better liquidity, having democratization of capital. Okay, Ashe BD, I really liked this post in terms of u last week on the tokenization super cycle. I think his analogy here in terms of what YouTube brought again is a democratization side.
43:06 Distribution is valuation. the more distribution, the more people are involved and theoretically the more you're going to be able to trade things at least that day and know where the price is. distribution was always one of the great moes of US capital markets and that monopoly has now met its final boss internet scale distribution. So the US has dominated capital markets not just because people are wealthy but because it work the deepest capital markets. If all of a sudden we have a competitor for capital markets which is tokenization creates an issue. again I'm showing you guys this because as I go through the next four things remember every week on the sub on the website I put up the video podcast info. All the podcasts that I reference in here those are not all the ones I listen to for the week. I go through I don't know 10 maybe 15 different podcasts. I go through more than that in terms of transcripts to determine whether I should go look for it. Sometimes I find a transcript where I like the timestamps. I go listen to that 15 minute period. I use those in here. I will go listen to it. If there's more nuggets, this one is big because I have a lot of things in here that I spent a lot of time on. And this is starting to get into the crypto side.
44:18 For those of you who want to learn more about tokenization, which I'm telling you is the most important thing to be spending time on at this point along with the payment rails in general. this token 49 Singapore event which was a year ago. This is 2025. Ash K ash BD spoke and I watched it and I thought it was great. capital markets no longer work for ordinary people. Labor has been left behind while capital owners won. He goes through this whole thing on why tokenization is important based on what's happened to the world. He talks about Salana specifically, but the internet internet capital markets and what it's going to look like. For those of you trying to I I guess get to the point of number one, why AI agents are necessary for this to be the point. You cannot do this stuff without AI. And so in 2022 where these where you know we were talking about these types of things, it was still a dream. there was no ability to do this and we didn't have Salana and Ethereum to the degree that they are today. So all of this stuff in terms of what the end state is, a lot more assets, wallet based ownership of those assets, not just assets, but things like IP and everything.
45:37 productive assets. So again, anything of value that you can think of that right now you can't trade. Broader ownership could reduce inequality and social strain. Think about this and go back to the Bessant thing. If you're going to make a bet at this point, the new technologies are the place to make a bet. Not thinking about the world from a economic handbook that goes through the history of the world like Ray Dalio does and no offense to Dra who I love, but the same type of thought process. It's a you have to at least incorporate this in the possibility. I'm not saying it's going to work out. Governments could stop it, but this is not a US clarity act decision. This is a global decision.
46:20 Salana is not a US thing. Ethereum is not a US thing. So when you go through all these things, I just want to make sure you understand that you have to watch these things to start thinking this way. The same way that a year ago when I was talking to people about micron and memory and why we need all this and I was writing about humanoids and embodied AI and then I wrote a paper on inference in May. Crickets tokenization crickets right now. Nobody wants to spend the time on it. And in a week where crypto is exploding, where Salana's up 40% this month, the only thing people ask me about this week is gold. I kid you not. Of the macro people that are reaching out to me, the only thing I heard this week was gold. Nobody is talking about this stuff. So, if gold is the big trade and people are saying, "Well, I think it's going to go up." I do, too. Gold's not going to be the fastest horse in the race. I don't even think it's going to finish in in in the top hundred of the fastest things. And that's because this thing is a part of the economy going forward and gold will not be a part of that. Gold will not be a part of that. So let's just remember that a store of value is good but the store of value and the tokenization and the stable coin and again if I compare what ash said and then I go through where stripe is again you guys can read this on your own what he was talking about a year ago and what Stripe is doing right now in terms of the companies they're buying and what they're trying to do what they said in their sessions and in their public reports. All of this stuff is based on what Stripe has said. Now, this is what he was talking about a year ago. And again, the reason this is important, AI agents were a dream a year ago. They were not supposed to happen the way they did. So, this has been the year of AI agents. If you guys go back and read what I wrote about or go watch what I wrote about last year on all the videos which are on YouTube, I repeatedly said AI agents will be the story for 2026.
48:26 consumer agents and AI agents will now be the story for 2027. The reason that's important is because we're now getting into the application side, which is the agents actually consuming and doing more traffic on the internet, doing more things, which is why I want you to use Grockbot. That is the reason why I do these videos so you can learn. Tom Lee, I don't know if because Tom Lee has this kind of look to him that people don't pay attention once he started to get more involved in crypto. I've done John Gillan interviews before. I think I have another one coming up in September. This one is a good listen. I think it's important. You should go understand Tom Lee says a lot of, smart things.
49:10 he says he has a lot of experience on Wall Street obviously, but he understands Tradfi, but he says a lot of very key lines. And I say that because when I'm listening to someone and during an interview I pause and stop the button seven to 10 times and I go into AI and I have a conversation. It took me about double the time this morning before I went to go work out listening to this for a second time where I had to go remember all the things. So when you go through this and you realize what he's talking about and how AI agents change everything, how AI agents demand this, they cannot work without the smart contracts. They cannot work without all of this. AI forces finance to move from human precision to programmable constraint. And again, it's the same thing as AI agents force memory. It's the same exact thing, guys. the inference needs, the memory needs would not be as high if it wasn't for the advancements we made with Opus 4.5. It wouldn't have led Nvidia to then very quickly go out and purchase Grock.
50:17 All of this stuff happened in the final quarter of last year. We are now seeing the Agentic side and the consumer side go and we have an administration that is trying to figure out a way to get out of the debt problem in the old system and they're betting on this stuff working again. Maybe it doesn't work, but it's part of the distribution. The Ethereum network, he goes through that. Ethereum is not just a blockchain. It's more like the root settlement layer for a new financial operating system.
50:45 there's a lot of things in here that are important. And again, financial systems are rarely won by technology alone. They are one by liquidity, trust, standards, developer activity, institutional comfort, and path dependence. This is a critical part because people on the crypto side that are negative on Ethereum, they see other places building and going through their own approach. I completely agree with this having worked at Wall Street. You have to remember the old system is not going away. We need to find a way for AI agents to work, but we also need a way for humans to feel and this is institutions too. At least for the near term, liquidity is there, trust is there. Maybe eventually it won't be there but for the beginning start I absolutely believe that Ethereum will be the big benefit from here. So Ethereum's edge may be less about speed and more about trust at scale.
51:40 Salana may represent 247 speed of markets. Bit may represent protection against time debasement. Ethereum in Lee's argument represents the institutional settlement layer where tokenized assets and activity become legally financially and socially usable. He obviously has a vested interest in this because he has a DAT on Ethereum. So, Bit Miners is something that I own and I own it because I believe in Ethereum and I believe this. I've listened to Tom a bunch of times and I actually think Ethereum should outperform Bitcoin. I like the way the chart has looked all year when Bitcoin was down. So, I just bring this up as something to go through it and I get back to tokenization as the super cycle.
52:19 Lee's point is that tokenization turns assets into software. Once an asset becomes software, it can move faster, settle faster, be divided into smaller pieces, be embedded into apps, be used as collateral, be traded globally, and interact with smart contracts. This changes an asset from a static financial claim to a programmable object. Again, there's so much richness in this in terms of things to understand and to go through. But a stock becomes software, a dollar becomes software, a bond becomes software, a royalty stream becomes software, a membership becomes software, reput you get it. It's when AIs enter the picture. So assets become programmable. That's the tokenization side. Then we go into 247. I gave a presentation at the New York Stock Exchange to I think all of the Korean major Korean brokers. just to give you an idea of again where Asia is leading on this. AI agents become the users of those markets. So, you need them to become programmable. That's what we've been working on and getting towards. You need this, but then you need AI agents.
53:23 This is the catalyst point. Okay? That's why I'm talking about this now. That's why as much as I love the infrastructure names to outperform the S&P, I don't think you're getting 10 and 20 baggers from those in a year anymore like the firework show is over. But I do think you can find those things in crypto. We have the tape speaking to us. We have the action point of AI agents. We have the administration saying we're not going to let yields go higher. Maybe they'll change their mind. Maybe Wars will raise 50 base points in September and crypto will go back to the lows. I just don't think that's the place, but it's obviously part of the distribution.
53:57 Now, connecting this to Grockbot, Elon Musk, Grockbot promised, we will make you whole if AI loses your money. I think this is an super important story. Number one, I'm using Grockbot. Elon Musk backed a bold Grockbot promise on Wednesday. If the AI agent loses money while running an investor's bank account, XAI will make the user whole. He's trying to get people to use it with agents. This is the way it starts, guys. And this is why he wants to own this framework, which is why I want you guys to use it.
54:32 Tom talked about why this crypto winter is different. Okay. Why this one is different. Price was acting like crypto was dead while fundamentals were acting like crypto was getting ready for an institutional adoption. So this is his big change right now is that other times when crypto winters were occurring. There was no fundamental side. It was all a way down a future dream. The fundamental side is happening. The value acrruel is happening. We have public companies that are showing what their earnings are. All of this stuff has changed over the last two years, but the fundamentals have been improving all year while the prices have been have not. Part of that was because AI was a better place to put your money. Whatever the case is right now, remember software was getting destroyed in the first quarter of this year. Then it reached a point where no one was in it and everyone was in AI.
55:28 Then we got the momentum unwind in July which got people to cover their shorts in software at the same time reduced their longs and semis. We're still seeing that play out. And guess what guys? Software's gone back up towards the highs. Now Bitcoin miners led it. Palunteer is part of that. Palanteer is part of the thematic portfolio. It's what I've written about. It's what I own. All of these things in here as far as I'm concerned are part of the rotation of looking for the next thing.
55:55 This is part of the software trade. So past crypto winners ended because speculation returned. This one may be ending because the use case matured. There was no FTX. There was no the system is showing a much better place. And meme coins are not leading this one out. This is being led as I created my thematic portfolio for crypto by quality fundamentally driven ones. You got this. This week, Coinbase and Better Mortgage announced general availability of Bitcoin backed mortgages.
56:26 I could show you guys time after time how many countries are embracing crypto. It's happening. figure more good news. The tokenized portfolio again broke out. Here we go. Bitcoin again. I'm showing you this. This is since October one. So, the tokenized index which is outperforming so far this year. It's up on the air while Bitcoin is still down. This is meant to represent that Bitcoin is the store of value for this and they're exactly the same trade. Okay. So, when you're trying to figure out the fundamental story for Bitcoin, even for crypto people who don't think this way, at the end of the day, it should be incredibly correlated to the ecosystem.
57:07 So, when the ecosystem is getting the money from the Tradfi world, Bitcoin is going to be going higher as well. If you just want to buy the proxy, you go buy Bitcoin. I don't see them separating. Here are the verticals. Not going to take you through all of them, but you can see how they're broken down sector-wise. This is what they are monthtodate. This is the verticals monthto date. So big moves all where everyone's complaining about AI movements. Here are the individual names that have moved so far. What you can see Salana up 46%.
57:43 Figure public company. hype. one drug mentioned in his quarter remember pure or purr purr which is owns hype is on there another big performer and then you've got circle nvidia reported blowout numbers next year the expectations were for 44% growth they said it's going to be 70 here's the pe now continuing to just move lower. Here's the earnings estimates post the announcement. This is for 2029. I just want you to see how much it's up. That's how much of a surprise it was to analysts.
58:29 But as I've said, we're in the Nvidia mudstorm. So the stock trades up 9% one day and then the next day it goes right back down four to 5%. This is what's been happening in it. this line here with the chart. It's almost exactly where we closed today. I think it's up $3 from that. That was October. The earnings have gone up dramatically. So, just get used to the fact that this multiple compression story has been happening to Nvidia. It's going to happen to a lot of the AI semiconductor names. They are overowned in the hedge fund world. People have already made a lot of money. They're just not having a fun time buying things that aren't working on a momentum basis. That's the way momentum ends up unwinding and selling off. I'll show more about that in a little bit. S&P for the week, as much as it was seemed like a crazy week, 40 basis point change. Same thing for the Q's. Russell was down 1.4%.
59:24 The thematic portfolio was down 1.4%. this is the breath analysis that I've shown you guys. This is what I'm waiting for for us to be out of the mud. I don't think we're going to be out of the mud till maybe the midterms. That would be my guess. I think we're gonna be in the mud. That doesn't mean you can't find a name that won't go up a decent amount. Pure Storage went up a decent amount. Marll went up from 180 to 240 and then pull back after good earnings report and after saying that things are going to be much better than what people expect going forward. But that's that's all different. Here's what we need. It's the 50-day moving average, not the 20-day moving average.
60:02 Structurally 50-day moving average. We are still only have 29% above the 50-day. This need name this needs to start expanding. The slope of the 50-day is turning down. We only have 36 there. The 200 day still massively positive. We're 25% off the highs. That's the biggest amount we've been off the highs except for the situational awareness lows. So, we are getting some improvement in terms of the range, the volatility range. This is a good first step because the V is coming down. So this is the average volatility range for all of the names. So we are making some progress. Again, this is mud. So we bounced out of here. Ken Griffin buys a bunch. We go up and now we're basically no different in price than we were after the first gap day. We're sitting here. I expect a more of this. And let's assume this goes in the midterms. That's out here. It will be frustrating, guys.
61:00 It'll be frustrating. momentum, this is tech momentum. Has not stopped going down yet. Made new lows. Industrial momentum went back down. This part of the reason you're going through it. Remember, momentum does not mean that the AI trade is not working. It means that the long side is not moving. It's in mud. But the short side continues to go higher. That is what's driving this. Now, so software is going higher. The longs are not moving. So, what you get is the V's coming down. I mean, here's the 15-day V on tech momentum.
61:33 The 60-day peak, but it's not going fast enough yet. factor neutral V still not moving. It's not coming down fast enough. It's going to take a little while. I think that's going to stay there. Bitcoin, you had this massive week. All those Sigma numbers, great consolidation week. Fantastic. Ethereum, a bigger week, over 30% consolidation. Salana even better up over 30 finished a week up eight. Salana seems to have some tokenization love going on right now. If you want to see something amazing in February semiconductors before they had had their big rally just to show you how quickly crypto can win.
62:18 Salana relative to SMH is now back where it was in the early parts of February, guys. After that entire bare market, it takes one month for it to make up everything. That's how you can find five to 10 baggers with inside crypto. Here is the software thing I talked about. This is the UBS software index. This is not a cap weighted one. This is equate. This was the highest correlation with Bitcoin. again looks pretty good to me.
62:49 credit, we've got triple C's widening out. This is what I talked about before. I think the crowding out and the movement on all this stuff in yields and the CDS going out, you're going to see crappy companies that are not going to be able to survive. The junk spreads, they're hanging in there, not doing much, but the triple C's are widening. Just something to watch. high yield CDS, nothing. Oh no, no. These are the disclosures that I mentioned at the beginning. I'll start including these at the end. You guys can watch them and read them on your own. that's it for this week. It's good to be back.
63:22 Although the humidity is horrible. I'll be seeing you guys at events that I'll be speaking at. I'm sure in September and October, some in DC. I'll be at an event in New York in September. And then I think Pomp's event is in October. I look forward to seeing everyone there. reach out and I'll see you guys soon. Bye.