MARKET UPDATE: Meta, Bitcoin, Crude And The Economy Are All Ripping. How Long Can It Last?

0:00 First of all, I want to start by saying income inequality is a fake issue. It's not real. It's not real because the march of time and capitalism improves the quality of life for every single person that lives in that capitalist country. The poorest of the poor today are often better off than the richest of the rich 200 years ago. It's a social issue amplified by social media where now you can see what the what the wealthy look like. It engenders a feeling of jealousy.

0:46 Jonah, how's it going? Can you guys hear me? >> Nice to see you. I can hear you. Great. >> Okay, great. I got I got my setup going. I'm here at my parents house. That's why you see this beautiful rug hanging behind me and not the usual background. And not only that, Jonah, not only that, I'm actually wearing one of my dad's suits. Hands tie. >> It fits on you. >> It fits. It fits. I mean, we we actually we're basically the same size, which is which is great. So, I didn't have to And he's like totally totally and utterly obsessed with clothing. He has maybe the most unbelievable suit collection I've kind of ever seen because for those of you that don't know, I mean, I don't know why you would know this, but he used to work at the IMF. he was an economist for 30 years and I guess he had to go into work every day with a suit and one of the ways that you >> distinguish >> is that the impossible mission force or the international monetary fund. So the the same organization that Tom Cruz works for >> the Impossible Mission Force.

1:50 >> Yeah, the Impossible Mission Force. So that's that's what he does or he did for a living. He's still an economist. I guess you don't like stop being an economist, but you know, it's it's it's great. I get I got access to all this all this stuff. Now, I I I will say, you know, if he hadn't spent all this money on these amazing suits, I might have had better vacations as a kid because all I did growing up was go to Florida in August because that's when it was cheap. But, you know, at least now I get to reap the benefits and wear the suits on stream so that you guys can see.

2:21 >> You look really professional, Avi. You're definitely showing me up. you're from the the branch of jewelry that hangs its rugs on the walls and values proper appearance and good clothing. I'm from the branch that basically just wears rags and does not does not value appearance, does not haggle over rugs because they're unnecessary. A jar of pickles is enough to sustain you through the winter. Goat milk. That's that's my crew. Anyway, I mean, look, Jonah, that's a great crew. I'm not going to lie. That's it.

2:55 It's I'm not I'm not going to judge the people that love pickles, but I will say, you know, dabble in rugs every now and then. And as long as we're not the the Jews that deal in diamonds. We're not we're not the diamond Jews. >> Then we're having a hard time cuz I don't know if you saw, but diamond prices have been literally going to zero. I had a tweet about this recently. You know, it's funny. you your tweet I showed it to my wife and she was like >> diamond prices have been >> she was like I would never I would never get a lab grown diamond. The whole point of diamonds, Jonah, is that they're precious. And I I just don't understand this. It's It's such a fake trend. And I real diamonds are all that matter. And these lab grown diamonds that are crushing the price of diamonds, it's it's just a trend for Instagram. So then, literally, coincidentally, last night, I had dinner with the CEO of the largest lab, like diamond lab in the world. This guy, this guy is a legend.

3:52 And basically he's in the process of pivoting his company from producing just basically undercutting to beers and making diamonds for jewelry and selling them to like Indian jewel cutters to now he's making you know what a a silicon wafer is like the dye onto which you make chips that you use. >> Tell tell me tell tell the audience about it. I'm going to pretend like I know what you're talking about. >> Yeah. Basically the the way that a computer chip is built is you start with a wafer of silicon and the way that the silicon wafer is built and its purity determines like basically how advanced the chip is that can be made out of it. And I could do a whole podcast on this but I don't want to waste everybody's time on like the minutia of computer chip manufacturing but basically silicon is the a great substrate for this because it conducts heat well. it has the right chemical properties, it has the right molecular properties, but a better a more optimal substrate for chipm would be diamond if it were possible to produce diamond wafers at a cheap cost, which currently isn't possible or it's becoming possible with these new lab grown diamond techniques. But ultimately like the best property of Did you know that diamonds are the best conductors of heat of any pretty much any material any in the world?

5:15 >> Yeah, I did. I did know that. That comes from my material science, chemical engineering background. >> That's right. You would have learned this in chemistry. Basically, the molecular structure of diamonds is such that it's like mostly carbon. there's not a lot of other crap in there that would cause you know I I I don't know the chemical term for this but make basically obstruct the passage of heat. So that's an ideal characteristic for chip manufacturing. And so if only you could make a diamond wafer at relatively the same cost as a silicon wafer.

5:46 Silicon comes from sand. It's like really cheap. then you you would have basically a quantum leap forward in chip production and you wouldn't need Elon to send data centers into space. You could just do all the heat conduction here on Earth and it would it would be much more efficient. so this guy is basically pivoting his entire company from manufacturing diamonds for jewelry and he produces lab grown diamonds at $6 a carat. So you could get like a a Kim Kardashiansized diamond for like raw uncut for like a hundred bucks. or like a Queen of England like crown jewel like a literal crown jewel for like a thousand bucks.

6:29 Something that is like you know like a hope diamond like a once in human history find. you can just make that. That's that's partly why the price of diamonds is crashing. But if he can pivot this thing successfully into producing wafers for, you know, your TSMC's and Intels, like the big fabs of the world, oh my god, dude, what a company that would be. we we'd be making chips out of diamonds instead of silicon. That that is insane. I mean, now this is the biggest issue with the diamond market is that historically the diamond market has been tightly controlled by debeers.

7:06 And what you find in any tightly controlled market is the moment that monopoly is broken, prices just absolutely collapse in on themselves because the prices are totally artificial, right? The demand, they produce supply basically just to meet the demand that exists a little bit less so that they keep the the prices where they need to keep it. That's the main issue with monopolies in general, right? Is they can set they can set pricing. And so what what you get now with these lab grown diamonds is massive supply on the market and people don't really care that much. Like your average person doesn't really care whether it's lab grown or whether it's real.

7:51 Obviously people like you Jonah you've done very well. You married a woman that now has a reasonably high standard of living. Like big expectations out of you. you know, if you get if you can afford a real diamond and you get her a lab grown diamond, I mean, she's going to be upset. But really, it's about the principle of the matter. Most people, you know, most people are scratching by. They're trying to save for rent. They're trying to save for groceries. And when they go to actually propose to their loved one, if their loved one rejects them because you offer a lab grown diamond instead of a real diamond, well, that's not a marriage that's probably going to last because that wife probably needs too much out of you. So that's my general take on lab grown diamonds is that diamond demand is driven almost exclusively by women that want nice engagement rings and women that want to show off relative to others. This is the difference between diamonds and the other colored gemstones market. people that buy emeralds, the people that buy rubies, that buy sapphires, that buy paribas that buy tanzanites, every other gemstone is accumulated by people that actually value the gem itself. They value the provenence. They are not really buying for any other reason than they enjoy that piece of jewelry. They enjoy that gemstone. And so even if you introduced if you went into the market and you produced tens of thousands millions of of lab grown rubies or emeralds, it would definitely impact the price but not nearly as much as diamonds because diamonds are driven by necessity in many ways. It's people that are buying them because they have to propose and that's just the way that it is. I mean, look, if I'm you and I want to be special and different and unique and actually interesting as opposed to just run-of-the-mill, like, go buy a color gemstone. That's way better. It's it's going to hold its value more. It's going to be a better conversation starter.

9:44 It's just going to be better for you generally. Like, try to convince your wife, if you possibly can, buy her a ruby emerald ring. Buy her a ruby engagement ring. Buy her an emerald engagement ring. Buy a Piva. Piva is absolutely gorgeous. >> Not on the same page as you. See if you see if you can convince your significant other to go for one of them. >> And if you can't you couldn't >> you failed. I You failed on Twitter. You failed on Twitter. You were like you were like you tweeted, "Hey, convince your girl to get a pariba or a a ruby as an engagement ring or a sapphire or a cohiba or whatever they're called, like the special gemstones." and I was like, "Try try that." Like try that on an actual woman. Obby, come on.

10:29 >> I did I did, by the way, I did try it on an actual woman. In fact, I tagged my woman >> on Twitter and she replied very nicely that she would wear anything that I got her because, you know, that's actual love. That That's real true love. >> Obby, read between the lines. Let's pull up the tweet. >> Okay, tweet. >> We're going there. You wrote Hold on. So, I wrote, "Try telling that to your girl." You wrote basically, "Stop buying your girl diamonds. start buying her rubies, tanzenites, emeralds, paribas, opals, etc. Might make an intro to gemstones video. I write I write, try telling that to your girl. You tag your girl. Then she writes back, you know, I'm one of those it's the thought that counts and would wear anything from you heartface emoji.

11:15 So, I'm glad you're on mute so that I can continue this. >> Jonah, go pull up the actual tree. Share your screen. Let's take Let's take a look at this. Okay, we're we're going we're going the distance here on the ThousandX podcast. So, here I'm sharing my screen. >> Okay, >> let me see if I can zoom in on this. Right. Okay. So, try telling that to your girl. >> Yep. And this this is in response for those of you that are listening. This is in response to me saying that you should buy color gemstones, not diamonds.

11:46 >> Yeah. Right up here. Stop buying your girl diamonds. Start buying her rubies. Blah blah. So, I wrote, "Try telling that to your girl. You tag your girl." Then she writes what I just read. She She's literally telling you here, "I'd wear anything. It's the thought that counts." But that doesn't mean that's what she wants. What she's telling you is, "Buy me a diamond." >> Oh, really? Really? You think that's what she cuz Okay, >> she's not saying, "That's exactly what I wanted, Avi. Wow. Thank you for reading my mind." She's saying, "Oh, I'd wear it because that's the thought that counts is you got me a shitty gift." That's what it means.

12:17 >> Oh my god. You know what? I you know I I I'll defer to you just because you've been married for quite a long time and I have never been married and you have three children and I have zero. So I'm just I guess Olivia, you're you're getting you're getting a diamond. You're not getting any color gemstones here. Which, by the way, just as a shout out cuz I'm very proud of her. Olivia is a writer for the Free Press and she just published an amazing article on Temple Israel synagogue in Michigan that suffered an attack and she went around interviewing a lot of the congregants basically about their thoughts on Abdul Aliad and it's a great article. Highly suggest go checking everyone go check it out. It's it's >> the free press is >> she's a phenomenal writer.

12:54 >> I love the free press. I'm a huge fan of Olivia. She does really credible journalism. I've started reading her articles after you guys started dating. She's great. Barry Weiss was apparently my college classmate. Maybe I should share her freshman Facebook. I don't think she would she would appreciate that. >> I'll do anything to get Barry Weiss's attention. I'm a super fan. I I never actually met her, but because our last names are like close to each other alphabetically. We were at the same like same part of the physical freshman year Facebook. I got to pull that up some point. But anyway, my point here is like where we're going with this whole gems thing. Let let's just zoom way back out for the audience. The anatomy of diamonds are the anatomy of a shitty commodity, right? Like a d a market that's controlled by one participant and manipulated and then suddenly gets like disrupted by technology. That's not something you can trade. That's not something you can traffic in. Meanwhile, like copper, incredible commodity production. Everybody's going full speed ahead. It's the most distributed competitive commodity in the history of the universe. Everybody makes copper.

13:58 There are tons of mining companies mining copper and yet they just can't make enough of it, right? Like whenever you're looking for a good commodity to trade, it's usually easier to trade anything from the long side than the short side just because there's no borrow or weird mechanics or squeeziness. So whenever there's something that's going up because it's getting squeezed by a supplier, that's usually like if you're really into the the minutia of the market, you can ride that bubble and time it properly. But for something that's for most of us normies trying to trade commodities, you have to look at something that's being squeezed by demand, not by supply.

14:35 and so that little head fake upwards in diamonds during COVID, like that's a that's not a tradable thing. but this this upswing in copper that's just going to keep going. Copper hit all-time highs this week. Shout out to myself last week for talking. >> Jonah, that was a great call. I want to give you props on that. I mean, look, and I think copper is just going to keep going. We're seeing the economy is ripping right now. You got PSM out and basically what we're seeing is we're seeing continued investment in AI infrastructure and copper is just the lifeblood of that. And that was a great call. Copper in my opinion is going to keep going. Actually, if you go look down here, look at the look at the little >> that's a demand driven. it it took took took a tiny little dip today down 2.3% but I mean we we're probably on our way to $8 copper.

15:24 >> Look that that's I I was I don't have much more to say on this. I was just going to say if you're going to look for something to trade around from the long side look for something that's being squeezed from the demand side. That's always a better strategy than something that's getting squeezed from the supply side. >> 100 100%. because supply almost always comes online at some point. And it's just one of these things that we talk about it a lot on this podcast, but you have one of the best ways that you're going to make money in life is by betting on the mega trends. And the mega trends are really a demand side story where it's always a demand side story that you have identified an area or sector or stock that is going to experience an explosion in demand for reasons whether it's you know whe whether it's macro reasons whether it's local reasons whatever it is you're trying to forecast demand for an asset. That's what that's that that's that's our job. And when you think about shrinking supply, very very very rarely does that lead to long-term sustainable outcomes. I mean there's this like great there's this amazing meme which is like you know every time the US runs into an issue where it's supply constraint of some some rare earth mineral it's like you know everyone starts freaking out about it and then suddenly out of nowhere some farmer in Idaho uncovers the largest known deposit of that mineral known to man and that price just comes crashing down. I mean, if you go back to what was it like 200 when when did they say we hit we hit peak oil? It was like end end of the 2010s or something like that. I remember I remember >> 0808 >> 08. Yeah. In ' 08 when I was in middle school. In '08, when I was in middle school, everyone was talking about how we were, the US was going to run out of oil and then suddenly the shale boom happens and infinite amounts of oil are now being produced by the United States and oil prices just come straight back down to earth. And so basically, never never bet on a supply constrained asset if demand isn't growing. Just you got to bet on demand growing. And with all that being said, demand is growing for things like Meta, for things like Intel, for things like Bitcoin. I mean, on the last podcast, we said that this is the start of a new mega trend, for BTC, for gold, for all these assets that are now experiencing the debasement trade.

17:54 10-year rates are in fact going up. I mean, that's causing the selloff in NASDAQ today. You're seeing 10 years, you know, get above get above 5%. People are getting spooked. And I think that's just leading to a general derisking across the board. But higher rates in this particular case, as we've said before, it it's counterintuitive and it goes against what you might learn in your CFA book. But higher rates are indicative of the market saying, "I don't trust the Fed anymore. I think that the Treasury is going to intervene in the bond markets. They're going to continue to print money, and that is fiscal irresponsibility." And what that leads to is higher Bitcoin prices, higher crypto prices, higher gold prices. Now whether it will lead to higher equity prices, I'm not necessarily sure. But I also do believe, as evidenced by my positioning, I believe that things like Intel, things like SanDisk, the AI trade continues to rip. Why? You you saw you saw it last week. Facebook finally announces their AI assistant and downloads are going totally nuts. Hundreds of millions of people have downloaded this AI assistant and for the first time are quite literally using AI for its intended purpose. I mean a lot of people just use chat GPT to answer questions. People are using Muse to book flight. They're using Muse to to plan trips. They're using Muse to get money back. I mean I saw a post that went viral from one of our friends of the podcast. This guy named EJZ who by the way runs runs a great pod called Limitless that you should go check out.

19:30 But he he tweeted out that he got delayed on a flight for seven hours, asked Muse to get a refund on his flight, and got back 250 bucks in the span of two minutes. And this is like AI is solving a lot of operational bottlenecks right now. And people are going to start integrating that into their day-to-day life. We're going to see usage skyrocket. And while inflation is going to be very bad for the rest of the industry, I mean, you're seeing banks get hit right now. you're seeing the credit, you know, the the the the world of credit really struggling, but chip demand, data center demand, hyperscalers, I don't think they're going to be infected affected by inflation as much, and they're not going to be affected by rates as much as as you might think either. And so, I'm still in my Bitcoin trade regardless of what, you know, some people are saying on Twitter right now, they're selling Bitcoin because of rates. I'm not selling Bitcoin because of rates. I'm not selling Intel because of rates. I'm not selling NASDAQ because of rates. I'm staying long and strong and I'm gonna I'm gonna sit in these assets until I see something fundamentally break in in the rally in the market. I mean, for now, all I'm seeing is strength and I have no reason to be worried.

20:41 >> Yeah, I'm I'm with you. I'm not worried either. As I've said time and time again, you have to ride this wave until the end of the Trump administration. It's only going to start like obviously markets price forward a little bit. So it's going to start to get pretty dangerous around 200 like early to mid 2027 if this current like sort of quasi third worldest tide continues to sweep the Democratic party and they seem to have a a shot at the title that would be bad for your bags. Like politics aside, you can believe all you want in their policies, but your assets will not perform if they get their way, right?

21:20 Like just look at the price of New York real estate indices under the Mom Donnie tenure. Like that's, you know, kind of a decent at best it'll flatline, right? So it's just not what you want to be involved in from a cold sort of bottoms up financial analysis approach. Now, we're nowhere close to that. So just the the music has is not going to stop anytime soon. at least not for a year. Probably not for a year and a half. I expect I don't think that the sort of socialist DSA trend I don't think that's going to actually win national elections. So I think the party may actually go on for another six years instead of two. that's my personal hunch, but it's too early to care, right? You have to just you cannot be on the sidelines right now. You've got to be you got to be pretty much allin.

22:08 Bitcoin is as surprising to me as anybody. Like you said it last week, it was kind of a hot take, too. You were like, "Rates going up, whatever. It's good for Bitcoin. Unintuitive. Definitely not what cycles have shown in the past." But man, you were right. This thing is just ripping. And I'm really glad that our mutual friend talked me out of just like my desire to fatigue blast out of my bags. this is this is really nice. it's up, what is it up like 20 30% from the lows, something?

22:38 Yeah, Bitcoin's up 20 30% from lows, but I mean the real story is the rest of the market. I mean, we're finally seeing like for example, take take Salana. Stonf fun is running a ton of volume. I think they made 8 million bucks yesterday. they're totally destroying pump. And basically what we're seeing is we're seeing assets actually start demand is really coming back for crypto in a big way. It's a broad-based rally. You're seeing Zcash 30x over the last year. just totally nuts. And returns like that on a large liquid asset like Zcash bring new participants into the market. I mean, this is about as good as you can get for crypto. The thing about Bitcoin that I'm struggling with is that look, I'm long Bitcoin. I like Bitcoin.

23:24 It's great. But, for example, my Intel trade has massively outperformed BTC. I mean, BTC is up 30%. And Intel's up, you know, 45, you know, 4550% from from the lows. And that to me is actually an easier position to sit in because I think I can hold Intel for the next 3 to 5 years and probably get a five bagger out of it. I'm not really sure where Bitcoin goes. The beauty of Bitcoin is that you can trade it effectively. And so like I don't know how I can I don't know really how to trade Intel. I know how to accumulate when it's cheap and then, you know, hold it and basically bet that it goes to 200, 250, 3, 300 bucks and sort of just wait around for that. Now, with with Bitcoin, it's like when you're when you're trading sideways at 60K for a long time and a bunch of bad news comes out and it doesn't send it lower, you can buy a ton of Bitcoin and take out a good trade on it, but like long term, some of these other assets, I think, outperform. That's why people are really shoving into Zcash. I mean, people are talking people have crazy targets for Zcash. They're talking about 20,000.

24:26 They're talking about 30,000. Will it pull a Bitcoin now? I'm a little bit more muted, let's say, than that, right? What What is Zcash really capable of doing? I do think it's capable of getting, you know, maybe maybe we see $5,000 Zcash. I do think that Bitcoin whales have blessed Zcash, that the crypto narrative has coalesed around it. It is now really the only other asset besides Bitcoin that has a monetary premium associated with it. I think people are going to hold it. I think that people feel very comfortable holding it because it has a true fundamental thesis. It is really the only real private cryptocurrency other that you can access because you can't really access Monero through regulated means. You can buy Zcash on Robin Hood. And so there's a great there's a great narrative there. Now obviously it's highly volatile. I don't suggest using leverage while trading Zcash, but I do think that that's that's one of the reasons why the crypto market is doing well is you need people once somebody makes a ton of money in the market and they flash their P&Ls and you see that you can do it in a large liquid manner. I mean, that's what brings people in. And Zcash is something that institutions can allocate to. It's something that pension funds can allocate to. It really is sort of driving the new narrative of crypto. And I'm I'm quite constructive on it.

25:51 you know, both over the short term and and the long term. And I think that, you know, we have to you know, if you're if if you're in crypto and you haven't allocated yet to to Zcash, it's probably time to think about taking some part of your Bitcoin stack and and and allocating to it because I do think it continues to outperform BTC. I think there's a new narrative in crypto. So, I agree with you. I don't know how to trade Zcash. I'm afraid to touch it. I don't like buying assets like that that are white hot on the highs, have been burned too many times.

26:18 You're probably right. It's just not for me personally. I I feel like I missed it. however, there is a new narrative brewing in crypto which I think is partially contributing to the rally. this is it's not that new if you've been in the trenches on X following crypto news daytoday like we do but you know it's hitting more broad mainstream media now like the Wall Street Journal and the New York Times are talking about this you know let's call it in the last week week and a half agents are becoming comprehensible to normies an AI agent was something that you was not necessarily like obvious to the everyday just person on the street until Now, now it's pretty clear with, you know, Muse or Grockbot, you can literally just ask this app in your phone to do stuff for you and it goes and does it. So, like the concept of an agent is no longer this sort of ethereal hard to grasp at thing. Agents, like crypto is sort of clunky payment technology for humans as we all learned the hard way over the last cycle. crypto is an awesome mechanism for agentic payments.

27:23 Like Bank of America is not going to bank your agent, but it will absolutely your agent can absolutely have a Bitcoin wallet and move BTC around or have a wallet on base and move USDC around or or Tether. So I think that honestly the honestly it's kind of funny to say this the S AI will save crypto. I think that literally the greatest onboarding of wealth basically onchain is not going to be a result of like JP Morgan and Black Rockck deciding they're going to link arms and sing Kumbaya and make some ETFs and distribute them to high net worth investors, which is kind of the narrative of the previous few cycles.

28:08 Now, it's literally just going to be like, "All right, these little robots that live in the cloud, they're going to fractionally pay each other for goods and services with tokens, like crypto tokens, stable coins, etc." I think I think that's huge. And then just like zooming way back out to broader markets, like why am I bullish? Everything even like absent my theory about politics and the DSA. Brad, can you throw up this chart on screen? I've talked a little bit in the past few podcasts about AI and shale. Here's an awesome awesome chart. This is the basically the price of technology as it depreciates as the technology gets better from a starting point until whatever. So compute is on here from 1940 to 2001. Electricity actually didn't get that much cheaper from 1892 to 1973. The price of artificial thought of AI is depreciating faster than any frontier technology in the history of the world. And as the price of an output token goes to zero, the price of the S&P 500 goes up a lot. why is that? Well, because basically this this is going to this is going to either replace or augment labor depending on who you who you debate with. I believe it's gonna augment labor and that goes straight into GDP. So to me, this is like, you know, we were talking earlier on the podcast about peak oil and shale kind of making sure that the economy continues growing even as a a once scarce commodity becomes abundant or perhaps because of it. That is literally happening in real time. If you are not invested, if you are not on this train, you you're you're going to miss out, right? you're like it to me it's crazy.

30:01 we've never seen such an important technology nor have we ever seen any frontier technology either this important or less important depreciate so quickly. To me, this is the most bullish chart I've ever seen. It's bullish crypto. It's bullish bullish stock market. Not not bullish bonds, of course, but it's it's basically bullish risk assets. what do what do you think of this chart? What do you make of it? >> I mean, it's totally insane is the first is is the first instinct, right? I mean, but this this just shows you I think one obvious bottleneck is that a lot of companies we saw a few months ago were actually capping AI usage and capping AI spend because it was getting too expensive for the output of productivity that they were they were seeing. And as AI continues to get cheaper to use and easier to use, we're actually going to see an explosion of demand because AI has not penetrated even the largest companies to to the full extent that it that it will, right?

31:08 I think what you're going to see is you're just going to see an explosion of use cases. You're going to see an explosion of integration. And it's the it's the same thing as expanding a highway, right? Traffic traffic engineers have known this problem for a long time. you you add two extra lanes to a highway, traffic doesn't get better because it actually just increases the demand. People that would have taken a bus before now drive and it just you end up in the same place as as you were before. And this is I think what's going to happen with AI demand as well. And that obviously is very bullish for the markets. Now, I think eventually what's going to happen if you're talking about yields, eventually what's going to happen is that AI is going to be deflationary and yields are going to yields are going to come down because of that. what's happening right now in the bond market is a temporary reaction to fiscal irresponsibility, but the long-term is actually that bond prices will go will go back up. Now the flip side of that is that for a period of time while these companies are making handover fist I think the equity markets are going to do exceptionally well and so that's actually going to require a higher rate of return from bonds. Like why would you hold a bond paying 5% if equity market returns are going from 11% annualized to 16% annualized, right? It just doesn't doesn't make sense anymore. And that's why so many more people are allocating to equities now than have ever allocated before because they're doing so well since 2021. The average expected rate of return has gone up substantially and will continue to climb. And so I think this period of >> that is just USD depreciation though like part of >> it is but it's the same thing, right?

32:49 It's like in order to escape inflation, I mean you can't buy tips, you're going to get absolutely nowhere. you have to you have to buy equities to escape it, which I think means that you can have high yields for an extended period of time and still a really good equities market. And people are not really talking about this this relationship of of, you know, as equity returns go up, bond prices are going to have to go down. That's just how it works because people have to figure out where to put their money. And so I think a lot of people are freaking out over this over this yield situation for kind of no reason, not really understanding all of the dynamics for why it's even happening, right? You know what's getting getting absolutely torpedoed as a result of this yield thing is real estate investment like mult real estate is like it's going to be a terrible investment >> seized for for the for the future unless you're investing very specifically in areas where high where there's about to be extreme wealth concentration. So, I do think eventually, I mean, San Francisco real estate, >> like Pacific Heights in San Francisco, Aspen, Bair in Los Angeles, and the Hollywood Hills and Beverly Hills, like they'll be fine. But if you're trying to like invest in just larger real estate projects, like another buddy of mine is a hotelier. He built basically America's hottest hotel outside of New York City in 2019, 20, and 21. It's crushing it now. he was telling me that like you absolutely cannot build a luxury hotel in America under 2 million a key anymore and at those prices like there's just not a lot of room for people. There are going to be a lot of distressed hotel deals though because a lot of a lot of hotels were built in the 2010s with the expectation that they would just you know after a few years of cash flow generation just refi at 2% as rates you know were presumed to remain low and then rates jacked up and now you can't refi under 7%. So, I think we're going to see a combination of like nimiism and interest rates will probably cause like a little mini commercial and like multif family real estate problem. But outside of these like rates specific assets, rates linked assets, dude, it's game on. There is deflation in the literally the number one thing that makes a company produce more profit, which is artificial intelligence.

35:12 Insane. It's interesting that you mentioned hotels because there are all these, you know, I think more than ever there are all these offsetting dynamics that are occurring in the markets and it's hard to parse out what's going to be stronger versus what's going to be weaker. Hotels as an example. As disc as the top half of the K discretionary wealth continues to grow massively, I think expenditure on travel and entertainment is going to go through the roof. Like you're going to see top end hotels probably jack up their prices even more. I mean, you're seeing it now. I was looking to book a resort in Mexico for a few weeks and basically three years ago, a resort that would have cost $700 a night is now going for $1,200 a night. I was then I was looking at Mexico and I'm like, "Okay, well, maybe I should book somewhere in Canada, you know, maybe I should go go completely opposite and see if I can get like a nice cabin in Canada." Literally every single nice resort. I looked at the Fairmont Lake Louise, looked at Emerald Lake, looked at basically every top resort that you can find in Canada that's on that's on the lake because they look beautiful. Every single one is completely sold out in October. It's unbelievable. There is so much demand.

36:26 And so, you have to think that the economy is really splitting in two, right? you're going to have extreme robust demand for high-end luxury and you're basically the middle market is just going to get absolutely gutted yet again. This is I think just the the classic thing that happens in in in in the United States is like the middle class always loses out somehow which is why people feel this tremendous pressure. It's why I think everyone's trading. That's why everyone's investing in memecoins. That's why people are punting on leverage because there's this tremendous desire to escape what is a dying middle and and lower class and somehow make your way into the upper half. But it's it's just like you you we have almost two separate economies right now. But to the to the point about hotels, for example, like >> it might be expensive to build a luxury hotel, but if things keep going the way that they're going, that might be a good investment still.

37:19 >> Yeah. I mean, it I guess the market's going to have to reset first. Like I think you're going to have to see a lot of hotel bankruptcies. Basically, the way that markets collapse and then revive is it's a time- tested pattern. Whether it's like the corporate credit market in 2008 during the crisis or the real estate market during various collapses, usually the first thing that happens in an illquid market is it just stops trading. It's crickets. That's what's going on in the hotel market right now. Like the normal deal flow has just halted. Then eventually after a certain amount of time there will be sort of a rush to the bottom like somebody will capitulate and then another financially struggling person who's next in line will probably abandon hope and sell their hotel at a price that they're uncomfortable with and then there will be a cascade because there's only a limited number of buyers. That obviously creates the fire sale that buyers are looking for. Then buyers step in. Then you get a lot of trades and liquidity builds in builds up again and then the the commodity whether it's a you know whether it's a hotel or a corporate bond market or anything just you know starts to recover then you get like a 2009 style event which I guess you were still in diapers or middle school or something but it was like a general liquid recovery.

38:32 So for those who remember that's a that's a good feeling. That's a long a long wave that you can ride where you can safely invest. That's personally why I like to I look for 2009 type analogs in my own personal investing. I like to buy when things are, you know, kind of like crypto did this in 2022 after FTX in December. It like volumes basically went to zero and then you had your sort of you know, morning in crypto where things started to trade again and price appreciation was a bit gradual, but the the volumes and liquidity were starting to rebuild. I look for those types of 2009 analoges for for when it's safe to get involved. you're still very early.

39:09 It's maybe you missed inning one, but it's still inninning two, right? There's a lot of ball game left. Now, to your point about luxury spending, K-shaped sort of a dual economy, I wouldn't say the middle class gets screwed. I would say that the middle class just sort of evaporates, right? Like what happens, you know, I I don't know, highly recommend everybody read this book called the Romanops about Imperial Russia and the dynasty of emperors that live there, the Romanov dynasty. you know, some a lot of analoges to today.

39:35 Fantastic page turner. You know, I love history books. It's a thousand pages, but it felt like 200. You know, these these guys, there's a class of people living large while most of the society was living, you know, peasant style. while the while the kings were having these, you know, sort of wild buckanal feasts in their palaces in Moscow and St. Petersburg. Needless to say, we're not we're kind of there in America, but it's not like so disproportionate. It's not like 1% versus 99%. I would say maybe it's like 20% versus 80% which is still horrific and probably explains a lot of the political shifts on the left but like it's you know the even people in the the bottom cortile are still probably living better than the Robonovs from a quality of life and like general basic dentistry levelund that said Instagram reveals what you don't have and that that's what makes it that's what makes this a bit tough. So as the middle I think what happens to the middle class in these sorts of events these sorts of historical shifts is like you know it it doesn't get that people in the middle there is no middle class no one's getting screwed in the middle class people are either like sort of climbing or descending in terms of where they fall in the hierarchy and you're sort of you're ending up with kind of a barbell America which is not good right it's not how it should be and That's I honestly I I worry about that. You know, a lot of people worry about it more than me. They, you know, on Twitter they talk about avoiding the permanent underclass. Investing is certainly a way out of it. memecoin gambling is is if you're lucky. But I truly think that the best way to do this, as you said earlier in the podcast, is to identify trends, ride them with a bit of leverage, and take your risk on something that's a surefire bet with a bit of leverage rather than putting, you know, sort of like cash capital into things that could move a lot, but are not surefire things.

41:31 So like copper, AI bottleneck trades, the S&P 500 with a bit of leverage, like you're you're totally good there right now. I think that's probably the way to invest your income and outperform. What what worries me though just a little bit like thinking a little bit longer term is the idea that there is no real like safety net if you get that trading thing wrong. Like, you know, this isn't our parents' generation where people had pensions, where a social security check could literally get you through your retirement and Medicare and, you know, basically like you were kind of you could wrap yourself in the warm blanket of of just like America helping you out from cradle to the grave. Not from cradle to the grave, basically from retirement to the grave. That's gone.

42:23 Like, we're literally, you know, I took I I went to Lake Arrowhead with my family over Labor Day weekend. It's a beautiful mountain lake near Los Angeles, like two two hours outside. And you know this we stayed at a four-star resort. It was kind of schlocky. The carpets were like piss green colored but you know a nice location right on the lake. And we had to spend literally for a night there for just a normal family vacation at what would have been like a kind of basic resort 10 years ago. We had to spend what the Amandiri or like Post Ranchion and Big Su like the two nicest hotels in the United States would have charged per night in 2019. Like there has been an orgasm of luxury spending that has taken even like kind of meh like nice but but meh nice resorts to the price of like to your point of like where they used to be. So people people are legitimately missing out on on tiers of experiences which matters a lot to especially younger generations and if you get it wrong there's no fallback plan. so I think that's why we're seeing a lot of very very angry very disgruntled participants and it's this this K-shaped thing is just not healthy. I don't really see how it reverses other than maybe AI literally bailing us out.

43:48 I don't know. Maybe it creates more inequality though. This is something I'm working through. I'd love to get your take. Like does AI create more Kshapedness which will ultimately bring markets down in the form of socialism or does AI equalize things? >> It's such an important question. First of all, I want to start by saying income inequality is a fake issue. It's not real. And the reason that it's not real is for everything that you just pointed out, Jonah. It's not real because the march of time and capitalism improves the quality of life for every single person that lives in that capitalist country. Everyone's the the poorest of the poor today are often better off than the richest of the rich 200 years ago.

44:28 And that's just the march of time. That's the march of technology. That is what innovation does for a country. It's what innovation does for a people. It's a social issue. It causes instability. exemplifi amplified by social media where now you can see what the what the wealthy love look like. It engenders a feeling of jealousy. It makes you feel uncomfortable with your law in life. This is why historically societies have had things like the cast system. The cast system was a social technology to make people feel okay with their law in life. If you were born into a position, you stayed in that position and that was just your destiny. It was God. It was your life. And that has been completely lost. Now, in many ways, it's a very beautiful thing. I'm not advocating for the cast system. I'm explaining why it existed. In America, everyone believes that they are a temporary embarrassed millionaire. Everyone believes that they can make it. And for the most part, that's true. With enough tenacity, with enough courage, you can make it. You can do anything you put your mind to. You can become a millionaire overnight by clicking the right buttons on the internet. But what it does is it creates a feeling, a deep feeling of discontent among the population. Because if you don't do it right, you see your neighbor do something correct. Maybe they get lucky. Maybe they're smart. But what it feels to you is it feels like the system is rigged. Is the system rigged? No.

45:51 You're just not taking advantage of it the right way. That's the issue. And what I have to say to you is most people are not going to get lucky. Most people are going to have to work. But you have to just appreciate the fact that because the system is designed the way it is, because you can advance, it creates a sense of motivation. And most of the people that do, most of the people that get wealthy, the vast majority of people, the vast majority of people that get wealthy deserve it. If you don't get wealthy, maybe that's a skill issue, but that's okay because there's a way out of it. There is a way out of it. And that is to trust in the American experiment.

46:28 to trust in the American economy and to save your dollars to put them to work in NASDAQ and the S&P. You don't have to trade. Trading is something that you can get good at and it's something that absolutely can make you money, but it's not something that everybody should do. It's something that has been useful to me and useful to Jonah and has really made a career. But the best thing that you can do, I say it over and over again, is invest in the mega trends.

46:54 invest in the impossible to argue with trends where the world is going over the next 10 years. And the way to figure out what those trends are, well, one, you can listen to this podcast, but two, you could also just pay attention, right? Anybody that was paying attention in 2010 knew that the internet was going to take over the world. It was obvious to everyone under the age of 30. You have to embrace new technologies. You have to embrace new things. You can't sit there and say, "We can't build data centers because it might put some people out of business and it might like poison the yellow-bellied finch." That doesn't make sense. You can't do that. Who cares about the yellowbellied finch? We got people to take care of. And this is this is the core premise of the Thousandx podcast is right like how how do you how do you get there? Right? Pay attention.

47:40 That that that that's what I have to say. Now, >> I want to add I want to end with this. I want to end with this particular top topic which is that it does like to people do genuinely feel like the system is rigged. People feel like I don't have access to capital. I don't have the advantages that everybody else does. AI fixes that in a huge way. AI equalizes the opportunity for people that are willing to put in the work.

48:10 But the vast majority of people are not willing to put in the work. You're not willing to grind. you're not willing to take a risk. You're not willing to put yourself out there. Most people aren't. That's okay. There's a lot in life for those people. But that means that income inequality obviously will increase because of AI because the highest agency, highest leverage people will use it to their advantage and suck up all the capital. That's what's going to happen. Is it going to be you? You tell me. But it's probably not because you're probably going to give up. Don't give up. You'll get there. It's my rant.

48:43 >> Amen. I love it. Dude, what a powerful message. I have so many thoughts. I don't know. Do you have to go or can I comment on them? >> I I don't have to go. We can keep going. >> Okay. Wow. I mean, yeah. Like that's what a speech. So, you know, you make a couple of points in there that I think are interesting. So, allow me to bring up a couple of quotes that came to mind. Jensen Hang, Nvidia CEO, genius, business leader said, "You will not be you you will not lose your job to AI.

49:12 you will lose your job to someone with AI. It's right, you know, like you know, I I'm pretty AI native at this point. I think I'm gonna win my fantasy league this year because I built a an agent that does it all the fant fantasy management for it for me. I used to lose to people who actually watch NFL games, which I used to do in college with these guys that I'm in a league with. I no longer have time. so these guys are now going to lose to a person with AI.

49:42 That's occurring at the societal scale. So you have to adopt this stuff. The second quote that I wanted to bring up, friend of the pod, Santiago Santi, >> sorry, I just like that was the most insane message that I've ever received in this chat, Avi, remember you were renting venues for high school parties in Rockville years ago. Who the are you? And >> the electronical man at the electronical man, the actual What the actual like how do you know that?

50:10 >> Were you one of those like nightclub party promoters? >> Yeah, for sure. Like yeah. >> Oh my god. >> I mean I did do that. That is something that I did. >> I just cannot believe that somebody joined the stream and is talking about it because >> yeah there's there's a guy named Austin I think who used to do it as well that I'm Is this Austin the electronical man? Who are you? I'm gonna find you. Anyway, totally totally nuts. Totally nuts.

50:39 Sorry, that was a complete tangent. I just like really was thrown off by the fact that somebody knew my history of trying to like I mean there was a whole industry of it actually. there was there there were just like a bunch of people that there there's a huge demand for parties in high school, right? there was all this need for it and you know underage people want to want to go to clubs and so we used to throw these parties in in venues in in Rockville and try to bring bring people in and it was actually really fun.

51:07 >> What the hell is rock the core premise of it Jonah was I was trying to get laid constantly and it never worked but that's really why I did it. I also made a little bit of money here and there anyway. Sorry that was just totally Yeah, that that that's a little bit of my lore. >> What is Rockville? Are you in Rockville right now? Yeah. So, I I live I grew up in Washington DC. I grew up in an area called Adams Morgan and I went to high school out in a place in Rockville called the Charles E. Smith Jewish Day School. I went to Jewish Day School for those of you that don't know >> and that was just super tangent. The Jews like to party, so we would host parties for them.

51:43 >> Okay. Well, anyway, here's >> Anyway, back to what you were saying. That was >> Here's my point. If you are if you are a 16-year-old party promoter in Rockville, you are going to lose your gig to a 16-year-old party promoter in Rockville with AI, right? You you boot up Grockbot and an agent, you're probably going to find clients and venues and negotiate better pricing with your Grockbot than without your Grockbot. So, that's point number one. Point number two is Santiago Royal Santos, friend of the pod, lovely guy, really smart dude, tweeted something. He said basically he tweeted about FOMO and about like counting other people's money. It's funny like I see it all of my colleagues from Goldman and VTOL are constantly getting upset when somebody else succeeds or or exceeds their their personal net worth. they're always counting other people's money. Like this dude I know who was, you know, early at Uber, made, you know, tens of millions of dollars while we were all still in our 20s, making way less than that.

52:38 he is now complaining that like he's surrounded by San Francisco like hundred millionaires and billionaires because of this anthropic AI you know private equity boom and I'm like dude stop counting other people's mind he just he was used to being the richest guy in the room and now there's like a lot of other wonders coming up and lapping him but he you know he was never forced to do what the rest of us had to do when he got super rich which is instead of like just crying ourselves to sleep every night you know Mark Zuckerberg is my age. I could have I could have I could have maybe done some things, right? I don't have the talent that he has, but like I could have convinced myself that it could have been me and then cried myself to sleep every night.

53:16 >> You do. I think you do. >> I I don't I could have cried myself to sleep every night for 20 years. Instead, I've just become a fan of his and and I listen to his podcast. So, Santiago's tweet is like, don't count other people's money. Don't FOMO into bad decisions because you see other people lapping you. Appreciate their success and try to learn from them. So like for example, you know, I I got fairly lucky in my career. I was in the right place at the right time. I also made some good decisions. So now, you know, I have a nice life in LA, thank God. I try to be thankful for it instead of instead of like getting upset that there there's, you know, you know, richer people out there than me, which is it sounds ridiculous, but like literally LA is the perfect place to encapsulate the sort of K-shaped FOMO that you described in your epic speech that you gave, you know, five minutes ago. So, like I I live in the hills. I literally look out my window and one of the first things I see every morning is Let me share my screen.

54:17 it's called the Fractal House. Can you see this? >> Yeah, I see. >> This is basically the nicest piece of real estate in America. It's the most beautiful. It's at the top of the hill that I'm not on the top of. It is 21,000 square feet of like perfect AR. Like this is real estate porn. This is the best real estate porn there is. It's the most beautiful freaking house of all time. It's got like 360 degrees sweeping views from the top of the mountain. It's an architectural masterpiece. It's like basically a Franklidd Wright house of our time. And I look at that and the first thing I could think would be like, wow, what a schmuck I am. Like look out there.

54:59 That's it's owned by one of the co-founders of AQR. He's a systematic trader. I could look out there, look out my window and be like, literally every single person in every single house that I see is just way more successful than me. I thought I was great. And I know a lot of people who are just like upset about stuff like that. But instead, I think the right mentality is, you know, as as we as we think about and talk about a lot on Yum Kipur as Jews, like just be thankful for what you have. Be thankful before you ask for stuff. And frankly, if ever I do get a little bit of real estate envy, which is a weakness of mine, you know, I see places in Malibu or in Beverly Hills where I'm like, "Dang, wouldn't that be nice?"

55:36 instead of like letting it get to me, I'm just going to, you know, log on to YouTube and watch one of this guy's podcasts and see how he did it and become a better systematic trader myself and start to become like fans of the people who have lapped me. And I certainly recommend that, you know, first of all, not like I'm some extraordinarily successful person. And I'm I'm kind of middle of the range as like as like you know successful people in their quote unquote successful people in their 40s are nowadays. but like every everywhere everywhere in the world no matter who you are, what you're doing, there's always going to be a bunch of people that are like clear as day visible to you who are just completely blowing you out of the water in terms of their success relative to yours. and to channel Jensen, the way to get there is to learn from them and use AI to overcome your def deficiencies on your road to achieving what they've achieved. And to Santiago's point, you got to just appreciate what they have done and try to learn from them and appreciate them and be you not try to even be happy for those people because it makes it much easier to digest their content and get excited about achieving some of achieving things in similar ways to to what they've achieved. That that was sort of what came to mind when you when you brought that up.

56:55 >> That's that's beautiful. and Jonah, I want to talk a little bit about Judaism for a second here. It's important. So, we just c not celebrated, we just had Yumipur, experienced it. It's a day of repentance, but not repentance in a way that you might think. Yumipur is really core to the Jewish tradition because it sets us up for the next year. You look back at everything that you've done over the last year, and you take stock of what you did wrong, the people that you've hurt, maybe the things that you didn't accomplish, and you say you're sorry. You say, "I'm sorry for not doing the absolute best that I could." Because very rarely does a human actually spend an entire year doing their best. But the point of Yonipur is not to dwell on what you did wrong. The point is actually to ask God for forgiveness and then look to the future. Look to the next year. What can I improve on? What can I do better? And go into that year with clear eyes and clear heart and say to yourself, I can be bigger. I can be better. I can do more for the world. I can do more for myself. I can do more for the people around me. I can do more for my family.

58:11 I can do more for my children. That's the point of Yum Kipur. That's really, I think, the point of life in many ways is you you you can't get bogged down by what you've missed. You can understand that you've missed things. You can take lessons from it, but you can't let it affect you. You have to forgive yourself, right? Nobody nobody is more important than that. I mean, other people can forgive you, but really you have to forgive yourself at the end of the day, and you have to look forward and do better in the future. And this is part and parcel with looking at other people and thinking, "Wow, if I had just made different decisions, maybe I could have been as wealthy as them. Maybe I could have gotten to where they are."

58:51 That doesn't matter. What matters is where you are now and where you're going in the future. And there's a guy that commented on the stream, "Life is far more fulfilling if you focus on anything other than wealth creation." Well, well, partially true, work does give you a sense of satisfaction work. And it's really what you're passionate about. And I think if you're listening to this stream, you're probably passionate about making money or you're passionate about making investments or you're passionate about trading or you're passionate about life because sometimes we just talk about life on this stream. But really, it's about finding pride in your work. And I find tremendous pride in the work that we do. And I find it extremely exhilarating and fun. but he's right. You know, not everything has to be about wealth creation. Not everything has to be about optimizing for a dollar.

59:37 I mean, what there's a there's a famous quote, if you want to take the fun out of something, optimize it. You don't have to, right? And that's really, I think, the the the key here is that we're speaking to an audience that probably does want to improve their law in life. And we're trying to give them trying to give you the listener. We're I'm trying to give you some framework, some direction, some understanding of how you might navigate the markets, right? That that's really that's really the key is, you know, to to look to look ahead and to improve on yourself. And hopefully our next stream will be even better than this one in that spirit.

60:10 >> Amen. Amen. Dude, I love it. What a great note to end on. That's that was that was beautiful, Jonah. And to all those that are still listening, remember to like and subscribe on YouTube. That's that's our favorite place for you guys to watch us. So, every every subscriber we appreciate, every like we love, leave a comment, increase our engagement. We love you guys. Mwah. Thank you for tuning in.

60:50 Nothing said on the ThousandX podcast is a recommendation to buy or sell any investments or products. This podcast is forformational purposes only and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of 1KX media. Our hosts, guests, and the 1KX team may hold positions in the company's funds or projects discussed.