Everyone Gave Up On Bitcoin At Exactly The Wrong Time

[00:00] And as we go forward, I'm going to say it again, the AI midcycle slowdown is basically the peak and the easy money of AI. And so if the money starts filtering back towards the other direction, I've laid out a pretty bullish case for Bitcoin, if you haven't got it, if we're overestimating the inflation side and productivity is coming. If we're overestimating the hawkishness of the Fed from what Worsh said, and at the same time the AI trade is not going to lose its earnings growth, it's just going to make it more difficult for institutions to stay long it the way they have in the past. Then all of a sudden the the lower volatility of
[00:31] Bitcoin will probably lead in if we get above the 200 day moving average with everything that I just said which is up up north of 70 at this point. I do think that that's going to be the beginning of the next phase of crypto and the next phase of AI. We'll see if it happens in the second half of the year. I think it will. What's going on guys? Today we've got a great conversation with Jordy Visser. It's 4th of July so he's here to explain to us what's going on in the AI trade. why he thinks that the midcycle slowdown is something you should pay attention to. He also describes why maybe some of the easy trades are gone
[01:01] and things are going to get a little bit harder from here. And then we talk about Bitcoin and why he's getting excited about Bitcoin once again. And then of course we go through a whole bunch of macroeconomic data points and he tries to unpack why exactly are some people ignoring these data points and how's he thinking about investing in his portfolio. All that and much more in today's conversation with Jordy Visser. All right, Jordy, happy 4th of July. a little Fourth of July edition here with the American flag hat. Uh let's start with Bitcoin. You know, a lot of people think Bitcoin is one of the most American assets you could have, but
[01:32] Bitcoin's not been doing very well, and it seems like people are starting to kind of give up a little bit online. Uh what's your take? Is that actually a good sign that you need people to give up to get to the bottom of a bare market? >> Well, first of all, I think give up is an understatement. Uh [laughter] I I it's very hard to find um people jumping into it. So, if you kind of took a poll of a hundred people that have never been in Bitcoin, a hundred of them will say, "I have no interest." If you've had people that have been involved, at this point, I would say at
[02:03] least 60 to 70% are questioning any involvement they've had. And so, you've got kind of hardcore people that are still in there. I I I'll just I'll give you, you know, my take in terms of this. This has been a um a bad year for for Bitcoin with a lot of headwinds. uh starting with software which we talked about a lot at the beginning of the year and how it got lumped in with everything that was built on code. Uh once the software stuff kind of bottomed you got
[02:33] into the what you said which is complete agreement a country like Korea which was part of the energy for Bitcoin moved everything into basically memory and we've seen massive leverage and margin debt and everything else. So, Bitcoin, which was always kind of the place you'd go to if you wanted to trade beta relative to tech, well, that ended and everyone now has beta in tech, where you can get 10 baggers uh in the span of a year. But then one other part that I
[03:04] don't think people um fully embraced as the last leg. And I talked about it briefly last week with this whole debasement unwide where it got lumped in with gold and silver. the rationale behind that which is starting to become more interesting to me and I'm seeing some technical signs finally uh with divergences which which I'll finish this off with but I I think that the basement trade um unwind there is a direct relationship here between something we talked about a lot and something I was concerned about for really the last five
[03:36] six weeks but then last week talked about that I'm not as concerned about anymore was this inflation uptick um particularly in core PC DCE core CPI with energy going higher. Well, obviously energy prices have collapsed. We've seen fertilizer. So, you're going to get a negative CPI print most likely for the June number. Already for July, we have a negative number. But I still hear a lot of people going out to macro clients talking about poor core PCE still being elevated. Then you get war. The second that we went from the Fed
[04:07] effective rate, which is about 3.6, six. We crossed over that for the December rate um of end of the year, meaning they had rate hikes built in. That was when Bitcoin had the last leg lower. I think we've hit the peak of that. I really do. Um you know, this is where the debate's going to come in. I am much more negative in my opinion on the jobs market getting better. And I think that is the difference. I listen to Darius Dale, who you've had on recently and who's a friend of the show and someone I
[04:39] respect, but I respect uh knowing what he's saying because I know his clients are responding to it cuz he's had such a good call on things and he was I just listened to him post something yesterday where he talked about wage inflation and I think that's where he and I disagree right now. Um I don't see the labor market as improving uh other than the fact that we've had more jobs. Some of this is related to the World Cup, but on the parts related to AI, there is no bounce whatsoever. Um the business side, the insurance, all of that stuff. And I
[05:11] think we people are underestimating the next part of AI, which is the application layer. The infrastructure side is going to slow down. So I'm just going to tell people technically we've got some nice divergences. Finally, we made new lows in Bitcoin, not just from the lows from a couple weeks ago, but also the lows from back in February, and it held in there. We've seen a lot of selling in the Bitcoin uh uh ETFs. So, I'm more interested in paying attention now. Like I've said, until it
[05:41] gets above the 200 day, I don't think it's worthwhile for people to to play on the other side. But, I do think the narrative is old. So now I've been able to find something where if the wage side doesn't improve uh meaning if we don't get a big change and we get some I think any weakness now that starts to show up from AI agents I think is going to be a a positive for Bitcoin. >> Now when we watch you know Bitcoin selling off like this it's coming at the exact same time that the Mag 7 have suffered to start the year and then on top of that we're now getting lots of
[06:11] debate in some of the AI names that people have been wondering you know how sustainable is it? Can this actually drive the returns or the ROI? Do you start to see even though there's divergence maybe from some of the things that used to be correlated? Are there new correlations that are starting to build or that you're watching where you're saying look maybe actually uh some of these assets are just rotating around in people's portfolio and they're looking at Bitcoin and you maybe some certain AI stocks or something as uh proxies for each other. Now, >> well, this is where the story gets very good for Bitcoin. Um, so about 4 weeks
[06:43] ago, I talked and I started doing videos on the AI midcycle slowdown. I don't think people really listened to me. I don't think they really cared. But these names have been hit pretty hard and they're going through a slowdown. The reason they're going through a slowdown, these headwinds are never going away. So, let me rephrase that. These headwinds are never going away. So, I think people have to adjust their expectations. And this goes for Korea. This goes for Micron. This goes for everything. We talked about Micron
[07:13] having blowout numbers last week. Stock is down a decent amount since that report. Um that was the high. Um when you sell off on great news, that is not a good sign. And you have to dig a little deep. The reason these headwinds or these that we're we're at a point is the headwinds are real. The government shut down one of the models, the Korean models are catching up. We're at a stage where the governments are getting more involved. This is a headwind that people have to understand. If governments are getting more involved with companies,
[07:43] Sam Alman proposed a 5% stake to uh the to the uh the White House. I I I I think we're getting back into what Bitcoin was meant to represent, which is when the government gets too involved in the capital markets, in the fiat system, in the ability to make money in these things, which is what happens when you shut down the models, when you slow down. On the data center side, we are absolutely having problems getting data centers in. This is again about politics. You've got a lot of people
[08:13] spending a lot of money in these elections. On the social democrat side, they are doing everything they can. On the Republican side and on the tech side, they're doing everything they can. We are at a point now where I think people have to realize that AI is a disruptive force and the models from here only get better. So what I was talking about in the first quarter, we're not going to see that easy trade again. It's not coming. And so the benefits are going to be to the companies that are able to use the agentic side and get their margins up. And we're starting to see health care stocks and financial stocks start to
[08:45] outperform the market. And that's why we're seeing this rotation because tech has been the big winner. The infrastructure has been the big winner. I still think over the next 5 years you're going to get get great returns in these things because the build that is going to happen. It's just not going to be as easy and I think that's good for Bitcoin. What do you think was happening behind the scenes for Sam Alman and OpenAI to be floating 5% stake in the government, right? Or for the government like it feels like that's not out of the blue. And so is that like the US government actually wanting to have the
[09:15] quotequote people, the citizens participate in the AI boom. Is that a US China competition thing? Is this a regulatory capture, you know, approach from somebody like an open AI? What's driving that? I honestly I think um you've got Daario and Anthropic on one side and they've made their point very clear that their their dealings with the government have not been um good. They're not donors to it. They're involved with some of the opposing forces in terms of the politics. Greg
[09:47] Brockman has donated a lot of money to um the Trump campaign and to everything on the Republican sides from what I've read. Uh so you've got these kind of two diverging forces. The here here's the thing I'll say about all this for everyone. Again, these headwinds are real. Um Open AI obviously came under some pressure for the spending. We saw Meta announce that they're going to become a comput company after spending billions of dollars on people. And the silliest thing I've I I may have ever heard in
[10:18] terms of a way a company just pivots left and right. Meta, we're not meta. We're going to spend tons of money on this now. we're going to become a a data center comput because SpaceX did it. I think all of these things show the same thing. The headwinds are coming and whether they're from politics that are getting involved and you're trying to have an edge on this because it is important or on the other side your investors are getting involved and saying you're spending too much money. I just think people have to recognize we are at the very early innings of the AI buildout. We were at the very early innings of the benefits we're going to
[10:48] see from AI, but we are past the anything goes period, which was probably for only about 6 months. I know it feels longer, but 8 months ago, people thought it was absolutely a bubble and these were hallucinations. Now, we know the models are too good. And so, you've reached a point where I think the government has to be involved and the model companies are getting uh I I I think they're starting to realize they have to work with the government uh or be in trouble. So we obviously saw them with Mythos and uh Fable. The Chinese open source models have really started
[11:18] to drive uh drive adoption. You can go look online and people are talking about hey we stopped using some centralized American model for this open source model. It's significantly decreased our cost and we're not worried about sec uh security or safety because we're just self-hosting the models ourselves. Now another aspect of this is with the open source models. Well, what is the model telling you? and is it, you know, telling socialist ideas or communist type ideas to your users or how how exactly was it trained? What was the source material? All of that stuff I think people are trying to figure out
[11:48] and and don't yet quite know. But there is a very small yet maybe exciting aspect of American open-source models. So Nvidia started to play here. There's a couple of other players. Do you give any importance or credence to American open source or is this pretty much American closed source versus global open source? >> American open source is going to be there. I mean I I think I think Nvidia's model I believe it's Neatron is already high enough on the scale for it to be
[12:18] useful but also remember any of the frontier model companies could release one of their older models tomorrow and it would be good. Um, I think this is uh I think people are getting a little bit too dramatic on things like the token index. I think they're probably getting a little too dramatic on how much the open source is going to win. The main story is going to be that along this path, companies are going to have to figure a way to keep their cost down. There there's no way around it. It's just too expensive to use the most expensive models. But this was always going to happen. We're It's just another
[12:50] recognition that 6 months ago there was not much adoption. I listened to Alex Canra Canerit's interview Greg Brockman and I thought it was a great interview. I really highly recommend people listen to it. Greg is very smart but he talked about uh enterprise adoption and where it was 6 months ago and 6 months ago it was just get me anything I need to catch up. Well, that's why we've they've overspent. And now what their business is is find me ways to turn it into ROIC. Like if I'm going to invest this money
[13:21] in in getting Open AI, you got to find some way to make this make me money so I can get some profit margins. And he said, "This is accelerating and their business is exploding on this front." The reason I bring that up is the token usage is going to just continue to grow. He talked about the fact, and this is what makes the meta comment so ridiculous. And for people that follow these things and get involved, I mean, it is honestly insane. I I spend my life listening to this stuff. There is not enough compute. So, if these guys say they have excess compute when they've
[13:51] done tons of major deals this year to secure more capacity, this honestly is just a way for them to get some cash flow in the door and make the investors think that they could always do this to put some floor on the stock. There's no doubt in my mind, but that doesn't mean they should see multiple expansions. So I think the model situation with the open source US will have open source models. The risk is that foreign company countries who've been shut off from fable and been shut off from others. [clears throat] Will they move to Chinese models which are way better than
[14:23] the US models at this point. So there's a gap in time and there's a gap in capabilities right now. >> If you were Mark Zuckerberg, what would you do? Would you continue to invest capex for your own internal consumption in the compute needs? Would you move to more of like this like neocloud type uh approach? Would you split and use some internal and rent some for the cash flow? How would you play it? >> So I I I don't even and anyone I think who who gives suggestions on this,
[14:53] they have a lot to lose. So you know, I think if you want to use something, why don't why doesn't Mark Zuckerberg go put 20% of his money into Bitcoin? Because he has no need to. He has more money than he'll ever need, so he doesn't need to try to make money. The reason I bring that up in this story is with AI and with AGI sitting right around the corner, I I don't know the right answer for any of these companies. So, I understand why they're flailing all over the place. I mean, Microsoft is flailing. Oracle had a big rally. It dumped all the way back to lows again.
[15:24] We're in a point where the uncertainty going forward is extreme. And I think that is the part that we've recognized is that with all of these headwinds, the same uncertainty we saw in the first part of the year where software companies got hit, we're now seeing it with the infrastructure names because people are questioning whether the buildout will happen, what what will go on. And I think with Meta, it's just there's no answer to the question that you gave. And I think the investors are like, we don't know. And whatever Mark says, he says one thing, we're going to go out and spend billions of dollars on
[15:54] talent to play catchup. Well, that clearly didn't work. Maybe they have something behind the scenes, but I think when they do things like the data center sign, it's a bad sign to me that you're just kind of throwing stuff against the wall. The one thing we've learned with AI, and we certainly learned it with OpenAI, if you make any kind of a breakthrough, you do have the chance to catch up. So, there's a lot more talk, and I say this every week that we get on here, I use Codeex more than Claude at this point. I absolutely do. And the reason is because I'm not throttled as
[16:25] much. So I talked to a lot of people that's not the same case. But the more that enterprises are using it, they don't have as much compute. And I think that's where OpenAI has made the catch-up is they overspend already. Anthropic is trying to play catchup, but OpenAI has enough compute right now. Mark doesn't have anything ready right now. He doesn't there's no models and the data centers aren't finished yet. So all right [music] folks, I'm going to take a little break from this episode right here to tell you something about Figure Markets. Now I think Figure is super interesting. I've been an investor in this business for [music] a very long
[16:55] time. From the private market to now they've gone public. They built a very cool business. And I think what's most interesting here [music] is they have two sides to a marketplace. If you've got Bitcoin and you want liquidity, but you don't want to sell the Bitcoin, you want to keep the upside and just take a loan out against it, [music] Figure Now offers these cryptoback loans. They charge about 8.91% interest. That's 9.9% [music] APR. And you can borrow up to 50% of the Bitcoin that you give over to them. And so when you do that, you're unlocking capital, but you're not triggering taxes
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[17:55] yield up to 9% APY, [music] you should also go check out Figure. They've been a great partner to me. I'm a very happy investor in the business. Go check them out at figurearkets.co/p [music] or click on the link in the description. Again, that's figurearkets.co/p. We've seen a lot of technological breakthroughs recently. Um, some of it's on the power generation side. Um we just saw um a nuclear uh company partner in some form or fashion with Nvidia. Um Etched just uh kind of came out of
[18:26] Stealth and they've got a whole bunch of innovation um around what they're building. How much of that innovation is going to hit the market in the next I don't know 12 24 months and will have a material impact here versus it took Nvidia 30 plus years to really become a household name and drive you know the value that they ultimately were able to. Is this around the the new tech, especially the hardware and chips? Is this stuff short-term or do you look at it much more long-term? >> It's long term. Um, there's no way to solve the compute problem from
[18:57] I mean, I can talk to a gazillion people and listen to as many podcasts and I try to cherrypick the ones with smart people. The OM podcast with Gavin Baker the this past weekend was great. There's just we're short compute there. I don't care who you talk to. There's no solution to that problem because right now to say that we don't have enough compute, we don't know what the demand is and again I I try to use these numbers but this is the reality. I keep hearing from everyone that demand is
[19:27] insatiable and the amount of demand that we have. So the only way I could say it is if you have one McDonald's restaurant and it says a billion served. Okay, great. Over how many years did that take to get to a billion served? If there was a line of a billion people outside of any McDonald's right now, how long would it take them to go through it? You can't just snap your finger with this stuff and get it. So, everyone can come up with, oh, there'll be more efficiencies. Oh, we're only we're we can't be in the third inning. Oh, blah blah. Unless everyone I'm listening to is
[19:58] completely wrong. We are so early in the stage. In fact, in fact, Brockman said right now 10 million users are using Agentic systems. 10 million. We have billions of people that will be using Agentic systems. Billions. We are barely in this no matter what. So, everyone just needs to woe down because once it gets easy, I mean, this is the reason why you can't have Siri on your phone do everything that you need. At some point, you will get that. We are still ways
[20:29] away. So, all these energy solutions, they're just making sure that we don't stop progress, but they're not going to make us be able to satisfy everyone's uh demand needs. If you look in your crystal ball, this midcycle slowdown, how bad is it? How long does it last? How does maybe the rest of this year play out in your eyes? >> I think we've done, you know, I I last week on the video I just showed that there are three different types of consolidations, and that's what we're in. We're in a consolidation of a bull market with inside the AI thematic
[20:59] trade. um they can be short and sharp, meaning they could have a a scary 20% 30% correction in the names in like a day or two. During really strong bull markets where the market earnings are going up so much, that's less likely. They could have a very tight, quiet consolidation. Well, when it when something like Micron goes from 60 to 1,200 in the span of 15 months, that's also not likely for it to stay around 1,200 for the next 3 months and allow everyone to kind of stay in their trade
[21:30] and then just ride it higher. I think the the third one that I highlighted is the one we're in. I'm going to go through it again this week. And that's where you have more volatility where you just kind of go up and down in a much wider range. So, let's take Micron as just an example here. Um the 50-day moving average as of today is somewhere around 840. Um it made a high of above 1,200. So let's just say 1240 to 840. I mean that's a big range. We're talking somewhere around 50% of the price from
[22:01] where it was at 840. I think we'll eventually get to the 50-day moving average on most of these names. It'll either happen through a combination of falling and then bouncing back or by time continuing to go forward to let's say the next earnings period in July and then gradually will go higher. The one thing I I feel very strongly about is that the earnings for these companies are still going to be great. That's the underlying cushion that they have. That's why I feel very strongly to say this is about multiple compression. This is about making sure people are um not
[22:32] able to ride a trend for free. there has to be some volatility to shake people out. And so that's the way I think it'll play out for the next 3 months. Uh but I think by the time we get in the fourth quarter of this year, these stocks will be making new all-time highs for sure. >> Now, we've seen the S&P in the first half of the year up 10%, NASDAQ come up 20%. What's your take? We just continue to go up and to the right throughout the rest of the year, and AI is a big driver of that, or will we get more divergence and and maybe some of these indexes actually will perform as well even if the AI stocks do? Yeah, I'm kind of torn
[23:02] between this. Um I I think it really comes down to the hypers scalers. They've been the biggest drag on the market. Um the S&P finished the first half of the year up about 7 and a half uh 8% I believe. No, I think it was closer to 10 actually by the time we got those two big days in. I think the week before it was around 7 and 1/2. But then we've had a pullback so far this week. We've underperformed Korea. We've underperformed Japan. we had even just barely performed with Europe. Um, I'm
[23:33] going to guess that because I expect a broadening out, we're already starting to see it in the healthcare stocks and the insurance stocks and the bank stocks. I think that's what's going to happen is I think you're going to see a broadening out into other places. The hyperscalers will probably be able to hang in the lows here even though I just don't see them having much upside. Uh, and as long as that's the case, I would expect another, you know, 10% by the end of the year in the S&P. I don't see anything on the horizon other than these headwinds becoming very political. I do
[24:04] think the midterms are probably going to be a negative for AI in general, particularly after the recent elections where Mandani uh uh candidates were doing so well. I think there's an anti- AI situation. And I don't think it's going to matter. And I think once we get to that period, it we should see inflation have come down. And if that's the case, then we don't have to worry about the Fed. And if we don't have to worry about the Fed and we start to see the dollar at least be on the weaker side again, I think we can be in a better position for all assets uh for
[24:35] the final four uh two months of the year. >> What are you looking for in the second half of the year? Are there specific milestones that you're either excited about or worried about? >> Uh well, it's really it still comes down to the earnings. I mean the Wall Street Journal had a good article um just highlighting how unique the first quarter was. So people have lowered let's say their belief in earnings and that's because there's been two factors that have juiced earnings which will continue to juice them on one side for at least uh you know this year but then
[25:07] the other one will run out after the second quarter. So just so we go through them. The first one is the reality that you get to um spread your expenses uh for the hyperscalers over the course of the next five years. Uh so the money you're spending uh you only have to hit against your earnings uh a little bit over the next 5 years gives you time to get your ROIC. But for the Nvidas and the people receiving the money, you get obviously a huge boost because their revenues jump up and that comes in. So
[25:38] there's a little bit of an accounting mismatch on this uh which in my mind because I believe that the profit margins will remain robust and will get better uh but slowly it you'll get the ROIC it'll keep earnings at a higher level but the margins probably won't expand as much as we saw there. The second thing is that a lot of these companies because they were owners in anthropic open AAI and SpaceX and they have to take marks on them well they get a big boost in their uh in their uh earnings. It's not in their operating
[26:08] earnings, but it's definitely in their earnings. That'll run out, too. I don't think those companies now that they've all been marked higher are going to go that much. But you could see Anthropic when it goes public. It could trade $3 million$3 trillion. There's no reason why it can't. Even if it didn't stay up there after we saw what we saw with SpaceX. So regardless, I think that means that the benefit or what I'm looking for milestones is that we actually see a broadening out. If you go read what Travelers said in their earnings report and you go through it, it's an insurance company. It's boring.
[26:38] It doesn't really matter. They're really starting to talk about AI in a bigger way. I've talked about Eli Liy on this. Those are two healthcare example or the two uh companies just in general. One in the insurance side, one on the healthcare side. I think people need to start realizing that the benefits from AI really come with the agentic side. And we only had the realization of the AI agent side in the first 3 months of this year, the first 6 months. As Greg Brockman said, he's seeing massive adoption and now Open AI is getting
[27:09] heavily involved in showing them how they can have real impact. He said the second half of the year is going to be a big gamecher uh in terms of the AI agents and particularly looking a year backwards. I think people need to start to build that into their uh their estimations and I I think that's what's going to happen. So I think there's a bit underneath the market and there's no AI bubble. It's the productivity boom that's going to start to show up. >> What I find really interesting is take um claude artifacts, you know, as an example or or something like that where people are now starting to take these agents and put them into their company
[27:40] workflows. There's a lot of debate as to are you actually giving the information to the models and they're just going to go compete with you. At the same time, I think there's a lot of people saying, "Hey, this is going to make us more productive." And so how do you just see this like agentic component? If you were running a company, you had, you know, thousand employees and your employees were saying, "Hey, this is going to make me more effective." You were seeing the revenue growth. What would your evaluation be as to whether you let the major LLM into, you know, the kind of hen house, right? Do you do you do it or do you worry about it? How do you look
[28:10] at that? I mean I think they've gone through this in a way that aside from the risks that come from uh the cloud as not being as safe. You they'll be using I mean they'll be using for example AWS and AWS will have their own security around it and that's one of the reasons why when people go well Amazon told on meth well no they want to make sure their job is security. Um, if a company like Coca-Cola or Eli Liy or whatever is using their cloud and they believe that
[28:42] Mythos is something that is an issue, they want to make sure that everything is tied up. The one of the key things that came out in the insurance side was how Mythos is actually a big positive. And I hadn't thought about this. Um, we hear about the vulnerabilities, but if companies like Travelers, which sells insurance, and part of the thing they want to check is, do you have risk inside your um your company, well, now they can have Mythos go check everything. So, it's not just does the company paying for it, the insurance companies and the consultant side, the
[29:13] Marsh Mlons, all of that stuff, they can now get involved with, well, how do you deal with this from a policy perspective? I I just don't think people have fully thought. And the reason is because it moves so fast. It was a year ago that people were still bothering me about hallucinations. You barely hear hallucinations now because we're talking about the models with 140 plus IQ. So I just think as we go through this companies will feel more secure because they are going to have the Amazons and everything uh as a defense. That being said, the amount of times being
[29:43] mentioned about cyber risk for smaller businesses, I do think there's going to be uh a market shock within the next year where we might come in in a day and the market could be down 10% globally because there was a hacking into a ma a major bank or a major place and whether it was IP that was stolen or whether it was um you know private information that's going to be released. I just think we're going to have that and people are just going to have to um deal
[30:13] with it. But I think those types of things continue to make it where if you're running a portfolio where you you can't handle volatility. I wouldn't have too much money in the market um because I think it is going to be volatile. I think you're going to get paid over time, but I do think that there's going to be a lot of shock waves and that the easy part of AI is over and the model capabilities have just gotten too good. There's been a lot of talk of for many of these cyber security reasons etc the US government coming in regulating approving not only the models getting
[30:43] released but who they get released to who the customers are you know there's many levels to the regulation um at the same time somebody like a bill gurly many others are saying wait a second this means that China or you know whatever model uh whether it's open source or another geography they're going to get this massive advantage because we're essentially shooting ourselves in the foot which side are you on on the debate I I there's no way that the Chinese open source models aren't going to um hurt it. It it it has to. Um
[31:14] [snorts] I I I've kind of thought about this from the way that I think about everything over the next 5 years. So humanoids are coming and part of the reason that that gets brought up in the conversation is you can't have humanoids without having super intelligence. Well, we're going to have super intelligence in 5 years and we're going to have humanoids in 5 years and that combination is going to change the the equation again. So, as much as I want to believe that opensource is going
[31:45] to hurt or help, I I just kind of look at it as the total revenues of the S&P 500, a fairly high percentage of them come from overseas. Uh I forget where the number is now, but let's assume it's 40%. It's somewhere around there. That's a lot of revenues, meaning the US is selling into all of these countries and almost everything that we're selling is services and software and things along those lines. Now, the hyperscalers have a huge part of it. So, do I think open-source uh and and LLMs are going to
[32:16] be critical towards maybe keeping that? I I don't see any of the other countries as being in a position where they can honestly use the Chinese open source models in the way that they want. They're going to need the US for something. And if we learned a lesson last year, everyone's interconnected already. Um, to say that, okay, you have our open source, we're shutting it down. The only two countries in the world that seem to be at a stalemate of how to deal with things is China and the US. Uh, the US was
[32:47] throwing tariffs on this, threatening invasions, all kind of stuff. And we ended up just kind of getting through the tariffs and then the Supreme Court said, "No, there are no tariffs." So, I think this is going to be a very similar thing. I really do because I don't believe that there's a time where AI gets so good that everything just ends. I'm going to continue to lean that the frontier models are being built to solve the world's greatest challenges. That that is basically the Manhattan project for every single great problem you want.
[33:17] If you go listen to that Greg Brockman interview and you and you fast forward all the way to the final 10 minutes, he starts talking about cancer. He starts talking about people being able to solve this and what as has already happened and he said this will be the standard. So if you haven't listened to me or don't believe me in terms of like the ability to have to not die from disease he doesn't do it from the Daario way. He does it from the it's already happening way. And so I don't think open source should be the you know the place that
[33:47] people debate. I think for Bill Gurley he's a VC guy. I think you're going to start to see capitalists and the capitalist system, and this is the reason why I got involved in Bitcoin in the first place. I think you're going to see major people start to question what AI means for the capitalist system and for their money. I really do believe it. Um, and this is the reason why I continue to focus my attention on outside the system. So to sum it up, if Bill Gurley uh and and people like Bill
[34:18] Gurley are saying, "Well, Chinese China it open source will always win." I kind of agree with it, but not in the way that that means China wins. It means that small businesses win, that entrepreneurs win, and that pl the places that have the most money don't win. And that's kind of the way that I see it happening is that there's a distribution of economics that happens. And I that's the reason why I think people are going to look for a place to be outside the system and protect their net worth. And I don't think it's the government taxes. I think it's AI.
[34:49] >> You were banging the drum on Micron, memory, etc. back, you know, sub$100 Micron stock. Um, now it seems like everyone is talking about this. There's everything from inference to, you know, podcast and and um we recently saw the president tweet about Micron. Uh we have seen um Gavin Baker, you know, kind of beat the drum as well. you wrote a paper this week on the importance of memory and and kind of this belief that even though everyone knows this is important and it's a bottleneck, it is not going
[35:19] to be solved seems to be the consensus. Can you just elaborate on that? >> Yeah, I I just wanted to make sure people realize that um memory is [clears throat] the most important thing. And I used a book that I don't think we've talked about and I don't mention too many books cuz I don't I don't read um really >> You read a book? You read a book? I I've read I've read a decent amount of books in my in my lifetime. Uh but not not recently. But Moonwalking with Einstein is a fantastic book. And I wanted to bring it up because I was always f I get
[35:51] fascinated by little nuggets. But knowing that Greek philosophers were able to memorize speeches that would take four hours, no teleprompter, and they could do the whole speech. And they did it through this um well I'll use the the technique the way it's called in moonwalking with dimes time which is the memory palace which is somewhat similar to the way we all remember songs that we haven't heard since we were 10 and all of a sudden it comes on the radio and we know every single word but you and I could ask each other what we spoke about on this we'll have no idea tomorrow. Uh,
[36:22] so how does a song stay in your brain? And memory is critical for the IQ to continue to go up. Like you have to have more memory because at some point you're going back and forth. You're connecting dots. And the only way your IQ is going to go up is the ability to retrieve things quickly and go through this. So I wanted to number one write a paper that just highlighted to people that watching the way Micron and SKH Highex and Samsung trade is very very important to what's happening in AI. it's going to be a shortage for a long
[36:53] long time. Um, we're just tipping the scales. Number two, I wanted to make sure that as people go through this, they realize we are entering the age where this IQ and this memory is getting us to a point where magic is going to start happening. And that was the point of kind of connecting it back to moonwalking with Einstein. So uh I just think that uh for people that are trying to understand AI and understand what's going on and realize that memory is not a bubble. Memory is an insatiable need and eventually we'll get more efficiencies uh in algorithms. We'll
[37:25] eventually build more memory. My point is I think from this point on people should expect normal type memory returns of maybe 30 to 40% a year and not 30 to 40% a week. Uh, and that's why we're starting to see the girrations. That's all it was. >> Today's episode is brought to you by Mogul. $4 trillion. That's how much real estate Deote says moves onto the blockchain over the next 10 years. That's good news for the rest of us because this year the VIX, Wall Street's fear gauge, it [music] ripped past 30.
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[39:56] the 250th birthday of the country I think people are very um excited and and there's a lot of patriotism but also there's another side of this which is like the future of AI is going to have a material impact on financial markets on people's individual portfolios and on what the economy and society looks like you know over the next 10 to 20 years um we talk a lot about the software side and I think rightfully so but you mentioned earlier uh kind of the physical AI, the robotic side and I
[40:26] think that that is probably going to be one of the areas where the average American first starts to see this stuff. What do you envision over the next 10 or 20 years? Is this like uh you know technological utopia where we're all in self-driving cars and humanoids are walking our dogs and you know every factory is completely automated or is there some like messy middle between that vision and where we are today that you think is much more likely and then like what the ramifications are for investors as they're trying to navigate
[40:56] you know what are the next trends that maybe aren't as popular today but will become popular over the next 10 years. No, this is going to explode over the next 5 years. And anyone that doesn't believe that is um is in the same hole they were with AI hallucinations. Um so let's just first put it into terms with the Chinese. What do people think is a bigger risk? Right now the Chinese models are only um 6 months behind our models.
[41:26] And yes, most of this is through copying them through distillation and then doing some changes. [clears throat] But the reality is their models are as good. Their robotic situation is far far far advanced over us. Now, not necessarily the capabilities, but the production numbers, the ability for society to embrace them and want them and use them. Um, China just in the last couple months announced that um, and I forget which company is, they have 140 different
[41:56] humanoid robotics companies there and they're now releasing uh, one for less than $5,000. So again, how are we going to win a war if the Chinese are embracing robotics and humanoids and we're not? So for anyone out there that doesn't believe this also won't be a military situation, believe Elon Musk when he says there will be millions of them uh certainly within the next decade. But the concept of them building themselves is already happening. And that doesn't mean again
[42:26] them going out and putting the parts together. It means them doing what humans do right now to create them. And that's already being done in Tesla and and and other shops that are going through this. So the scaling out of humanoids is going to happen. But I want to bring this back to it's already happening in society. We already have a car that has done flying flying car that's done trips from the west side of Manhattan to JFK. Uh that's already happening. There's drones already working in Florida going in front of the
[42:57] police to go to situations. We're going to have ambulances like all of these things. is the first place it's going to happen is in places where people won't fight it because it's an emergency situation for crime where someone's getting hurt for an ambulance where someone's getting hurt. Full self-driving will happen. The humanites inside our home will take a lot longer to go because those have to be perfect to go through. But again, this gets back into being able to solve something on a computer textually is nothing compared to the compute necessary for a humanoid
[43:28] to be making good decisions. For anyone who's been in one of the older Teslas, which I have, and has used the full self-driving, I would never let my hands off it for very long in Maine. Um, these roads are not on the map perfectly. Every there's things there, the bikes are all over the place. Like, I I just wouldn't do it. Um, and the newer models, I'm sure it's much much better. And as I get another car and I get the new models, I'll go through it. But I think for people not to realize that this is coming, it's going to be a big part of our lives. And it's why they
[43:58] should never fade the hardware situation. The hardware buildout, the parts is the place to be. Memory is part of that. The infrastructure part is part part of it. This is going to be a $90 trillion buildout. And I think you want to be focused on a bull market in stocks because that buildout is going to have the money that's going to be spent to do those things. One of the aspects um that has really uh I think gotten for been forgotten in the AI conversation is the impact of the
[44:29] Fed. And we've been doing all of this with you know somewhat elevated interest rates. And so if wars does come in and start cutting rates and driving all kinds of money into the market that should provide cheaper capital to these companies to then go and use that to build out some of this stuff. And like there's a flywheel there. The question just is like what would the inflationary aspect be? You know, what would the the pain or the trade-off? Oil prices have come down. What's just your general
[44:59] sense right now on like war inflation and then the ability for macroeconomics to help or hurt these AI companies? >> Well, first of all, I think people completely overreacted last week to to Worsh's first statement. Um, and and I'll I'll just say I I like looking at the movements and things and I think the way the media and especially people in the macro world talked about it like oh it was hawkish. You just didn't get a
[45:30] big enough move in anything to say anything happened. There wasn't like some massive move where it was a reset where he said this is going to happen. In fact, he said I want less guidance from the Fed. I don't want to be coming out there and trying to stop volatility. Uh, I think it's important for us to get back to monetary policy being the way that we're moving things because that is the only way that we're going to be able to get a change in what's happened. So, I think one of the messages that he said is that he would love to reduce the balance
[46:00] sheet. Now, I personally don't see how that's going to be possible. Um, and he did admit in an interview this week uh on a panel where he said it took us 18 years to get into this balance sheet. we're not going to get out of it in 18 weeks with the implication being that this is going to be a slowmoving thing. And he said we are not going to shock the market. We will give them plenty of time to know that this is going to happen. But at the same point, he wants rates to be lower. And the reason he wants rates to be lower is because he knows that they have an impact on
[46:31] housing. They have an impact on people that maybe don't own assets and still need to borrow money. And so all of these things fit into a Fed that probably will be much different than the past and I think the market has to adjust to it. But the most important thing that he said both last week and also this week which I want people to understand I very seldom meet any macro person any macro person who understands artificial intelligence. And when I say understand it I mean uses it
[47:02] every day for hours a day. And the reason that's important, if I say this a hundred times, I'll end up saying it a million times in my lifetime for every hundred times I say it in a day. If you're not using the model, if you're not understanding how powerful it is, how can you possibly understand the impact it's going to have on productivity? It is productivity that is the most important change that is going to go on and it has already started and it's showing up and I don't even think GDP is properly measured. So, we're at a
[47:34] point where what Kevin Moore says is, "I don't know what a AI is going to do." But in this weekly uh this interview, which anyone can get the transcript from YouTube, and I'll go through it this weekend, he literally said, "We are at the beginning of an exponential change in AI." He's admitting I don't know what that means in productivity, but I do know that the history of Gen Greenspan when one of these technologies come is not to overreact to the inflation data today. That is the message that I heard.
[48:05] Now, that does not just go with oil. And I think this is the mistake people are making. He's also talking about core inflation. if he believes that AI is going to take down core inflation. He talks about the job market and he talks about it in a way that it may hurt jobs today, which I agree with more than it will in a couple years because the displacement takes time. People lose their job and then you got to go find another job to get hired. But if you're fired as an accountant and all the accounting jobs are leaving, what do you
[48:36] go become? You can't become an electrician quickly. Could you do it in a year? Yeah. could you become a nurse in a year? So, there's a time factor and I think what he was saying is he expects the labor market to remain on the weaker side. He expects the inflation data to lag. What will actually happen because of AI? And I think that's what people have to read the part on is what is his view on AI and productivity. And then finally, he wants these task forces to go question the way inflation is measured. And he's someone that has talked about median inflation. core
[49:07] inflation is going higher, but median inflation has not gone up. And the reason is there's a lot of stuff happening in AI like memory that is having kind of a one-time impact that will eventually come back down. And will the insurance companies, if they're starting to benefit, will the health care companies, if they're starting to benefit, specifically on the insurance side, be able to lower the cost of insurance, which we all know has gone up exponentially. I just think there's a lot of changes coming and he wants to be more forward-looking and not sit there and
[49:38] take every tick as being the way to do it everything. So, I'm going to say that the Fed is going to remain on hold despite everyone building all this stuff in. And I actually have liked reading what Wars has said. I think he's going to be much a much uh necessary person in an age of AI. >> One of the things I've been thinking a lot about is we talk a lot about individual companies etc. But the NASDAQ, let's just look at numbers over the last uh couple of time periods. So year to date, it's up about 16% as of today. Over the last 5 years, it's up
[50:09] somewhere in the ballpark of uh about 100% or so. Um if you look at, you know, last month, it's down about 5%. And so you can go and kind of pick these different time frames. But if I said to someone, hey, you can deliver 15 20% return every year, year after year. Why do I go invest in a private venture capital fund who may or may not put up that money, you know, that those types of returns like I lock my capital up and be illquid? Why go pick individual names if I can deliver returns that are going
[50:40] to beat most hedge funds, you know, for example? How are you thinking about index exposures versus uh actually going and buying individual names or how do you think maybe people who are watching or listening to this should think about it? Well, again, one of one of the themes that I've tried to help with my subscribers on um has been the situation that all these including the NASDAQ, it's it's a modified cap weight. Um so, it's not 100% cap weight. They they do have limitations. Uh but I do think
[51:10] Nvidia is still a very large portion of it at this point. So, it's been pulled back by Nvidia, but it has a lot of names that have benefited from AI. So on the S&P 500 again as of today you're probably up about eight little bit percent uh maybe a little bit less eight and change is my guess which is a little surprising given the fact that earnings are up as much as they are but I think in the case of the S&P it is a cap weighted index and you suffer with cap waitings and the fact that you're heavily weighted towards the winners of
[51:40] the prior 15 years and you're underweight the losers. Well, if the semiconductors are winning and they were not the winners and the hyperscalers are losing, then you're suffering in that side. Um, I still believe stocks are going to outperform bonds uh for at least the next couple years until AGI starts to become a little bit more scary. Uh, I still believe that commodities are going to be a a a big uh necessary including silver. Uh, and I still believe that Bitcoin is going to be the best performer out of all of them once we get to the point that the
[52:10] negatives of AI start to become apparent. And I think they're becoming apparent right now. If the best you can get from the S&P 500 is just a guess or then or Q's is 15% a year, well, that's the world that Bitcoin thrives in. If you can get a 100 to a,000% which is the world we've been living in for retail which is the energy of Bitcoin well then Bitcoin's going to suffer. I think that world's going away and more importantly
[52:40] for people that are invested in private credit in private debt which wealthy people are in real estate I think gradually over time especially when the S&P starts to run into some some bigger resistance the volatility now is in the equity market. Um, I've shown this repeatedly. Remember when Bitcoin was such an extreme volatile position? Well, now when Bitcoin has a big down day, it's down one and a half percent. So, it's moving on a 30 V. Not even a 30 V using that. I'm telling you right now, the
[53:10] tech momentum index I the last 60 days is an 85 V. That's higher than any time over the last 25 years, including the.com bubble. Now, a momentum index like that is long short. So that has the winners of tech over the losers of tech. Well, that's the way most hedge funds run their book. When you have an 80 volatility, that prevents you from having much of a position in that cuz you'd be hitting your draw down limits very quickly if you had that trade on. This is what's happening in the equity
[53:40] market. And this is not something that people should minimize. In fact, I've showed that over the last year, it's been a megaphone, meaning we're making higher and higher and higher volatility bands as we move forward. And that's going to make it more difficult for people to be long stocks. The sharp ratios are going down. And as we go forward, I'm going to say it again, the AI midcycle slowdown is basically the peak and the easy money of AI. And so if the money starts filtering back towards the other direction, I've laid out a pretty bullish case for Bitcoin. If you haven't got it, if we're overestimating
[54:11] the inflation side and productivity is coming, if we're overestimating the hawkishness of the Fed from what Worsh said, and at the same time, the AI trade is not going to lose its earnings growth. It's just going to make it more difficult for institutions to stay long it the way they have in the past. Then all of a sudden the the lower volatility of Bitcoin will probably lead in. If we get above the 200 day moving average with everything that I just said, which is up up north of 70 at this point, I do think that that's going to be the beginning of the next phase of crypto
[54:41] and the next phase of AI. We'll see if it happens in the second half of the year. I think it will. >> I love it. That's a great place for us to end. Uh anyone who has not yet, please go and subscribe to Jord's uh YouTube uh channel. He does a fantastic job there. And uh also go check out 22V. Uh he writes a bunch of research um that I uh I read every single time he publishes. So uh go check it out. And Jordy, I hope you enjoy a great Fourth of July in Maine. And uh we'll do this again next weekend. >> Same to you, bud. I'll see you next week. Same to you, Matt.