Is Bitcoin Ready To Rip While Wall Street Breaks?

[0:00] You know what the hedge is? If I'm right, it's to go buy Bitcoin. So, if you believe that you're going to get disrupted by AI, then you start asking if I'm getting disrupted, who isn't going to get disrupted. It's really hard to come up with any company, which is why I focus my attention on the agentic compute side. I have total confidence over the next three years that as a basket of semiconductors of the optical companies of the transporta you know the industrial companies that make the data centers that over the next 3 years with
[0:30] humanoids coming and everything else that what's going on guys today we've got an excellent conversation with Jordy Visser in this he's going to talk about the death of hedge funds and why tokenization may be the thing that brings that right to their doorstep we talk about long-term capital management bitcoin tokenization what is going on with CPI why we don't care about it anymore how AI is now inevitable, what's going on in financial markets, what it means for your portfolio, and then of course we got to disagree on something. So, we're going to get into a very heated debate, heated for two gentlemen. And in that conversation, I think you're
[1:00] going to learn a lot about how AI is working, token prices, and how we see the world evolving over time, both for big companies, small companies, and how you can invest along all these themes. That and much more in today's conversation with Jordi Visser. All right, Jordy, you've got some very unique thoughts this week on long-term capital management and how we may be living through a very similar time right now. Can you give us context on how you're thinking about this moment in time? >> Yeah. And for those of you who are um my subscribers, you saw me do a very brief
[1:30] video on Thursday. And the reason I put it out is because so many people had reached out and I had a busy week. But because people had reached out and said, "What's going on? Is this something I should be worried about? >> The sell-off and all of the fears around the AI. >> Yeah, semiconductors are down seven days in a row. Coreweave, CDS, all this stuff. And of course, the echo chamber of bears gets louder and louder whenever there's a Oh, it's popping now. Finally. Um it to give you like a brief sports analogy,
[2:00] this is like you go into a game um and you've decided to bet on a football team that you know is is given 28 points. >> So there are four touchdown underdog and the you get the first touchdown and you start banging your chest. That is what bearish people on the AI bubble popping when the S&P is a couple percent off the all-time highs feels like to me. Like I've never met anyone who predicted the end of a bubble and I certainly didn't don't think anyone who's waiting every day for anything to happen. So this week
[2:30] brought out a lot of fear and I I want to share some thoughts on how LTCM fits into this because I think it's really important for people to understand leverage. So I'm a believer and this is the reason why I'm not in the hedge fund industry. >> I have no interest in being in a competition against artificial intelligence which everyone who's staying in the industry is competing. they're competing against AI agents. The fact that any retail person can set up a long short hedge fund instantaneously now back test things and do it. So, I didn't believe this was going to be an
[3:00] easy period. But there is no doubt in my mind with 100% certainty, just like before the dot bubble. We knew before the.com bubble that the internet would change our lives. What we didn't know was how long it would take. So when the.com bubble happened, which was right after LTCM, which I'll get into, people have to understand every single thought on the internet ended up being right. The problem was the capital that was borrowed to build the pipes necessary
[3:32] for it took a long time to get there. Now, let's go back to LTCM. I was in Brazil. I got to see LTCM on the other side of their trades. And to give you the kinds of trades they did, Telos, which was one of the largest trading stocks in the world in 1997, was going through a privatization. So the company basically was going to be or not, they were going to be privatized. And what was going to end up happening was ordinary and preferred shares would converge to the same price. So, one of
[4:04] the trades that LTCM did was to basically short the preferred stocks trading at a premium to the ordinary shares and they'd converge as the privatization got the date became more certain. Well, before that date happened, the spread widened out. Now, why did it widen out? Why would it widen out? Well, there's a variety of reasons that go into why a spread would widen out. And that's what hedge funds are going through right now. And the reason I say with certainty AI and the compute needs for it are an
[4:35] inevitability. You can debate whether it's going to take 20 years and we'll go through some form of a.com bubble. You can you can have that debate. I everyone knows my views which are as long as demand is greater than supply. There's no chance in my mind of having an unwind that is very similar to the dot bubble because the people that are financing it are very different than the telecom companies. Uh, I made a joke on my video on Thursday when I compared it to the housing market. I'm like, "Okay, let's go through Cororeweave." Corweave
[5:07] doesn't have strippers funding their needs for capital. It's actually coming from Microsoft, from OpenAI, from go through Meta, go through the list of really big companies. And I made the joke about the stripper funding because that's what was going on with the housing bubble. Like they started defaulting on their payments. Microsoft's not defaulting. Meta is not defaulting. OpenAI is not defaulting. So for Coreweave to be an issue, the Gartner group said that they think by 2030
[5:39] when companies report earnings, they have they have visibility with orders sold out to 2030. This has been coming on repeatedly. So for the first time in the history of markets and certainly the first time in the history of my life, everyone is worried about whether we're going to hit revenues in 5 years. >> Mhm. >> That is not going to drive the inevitability of AI. And I find it almost impossible that we won't hit there because I listen to people like Jensen Yuang. I listen to people that
[6:10] have been in the technology field for a long time that realize that every day the orders keep coming in for compute, for compute, for compute. So everyone can take the nuance. I'm bearish anthropic. I'm bearish OpenAI. I'm bearish this. The problem people have to understand is the only leverage that I see in the system that is being knocked out is hedge funds. >> We recorded last week at the end of that day on Friday of last week one of the best hedge funds of this century. This century, not situational awareness, not
[6:41] some guy who just started managing money. Lone Pine Capital was up 40 plus percent in the first half of the year and as of the end of September and I want to say in a quarter that the S&P was up 2%. Never did the VIX go higher in any meaningful way never in an entire time was there a big move on a monthly basis and yet somehow they gave up the entire performance. And so people understand how that means. If you're up 40 plus% and I don't know what their fees are, but let's assume you're
[7:12] charging 20% and let's leave the management fee out. That means by definition you were up more than 50% cuz you gave it all back and now your net return is is zero. That just says that something big is happening. It wasn't just situational awareness. It was some of the best hedge funds that have ever existed. And in my opinion, what is going on and will persist for the entire 5 years to the inevitable is what I watched with LTCM. You are making a bet as to how long your investors will stay with you.
[7:42] >> Mhm. >> You are making a bet on how long the prime brokers will give you leverage for whatever leverage you're using. We are watching leverage come out of the system. And the hedge fund industry, in my opinion, is going through a process which is going to weed out a lot of leverage in the system. And this process is going to continue and continue because the concentration of the winners in AI is so small and the losers are so big that this process will leave people needing to invest in certainty and with certainty you're making a bet on time
[8:13] and your ability to navigate that path. So I think this was a big week and when you listen to the bears going the bubbles unwinding the irony is the bubbles are in really smart people that have used leverage to make money for a long time. When you look at investment strategies, there is the Buffett, you know, era, buy great things, hold them forever. There are gold bugs, Bitcoiners, buy great asset, hold it forever. Um, hedge funds, they really, outside of the rents and maybe the citadels and market makers, most of the hedge funds have found, you know, kind
[8:44] of structural mispricing or structural arbitragees. They've used a lot of leverage and they've been able to generate significant returns. What I think I hear you saying is that that section of investing is now rapidly evolving on a day-to-day, week to week, month-to-month basis. And so, you can't sit here and say, "Hey, you know what? I'm going to buy the close and sell the open every day, and I'm going to do that for months or years, and I'm going to do it with lots of leverage, and so I'm going to clip my 100 basis points, you know, each day, and I'm going to end up
[9:14] with this great return." And because everything is evolving so much that that's really where now these people have to evolve with the market and you're just increasing the odds that they make mistakes. Is is that the way to think about it? >> So I'm going to I'm going to go a little bit further backwards and say this. If I asked you what has hurt private credit, if you really think about it, it was AI. So AI >> so the majority as we learned of the private credit investments
[9:45] They're from 21 22 and they're SAS companies. What did AI destroy was SAS companies and it didn't move them all to zero. But what it did was if you make investments in these companies and they're in competition with AI, it just eats at you. My thesis has always been that human beings are no longer the top of the intelligence food chain. If everything that was made was about LTCM when genius failed, we are now at the point where an AI agent can do
[10:16] everything that a hedge fund can do. Everything. There is not a single thing. And who would you rather lend to? Risk management that is instantaneous in seeing everything happening that can read every single thing from a company can understand am I in a crowded position or not by going through the 13F filings. Hey, I heard I mean there's a new hedge fund Vera not new but Vera Aai reportedly with 26 they were down 40ome% in July. So this is a new story today. I don't know anything about them. I don't know what the reality is in terms of
[10:46] where they are but they're going through a similar situation. And I'm sure just like with LTCM if you go back all of the positions that were unwound from LTCM made the people that took them on money. So Ken Griffin got the whole LEO like acknowledgement. I don't think people realize when LTCM went out, the Fed didn't bail them out. They gathered 14 banks, hedge funds, whatever that contributed, I think it was slightly less than $4 billion to take their stuff out. Now, I was part of
[11:16] the LTS tom closed down. When I went back to New York after Brazil, so I was on one side of LT Sam, I saw the other. I I don't want to pick on the hedge fund industry. What I want to pick is that illlquid assets have been impacted. VC's been impacted. Private credit's been impacted. Private equity's been impacted. Bonds have been impacted. Real estate's been impacted. Meaning remote work AI is going to bring digital agents. What are we going to do with all these seats? I just think that when you look at the returns you're getting
[11:46] relative to where interest rates are, you bogey is getting higher and higher and AI is pushing rates higher at the same time. So AI is crowding out all inefficient businesses, but it's also going to crowd out hedge funds who use leverage that depends on the volatility correlation of the market and the crowded nature of the positions. And I just think the industry is too big on a levered basis relative to the liquidity that exists. This will merge with tokenization because the final piece of this and I was at Morgan Stanley this
[12:17] week and and at the very end we talked about tokenization. If you're a hedge fund listening to this and you haven't thought about the way tokenization will change your life, forget your business, your life. Riskmanaging 24/7, 365, it's it's an unthinkable process to me, but that's where we're headed to. The capital that will be immediately changing. It has huge implications for the volatility in the market has huge implications for the way you hedge your book and the and the the the ability for
[12:47] prime brokers to provide leverage. Now that may not be this year's business, but just like with AI, these things are moving so fast that over time your bogey becomes, hey, where's the cost of capital? That's why when you and I talk about for me personally, my cost of capital is related to Bitcoin. It's not related to this cuz that's the way I see this ending. And so for AI, if you really go through when the hedge fund industry entered this abyss, it started in June. And since June, let's say a exactly four months
[13:20] ago, go look at what Bitcoin has done. It's up close to 30%. Go look what Ethereum has done. It's up more than 30%. The S&P flat. NASDAQ flat. Hedge funds, I mean, I just told you a lot of these funds are down 40 plus% and nothing has happened. This should be scaring people because the only way this ends is if this isn't the case. So, every time we get another one of these little episodes like this week, the coreweave thing is ridiculous. They have cash flow coming from big companies.
[13:51] This is not the same situation as telecom. Are they good equity investments? I don't know. Are they good bond investments? I don't know. But I know this. We won't know for sure whether they're going to be in trouble, according to Gartner, until 2028, 2029, 2030. That's not going to drive the market from there. Tokenization you think brings both liquidity and transparency and you're arguing that tokenization could be the death of the hedge funds. >> I think as time goes on it will put so
[14:21] much pressure on the way hedge funds and again there are the mega hedge funds which will sustain the longest over time and for no other reason they've just met most of them gone to like 5year lockups so they've locked capital in. I think this tokenization and this concept of of bringing in locked up capital. So let's go back to private credit. If you go into private credit and you look where the BDC's are trading, so real time marks on this and let's assume right now the BDC's are trading at 20% below where retail
[14:52] investors who got into private credit. So they're basically over the course of let's say the next four years, let's just use all this, they end up losing 20% on their investments. Okay, it's not going to kill them. It hurts in the fact that if they would have had that capital and been able to sell out at 20% below here and then put the money back in the market, well, that's double the impact. It's the trapped nature. When tokenization comes
[15:23] and people are like, "Okay, where can I get out of this?" Well, someone is willing to buy into private credit at some level. So, you have trapped capital that doesn't want to be there anymore. This is the same thing for endowments, same thing for a lot of as tokenization comes, it will free up the ability for there to be a price on things. And once there's a clearing price on things, then capital will go to where it should be. What it will also do is what would I rather own? Coreweave debt at 75 cents on the dollar or the private credit garbage that I own from the 2122
[15:54] vintages that I'm sitting in. I'd rather own coreweave right now for the next whatever years than this. So that capital would come in and core would go back up. Remember when stretch Michael Sailor's product traded down to 75? I heard the same the exact same people sending out expost on coreweave. The stretch things went all the way back up to par. So these arguments of people looking at short-term things and saying this is the end of it. This is the these are mainly hedge fund people or people
[16:24] that made most of their money on leverage. There are two ways like general ways that hedge funds end up making money. So Dr. Miller never talks about like leverage and I'm not sure what he's ever used in leverage. He talks about putting a position on being concentrated and that's the risk he's taking is concentration risk on a diversified hedge fund that's using leverage like an LTCM that's levered 30 to1. They're betting on correlations and volatility staying in some kind of way that they don't have margin calls come in because of the amount of leverage. Well, that's the way most of the
[16:54] multistrats are set up. And so if we end up in a scenario biotech blew up in September, so everyone who runs a long short portfolio in biotech, and I say everyone, I don't like absolute statements. A lot of funds from what I've heard, uh, pods in particular, had trouble. Converts, converts are part of coreweave. They're also part of micro strategy. When you get these little things happening where people are running some kind of leverage where it's like, I'm long this convert, I'm short this convert. They're depending on these
[17:24] things not to widen out like LTCM. Well, this has been another widening out. So, I think for people that are trading and like I'm trying to give my subscribers thing of like if you need to make money on a position over the next month, you're in you're in trouble. Like take advantage of the time that you have. So maybe the most shocking thing to me in a positive way, all of the weakness in the stock market, all the weakness in uh the NEO clouds and you know the AI trade, Bitcoin has held in really strong. It's
[17:55] been trading pretty much between 82 and $85,000 and it almost feels like it's defying the market momentum where everything else was trading down and Bitcoin holds in. What do you read into that? So what I read in is as it gets harder and harder to own other things whether it's computer decided whatever it is human beings and computers look for good sharp ratios. Bitcoin sharp ratio right now
[18:25] over the last four months stands out and it stands out as the rest of the world is kind of going through this chaos. And and I do want to say this is not just the AI trade. Like I said, the NASDAQ's unchanged over four months. The S&P is unchanged over four months. The bond market is down. It's getting very hard to find investments just using a trailing period that do well. I believe it's because the size of the space is too small. Tokenization's a reality. Um
[18:55] like I said, I created my crypto ecosystem. You know, we talk about Bitcoin. I also can say that I watch Near every single day as kind of one of these AI agentic where I think it should do well. Ethereum the same thing. It's not just Bitcoin that's that's hung in there. It is the most quality parts of crypto. And I still believe that this is a reality of something for next year. Um if you ask me when the AI trade because if the AI trade is an inevitability, the time for it to rally
[19:25] is when people have just taken off the risk. And when do we learn this? First, with situational awareness. Right now, someone sent me something saying the AI long short trade on the Morgan Stanley Prime brokerage list is now in the seventh percentile of the last year. Seven. So, the risk has been completely taken off. Now, it's in the seventh percentile. It could still be high, but that is relative to the last year. For me, that means that people have bailed out. There are two three trigger points that I'm looking in terms of timing for
[19:56] the next wave. And this year, if you look at the S&P 500, it was very frustrating start to the year. First two and a half months and then all of a sudden we had a big fall 9%. And then out of nowhere with the expectations that oil was going to 200, the S&P started to rally purely from short covering and things like that. So there was really only a window of about 3 months this year where the S&P rallied. And during half of that time was the fear over oil. Now what drove the S&P higher? It
[20:29] was all the AI trade. So it was only a three-month window. And aside from that, that takes you from March to June. There's been no rally in the S&P the entire year. So your windows of making alpha have gotten smaller and smaller. And this is the way Nvidia's traded for the last 3 years. There's like they they make money on an alpha basis. It's like 20% of the time. I think the entire market's going to be like that. So for people that are watching Bitcoin on a relative basis, it is starting to do
[21:00] what I thought it should do. And when we get into the end of the year, I still will say the biggest positive for me is that the amount of really smart people are starting to call up every day going, "Will you talk to me about tokenization? Will you like there?" If I write enough thoughtful pieces on how it affects M2 and how it affects hedge funds, more people want to hear because they're interested in what if he's right. You know what the hedge is? If I'm right, it's to go buy Bitcoin. So if you
[21:31] believe that you're going to get disrupted by AI, then you start asking if I'm getting disrupted, who isn't going to get disrupted? It's really hard to come up with any company, which is why I focus my attention on the agentic compute side. I have total confidence over the next three years that as a basket of semiconductors of the optical companies of the transporta you know the industrial companies that make the data centers that over the next 3 years with humanoids coming and everything else that earnings will come to those companies and I have faith that relative
[22:01] to homebuilders and autos they're going to outperform which means those companies will go up. I just think if you're betting for it to happen at any month, you're gonna have a really hard time because hedge funds, I think, are playing the same game and they're crowded into the exact same trades. Today's episode is brought to you by Figure. If you're into Bitcoin, you already know selling's the last thing you want to do. But at the same time, life happens, man. Opportunities arise, bills come up, and markets move. That's where Figure comes in. Instead of selling your Bitcoin, Figure let you borrow against it so you can get cash
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[23:33] When you play sports, when you play a board game, there's always at certain times you want to play offense, other times you want to play defense. And actually understanding when to flip back and forth between those is pretty important. Mhm. >> What I love about having conversations with you every week is you come from a very different world than I come from, but we both have arrived at the same thing. And for years, I've always thought about these complex financial trends or developments are very hard to communicate. The phrase that I keep using is AI is offense, Bitcoin is
[24:03] defense. And it feels like if you go back to that board game analogy, you want to use AI to go disrupt the market, disrupt a competitor, disrupt something. And so that offensive move of using this technology, immense amount of opportunity to do that. >> At the same time, if you play 100% offense, you expose yourself almost like boxing, right? If you don't cover your chin, you can get knocked out. >> And so Bitcoin then becomes defense. And it feels like if you can use AI
[24:34] offensively to go and get revenue, get profit, you bring that back, now you have to somehow protect it from being disrupted and that's where you store it in Bitcoin. Is that kind of a good summary uh summary of your worldview as to how this comes together? >> So, let me use a real life example. Um, and I do want to give >> sylvia.com plug early early in the podcast. Uh um Peter, where did Peter where did Peter Teal just move to?
[25:04] >> Well, I know the truth, but go ahead. You can go with the uh >> what did he tell people? He was What did he tell people? Or what's the news reporting that he moved to Argentina? >> Yeah, he's in Argentina. Uh you guys Google his address. >> Okay. >> Um let's just use the reported news story and the reasons why. >> Okay. >> Um AI is going to take down the world. Humanity is going to be destroyed. Okay. Um, did he move there for economic opportunities? Assuming he moved there. Do you move to Argentina for economic
[25:35] opportunities? >> Malay is doing a great job, but I don't think so. >> Do you move there for safety? Do you move there for um I lived in Brazil. One of the reasons that people moved to Brazil shortly after World War II is because of the fear of nuclear war and everything happening and where they would be the safest and where to hide and where to go through it. So, I do believe and I've always believed this. This is where the debasement crowd gets mad at me on one side. Um, the
[26:05] programmable side gets mad at me on the other. I believe in a deflationary world accelerating right now. So instead of disruption, I believe in deflation is just going to tear apart everything. Literally everything. Leverage the whole thing. You don't need the leverage. You don't need the returns that are able that you're able to get from these things in a world where AI is coming to just be deflationary. So Bitcoin to me is more about where agents make decisions going, hey, I don't want to
[26:36] take risk today. where do I move my money for a store of value that is creating good returns and it's safe and or safer than everything else type thing. So I do believe that's happening. I want to make sure I answer one thing that you said before that fits into this. So when will Bitcoin have its next rally? Well, I do believe that comes to when the AI trade starts to have let's say its next bounce. either right during or after the hyperscalers report because it'll
[27:06] coincide with two things. It's happening at the end of the month. So people start realizing when did situal aware awareness happen? When did the last bottom happen in AI? It was at the end of the month. The end of months are really important when hedge funds are in distress because they play short stacked until there's a new month. And if people don't realize this, as someone who was in the hedge fund industry for a long time, the stress on people in December versus January, >> different ball game, >> different ball, it's Oh. Oh my gosh.
[27:37] When you're in December and you've got a big stack of chips and you're like, I don't want to take any risks this last month. So the end of this month is a big one. >> You have the midterms. So right around there also kind of coincides. So if I had to guess, I'm going to take two times where the the next AI >> second week of November. >> No, no, no. I would say right it usually happens before the event. So this would happen when the hyperscalers report and I do think there's an opportunity for the hyperscalers to because the stocks are trading so well. This ROIC thing to
[28:08] me is so stupid. The anthropic and open AI things last two weeks are just so stupid. Everyone please go listen to Jensen Yuan with Brad Gersonner on the BG2 podcast. I will be covering it for at least five or six slides in this weekend's video. Just go listen to a guy who actually knows what's going on and how simple he makes the whole thing about where the revenues are going to come from. They're not all about OpenAI and Anthropic. The second time would be December and it would happen in the month of December
[28:38] because that is the time when a lot of people just say I'm done with the year and it gets away from them going into next year. Those are the kind of channels where if I only think the AI trade is going to work like three months of the year, which is what I think maximum. It could happen three months in a row or it could like the S&P did this year or it could happen one month it goes up dramatically then nowhere then another month. That has been the nature of the game. And so I do believe that those are the two times for the rest of
[29:08] the year. So go for Bitcoin. I expect it to have its next move up to the highs. But I'm going to say again that my belief is that next year because of all of the things that are happening on tokenization between now and the end of the year, real stuff is happening, more and more people are paying attention to crypto. And the more people that pay attention to it, the more people that get involved in it, the more the reality becomes that there's money flowing into the space. And if money flows into the space, Bitcoin is going
[29:38] to do well as well. Now, when we sit down for this, we try our hardest not to talk all week. Uh, we do a good job of that. Yeah. Although, uh, it's sad. We We try not to. Um, we make a little list. Here's all the topics we want to talk about. This week's list does not have the CPI report on it. CPI came in quote unquote hot. Everyone was freaking out. You nor I seem to care nor think it's a big deal.
[30:08] you're talking about deflation and it struck me as I was reviewing the list three minutes before I came in here uh that neither one of us were planning to talk about CPI even though most people in the traditional world would think that is the biggest story of the week. >> Y >> why do you not care? >> So right now um core CPI is whatever 2.6%. Whether it's 2.6% or 3.2% or 2.2% 2%
[30:38] it's not going to help you make money. It doesn't matter. So if I come in here and say that interest rates where the level is is not going to be the thing that makes you money, it's just the reality of the situation. I've actually become numb to all of these things because they're so inconsequential to the reality of the AI trade. And that's the thing I just want people to understand. If only 20% it's really 24% of the stocks in the S&P 1500 have
[31:08] created alpha since Chachi PT a time when inflation was actually up at close to double digits. This has become insanity and I think the Fed makes it insane. I think history makes it insane. It really does not matter whether inflation is 2.3% or 3.2%. The only time in history of markets that something really bad happens is when we lose lots of jobs and the country goes into a recession because
[31:39] credit starts to unwind. That is not going to happen. So I have complete certainty that that will not happen. Can the stock market be down 10% over a year because the CPI surprises and goes up to 3.5%. Yes, it can. Is that the end of the world? No. I'm going to highlight this weekend that from today, if you look back over the last 10 years, the S&P has given you about 17% a year. If you look back over the last 20 years,
[32:09] it's greater than 10%. Last 30 years, greater than 10%. Last 40 years, last 50 years, last 60 years, last 70 years, last 80 years, last 90 years, greater than 10%. Do you know how the majority of people get wealthy? Through compounding of money in investments. the S&P 500 that is 10, 20, 30, 40, 50, 60, 70, 80, 90 double digits in total return for the entire time period. Why are you sitting here worried about people telling you that a bubble is going to unwind? Why? Now, if you're
[32:40] 90, I get it. If you've got money in the market and you're 90, you may not live long enough to get the benefits of staying in the market. If the market goes down, as I told my kids, I'm like, that's where you stop spending money and you put more money into the compounding machine. You buckle down and you go, "Okay, I have a job." Everyone has a job in this country who wants a job. Everyone. You may not have the job you want, but you have a job. That's why the jobless claims are at all-time low. And when I say all-time low, so people know that number that comes out every Thursday, the weekly jobless claims,
[33:11] that is not adjusted for population. So, it being at 200,000 and sitting at 200,000, that is the amount of people that have had to go claim insurance for being unemployed, that is the lowest number basically in history. And if you adjust it for the population, it's lower than it was when the population was half as much. It's lower than all of these other times. So, there's no job loss. And my grandmother taught me very well, like unless people are losing their jobs, they're still
[33:42] spending. and they might be spending more than they have and they're taking out credit cards. But when the real problems come up, it's when people start paying stop paying their debt because they're out of work. And if they're out of work, we start having housing bubbles. We start having the telecom companies because the telecom companies built stuff. They didn't have any revenues coming in the door. I know the revenues are coming into companies like Coreweave. I know the revenues are coming in because Anthropic is the fastest growing company in the history of the world. And what do people
[34:13] talk about? I think it may have slowed down for a month. I mean, are you worried >> about what? >> Oh, I This is exactly what I told everyone was going to happen. Today's episode is brought to you by investorhealth.com. You've built the portfolio. You've made the long-term bets. You still have to be around though to compound. Your body is the balance sheet. And most people never invest it in a way that they invest in everything else. Investor Health is a product. Investor Health is a company that we've
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[35:44] provided by affiliated licensed clinicians. Compounded medications are not FDA approved. Individual results may vary and treatment requires evaluation by a licensed provider. Terms and conditions apply. See investorhealth.com. Anthropic's growth rate is going to continue to decelerate and we can disagree on it because uh people are realizing that there is they they have the worst position in business possible. Ready? >> Okay. >> They have increasing competition from
[36:16] wellunded good entrepreneurial uh competitors. >> Disagree. Go ahead. >> Hold on. So it used to be open AI and anthropic. Now it is open eye, Anthropic, Grock, Gemini, Muse, etc. Everyone is now getting in the game. And then >> agree, keep going. >> And then that is just the major labs. But then you have all of these companies that are starting to come out and say, "Wait a second here." Coinbase comes out and says, "Hey, we're using open source
[36:46] models and we're training our own stuff. We don't need those guys anymore. We can do it better ourselves." We come out, we say that. Harvey comes out and says it. And so you have pressure from basically people saying, "Hey, I'm going to fine-tune open source." If you look at open router, you see massive acceleration in all the open source stuff. And so a company like Anthropic, which used to benefit from an oligopoly, that oligopoly doesn't exist anymore. It is now becoming decentralized and people having lots of options. >> Disagree. >> And okay. And
[37:17] what ends up occurring at the same time that you're getting competition death by thousand cuts from open source uh owning your own intelligence and the other models is token costs are falling off a cliff because there's massive pressure there as well. So when you see grock uh openai etc. So what you basically do is the equation that I use is number of tokens processed times price per token equals revenue. The number of tokens processed on a percentage basis going through anthropic on a per customer
[37:47] basis, my guess is is falling. Ramps AI index shows this. The rise of open source shows this. The increase of competition from major labs shows this. Then your price per token is falling as well. So they will continue to grow. I'm not here to say that they are going to stop growing, but the growth rate is going to go from, oh my god, this is the greatest thing ever to it will go from asymmetric to it slowly become more and more linear because not anything that they're doing. I actually think they're
[38:17] continuing to innovate. It's just the market pressures end up being good for us as consumers, but like that's a very different business. And we saw that their valuation people thought they were going to come out at two trillion. Now it looks like one one and a half trillion. It's a 25% decrease in potential valuation, $500 billion that they've lost in six weeks, eight weeks. >> So, >> you disagree. Go ahead. Have the floor. Professor, >> so Professor Jordan, >> we we've only had, I think,
[38:48] so let's separate when we have different views on things that are related to the next month or two or things like that and longer term views. One of the ones that we disagreed on, which to me is the exact same situation, is when you thought the budget would be balanced. Okay. >> Um, >> guy goes back to the one time that he got me. >> No, no, no, no. Not the one time, but when you're when you're taking a long-term view of something, you're making a long-term statement based on one month trend of something. And where
[39:18] we agree is there is no way. So, Anthropic has 10 times at the end of this year, they will be around 10 times where they were a year ago on the ARR. No question about it. >> They're on that pace still. Even if they do what they did from Q2 to Q3, they will be close to 100 billion of ARR at the end of this year >> allegedly. >> Okay. So, the beauty of that is they've 10 times. If you ask me where I think they'll be next year, I don't know, three times, three and a half times. So we agree on the fact that it won't grow
[39:49] at the same pace that it has of course bigger company everything >> and and where I disagree and this is the most important thing. We haven't talked about this so I'm going to I'm going to I'm going to get to it in the end by comparing Sylvia to JP Morgan. Okay, in terms of what they're going to use. Okay. You're you're saying everyone's going to I'm telling you, I've worked at a bank. When you're spending 16 billion a year or whatever they're spending now in their technology, you are not putting open source as your big thing. That is
[40:20] not happening. No, no, no, no. It's not even I this one I won't even like let you go too far. >> If you're going to tell me exclusively. >> No, no, no. Ju, just so and maybe back up for a second. >> Forget all the competitions for a second. I can just tell you from my experience when we started with Sylvia using the uh models and I've gotten a lot of questions actually maybe it's help for me to understand it explain this we start out chatgbt wrapper so basically build a bunch of software you hook up your accounts when you hook up your accounts you can talk to AI and it
[40:50] feeds in the context window your query how to get my taxes down along with the context of your personal finances and it goes asset by asset and says okay this is a tax loss harvest here bonus depreciation here etc so it's better than Google it's better than just a regular LLM because you get the context plus that. >> We went from zero to $550,000 per month of compute cost in like 5 months or something. Like it was explosive. >> That was like an alarm going off saying, "Oh my god, every time I tweet and tell
[41:21] people to go use Sylvia, money is coming out of my pocket because they're using more compute." >> Now, the first thing we did was we didn't even touch the model stuff. It was just like architecturally. If you refresh a page and it hits the model, well, like when we refresh the page, we shouldn't hit the model, right? So, there's a bunch of like people were just trying to figure out how do you build tech uh architectural technology today with this whole model compute thing. Once we got all this this low hanging fruit stuff, then we looked at the model. I was not convinced to switch from the frontier models to open source
[41:51] until I realized that it was going to be lower latency and better performance. >> The cost is incredible. If we process 500 million tokens on Anthropic versus our own hardware and software, we pay 97% less. That alone should be a big incentive for people to go do it. But the thing that got me convinced was, wait a minute, you're telling me that the answers will be more accurate. You're telling me that they'll be quicker. It'll be a better performing experience for the user. Oh, and by the way, it's 97% cheaper. Of course, we're going to go this way. >> Mhm. So, what I think ends up being a
[42:23] huge headwind, which again people they're still trying to like kind of feel in the dark on this is I find it very hard to believe that JP Morgan is going to take all of their information and they are going to send it to Anthropic and they're going to say, "Please don't look. Please don't use this for training. Please don't do any of this stuff." and instead they have the option to go and take open source software and then they can train it on their own internal data architecture etc.
[42:54] There are still regulatory concerns, legal concerns, data privacy, security, like there's all this kind of stuff. But I actually think that this experience is more secure, more private, more regulatory friendly than we're going to use this open, you know, we're going to use the anthropic, open AI, etc. So to me, it's not just the cost. It is controlling. Think of it as sovereignty. JP Morgan wants sovereignty over their AI. They do not want to be reliant on Daario. Do you agree or disagree on that? Uh
[43:25] >> see the problem is your your your thought is coming from your experience at Sylvia. >> Yes. >> Okay. >> Maybe I'm blind. >> Well, here's the thing. You would die for the valuation of Sylvia to be equal to the tech budget of JP Morgan. >> Of course. Okay. >> JP Morgan >> a matter of time, Jordy. >> Exactly. So, but this gets into the difference between the two economies. And this is the part that I want to say. JP Morgan doesn't have time to wait. You mentioned Open Router. Who just bought
[43:55] Open Router? >> Stripe. >> What is Stripe's valuation? $200 billion about like 160 is the last one, but the people telling me who are thinking of investing is closer to 200. What's City Bank's market cap? 200 billion. How many people does Stripe have? 10,000. How many people does City Bank have? 200,000. So Stripe bought Open Router. Why? They're not a They're not a routing company. JP Morgan's net interest income, did you see the number on their most recent
[44:26] earnings report? >> Tens of billions. >> It was 107 billion. Okay, I want to put that number 107 billion. So JP Morgan is going to be in a speed race to not lose that money because what does Stripe offer you? the ability of not you put your money in, you're getting paid yield as opposed to I put my money into JP Morgan, I get zero yield. >> They're borrowing money at zero and they're lending it out at four, five, six, seven and they're making a huge
[44:56] spread. There's two parts of a bank. There's the let me put it in the bank and keep it there. And then there's the okay, the bank is making money borrowing and spread. So I believe what Torson lock that AI agents will move that money out. I've said it publicly, I'll say it again. If you go from 2022 and you look at money market f fund growth, it's been 70% growth since 2022, bank deposits have grown by 56%. The the the taking money out of the
[45:27] banks is already happening. So, the spread has gotten wider and they've been able to lend it out. The reason I bring that up is when you talk about the intelligence side, the only thing that matters to JP Morgan over the next 3 years is the agent workflow. They need to basically deal with people cuz their spreads are going to be going down. So the game for profit margins is how does AI in the Fortune 500 companies the City Bank the only way city bank can compete with Stripe who has 190,000 less people
[46:00] they need to get rid of people and still do the business and keep their spreads. It is a very complicated game to do that with agents on the one side that are killing you because they are eating at your net interest income but at the same point you have to find a way to replace the people's workflows. So, you're dealing it from a position of no employees. You want the user to have a better experience and you want the company to find a cheaper way to get that experience to be good. I completely agree with that whole thing. I have no problem with the fact that that'll go.
[46:31] But in a Fortune 500 company, so let's separate the consumers and let's separate what I consider Sylvia as being part of. I consider this the tokenized digital economy. >> The digital economy, the Amazon verse retail malls, the Google vers newspapers, all of that rise has led to the most profits. So the part that I agree with is the winners of the next 10 years are the people that only use open source. So we agree on that. But the enterprises will pay anthropic and open AI because of the advance the smarter
[47:01] intelligence and the the companies that have the most money they should be spending the most money on their AI and not taking a risk. Jensen Wang talks about all the time and he did on BG2 that people don't want to take the risk of buying these chips that are cheaper when I can deliver them an entire system for 100 billion that will work because I have decades of of doing this or at least the last 5 years. The same thing will happen with anthropic and open AI at the higher levels of things, but gradually each company will do what you're saying, which is okay, I got to
[47:31] find a better way because I can't have these costs keep going up because my income is going at a faster pace. So, I do view this in a very similar way to you that the open source will win. But if you listen to Jensen Yuang, he said it perfectly. He goes, I think it's a mistake to view anthropic and open AI and focus on their revenues. They will be very successful of what they're doing. They have the best models. They have the highest intelligence. They will dominate research and science. No question about it. >> Agreed. >> They're not letting anyone see their models anymore, which means distillation goes down, and we're already seeing that in the China data. So, all the open
[48:02] source people that think they have a smart model, that's great, but not for math, not for science, not for rebuilding things there. I think all of that's going to start to take shape. And we're in the very early innings. But I think it's a mistake for people to doubt. The revenues will come in. I think they're going to come in from so many different sources. And anthropic and open AI may never meet the valuation of the company of what people thought. If we sat here in 5 years and anthropic and open a open AI combined were $4.5 trillion. It was a waste of money to
[48:33] talk about the whole thing both from are they going to make it or go extinct or is it the greatest investment opportunity? We already missed the greatest investment opportunity. >> I I I actually think um they will continue to grow and and people are like are they going to be a great company? They're already great companies, right? So like this is not me like on them in any any form or fashion. What I think is uh and maybe to be explicitly clear the per company or per customer token consumption is going to keep going down over time because what they
[49:04] open and anthropic are the starter pack for a company to get involved in AI. You go and you adopt them first because >> you don't know nothing, right? You you need, hey, what is the thing to to get this going? I'm going to build software and then I need to plug in AI. They have intelligence. As companies move up the curve of I need to now customize it, improve it, optimize it, whatever. Then you start to move off of the general purpose models into the specialized models, the fetine tuning, the open source, like all that kind of stuff. And so for us, it's super easy to do that in
[49:35] a matter of 6 months. For JP Morgan or even large law firms or these big companies, maybe it takes 6 to 10 years, but the end result is they're going to end up wanting to own as much of that as possible. So it's sovereign, it's cheaper, it's better, whatever. I think that there is a window of time where the other aspect we haven't talked about is like Anthrop's got a sales team, right? Open source doesn't have a sales team. And so if you're the guy sitting at JP Morgan and you get to make the decision as to what you're going to do, well, I don't know, maybe the dude taking me to the Knicks game is going to
[50:06] get some business, right? And so like there is a whole other element of this that isn't just like what is the long-term best thing for the company. There's human relationships and all of this. So, I'm not arguing that they're zeros or they're not bad investments or any of that stuff. I'm just arguing that if I fast forward 15 years from now, most companies I think are going to want to own their full stack. Big companies are going to be slower. Small companies are already doing it. And so, the trend to me is like that there is way more headwind here than just like uh have we
[50:37] ever talked on this podcast about the fat protocol thesis? >> No. >> No. All right. So, let me go back for a second. Most of my view of AI comes from my experience on crypto. >> And if you look at all the people who are saying AI is going to kill us, they were telling us that the government was going to shut down crypto, right? So like there's a lot of parallels between new technology, whatever. And I was uh only now fortunate enough to have lived through one of these like zero to one moments in technology and now I'm seeing it. I'm like, oh, this must be like every technology. But in crypto, if you go back 12 years ago or so, there was this very famous
[51:08] fat protocol thesis. And the whole idea was all of the value acrru to the protocol. So the apps, the infrastructure, like all of that, there's going to be no value there. It all goes to Bitcoin, Ethereum, you know, Salana, whatever. Ended up not being true because obviously there's lots of value at the app layer, the infrastructure layer, and the protocol layer. AI is very similar in that no one has called it this yet but there's basically this like fat model thesis that people have had for a lot for a couple years which is like all of the value is going to acrue just to open AAI
[51:38] or anthropic >> I think now you know UI many others are realizing hey no no there's going to be apps there's going to be infrastructure there's going to be uh also value at the model layer and so the fat protocol thesis was wrong I think the fat model thesis is wrong as well but it doesn't mean that it's a zero it just means that it doesn't take 100% maybe it takes 40% of the value. There's still value in these other layers as well. And so companies have to choose where do they play in the stack. And like I'm going to put dollars out. Do I put it to the model companies? Do I put it to the infrastructure? Do I put it to, you
[52:10] know, open source? Where does my money go in that stack? It's not all going to go to the model companies. >> And I So you brought up the point that I think everyone listening should should be paying attention to, which is we're getting caught too much. And I think this is where our original conversation went on this, which is if you focus on the economics of something, you're just you're wasting your time. Meaning to think that anthropic and open AI are losing everything to open source is just stupid. Like it it doesn't make any sense. Do I think that the pie of
[52:42] TAM of intelligence is so big that everyone has a chance not to win but to survive? Yes. I think that's the key thing is that when Jensen talks about it, he literally says there's $90 trillion going into compute and AI. He's been right about almost everything. And yet he still doubted. And that was the the part about BG2. If you go listen to Zuckerberg and Alexander Wang talk with on Cheeky Pint,
[53:12] it's the same thing. Go listen to what he said the benefits are for Meta over the Neoclouds. He didn't say the Neoclads weren't necessary. He's heavily involved with Coree. So is Nvidia. Nvidia supplies the GPUs. I mean, Jensen came out and said their cost of capital is actually getting lower. And if you go read on how their structure is set up, there's a lot of truth to that. So, I just think there's a separation for people from the economics of a business and the companies. Anthropic was a $50 billion valued
[53:44] company 18 months ago that is now valued at 2 trillion. Whether it's 2.4 trillion, 1.9 trillion is irrelevant. The one thing I know for sure is to bet that you're going to get the same kind of return on it over the course of the next 3 years is silly. Like that's stupid. >> We're we're running out of time, but I have to ask you, did you see Elon's demo of the of his new cars? >> What are your thoughts? Um, you know, he I I've avoided talking
[54:15] about SpaceX. Uh, and I'm I'm I'm driving this into SpaceX for a reason cuz Elon has also said that um he sees SpaceX as being bigger than the global economy. I want to put that in perspective of how my brain finally got to the place that he could be right. Okay. >> Okay. >> Now, do I think that's going to happen? No. But do I could I come to the terms of what my vision is of the future and how Elon could be right? Here's the way
[54:45] it could be right. There are $900 trillion on the asset. I've been thinking about the equity market as the total sum. So he was basically saying I'd be all public equity and I went well that's not possible. But what he's really saying is a world that I believe in which is the 900 trillion which is predominantly illlquid assets actually moves through tokenization into liquid assets. It's no longer trapped in this part. And that way you could have one company worth 50 trillion. I have no problem with it because Bitcoin to me
[55:16] same argument like could it be 50 trillion? Of course it could. That is why when I saw the flying car thing and I saw some funny memes that came out from people saying, you know, talking about different things, I just went, I believe this. I saw a bald eagle three times outside my apartment in Brooklyn this week. So, if I can see bald eagles nesting outside of my uh my balcony, I think I can see flying cars everywhere. >> All right, I got some alpha for everybody. This is if you listen to the end of the podcast is where the good stuff is. Ready? I tweeted uh on
[55:46] Thursday morning, "As a shareholder, I would fully support a Tesla SpaceX merger. It is clear that Elon Musk is the best entrepreneur of our generation. Give him as many resources as possible and let him do his thing." Explicitly saying that I support it. Do you want to know what the alpha is? Who is at the top there who liked it? For those who can see, Mr. Elon Musk, which I think is kind of the subtle way if you've noticed, you know, he likes that tweet. He put SpaceX, X, Tesla,
[56:20] like he's probably going to merge them. I don't know if he does it this year. The rumor is that he could possibly do it before the end of the year, which would be pretty, you know, epic. Now, the reason I bring that up is maybe one of the alpha generating ideas from this podcast is it is likely that SpaceX would acquire Tesla and would have to do it at a premium to the current Tesla valuation. >> And if that's the case, then I don't know 15, 20, 30%, you know, kind of upside from there. >> And so my guess is that we are going to see Tesla's stock start to kind of grind
[56:51] up here because there are going to be a bunch of hedge fund guys who start speculating on, hey, is he actually going to do this or not? Yeah. >> And then on top of that, by the way, he's got a flying car that, you know, hops over traffic. And so you get these kind of like there's like fundamentals of the technology, the product, plus just pure speculation on, hey, is this guy going to merge these two? And if he does it at a premium, Tesla stock could run here into the end of the year. >> It could. And I think the Starlink um situation is really important. I think Elon has here's where I think he's become very smart in this thing. At the
[57:23] very beginning, we talked about LTCM. I want to make sure people understand that um at some point and this is what we've seen this year. The amount of capital needed for the AI trade from the public markets is enormous. This is another reason why tokenization has to happen faster. Um you need to free up capital from other places to where the economics can be distributed to places that people want. The the problem we're running into with the capital side is it's not that these trades are bad. that if Broadcom comes to the market for 100
[57:54] billion and Google comes to market for 100 billion well then someone is buying that money they have a portfolio of investments you do I do I have a 100% of my investments in Bitcoin no and nor should anyone have all of their investments in one thing you >> scared you scared >> the the problem with AI and this is the issue if you keep coming with all of this what's the difference between a coreweave bond and a Broadcom bond and an Nvidia stock and they're all part of a very concentrated portfolio. So the
[58:26] amount of capital coming to the market, not the size of it, but the concentration of it is why the CDS blows out. It's why there's so much correlation with the names that are not winners of AI. And I think this is a very unique situation in time. And so what needs to happen is the capital needs to basically be digested and open AAI is coming to the market. Anthropics coming to the market. These are big things. SpaceX came fast. Like if you really go down, it starts to make
[58:57] sense. So what's happening to the market? Why are hedge funds blowing up? They're blowing up because they underestimated the impact that all this capital would mean to people who can't handle buying any more of it. They'll eventually buy more of it, but you know when they'll buy more of it? when they start having profits in their portfolio because then that delevers that position purely through the profits that have come through the gains and the other positions. That's what needs to happen for the next year. And that's why when Paul Tudtor Jones goes out and I don't know if he actually said this is some of the stuff, but he did say that it's going to be a negative liquidity year in
[59:27] 2027 because you're going to have so many companies coming to the market. Although I don't agree with him that the market will necessarily be down or that it's worth talking about in that manner. Uh I do believe that what is happening is there's an enormous amount of capital that is needed for this buildout and it's growing bigger and bigger every year. It won't take the market down because the economics behind it are supported, but it does mean that as an investor, you have to be patient with the time side and that goes back to the leverage. If you're leveraged and you need the AI positions in your portfolio
[59:57] to work for the next year, you might be in trouble. That's it folks. Make sure you go to Jordi Visser on YouTube. Subscribe to his channel there. If you want to use AI to better manage your finances, go check out silia silvia.com. It's all we got. See you guys next time.