Latest / TFTC: A Bitcoin Podcast / Ten31 Timestamp: Growth Mindset

Transcript

Ten31 Timestamp: Growth Mindset · TFTC: A Bitcoin Podcast

• 0:00
  Mr. Arnold, it's Labor Day, but the situation needs monitoring.
• 0:04
  No rest for the wicked here.
• 0:06
  Situation never sleeps.
• 0:08
  Never sleeps.
• 0:08
  It doesn't take holidays.
• 0:10
  It doesn't.
• 0:11
  Neither do we.
• 0:12
  It's a relatively quiet weekend, though, outside of Bitcoin land.
• 0:16
  I mean, we were just mentioning it.
• 0:17
  We don't have it on the list, so maybe bears acknowledgement at the top of the episode.
• 0:22
  Liquid, the sidechain produced by Blockstream, which is a federated sidechain of Bitcoin.
• 0:30
  Looks like some white hat hackers may have moved 4,000 Bitcoin out of Liquid, which is,
• 0:37
  I believe, 95% of all the Bitcoin that's been pegged in. So a situation that is unraveling.
• 0:42
  We're monitoring the situation, but I feel like we should make the audience abreast of the situation
• 0:47
  as it's unfolding. Yeah. Active, active situation, unclear how it's all going to play out. We'll
• 0:54
  probably have more to say on it next week. Hopefully if some of it gets resolved or
• 0:58
  clarified, allegedly a white hat hack, you know, we'll see if that's true. A very, very odd situation
• 1:04
  on a variety of fronts, but hopefully it does not end up actually being a long-term loss of funds
• 1:09
  scenario. Yeah. So we'll, we'll probably touch on that more next week, but that situation's
• 1:16
  unfolding right now. Situations have come and they've passed and we've got to talk about them.
• 1:21
  The G20 meeting, the second meeting of the G20 finance ministers and central bank governors was
• 1:26
  held in Asheville last week. And you highlighted control F growth in the PDF of the minutes of
• 1:34
  this meeting. Why did you do that, sir? Yeah. I mean, it's the story of the whole meeting
• 1:39
  pretty much, right? Like if you go and look in the statement, it's fairly short. It's got about,
• 1:43
  I think 20 points in it, most of which were agreed upon by everyone, one of which was
• 1:49
  disputed by a certain member of the G20 that did not like, did not appreciate the group's focus on
• 1:57
  the unsustainability of heavily export-driven economies that under-consume internally.
• 2:01
  We can let people guess who objected to that. But otherwise, you know, there's also an interesting
• 2:06
  reference in there. One of the points is specifically carved out for digital assets,
• 2:10
  quote unquote, and stable coins, which I think is, you know, maybe we'll talk about that at the end,
• 2:14
  but just an interesting signpost as well, that they carve out space for that in a statement.
• 2:17
  But generally, this, you know, if you read through, there's, it's growth, growth, growth all over the
• 2:21
  place. I went back and looked anecdotally, just that a few prior G20 statements, just to see if
• 2:26
  that's like aligned with baseline. And generally, it does not seem to be, you know, these are,
• 2:31
  these statements, historically, in the last few years, have not foregrounded growth in quite the
• 2:35
  same way. So do you think it's notable that there, you got 34 references here, and what is basically
• 2:40
  just a few page document to ramping up growth. And Besant himself, Treasury Secretary Besant,
• 2:47
  succinctly summarized it for everyone, everyone in the room that, as he put it poetically,
• 2:52
  the world is awash in debt. And the only way for us to get out of it is to grow our way out.
• 2:56
  So something that we've talked about for pretty much the last year that this is the this is going
• 3:00
  to be the playbook. The various administration officials, especially Besant, have not been shy
• 3:05
  about that over the past year. But interesting to see it take center stage at this multilateral
• 3:11
  meeting where everyone is basically being told to get on board that this is the way that it's
• 3:16
  going to have to go. Yeah. That's a big question. Can we can we thread the needle? I think that's
• 3:21
  on everybody's mind is paying attention, particularly in the administration. And it is a
• 3:25
  high stakes game where you got to get a lot. You got to do. I recorded with Michael every
• 3:31
  last Thursday, John helped me with some show prep with Michael Every, the chief strategist,
• 3:38
  head strategist at Rabobank. We talked about his reverse perestroika piece in the beginning of the
• 3:44
  year, which is, I think, probably like the best start of the year piece I've read in quite a while.
• 3:48
  And there's been like a lens through which I've viewed everything. Highly recommend you go back
• 3:53
  and read that. Not everything has come to pass, but I think directionally, he's very, very on
• 3:59
  target there. And one thing he said in our conversation on Thursday is that to do everything
• 4:04
  all at once and thread multiple needles at the same time. And growth is imperative. And it's
• 4:10
  refreshing, actually. I mean, it's obviously high stakes and a bit unnerving at times. But
• 4:15
  the fact that they're focused on growth after we had the era of ESG, DEI, net zero, it looks like
• 4:22
  during that period, we're building up all this debt. And now we're more sensible people
• 4:28
  in charge, or maybe not in charge, but in positions of power. They're saying, oh, well,
• 4:32
  that was probably a mistake. We need to grow our way out of that. And one of the ways you can do
• 4:36
  that is by lessening regulation. And it looks like Scott Besson is calling for less regulation
• 4:43
  to help small banks. President Donald J. Trump announced historic oil agreement to secure
• 4:49
  American energy dominance and drive Venezuela's economic recovery. So we talked about this as
• 4:54
  well. So, so growth via deregulation and tapping into energy markets in our hemisphere. Yeah,
• 5:01
  for sure. So, I mean, I think we'll, it remains to be seen if the people in charge now are more
• 5:06
  sensible but certainly we can say the the de have been firmly shoved into a locker and that that not where we are right now So yeah to your point if the growth agenda is going to play out what do you
• 5:18
  need? Well, two things that you need are you need credit creation and you need cheap, abundant energy.
• 5:24
  So that's kind of this past week, I think we got to one of these was actually at the Asheville
• 5:30
  meeting, the G20 meeting on the left here, what Besson was saying about banking regulation. He's
• 5:35
  been on this soapbox pretty much since the day that Trump 2.0 started discussing how the degree
• 5:41
  to which Dodd-Frank and other regulations and capital requirements have stifled private credit
• 5:47
  creation in the US. And frankly, I think he has a point where you can kind of see that the changes
• 5:53
  that took place post-08, whatever you think about them, have certainly, it seems, accelerated
• 5:58
  consolidation of the banking industry. You've had a lot of roll-ups, a lot of smaller banks,
• 6:03
  small community banks going out of business or, you know, getting absorbed into bigger companies.
• 6:07
  And you've also had this massive explosion that we've talked about on the show and other contexts
• 6:12
  of, you know, the private credit industry. And I think some of that is, you know, not to say it's
• 6:16
  all, you know, smoke and mirrors by any means, but clearly that is a market response to filling
• 6:22
  a hole that was left to at least some degree by the traditional banking system kind of operating
• 6:27
  with at least if you hear Best Intelli, you know, one hand tied behind its back. And so I think this
• 6:32
  goes hand in hand with the growth strategy here of enabling more credit creation to come back out
• 6:38
  of the private sector. Best of points to ramp up in new banking applications and approvals under
• 6:45
  Trump administration. I think a decent chunk of that is in the quote unquote digital assets
• 6:50
  industry. And I think that is interesting by itself that those two threads kind of come together
• 6:54
  there. But reiterating with notably Goldman CEO, David Solomon, JP Morgan CEO, Jamie Dimon,
• 7:01
  sitting kind of right next to him at the G20 meeting. There's, I didn't put it in here,
• 7:05
  but there's a great photo of Besant Warsh flanked by David Solomon and Jamie Dimon at kind of the
• 7:10
  big kids table at the G20 meeting, you know, talking about a lot of this stuff. And if you
• 7:15
  go back and look at prior meetings, that's, it's, it's fairly notable and fairly, I don't know if
• 7:20
  unprecedented is the right word, it makes it sound probably too momentous, but it's not necessarily
• 7:24
  common course to have kind of a setup like that, where you have two, you know, members of private
• 7:28
  industry right next to the big wigs from Washington talking about all this stuff. So
• 7:32
  it clearly tells you what one focus point here is going to be to kind of make the strategy work,
• 7:38
  if indeed it's going to work. And then the other big piece that's going to be necessary here is
• 7:44
  abundant cheap energy. The US is in a much better spot than it was in 20, 30, certainly 50 years ago
• 7:50
  during the 70s oil shock, where we were much more energy dependent. Now we're a net energy
• 7:54
  exporter. And we talked about that a lot on the show and how kind of meaningful that's been this
• 7:58
  year. But to do kind of what needs to be done here under the administration's framework, you know,
• 8:03
  you can never really have enough oil, you never have enough energy. And you saw some additional
• 8:08
  detail come out this week from the Venezuela deal, which we talked about last week, have more to say
• 8:14
  about it here. And I think, you know, there's a few, if you're watching on video, I think it's
• 8:18
  worth just checking out a few of these points that we've highlighted about just the nature of
• 8:21
  this deal that was just signed. I think a lot of caveats are at play here. Timelines or TBD,
• 8:28
  Five years from now, all of this could be torn up by, you know, an aggressive anti-American government that nationalizes everything again.
• 8:33
  So you can only take so much from it.
• 8:35
  But the way that it's been structured is, you know, a hundred year concession into fields providing 65 billion barrels of oil via a private company in which the Department of War has a 35 percent equity stake.
• 8:48
  that will give that company the right to buy at cost, at production cost, the first 20%
• 8:53
  of production from all these fields, and then a rofer on the next 80%. So theoretically,
• 8:59
  like all of it, if we want it, although only the first 20% at cost. And then the government has
• 9:04
  veto power over the appointment of directors on the board of directors for this company.
• 9:09
  And so this is like a very, I think the first past thing to say about it is just obviously how
• 9:15
  potentially meaningful it could be for U.S. oil supplies. Now, whether that's like an ethical
• 9:20
  deal and whether that represents like a degree of, you know, imperialism that we're comfortable
• 9:26
  with is I think one, one big question for people to think about. But the other, the other point
• 9:31
  that I think is just worth noting is just how like, we haven't had anything like this in the
• 9:35
  U.S. for like a hundred years, right. That you go back, you have to go back to basically like
• 9:39
  depression era, like early, yeah, early 20th century programs, like the company that I believe
• 9:44
  was responsible for like building the Panama Canal, some different like public-private
• 9:49
  partnerships during the depression, which had, you know, varying levels of success. And so again,
• 9:54
  just kind of tells you like where, where we are in, in the imperial cycle. And I think this goes
• 10:01
  back to our discussion last week about the Stan Druckenmiller piece, you know, being written from
• 10:05
  a perspective of, or it sounded like to me being written from the perspective of someone who,
• 10:09
  who has been trading in a time period
• 10:13
  that's very kind of like historically unique,
• 10:15
  like this Goldilocks time in US history.
• 10:17
  And I think we are this is the latest data point telling you we kind of firmly shifting into a market backdrop that looks very very different yeah i think it important to know what the venezuela oil deal too the again talking about threading the needle this is more threading the needle in the long term because
• 10:34
  there will be a bit of a lag effect in terms of the material effects it has on oil prices because
• 10:40
  you need to build the refineries to actually turn the crude into something that we can we can use in
• 10:44
  the economy i think that's an important thing to yeah and so it's got it to that point it has to
• 10:48
  survive changes in administration in the U.S. and Venezuela for long enough for all of this to
• 10:55
  actually, for any of this oil to actually flow to the U.S. and kind of be meaningful from a material
• 11:00
  perspective. So you got to think that's like what at least like a three to five year timeline and
• 11:04
  will have gone through a presidential election cycle, another set of midterms, who knows what
• 11:10
  happens with Venezuela's government and how American friendly or not they might be over time.
• 11:15
  So like I said, a ton of caveats and asterisks on this one, but I think a major signpost for where we are.
• 11:21
  Definitely.
• 11:22
  And then getting into the question, is the economy growing?
• 11:24
  Why are yields going up?
• 11:26
  And we had a couple of Fed governors speaking this week, I guess, sort of in tandem, a bit disparate in terms of the topics they were talking about.
• 11:36
  but New York Fed's Williams says yield surge is due to strong economic prospects, saying that a
• 11:42
  really strong U.S. economy and a strong economic outlook fueled by big investments in AI and data
• 11:46
  centers and technology in general is what's driving yields higher. And then you have Fed
• 11:51
  Governor Waller indicate that he will support holding rates steady at the September meeting,
• 11:56
  saying traditionally don't raise into a supply shock unless you see second or third order
• 12:01
  effects. And so talking about threading the needle, the economy's strong. We just had a
• 12:07
  really good jobs report. And I guess we should take a step back. And what are your thoughts on
• 12:13
  the question around, is the economy actually growing? I'll let you start. I've got a couple
• 12:19
  things I want to add because they're not on the list. And I think people should really
• 12:23
  be thinking about the impact of the topic that I'm thinking about, but I'll let you guys,
• 12:28
  So I'll give a little hanger there and then we'll come back to it.
• 12:31
  All right.
• 12:31
  Yeah, I mean, I think so maybe an asterisk on this is I think there's some interesting data that Matt Dratch put out over the weekend kind of pointing out that, you know, there could be some calendar timing quirks that led to like an abnormally strong report.
• 12:45
  That's in the timestamp this week if people want to go just take a look at that.
• 12:48
  But, you know, that's just to frame it all up.
• 12:51
  I don't know that we can necessarily take at face value that the jobs report was a blowout and everything's great.
• 12:56
  And certainly we've seen, you know, many, many quarters or many months of downward revision, both under Trump and Biden previously.
• 13:02
  So I think I take it all with a bit of a grain of salt when the first headlines hit.
• 13:06
  That said, I mean, I don't have them in the slide today.
• 13:10
  We'll probably have them next week.
• 13:11
  But some good data came out over the weekend from some was in The Wall Street Journal and some was in The Economist,
• 13:16
  just basically showing the degree to which kind of the blue collar and the trades market is really picking up steam.
• 13:22
  And I think that's, you know, it kind of depends which which pocket of the economy you're looking at.
• 13:28
  But I think that's that notably ties into what Williams is saying here as kind of his justification for not being super worried about the direction of yields, because that's directly related to you call it reshoring in general.
• 13:41
  But the big impetus for that, right, is the idea is to build out.
• 13:44
  So I think that's also relevant, too, for as you consider what happens going into midterms and the relative popularity of the administration going into 28.
• 13:55
  There have been a lot of pockets of employment that have really been challenged under Trump 2.0.
• 14:01
  Obviously, what we might call maybe uncharitably the bureaucrat class or kind of academia have seen real headwinds.
• 14:09
  But if you're looking at kind of the base that Trump's pollsters care about, they arguably are getting a lot of tailwinds.
• 14:17
  You're seeing more and more in the data and based on this tailwind that Williams is talking about here.
• 14:22
  So as to the question of is the economy strong or not, I think the answer, as it has been over the past few years, is kind of it depends.
• 14:28
  Depends how you look at it and what you're optimizing for and what you think is relevant, where you think it's relevant for the economy to be strong.
• 14:36
  I'll pause there and let you jump in with your secret surprise points.
• 14:41
  Well, going back to, it's not really secret surprise points, but I do think going back to like leading lagging indicators, I think a lot of the policy decisions that the Trump administration has made will have lagging effects.
• 14:52
  And I think we're beginning to see a net effect of one of them, which is like immigration.
• 14:56
  I think people have been surprised to the upside.
• 14:58
  Again, just approaching this unemotionally.
• 15:02
  looking at it, but if you look at net migration, so total farm-born population declined by 2.9
• 15:07
  million people from January 2025 to July 2026. So the first decline in net migration to the U.S.
• 15:17
  in many decades. And when it comes to growth and talking about those blue-collar jobs,
• 15:22
  specifically in affordability, I think what Waller was alluding to with the supply shocks,
• 15:28
  I think if you look at cracked diesel spreads, they're at all-time highs,
• 15:31
  and that could definitely lead to a supply shock So you again trying to do everything all at once We in Iran obviously creating incredible supply disruption that could be inflationary as the raw inputs of the economy
• 15:44
  energy, particularly oil, increases.
• 15:47
  And it's like, okay, how do you balance that out?
• 15:48
  And I do think not enough people are paying attention to net migration
• 15:53
  and the fact that if we are securing the border
• 15:56
  and getting illegal immigrants out of the country
• 16:00
  opening up jobs for native-born Americans. And then I think the bigger effect that would have
• 16:05
  an equalizing effect on something like diesel prices is rents going down in areas where
• 16:12
  illegal immigrants are being swept back to their home. And so that's one thing I wanted to highlight.
• 16:17
  Again, talk about threading the needle, doing everything all at once, looking for equalizing
• 16:22
  effects, but for the negative and the positive, I think net migration is something that you do have
• 16:27
  to take into effect and could be a lagging indicator that will begin to show up more and
• 16:32
  more in these blue collar job wages going up. Yeah, it's a good point. It clearly has been
• 16:37
  top of mind, right, for the administration. And you can kind of see, you know, there's like an
• 16:41
  ideological point behind that. And there's like a, you know, red meat for the base point behind
• 16:46
  that. But there's also like a clear impact on exactly all these dynamics, right, as it relates
• 16:52
  to potentially giving, you know, blue collar workers, native-born blue collar workers, the,
• 16:56
  the lion's share of the benefit of that build out and what it creates. But I mean, I think,
• 17:02
  so we've got, uh, we flashed up here, a vintage, uh, true social post that I think is interestingly
• 17:07
  aligned with the commentary that we just talked about from Williams and Waller. You know, we came
• 17:11
  out, we didn't really talk about Jackson hole much, mostly because we had other stuff to talk
• 17:15
  about. And I really just am tired of dissecting fed speak, but you know, the market got a little,
• 17:19
  uh, it got its panties in a wad a little bit, um, last week when it seemed like worse was going to
• 17:24
  be more hawkish on inflation. And, you know, you get kind of the cleanup crew of Williams and Waller
• 17:29
  coming out this week and saying, well, we don't really need to raise rates. And we, you know,
• 17:33
  rates are pro cyclical. And that's why we're seeing yields pick up because the economy is so strong.
• 17:37
  And so I think that's notable and you're getting a much more kind of like, you know, let's say
• 17:41
  caveman, you know, grug brain version of that here on this, this, this true social post in a way that
• 17:48
  only Trump can provide. I think there's a lot of anti-consensus thinking in here that a strong
• 17:56
  country means a lower interest rate because it's a better credit and because growth is so good,
• 17:59
  our rates should come down. I think there are dynamics we can talk about in there, some of which
• 18:03
  are maybe legitimate and some of which are more questionable. But I think all that is to say,
• 18:08
  this is telling you the same thing as the prior two quotes on the last slide, which is just the
• 18:15
  ongoing countervailing forces pushing against aggressive tightening and aggressive, you know,
• 18:22
  hawkish policy on the Fed side, which is, you know, whether you get explicit yield curve control
• 18:28
  is, I think, much less likely. But clearly, like the, there's a variety of vectors of pressure kind
• 18:36
  of arrayed against, you know, hiking aggressively, just because, you know, observed inflation is
• 18:41
  is higher than, you know, the Fed might, might like to see or the people might like to see.
• 18:45
  So again, just we'll have to test what the unitary power of the executive is to actually,
• 18:52
  you know, force an agenda like this through. But in, you know, if you want to call it a fourth
• 18:56
  turning or just some, you know, meaningful phase shift in US history, I think it's bears monitoring
• 19:02
  all of the little signs stacking up, pointing to, you know, the need to, to at least not hike
• 19:07
  aggressively here. And we'll talk about some other reasons that's the case in a second too.
• 19:11
  Well, yeah, I mean, gorilla in the room,
• 19:15
  threading the needle.
• 19:16
  I think the biggest needle to be threaded
• 19:18
  is reshoring and winning the AI battle.
• 19:22
  And I think this is probably the most white knuckle variable
• 19:26
  that we have.
• 19:27
  There's a ton of money, a ton of capital,
• 19:29
  and a ton of debt now building in this AI build out.
• 19:34
  And it's can we keep the plate spinning on the stick
• 19:38
  without them falling and breaking
• 19:40
  while we're trying to do all this.
• 19:42
  Yeah, I think this is an interesting chart.
• 19:45
  It's for anyone not watching,
• 19:47
  we're highlighting a chart of hyperscaler
• 19:50
  and NVIDIA debt issuance
• 19:52
  as a percentage of treasury bond issuance,
• 19:54
  which I think this is computed
• 19:55
  as net change in 10-year equivalents.
• 19:59
  I don't know if this is intended to be,
• 20:00
  I haven't seen the underlying data set
• 20:01
  intended to be just the 10-year
• 20:02
  or like 10-year equivalents
• 20:04
  relative to the overall base of issuance.
• 20:06
  In any case, the relevant thing
• 20:08
  is it's up and to the right.
• 20:08
  It's kind of hockey sticking
• 20:09
  from a couple of years ago, it was under 10%. Now hitting close to 70%. So clearly meaningfully
• 20:15
  moving higher as this build out starts to transition into a new phase of funding.
• 20:20
  We've talked about on the show in the past that up until pretty recently, the biggest driver of
• 20:25
  funding here was basically just the enormous free cash flow and the existing cash balances of
• 20:31
  the hyperscalers, some of the most cash generative businesses in the world with fantastic returns on
• 20:35
  capital that, you know, previously spending the last decade, basically just, you know,
• 20:38
  buying back stock with all that free cashflow didn't really have anything, you know, didn't
• 20:41
  have enough internal investment opportunities to actually use it.
• 20:44
  Um, and, you know, we've gotten to the point where that's getting more and more or less
• 20:47
  exhausted now and you're moving into needing external finance.
• 20:49
  for more and more of this, this build out, I think probably the better way to actually think
• 20:54
  about it is not just debt as a percentage of like treasury bond issuance, but debt as a percentage
• 20:59
  of kind of total spending on, on the build out. And as of right now, I believe a majority is still
• 21:06
  funded effectively from operating cashflow from, from these companies. So I think the question for
• 21:12
  your, the plate spinning question is, you know, can operating cashflow continue to inflect and ramp
• 21:18
  up quickly enough to continue to be a meaningful portion of the overall funding so that you don't
• 21:25
  need to really rip debt issuance just to keep it all going. And also, you kind of need to see that
• 21:32
  to even have ongoing debt issuance at a certain level because creditors are going to want to see
• 21:37
  clear evidence of ROIC on the buildouts thus far. So it's a big open question. I think you and I are
• 21:44
  both of the mindset being, you know, using this stuff day to day, you know, especially you as a
• 21:50
  Hermes power user, just seeing how it's changed our workflows and how much we can still be doing
• 21:54
  with it. You know, I think we can say the private market fit is real. The, you know, we're just
• 21:57
  scratching the surface of, you know, what the, the actual technology can do. So I think there's
• 22:02
  still a very strong bull case that operating cash flows do ramp up enough to at least for the next
• 22:07
  few years, sustain this. But as you get more and more debt funding, the build out on the margin,
• 22:12
  That goes back to our rates question of can you really if this if this chart needs to sustain where it is and if this kind of build out needs to continue with some meaningful level of kind of debt financing behind it.
• 22:23
  Can you if that needs to happen for the overall strategy to work, if this is kind of a linchpin or a major linchpin of kind of getting the growth that we need, then can you really sustain an environment where, you know, rates go up to too much higher and, you know, the tenure and the long end blow out?
• 22:39
  and you know now hyperscalers and neoclouds etc are instead of paying what like mid to high single
• 22:46
  digit rates now they're paying double digit rates or whatever right can can that really be allowed
• 22:51
  to happen for for the strategy to move forward as it seems like the administration wants and
• 22:55
  i think i probably have to take the under on that yeah i think i'm getting some echo i don't know
• 23:01
  i think we're good now though but i i mean at 1031 i mean we have a portfolio company has really
• 23:07
  prove that you can you can scale with operating cash flow with giga i mean i don't think we talk
• 23:12
  enough about them and they're one part of this build out stack on the on the infrastructure
• 23:16
  on the power infrastructure the modular data center side and i know matt has been on tbpn he's
• 23:23
  spoken very publicly about this but i think they're an incredible example of a company that's been able
• 23:28
  to scale pretty massively leaning heavily on operating cash flow yeah i mean i think it comes
• 23:33
  down to like we've talked about the we've talked about in the past like how a lot of it just comes
• 23:38
  back to like our scaling laws holding right our capabilities of of the models at a technical level
• 23:44
  like continuing to get better and better you know commensurate with the amount of spin that's going
• 23:49
  into training them and then also i think increasingly on like the you know the product
• 23:52
  application layer two are like harnesses getting more and more capable and our new kind of especially
• 23:57
  enterprise use cases getting more and more unlocked to justify further and further build out and um
• 24:03
  the economics on inference being held up.
• 24:07
  And I think you know right now again like the inputs suggest that they are and maybe we can flip to not the next slide but the slide after to talk about some of that because I think it also very relevant to that question Yeah AGI is it here I mean talking about the meta sort of proxy war behind all this I think is U versus China who going to win the AI battle on many commenters and people in the know and on the frontier of building out this stuff
• 24:37
  It said you need to get to whoever gets the AGI and recursive self-improvement first wins the game.
• 24:43
  And many people are looking at the Astra 6 release last week and looking at the benchmarks and using it in practice and claiming that AGI is here.
• 24:53
  We have Jensen Huang responding to a chase from Crusoe Energy, I believe, coming out and saying that AGI has arrived and congratulating OpenAI for the feat.
• 25:05
  And so I would say, I guess it's yet to be determined.
• 25:09
  I don't know if we can say AGI is here, but Jensen is much smarter than I am.
• 25:13
  And so maybe we do have to concede that it's here.
• 25:16
  Or is it posturing by the American industry to basically claim AGI first so they can do
• 25:25
  what is or just take a victory and hold the adversary at bay, if you will?
• 25:31
  Yeah.
• 25:31
  I mean, I think maybe the answer is kind of both.
• 25:33
  there's obviously significant incentive for book talking by both open AI and NVIDIA and kind of
• 25:40
  anyone involved in the supply chain that, you know, things are constantly getting better. And
• 25:44
  we're right. We're seeing massive new gains every, every week. And we're right on the cusp of,
• 25:49
  you know, this totally phase shift in American industry. So you got to caveat it with all that
• 25:54
  on the flip side. And I haven't, I haven't used Astra enough in my workflows to really know if
• 25:59
  this, if this holds water, but I mean, like, it's not, um, I think like, again, absent some breakdown
• 26:05
  in scaling laws or some like massive wall that we hit where, you know, for some reason you can
• 26:10
  only productize this stuff up to a certain point. Like you can kind of see where the trend's going
• 26:15
  and whether this is AGI or what that even means. I mean, I think that's like, there's maybe a
• 26:20
  philosophical argument to be had of like, is AGI as such, like even achievable. And that gets into,
• 26:25
  you know, philosophical territory that we're not equipped for on the show, but either way, like,
• 26:29
  whether this is the industry's definition of AGI or whether that's going to take longer. I mean,
• 26:37
  the point is like, you can kind of see where the line's going. And I think that'll ultimately be
• 26:43
  what it all pivots on, right? What a lot of this, the whole strategy we've been talking about,
• 26:48
  what Michael Avery calls kind of grand macro strategy, the impetus for it. And the thing that
• 26:52
  from the US's perspective, I think makes it work or not is whether this trend line generally
• 26:58
  continues. We can ask if it's desirable to live in a world where this is increasingly true. And I
• 27:05
  think there will be a lot of, you know, destabilizing social effects if this continues.
• 27:10
  And I think those are all worth talking about and thinking about. But in general, just for the
• 27:13
  purpose of like, can the plan here to the extent there is one work? I think that a lot of it pivots
• 27:19
  on whether this is, whether this is credible or not, whether you think this is AGI or not,
• 27:23
  is not super relevant, but like is, is this, is the line going where you think it's going
• 27:28
  based on what we've seen. And, you know, thus far, like, uh, it all continues to move kind
• 27:32
  of roughly at the pace that you would kind of expect if you had been paying attention to the stuff for the last few years Yeah I haven uh taken Astro six for a proper spin yet either that all my plan this afternoon to really dive in but i know a number of people who have and
• 27:47
  i've had multiple side conversations over the weekend of people sending me what they've done
• 27:52
  with astro six it is incredibly impressive um and so i'm actually looking forward to this afternoon
• 27:59
  to sitting down and spending my labor day diving in and pointing astro six and everything i've built
• 28:03
  and ideas I have that haven't been possible to accomplish yet
• 28:09
  up to this point with the models before Astro 6.
• 28:12
  So, I mean, it is a strange new world, to your point.
• 28:15
  I think there are a lot of important conversations
• 28:18
  that we're not going to have on the show right now,
• 28:20
  but you look at the Hugging Face agent swarm attack
• 28:24
  and the reaction to that.
• 28:26
  And again, that could be K-Fob.
• 28:27
  It could be sort of rhetorical positioning
• 28:30
  by open AI and the walled garden frontier models
• 28:34
  looking for regulatory moats where it could be legit.
• 28:36
  We could have just unleashed Skynet on the world.
• 28:38
  But I think to John's point,
• 28:41
  for the context of the unemotional
• 28:44
  sort of economic ramifications conversation we're having here,
• 28:47
  it does seem like things are up and to the right,
• 28:50
  at least for now.
• 28:51
  Speaking about up and to the right,
• 28:54
  many people saying Bitcoin could do that as well.
• 28:56
  We had River come out with a research report last week
• 29:00
  basically diving into the allocation recommendations
• 29:04
  from many of the world's top asset managers
• 29:07
  and basically projecting forward,
• 29:09
  looking at how much of the average portfolio
• 29:12
  has been allocated to Bitcoin to date
• 29:14
  and based off of the recommendations
• 29:17
  from those asset managers where it could go
• 29:19
  if portfolios start moving towards those allocation percentages.
• 29:25
  Then we had Eric Balkunas come out highlighting
• 29:28
  that iBit inflows are hitting the over.
• 29:32
  And so we have a ton of capital flowing
• 29:34
  into the Bitcoin ETFs at the same time.
• 29:38
  Yeah, I think the most notable thing to me
• 29:40
  about Eric's post was he says only 1 billion away
• 29:44
  from fixing the hole in year-to-date flows.
• 29:46
  So which is to say, you know, they took in,
• 29:48
  the ETFs took in close to a billion dollars
• 29:51
  on the day that he posted this just a few days ago.
• 29:53
  So basically you're one or two days away
• 29:55
  from kind of being neutral on year-to-date flows
• 29:57
  for the ETFs, which I think is just a real testament to the demand and the resilience of
• 30:03
  kind of the ETF buyer, not even just of Ibit, but if you look at just like the passive flows dynamic
• 30:09
  of, you know, retail and retirement accounts, and even institutions just being trained to
• 30:15
  consistently like, you know, buy the dip, plow more in on a kind of recurring basis into, you
• 30:20
  know, whether it's SPY, the QQQ, whatever, like this is a muscle that's very familiar to the
• 30:25
  average American brokerage account. So kind of seeing that with Bitcoin, even though we've had,
• 30:31
  you know, very atrocious and like disappointing price action this year is I think just a pretty
• 30:35
  notable indication of the regime shift, the market regime shift that Bitcoin is experiencing right
• 30:40
  now. And I think when you look back at everything we've discussed on the prior slides, like you're
• 30:46
  looking at, you know, is it if the plan works, like you're still going to need, like we've discussed
• 30:51
  a meaningful improvement in the collateral base
• 30:54
  of that that ultimately underpins, you know, US debt.
• 30:58
  So I think there's a there's a role that's very bullish
• 31:01
  for Bitcoin in that scenario The world where it doesn work and you know we have a nonlinear break of something that requires you know the big print Okay okay well that obviously quite positive for Bitcoin as well You look at the we didn get to talk about it but Bernie Sanders came out with a introduced a bill to ban artificial superintelligence and institute significant new controls over data center buildouts
• 31:22
  And I think, interestingly, there may be some horseshoe theory there where increasingly you're going to see the Trump administration also, we've already seen elements of this in the past this year, wanting kind of more and more of a stake in the build out and control over the build out.
• 31:36
  And it's becoming more and more and more of a national security issue.
• 31:39
  So in a world where you're having that much more top-down control and potentially interest in maybe not nationalization, but kind of outright government ownership of certain strategic assets, again, that highlights a world where I think it may be interesting to have exposure to and control over a sovereign asset that can't be seized as easily, although IBIT doesn't really check that box.
• 32:00
  So think about that. But I think ultimately, then that just boils down to why you ask the question, like, what does it actually mean for Bitcoin if all those demand drivers and all those kind of tailwinds come to fruition?
• 32:09
  And I think the River Report is just a really good overview of where it could go and what we could see in terms of net new capital inflow on some fairly conservative and reasonable assumptions.
• 32:20
  And I think a question that they raise that I'll just kind of leave everyone with is, you know, there's the capital flow itself as the kind of the base question, but then also like, what's the multiplier on that, right?
• 32:30
  price is set at the margin and you have a perfectly an elastic supply base in Bitcoin
• 32:34
  that's going to eventually potentially be met in any of these scenarios with meaningful
• 32:39
  incremental capital flows. So, you know, last couple of years, we've seen gold's market cap
• 32:44
  effectively grow by 15 to $20 trillion. That didn't happen because like, you know,
• 32:49
  sovereign wealth funds and pension funds, you know, liquidated $15 trillion elsewhere and came
• 32:53
  to the gold window and said, I would like this much gold, please. Right. Like there was a
• 32:56
  substantially smaller amount of capital that actually flowed into gold to get that level of
• 33:02
  market cap increase. And so there was some multiplier that you can argue about. Well,
• 33:05
  the same thing is going to be true here of Bitcoin. And it'll depend on the relative willingness to
• 33:10
  sell of existing holders who may revive old coins and come back to market. That's always a dynamic
• 33:16
  in any bull market. So you have to ask yourself, how strong is that effect? But all that is to say,
• 33:21
  it doesn't necessarily take a lot of actual capital inflow and doesn't necessarily take a
• 33:26
  lot of, you know, a multiplier assumption to get you to a point where everything we're talking about
• 33:31
  here and all these tailwinds kind of converge into a meaningfully, meaningfully higher Bitcoin price.
• 33:37
  Yeah. I mean, to your point, gold had a 1.1 trillion intraday inflow last week. And in terms
• 33:43
  of market cap, market cap grew by 1.1 trillion. It wasn't, it actually wasn't a 1.1 trillion
• 33:48
  inflow, but it had a massive inflow and it pushed the market cap up 1.1 trillion. And that's what
• 33:55
  bitcoins competing with and if we're i think that's what 80 percent of bitcoins market cap
• 34:00
  right now in one day yeah for for for gold bitcoins that uh let me see where we at here
• 34:06
  1.59 trillion yeah so about 80 70 to 80 percent of bitcoins market cap gold just added in one day
• 34:15
  it's early it's early yeah a lot of ways to win and one day it's going to hurt to be sidelined
• 34:21
  yeah we'll see you guys next week
• 34:25
  Thank you.