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Ten31 Timestamp: Revenge of the Nerds · TFTC: A Bitcoin Podcast

• 0:00
  85,399 United States debt tokens. That's what OneBitcoin is trading at right now.
• 0:06
  A little pop overnight, a little Monday morning overnight pop.
• 0:09
  No question about it. I'm ready to be heard again.
• 0:15
  It's nice to see. It's nice to see. We're at levels not seen since early February.
• 0:20
  I think we were in New York together, actually, when we were last at this price level,
• 0:25
  if I recall correctly. We were talking about how over it was, and now we're so back.
• 0:30
  So back once again, I think if we get to, if we add another few thousand, I'd have to look,
• 0:36
  consult my chart, but I think we're, we're right up on a green year here. If we get to,
• 0:42
  yeah, like we get to 87.5, despite everything that has happened, despite it being so over once again,
• 0:49
  despite the four year cycle, the dumerism, war in Iran, et cetera, it would be a green year in
• 0:55
  that case if we held it. So pretty, pretty incredible. It is how emotional this market
• 0:59
  It's very emotional. People let their emotions get the best of them, make rash decisions.
• 1:04
  But par for the course, pattern recognition. I've been here before. We'll probably be here again.
• 1:09
  And we meet here on the first Monday morning in a couple of weeks.
• 1:14
  Yeah, some travel of both of us in the past couple of weeks.
• 1:17
  But it's been a bad couple of weeks to stop sniffing glue.
• 1:23
  Some serious headlines hitting over the last couple of weeks and especially this past week.
• 1:27
  So glad we're able to make it happen again.
• 1:29
  Yeah, a ton to talk about. The great slowdown is what most people are focused on. Daryl Amadei,
• 1:37
  we must pace the frontier. Sam Altman, Brad Gerstner, Elon Musk, all coming out simultaneously
• 1:42
  saying we need to slow the pace of AI progression. They're getting too smart. They're breaking out
• 1:47
  of their sandboxes. They're hacking the internet. And we need to be safe. I don't think we've
• 1:54
  talked about this one-on-one yet. I'm interested to get your read on this situation because I know
• 1:59
  I know what mine is. Yeah. I mean, yeah, I think it's important that we have, you know,
• 2:03
  safe and effective solutions. We should probably, I think we should probably, we should take a two
• 2:07
  week pause to flatten the curve of intelligence, you know, just, just to be safe. I think we should
• 2:12
  trust the experts TM and you know, at least that's the, that's the line that I think a lot of people
• 2:17
  are trying to peddle over the last couple, couple of weeks to your point on pattern recognition.
• 2:21
  I think we've been here before to, in a few other situations. Yeah. How bad is it inside
• 2:28
  these frontier labs if they're well look i think so this the slide here that we have to kick off
• 2:34
  the the week is like you know showing dario posts this thing saturday morning blows over everyone's
• 2:38
  weekend sam altman brad gerstner elon even and then variety of other kind of leading acolytes
• 2:45
  and in ai kind of immediately jump in within like you know 30 minutes to to quote tweet and you know
• 2:50
  agree and co-sign you know a lot of people who famously kind of can't agree on anything you know
• 2:55
  jumping in to talk about this all at the same time, you know, looks, you know, you put your
• 2:59
  sinful hat on. It looks a lot like an op, frankly, looks, looks just a little bit coordinated.
• 3:04
  It's funny because when this happened, I saw on my timeline, you know, I put this in the newsletter,
• 3:09
  but simultaneously like, you know, this AGI is here. Skynet is here. We are, we are well and
• 3:15
  truly screwed. We've got to, you know, do our two week pause and hand over the experts. I saw the
• 3:21
  labs are totally cooked and they're scared of open source and they want a regulatory mode.
• 3:25
  I saw this is all a conspiracy to crash the equity markets, to send everyone into treasuries
• 3:29
  and a variety of other things kind of flying around across that spectrum, which, you know,
• 3:35
  tells you like no one really has any idea. I think the one thing that makes all this tough
• 3:41
  to untangle is that at least a couple major, major figures involved in this whole, in the
• 3:47
  frontier are, I think actually not saying these things out of bad faith. Like I don't actually,
• 3:52
  Sam, who knows Gerstner, Elon, whatever, you know, I think they've got their, their different ways
• 3:57
  that they play the game. Um, but my read is that a guy like Dario and the anthropic guys, you know,
• 4:03
  they, they come out of the EA camp. Like you could say that they're wrong, but I don't necessarily
• 4:07
  think that I think they're true believers on some of this stuff. I think that there, there's a lot
• 4:10
  of like kind of less wrong influence there. And, uh, that makes it tough to disentangle kind of
• 4:14
  what's disingenuous and what's actually coming from kind of a place of good faith. All that said,
• 4:21
  I think over the last week, we've gotten interesting reports from other insiders and
• 4:25
  whistleblowers. There was a report I don't have on here from a few days ago, but from various
• 4:29
  people inside the lab saying basically like, this is kind of a trumped up sham to either to
• 4:36
  entrench a regulatory mode or to get some other types of, some other kind of strategic benefit.
• 4:41
  and we can speculate on what that is.
• 4:44
  We've seen some audits of various cybersecurity incidents
• 4:47
  that basically suggest that like
• 4:49
  there was kind of no rogue agent problem at all.
• 4:52
  And there were very simple controls
• 4:54
  that could have been put in place
• 4:55
  and going forward will be put in place
• 4:57
  to kind of avoid some of these situations.
• 4:58
  You know, we're not nearly at kind of a Skynet type scenario.
• 5:02
  Notably Jensen Wong of NVIDIA was quite emphatic
• 5:06
  that that was the case and has recently kind of publicly suggested that some of this may be coming from a desire to have a liability shield put in place for any untoward behaviors of models or ways that people
• 5:20
  use models in the future. So all this is to say, like, there's a lot flying around. And I think
• 5:26
  we should probably get into, I'll pause here, we should probably get into, I think, what the
• 5:30
  relevant kind of takeaways from this will be going forward. But as it relates to, like, what in the
• 5:35
  world was actually going on here. I think it's, you know, I'd love to hear your take. I think it's
• 5:40
  a mix of things from some true believers and some people who are just kind of callously,
• 5:44
  disingenuously, cynically playing the game. But I think it bears significant skepticism,
• 5:51
  kind of regardless of how you parse out what the motive truly was.
• 5:56
  Yeah, I think I like 95% aligned with everything you just said. I think one of the,
• 6:01
  I think the anthropic team is genuine, but I also think they're absolutely insane because effective altruism is an insane cult-like attempt to create a new religion and try to micromanage the economy of the future today.
• 6:21
  today. It doesn't make any sense. It's an ideology steeped in hubris run by a bunch of polyamorous
• 6:29
  nerds who I would not want my children anywhere near. So I think they're genuine, but the genuine
• 6:37
  nature of their arguments are rooted in a completely insane ideology. I think the slowdown
• 6:43
  too, I think maybe looking for excuse to not have an IPO or a couple of IPOs that flop too,
• 6:49
  I think particularly in the case of OpenAI. I'm not sure if you saw it. I wasn't able to verify it,
• 6:53
  but I do vividly remember seeing a report that there was a secondary sale of OpenAI shares in
• 7:00
  a secondary market at a $445 billion valuation, which would be one third of what they were
• 7:06
  publicly marketing they wanted to IPO at. And then a headline that you didn't mention that I think was
• 7:11
  a glaring signal that does not bode well for Anthropoc or OpenAI was Latham and Watkins,
• 7:18
  the largest law firm in the country, saying, hey, we're not going to use Anthropic in open AI
• 7:24
  because we don't want to be leaking our IP to these companies so they can build a solution that we're
• 7:30
  working on by taking our information and just copying it. We're actually going to buy a bunch
• 7:34
  of GPUs and self-host open weight models. And I think if you are a large corporation on the scale
• 7:41
  of Latham and Watkins, I do think you need to seriously consider whether or not you use
• 7:46
  open AI, an anthropic models, because in the case of open AI specifically, I mean, within the last
• 7:53
  month, they've proven to look at the inputs and prompts of their users to sort of take what they
• 8:02
  did and claim to have done it themselves in the case of the math problem that was solved a few
• 8:07
  weeks ago. Yeah, for sure. I mean, what you're highlighting is like the, I think we've talked
• 8:12
  about on the show before, but the reason I think, or one of the many reasons that, you know, the
• 8:15
  the leading figurehead kind of spearheading the open source movement for enterprise, especially,
• 8:22
  is Jensen, right? That obviously he's economically incentivized to do that, but there's a clear
• 8:28
  case that a lot of enterprises are, I think, increasingly going to have to kind of move
• 8:32
  in something like that direction. The flip side of that is, you know, I did see the points on
• 8:37
  secondary sales, and I think it's tough because the secondary market's just so,
• 8:41
  So even for a big, you know, much more liquid company like this, those can still be so like swirly and dependent on like the market regime of a given like month.
• 8:51
  So it's hard to take a ton away from it.
• 8:53
  But I don't think it's you can't totally discount it.
• 8:55
  I mean, it's not it's not been it's not the market environment that it was a few months ago.
• 8:59
  You know, you would have liked if you were these guys to probably IPO into like, you know, the June run up when when Leopold was still, you know, YOLOing and driving the market.
• 9:07
  But I think there is some potential of using this to create noise to push out an IPO a bit.
• 9:14
  I do think that, though, that I always there's a there's a clear desire from a lot of people, probably like, you know, present company included, to see the labs kind of put in their place a little bit and, you know, to see some of the valuations re-rate.
• 9:30
  And there's I think there's some like instinct and sense that some of these valuations right now are not sustainable.
• 9:35
  And so then there's like this desire to say, like, you know, the labs are cooked because of open, open weight models and all the enterprises are just going to go kind of run their own capacity on their own GPUs or something on open weight models.
• 9:46
  I think there'll be a lot of that, but the flip side is, and it connects back to this pacing the frontier thing.
• 9:51
  A headline I don't have on here is the reports about Anthropic opening, opening their own automated wet lab for biological research, which is like not the thing you'd think you would do if you thought you had just invented Skynet.
• 10:03
  and you were worried about the invention of a biological weapon, unless perhaps you think that,
• 10:06
  you know, you can use effective altruist principles to construct the right biological
• 10:10
  weapon to cause like just the right kind of mass casualty event to get the, you know,
• 10:13
  probabilistically weighted a best outcome or whatever. But I think like there's, we've talked
• 10:19
  about it a bit internally like you know you can kind of see a future too where you know if you in like investing if you have alpha like generally you don like want to leak too much of that alpha Generally the best way to kind of capitalize on that is to just just to trade right You can
• 10:34
  write a sub stack newsletter and, you know, you can provide portfolio advice to people or whatever
• 10:38
  to kind of fund, you know, to, to fund that model. But like what you want to do is, is just be
• 10:42
  capitalizing hard on the alpha that you have. And you kind of think about, okay, if you're
• 10:46
  philanthropic or open AI, do you want to start like verticalizing some of the things, some of
• 10:51
  like the high, the most economically valuable applications of frontier intelligence by, you
• 10:58
  know, partnering with, you know, major player, major enterprise players in a given space and
• 11:03
  taking some sort of like success fee, some, you know, some sort of like upside equity economics
• 11:07
  in your, your model that's ahead of everybody else for at least, you know, for the next three to six
• 11:12
  months, Model X is this far ahead and it will enable you to discover the cure for cancer or
• 11:17
  like to place, you know, the world's greatest basis trade or whatever. And it's going to earn
• 11:22
  you billions or trillions of dollars. And like for a small 10%, you know, uncapped upside fee,
• 11:26
  you can, you know, use our models for that, right? I think like, I don't know that that's
• 11:31
  going to happen, but I think before people fully dance on the grave too much of the labs, I think
• 11:37
  it's worth considering that the model long-term may not be to just kind of sell commodity tokens
• 11:42
  to people, but rather to kind of silo and gatekeep some of the alpha that they think their models can
• 11:47
  generate. So it's all kind of TBD, who knows, but I think the next slide kind of puts a period on
• 11:54
  maybe what the output of all this was for now. Yeah. You may want to pace the frontier, but we're
• 12:00
  not doing that. Full bore head, President Donald Trump stepped in and said, get in there. Stop being
• 12:05
  a bunch of scared nerds. We got to accelerate. We can't lose this war to China. Yeah. Some real,
• 12:10
  Well, you know, shut up nerd energy to both the labs and all podcasters who, you know, pontificate about what they think is going to happen next.
• 12:18
  You know, it shouldn't be shouldn't be too surprising.
• 12:20
  But, you know, Trump came out very aggressively kind of against all of this, all this talk of slowing down and called it a hoax and said, you know, data centers are great.
• 12:28
  They make people wealthy. And if and if we don't if we don't win, then China will win.
• 12:32
  So I think it's it's a very like Trumpian response.
• 12:35
  I think it also, you know, shouldn't be that surprising and kind of clearly aligns with the great game that's being played that we've talked about.
• 12:43
  AI clearly is seen by this administration as one of the key impetus for reshoring, for driving, you know, industrial impulse to bring back some manufacturing capacity, to run it hot, to get GDP up.
• 12:55
  And I think not totally disingenuously, I think it's, you know, in the great power competition that we're in, this transition, this phase change, you know, every country is going to want to press every advantage that it has.
• 13:07
  And for now, the U.S. does have an advantage in compute capacity and the latest frontier models.
• 13:13
  And so, you know, operating from that perspective, I think you can see why Trump immediately, this was his kind of knee-jerk reaction.
• 13:20
  And I think it sets up an interesting, you know, bit of interesting showdown maybe over time as it relates to what's the relationship between frontier intelligence and the state.
• 13:29
  We've talked about it a little bit in the past, but, you know, a few months ago, we wrote about we wrote and spoke specifically about, you know, what happens if if the build out, you know, can't be easily funded by, you know, private enterprise, private capital markets anymore.
• 13:43
  Or does the state ultimately step in and nationalize things or take an equity stake or do really unconventional things to keep this flywheel turning, whether that's the right decision in the long run or not?
• 13:56
  And I think this is another data point telling you if you're Sam Altman, if you're Dario, if you're any of the guys kind of in the seat here, you're kind of renting the big seat.
• 14:05
  And if you don't play your cards right, then somebody else is going to come and tap you on the shoulder and take it over for you.
• 14:10
  Yeah, NSA, we're here to take over your models.
• 14:13
  Thank you. Speaking of the great game, we've been covering it for the whole year, especially with the emergence of the war with Iran.
• 14:20
  Part of that great game is energy markets domestically, globally.
• 14:26
  What levers can be pulled to weaken the adversary?
• 14:31
  And in this case, the great game, the U.S. versus China, looking at it through that lens now and hurting at the pump.
• 14:37
  I think we're well over $5 a gallon.
• 14:41
  We're getting close to $5 a gallon here in the Northeast and the Philadelphia area.
• 14:45
  Many other parts of the country are above that diesel screaming.
• 14:49
  But if you take a step back and look at the relative stress in oil markets around the world,
• 14:55
  it looks like Shanghai crude is dislocating from WTI.
• 14:58
  And this would play into the great game where we're rushing ahead, accelerating with AI.
• 15:04
  we're trying to re-industrialize our economy here in the United States. And I think one of the lenses
• 15:10
  through which John and I have been viewing this through is like, okay, is everything just a proxy
• 15:13
  war with China? And if so, what data points would point to that? And this is a very glaring data
• 15:21
  point with the recent pipeline attacks in Saudi Arabia. Saudis have told Europe they're not going
• 15:27
  to be able to deliver crude to them this fall And then obviously this disrupts the flow of oil too China as well where Shanghai crude is screaming to I would imagine all highs right now Yeah I believe it multi highs at least And yeah I think the chart kind
• 15:43
  of speaks for itself. It's all a game of relative leverage. I think you had this period where,
• 15:48
  and it's kind of hard to tell because the data is not great. Out of China, I think a lot of
• 15:52
  analysts were somewhat stumped at basically trying to put the pieces together on how China was
• 15:58
  managing to kind of to get by while radically cutting imports and not obviously running down
• 16:06
  observable stocks. It seems like there's some thought that in the background there were
• 16:10
  petroleum reserves being drained, as well as some demand destruction activities to kind of keep
• 16:15
  a lid on prices. But it seems like the Chinese have meaningfully returned to the market in the last
• 16:20
  few weeks. And then that has been compounded by the pipeline attack, the East-West pipeline that
• 16:26
  was serving as a big offtake valve to avoid the straightforward moves for the Saudis.
• 16:32
  And so you kind of see that relative spread blow out here in these last few weeks.
• 16:36
  So we've been watching it closely this whole year, but the energy game is, again, one of
• 16:44
  those levers that for now the U.S. has probably the upper hand on.
• 16:49
  And so you put your tinfoil hat on and maybe ask who is responsible for the pipeline attack.
• 16:55
  I'll leave that to listeners to consider. But clearly, either way, regardless of the source,
• 17:01
  the outcome is kind of similar, that you've got this blowout potentially in relative leverage,
• 17:05
  as much as it still hurts in the U.S. in various ways that we'll get to.
• 17:11
  Yeah. And then moving on, getting below the surface level headlines that are fear-mongering
• 17:17
  and looking at the actual data as it pertains to the straighter her muse and how much oil is
• 17:22
  actually making it through that waterway, it looks like it is trending up continually. And
• 17:29
  the Saudis are pivoting to send more oil via Hermes after the pipeline was shut down. And then
• 17:35
  Rory Johnson here has a chart from Commodity Context that shows that the seven-day average of
• 17:40
  oil transit flow through Hermes has rose to nearly 12 million barrels per day as of Sunday.
• 17:46
  This was last week. Yeah, it's kind of funny that the East-West pipeline and all these other
• 17:51
  workarounds were made to kind of, were being leveraged to avoid straight-up Hormuz. And then
• 17:55
  the pipeline blows up and the Saudis, the headlines that you see here, the Saudis are working around
• 17:59
  that by going through the straight-up Hormuz again. But yeah, this is, you know, you're seeing
• 18:04
  more and more kind of, you know, smoke on this point that there is volume kind of getting through
• 18:09
  now to a higher degree of that highly contested waterway. And I think it's not on here, but we
• 18:14
  should note also, I think the Saudis later said that they expect to have the East-West pipeline
• 18:18
  back up to 50% of its original capacity in like a week or a few days or a week, and then more coming
• 18:23
  by the end of the year, early next year. So you can kind of see the, the wheel is turning to
• 18:28
  loosen up kind of more and more flows there. Um, and you know, we'll see how that kind of plays out
• 18:33
  between again, U S and China and who that benefits more, but I'm just notable that the narrative I
• 18:39
  think has been, you know, the U S isn't, is just obviously definitively not winning in Iran or
• 18:44
  making any progress because, quote unquote, the Strait of Hormuz is not open. But with between,
• 18:49
  you know, dark transits or the workarounds that it seems like the military has been involved in
• 18:54
  over the last few weeks that we've discussed to kind of escort ships along the Omani route
• 18:59
  to get oil out, it seems like there has been actually a decent amount of progress made there.
• 19:04
  And maybe the chokehold here is fading a little bit. Again, you can debate whether the U.S.
• 19:11
  actually wants that chokehold to totally, you know, fade. But either way, the, I think the,
• 19:17
  the narrative that nothing has changed since, you know, March and the U S is, is stuck in a quagmire
• 19:22
  and can't make any progress is, is kind of, you know, contradicted by the data that we're seeing
• 19:25
  here. You're on mute. I was going to say, but there are actual real-time effects on the economy
• 19:33
  with the disruption in oil markets that I mentioned earlier, but diesel at all time highs,
• 19:37
  $6.31 per gallon last Wednesday. And I think a lot of the fear mongering on X and other social
• 19:45
  media platforms right now stock up on food. We're about to have the oil crisis going to lead to a
• 19:52
  food crisis. We're not going to enable the ability for goods to be shipped around the country. It's
• 19:59
  going to be significantly perturbed with diesel prices being at all time highs. And Delco is
• 20:05
  saying that who's delco cfo at jb hunt okay so jb hunts cfo came out he's expecting an earnings
• 20:14
  drop of five to ten percent from second or third quarter as a result of higher costs so again going
• 20:19
  back to leverage pulling levers you have to decide what is the the trade-off the risk reward trade-off
• 20:25
  here and i think domestically the way we're feeling this is obviously at the pump and there will be
• 20:30
  knock-on effects throughout the economy and on earnings and on food prices at least temporarily
• 20:35
  And is that a trade-off that's going to be worth it
• 20:39
  in the long run?
• 20:40
  We shall see.
• 20:41
  Yeah, it's at the pump for the consumer.
• 20:43
  And I think there's a long run knock-on
• 20:45
  to the food prices as well.
• 20:47
  But I think it's also, it's notable for diesel specifically
• 20:49
  that's so critical to trucking and to logistics and heavy industry.
• 20:54
  So it's interestingly in tension with the way that the game is going to work, if it works at all.
• 21:00
  And the Trump-Bescent framework is kind of running it hot, keeping GDP elevated and having this higher impetus for an impulse for industrial activity.
• 21:10
  Well, that's directly kind of weighed down by diesel prices is kind of ripping to all-time highs.
• 21:15
  And I think the question is, you're asking if it's worth it.
• 21:18
  I think the question is how long can it stay there relative to the other goals that are trying to be accomplished.
• 21:25
  It's not in the slides, but last week, John Thune floated the idea of a diesel export ban to put some near-term downward pressure on diesel prices.
• 21:34
  I think it's questionable whether that would actually have the effect that they're looking for.
• 21:37
  But I think Chuck Grassley also was tweeting about this over the weekend.
• 21:41
  So you're getting more and more kind of Overton windows shifting toward the idea of banning diesel exports, at least temporarily.
• 21:48
  You know, there's nothing so permanent as a temporary government program.
• 21:51
  But in any case, I think the question is like the duration here, right?
• 21:55
  Relative to can you make other key counterparties across this whole game board, you know,
• 22:00
  cry uncle before you have to tap out on this.
• 22:04
  Yeah.
• 22:04
  And you don't have it in the slides either, I don't think, at least.
• 22:06
  But I think while we're on the subject, talking about tradeoffs, I think the Atlanta Fed Q3
• 22:11
  GDP estimate is hovering around like 5.1% right now.
• 22:14
  Right.
• 22:15
  Yep.
• 22:16
  Which is pretty insane.
• 22:17
  That would be the highest since Q4 2021.
• 22:20
  We had to put an asterisk on that because we were coming out of the economic shutdown.
• 22:23
  So that was a bit exaggerated to the upside.
• 22:25
  So I think you take that out.
• 22:26
  It's been quite a while since we've had that type of GDP growth.
• 22:30
  Yeah, I mean, that gets into the next.
• 22:32
  That's a good lead into our next topic, too, with the FOMC meeting.
• 22:36
  Yeah.
• 22:36
  Another rate hike, 25 bps.
• 22:38
  Yeah.
• 22:39
  Yeah. So despite, despite Trump spending the last couple of years berating a Fed chair Powell on
• 22:45
  true social and famously in real life while wearing hard hats, you know, he, for not,
• 22:51
  for not lowering rates, his boy, Kevin Worsh now in the big seat. And, you know, just a couple
• 22:56
  of meetings in hikes, hikes rates, 25 bips. Obviously Trump, as we can see from his true
• 23:02
  social post, you won't be surprised to hear he's again calling for a benchmark rate of 1% or less
• 23:07
  because we're the best credit in the world. So not happy there, although there's some commentary
• 23:11
  suggesting that, you know, he's still, he's still proud of Kevin and knows that he had to just go
• 23:15
  with the overall board because they're too political and there's no point voting against
• 23:19
  them right now. So we'll see how that relationship holds, but it's definitely, it's, you know,
• 23:24
  it's precarious position to have energy prices where they are. The diesel situation we've talked
• 23:30
  about and have a Fed that's actually moving toward tighter monetary policy and pushing rates higher,
• 23:39
  generally not a great combination for forward equity returns. And it's also particularly
• 23:45
  interesting because just this was a notable point that Felix from Forward Guidance made,
• 23:51
  that the committee's relative concern about inflation and kind of the balance of risks to
• 23:57
  core inflation is actually down somewhat from the June meeting, not dramatically, but somewhat.
• 24:03
  And yet, you know, now they're moving to do this hike and saying there's going to, or the dot plot
• 24:06
  saying there's going to be another this year. And I believe the indication is potentially more in
• 24:11
  2027 as well. So it's, it's a tough spot to be in. And, you know, we'll see how tenable this is
• 24:18
  over the longterm and how, you know, committed the FOMC actually is in the face of the various
• 24:23
  things that need to be accomplished to continuing to push rates higher in a situation where rates
• 24:29
  don't necessarily like fundamentally govern the effects of the core effects of inflation
• 24:36
  that people are feeling. And in a situation where geo strategically, we really cannot afford to be
• 24:42
  increasing the cost of funding a lot of the things that the executive branch has decided
• 24:47
  need to be funded right now. But I also thought it was notable that this is like the sixth
• 24:53
  slide in, frankly, you could almost forget that the FOMC was, was meeting this past week.
• 24:58
  It was far and away, you know, like the, the fifth most important thing that, that happened,
• 25:02
  which I think just interestingly speaks to kind of a declining centrality of traditional
• 25:06
  monetary policy relative to some of these other forces that uh that we talked about And that may become an interesting interesting preview for what we going to see over the next couple of years Yeah And I mean our favorite chart is up next which is the 10 alongside the move index
• 25:23
  which measures the volatility and the market option volatility estimate index on treasury
• 25:28
  yields. And I think it was a big story leading up to the Fed FOMC meeting. 10-year was over
• 25:37
  5% FOMC meeting happened. It fell quite a bit when they raised rates, but then quickly by the
• 25:44
  end of the trading day was back up around five, currently trading at 4959. But as we've been
• 25:51
  saying, I think it would be idiotic to think that Scott Bessent and everybody in the treasury
• 25:57
  doesn't understand that the fiscal side of the equation is pretty woefully far gone at this
• 26:05
  point. I think they understand that yields want to drift higher, no matter what they say publicly.
• 26:12
  And their job is to just manage that structural bear market and bonds and make sure that the
• 26:20
  volatility doesn't catch people off sides and cascade into a liquidity crisis. And
• 26:26
  move index seems to be relatively stable right now. Yeah, I think you can kind of see on this
• 26:32
  chart, I've noted a few key moments over the past five years in both yields and bond volatility.
• 26:37
  The two on the right, I just realized should be moved over a little bit. So the Rose Garden
• 26:41
  massacre should actually be that big spike you see kind of near the second red line to the right.
• 26:47
  And the straighter form of the shuffle should be the other, the big spike there. But I think the
• 26:51
  point that you can kind of see here, I'm eyeballing it is, you know, you can't do TA on a volatility
• 26:55
  index. It's not actually an asset that can be traded, but my TA bros would call this a descending
• 27:00
  channel over the last five years. You kind of at each point where you've had stress on the system,
• 27:04
  whether it's, you know, late 2022, you had UK LDI crisis, which is kind of a result of the fastest
• 27:10
  rate hiking cycle in history for the US, SVV blowing up. Last time we were here around 5%
• 27:15
  on the 10 year Liberation Day and war in Iran. Kind of at each point you can see, you know,
• 27:20
  maybe you get a spike in yields, maybe you get yields moving back into kind of this 5% territory
• 27:24
  even. But at each point, the bond volatility peak is kind of lower and lower. And now we're back up
• 27:32
  at 5% again-ish. And we've kind of been in this tight 70, 80 band on bond volatility, treasury
• 27:38
  volatility, since over the last few months. And we're at the lowest level on that index that we've
• 27:45
  been at across this whole, all these other spikes that I'm kind of pointing to. So yeah, just,
• 27:50
  we've talked about it ad infinitum basically over the last few months, but
• 27:54
  I, you know, cosign everything you said. I think the speed of travel is maybe more important in the
• 27:59
  near term than the direction of travel. And, you know, keeping a lid on that volatility is in the,
• 28:05
  call it one to two quarter timeframe, more significant than managing to an absolute level.
• 28:11
  Over the long term, the absolute level does matter because it's going to affect, you know,
• 28:14
  how we can roll over debt and actually be able to service the debt. And you can't really have
• 28:19
  5% plus blended interest rates on overall federal debt, even where we are on debt GDP and interest
• 28:26
  payments relative to receipts. But the short-term kind of mandate, I think, is looking pretty clear
• 28:35
  here. So worth watching, certainly the 10-year get to higher levels, but also worth watching
• 28:41
  kind of the speed at which it does it and the overall volatility kind of backdrop while it's
• 28:45
  doing it. Yeah. And then this next slide we have, you mentioned we could blow through a bunch of
• 28:50
  just headlines that are probably important to flag, but we don't have to spend too much time
• 28:56
  on this particular slide. What do you think is most important to express here?
• 29:01
  Yeah. I mean, I think just we had a ton of geopolitical headlines as well last week. I
• 29:05
  mean, the top left here is the Lindsey O. Graham sanctioning Russia Act that had broad bipartisan
• 29:12
  and support now gives Trump basically a tool to levy 100% tariffs on buyers of Russian oil.
• 29:18
  And that's basically, you know, China and then secondarily India.
• 29:22
  So kind of tariffs are back on the menu, boys.
• 29:24
  There's a really good chart here from Javier Blas at Bloomberg showing Venezuelan crude
• 29:29
  ramping way back up crude imports in the US ramping way back up Basically had been flat for several like zero for several years now back up into you know kind of 10 high territory
• 29:40
  which is going to be very relevant to the overall energy picture and the kind of Don
• 29:43
  Roe Doctrine picture, which then got its probably fullest expression in the Friday evening announcement
• 29:48
  that the U.S. has a deal with Denmark and Greenland to manage Greenland's security and basically
• 29:55
  guarantee that the U.S. has some level of infinite and forever influence and exclusive influence over
• 30:01
  Greenland and military bases and different things that can be done there. I think a lot of that
• 30:07
  still needs to get fleshed out and we need to see what that agreement fully comprises. But
• 30:12
  it's not quite making Greenland the 51st state, but it is in conjunction with everything we've
• 30:18
  seen in South America, Venezuela, et cetera, you know, pointing, moving, not just, this is no
• 30:25
  longer Trump just kind of spouting things off on true social and retweeting articles about the Don
• 30:29
  Roe Doctrine because they flatter him. It's actually kind of real policy changes are happening.
• 30:33
  They're kind of moving things in that direction. So in another week, that might've been what we
• 30:37
  talked about for like 10 minutes on the show, but yeah, definitely thought it was worth flagging at
• 30:40
  least a little bit. Yeah. I mean, the Venezuela numbers are actually very encouraging. I would
• 30:45
  say like, maybe the Don Road Doctrine and the move to get Maduro out of there and have
• 30:52
  more influence in Venezuela will be a net positive for the domestic economy. Again,
• 30:57
  the crude is flowing into the US. How much of that can we refine here? I think we can refine
• 31:02
  the Venezuelan crude in the Gulf. Yeah, we should have a good goal for
• 31:06
  finding capacity for that crude specifically. There was a lot of capacity that was built out
• 31:09
  specifically for that. I don't know where it stands in terms of like its ability to quickly
• 31:14
  like take it on, but I think the capacity theoretically exists. Um, and yeah, you know,
• 31:19
  whether you can have a lot of opinions on, uh, military adventurism and U S interventionism,
• 31:24
  but I think either way, the point is just like, these things are being instantiated into physical
• 31:28
  reality now. And I think it's harder and harder to kind of deny that. Yeah. And then as it pertains
• 31:33
  to the Greenland, I think two things, very underappreciated trading route there, um,
• 31:38
  in the Arctic, uh, and then the rare earth minerals too. I think that's, that's becoming,
• 31:43
  I watched an hour long mini doc or expose on a Sumerium, which is integral for the magnets
• 31:52
  that are used in drones and missiles.
• 31:56
  And 100% of it at this point is produced in China.
• 31:59
  So there's a mad dash to find, not only find these rare minerals, but more importantly,
• 32:05
  great processing plants outside of China because they have a struggle.
• 32:08
  That's probably China's biggest point of leverage right now over the U.S. specifically is they hold all the spice that can turn our magnets into heat resistant.
• 32:22
  They make the magnets heat resistant, which make modern missiles possible to actually operate.
• 32:30
  And that's a pretty big point of leverage.
• 32:33
  But shifting back to Bitcoin, we started with Bitcoin.
• 32:35
  We are 1031.
• 32:36
  when we do invest in Bitcoin infrastructure, that is our mandate, that is our reason for being.
• 32:43
  And as John and I often say, while we're talking about all these things that may not seem directly
• 32:47
  connected with Bitcoin, they are at the end of the day. I think a lot of what we discussed up
• 32:51
  to this point is very bullish for Bitcoin. It would not be surprised that Bitcoin is drifting
• 32:55
  higher because the world is waking up to the fact that we are moving into a more multipolar reality.
• 33:00
  The fiscal situation is pretty insane. And in a world of uncertainty, the certainty of Bitcoin's hard cap 21 million supply enforced by a distributed consensus among nodes and miners around the world is very valuable.
• 33:16
  And if you believe it's valuable, you should believe that the government believes it's valuable, too.
• 33:22
  and we've been talking about this for years.
• 33:24
  Clarity Act was top of mind for most of the year.
• 33:28
  That failed to get past the cloture in the Senate earlier,
• 33:32
  or excuse me, in the middle of last week.
• 33:34
  But the bill that I'm more interested in
• 33:37
  is the Strategic Reserve Act,
• 33:38
  which is manifesting another form
• 33:42
  via Congressman Bejic,
• 33:44
  which is the American Reserve Modernization Act,
• 33:46
  which would codify Bitcoin as a strategic asset
• 33:50
  on the federal government balance sheet and the ARMA bill cleared a pretty big hurdle last week clearing the House Financial Services Committee vote So it moving along Yeah So this is not the ARMA bill is not exactly the same as the Bitcoin Act
• 34:05
  I mean, there's no million Bitcoin purchase mandate like the Senate Alamos's bill had.
• 34:11
  But certainly it's the start of what you would kind of need to, I think, eventually get there
• 34:15
  and build a permanent reserve on existing government Bitcoin holdings.
• 34:19
  You know, the first segment out of the woods in that bill yet, but notable that it cleared that hurdle, I think, in the same week that the Clarity Act notably failed.
• 34:28
  Although, as we have on the bottom left, the SEC and CFTC basically immediately came out and said, you know, we're going to provide some level of additional regulatory air cover for the time being.
• 34:37
  That could obviously be reversed by the next administration.
• 34:39
  But, yeah, I think interesting contrast in the bills that moved forward and didn't last week.
• 34:46
  But I think even more interesting is if you flip to the last slide, it's not going to tell people anything they didn't already know.
• 34:52
  But we had the Clarity Act kind of get killed in case of negative headline, even though I think we both argue it didn't really matter to Bitcoin ultimately long term.
• 35:02
  We had diesel hitting all time highs, East West Pipeline attacked, oil ripping back to kind of year to date highs.
• 35:08
  You had 10 year hitting 5 percent.
• 35:11
  Again, you had another Fed rate hike, which we thought a few months ago was basically off the table.
• 35:16
  You had all those things kind of happening.
• 35:18
  You had an AI pause that threatened to basically kill the S&P 500 and throw off all the equity momentum.
• 35:25
  You had all these things happening.
• 35:27
  And against all that backdrop, Bitcoin breaks above its 50-week moving average.
• 35:32
  We have a good chart at the end here that Alex Thorne at Galaxy put together just kind of showing that.
• 35:37
  But collectively, I just found that to be an extremely interesting setup and an extremely interesting event path and fact pattern.
• 35:43
  that all of those optically negative things would be happening,
• 35:48
  the kinds of things that at the very least you wouldn't think would give a quote-unquote risk asset
• 35:52
  any additional momentum, especially one that's down on the year and has kind of been left for dead
• 35:56
  and is certainly out of favor. To see it pop back above this kind of key technical level that has
• 36:01
  historically marked the end of prior Bitcoin bear markets, all extremely interesting for that to
• 36:06
  happen kind of all at once. I think you got to say it's bullish. What are they, climbing a wall of
• 36:12
  worry. Is that what they say? That is what they say. Is that what we're doing right now? I mean,
• 36:16
  this chart's outdated. It has 81,159. We are right under 86,000 right now. So another 7% to that,
• 36:25
  to the upside above the 50-week moving average, of course. We have to close the week
• 36:29
  around these levels. But it seems like if you look at this chart and then you'd have another
• 36:33
  surge up, looks like we're surging up, consolidating, surging up, consolidating.
• 36:38
  So it'll be interesting to see if we consolidate around these levels this week.
• 36:43
  But yeah, I think the other thing I wanted to mention on the last slide, I had Sam Lyman from Bitcoin Policy Institute on TFTC.
• 36:53
  We published that on Saturday.
• 36:55
  Highly recommend you go look at that.
• 36:56
  We talked about clarity.
• 36:57
  And you mentioned it.
• 36:58
  Like, yes, it could be the SEC, CFTC, OCC are moving forward with rulemaking guidelines for industry participants, despite the fact that clarity didn't pass.
• 37:07
  And Sam made the point and said, even if we do get a new administration or the Democrats take over in 2028 and have the House and the Senate, he was under the belief that at that point, like the rulemaking will be pretty much entrenched.
• 37:20
  It'll be hard to untangle all that.
• 37:22
  And so the show must go on.
• 37:24
  The Trump administration has strategic goals and initiatives.
• 37:29
  And as we've been saying all year, they're not going to wait for Congress and the Senate to play ball.
• 37:35
  They will they will give use the executive branch to give the agencies dealing with this stuff, the the head cover they need to to make sure that everything moves forward.
• 37:45
  And I'm headed to D.C. later this afternoon for the BPI summit on Freedom Tech.
• 37:50
  And I'll be I'll be speaking on a panel about just the goals of the administration as it pertains to Bitcoin and broader crypto and integrating them in the system.
• 37:59
  And it seems like full bore ahead, boys and girls, if you're listening to there's a few of you girls out there who listen to the show.
• 38:05
  There are dozens of them out there.
• 38:07
  We'll see you next week.