[00:00:03.020 -> 00:00:04.500] Jay, good to see you again.
[00:00:05.460 -> 00:00:06.380] So good to see you, Mario.
[00:00:10.610 -> 00:00:14.860] We're just talking about the AI bubble
[00:00:14.860 -> 00:00:17.540] and the problems that's causing the treasury right now
[00:00:17.540 -> 00:00:21.640] and America's inability to pay back its debt,
[00:00:21.740 -> 00:00:22.460] the bond yields,
[00:00:23.120 -> 00:00:25.500] best and swore with the bond yields household interconnected.
[00:00:26.400 -> 00:00:27.800] But before going there,
[00:00:28.120 -> 00:00:30.260] because I know you did a deep dive into this not long ago,
[00:00:30.580 -> 00:00:32.620] I want to talk about the energy markets as a whole
[00:00:32.620 -> 00:00:34.540] because you've got Brent and WTI
[00:00:34.540 -> 00:00:38.220] at similar levels to May and June respectively.
[00:00:39.280 -> 00:00:41.800] So almost wartime levels.
[00:00:42.620 -> 00:00:45.940] And then you've got diesel prices breaking all-time highs,
[00:00:46.360 -> 00:00:49.200] commodities in general still skyrocketing.
[00:00:49.980 -> 00:00:51.200] So I want to get your thoughts
[00:00:51.200 -> 00:00:53.480] on the state of the energy market right now
[00:00:53.480 -> 00:00:55.140] because I want to go back
[00:00:55.140 -> 00:00:56.460] to what people were saying months ago.
[00:00:56.820 -> 00:00:58.780] If the Strait of Hormuz is still closed by June,
[00:00:59.160 -> 00:01:00.580] the global markets are going to collapse.
[00:01:00.960 -> 00:01:02.620] If they're still closed by September,
[00:01:03.160 -> 00:01:04.520] the global economy is going to collapse.
[00:01:04.540 -> 00:01:06.720] We're in September now.
[00:01:06.860 -> 00:01:08.860] I know the Americans have been able to get a lot of ships out.
[00:01:09.660 -> 00:01:11.180] But it seems that now,
[00:01:11.320 -> 00:01:12.320] despite the calm,
[00:01:12.440 -> 00:01:14.660] like right now the Iranians attack like they did last night,
[00:01:14.720 -> 00:01:15.500] a massive attack,
[00:01:15.840 -> 00:01:16.820] Trump does not retaliate,
[00:01:16.860 -> 00:01:17.480] does not respond.
[00:01:17.980 -> 00:01:19.240] Yet the markets don't recover.
[00:01:19.360 -> 00:01:20.680] Usually we see the markets recover
[00:01:20.680 -> 00:01:22.380] as soon as we see Trump not escalating
[00:01:22.380 -> 00:01:25.360] because he had what we call in military terms,
[00:01:25.480 -> 00:01:26.320] escalation dominance.
[00:01:26.440 -> 00:01:27.980] He was dictating what happens now,
[00:01:28.360 -> 00:01:29.440] what happens next.
[00:01:29.720 -> 00:01:30.760] And he doesn't have that anymore.
[00:01:30.760 -> 00:01:34.380] So I feel like either the markets are pricing in,
[00:01:34.380 -> 00:01:35.580] in a prolonged conflict,
[00:01:35.580 -> 00:01:37.000] a quagmire or forever war,
[00:01:37.440 -> 00:01:39.660] or there's not as many ships going through,
[00:01:40.320 -> 00:01:43.380] or there's just not much oil out there anymore.
[00:01:45.370 -> 00:01:47.230] Well, it's like the combination of all three.
[00:01:47.290 -> 00:01:52.270] And to your point about the cataclysmic effect that everybody expected
[00:01:52.570 -> 00:01:53.530] back in the spring,
[00:01:53.590 -> 00:01:56.650] when this thing kicked off first week of March,
[00:01:56.770 -> 00:01:57.130] you know,
[00:01:57.130 -> 00:02:00.070] it was forecasted that by the end of spring,
[00:02:00.490 -> 00:02:02.730] if the Strait of Hormuz was still not shipping,
[00:02:03.830 -> 00:02:05.590] we'd see massive economies,
[00:02:05.690 -> 00:02:07.630] oil importing nations crater.
[00:02:07.690 -> 00:02:08.190] And,
[00:02:08.350 -> 00:02:09.310] and that didn't happen.
[00:02:09.550 -> 00:02:10.050] Right.
[00:02:10.050 -> 00:02:10.570] Um,
[00:02:10.570 -> 00:02:14.050] people can point to China's halted imports,
[00:02:14.230 -> 00:02:16.270] leaving more oil on the open seas,
[00:02:16.570 -> 00:02:18.910] us removing sanctions from Russia,
[00:02:19.250 -> 00:02:20.950] leaving more oil on the open seas,
[00:02:21.130 -> 00:02:23.290] or the us releases from the SPR flooding,
[00:02:23.290 -> 00:02:24.870] the market with more oil to buy.
[00:02:24.870 -> 00:02:26.410] It just increases the supply and,
[00:02:26.890 -> 00:02:28.150] and that keeps prices down.
[00:02:28.690 -> 00:02:29.650] Maybe all those things.
[00:02:29.650 -> 00:02:30.550] I think at the end of the day,
[00:02:30.550 -> 00:02:31.010] like it,
[00:02:32.120 -> 00:02:32.720] you know,
[00:02:33.360 -> 00:02:35.600] the world is far more resilient to anyone,
[00:02:35.700 -> 00:02:40.700] crisis than we immediately believe the same as bubbles can inflate far larger
[00:02:41.400 -> 00:02:42.640] than anyone believes,
[00:02:42.680 -> 00:02:42.940] right?
[00:02:42.940 -> 00:02:47.340] We can see the mechanics in place for a disaster far before that disaster
[00:02:47.340 -> 00:02:48.160] strikes.
[00:02:48.320 -> 00:02:49.040] Um,
[00:02:49.100 -> 00:02:51.580] 2008 crisis was evident to 2006,
[00:02:51.580 -> 00:02:54.080] but people looked wrong for two years before anything actually happened.
[00:02:54.080 -> 00:02:56.260] That's very common with these systemic issues,
[00:02:56.260 -> 00:02:56.480] right?
[00:02:56.480 -> 00:02:58.760] And so I think with the energy trade,
[00:02:58.780 -> 00:03:00.480] it's probably a similar situation.
[00:03:01.020 -> 00:03:01.780] Um,
[00:03:01.940 -> 00:03:05.560] and Scott Besant and Marco Rubio,
[00:03:05.560 -> 00:03:08.260] his comments over the last month about the Strait of Hormuz,
[00:03:08.260 -> 00:03:12.800] just becoming an irrelevant body of water in as near as two years,
[00:03:12.820 -> 00:03:13.300] uh,
[00:03:13.300 -> 00:03:15.180] probably did a little bit to calm markets.
[00:03:15.180 -> 00:03:16.660] Although the math doesn't add up,
[00:03:16.660 -> 00:03:19.080] there's no scenario where that's reality,
[00:03:19.100 -> 00:03:20.880] especially inside that timeline.
[00:03:21.420 -> 00:03:22.180] Um,
[00:03:22.280 -> 00:03:24.160] and I think people are just a bit apathetic.
[00:03:24.180 -> 00:03:27.120] I think oil is priced properly right now around a hundred.
[00:03:27.120 -> 00:03:28.180] That's likely where it,
[00:03:28.200 -> 00:03:29.020] where it should be.
[00:03:29.500 -> 00:03:30.140] Um,
[00:03:30.140 -> 00:03:30.940] I trust markets,
[00:03:30.940 -> 00:03:31.180] you know,
[00:03:31.180 -> 00:03:32.180] I guess what I hear people say,
[00:03:32.180 -> 00:03:32.300] oh,
[00:03:32.300 -> 00:03:35.500] the market's not responding properly or oil is mispriced.
[00:03:35.500 -> 00:03:35.740] It's like,
[00:03:35.740 -> 00:03:35.900] no,
[00:03:35.900 -> 00:03:36.680] it's priced.
[00:03:36.680 -> 00:03:36.940] That's,
[00:03:36.940 -> 00:03:37.600] that's the price,
[00:03:37.600 -> 00:03:37.800] right?
[00:03:37.800 -> 00:03:39.340] That's what people are buying it for and selling it for.
[00:03:39.340 -> 00:03:40.780] And so markets don't lie.
[00:03:40.780 -> 00:03:42.100] They are the ultimate truth teller.
[00:03:42.100 -> 00:03:44.320] They can be coerced and manipulated,
[00:03:44.320 -> 00:03:44.880] I suppose,
[00:03:44.880 -> 00:03:46.060] by oversupply,
[00:03:46.060 -> 00:03:47.080] but that's just supply.
[00:03:47.080 -> 00:03:47.540] It's just,
[00:03:47.540 -> 00:03:47.740] you know,
[00:03:47.740 -> 00:03:49.460] those are just inputs into the market price.
[00:03:49.460 -> 00:03:50.240] So,
[00:03:50.240 -> 00:03:50.740] um,
[00:03:50.740 -> 00:03:51.040] you know,
[00:03:51.040 -> 00:03:51.260] when I,
[00:03:51.260 -> 00:03:52.720] when I see the recent escalation,
[00:03:52.740 -> 00:03:53.860] I just shrugged my shoulders.
[00:03:53.860 -> 00:03:56.260] It's more of the same is Iran escalating this.
[00:03:56.440 -> 00:04:00.780] That's timely midterms are coming up and they can put president Trump on his
[00:04:00.780 -> 00:04:01.120] heels.
[00:04:01.120 -> 00:04:02.260] That's probably a good bet.
[00:04:02.600 -> 00:04:04.620] The president is currently not responding to that.
[00:04:04.620 -> 00:04:05.080] Instead,
[00:04:05.080 -> 00:04:08.680] he's busy with a meme warfare with Canada,
[00:04:08.680 -> 00:04:11.260] which is maybe more palatable to his base at home.
[00:04:11.560 -> 00:04:11.980] Again,
[00:04:11.980 -> 00:04:13.900] same play midterms are coming up.
[00:04:14.400 -> 00:04:15.640] How could he appease the public?
[00:04:16.000 -> 00:04:18.740] And so they're playing their own games with their own intentions.
[00:04:19.060 -> 00:04:20.560] Those just happen to be different games right now.
[00:04:22.660 -> 00:04:22.980] Yeah.
[00:04:23.400 -> 00:04:23.820] Um,
[00:04:27.220 -> 00:04:27.400] yeah,
[00:04:27.400 -> 00:04:28.540] I'm just trying to see how the,
[00:04:29.390 -> 00:04:30.530] the Canada issue,
[00:04:30.650 -> 00:04:31.070] um,
[00:04:31.450 -> 00:04:33.130] is that going to have much impact on the economy?
[00:04:33.130 -> 00:04:33.230] I,
[00:04:33.410 -> 00:04:35.210] and then I was told by one of my guests a while ago,
[00:04:35.210 -> 00:04:36.110] I've never looked into it.
[00:04:36.530 -> 00:04:39.110] Is that Canada's cutting some of the oil exports it had going?
[00:04:39.110 -> 00:04:40.310] Going to the U S is that true?
[00:04:41.800 -> 00:04:42.220] Yes,
[00:04:42.220 -> 00:04:42.760] a little bit.
[00:04:42.820 -> 00:04:43.480] Um,
[00:04:43.540 -> 00:04:48.640] Canada's exports in general to the U S are at the lowest in my lifetime.
[00:04:48.760 -> 00:04:52.060] 80% of Canada's exports used to go to the United States.
[00:04:52.480 -> 00:04:54.520] It's now down to about 67%.
[00:04:55.060 -> 00:04:55.660] Um,
[00:04:55.720 -> 00:04:56.740] and these recent,
[00:04:56.980 -> 00:04:57.220] uh,
[00:04:57.220 -> 00:04:58.480] tariffs on goods,
[00:04:58.640 -> 00:04:59.160] honestly,
[00:04:59.160 -> 00:04:59.400] they're,
[00:04:59.400 -> 00:05:02.740] they're on the margin and I believe they're an absolute sideshow.
[00:05:02.880 -> 00:05:05.200] The it's about 5% of the export market.
[00:05:05.200 -> 00:05:07.840] That's threatened to be tariffs next.
[00:05:08.260 -> 00:05:09.860] That's about $20 million worth.
[00:05:09.860 -> 00:05:10.700] Of goods,
[00:05:11.060 -> 00:05:14.600] $2 billion worth of goods crosses the Canada U S border every single day.
[00:05:14.600 -> 00:05:16.580] So call it 10 days of trade.
[00:05:17.360 -> 00:05:20.960] It's good headlines because it rallies people behind their flag,
[00:05:20.960 -> 00:05:24.300] whether you're in the United States and you can rally behind the U S flag or the
[00:05:24.300 -> 00:05:24.980] same in Canada,
[00:05:24.980 -> 00:05:29.060] you're catalyzing the public behind Mark Carney in a way that Canada hasn't been
[00:05:29.060 -> 00:05:31.280] United in over a decade.
[00:05:31.740 -> 00:05:32.240] Uh,
[00:05:32.240 -> 00:05:34.040] but it's from my perspective,
[00:05:34.040 -> 00:05:34.880] it's a sideshow.
[00:05:34.880 -> 00:05:39.380] And even I saw a clip of Wolf Blitzer last night on Fox news talking about
[00:05:39.380 -> 00:05:42.500] not joking the inflated cost of wigs,
[00:05:42.500 -> 00:05:43.280] hockey sticks,
[00:05:43.280 -> 00:05:47.420] and fake beards that Americans will have to pay in response to these tariffs.
[00:05:47.420 -> 00:05:47.600] You're like,
[00:05:47.600 -> 00:05:48.300] that's where we're at.
[00:05:48.300 -> 00:05:49.200] That's where we're at right now.
[00:05:49.200 -> 00:05:49.940] It's that's great.
[00:05:50.790 -> 00:05:51.810] What happened with the,
[00:05:51.810 -> 00:05:52.470] um,
[00:05:52.470 -> 00:05:54.390] let's talk about the yen bailout.
[00:05:54.870 -> 00:05:55.170] Um,
[00:05:55.170 -> 00:05:56.010] I think the,
[00:05:56.010 -> 00:05:57.550] the Japanese,
[00:05:57.550 -> 00:05:58.590] uh,
[00:05:58.590 -> 00:06:04.470] essential bank is still selling us treasuries and other assets in order to prop up the yen.
[00:06:04.470 -> 00:06:05.570] Have you been keeping up with that?
[00:06:05.570 -> 00:06:07.010] And how's that looking today?
[00:06:07.010 -> 00:06:07.290] Matt,
[00:06:07.290 -> 00:06:08.290] did they get out of the,
[00:06:08.290 -> 00:06:08.730] uh,
[00:06:08.730 -> 00:06:10.350] the trouble they were in a few weeks ago?
[00:06:11.130 -> 00:06:11.370] Well,
[00:06:11.370 -> 00:06:17.730] they're still in a similar situation in that they're dependent on importing oil at inflated prices.
[00:06:17.770 -> 00:06:21.790] And so they need to free up cash either by creating currency,
[00:06:22.170 -> 00:06:26.250] which they've been able to do for a very long time because consumption is so low in that country.
[00:06:26.250 -> 00:06:28.030] It doesn't trigger immediate inflation,
[00:06:28.030 -> 00:06:32.470] but the next lever they'll have to pull on is liquidating those us treasuries.
[00:06:32.490 -> 00:06:38.770] And they were the first to leverage that new FEMA mechanism that allows them to use their,
[00:06:38.790 -> 00:06:39.630] uh,
[00:06:40.150 -> 00:06:47.170] roughly a trillion dollars in treasuries as leverage to borrow preventing any sale of that asset and the suppressed price.
[00:06:47.170 -> 00:06:50.190] But they get access to new capital through money creation in the United States.
[00:06:50.190 -> 00:06:55.170] So money is still created just us dollars instead of yen that are then converted to us dollars.
[00:06:55.170 -> 00:06:56.030] So yeah,
[00:06:56.030 -> 00:06:57.790] that story is very much still in play.
[00:06:57.810 -> 00:06:57.990] Uh,
[00:06:57.990 -> 00:07:00.030] Japan doesn't have an easy way out of that.
[00:07:00.030 -> 00:07:05.670] The only thing that's kept Japan from aspiring spiraling quickly is that their consumption is so low.
[00:07:06.090 -> 00:07:06.390] Uh,
[00:07:06.390 -> 00:07:08.770] there's something like 9 million vacant homes in Japan.
[00:07:08.770 -> 00:07:10.650] In the countryside,
[00:07:10.650 -> 00:07:11.490] when people age out,
[00:07:11.490 -> 00:07:14.970] they just walk out of their homes because there's no buyers for so many of those markets.
[00:07:15.470 -> 00:07:15.970] Um,
[00:07:15.970 -> 00:07:19.090] this is the country that's furthest down the demographic curve,
[00:07:19.090 -> 00:07:32.150] and so there's no younger generation to fill that consumption population and that's why they've been able to create currency so recklessly without inflating the currency because consumption is so low.
[00:07:32.150 -> 00:07:38.010] But when you're faced with an inflated input costs like oil inflation happens from the outside,
[00:07:38.010 -> 00:07:38.770] not necessarily from,
[00:07:38.770 -> 00:07:40.210] inside consumption and spending.
[00:07:40.210 -> 00:07:40.510] So,
[00:07:40.990 -> 00:07:41.650] um,
[00:07:41.910 -> 00:07:42.370] you know,
[00:07:42.610 -> 00:07:44.330] we'll watch that story play out.
[00:07:44.330 -> 00:07:45.130] I think it's,
[00:07:45.130 -> 00:07:45.370] uh,
[00:07:45.370 -> 00:07:46.930] they don't have any easy exits there.
[00:07:48.420 -> 00:07:49.320] And then you had the,
[00:07:49.320 -> 00:07:49.740] um,
[00:07:50.440 -> 00:07:50.640] uh,
[00:07:50.640 -> 00:07:52.400] best sense in the U.S.
[00:07:52.400 -> 00:07:56.560] Try to play around with the curve for the bond yield curve on the long end.
[00:07:56.560 -> 00:08:00.420] Try to reduce that ahead of the midterms that failed.
[00:08:00.420 -> 00:08:02.120] And one thing I know with my limited,
[00:08:02.360 -> 00:08:02.640] you know,
[00:08:02.640 -> 00:08:05.820] financial knowledge is that you just don't mess around with the bond market.
[00:08:06.220 -> 00:08:07.680] The market forces will always win.
[00:08:07.680 -> 00:08:08.580] It's just a massive,
[00:08:08.580 -> 00:08:08.940] massive market.
[00:08:08.940 -> 00:08:09.080] Um,
[00:08:09.120 -> 00:08:12.060] I don't know why Besson who's pretty smart guy.
[00:08:12.060 -> 00:08:18.320] I think he worked on the Soros tried to go against that rule of rule.
[00:08:18.320 -> 00:08:18.980] He used to,
[00:08:18.980 -> 00:08:19.340] to,
[00:08:19.340 -> 00:08:20.340] to advocate for.
[00:08:20.880 -> 00:08:22.380] So how did that go?
[00:08:22.380 -> 00:08:23.640] Did it make much of a difference?
[00:08:23.640 -> 00:08:25.200] What does the market think about it?
[00:08:25.200 -> 00:08:26.240] And did we see the end of it?
[00:08:26.240 -> 00:08:30.900] Was he still trying maybe explain for the audience what he actually tried for anyone that has been keeping up?
[00:08:31.280 -> 00:08:31.680] Yeah,
[00:08:31.680 -> 00:08:32.220] I think,
[00:08:32.220 -> 00:08:33.240] I think,
[00:08:33.240 -> 00:08:33.700] you know,
[00:08:33.700 -> 00:08:38.360] best in stuck in a place where the appetite for us treasuries is decreasing,
[00:08:38.380 -> 00:08:38.660] uh,
[00:08:38.660 -> 00:08:39.240] monthly.
[00:08:39.240 -> 00:08:42.720] And they need that market to stay super active and appealing to the rest of the world.
[00:08:43.320 -> 00:08:44.100] Um,
[00:08:44.100 -> 00:08:47.940] us has a couple of tools they can lever to fulfill those bond auctions.
[00:08:47.940 -> 00:08:49.920] So when the United States wants to,
[00:08:50.040 -> 00:08:55.240] has to borrow more money to fund their two plus trillion dollar deficit every year,
[00:08:55.260 -> 00:09:00.720] they issue bonds IOUs that the rest of the world can buy and fund the us government with debt.
[00:09:01.120 -> 00:09:06.300] It's the exact same as if you or I were living our life above our means spending more than we earned.
[00:09:06.320 -> 00:09:09.240] We could do that as long as the bank kept funding our credit card.
[00:09:09.260 -> 00:09:11.600] So as long as we can stay attracted to lenders,
[00:09:11.620 -> 00:09:13.580] we can keep living beyond our means.
[00:09:13.600 -> 00:09:15.940] That's the game the US government has to play.
[00:09:15.960 -> 00:09:20.000] And it's been an easy game for them to play because for the last 40 years,
[00:09:20.000 -> 00:09:22.400] us treasuries have been the safest,
[00:09:22.400 -> 00:09:22.960] most secure,
[00:09:22.960 -> 00:09:23.960] most predictable,
[00:09:23.960 -> 00:09:24.860] uh,
[00:09:24.860 -> 00:09:26.940] interest paying asset in the world.
[00:09:26.940 -> 00:09:30.080] And so that's where the whole world has parked their savings.
[00:09:30.080 -> 00:09:33.720] That's why Japan has such a large treasury holding.
[00:09:33.740 -> 00:09:34.260] Uh,
[00:09:34.260 -> 00:09:37.620] same with the UK countries all over the world have parked their savings there.
[00:09:37.620 -> 00:09:38.920] Uh,
[00:09:38.920 -> 00:09:39.440] two things.
[00:09:39.440 -> 00:09:40.400] You're happening right now.
[00:09:40.420 -> 00:09:41.080] Um,
[00:09:41.100 -> 00:09:41.660] number one,
[00:09:41.660 -> 00:09:47.720] inflated energy costs are causing countries to require more cash to pay their energy bill,
[00:09:47.720 -> 00:09:49.880] specifically energy importing countries.
[00:09:49.880 -> 00:09:51.180] Japan's a classic example,
[00:09:51.180 -> 00:09:58.640] but there's about a dozen that fall right in that bucket and they're having to sell or access their savings accounts to pay the higher cost of energy.
[00:09:58.640 -> 00:10:00.140] The most liquid asset,
[00:10:00.140 -> 00:10:02.120] most of them own our us treasuries.
[00:10:02.140 -> 00:10:04.820] So they're selling those to raise cash to buy oil.
[00:10:05.620 -> 00:10:09.400] Selling pressure on any asset decreases the cost of that asset.
[00:10:09.400 -> 00:10:10.780] The price of that asset.
[00:10:10.780 -> 00:10:12.300] And so the,
[00:10:12.300 -> 00:10:15.280] the way a bond yield is determined is,
[00:10:15.940 -> 00:10:16.600] uh,
[00:10:16.600 -> 00:10:17.460] the rate,
[00:10:17.460 -> 00:10:18.280] let's say like,
[00:10:18.280 -> 00:10:19.020] um,
[00:10:19.020 -> 00:10:19.420] I,
[00:10:19.420 -> 00:10:21.080] I take a thousand dollar bond out.
[00:10:21.080 -> 00:10:22.760] I'm paid a 5% interest rate.
[00:10:22.760 -> 00:10:23.980] That's $50 per year.
[00:10:24.460 -> 00:10:24.780] Uh,
[00:10:24.780 -> 00:10:25.200] but if,
[00:10:25.200 -> 00:10:28.360] if bonds are being sold more than they're being bought there,
[00:10:28.680 -> 00:10:31.640] the price of my bond decreases with the selling pressure.
[00:10:31.640 -> 00:10:33.880] And so if I want to sell my bond early,
[00:10:33.880 -> 00:10:34.920] get my cash back,
[00:10:35.200 -> 00:10:36.780] I may not get a thousand dollars for it.
[00:10:36.780 -> 00:10:38.020] I may get 950,
[00:10:38.020 -> 00:10:38.540] 900.
[00:10:38.540 -> 00:10:39.360] I'll get a decrease.
[00:10:39.360 -> 00:10:41.220] The price on that suppressed asset,
[00:10:41.580 -> 00:10:43.640] but the $50 payment remains the same.
[00:10:43.640 -> 00:10:45.180] So the effective yield goes up.
[00:10:46.020 -> 00:10:47.820] That all happens on the secondary market.
[00:10:47.820 -> 00:10:49.440] So if you want to buy us treasuries,
[00:10:49.440 -> 00:10:52.600] you can go to the secondary market today because there's so much selling
[00:10:52.600 -> 00:10:56.320] pressure and buy that asset cheaper than directly from the United States
[00:10:56.320 -> 00:10:57.160] treasury market.
[00:10:57.300 -> 00:10:58.660] So at the next auction,
[00:10:58.660 -> 00:11:03.020] us treasury has to increase the interest rate to compete with the new effective
[00:11:03.020 -> 00:11:05.020] yield on the secondary market.
[00:11:05.680 -> 00:11:06.220] Um,
[00:11:06.220 -> 00:11:06.680] and,
[00:11:06.680 -> 00:11:07.400] and that's,
[00:11:07.400 -> 00:11:09.080] that's tough,
[00:11:09.080 -> 00:11:09.520] a tough game,
[00:11:09.520 -> 00:11:12.420] for the U S to play it because they're already paying over a trillion dollars,
[00:11:12.420 -> 00:11:13.700] um,
[00:11:13.700 -> 00:11:16.900] in interest on their $40 trillion plus in debt.
[00:11:16.900 -> 00:11:17.940] Um,
[00:11:17.940 -> 00:11:21.420] and so what I expect to see moving forward is a couple of things.
[00:11:21.420 -> 00:11:22.460] Um,
[00:11:22.460 -> 00:11:25.580] I eventually expect them to begin monetizing their own debt,
[00:11:25.580 -> 00:11:30.420] which just means printing money to buy their own bonds and fund themselves with money
[00:11:30.420 -> 00:11:31.380] creation.
[00:11:31.380 -> 00:11:33.620] As long as they can prevent that they will,
[00:11:33.620 -> 00:11:36.780] because that's the quickest way to an inflated currency.
[00:11:36.780 -> 00:11:39.520] It's direct money creation and direct inflation.
[00:11:39.520 -> 00:11:40.520] Um,
[00:11:40.520 -> 00:11:42.520] but the borrowing market's getting busier.
[00:11:42.520 -> 00:11:46.520] And right now we're looking at these AI capex spends,
[00:11:46.520 -> 00:11:47.520] for example,
[00:11:47.520 -> 00:11:48.520] last year,
[00:11:48.520 -> 00:11:52.520] 750 billion in promises to build these AI data centers,
[00:11:52.520 -> 00:11:57.520] 750 billion in capex is more than all of those companies that are spending that,
[00:11:57.520 -> 00:11:58.520] those dollars,
[00:11:58.520 -> 00:12:00.520] all of their income combined.
[00:12:00.520 -> 00:12:02.520] I'm talking about the oracles,
[00:12:02.520 -> 00:12:03.520] the Microsofts,
[00:12:03.520 -> 00:12:04.520] the Amazons,
[00:12:04.520 -> 00:12:05.520] the Googles,
[00:12:05.520 -> 00:12:06.520] that's more money than they earn.
[00:12:06.520 -> 00:12:08.520] And so they're funding every new shovel in the ground with these,
[00:12:08.520 -> 00:12:09.520] these,
[00:12:09.520 -> 00:12:13.520] these AI capex and data center build outs with borrowed money.
[00:12:13.520 -> 00:12:17.520] So they're also in the borrowing market and they can afford to pay a lot more than the
[00:12:17.520 -> 00:12:19.520] U S treasury wants to pay.
[00:12:19.520 -> 00:12:24.520] Google pays about 7% on their debt and they would happily pay more because the return
[00:12:24.520 -> 00:12:27.520] on a dollar spent on a data center is far more than that.
[00:12:27.520 -> 00:12:29.520] So they can probably stomach 11%,
[00:12:29.520 -> 00:12:30.520] 12%.
[00:12:30.520 -> 00:12:33.550] They would probably pay that because the return is there,
[00:12:33.550 -> 00:12:35.550] but there's only so many lenders.
[00:12:35.550 -> 00:12:37.550] So if there's more borrowers than lenders,
[00:12:37.550 -> 00:12:38.550] right?
[00:12:38.550 -> 00:12:41.550] They're in the hand of the lenders and they will go to the highest return.
[00:12:41.550 -> 00:12:42.550] So to compete for those dollars,
[00:12:42.550 -> 00:12:44.550] you have to increase your interest rate as well.
[00:12:44.550 -> 00:12:48.550] And that's the situation that the lending market finds itself in today.
[00:12:48.550 -> 00:12:52.960] The AI bubble is its own really interesting situation right now,
[00:12:52.960 -> 00:12:54.960] but there's enough pressure like that.
[00:12:54.960 -> 00:12:58.960] There's external pressure from input supply costs in the energy market.
[00:12:58.960 -> 00:13:02.960] There's a new crowding out of us treasuries from other buyers that are,
[00:13:02.960 -> 00:13:05.960] I think very quickly going to be deemed a matter of national security.
[00:13:05.960 -> 00:13:07.960] These AI data center build outs.
[00:13:07.960 -> 00:13:10.960] And that money is going to have to find their way to those data centers.
[00:13:10.960 -> 00:13:13.960] And president Trump was on X two weeks ago,
[00:13:13.960 -> 00:13:17.960] kind of reprimanding his own base saying like data centers or not,
[00:13:17.960 -> 00:13:18.960] they are coming,
[00:13:18.960 -> 00:13:19.960] you know,
[00:13:19.960 -> 00:13:21.960] prepare yourself for moving forward with this,
[00:13:21.960 -> 00:13:22.960] which is very interesting.
[00:13:22.960 -> 00:13:28.030] But the lending markets like any other supply and demand market,
[00:13:28.030 -> 00:13:29.030] right?
[00:13:29.030 -> 00:13:30.030] The more borrowers there are,
[00:13:30.030 -> 00:13:31.030] the lenders have the power.
[00:13:31.030 -> 00:13:32.030] If there's more lenders,
[00:13:32.030 -> 00:13:33.030] the borrowers have the power,
[00:13:33.030 -> 00:13:38.920] but right now there's far more borrowers than lenders.
[00:13:38.920 -> 00:13:42.250] So,
[00:13:42.250 -> 00:13:44.250] why is anyone buying us treasuries then?
[00:13:44.250 -> 00:13:46.250] I know it sounds like a very silly question,
[00:13:46.250 -> 00:13:47.250] but if you're looking at the,
[00:13:47.250 -> 00:13:48.250] the,
[00:13:48.250 -> 00:13:49.250] the current situation,
[00:13:49.250 -> 00:13:50.250] the us is in with $40 trillion debt,
[00:13:50.250 -> 00:13:53.250] a trillion dollars a year to service that debt alone,
[00:13:53.250 -> 00:13:54.250] more than the defense budget,
[00:13:54.250 -> 00:13:55.250] more than,
[00:13:55.250 -> 00:13:57.250] than healthcare very soon as well.
[00:13:57.250 -> 00:13:58.250] No,
[00:13:58.250 -> 00:13:59.250] I think more than social security soon,
[00:13:59.250 -> 00:14:01.250] it's going to be the most in a few years,
[00:14:01.250 -> 00:14:04.250] the biggest expense for the us is just to be able to service its debt.
[00:14:04.250 -> 00:14:08.250] And the only way to get out of this is either the economy grows.
[00:14:08.250 -> 00:14:10.250] So either the economy grows,
[00:14:10.250 -> 00:14:11.250] grows a lot faster,
[00:14:11.250 -> 00:14:12.250] you know,
[00:14:12.250 -> 00:14:13.250] that's wishful thinking.
[00:14:13.250 -> 00:14:17.250] Some people saying AI is going to lead to mass productivity and that's going to help deal with the debt.
[00:14:17.250 -> 00:14:18.250] But that's again,
[00:14:18.250 -> 00:14:20.250] wishful thinking that only recently came up.
[00:14:20.250 -> 00:14:28.250] Then you've got the us will cut expenses and stop maybe running a budget surplus.
[00:14:28.250 -> 00:14:31.250] That's even more extreme wishful thinking with the current political climate.
[00:14:31.250 -> 00:14:32.250] And number one,
[00:14:32.250 -> 00:14:33.250] number four is debasement,
[00:14:33.250 -> 00:14:36.250] just printing money to be able to pay back its debt.
[00:14:36.250 -> 00:14:37.250] But that would lead to debasement.
[00:14:37.250 -> 00:14:38.250] If you,
[00:14:38.250 -> 00:14:39.250] if you look at these four scenarios,
[00:14:39.250 -> 00:14:40.250] this,
[00:14:40.250 -> 00:14:42.250] this doesn't seem any way out.
[00:14:42.250 -> 00:14:44.250] Like the only two ways out for the us government is number one,
[00:14:44.250 -> 00:14:45.250] your default,
[00:14:45.250 -> 00:14:46.250] which won't happen.
[00:14:46.250 -> 00:14:48.250] You can't afford for that to happen.
[00:14:48.250 -> 00:14:49.250] Number two,
[00:14:49.250 -> 00:14:50.250] just,
[00:14:50.250 -> 00:14:51.250] you know,
[00:14:51.250 -> 00:14:52.250] devalue your currency,
[00:14:52.250 -> 00:14:54.250] inflate your currency to be able to get out of that current situation.
[00:14:54.250 -> 00:14:55.250] That spiral that the us is in.
[00:14:55.250 -> 00:14:56.250] It's not only a spiral,
[00:14:56.250 -> 00:14:57.250] a spiral that's only getting worse.
[00:14:57.250 -> 00:15:06.250] You had Trump talk him and Besson talking about one of Besson's objectives is to cut down the debt and complete opposite happened under both.
[00:15:06.250 -> 00:15:09.250] So with these two scenarios and you look at what other countries are doing,
[00:15:09.250 -> 00:15:10.250] you know,
[00:15:10.250 -> 00:15:11.250] Japan had issues selling its treasuries because if they do,
[00:15:11.250 -> 00:15:12.250] then it leads to other issues.
[00:15:12.250 -> 00:15:13.250] Everything is so interconnected.
[00:15:13.250 -> 00:15:14.250] You've got other countries that hold so many us treasuries,
[00:15:14.250 -> 00:15:15.250] not be treated that well by the us,
[00:15:15.250 -> 00:15:16.250] by Trump.
[00:15:16.250 -> 00:15:17.250] You've got China selling treasuries.
[00:15:17.250 -> 00:15:18.250] You got a Norway sold a bunch.
[00:15:18.250 -> 00:15:19.250] It is a bit more complicated there,
[00:15:19.250 -> 00:15:20.250] but they did sell a bunch recently.
[00:15:20.250 -> 00:15:21.250] The sovereign wealth fund.
[00:15:21.250 -> 00:15:22.250] So all these countries selling us treasuries,
[00:15:22.250 -> 00:15:23.250] private buyers has hedge funds,
[00:15:23.250 -> 00:15:24.250] et cetera,
[00:15:24.250 -> 00:15:25.250] buying them.
[00:15:25.250 -> 00:15:26.250] But I don't understand from what I know,
[00:15:26.250 -> 00:15:27.250] why is anyone even buying treasuries?
[00:15:27.250 -> 00:15:28.250] I mean,
[00:15:28.250 -> 00:15:29.250] I don't know.
[00:15:29.250 -> 00:15:30.250] I don't know.
[00:15:30.250 -> 00:15:31.250] I don't know.
[00:15:31.250 -> 00:15:32.250] I don't know.
[00:15:32.250 -> 00:15:33.250] I don't know.
[00:15:33.250 -> 00:15:34.250] I don't know.
[00:15:34.250 -> 00:15:35.250] I don't know.
[00:15:35.250 -> 00:15:37.150] I don't know.
[00:15:37.150 -> 00:15:38.150] But I don't understand.
[00:15:38.150 -> 00:15:39.150] From what I know,
[00:15:39.150 -> 00:15:41.910] why is anyone even buying treasuries with the current situation where there's
[00:15:41.910 -> 00:15:43.230] no way out for the us?
[00:15:43.230 -> 00:15:46.890] Speaker 2 The number one reason is inertia.
[00:15:46.890 -> 00:15:49.330] This is a pattern that's existed for decades.
[00:15:49.330 -> 00:15:50.850] And it's a tough one to break.
[00:15:50.850 -> 00:15:52.290] And you have to look around the world and say,
[00:15:52.290 -> 00:15:53.290] well,
[00:15:53.290 -> 00:15:56.540] what are the choices for all the problems the US dollar has.
[00:15:56.540 -> 00:15:57.540] And for all the problems,
[00:15:57.540 -> 00:16:00.920] the us economy has for all the problems the treasury market has,
[00:16:00.920 -> 00:16:02.740] it's still one of the best options out there.
[00:16:02.740 -> 00:16:05.300] What else are you going to Brazilian bonds or where else are going to go with
[00:16:05.300 -> 00:16:06.100] Canadian bonds?
[00:16:06.100 -> 00:16:12.020] not a big enough market right there's not many places you can go uh european bonds sure renminbi
[00:16:12.580 -> 00:16:17.700] capital controls it's tough that's why we're seeing more central banks buy gold than ever
[00:16:17.700 -> 00:16:24.820] before right q1 of this year saw 244 tons purchased we've never seen that much gold
[00:16:24.820 -> 00:16:32.880] purchased in q1 ever ever the last 10 of 11 quarters we saw over 200 tons purchased by
[00:16:32.880 -> 00:16:40.180] central banks so they're looking for options but today and for the last 50 40 50 years u.s
[00:16:40.180 -> 00:16:47.780] treasuries have been the undisputed best choice and although the u.s currency is being debased
[00:16:48.580 -> 00:16:52.820] u.s military strength is deteriorating and global influence is questionable
[00:16:54.100 -> 00:16:59.460] if you search globally there's not a lot of safer options it's the cleanest dirty shirt
[00:16:59.460 -> 00:17:03.380] in the hamper like what are you supposed to do you know and so so that's that's
[00:17:03.460 -> 00:17:07.300] my primary rationale mario is that given the choices available to you
[00:17:09.060 -> 00:17:13.060] every country is in the same situation from a balance sheet standpoint most they're running
[00:17:13.060 -> 00:17:18.150] deficits and they have debt many of those countries also have massively inflated costs
[00:17:18.150 -> 00:17:23.670] due to supply chain bottlenecks if not oil something else directly because of the disruption
[00:17:23.670 -> 00:17:29.990] to global supply global trade routes so all countries are looking at options to
[00:17:31.110 -> 00:17:33.350] um to afford the things they need and
[00:17:33.590 -> 00:17:38.950] will choose a little bit of currency expansion but most don't have the rest of the world that
[00:17:38.950 -> 00:17:44.310] also demands their currency so the us can afford to debase far more than any other country because
[00:17:44.310 -> 00:17:50.310] back to supply and demand you can inflate the supply as long as demand meets it and no other
[00:17:50.310 -> 00:17:55.910] currency has that equilibrium like the us does so they can be more reckless and we focus on it
[00:17:55.910 -> 00:18:00.630] because it is the tallest poppy and there's a lot going on there that's wrong and this empire yes
[00:18:00.630 -> 00:18:07.410] like we we've spoken about the bigger story before this movie ends one way every every time
[00:18:07.410 -> 00:18:13.490] right debasement and eventual um removal of influence but between now and then everyone
[00:18:13.490 -> 00:18:17.410] else is going to get hurt worse from a currency standpoint right there'll be exceptions but
[00:18:17.970 -> 00:18:25.010] but what i mean was the goal there's no other big enough market to compete no not even close
[00:18:25.010 -> 00:18:29.810] not even close not even close a tiny compared to us treasury market
[00:18:30.690 -> 00:18:36.450] exactly exactly exactly so we're seeing more and more central banks step off the lifeboat uh sorry
[00:18:36.450 -> 00:18:42.210] on to the lifeboat being gold and there's a handful of reasons that that's a better choice right now
[00:18:42.210 -> 00:18:48.530] there's no counterparty risk to gold nobody can inflate the supply it grows by about two percent
[00:18:48.530 -> 00:18:54.290] every year from mines where it comes from but that comes at a cost there's no yield on gold and it
[00:18:54.290 -> 00:18:59.490] costs money to store and it's a headache to transport like it's not an ideal asset either so
[00:19:00.690 -> 00:19:05.170] you know this is a very long term process but i think the idea of the price that we're seeing
[00:19:05.170 -> 00:19:09.890] in the world right now is that we're seeing countries diversify for lack of a better idea
[00:19:10.530 -> 00:19:14.050] and that even goes a step further we're seeing many countries withdraw their gold
[00:19:14.050 -> 00:19:19.410] from the united states now last week the netherlands and france both pulled their gold
[00:19:19.410 -> 00:19:24.290] from the us as well france as well they pulled all of it yeah the netherlands left 18 tons france
[00:19:24.290 -> 00:19:28.530] france took it all and france took it home right the netherlands park there's in london uh france
[00:19:28.530 -> 00:19:30.130] their gold's in paris now and
[00:19:30.690 -> 00:19:36.770] And the reason they do that dates back to pre-World War II era, when Europe was descending
[00:19:36.770 -> 00:19:39.910] into war, and everybody could see it coming, and eventually this happened.
[00:19:40.840 -> 00:19:43.460] European countries wanted to get their gold out of their borders.
[00:19:43.640 -> 00:19:48.780] And so they put it on a country far away, across an ocean, that they couldn't expect
[00:19:48.780 -> 00:19:51.100] any country to invade sustainably, right?
[00:19:51.140 -> 00:19:55.080] Like you might in Poland or Germany and European countries that share so many borders.
[00:19:55.640 -> 00:19:58.380] The US, that's where the term Fortress America came from.
[00:19:58.600 -> 00:19:59.740] Let's put our gold there.
[00:19:59.860 -> 00:20:00.620] It's safe.
[00:20:00.620 -> 00:20:03.520] They're wealthy, they're armed, but most importantly, they're far away, and they're
[00:20:03.520 -> 00:20:04.620] bordered by two oceans.
[00:20:04.760 -> 00:20:05.760] It's a very secure country.
[00:20:06.340 -> 00:20:09.480] And so most of the world's gold has been there since the 30s.
[00:20:11.160 -> 00:20:15.780] Now, with the Netherlands and France, it's important to ask the question, why are they
[00:20:15.780 -> 00:20:16.920] pulling their gold home?
[00:20:17.200 -> 00:20:20.380] Because the world is not more stable today than it was 20 years ago.
[00:20:20.420 -> 00:20:21.140] It's far less.
[00:20:21.200 -> 00:20:23.640] So wouldn't you want your gold in Fortress America?
[00:20:23.720 -> 00:20:24.880] That would be the logical thing.
[00:20:25.540 -> 00:20:27.100] There's a handful of reasons they didn't.
[00:20:27.100 -> 00:20:29.520] And both withdrew their gold.
[00:20:29.800 -> 00:20:30.100] And so...
[00:20:30.680 -> 00:20:35.180] I don't want to say a conspicuous way, because there's no evidence to support the idea that
[00:20:35.180 -> 00:20:36.140] maybe the gold isn't there.
[00:20:36.420 -> 00:20:38.980] But they decided not to transport the physical gold.
[00:20:39.120 -> 00:20:43.380] What they did is they sold the gold in New York on the gold market and repurchased it
[00:20:43.380 -> 00:20:44.500] immediately in Europe.
[00:20:44.620 -> 00:20:46.520] So they didn't actually have to transport any gold.
[00:20:47.040 -> 00:20:48.800] The reason that matters is twofold.
[00:20:49.360 -> 00:20:54.840] Number one, Germany repatriated their gold in 2013, and it took them four years to get
[00:20:54.840 -> 00:20:55.440] that gold home.
[00:20:56.300 -> 00:20:57.980] That's not an abnormal amount of time.
[00:20:58.180 -> 00:21:00.660] Gold's a headache to transport, because you don't want to put all of it on one gold.
[00:21:00.660 -> 00:21:04.780] It's too much wealth in one place, so you always break it into small batches and ship
[00:21:04.780 -> 00:21:05.200] it like that.
[00:21:05.300 -> 00:21:06.220] Logistics are complicated.
[00:21:06.360 -> 00:21:09.020] So it took four years for Germany to get its gold home.
[00:21:09.340 -> 00:21:14.400] But that was in 2013, when global trade was pretty stable and the world was fairly predictable.
[00:21:15.000 -> 00:21:18.040] Would you be willing to wait four years today to get your gold back?
[00:21:18.400 -> 00:21:19.940] What's the world going to look like in four years?
[00:21:20.460 -> 00:21:22.220] Are your allies still going to be your allies?
[00:21:22.280 -> 00:21:23.260] It's far less certain.
[00:21:24.560 -> 00:21:30.240] In addition, what if you ask for that physical gold from the United States and they say no?
[00:21:30.660 -> 00:21:33.240] And they don't tell you why they say no, but they just say no.
[00:21:33.600 -> 00:21:36.420] Maybe, I don't know, maybe they don't.
[00:21:36.540 -> 00:21:37.060] Who knows?
[00:21:37.340 -> 00:21:41.800] But how politically explosive that question could be if you had to ask it publicly.
[00:21:41.960 -> 00:21:44.900] And so both the Netherlands and France decided to not even ask it.
[00:21:45.220 -> 00:21:47.160] They just said, we're just going to sell there, buy here.
[00:21:47.240 -> 00:21:50.800] We're transporting the contracts, which is how most people own gold anyway.
[00:21:50.920 -> 00:21:52.580] So they don't actually ever take possession.
[00:21:52.840 -> 00:21:55.900] They just own a contract on an ounce or more.
[00:21:56.680 -> 00:22:00.700] Both the Netherlands and France decided not to ask that potentially politically explosive
[00:22:00.700 -> 00:22:00.800] question.
[00:22:00.820 -> 00:22:04.560] And just transfer ownership to Europe.
[00:22:05.520 -> 00:22:10.000] And both came out publicly and said, look, this has no political motives.
[00:22:11.100 -> 00:22:14.860] The Netherlands said they wanted easier access.
[00:22:15.420 -> 00:22:20.480] And France said they wanted to modernize their bars because bars that were poured in, say,
[00:22:20.540 -> 00:22:24.880] the beginning of the last century may not hold up to today's purity standards.
[00:22:25.260 -> 00:22:27.440] And so they wanted to buy more modern bars in Europe.
[00:22:27.540 -> 00:22:28.280] That was their rationale.
[00:22:28.520 -> 00:22:29.460] So they said, look, it's us.
[00:22:29.500 -> 00:22:30.020] It's not you.
[00:22:30.020 -> 00:22:30.620] Don't worry.
[00:22:30.620 -> 00:22:31.120] You're good.
[00:22:31.620 -> 00:22:33.620] We just want to modernize our stocks.
[00:22:33.880 -> 00:22:37.980] And Netherlands said, we just want easier access in an unpredictable world.
[00:22:38.140 -> 00:22:41.760] So again, it's like it's, you know, but it's telling.
[00:22:41.920 -> 00:22:42.320] It's telling.
[00:22:42.480 -> 00:22:42.840] It's telling.
[00:22:43.100 -> 00:22:47.800] And anyway, so we're seeing those two trends stand out to me.
[00:22:47.840 -> 00:22:49.140] Sorry, just to close the loop on that.
[00:22:49.180 -> 00:22:50.920] It's not just central banks buying gold.
[00:22:51.100 -> 00:22:52.460] It's them repatriating it, right?
[00:22:52.460 -> 00:22:53.240] Which is the ultimate.
[00:22:53.720 -> 00:22:56.200] It's what you would do if you're not sure what's around the corner.
[00:22:56.340 -> 00:22:58.740] You'd want to be ready for anything and have that arsenal at home.
[00:23:02.180 -> 00:23:02.660] Hmm.
[00:23:02.960 -> 00:23:03.820] Has that happened?
[00:23:03.940 -> 00:23:10.580] To that extent before, like what Netherlands and France did now, the same way they did
[00:23:10.580 -> 00:23:11.620] it, the speed of it.
[00:23:11.620 -> 00:23:15.300] Because I know there's been issues previously of countries taking too long to get their
[00:23:15.300 -> 00:23:16.220] gold out of the U.S.
[00:23:16.240 -> 00:23:17.100] That's happened before.
[00:23:17.480 -> 00:23:18.600] I don't know the exact years.
[00:23:19.040 -> 00:23:23.720] And there's also been instances where the U.S. just did not send certain countries their
[00:23:23.720 -> 00:23:24.020] gold.
[00:23:24.160 -> 00:23:27.580] I know Venezuela, I think, had that problem with the U.S. or the U.K.
[00:23:27.960 -> 00:23:29.400] So that is a worry as well.
[00:23:29.400 -> 00:23:33.920] Like if it's their gold, if you're, you know, you're a custodian of our asset, would it be a problem?
[00:23:33.940 -> 00:23:35.620] Would you expect to get that asset back?
[00:23:37.360 -> 00:23:40.240] But has there been instances where they took it out the same way as they did now?
[00:23:41.450 -> 00:23:49.010] You know, the closest analog would be would be Russia, who repatriated their gold through the 2010s.
[00:23:49.670 -> 00:23:56.890] And everybody watched that happen and then watched what happened to Russia's foreign currency
[00:23:56.890 -> 00:23:59.810] reserves after their invasion of the Ukraine.
[00:24:00.050 -> 00:24:02.690] So they had two savings assets.
[00:24:03.170 -> 00:24:04.170] One was held in somebody else's.
[00:24:04.170 -> 00:24:05.610] Treasury. One was held in theirs.
[00:24:06.030 -> 00:24:10.590] The one held in somebody else's treasury was confiscated and frozen and they could no longer access.
[00:24:11.250 -> 00:24:17.670] And so, yeah, it puts you in that situation where you're storing an asset in a secure market, whether that's the U.S.
[00:24:17.670 -> 00:24:24.210] Treasury market or the New York vaults, whatever that is, you're protecting it from international volatility and
[00:24:24.210 -> 00:24:28.830] unpredictability. But that's only that only stands as long as the custodian is trustworthy.
[00:24:30.510 -> 00:24:33.430] I would expect that the the the Tesla.
[00:24:33.430 -> 00:24:33.450] Tesla.
[00:24:33.450 -> 00:24:33.470] Tesla.
[00:24:33.470 -> 00:24:33.510] Tesla.
[00:24:33.510 -> 00:24:33.550] Tesla.
[00:24:33.550 -> 00:24:33.570] Tesla.
[00:24:33.570 -> 00:24:33.630] Tesla.
[00:24:33.630 -> 00:24:33.710] Tesla.
[00:24:33.710 -> 00:24:33.770] Tesla.
[00:24:33.770 -> 00:24:33.870] Tesla.
[00:24:33.870 -> 00:24:33.910] Tesla.
[00:24:33.910 -> 00:24:33.970] Tesla.
[00:24:33.970 -> 00:24:34.030] Tesla.
[00:24:34.030 -> 00:24:34.090] Tesla.
[00:24:34.090 -> 00:24:34.110] Tesla.
[00:24:34.110 -> 00:24:34.130] Tesla.
[00:24:34.130 -> 00:24:34.150] Tesla.
[00:24:34.170 -> 00:24:42.770] So the the rest of 300 billion in Russian foreign currency reserves confiscated in 2022 was was a clue to the world that the custodian was no longer trustworthy.
[00:24:42.770 -> 00:24:47.150] And so whatever asset you hold, if not within your borders, is it really your asset?
[00:24:47.150 -> 00:24:49.350] And that's the question that these countries are asking.
[00:24:49.350 -> 00:24:53.210] And many are answering with their with their repatriation.
[00:24:55.680 -> 00:24:57.120] So you see me looking down.
[00:24:57.620 -> 00:24:59.320] There's just some reports of explosions.
[00:24:59.320 -> 00:25:06.550] I'm making sure that they were just alerts in Israel, which there hasn't been any alerts in Israel.
[00:25:06.550 -> 00:25:13.350] and since the war since the 40-day war and uh explosions in iran like okay do we do do we have
[00:25:13.350 -> 00:25:17.890] war while i'm speaking about this but it seems no that seems to be a separate alert in israel
[00:25:17.890 -> 00:25:22.610] we don't have the details of it and explosions near iran as you were speaking just because of
[00:25:22.610 -> 00:25:26.310] the ships getting attacked it kind of gives you the state of the state of affairs right now but
[00:25:26.310 -> 00:25:34.650] i want to ask you again before going back to the ai um ai boom um or bubble just the repatriation
[00:25:34.650 -> 00:25:42.600] of gold um is that necessarily what are what are other reasons so actually what are the reasons for
[00:25:42.600 -> 00:25:46.060] that to happen why would you want to hold your own gold because you gave the example of before
[00:25:46.060 -> 00:25:50.500] world war before the 30s so world war ii before the world before world war ii as countries as
[00:25:50.500 -> 00:25:56.040] things were heating up politically and fears of a war were rising countries moved their gold into
[00:25:56.040 -> 00:26:00.600] a safe haven and moved their gold elsewhere now for them to take it out of the u.s do they expect
[00:26:00.600 -> 00:26:04.340] the u.s to be the source of that instability do they worry that the u.s is not a trustworthy
[00:26:04.340 -> 00:26:05.140] custodian
[00:26:05.680 -> 00:26:09.780] do they find it more trustworthy to have it on their own territory is it politically motivated
[00:26:09.780 -> 00:26:14.520] is it fears economic fears is it political geopolitical fears what do you think stems
[00:26:14.520 -> 00:26:18.440] what do you think leads them to repatriate their gold and again this is not just last
[00:26:18.440 -> 00:26:23.770] week that's been happening for for years now yeah yeah i think a couple things i think
[00:26:23.770 -> 00:26:29.590] if you had your wealth stored at your neighbor's house and you stored it there because they were
[00:26:29.590 -> 00:26:35.330] wealthy and armed and you knew that was the safest house on your block the rest of the block is chaos
[00:26:35.330 -> 00:26:35.690] the
[00:26:35.690 -> 00:26:41.510] that house is safe and years go by and you look at that wealthy neighbor and they start developing
[00:26:41.510 -> 00:26:46.570] a bit of a drinking problem and then a gambling problem and they acquire a bunch of debts more
[00:26:46.570 -> 00:26:52.750] than they could sustain and they become dependent on uh financial aid to keep the party going you'd
[00:26:52.750 -> 00:26:58.470] probably be pretty curious about the safety of your asset inside that household that is entrenched
[00:26:58.470 -> 00:27:05.050] in debt and has an excessive spending problem how secure is my wealth but they're well armed so you
[00:27:05.050 -> 00:27:05.670] can't necessarily not be able to keep your money safe but you can't necessarily not be able to keep
[00:27:05.670 -> 00:27:05.690] your money safe but you can't necessarily not be able to keep your money safe but you can't necessarily
[00:27:05.690 -> 00:27:09.450] knock the door and demand your stuff back because if they say no there's nothing you can do about it
[00:27:09.450 -> 00:27:17.600] it's a silly analogy but like i do think that is a simple way of describing complex things and i i
[00:27:17.600 -> 00:27:24.540] would expect that as the perception but separately i think it's possible that inside the next five
[00:27:24.540 -> 00:27:32.660] years we do see a correction of the gold price to reflect the actual gold supply and all i mean by
[00:27:32.660 -> 00:27:35.740] that is that the majority of gold that is owned is not going to be able to be used for the rest of
[00:27:35.760 -> 00:27:35.780] the next five years the gold that is owned is not going to be used for the rest of the next five years
[00:27:35.780 -> 00:27:39.600] the gold that is owned is not going to be used for the rest of the next five years the owners of that gold
[00:27:39.600 -> 00:27:43.520] the owners of that gold the purchasers and traders of that gold never actually take possession of a
[00:27:43.520 -> 00:27:50.800] single ounce they just buy and sell paper contracts that specify ownership over an ounce
[00:27:52.080 -> 00:27:56.240] but this isn't policed very effectively and it's incredibly hard to measure
[00:27:56.800 -> 00:28:01.360] because very few people if any ever take actual possession of a physical ounce
[00:28:02.080 -> 00:28:06.000] more than one paper contract can be sold for every ounce that it claims
[00:28:06.240 -> 00:28:11.600] and the evidence of this appears every so often when the market loses confidence
[00:28:11.600 -> 00:28:17.760] that there's enough ounces to back up the paper contracts most recently this happened in january
[00:28:17.760 -> 00:28:23.760] with the silver market which is exactly the same and the price of physical silver was 40 percent
[00:28:23.760 -> 00:28:29.760] higher than the price of a paper contract on a silver ounce interesting so you have to ask the
[00:28:29.760 -> 00:28:35.520] question why would somebody pay forty percent more for the same asset legally speaking the same asset
[00:28:35.520 -> 00:28:36.000] well one you could say like they're buying a six-digit amount of matter but actually they're not
[00:28:36.000 -> 00:28:40.880] you can hold in your hand the other is a promise and that's the difference they do that because
[00:28:40.880 -> 00:28:47.680] they don't trust the promise anymore now there's high speculation about the what's the ratio of
[00:28:47.680 -> 00:28:53.200] paper contracts to actual gold that circulate the world is it three to one is it five to one
[00:28:53.200 -> 00:28:59.360] is it twenty to one we don't know that is why and and china is trying to blow smoke on this
[00:28:59.360 -> 00:29:04.800] right now because they are the world's largest producer of gold largest importer of gold they
[00:29:04.800 -> 00:29:08.480] don't export any we don't know how much they have but it's definitely a lot
[00:29:09.600 -> 00:29:15.760] and just think about that if the price of gold reflects uh the the market for gold which is
[00:29:15.760 -> 00:29:19.920] people buying and selling these contracts right there's an inflated supply possibly if there's
[00:29:19.920 -> 00:29:24.640] 10 contracts for every ounce if you were to correct that and correct the price to the actual
[00:29:24.640 -> 00:29:29.760] supply therefore it would in theory 10x what it is today because the actual supply is a tenth of
[00:29:29.760 -> 00:29:34.560] what we think there is does that make sense yeah so china halted uh physical
[00:29:34.800 -> 00:29:40.240] sorry they halted paper trading of gold for retail investors this is about one and a half
[00:29:40.240 -> 00:29:46.880] maybe a month six weeks ago their intention there is to um is to blow open this disparity between
[00:29:46.880 -> 00:29:52.720] the physical price and the paper price and we'll have to see if it works but as a significant holder
[00:29:52.720 -> 00:29:57.520] of gold it would be in their best interest if gold was repriced because people lost confidence
[00:29:57.520 -> 00:30:02.880] in the paper market they would benefit tremendously from that as would anybody holding gold so now
[00:30:02.880 -> 00:30:04.640] would be a good time to get that gold back
[00:30:04.800 -> 00:30:09.520] so i'm going to go ahead and get back to the question of what is the ratio of gold
[00:30:09.520 -> 00:30:14.960] close to home if you have suspicions about that i don't know what the ratio is i don't know if we're
[00:30:14.960 -> 00:30:19.520] going to get clarity on that but when i see central banks setting records for gold buying
[00:30:19.520 -> 00:30:25.680] over the last 11 quarters q1 of this being an all-time record when i see central banks
[00:30:25.680 -> 00:30:31.360] repatriating that goal within their borders you have to ask the question why what are they seeing
[00:30:31.360 -> 00:30:34.640] what are they worried about what are the conversations they're hearing having that we're
[00:30:34.800 -> 00:30:40.180] seeing right now i don't know what the future holds but you know there's a gentleman you might
[00:30:40.180 -> 00:30:44.980] have had on your show luke groman he's a good friend of course a platform and and brilliant
[00:30:44.980 -> 00:30:49.300] mind on him and he's got this amazing he's got a good quote he says there's very few moments
[00:30:49.300 -> 00:30:54.660] in history when you actually want to own gold but during those moments it's about the only
[00:30:54.660 -> 00:31:00.260] thing that you want to own and all he's talking about is those bridge moments in history when
[00:31:00.260 -> 00:31:04.660] the world is transitioning from one thing to the next and wants to de-risk and they
[00:31:04.900 -> 00:31:08.340] won't even believe that and they're still thinking that they're going to be able to
[00:31:08.340 -> 00:31:12.080] live on that a little bit longer and so i think this is a good thing to do but now the first
[00:31:12.080 -> 00:31:18.080] step is to step on to the lifeboat and when i look at the trends in central bank gold buying
[00:31:18.880 -> 00:31:23.040] and more importantly repatriation when you look at the gold price and how it's inflated over the
[00:31:23.040 -> 00:31:28.800] last two years i see that i see the demand is there it's on the margin still the average retail
[00:31:28.800 -> 00:31:34.320] investor or institution is still not very exposed to the gold market that is what it is but those
[00:31:34.960 -> 00:31:40.480] 2023 really since Russia's assets were confiscated which is very telling very telling if you can't
[00:31:40.480 -> 00:31:46.480] trust the custodian of your assets you need to do something about that and repatriation does solve
[00:31:46.480 -> 00:31:53.360] that oh and you've got now um the same thing happening to Iran on a much bigger scale a much
[00:31:53.360 -> 00:31:59.660] more extreme levels with economic D-Day operation outcast let's see what happens and they've already
[00:31:59.660 -> 00:32:03.740] sanctioned a few banks that are doing business with Iran uh the last thing I'm going to ask you
[00:32:03.740 -> 00:32:08.360] and I'll probably jump off just because it seems there's some attack ongoing now in Iran but I
[00:32:08.360 -> 00:32:13.040] really want to get your thoughts on the the situation the AI the state of AI right now
[00:32:13.040 -> 00:32:17.180] if you've got all that cap access going out that's already causing bond yields to go up
[00:32:17.180 -> 00:32:23.420] and competing with the US Treasuries um is that sustainable a lot of these companies are not
[00:32:23.420 -> 00:32:27.560] profitable they these companies you would never think countries they kind of companies like meta
[00:32:27.560 -> 00:32:33.680] and Google would be spending more than the money they bring in these are cash cows they've we've
[00:32:33.680 -> 00:32:38.180] talked about them printing money for so many years now they need money they're raising money it's
[00:32:38.180 -> 00:32:43.580] just such a bizarre situation to be in but obviously we also know about the potential of AI
[00:32:43.580 -> 00:32:49.090] so I'd love to get your your thoughts on it all yeah I think when people look at the market right
[00:32:49.090 -> 00:32:54.430] now and the inflated value of these AI stocks it's really easy to make the assumption that a
[00:32:54.430 -> 00:33:00.430] correction must be coming and that this is not sustainable uh but high prices on their own don't
[00:33:00.430 -> 00:33:03.850] mandate a crash or a correction as we talked about at the front end of the
[00:33:04.030 -> 00:33:08.530] business conversation bubbles can inflate far larger than anybody ever predicts and usually
[00:33:08.530 -> 00:33:13.750] they do uh usually those that see it first are early enough that they're flat out just wrong
[00:33:13.750 -> 00:33:19.810] right that's that's the most common what I'm paying attention to with this is the leverage
[00:33:19.810 -> 00:33:25.090] on top of leverage and this is what's really important because if you look at the AI companies
[00:33:25.090 -> 00:33:30.610] themselves and we can just focus on open AI and Anthropic because those are the names that most
[00:33:30.610 -> 00:33:33.970] people know they lose billions of dollars a year hundreds of billions
[00:33:34.030 -> 00:33:39.370] and they have bills to pay so how do they pay those bills how do they pay for their compute
[00:33:39.370 -> 00:33:44.350] power that they're ordering from Microsoft and Oracle and Amazon well they they spend other
[00:33:44.350 -> 00:33:49.510] people's money they go back to the market and they raise more capital to pay their bills that's where
[00:33:49.510 -> 00:33:55.150] the money comes from that's where it goes um as they burn through cash and need to access more
[00:33:55.150 -> 00:33:58.930] they can go back to the market and raise more capital as long as they go back to the market
[00:33:58.930 -> 00:34:03.910] with a higher valuation as long as the market believes your customer base has grown you're
[00:34:04.030 -> 00:34:07.870] profitable yet but your revenue has grown therefore you are a more valuable company
[00:34:07.870 -> 00:34:16.580] today than the last time you needed money so we'll finance you again they order compute power uh in
[00:34:16.580 -> 00:34:22.100] advance they put future orders for compute power uh from the companies that produce it like Oracle
[00:34:22.100 -> 00:34:27.500] Microsoft Amazon and Google and they may order this months or years in advance and as those bills
[00:34:27.500 -> 00:34:33.260] come due they pay them with borrowed money the future promises to pay for compute power from
[00:34:33.260 -> 00:34:35.780] Anthropic and open AI alone to those companies
[00:34:36.200 -> 00:34:41.840] over two trillion dollars and they're called take or pay contracts which means when the compute
[00:34:41.840 -> 00:34:46.160] becomes available they can take it but they have to pay either way whether they're ready to accept
[00:34:46.160 -> 00:34:52.460] or not the money is due that 2.1 trillion is due mainly to those four companies and primarily to
[00:34:52.460 -> 00:34:59.970] Oracle and Microsoft so that two trillion dollar note payable to those four tech companies is is
[00:34:59.970 -> 00:35:06.680] colossal those tech companies are the ones who are announcing these skyrocketing capexes every
[00:35:07.100 -> 00:35:13.340] year and last year was over 750 billion that number has now surpassed all their earnings combined so
[00:35:13.340 -> 00:35:19.040] they now have to raise debt to fund every new build out every new shovel every new material
[00:35:19.860 -> 00:35:26.580] so they borrow to facilitate that and they borrow against that note payable if you owe me a million
[00:35:26.580 -> 00:35:31.980] dollars that's actually an asset on my balance sheet and I can take that to the bank and say hey
[00:35:31.980 -> 00:35:36.000] I need to borrow 300 grand they say what are your assets I said I have a note payable for a million
[00:35:36.000 -> 00:35:36.720] bucks from Mario
[00:35:37.320 -> 00:35:41.640] to be against that they'll look at you and say okay if you don't pay we can come after him right
[00:35:41.640 -> 00:35:51.650] and that's the sequence of of uh security so these these tech companies now are financing their crazy
[00:35:51.650 -> 00:35:57.950] uh AI data center build out in capex with borrowed money that is secured by over two trillion dollars
[00:35:57.950 -> 00:36:04.220] owed by companies that don't actually make any money now all of that is sustainable as long as
[00:36:04.220 -> 00:36:08.060] those two AI the AI companies primarily open AI and Anthropic
[00:36:08.120 -> 00:36:14.420] as long as they keep seeing their valuations skyrocket at the speed at which they are and
[00:36:14.420 -> 00:36:25.000] that's the key um and this is where there's like a direct analog to the 2008 GFC back in 2006 the
[00:36:25.000 -> 00:36:28.540] majority of Americans that bought homes that couldn't afford them were offered a specific
[00:36:28.540 -> 00:36:33.100] mortgage called the 2 and 28. that meant that you could get a 30-year mortgage for the first
[00:36:33.100 -> 00:36:38.920] two years you paid a very very low interest rate and no principal and after that for the next 28 years
[00:36:39.280 -> 00:36:43.360] you paid a much higher interest rate and you had to contribute to the principal most of these buyers
[00:36:43.360 -> 00:36:48.040] could never afford that but they were never expected to pay it because house prices were
[00:36:48.040 -> 00:36:55.000] going up 15 every single year and so they'd enter a 2 and 28 mortgage at the conclusion of their two
[00:36:55.000 -> 00:36:59.680] year they'd go back to the bank and they'd say I want to refinance my house is far more valuable
[00:36:59.680 -> 00:37:04.180] today it's gone up 15 every year and the bank would look at it and say yes the assets more
[00:37:04.180 -> 00:37:09.220] valuable will refinance this home for you get you back into a fresh 2 and 28 and the cycle would
[00:37:09.280 -> 00:37:14.240] begin they never actually paid the higher rate or the actual principal and that could continue as
[00:37:14.240 -> 00:37:20.300] long as home prices rised enough that at the end of each two-year term the owner could go back to
[00:37:20.300 -> 00:37:24.440] the bank and say look at all the excess home equity I've acquired lend to me against that
[00:37:25.100 -> 00:37:32.780] and by 2006 like 80 of the loans written in 2003 had been refinanced into fresh 2 and 28 so it was
[00:37:32.780 -> 00:37:38.900] working just fine right so but what happened in 2006 is that home prices didn't crash they were
[00:37:39.500 -> 00:37:46.340] time highs and still going up just going up slower going up about eight percent instead of 15. so when
[00:37:46.340 -> 00:37:51.860] the owner went back to the bank two years after purchasing and said I need a fresh loan you look
[00:37:51.860 -> 00:37:55.880] at the home equity and they'd say there's actually not really enough there for us to loan against
[00:37:55.880 -> 00:38:00.140] because we're going to underwrite the loan there's going to be about 30 grand in fees there's not
[00:38:00.140 -> 00:38:04.160] enough new capital available with your new valuation to facilitate that so we can't refinance
[00:38:04.160 -> 00:38:09.180] you and that began happening in 2006 and that's why thousands of Americans suddenly walked in
[00:38:09.600 -> 00:38:15.240] into the 28 part of their 2 and 28 and that's why thousands of defaults happened in 2007. then the
[00:38:15.240 -> 00:38:20.880] market eventually crashed in 2008. so the parallel there is that the system keeps working as long as
[00:38:20.880 -> 00:38:26.580] the underlying asset that's securing all of this debt doesn't just stay at all-time highs but keeps
[00:38:26.580 -> 00:38:31.260] accelerating in price that's what these AI companies have to do to keep the rest of this
[00:38:31.260 -> 00:38:36.300] train going as long as they can keep going back to the market with a massively amplified valuation
[00:38:36.300 -> 00:38:39.660] they'll get new capital because investors will have confidence that train's going to be able to
[00:38:39.720 -> 00:38:46.200] keep on going they can keep on ordering compute power in the future big tech companies can borrow
[00:38:46.200 -> 00:38:53.360] against it and the thing can continue you know use your judgment how long that can maintain
[00:38:54.080 -> 00:38:59.180] I would argue that we've seen this movie many many times before and that's not a bearish case
[00:38:59.180 -> 00:39:06.560] for AI by any stretch I intend and plan on using AI next year two years 10 years but in 1999 the
[00:39:06.560 -> 00:39:09.920] internet didn't crash it was the financial markets on top of it in 2008.
[00:39:09.980 -> 00:39:14.060] the housing market wasn't destroyed it was just a financial structure built on top of it right the
[00:39:14.060 -> 00:39:19.460] houses were fine the investors got taken out and that's probably where this will end the only
[00:39:19.460 -> 00:39:28.750] reason that we wouldn't is because 40% of the S&P 500 now is 10 companies nine of which are AI
[00:39:28.750 -> 00:39:33.370] dependent the 10th being Berkshire Hathaway it's the one outlier but the other nine AI dependent
[00:39:33.370 -> 00:39:39.310] that's 40 of the S&P 500 so who depends on the S&P 500 well everybody's retirement plan in the United
[00:39:39.310 -> 00:39:44.390] right? All the institutions, all the pension funds, right? Global currency is tied up in the
[00:39:44.390 -> 00:39:51.630] S&P 500. So if that train slows enough that the new capital can't be raised and this thing begins
[00:39:51.630 -> 00:39:57.990] to deflate, the impact is as systemic as back in 2008 when housing was the backbone of the US
[00:39:57.990 -> 00:40:01.350] economy, right? That was the headline that everybody believed. And it was true. Look what
[00:40:01.350 -> 00:40:06.510] happened when it slowed down. It was bad. And so that's a situation that we're in. But because of
[00:40:06.510 -> 00:40:11.950] that systemic effect, I expect us to see very creative government intervention to ensure
[00:40:11.950 -> 00:40:16.330] this doesn't slow down. Because this one isn't just a financial market, it's a geopolitical
[00:40:16.330 -> 00:40:22.850] competition. If the US can't keep builds like this coming and loses the AI race, they lose it to the
[00:40:22.850 -> 00:40:27.550] chief geopolitical adversary who doesn't have to worry about public sentiment to get things built.
[00:40:27.550 -> 00:40:33.930] They can move forward at any cost on their own timing. Cheaper labor, less public support needed.
[00:40:34.830 -> 00:40:36.510] The US can't play that game. And so
[00:40:36.510 -> 00:40:43.930] the bubble looks unsustainable. The prices look too high. They probably are. That doesn't mean a
[00:40:43.930 -> 00:40:48.710] crash is imminent. It does mean there's amazing fragility. But I would expect the US government
[00:40:48.710 -> 00:40:53.550] to be incredibly creative in how they float this market because at present, they can't afford it,
[00:40:53.550 -> 00:40:56.290] not just to fail. They just can't afford to slow down.
[00:40:58.360 -> 00:41:02.540] Exactly. You might have the US administration, the US government continue to prop up that bubble
[00:41:02.540 -> 00:41:06.600] because it's systemically or strategically from a national security perspective.
[00:41:06.820 -> 00:41:07.520] And it wouldn't be...
[00:41:07.600 -> 00:41:11.980] Well, it would be out of left field. We're now seeing the resource race over the last couple
[00:41:11.980 -> 00:41:17.260] of years. This became really real for Western democracies who for the previous 20 years
[00:41:17.260 -> 00:41:23.920] vilified the extraction industries. Any mining companies, extraction companies were demonized
[00:41:23.920 -> 00:41:27.220] from the podium. If you wanted to get elected, it's like, we're not building any mines in our
[00:41:27.220 -> 00:41:31.620] backyard. That was the mandate, right? Then they woke up 20 years later and it's like, holy smokes,
[00:41:31.860 -> 00:41:36.000] we don't control the supply of anything. And that's a problem. China has tremendous leverage
[00:41:36.000 -> 00:41:37.580] because we outsourced all of our resources. And that's a problem. And that's a problem. And that's
[00:41:37.600 -> 00:41:43.000] all of that to other countries. And that's why you're seeing the Department of Defense now become
[00:41:43.000 -> 00:41:51.340] like an active investor in mining companies. 15% of MP materials, 5% of US antimony, 10% of
[00:41:51.340 -> 00:41:57.440] lithium Americas. And it goes on like they're actively engaging in state capitalism, the same
[00:41:57.440 -> 00:42:02.500] as we used to call China's approach, capitalism with Chinese characteristics. The US is doing
[00:42:02.500 -> 00:42:07.580] their version of that because they've got to play catch up, right? So it wouldn't be a wild move.
[00:42:07.600 -> 00:42:14.220] To see a similar play into the AI sector in a major way, because it's not just a financial
[00:42:14.220 -> 00:42:20.680] point of massive systemic fragility. It's not just an innovation race. It's tremendous geopolitical
[00:42:20.680 -> 00:42:26.360] tension that is at stake. And so I would expect, reasonably so, the US gets very involved,
[00:42:27.100 -> 00:42:33.510] however they need to be. I agree. Jay, always enjoy our conversations, man. Thanks a lot for
[00:42:33.510 -> 00:42:37.460] giving us your time. Pleasure's all mine, Mario. Take care, man.
[00:42:38.140 -> 00:42:42.260] Guys, I recommend you check out Jay's channel. He does deep dives into this. I really enjoy
[00:42:42.260 -> 00:42:47.140] watching his videos. Really good at explaining those topics. I'm going to be back live in nine
[00:42:47.140 -> 00:42:50.420] minutes with Lieutenant Colonel Anthony Aguilar to talk about some of the developments that are
[00:42:50.420 -> 00:42:55.620] happening on the ground now. There's some reports about explosions in southern Iran. Some people
[00:42:55.620 -> 00:43:00.400] are claiming it's US strikes. I doubt it from what I've seen and no confirmation yet. We'll see.
[00:43:01.060 -> 00:43:04.220] So we'll be live in less than 10 minutes to talk about this. Bye-bye.