TFTC: A Bitcoin Podcast - Ten31 Timestamp: DRAM Rules Everything Around Me

Starting point is 00:00:00 War's back on the table, boys. Happy Monday. Or is it? Depends on what hour you're talking about. Is this ever going to end? Is this just going to be the eternal September? The straits open, straits closed, war's over, peace deal be made, peace deal off. There's an oil analyst in Asahaji that I think you've had on the show before who has contended that it is in neither party's interest to actually resolve this for various different reasons. So we may just be eternally doomed to uh the the eternal recurrence of straight of hormones being open and then closed yeah i mean

Starting point is 00:00:32 we'll open with that today that's the first uh the first uh page on on the deck you sent which is the of headlines that we've gotten over the last week as it pertains to what's going on in the street yeah i mean i'm not gonna read all these uh you know i ain't reading all that but happy for you sorry it happened uh but yeah this is uh you know what it's it's increasingly low signal to to worry too much about any given headline here but here's what we're looking at as of i think the start of the start of this show the headline on the bottom right which says u.s and iran agreed to halt days of fighting over straight after a bunch of weekend uh slap fighting seems to be what's prevailing right now so check back in later this afternoon and that'll probably be flipped but uh directionally

Starting point is 00:01:16 if you were going to look at this i think on a chart chart basis and do kind of the ta of what's going on here you know i think we're very much in a up and to the right from the us's perspective and up into the right trend maybe last this weekend was a bit of a bull flag little pullback and now we're gonna gonna resume the uptrend generally it looks like developments uh tracking more in us's favor and we'll talk about a few indicators to that effect later in the show but yeah you know for for all of our sanity i'm hoping we can finally cancel the reruns on this one and move on to something else yeah as we've been saying for months let's look at the data and not really focus on the headlines we're looking at wti it's at uh 70 and 50 cents right now so

Starting point is 00:01:57 still relatively depressed from its highs in in the the heat of the war a couple of months ago and so oil markets are they're up 1.25 right now wti is so maybe reacting but not as aggressively maybe the stalemate is not as uh deleterious to to oil markets as many people were led to believe a couple of months ago but on that i think just zooming out and thinking about broader economic strategy here in the u.s you flagged secretary scott besant's speech at the neat club economic club in new york america 250 gala dinner which happened last week over the weekend and his focus at least in this section of the speech, was on re-architecting supply chains and highlighting where our weak points are, where they can be strengthened, and what we need to do to make

Starting point is 00:02:50 sure that we can sustain the economic engine in cases of pandemic cyber attacks, war, financial shocks, whatever it may be, just auditing our economic supply chains, making sure they're strong wherever they need to be, wherever they're critical for the functioning of our economy. Yeah, it's a pretty comprehensive speech. It's pretty long. I recommend people either go watch it or you can read it on the Treasure website as well. But I think there's a lot in there. The interesting thing to me is it validates everything we've been talking about on the show for the last basically year and the timestamp for that amount of time. And that's not by accident. It's not because Scott is a listener. He may be, but I highly doubt it. The causality runs

Starting point is 00:03:33 in the other direction. Hey, Scott, you're listening. Scott, Scott, if you're out there, let's, let's get in touch. I think you'd be a great TFTC guest, but you know, the causality runs in the other direction, right? Like we're just reading the, you wouldn't even call it the tea leaves, just like reading speeches like this for the last year from Besson and Elbridge Colby and Trump, all, all of the guys kind of around the decision-making table. And they're all kind of speaking off of this one talk sheet. And so I recommend people go look at it. It's a good summary of all this. If you've been listening for a while, it won't be, it'll all seem very familiar. And I think, you know, I highlighted this one part just because like, I think this

Starting point is 00:04:12 is really like the key question is like, not even just, I think the pandemic stuff, the cyber attack stuff, the financial shock stuff, obviously it's relevant. And we saw, you know, big supply chain issues worldwide and since COVID in early 2020s. But I think the real question to me is like can it withstand coercion and does it depend on a country that could use economic leverage against us because that's really like the latent power behind all the different you know dynamics and relationships that trump is trying to thread the needle on right here all come down to like it's basically just a big like geopolitical poker game right and you don't necessarily know who's who's got what cards or like when they when they might play them and you know that that that lack

Starting point is 00:04:55 of awareness, that black box, that potential that someone could pull a lever that they previously hadn't pulled. Maybe you didn't even know that they had or that you thought that they wouldn't pull. That's coloring like that element of deterrence is coloring everything that we do and that our, you know, our adversaries or our trade partners can do or would do. So I think, again, it's really not even so much about like kinetic war on a global scale. Hopefully that doesn't happen. It's not so much about like entirely, you know, cutting off one half of the world and saying the U.S. just isn't going to play in like the another hemisphere that someone else will just kind of see that as someone else. I think it's much more about how do you keep the

Starting point is 00:05:32 plane flying and kind of fix it, you know, while it's in the air in such a way that, you know, doesn't require you to land it and start a whole new flight. Can you keep the system running while implying that you have certain levers you're going to pull or that you could pull if absolutely necessary. And that often just even the implicit threat of that can be a useful tool. And I think Besson would probably argue we haven't played those cards or threatened to pull those levers sufficiently over the last 30 years. And certainly it seems like he's been teeing that up very directly here. Yeah. And I think if you look at the growth of this, particularly on the startup side of things coming out of parts of the country like el segundo michigan you have companies like

Starting point is 00:06:19 knox metals spinning up uh sort of metal refineries and really getting back to locking down like inputs of critical parts of the system it's early days but you look at something like valor atomics what they did with getting that that small modular reactor online uh in nine months i'm actually pretty bullish on this this real reshoring of parts of the supply chain that we need to lock down and as he says in this quote it would be foolish to think that we're going to bring everything here it doesn't make sense division of labor globally makes makes a ton of sense still but making sure that we have critical materials being being produced here in the us is it's going to be big and i would say if you haven't been paying attention to the wave

Starting point is 00:07:04 of sort of industrialization coming out of El Segundo, places like Michigan and even outside of Austin as well. I believe Michael Dell's nephew has a sort of startup incubator between Bastrop and New Braunfels that is testing all this sort of hard supply chain startup infrastructure. And I'm pretty bullish on this. Yeah, I mean, you can go look at a lot of components of XLI, which is the big state street industrials ETF, look at any of those charts over the last 12

Starting point is 00:07:38 months. All the examples you mentioned are great. It doesn't necessarily mean that every single company that has any leverage to this is going to be a fantastic investment. But it's clear that if you take Besant at his word, if you take the national security strategy at its word, there's only one way that this goes. And it seems like this should be pretty obvious at this point. But based on mainstream commentary, I think it's still not as obvious as it should be, though. Certainly, I think it's notable that, you know, this phrase economic statecraft that Besson is using here, the title of speech that was a year ago. You know, that was the provenance of analysts like Michael Every, who is really good geopolitical kind of strategist

Starting point is 00:08:21 who's surveyed a lot of the stuff for the past couple of years and even before that called a lot of the direction that we've been going in several years ago, that phrase, I don't know if he actually coined it, but he's certainly, you know, it's, it's become kind of his calling card, but you know, Michael, every, he's not, uh, he's not going on Fox news. He's not going on CNBC every single day. He's not, he's far from a household name. He's far from a name that, you know, most of your, uh, wall street PMs are going to know at this point. And so for a phrase like that to make its way into this, um, you know, the speech given by one of the most important leaders and decision makers in the world right now is, is I think

Starting point is 00:08:54 very telling yes what else is telling is something that we highlighted last week but sticking on the scott percent section of the show talking about dollar strength with with their good friend bitcoin uh bitcoin advocate joe kernan from cnbc but really leaning into what we've seen which is dollar dominance despite what's going on with the war and this geopolitical fracturing a lot of people thought myself included to a certain extent that this would um this would lead to people diversifying away from the dollar system. But what we've seen, and like we discussed last week, probably predominantly, or maybe not predominantly, but definitely a material contributing factor being this AI wave pulling capital into the US. But the dollar's been

Starting point is 00:09:36 relatively strong. And Bassem was making the case here that he thinks that anybody who has been cut off from the dollar system, whether it be Russia, Iran, or Venezuela, which is being let in, will will jump back into the dollar system if given the chance because it is the most liquid and best money market in the world yeah i think uh it just it struck me as a pretty blatant statement to make on cnbc you know he says everything president everything president trump is doing here if you look new venezuela iran etc like he frames it as basically this is a dollar dominant strategy which, you know, 20 years ago, I think the idea that, you know, the esoteric flows between currencies and how the dollar plays into that and how the U.S. wants to situate the dollar as

Starting point is 00:10:26 dominating that was just simply not something you were going to hear again on CNBC. So it's notable that you've got someone like Besson again coming out and saying that very directly. This obviously has always been a meaningful bulwark of U.S. strategy, but to say it so plainly I think is notable and I think also cuts against a lot of the narratives that people have built up around the war. And I think you just scroll to the next slide, I think it leads into that well, that this headline last week that I believe Besson was going on CNBC specifically to talk about this headline, but the U.S. issues sweeping Iran, oil sanctions, waivers, unlocking billions of revenue for Tehran. This is a 60-day waiver for Iranian oil sanctions and U.S. dollar sanctions for the country, provided that oil is invoiced in U.S. dollars. It seems like that from early reports, that's being very much taken up aggressively by both Iran and its trading partners, seems like notably China as well. So just an example that, you know, early days, the fan of outcomes is wide here. Things can still go many different ways.

Starting point is 00:11:33 I don't think it's off the table that, like, people around the world would, in some sense, like to not be beholden to, you know, the currency system and the financial system of a much more powerful semi-adversary. So the idea that countries wouldn't always be looking for alternatives, I think that that's, you know, always going to be happening. But, you know, this development is just the latest in a long line of developments we've seen over the last year or so, and especially since the start of the war, showing that it's easier said than done to de-dollarize and stand up your own competing international currency system and international capital markets system that can facilitate all the trade that people want to do in an increasingly complex and interconnected economy. and down at the bottom on the slide you can kind of see the the results like the we're now at 101 on the dixie a lot of that's driven by the the japanese yen component but nonetheless we're basically at post-liberation day highs after uh despite um despite the war and after many many twitter analysts assuring us that that was the final kind of death knell of the dollar so yeah it's it's kind of gone again in the opposite direction that i think many expected a few months

Starting point is 00:12:41 ago on that note what does it say about the current administration and our geopolitical counterparts lack of willingness to to diversify away from the dollar in earnest because they know there will be a response from sanctions and potentially kinetic response maybe not a response but a proxy response as you're walking through that thesis it's like okay like what happens if get sort of like a weaker administration from the geopolitical front like let's say democrats come into office in 28 you think our geopolitical adversaries would be more willing to to try so earnestly to diversify away from the dollar yeah look i think um it's an interesting question because it kind of depends on how how powerful you believe the deep state is the administrative state

Starting point is 00:13:30 and you know who's actually pulling those levers to be fair to the prior admin like you know the The lithography, ASML lithography, export controls started under Biden in 22, 23. And, you know, it was agreed with quite a lot of controversy in the industry at the time. The CHIPS Act started under Biden. And so to some extent, you kind of see these things, different incarnations of these things bubbling up across administrations. Obviously, you know, as he's want to do, Trump has taken a return of everything to 11 and gotten people around him who would do that. You could ask yourself whether that's because of Trump specifically or because the powers that be under the hood, behind the scenes, realize that the hour was late and it was kind of now or never to start pushing a lot of stuff aggressively in one way or another. But if you believe that thesis, then I think it's arguable that, especially now that the Band-Aid has been ripped off, you kind of don't get to put the toothpaste back in the tube and put the genie back in the bottle.

Starting point is 00:14:26 And you're going to see versions of this continuing at a slower, faster pace, you know, based on based on who's in office. I don't really know that even if we got, well, let's say President AOC or President Mamdani, that we would get a very, you know, and frankly, I would say, let's let's not have that happen. Oh, Mamdani can't happen. He wasn't born here. Well, never say never. But in any case, I'm not necessarily convinced you wouldn't just see a rebranding of kind of the exact same policies with a different veneer and a different kind of framing. But, you know, we'll see. Certainly, like if you're if you're China, if you're Russia or anyone kind of in that nexus, I don't know that you can necessarily afford to hope you can run out the clock for another two years and just maybe get someone who's a patsy in office to completely reverse everything. i think the the right thing that you have to do is just behave as if this is going to continue yeah that's a good point i mean we mentioned earlier wti again trading around 70 dollars but you also have um the change of consumer prices for computer software and accessories

Starting point is 00:15:31 from a year earlier juxtaposed with each other yeah it's it's it's an interesting like dynamic for for the fed for congressional leaders who are up for reelection midterms for the republicans as as they look at midterms, you know, you've got what looks like if this kind of general megatrend continues, oil prices coming down to basically pre-war levels. If the Iran deal, such as it is, holds, that probably continues or we hold around here, gas prices more manageable. OK, so that helps you on one big, meaningful component of inflation. At the same time, you're seeing ripping prices in electronics components kind of all across the board, thanks to the AI build out that we've talked about a lot on the show. And I think it's notable

Starting point is 00:16:12 because that's a meaningful countervailing trend potentially to relief on oil prices. But also, basically, if you're under 40, like you don't really remember a time when, and this chart doesn't really even go back that far. It's like 2020. But like, you know, we've all seen like the great charts of like, you know, deflationary things versus inflationary things in the economy. You know, obviously, healthcare, college tuition, those things are up and to the right. One of the great examples of like deflation in our economy, though, has been consumer electronics.

Starting point is 00:16:38 Like if you're under 40, like you probably don't remember a time when TVs and computers of the same quality didn't get less, didn't get more or less expensive year on year. Right. That same model of TV, that same model of iPhone, that same model of, you know, new PC. Generally, you could rely on it to at the very least not go up year on year. And typically it was it was going to go down. Memory was thought of as a commodity. And I think you could make an argument that probably still is true. But the AI build-out is so aggressively memory-hungry that the memory oligopoly has now put players like Apple and Microsoft in a position where they basically have no choice but to pass through costs to consumers to the tune of 10% to 20% year-on-year for the new models of iPhones and Xboxes, etc. So that'll be a meaningful trend to watch as it relates to how the consumer feels about how far their paycheck goes and whether their life is getting harder or easier.

Starting point is 00:17:33 I think if you had to pick, you'd rather as a politician trying to get reelected, you care more about gas prices than you do about iPhone prices. But, you know, it's it will if it keeps up at this level, if the shortage keeps up at this level that we've talked about and it keeps broadening out, it's going to have more impacts beyond just, you know, your fancy consumer electronics. It's the stuff is an input into everything we do now. And so you're just going to see kind of more and more more pressure there. yeah i watched a part of an interview with dylan patel from semi-analysis over the weekend and i mean this this memory shortage is not going to be sorted out anytime soon i think he was saying maybe back in a 2027 is when they begin they can begin to spin up the supply chains to bring on enough supply to meet the demand but the demand is still outpacing supply at companies like micron

Starting point is 00:18:25 and other memory dealers out there. That's a callback to Roger Burr there for those who are unaware. But yeah, you can expect this sort of consumer electronic inflation to continue for a couple of years. And I think you had AOC come out over the weekend and say that Apple needs to be broken up

Starting point is 00:18:45 because they're using their monopoly pricing power to increase prices, completely neglecting the physical reality of this memory shortage that has arisen because of the ai boom but to your point i think a focus on oil is much more important where the the memory story is is very much explainable because you can point to the demand the growing demand and the efficiencies being driven by ai and parts of the economy say hey this is just part of this build out and we're going to suffer some some years of of inflation on these electronics

Starting point is 00:19:18 it also it also helps that two of the three biggest uh the two of the three basically memory oligopoly players are samsung and sk hynix so koreans so just if you're thinking kind of cynically about the way that republicans and trump could position it it's you know foreign companies are you know not playing ball and they're ripping us off and they're not expanding capacity fast enough and you know they're they're the ones who are kind of doing the aggressive predatory pricing never mind micron don't look over at them but uh yeah it's uh it'll it'll definitely be interesting to see you know with every we talked about this before on the show but every vertical chart always has a supply response i think they're interesting things that

Starting point is 00:19:51 you know the the industry can do in terms of high band with flash potentially over time to maybe replace hbm or you know otherwise displace it make it less relevant and critical to the design stack but in any case i don't see that happening in the next like year or two right so be interested to see how the narratives gets fun yeah speaking of narratives big narrative right now is the interjection of the u.s administration in frontier model releases obviously fable 5 getting pulled from the market a few weeks ago was a big story but it seems like the the overall thrust from the administration to put some filters on the models or get their hands on them and and decide in a centralized fashion what gets released to the market when is is picking up yeah it's uh

Starting point is 00:20:36 look i you know i hate to say we told you so kind of thing like if you go back and look at the situation with the dod or the dow and anthropic you know right before the iran war happened And we were saying, like, this is increasing this stuff, you know, frontier intelligence, if it's as powerful as these guys think and as industry experts think and the real AGI pill people in the world think it's going to be increasingly treated as, you know, a weapon or a matter of national security, rightly or wrongly. And you certainly are seeing that now playing out in a much more accelerated fashion across all these headlines. I think it's interesting that, you know, there's a debate right now about whether this is effectively the outcome that Anthropic has essentially been angling toward and that this is all, you know, regulatory capture theater to put themselves in an advantaged position, you know, the Frontier Labs in an advantaged position to, A, avoid or make distillation attacks harder, keep more things behind the veil, have greater leverage over all the enterprises in the U.S., be kind of hand in hand with the regulators as they write the legislation to say, who gets to do what and be right there in the driver's seat and have a regulatory moat that basically no one else can easily match. And so maybe that's the case, right? I think if you look at this letter that came out, I think it was submitted early June to Congress from Anthropic

Starting point is 00:21:54 about Alibaba and their alleged massive distillation attack against Claude, that if you look at the text of that, it's all framed as pro-national security, like the US needs to ramp up. It's cybersecurity and we can't allow, you know, China to co-opt this frontier intelligence and draft off us as we do this. So certainly, like, however much Dario and co. may complain about, you know, the U.S. government infringing on their rights with mythos and fable, there's definitely an element of talking out of both sides of their mouth where they're arguing for, you know, restrictions in the name of national security. So let listeners decide kind of what real motivations are here but either way kind of the outcome is the same right you're seeing

Starting point is 00:22:34 certainly a growing trend toward control and regulation of these things as a meaningful you know national security strategic advantage yeah dario on capitol hill last week at least the clips were floating around over the weekend besmirching open source open way models and saying that their national security threat like in front of congress so or the senate i forget where the hearing was but he's out there pumping that narrative and i guess this dovetails into the question of what is the actual competition between these frontier models and the open source open weight models that that exist today that many people based off of the posturing of the u.s government and the frontier labs over the last month or two are beginning to beat the drum we

Starting point is 00:23:19 really need to lean into open source open weight models we can't let the government co-opt this And you have this tweet and quote tweet here that basically poke fun at that idea, which is like, yeah, you may be saying that you want that. But when push comes to shove, everybody just uses the latest frontier model because it's the best and they're willing to pay for it. Yeah, I think, you know, it's it's very much TVD and I don't want to call on exactly where it's going to go. I do think there's a lot of the data that I've seen that's floating around is basically like you've got 80% plus of tokens that are other call that are used are open source tokens. 90% plus of the actual economic value being spent on tokens is going to frontier models. And you've heard, you know, I mean, Throbix CFO was on a podcast a couple, I believe it was Invest Like the Best, a couple months ago, basically saying that, you know, they very much see that internally. And they believe that the meaningful economic returns all accrue to the frontier over time.

Starting point is 00:24:14 But I think you could have, you know, a kind of a volume dollar bifurcation, right, where a lot of volume goes to open source and a lot of dollars actually can go into the frontier and both can kind of, you know, live side by side. But I do think it's the narrative that, you know, to me that basically open source is like pretty much caught up or it's about to catch up. It's just a few months behind the frontier. And, you know, in just a few months or just a few quarters, OpenAI and Ambropic will be totally cooked and we won't need them. And so we'll just we'll just wait around until that happens, because I think like as someone who has really ramped up, you know, his use of agents in the last couple of months and like you and I have talked about this offline, you've obviously been, you know, many chapters ahead of both me and I think most people there hasn't been on either for either of us or for other members of our team, you know, a massive appetite to transition a lot of those tokens so far over to open source, because like regardless of the benchmarks, like regardless of what difference, you know, meter tests say or what like sweep bench says like there is for a lot of tasks at least there is in my opinion i think you agree with this like a very very clear feeling a very very clear difference and just like what it is to interact with you know an agent that's running on the frontier versus an agent that's running you

Starting point is 00:25:25 know one generation behind or something on you know on open source even if it's much cheaper i definitely think like and i look forward to a world where you know an open a cheap open source model that cost me basically nothing gives me something like gpt 5.5 or you know opus 4.8 or Fable 5, whatever capabilities. And I think that that's a world where there could be a lot of economically valuable token spend on those types of models. But to the extent that you don't believe scaling laws are anywhere near saturated, we're not anywhere near a ceiling, which it seems like our most AGI-pilled people out there do not believe, it stands to reason to me that you're going to have a frontier that just keeps moving out and out and out. And there's always, I think,

Starting point is 00:26:05 going to be near infinite demand for the best possible intelligence that you could deploy. even if it's for totally new use cases that you know we can't even imagine and so that gets back to like this is gonna be a meaningful national security conversation i think for a long time right who gets to who gets access to that intelligence and when and what does it mean if you are not in the cohort which we probably won't be that has access to that intelligence right what does it mean to is that where the permanent underclass comes from and is it already too late to to avoid the permanent underclass and if so what are the the implications of supporting the the group that's locked out of intelligence yeah i've got two competing thoughts here one

Starting point is 00:26:43 on the open source side i think a lot of the problems are wrapper driven where like like you can download claude or codex and get access to the cli or the desktop app and they have really good integrations and it's really easy to seamlessly port those frontier models into an agentic flow whereas for me as somebody who has played around with the the open source models as well it's like not as easy to do so maybe there's some ux hurdles that can be overcome that make it easier to implement these and and test them and switch them in and out basically model route based off of the particular tasks you need and hopefully the open source openweight models will get to parity with the frontiers with the help of most likely distillation but the competing view

Starting point is 00:27:29 there is too when you when you think about the model training side of things and the capex being deployed by the hyperscalers and the frontier labs to to train the next generation models that's that's where like catching up like literally in the physical energy and compute side that it's it's hard to envision the open source models catching up without really getting good at distillation um and getting to a point where distillation like they launch a frontier model you could distill it rather quickly and um and efficiently and competently i think that that seems like the only hope for for these open source open way models in the long run and it depends on your view on recursive self-improvement too right like that's the that's where the real it feels

Starting point is 00:28:15 like that's what everyone is is running toward and you get there first and i think there's a view that you get there first and kind of you win you know game over and then you know the the three to six month gap between frontier and open source goes to you know much much wider and basically you know unbridgeable you know not uh competent enough in matrix math to tell you whether i think that's going to happen or not. But I think it's much more of an open question than a lot of influencers like deposit. Yeah. We're running long here, but we've got two more stories shifting gears back to private, not back to, but to private equity. You have this headline here, Apollo curve withdrawals after exit requests at 17% reigniting fears of the private credit

Starting point is 00:28:54 liquidity. I had an episode that recorded last week with Nick Namath, who has been on this sort interplay between private credit private equity and insurance companies for the better part of a year we talked originally i believe in april caught up and that was basically the the tenor of the conversation was what we discussed in april has not gone away maybe out the headlines but these risks that exist in private credit and private equity are still there lingering in and growing in the background and this apollo headline would confirm that yeah you know we have to spend a ton of time on it. We've talked about on the show before, I think just notable that you're seeing quarter over quarter, these withdrawal requests grow in terms of percentage

Starting point is 00:29:36 of AUM on these funds. And 17% was the highest one that I'd seen for that Apollo fund. So notable there. Bottom chart is just pulled straight out of Mindprint Ash, Matt Dines and Cameron Otsuga's show from Build Asset Management. I highly recommend people go subscribe to that and also just listen to the latest one. But Matt's calling out here that cash advances from the FHLB to life insurers, went back to Q1 2020 highs, you know, really ripped quarter on quarter. And this is actually for Q1. So we don't have the Q2 data yet. So it's lagging a bit, but just notable because I think Nick has highlighted this, as you're saying, you see stories elsewhere and Bloomberg's covered it some, but just about the growing kind of exposure that a lot of insurers

Starting point is 00:30:13 have both in the US and abroad to these private credit funds. And this would be, you know, one sign of potential growing distress in that complex. And it's just relevant to everything we're talking about because it's it's one one more thing that's lingering out there in in market that's you know it maybe it's just a few trillion dollars relative to hundreds of trillions of dollars of you know assets across a bunch of different verticals and um you know asset classes but we have an increasingly levered and interconnected economy and as we've seen as we saw in 22 and 23 you know relatively small changes and core inputs can cause a daisy chain of unexpected impacts that require meaningful policy response and so when you've got this out there

Starting point is 00:30:51 with all the other, with the AI issues that we're highlighting, whether that's, you know, mass unemployment caused by AI or the AI bubble, if you're, if you think that way, cracking and the constraints on existing debt to GDP, all that just kind of is part of the mosaic you should be considering when you think about what the Fed and Treasury's, you know, option set and reaction function will be over, you know, the next year. Yeah. And the 32nd elevator pitch for this interplay between private equity, private credit, and the insurance companies is a lot of these private equity companies look at what Berkshire Hathaway did by buying large insurers and getting access to those cash flows. And they would go buy an insurer and then immediately replace the

Starting point is 00:31:32 asset manager of the insurance balance sheet with themselves and then funnel a lot of those assets into the private equity and private credit investments, which are beginning to feel headwinds from AI coming and deflating a lot of the software-focused companies in those portfolios. So you have people taking out life insurance policies depending or annuity policies depending on cash flows from the assets managed by the private equity companies that have bought the insurance companies and they may not materialize. and then you have just the whole the whole thing of these private equity portfolios not being marked to market on a consistent basis so it's really hard to tell exactly what these investments are actually worth at the end of the day versus their marks last but not least this is a bitcoin podcast we'll talk about it at the end of the show always big uh big headline big theme in the

Starting point is 00:32:29 based last week was stretch the strategy variable rate perpetual stretch preferred share series a deep pegging from 100 that's what par is supposed to be fell i believe to 72 at some point last week it floated back up to 78 by the end of the week and micro strategy this didn't make it in the deck but right before we hit record they came out with some new forward guidance about how they're going manage their balance sheet. Yeah. Maybe we talk more next week about that, the updates to their policy. I'd like to spend a little more time thinking about the implications of what Saylor put out there. I don't put this in there to dance on any graves or mock anyone. There's quite a lot that can be said and has been said on many different podcasts about stretch. And that's

Starting point is 00:33:19 in the last minute here, not really what I want to do. But I thought it for our purposes was notable that in you know a very uh very violently uh down downwardly biased uh environment last week with with stretch potentially you know many people saying unwinding i think it's probably too excessive but we'll see um and you know bitcoin again uh breaking 60k going down to i think as low as 58 58k gang got their got their meme finally maybe we can stop hearing about that now for the for the you know the first time in five years but when it happened as all it was happening, BlackRock tweeted out a reiteration of their guidance that all investors should have, you know, one to two percent allocation to Bitcoin in their portfolios. That came from

Starting point is 00:33:59 December 2004, right after the election. And they first actually put pen to paper on that and made it official. And so, again, as we've said in prior weeks with a lot of different types of headlines around Bitcoin, this is not something that you have to do in this environment when you're not sure if everything's going to unwind because Stretch is going to blow up or some other kind of, you know, FUD oriented headline, you could just keep quiet, you could just kind of not emphasize Bitcoin, slip it under the rug, not think about it. So to kind of post this in the middle of all that is just the latest iteration on this theme of these little bread crumbs from people who have no reason to be saying anything about Bitcoin, who are still coming out

Starting point is 00:34:34 and reiterating their positive view on Bitcoin in, you know, a terrible price environment and awful sentiment. So just one more thing to think about in your mosaic of how you're considering Bitcoin's path from here. We'll end it there. We'll see you guys next week. Thanks for watching!

TFTC: A Bitcoin Podcast - Ten31 Timestamp: DRAM Rules Everything Around Me

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