The Pomp Podcast - Why Isn't Bitcoin Going Up? | Jordi Visser

Starting point is 00:00:00 What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat

Starting point is 00:00:40 any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. Let's talk about Bitcoin. It's not going up. everyone is very disappointed they wanted to go up why is it not going up jordy yeah i'm i'm uh i'm a little uh surprised over the summertime that it wasn't able to break out when ethereum broke out but it did get up to 125 124 and then it pulled back um we're doing the same routine again that we've been doing unfortunately all year in this which is it follows the stock market to some degree. The thing that hurt it in the last week has been.

Starting point is 00:01:27 What's going on, guys? Today, we've got a great episode with Jordy Visser. In this conversation live while we were on air, we got Jerome Powell's comments from Jackson Hole yesterday. It was pretty good. Jordy gave a live reaction to what's happening there. On top of that, we talk about the PMI. We talk about the AI bubble, talk about stocks, the mag seven getting cheaper and why Bitcoin's not going up. It's all in today's episode. You're going to really enjoy it. We got a lot of fun, some good laughs and always great information. Here's my latest conversation with Jordy Visser. All right, Jordy, I thought a great place to start this conversation. You wrote an article that I think is worth talking through in great detail. It's

Starting point is 00:02:00 called the academic Fed versus the inflation target of the future. And you really lay out kind of where we've been, where you think we're going and what some of the challenges are right now. Yesterday, we had the Jackson Hole Symposium. Jerome Powell, kind of all eyes on him. I call it the nerd Super Bowl. What are you thinking here with the Fed and kind of this idea of an academic Fed, more so than maybe what people think the Fed's supposed to be doing? Yeah, I wanted to write the paper because I don't think people fully grasp the approach that Scott and Trump have been trying to make about the Fed and the pressure they've been applying. They've used the word, the Fed is too academic. And the reality is, it's true. And I really wanted

Starting point is 00:02:45 to go through and just highlight in the paper, all of the commentary, not just from Besson, which has gone on for some time. The podcast, he said it on the interviews in Asia, everything. He's repeatedly said it. And Scott is obviously a well-respected person from the hedge fund world. He understands markets extremely well. He's a historian. And on an all-in podcast, he specifically made the reference that he would like the Fed to run their decision-making the way Alan Greenspan did during the 1990s. And he highlighted that we had a period of high growth and low inflation, and that was because of a productivity boom. But it was really about being forward-thinking.

Starting point is 00:03:30 And I think the comment about academic, which was reinforced in multiple interviews with David Zervos, David Malpass, other people that were at one point or still are in the final 11 for the Fed chair, they basically went through and said the Fed only focused on the most recent data points. If for the next three months we have CPI that comes in at 0.4, 0.4, 0.4, but we're heading into a period of deflationary situations with AI, when an analyst invests in a stock or they make a call on a stock, it's about the future discounted cash flows. It's not about what happened in the most recent quarter. It's not about what's going to happen in the next quarter. It's really about, in the Fed's, in Besson's mind, about what's coming down the road. And right now we have a situation where the labor market has been weakening. Most measures have, you know, we've talked about it on here. They're not at recession levels.

Starting point is 00:04:30 They're not at some warning level. But you can clearly see that AI is having an impact on the jobs market. They have a dual mandate. They have to pay attention to both inflation and also the jobs market. It's just very difficult to see the jobs market getting better as the AI acceleration continues. And that was the point of the paper is whether or not you agree with this, the Fed is going to be run more like what Donald Trump wants once he gets his people in charge. And so the point of the paper was we're at a very important crossroads that to me reminds me of 2007, 2008, where fiscal policy, the AI action plan, the AI arms race, all of the things that the administration has talked about, the spending that's going to happen, is now going to be combined with monetary policy, which they want to run hot. They believe they want to make a bet that inflation is going to come down in the future.

Starting point is 00:05:26 And if it means having CPI above 3% for the next two years, so be it. As long as they can work out of this, they also have a deficit problem. But just like in 2007, 2008, when we had a shift in both fiscal and monetary policy, you also had an innovation boom, which came from the software side and the smartphones. This time it's AI. Those three forces, to me, are very critical in kind of the next phase of what's happening in the United States. And so I think monetary policy should be aligned with the desires of the of the government from a fiscal side, as long as inflation is not out of control.

Starting point is 00:06:00 And that's where we are right now. You think about inflation being out of control. One of the parts that usually gets lost in the conversation is different people have different experiences with inflation. If you have a lot of exposure to highly sensitive inflationary goods, then obviously in certain situations you're going to experience very high inflation. Somebody who does not have exposure to those goods can have a much lower inflation experience. And so I've always thought that it was very difficult to put kind of a one size fits all monetary policy on 300 plus million people because they have these different experiences. But how do you measure inflation is too high or inflation is out of control? Is there like a numeric value or is there some other measurement that you would look at that may trigger?

Starting point is 00:06:46 OK, they've got to have some sort of policy shift. yeah and i so i think what you have to do there no one in the united states for a second would argue with the fact that there has been significant education inflation significant health care inflation significant auto insurance inflation significant uh health insurance inflation housing affordability is off the chart you know is at levels where most people can't afford a house Those are the issues that came out of COVID. We had rapid acceleration in most of those. And I think those affect all Americans, regardless of where you stand in how much money you're making. And that's been the issue. And I think that's why the sentiment numbers are so low. then when you start adding in the pressures that are coming from AI, this is where I do understand the concept of somehow or another, this has to change. The administration wants rates to be

Starting point is 00:07:39 lower because in their mind, it will help the housing market. There's no guarantee it'll help the housing market because there's no guarantee that long-term rates, which are not controlled by short-term rates, will actually go down. And that's the fear that most people have is that we're going to reignite inflation. We're going to have to turn around, raise rates, go through this. But I do believe, again, when you think about inflation, you have to think about what's happening from the AI situation. AI is going to be coming down the road. It will have deflationary implications for everything.

Starting point is 00:08:09 And whether it takes two years or three years, we're only four or five years away from AGI. And the compounding of just AI acceleration is mind-boggling. And I know most people don't see it at this point because they don't see the benefits because it's really been predominantly on the software side. But once we move into the embodiment side and we move into the robotic side, you're going to start to see massive deflationary pushes because it's going to involve

Starting point is 00:08:35 what we talked about last week as well, which is digital employees, artificial intelligence employees, everything's going to change and you'll start to see pricing power come down and competition come down. But for right now, everyone still feels the inflationary pressures.

Starting point is 00:08:49 I don't care who they are. I am seeing more and more videos. I'm just going to call them robotics videos, mostly humanoid robots, but there are some ones that are not. And frankly, they are somewhat elementary in that they are kind of single task video demos. I saw one, I think it came from One X, where they were carrying a case of beer into the house. I saw another one where they were picking something up and they were moving it. I've seen, I think, Figure AI has one where they're folding laundry, right? These are all kind of like in-home. And then there are a lot of videos that have been surfaced in terms of

Starting point is 00:09:22 inside of warehouses and industrial places and picking things up and moving them and stuff like that. And so when you talk about the embodiment of AI being deflationary, is that what you're talking about of just like these humanoid style robots are able to start to do things that increase productivity and decrease expenses? Or is there something else that you kind of point to that says, hey, this is where the deflation is going to come from? Yeah, the humanoids and anything in the physical side are going to be the most obvious in terms of bringing prices down the cost of a house will go down if humanoid workers can build the house why because they're cheaper than humans to build the house but also they can work 24 hours a day it's just a different

Starting point is 00:10:04 mentality in terms they're trying to get these costs down to levels to where there's really no argument you can basically build around the clock you can do this without having to deal with the other expenses that come in without the food without the health insurance without all these other components. So at some point we'll get there. The things you're mentioning, and I just want to make sure, the humanoid side, we're still talking 2030 before we actually get to the point where these things will start being rolled out, partly because of the scaling issues in terms of getting this up. But also those things you're mentioning, a lot of them are, they're trained to do that thing. It's a lot harder to get them to learn how to do something new. And that's the

Starting point is 00:10:46 part to where, you know, we're getting closer to now. That's why, you know, I'm starting to spend, as you know, more time on robo taxis because I'm getting more interested in it. And there's an element of this, which is when you reach a point where they begin to learn on their own, meaning we're collecting data on the physical world. And this is why whenever, you know, people hear this thing about, oh, it's AI, it's a bubble. We've reached the point. There's no more scaling. We have infinite amount of data to learn every single day from the physical world in terms of how to move around in it, how to learn something new, how to create something new. So the humanoids are going to help dramatically when we get to that point. But before we get to the humanoids,

Starting point is 00:11:21 we will have digital employees through AI agents that are going to help the most in terms of bringing costs down on everything that you do. We're getting closer and closer to that. The first place it's going to help, as I've talked about, is in the profit margin side. So if you take companies and they're able to make more money in profit margins, that means they have more pricing power. They can lower prices. We're getting closer and closer to that now. I think that's going to help the insurance side. I think it's going to help all different types of industries where people have felt the pinch from inflation, but we're getting closer and closer.

Starting point is 00:11:50 So everyone in one end wants AI to accelerate because it will bring the cost down. At the same time, it's going to disrupt the job market. That's where the give and take comes with this. What's really interesting is, I forget the gentleman's name, so I apologize, but there's a guy on Twitter, whenever somebody tweets something like, you know, I pay $1,000 a month and I saw one recently, he said to have a product that would allow me to talk to it and it could check my calendar, answer my emails, et cetera, while I'm driving, right? I want to turn that kind of dead time of driving into productive time.

Starting point is 00:12:21 And I want to use the voice interface to be able to do that. And this guy goes and he builds it and it was like 24 hours later and he goes, hey, I built what you wanted. And, you know, again, it is kind of a V1, but it works, right? You know, you can talk to it. You can tell it to put things on your calendar, cancel things, make reservations, answer emails, things like that. And my takeaway was not so much the end result as much as, wait a second,

Starting point is 00:12:41 If the tools exist to be able to create something like that in less than 24 hours and do it with some degree of efficacy, this is an explosion because it's actually like an innovation at the tool level that now is going to empower millions of people to be able to build whatever they want. And I think that's part of what you're talking about here is like that guy essentially spun up a digital worker and he could go and hand that to a lot of different people, whereas maybe somebody who is wealthy, they would have an individual like an assistant or somebody who they would hire and pay. And maybe they talk to him on the phone while they do that type of stuff. Right. But like you're seeing it happen at the edges where you're getting what could be human labor converted into this digital labor. And it just feels like that is very misunderstood in all the economic data. it definitely is so there's no way for it to measure it was not built to measure gdp the statistic was not meant to how to measure the fact that someone driving down the road could do that i mean i've talked about it maybe not on on with you but i've talked about it on all my videos

Starting point is 00:13:44 i i it's got to be at least three times a week when i'm driving down the road if i can't find a podcast that i want to listen to i will just start having a conversation with chad gpt while i'm driving on voice mode and it's very easy to go spend time learning about whatever topic doing research that i'm going to use for my writings and for the videos it's very easy to go in and do that as you're driving down the road so if anyone hasn't done it and they want to get the sense it's there and then at the same point you can now with chat gpt5 you can with grok heavy you can go in and you can start building apps and you should try to build them from beginning from a text and just going through it and coming out at least to get a sense that it's still the early

Starting point is 00:14:26 stages the compounding of the compute and the benefits are just i mean lon musk is now tweeting about grok 5 is getting close to being released this stuff just never stops so it's hard for people to imagine it but it really is only two and a half years since chat gpt was launched and that was the beginning of our our entree into doing this i don't think people can fully grasp the impacts that this is going to have on the economy but i'll keep saying it again and again The place where this is going to have the biggest impact is when we get three, four years down the road with humanoids. So Scott Besson in the All In podcast talked about the fact that we're still in the infrastructure build-out, which I agree with for AI. It's been about getting the data centers, getting the power, making sure we can get the compute.

Starting point is 00:15:09 But the productivity benefits are going to start to show up next year. They're already showing up, but they're really going to start showing up next year. We just came out of an earnings period in the S&P 500, but also even for small caps where profit margins remain near all time highs. And at the same point, it was one of the largest surprises in the last 30 years in terms of earnings relative to expectations from June 30th going into this. So we're already seeing it. It's just not going to show up in GDP numbers as fast as people would like. As you said last week, earnings don't lie. I love that line. Today's episode is brought to you by Figure. They're the largest non-bank mortgage lender in the United States with over $15 billion unlocked on their lending platform. They've

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Starting point is 00:16:33 or even buying more Bitcoin, Figure makes it straightforward and transparent. Visit their app or click my link below to take out a Bitcoin-backed loan with Figured today. I want to bring up one other thing around economic data before we talk about Bitcoin. My friend Mike Gonzalez, he's a senior advisor to OPM down in D.C. And one of the things he brought up is that over 154,000 government employees took the deferred resignation program. And so they're still counted as employees because they're getting paid through September 30th. But they will likely find private jobs or something else.

Starting point is 00:17:05 But what he was talking about is the fact that those are not showing up in kind of the employment data in what would really be kind of a more accurate characterization of them. Right. Yes, they're still being paid, but they resigned, you know, seven months ago or something. And so, you know, that's just one example, I think, of a lot of little things that go into this data, which makes it very hard. Which brings me to the question of how accurate do you think the quote unquote academic Fed is in understanding some of this nuance? I have to imagine, I want to imagine it is true. They don't just look at the kind of aggregate number without understanding what the inputs are and trying to identify some of these things like, hey, we know there's 154,000 people who they're getting paid, but they're not actually being productive at the moment.

Starting point is 00:17:51 How does that impact any policy decisions we may make? Do you think they're going to that degree of understanding? Or is it just like, what's the unemployment number? That's what we're looking at. We don't really pay attention to the inputs. No, they're going to granular. The one thing I'll give them credit for, this is a hard year with jobs. The fact that the immigration numbers have just been reversed so big, it has created an issue for them in terms of what they actually believe the break-even point is for the economy with jobs.

Starting point is 00:18:24 And the number is below 100,000. Meaning for the economy to still grow without population growing, you're going to have a situation where you need to create jobs of, say, 50,000 to 75,000 as opposed to 100,000 to 150,000. They do their work on this stuff. I just think the academic side, and this is the problem, by definition, academic is using historical data, which is fine if you're in a linear movement world. But if you're in an exponential movement world, how can you possibly be making decisions when what happened yesterday is less relevant than what happens tomorrow because tomorrow is moving so much faster than yesterday was? This is the problem with exponential innovation is that in three years, you're talking about now what would happen in decades in terms of the advancements. How can you be making monetary policy on that situation? We know it's deflationary.

Starting point is 00:19:19 innovation always at the end of the day is deflationary there's nothing really showing up currently today about the inflation side yes we did put an enormous amount of money into the system during covid yes we had supply shocks around the globe because people weren't able to work we don't have that situation now so we have people that are angry because the price has moved higher i just think the fed is being academic and i agree in the fact that they're using historical data they're doing the best job they can but they really don't understand the impact that artificial intelligence is going to have in our life two years from now, three years from now. And there is a way to go spend the time on that, but they're going to make their decisions based

Starting point is 00:19:56 on what's happening today rather than what's going to happen in six months. I was just kidding about talking about Bitcoin next. I want to talk about PMIs before we talk about Bitcoin. PMIs came in, global surprise. I think a lot of people were thrown off. If I remember correctly, you said that PMIs were going to come in higher. So you were kind of dead on on that. Talk a little bit about the PMI. Why is it important? Why was it higher? How did you know it was going to be higher? Just kind of talk us through, you know, how you're looking at this data point. Yeah. And I know we get a lot of questions and I hear this on my video. What's a PMI? What's the ism? So the PMI is a survey. So let's just start. Most of the data that comes

Starting point is 00:20:37 out, like the jobs number, it's a survey. The PMI is a survey. So let's just assume there's a thousand companies across the United States and there's the services PMI and there's a manufacturing PMI. The manufacturing PMI historically is the one people focus on the most, at least when it comes to what's happening at the economy level. So if you think about the services side, think about it, that's the place where people are buying stuff at restaurants, at retail, but you got to make this stuff. The manufacturing stuff is where it is. So the PMI is a survey of companies across industries that are building stuff. And when more than 50% of them say the economy is good, you get a PMI above 50. When it's below there, you get it below. So

Starting point is 00:21:20 it's just a diffusion index across industries. And what you're looking for when the PMI is good, it's historically been a time that they're building buildings, they're building cars, they're making everything is starting to go up, which means the manufacturing side of the economy is seeing the need to produce more supply because the demand is accelerating. So the PMIs around the globe have been weak for three years. And in the U.S., they've been below 50 for almost four years now, really since early part of 2022. And the reason that's important is that it just means that we've been in kind of a recession when it comes into the manufacturing side. And when you break back above 50, historically, that's usually when the economy

Starting point is 00:22:06 is good. You start creating jobs. And all of a sudden, everyone starts getting a little bit more euphoric. But it also historically has been a time where there's certain types of investments you want to get involved in. For the last 18 years, and so now I'm going to go back and just tell everyone, we've been in a, let's say, a manufacturing situation that really has not had any kind of a sustained cyclical upswing. And the reason is because it's been a world dominated by So you go back to 2009, there was still, you know, you go back in your car, there was a GPS that you had in there, a Garmin, you had something in there. And over time, this has all become CarPlay. It's all become on your phone. It's all, all of these things that were on your phone, cameras, all of that. If you went back and looked at how many cameras were sold in 2007 versus today, you'd realize that the world became less physical. There was less manufacturing.

Starting point is 00:22:57 There was just more of a focus on software. And so everything got smaller. We didn't need as many trucks. We didn't need as many things as we did before. So when the PMI gets back above, it's a big deal. But I believe we're entering into a period of time. And the reason I focus so much on writing about and talking about it is because I believe we're entering a new period of time where manufacturing and hardware starts to overwhelm software, partly because the new disruption is that AI will disrupt software companies. So what you mentioned about someone creating something immediately to compete with something that doesn't exist, well, what about the things that compete with things that do exist?

Starting point is 00:23:34 So we talked about this last week. Software is going to be under extreme pressure from artificial intelligence because you're able to create anything on code very, very quickly. You don't need coders. There's no more moats. So that's going to be disrupted. But you still need cement. You still need concrete. You still need steel. When you're building out data centers, you still need physical stuff. Then we're getting into more drones, more humanoids in terms of build out. So we're entering a period where the hardware side is going to be the most important. And so I wanted to focus on PMIs, one, because they've been at such depressed levels for such a long time. But secondly, we haven't had a true cyclical upswing in manufacturing for some time. And I believe we're at the beginning stages of one that's going to last for not weeks, not months, but for years. When you look at the manufacturing component there, when I hear survey, it always makes me think, are people telling the truth? Obviously saw political polls.

Starting point is 00:24:31 They weren't. It's very hard to do this. It's kind of funny, you know, a survey and a poll, it's not a lot of difference, but when somehow society has more trust in the survey than in the poll. When we think about this, is there contradicting quantifiable like metrics or data that we can look at that say, hey, yeah, we do know that people tend to be more optimistic or less optimistic? Or do you feel like PMI survey is still a pretty strong signal?

Starting point is 00:24:59 And it's something that has, you know, kind of been able to predict what is happening. And the reason I ask that is, if you go back to April, I think there's a lot of people who ran businesses who were telling you, I'm going to have to do X because they were trying to understand the impact of tariffs and the economic situation on their business. A lot of those people didn't end up having to do what they said they were going to have to do, right? So like, I always, when you like ask somebody what is happening, I always wonder, do they tell you what they think that they're going to do, or they tell you what they're actually doing.

Starting point is 00:25:31 So how do you kind of delineate the difference? Or maybe it's just, you know, hey, don't get so in the weeds. It's just at one data point. Well, this is the part, and for people who've seen my videos, I have a lot of proxies. So the great thing about the stock market and economic data points there, the PMI is just one. If PMIs are going higher, you would expect that durable goods orders would be going higher. Capital goods orders would be going higher. You'd expect that there'd be something happening that you could lean into. Data center build-outs are growing rapidly in terms of construction. They're about to surpass commercial real estate. We're about to build out on power. So I should start seeing not only the power stocks going

Starting point is 00:26:09 higher, but in the earnings commentary, I should hear things like Siemens has got a back order for stuff five years out. And that's what we've seen. The other thing for PMIs and the other way to just see whether the survey is correct or not. The PMI in the US was up sharply, but it was also up sharply in Europe. It was also up sharply in India. It was also up sharply in Japan. The Chinese stock market is out of control right now. It's going up every day and there's more stimulus measures that keep coming out. So we have on the global scale, a lot of indicators and a lot of indicators that I look at that are saying the manufacturing side is definitely getting better. Now, the thing that hasn't happened so far is that the stocks that have been leading the market have still mainly

Starting point is 00:26:55 been software names. They've been AI names. So this week we had a lot of fears over an AI bubble. Again, we're going to keep having these bubble fears. And there is a part of the bubble side, which is about speculation, which we had seen. Retail had been making easy money, just continually riding the momentum of some of these names. I've talked about it. When PMIs typically go higher, it's usually good for companies that have not been a part of the expansion. So what you're looking for is if you have half the stock market trading at a 35 PE, and you have the other half trading at a 10 PE, and you get a valuation once you've cap weighted everything of 22 and a half that is historically expensive. If PMIs go higher,

Starting point is 00:27:39 you can see all the 10 PE stocks go up to 17. See the 35 PE stocks come down to 28 and the multiple stays the same at the market level. And that's kind of what typically happens during a PMI surge is you end up getting a rotation in the market rather than a collapse in it. And I think that's what we're going to end up seeing. And so that's the way that I approach the market with PMIs. They're an important indicator, but more importantly, when you put them in a broader context, which is, hey, AI embodiment is coming, and we need to build out a massive amount of infrastructure for it. That's a secular change, and I think that's what's happening. Hi, this is Matt Hogan, the Chief Investment Officer for Bitwise Asset Management.

Starting point is 00:28:20 Each week, I write a five-minute memo outlining the biggest story in crypto. In this week's memo, I give a sneak peek on a new Bitwise report offering the first-ever long term capital market forecasts for Bitcoin. Want to know how Bitwise thinks Bitcoin will do from a return, volatility and correlation perspective over the next 10 years? Check out my memo at bitwiseinvestments.com slash CIO memo. That's bitwiseinvestments.com slash CIO memo. Carefully consider the extreme risks associated with crypto before investing. Let's talk about Bitcoin. It's not going up. Everyone is very disappointed. they wanted to go up why is it not going up jordy yeah i'm i'm uh i'm a little uh surprised over the

Starting point is 00:29:07 summertime that it wasn't able to break out when ethereum broke out but it did get up to 125 124 and then it pulled back um we're doing the same routine again that we've been doing unfortunately all year in this which is it follows the stock market to some degree um the thing that hurt it in the last week has been the fear over, number one, it still has a beta side to tech. So when the AI bubble momentum trade unwinds, you get retail bailing out of all the things they're involved in. But the second thing is the rate hike, rate cut situation. So we did have 100% probability of a rate cut for September in as of last week. It actually got slightly above 100%. percent as we get here today and i think pal is probably speaking around now or his his statement

Starting point is 00:29:56 is coming out so we're not going to be able to get into it but uh it was down to about 70 percent so the market is getting all flustered with will the fed cut rates will they not cut rates there's so many catalysts coming up for bitcoin in the second half of the year uh and the stock market looks great but more importantly as i've said before the pmis historically when they're going higher that has been the best time the best time for bitcoin so people search around they see the money supply growth so when money supply is getting higher it goes high but the reality is it still goes higher because of pmis just because you get this surge i'm still focused on this thing having a very very sharp up move my estimations for the price were much higher than i think we're

Starting point is 00:30:42 going to be able to reach because we're just running out of time for this year but i still don't think all of the tailwinds are behind. We just need to get through a summertime of boringness for people. One thing people should recognize, though, is there are more and more hedge funds and more and more people on Wall Street that are involved in it. And so it will get these mini surges and then it will fall back very quickly when you get anything on the macro side that makes people believe they want to be short. It is a way, a very liquid way, 24 hours a day for people to hedge any kind of technology portfolio. So we need to kind of break away from that correlation. So if I'm right about hardware doing well and software not doing well,

Starting point is 00:31:22 then everyone who's looking for betas and technology is going to have to move into Bitcoin. That's been my long-term thesis is that the MAG-7 would eventually run into trouble and you'd have this surge the other way and then Bitcoin would benefit the most. One question on the MAG-7, they have gotten cheaper this year, which I think has been somewhat surprising to people? Everyone's talking about a stock bubble, but you actually have the seven, you know, seven of the 10 companies driving most of the S&P return are actually getting cheaper. How do you evaluate that? Yeah, it's kind of a hidden thing. Now, let's be straight. Apple is down sharply this year. Tesla's down sharply this year. The rest

Starting point is 00:31:59 of them are up. But I think people have to start getting used to the fact that, so Apple's being disrupted. They're not doing a big CapEx spend. Tesla's not doing a big CapEx spend. These are companies that have more, they're more involved in the physical side. You've got phones, you've got cars. So they've suffered from the tariffs, but also from just the general consumption side. The Metas, the Googles, the Amazons, I think people have to start paying attention to the free cashflow situation that's going on. There's a lot more stories happening. And overall, the MAG7 has underperformed the S&P. The fact that we've had another good year in stocks and they've underperformed, and it's been a very, very good

Starting point is 00:32:41 year for a lot of software names in the whole AI trade, and they've still underperformed. I just really believe that these stocks are going to have a hard time unless they can find a way to monetize the AI investments that they have. And they've been very outspoken about the benefits that are going to come for this, are going to come down the line. I just think every year that passes that they don't get to see a very large jump in ROIC. It's a game where their earnings have grown 26% this year, but the stocks are only up about seven to eight. That's telling me in relative terms to the market that if we get a surge in small caps and we get a surge in the 493, I think these stocks are going to be under pressure, not to collapse because their earnings

Starting point is 00:33:28 are still good but i think a lot of people are questioning how long they can keep spending this type of money and not see the benefits and not have their stock get hit so i'm going to focus more going forward on tesla because of the embodiment side but i think the pmis are just another negative thing for the mag 7 in my opinion all right i knew that we thought we weren't going to be able to talk about the fed but we're so good here on this show you and i that i've got real-time updates on the fed uh fed speech so uh adam kobisi did a nice little summary so let me just read out five points in real time and you can react uh to them so the first thing is uh there's a shifting balance of risks that quote may warrant adjusting policy end quote the second is that uh

Starting point is 00:34:11 powell suggests downside risks to employment are rising so you've got uh kind of may warrant adjusting policy you've got downside risk to employment as a second point third point labor supply has softened in line with demand the fourth is that the fed abandoning flexible average inflation targeting framework seems pretty big and five is they can't take stable inflation expectations quote for granted and then in some answers to questions uh fed chair powell according to heather long is indicating a 25 basis point cut in september is highly likely. And she believes that his Jackson Hole speech is about as clear cut as the Fed can get. What's your reaction? Well, I'm just looking as you're speaking,

Starting point is 00:34:57 because everything you said would suggest that he's cutting and the markets responded that way. Stocks are up sharply and you have rates moving lower. I think the most important thing about this, Anthony, obviously, from my perspective, that statement about the jobs market has weakened, inflation is still on that side, regardless of whether they're admitting it, they're leaning towards the fact of the jobs market is more important than the inflation side at this point. And for me, with PMIs rising, all of the prices paid side rising, they will be easing into a situation where PMIs are going up. Now, we still have another CPI report and we have another jobs report. One thing that we haven't talked about on September 9th,

Starting point is 00:35:48 I believe it is, there will be benchmark revisions for labor. And the estimates I've seen are anywhere from 500,000 to 900,000 job losses that will be added to what had happened into March of 25, which again, I think they're just leaning on the dual mandate towards the side of the jobs market. And it's a big deal for stocks. It's a big deal for crypto. The stocks are up about 80 points or so. One thing that people know I've been paying attention a lot to is Opendoor. They're in the business of residential real estate buying and selling. The stock is up 25% this morning on, I'm assuming, both yesterday, the leader, Sharish, coming out and saying that they finished up a board meeting. He has changed his opinion on AI, and he used to think it wasn't going to be very valuable for doing things for real.

Starting point is 00:36:43 Now he has shifted that stance, and they're going all in on AI. And then you get a rate cut, which should start to unlock some of the housing kind of transaction volume freeze. And so obviously there's a lot of retail attention on Opendoor, but to me, they are a business that is embodying a lot of things we're talking about here. Lower rates equal kind of material changes for some of these businesses. You get the embracing of AI. Like, how do you think about, you know, a business like that? They technically aren't manufacturing homes or products or anything, right? But they're more a software business. But it does feel like the things you're talking about are happening to the economy or showing up in a business, you know, that obviously this morning investors are much more excited about than they were when they went to sleep last night. Yeah, it'll be interesting to see, though, if we get the activity in there.

Starting point is 00:37:32 So one of the things I want to make sure, the only activity we're seeing right now in the manufacturing side is related to AI. So if you have any part of your business that's associated with AI, you're going to get a better approach from investors in terms of how they think about it. But you have to see the activity happening. The housing market, travel market, all of that stuff is critical to the economy continuing to be strong and broadening out what had been only an AI software bubble. I think we're going to see it. You've done a good job of focusing on open door. I think all of those companies that you can look at that maybe have been left for dead, that were more on the broader side of the economy, I think moving rates lower at a time when we're already seeing the spending happening, it's a big deal. I'm going to say it's a big deal.

Starting point is 00:38:21 Everything is a big deal when it comes to rate cuts, but in particular, when you already have a strong economy, cutting rates into an economy where PMIs are going higher, I think is just going to help the market in a significant way into the end of the year. Yeah. Now, where's risk? Everyone's very excited. Rate cuts are now potentially coming, given Powell's comments. I think that people are seeing stocks go higher. They're obviously very excited about Bitcoin into the end of the year. Whenever I see everyone very excited, I always ask myself, okay, where's the risk? Where are the things that we should be watching? Are there certain things, you mentioned labor market earlier, anything else that either data point-wise you're cautious or want to make sure stay strong and don't turn negative, or anything in terms of your investment portfolio

Starting point is 00:39:02 or assets that you think are potential risk areas? No, I think the risk is going to be that inflation doesn't come down. So a recession is not on the cards. So the jobs market is weakening, but the jobs market is not weak, meaning we're not losing jobs. The aggregate payrolls are fine.

Starting point is 00:39:21 Hourly earnings are fine. Weekly hours are fine. But I do think at this point, when you've got earnings growth and you have a labor market, which is okay, you have PMIs, which are going higher. The risk is that we get inflation for a period of three to four months. The reason that I'm not concerned about that in a big way is because I don't think the Fed is going to turn around and hike. And part of the reason is, and people have to remember

Starting point is 00:39:44 this, this is my whole point of writing the piece on the academic Fed. The administration wants the Fed to align themselves with the goals of the administration. David Zervos gave a speech this week on a question, or not an interview this week, where he was asked, is the Fed independence real? And he said, of course not. The Fed is absolutely dependent. They're biased, just like all human beings are. And he got into this, and I completely agree. You cannot be completely independent. If inflation were to go higher at this point, which I think people should at least accept that it could happen, if for no other reason, the PMI, when you go read the, so it was the S&P Global PMI that released the data yesterday. We'll get the U.S. ISM one,

Starting point is 00:40:34 the Institute of Supply Management, next week. But if you go through and you look at this, they talked about the fact that there's bottlenecks, there's supply and demand issues, price pressures are growing. And it specifically said in there, with this kind of PMI, the Fed would normally be raising rates, not cutting rates. And that was in the report yesterday. pay. So I think the risk would be that people start to freak out a little bit if the inflation numbers go higher. I personally don't think it's going to matter unless we get some really high numbers. But for the time being, even on the CPI, if we're coming in at 0.3, 0.2, it's not going to matter one bit. So I'd say inflation is the biggest risk. The only other thing I'll just add

Starting point is 00:41:14 for people, long-term rates, if they do cut, there's a fear that long-term rates could move higher. I talked about it last week. I've talked about it on my video. I don't think that's as likely as it was last year, partly because they surprised last year, but also because way too many people are expecting it this year. My last question for you is, Powell is suggesting a 25 basis point cut. Is it too small? Should he do 50? I do not think he should do 50. I think, honestly this is uh him giving in to some degree not to trump but he's bending the knee jordy are you saying he's bending the knee i i think he's had enough people internally that have convinced him that the labor market is weaker than the inflation market is out of control remember

Starting point is 00:42:01 five months of cpi numbers came in lower than expected until last month and last month or the last report was not a big deal the stocks went up sharply on cpi they came down on a ppi print So it wasn't even a CPI print. The labor market, on the other hand, had the second largest revision in the history of the data. So I think it's justified to do 25. I also think 50 would be a bad message to the markets, especially with PMIs going higher. So you said the labor market is weaker than inflation is out of control. Yeah.

Starting point is 00:42:36 Yeah, I think that that's fair. I think you should do 50. But you know why I think you should do 50? One, it'll shut everyone. up two is um i think that the ai story is way bigger than they realize and that probably you and i realize that we are probably underestimating you know kind of the deflationary aspect of it and then the third thing is um if you think of the white house and the administration they went from we're going to cut costs to now we are going to grow gdp uh growth in q2

Starting point is 00:43:08 very strong. But if he really wanted to juice growth and use surprise with a 50 basis point rate cut, yes, asset prices will explode. But I also think that you will see productivity in this country. And there is something, whether people like the policies, the person, forget all the politics for a second. The single most hopeful message that I think has come out of the Trump campaign, and now the White House, is the promise of an economic golden age. And there's a lot of people who, if you hate capitalism, you hate that idea, right? But for the most part, people say, hey, wait a second, technology has been pretty good in my life, economic boom is pretty good in my life, you know, there's all these benefits.

Starting point is 00:43:50 And to me, Powell could leave a stamp, leave a legacy moment with a surprise 50 basis point cut, juice the economy on his way out. And I think a lot of people, because we have amnesia, would forgive him for the 2020 debacle and 2021 debacle. Although they shouldn't. I think that if he goes out and the market is cranking, economics, market is growing very fast. He just walks away and people are like, wow, that guy was awesome. Which seems to be he cares about the legacy component of this. I'll let you have the final long word on that.

Starting point is 00:44:28 That was a good way to end it. No, you don't want. You don't want the 50 rate cut? Just personally, I am concerned on the other side of the legacy side that he made a mistake with keeping rates too low for too long. Said it was transitory. He finally nailed down inflation. You're asking him to drop the mic and do 50. I think he should walk out and at least realize there is some risk that inflation picks back up.

Starting point is 00:44:57 Listen, if he leaves right now, this is my point. If he leaves right now, he's known forever as Jerome Too Late Powell. So if you get ahead of it, then you kind of, you know, you equalize out at like, okay, you're on time. And then he goes to retirement. All right, Jordy, thank you for doing this. Where can we send people to find you on the internet? They can find me on YouTube. They can find me on LinkedIn.

Starting point is 00:45:18 They can find me on X. And actually, for anyone who is a big Tesla fan and loves reading about it, I'm doing a long-form paper on robo-taxis, which I'm sure we'll talk about in the future, which I think are going to be the symbol of the transition into the embodiment side. So if anyone wants to do that, they can find it at 22vresearch.com. Amazing. Thank you so much. We'll do it again next Saturday.

Starting point is 00:45:47 Thanks, bud. Have a good one.

The Pomp Podcast - Why Isn't Bitcoin Going Up? | Jordi Visser

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