How To Trade The AI Productivity Boom | Weekly Roundup

本站添加: 2026-05-31

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[00:00:33]What's going on everybody? Welcome back to another random edition forward guidance. I've managed to wrangle back hosting duties from the inmates after I let you guys take over the shop last week. Looking good with your haircuts, boys. What's up?

[00:00:48]>> Thanks, brother. Not much, man. Short week holiday here.

[00:00:53]>> It's nice.

[00:00:53]>> Love a short week. Just feels right.

[00:00:55]Especially as the summer starts to hit, too.

[00:00:58]>> Yeah, this uh high and tight is feeling good in the uh the hot weather. That's for sure.

[00:01:05]>> Feeling Yeah, you guys, it must be pretty getting pretty hot for both of you down in the down in the south.

[00:01:10]>> Oh, yeah.

[00:01:11]>> It's nice. It grows back quick, Tyler.

[00:01:13]I' I've been shocked at like one week >> quicker than mine, bro.

[00:01:19]>> Oh, man.

[00:01:20]>> Hell yeah.

[00:01:22]>> Sweet. Well, feels like, you know, we were just kind of saying before we hit record that it feels like just the macro is a bit of the repeat of the same stories as we try to figure out which way this whole thing is going to break up or down, you know, World War II or resolution. Every day we're waiting for a new deal to come from Iran and Trump and um continuing to do so as we start to enter the the summer doldrums. But I do want to just start the conversation by just thinking through whether these these rate hikes that are now pricing the curve. I I haven't looked recently, but last I checked, it looks like by the end of 2026, we might even get the first hike. And if you just look at something like a tailor rule function here, which I have on this chart, um, Fed funds rate is below policy rule prescriptions up to the last round of insurance cuts. Even with Fed's Rstar estimate, include this chart, it would be a large gap under DB's RSTAR estimate. So basically, if you follow these Taylor world traditional models, we should be hiking here. Curious if it's warranted or not.

[00:02:23]What do you guys think?

[00:02:26]I mean, historically, they look through the energy supply shocks, but I think the case here is all of the other stimulative measures they're doing like suppressing oil prices, uh, suppressing yields, currency manipulation with the yen and dollar, all of that stuff is stimulative. So when you do those things, it increases the chances that what started as just an energy price shock then has better odds of seeping through other inflation met metrics and into core. I think shelter, wages, a lot of big components are still disinflationary, but if you don't act or lean against it, you definitely risk prolonging it. And I I don't even know how there's much of a debate at this point. Like the Fed has, you know, inflation's been above the Fed's target for 60 plus months. So I I don't like I get that Worsh is maybe slightly more hawkish, but then you have the offsetting factor of the Trump appointee and pressure, but Powell's been unbelievably doubbish himself and all the balance sheet RMP supporting the long end. All those shenanigans have been in many cases more stimulative than what rate cuts would have done. So I think it's a all-encompassing policy shift that needs to happen but despite what Wars and Besson and all these guys have been saying in terms of reducing the footprint etc like they haven't done it yet and they we know they're supporting markets at all costs. So I think it's nuance like I don't I'm not sure they should be hiking. I don't I actually would probably lean against that, but they should be removing all of their other stimulative measures. But if they're not going to do that, then I don't know. Maybe they should hike. It's It's wonky.

[00:04:25]>> At this point, I don't think they're going to hike at all. I think this is, you know, >> I agree.

[00:04:29]>> This is wartime policy. And basically because we have a massive deficit, we have a trillion dollars of interest, a massive amount of debt to be rolled, I think we're getting our answer, which is the market's telling us we're growing our way out of this no matter what. On the short term, you know, we've been we've been wrong about this, you know, over the past like week or so, but given the skew and the options and positioning, I would have thought the market would have kind of take it a little short-term dip. Long term, I think we all know the policy. It's just we're going to fiscally grow our way out of this and negative real rates are going to be here for good. And maybe maybe the market's just getting ahead of that. But, um, yeah, the positioning in the short term is super extreme.

[00:05:20]Euphoria is around and I I hate taking risk when things grind up every day and the VIX is, you know, sub 16 after being at what was it like 40.

[00:05:36]And I I don't know. I think on the policy front, this is just a managed, you know, we're just watching them slowly manage it from every angle. geopolitics, monetary policy, you know, treasury supply on on issuance there. It's just in and in in fact it's working, you know, like it to give them credit, you know, we're seeing a massive productivity boom that the the one piece where I think it's failing is it's not it's breaking the social contract.

[00:06:14]And that's that's my big quam of it all is like I know the Mark Andre's of the world and all the the big AI bulls are like this is going to unlock new economies of scale. This is you know incredible for society etc. But there is a transitional period where people are really struggling and I there's like almost zero and I think what if you don't address it politically you're probably more likely with the AOC and Mumanis than you are with you know handsoff LZ fair uh conservative government and that that's where that's where I think the the the failure is but like I don't know it seems to be working. Uh the the AI boom, it seems to be real. So >> yeah, it's definitely working. I mean, every time the VIX shows any upside movement, then there's another fake headline. And so as a market practitioner, you can't not like the VIX is not not going to get sold down and stocks are not not going to rise if there's headlines that could be real. that the straight is opening and all these things. So they are like it's working what they're doing because there's extreme information asymmetry on the side of the administration. Now like the the the other side of it is since when were presidents and politicians elected with the sole priority of propping up stock markets?

[00:07:53]>> Well, that's the whole sham is like it's has it always been a free market? Like probably not. Yeah.

[00:08:00]>> No, definitely. But this is a new extreme. I mean, >> yeah, >> I know Felix, you were talking about the inequality stuff today, but yeah, you're you're right. You're spot on, Tyler.

[00:08:08]Like, it it's getting so egregiously divergent that it's it's almost hard to believe is is still ongoing.

[00:08:16]>> I mean, it's hard to believe because like there's just zero consideration for how bad that lower shape of the K is going into midterms. Like it just I feel like every time I think about it, it just blows my mind that there's just no regard for how bad the average person is doing right now.

[00:08:33]>> Yeah, that's that's for sure.

[00:08:37]>> It's surprising. I I agree. It's totally surprising. Like the only thing at this point you can chalk it up to in my opinion is is the same hubris that led him to invade Iran Iran and take home a huge loss like because you know the confidence in being able to get oil prices to plummet which you know if you drain the SPR of course you can but what does that do long term you know if if and then the the ability or confidence to improve poll numbers within five months the the midterms when you're just hanging the the lower and middle income classes out to dry.

[00:09:19]I don't know who the strategies strategists are, but it doesn't seem prudent.

[00:09:24]>> I I don't know though. Like look at what's crazy to me is like Thomas Massie was the one that went against him. He he tried to really go >> Yeah. show the Epstein stuff and I I just don't I think the banking cartel also crushed crypto like I want to talk about that today which is like in a world of and and maybe my this is where I'm being open to this stuff is maybe an AI productivity boom is actually like a really great thing for America but what is the role of crypto if you're you have national GDP P growth of 15%.

[00:10:07]Do you need a store of value? Like what is what is what is the role of crypto there? M >> you know like you don't and I I'm increasingly not like I'm I'm a big Bitcoin believer long term but like there is a world to be pictured where like AI is that productive and it sucks up we go into a whole new type of economy that we've never had before and >> yeah there's there's a clear bid for productive assets right now and like there is and that's the issue is on on the crypto point like the only portions of the crypto industry right now that lean into that idea of productive assets for the most part don't really have a token related to them like it's stable coin adoption and like improving payment rails and it's like yeah >> you can see adoption of that and you see no value capture in any of the tokens like >> you see more and more people using Ethereum for example the network but it really does not correlate to the to the price of their token and been starting to see some like true OG uh ETH believers start to capitulate under Ethereum. Like David Hoffman from Bank list recently sold his Ethereum this week and he's like I'm bullish on the network. I was just I'm the the the asset itself is uninvestable. I mean Quinn, you've been saying that for over a year now. Like the network's fine.

[00:11:32]>> The problem with crypto, I mean to me is just there's nothing useful uh in 99% of the token landscape. So, and then in the majors, Bitcoin and ETH, you have Ponzi scheme DATs that have just corrupted and perverted the market structure. I mean, these guys have bought 15 trillion 15 billion dollars of Bitcoin and ETH this year, and both assets are down massively year to date. It's just financial engineering scamming retail propping up artificial demand. So, I mean, the liquidity picture under the surface isn't great either. like that if if we agree that the thing keeping equities propped is the ball mechanics, passive flows and the man manipulation and keeping that systemic and passive bid flowing like it makes sense that crypto is lagging. So I think as far from a Bitcoin perspective, it's just not the right market environment and macro conditions for it to do well. But yeah, the I mean it's in a bare market like this is what it is. It's in a bare market. You know what it reminds me of is remember I was at a gold fund in like from like 2010 to 2014 and we had like from 2010 I think to 2012 gold went basically like parabolic and it just went blowoff top. They had all these giant gold miners were overlevered taking out debt and overs supplied the market with gold at the exact same time. all these like you know Silicon Valley tech companies at in 2012.

[00:13:06]>> Yeah.

[00:13:06]>> Basically like started growing you know they were they were very productive.

[00:13:11]They were growing productivity. Their top lines were growing immensely. And that just sucked so much capital out of gold miners. And I'm almost wondering if we're watching the same thing happening in, you know, AI infrastructure to crypto, which is there's really if you're not growing at the same rate, I I don't, you know, it's really hard. Not only that, but like what crypto funds do you know are growing assets? Who's allocating there right now? It's it's really hard to wrap your head around.

[00:13:41]And it's clear the administration used crypto as a a leverage to, you know, for the for the election. And he hasn't they haven't really done anything. They're adding they're saying they're going to give money to drones and and finance drone operators. They But the truth is they really back the the centralized banking industry rather than, you know, this decentralized world that might go bye-bye. I mean, I I'm open. It sucks to say that and maybe I'm a contraindicator, but like in a world where the money just keeps getting sucked into this stuff and it's I don't there it's like self-reinforcing and maybe that's a maybe that's a bubble top. But I I I do want to show you some V mechanics which I think are reinforcing if if that's cool.

[00:14:34]>> Let's do it.

[00:14:36]>> Okay. Okay, so obviously we're you know I've talked about the dispersion trade but if you look at slide uh 36 this is the implied correlation.

[00:14:47]So when when correlations are up essentially like they're all the stocks are acting similarly they're going up and down together but when correlations are down that means like you know stocks are doing lots of different things which basically allows all the quant systematic investors they've been just buying the things that are working and they're working because the earnings are growing right so we're seeing that and at the same time if you go to slide 35 five.

[00:15:17]This is the V of the VIX that's fallen as well. So the dynamic is if you look at single stock volatility relative to the index volatility, what you're seeing is these momentum systematic in retail investors are basically going like balls long single stocks and creating a high implied volatility by buying calls on single stocks. And then you know the the systematic part of it is the the quant funds are shorting you know index volatility. So that's why we see you know the VIX is so low is that's that's their hedge. Now this this can unwind and we saw it unwind in the carry trade like last year. We we've se we've seen this a couple times is the market gloms onto a narrative. There's an earnings growth story. There's a you know it's backed by a lot of capex etc. and then they just blow it out to extremes. And what makes me nervous in the short term, it doesn't make me nervous in the long term just because of all the policy behind it, but like it feels like to me your riskreward is skew especially for a lot of these the big you know semiconductor stock. It's in like the 98th percentile meaning like people are really bidding up calls to to puts.

[00:16:35]There's no downside protection being bought. It's the complete opposite scenario as we saw in the middle of the Iran thing where we're being bit up and and so from a positioning standpoint, that's where I'm like I these are the times where I'm happy, you know, in my own personal account to just like let the mania happen and I I I watch it until it, you know, you get better better prices. And maybe that's a stupid idea, but I hate getting caught up in the the the the real sharp >> downturn and and you know, I'm happy to watch it grind up in my face, but I you know, this given the positioning, I just can't, you know, >> and and all the this the social media stuff. I'm sure you guys have seen these posts, but like people people saying posting how much money they're making.

[00:17:27]It's like the eup the short-term euphoria of it all is kind of wild.

[00:17:35]>> Yeah. I mean, the thing is just the catalyst like what it's often these macro things that no one foresees. I I just given how focused they are on stopping any volatility in its tracks, it's it's just hard to bet on it. Like the thing with the Iran situation is it's it's clear like one we have no leverage like we're begging them to reopen the straight and two it's very difficult to make any sense of what's actually going on.

[00:18:12]>> I feel like we do have leverage though >> because like >> if we did it it would be it'd be done.

[00:18:18]We are we are the world's oil producer.

[00:18:20]So it's like it's not affecting our market at all.

[00:18:23]>> Yeah. But we're record draws of the SPR taking our our reserves to zero.

[00:18:28]>> Even just look at this chart of um inventories. Like I think it's just been circumstantial that like we started this whole thing at the seasonal highs and we were able to just draw down and now we're like like we're below the 5year range in inventories. I think I think now it gets a bit more real and like I think you know some of the really smart uh geopolitical experts that know a lot about Iran were were talking a lot about early on about how they're incentivized to drag this out as long as possible and it seems like that just is the case here is that they have they know that time is ticking here like you have all the inventories that are being drawn down now you have the SPR that's being drawn down you have consumers that uh I have a few different actually charts I wanted to go through just on on the ability the the buffer for consumers to absorb this this impact. And you can see like this is just looking we got some data today of PC and and incomes and you can see like back in 2023 you know disposable incomes were above consumer expenditures. So savings rates were going up and people were doing pretty well. Um and then basically last year it started to flip the other side and we've seen this this savings start to occur and you can see this this uh these incomes they're they're accelerating to the downside now and therefore to to keep up with such an energy shock like we're seeing they have to tap their savings rate. So you can see like personal incomes are trending negative.

[00:20:02]Now, this is where circling back to my first question at the start of the of the conversation here about whether the Fed should hike rates or not. It's like a really weird situation and this is why, you know, energy supply shocks are such a nightmare for central banks is that you have the the the supply shock in terms of headline inflation going higher. But at the same time, you can see that incomes are actually negative for like the first time since 2022 when they were abruptly there. Um, and if you just look at the the other previous historical moments where that also occurred, it's it's during times of either growth shocks or outright recessions like '08. So you have incomes that are really having a hard time. Um, this is just another example of it showing it by by per capita. So, like overall, I don't know. It's we're we're in this this this phase, this transitory phase where we have the the buffers of inventories of SPRS of saving rates being drawn down. Um, and I talked about last time before I went on vacation the other week about how a lot of that was because of these huge tax refunds that hit from the big beautiful bill. So, like all that stuff is running out over the next couple months. And so it's like we need that resolution or I don't I think things are going to get pretty hairy personally and like in a very stagflationary way.

[00:21:24]>> Yeah, I totally agree. I mean this is why I think Trump's going to cut a deal that will probably end up being worse than Obama's >> because he's he has to open he we're four months away from the midterms. He can't reescalate and engage in another monthsl long conflict with gas prices where they're at, the consumer health.

[00:21:43]Yeah. It's it's that would be disastrous. So he's like it's the classic today was the classic trial balloon. He does they do this all the time to you know get as much juice out of out of the headline and resolution as possible. But to put it in simpler terms so people understand when we talk about K-shaped economy talk about the consumer health by doing all these stock market propping manipulation stimulative tactics that support the long end and and equities. It is at the direct like literal direct expense of main street small business lower and middle inome class people because what they should be doing we should get pain in the markets. you should get a slowing growth, you know, headwinds from rising bond yields that then bring down inflation, wealthy, you know, wealth effect spending and slow the inflation problem and then you can cut rates and those rate cuts help Main Street and the small low income, you know, engine of the economy. And so they are purposefully doing the opposite of that which comes at the direct expense. And so that's why I think it's just, you know, it's a it's not a well understood topic, but you know, some people maybe who don't understand it so well and how these policy mechanisms work. But that's what's happening. The reason it's becoming such a loud topic, this K-shaped economy is because it's a deliberate policy choice to leave the majority of people behind at and and just favor, you know, those that own the assets and and equity and private equity and all these things. So it's that's probably the most disappointing thing in all of this is that you know you elect people like Besson and you know very talented and and well understanding knowing the intricacies of of these markets people and then they just continue the same benefit the wealthy and the rich at at the exact expense of of everyone else.

[00:23:49]>> I think that's so well said. I think what we're watching is just the blowoff top and centralization and and maybe not, you know, it might keep going just under a different regime, but it really makes me nervous because because like think about a centralized world where like AI is like watching us at all times and no one has any privacy and like that's really kind of what we're going into.

[00:24:20]And the amount of wealth that's going to be made by a small cadre of people is just like there was there was a great um I don't know if you guys saw this, but Bezos said, you know, no one at the lower end of the uh income spectrum should pay taxes. Like that's stupid.

[00:24:41]And I think Jeff Park said, you know, that's that's actually a sign that the system's been co-opted and that all, you know, all the fiscal is flowing basically upwards to, you know, this centrally planned economy and and it's a sign that it's not like a free market and and it's really not like because of the debt and all these things that they have to pay off. there's just like giant centralized toll boosts that get the benefit of all the fiscal spend and then it slowly just erodess the the lower labor and and I think you the battle is really capital and labor and you have the centralized market structure and then you're seeing gamma squeezes basically because of labor's going out and they're they're buying yolo call options and you know there here's a good chart to show this effect but go to slide 29 9.

[00:25:36]You can see basically what happens is, you know, gener generationally all these, you know, bureaucratic pension funds, endowments, you know, boomer Ponzi players have choked the float of a lot of the equity market. And now, you know, they're figuring out how to use Robin Hood and and basically buy call options to artificially create gamma squeezes. And so you can see the retail cash, you know, uh, retail cash and then retail options.

[00:26:08]They're the ones that create like the end where, you know, V goes into the 98th percentile and skew goes into the 98th percentile. And then if you go to the next chart, this is slide 30, you can see uh retail is actually, you know, picking up the investor volume.

[00:26:28]And that's, you know, that's a large portion of it. Um, and yeah, that's that's basically it.

[00:26:36]But then you can see this is slide 33.

[00:26:37]It's a little bit this is actually it's worse than it was. But this is the S&P one month 25 delta skew. So this is like puts to calls. So as that blue line goes up, puts are becoming more expensive. As it drops, you know, it's becoming less expensive. So this is uh from my guy at Clear Street, but he said, you know, it's in 25 delta implied V spread for puts relative to calls in the fourth percentile, which is like super super cheap on on the put side. Um, but I the the end thing is just like I I think, you know, I gotta I gotta say the Bruce Springsteen lyrics of Atlantic City, but it's like he says, "I've been looking for a job, but it's hard to find down here. It's winners and losers, and don't get caught on the wrong side of that line. I'm tired of coming out on the losing end. So, honey, last night I met this guy, and I'm going to do a little favor for him." And like that I think that's what we're watching in the equity markets is people used to go to the mob and you know do something dirty. Now they're going out and they're saying you know screw it. I'm going to hyperlquid and yoloing 40x leverage or I'm going into call options. It's the only way you can stay up with the centralized, you know, nature of this, you know, as it in generationally like boomers are doing great because you have savings. You have your assets are are basically like creating yield for you. Your cost of living is going down because you don't really have to spend as much. You don't have kids. You don't have all these expenses. So, the system works really great for them. But like, as a younger generation, you have to take that risk.

[00:28:20]you're you're being forced to take that risk when you know not necess people don't necessarily want to. So that's uh there in lies a conundrum and to to finish it off is these scenarios you end up with more leftist you know communist policies and redistributive policies and I think that's the real risk here longer term is the more you you know you're creating this centralized like productivity boom but like we'll see it politically v cannot be stifled for long enough it gets transmuted to the social contract And I think in the end that's that's where we're going to see it.

[00:29:00]>> Have you guys seen this movie Good Fortune with Seth Rogan and Aziz Aziz and sorry?

[00:29:05]>> No.

[00:29:07]>> You should watch it. It's it's one of it's a really well done movie that basically is this venture capitalist who's Seth Rogan and this gig economy worker which is Aziz. And it's it's one of the I'm surprised that something like this came out of Hollywood and that they understand this dynamic so clearly and fundamentally. And it basically just explains this K-shaped economy in a nutshell and kind of puts you in the daily life and shoes of each one of these people and helps the other side understand what the other one is going through more. And um I was just so it's not like pitting someone against the other. It's not saying the VCs are bad and the you know the gig workers, you know, all this stuff. It's it's like very neutral but sort of heartfelt and real and um so I was really surprised to see something like that come out with such an accurate representation of what's actually going on. But yeah, it's uh I I think this is where like the bulls and bears sort of at least in some respects disagree is like I I don't think anyone would argue with the fact that we're in a raging bull market across various asset classes and there's thematic secular themes that are producing monstrous, you know, booms and winners and earnings. I think the, you know, beef that people have is is that it's maybe not how markets are supposed to work over a long-term time horizon and and, you know, it all is just so, like you said, Tyler, centralized and at the whim of policy makers. Like it's not in any sense of the words free markets.

[00:30:50]And so, you know, and I'm like whenever you talk bad about it, people say, "Oh, like you're just bearish." I'm having the best start of a year in like in my life year to date. But that can be true.

[00:31:04]And I can also absolutely despise the like political decisions and policy choices that are ongoing because it's like I would much rather live in a place where the 90% of people that I live around are healthy and functioning and not in huge distress while the my one neighbor and you know people out are doing phenomenally. So like it's just it it gets it's hard for these things not to turn political.

[00:31:30]>> Yeah. You know what's an interesting thing I heard um just speaking to this idea of just how you know synthetic this market is and how fake it is is there's actually an interview with Mike Green who's obviously been writing a lot about this passive investing idea but he he brought forth this really interesting dynamic of just how important it was this shift in how pensions are created to go from this like defined benefit plan to defined contribution plan over decades where Like previously in the defined benefit world where everybody would work at a certain company and then they would be like contributing uh to a to a pension and there'd be a pension fund manager and they would have to you know they would have to hedge their duration. There'd be like an asset and liability match there that sort of kept markets rational in some ways because you know if stocks got overvalued relative to bonds they might rotate in the bonds and you have to hedge duration and all these things. So you had these pension fund managers that would just manage that for employees. But then when we moved to this defined contribution plan, we basically manded every mandated every employee to become their own stock picker where they have to go out into the market and buy ETFs at every week and those you know those folks are not thinking about duration mismatch or liability management. They just buy passive ETFs every every paycheck and you know do that forever. And this dynamic of going from that one system to this new system has just like it's just I don't know I I've heard that this thesis talked about before but it just really hit the nail on the head of just how powerful these flows are when you just think about the fact that we had these multi-t trillion dollar flows that were had to be duration hedge to now we just we don't care. It's crazy. You know, you know what else Mike talked about that I I thought was kind of interesting was he said something like, you know, your your ability to like if you were had some uh capital essentially, you you you had you were passed down from some wealth, your ability to compound that wealth is like exponentially better because you can deal with draw downs. But like if you're in a lower income bucket, you know, you can't really take risk because it's, you know, obviously you have less to work with and it's like that that slowly erodess over time the social contract and you can't you can't catch up is really you know what he's been talking about. But all these things are it's it's policy. Like I have zero problem with the entrepreneurs. I love it. I love the frontiers. I love all that stuff besides the, you know, the sociopaths that come out, you know, doing, you know, crazy, you know, stuff.

[00:34:16]But I I and I I and I have no problem with like asymmetric wealth or or Elon being a trillionaire if he's going to launch rockets. Like that's awesome. But like you got to create some some policy around if you want to live in a society that's not like a third world country.

[00:34:33]And I think that's really where we're headed. And you know that and and Texas is is probably more well-governed than other states. So I feel really great about Texas. But growing up in outside New York City my whole life, that place is massively changed. Like it's crazy.

[00:34:54]And I'm not trying I think there's other great places to live in the country, but I don't know.

[00:34:59]>> Well, you know what's an interesting signal? Well, I saw a headline today that uh Peter Thiel just decided that he's moving to Argentina. He's relocating there because he's he's concerned about the future outlook of of the US and what's going on in California and and the rise of socialism. So, yeah, it just came out that he's moving there and like I don't know, I'm pretty I'm pretty agnostic on my perspective of Peter Theal, but I do recognize him as a very powerful signal early to these secular shifts. And so if he's making that move, to me that's more of like a signal of of the beginning than something that's like that you want to fade. So if he's doing that, that's quite interesting to me.

[00:35:37]>> Yeah. He he also owns a places in like New Zealand, too. I don't know. That's the >> He's building bunkers and Yeah. He's uh I don't know. I try not to think about that too much.

[00:35:48]>> He He's also He's also been the most right out of anyone for the past >> That's the problem. Yeah. Like Yeah. And I always I mean I don't know if he's an evil genius or he's like uh he's actually helping humanity. Like those two they're two sides of the same coin. It's like I don't think he even knows if he's doing the right thing. Sometimes you could be doing the right thing and someone co-ops it. But uh there regardless the guy's you know I think his framework is better than anyone in in in the world. I think another good like angle to view this conversation through is is from an actionable investing perspective is just that cash is a position and if things don't make sense to you and there's always times where things make fantastic sense to me and they don't make sense to you or they make amazing sense to you and I I feel lost in the markets right based just on our biases and what we're watching and what our styles are and I like having the maturity as a trader investor to say this isn't making sense.

[00:36:57]I'm not going to force it or I don't have enough conviction or you know edge in this scenario to be able to predict what comes next given these uncertainty you know uncertain circumstances and and heavy policyhanded influence. I just that's one thing I think is important like because people always want to know a trade and a uh you know like something to do but you know it's so often that you we make the most of our money in very short stretches like if if you're an active trader participant yes the majority of people long only investors who are just long stocks at all times like this is fantastic like you have capital to put to work and it's working but that's not everybody's investment style. And so I think um you know for for more like active there's times where things make sense and not and like if you sidestep when they don't and just pound and press hard when they do like odds are you're in a better situation than forcing things throughout every market environment because that's the reality of it. Like there's never a end state for markets. like there's bullish times, there's bearish times, there's stlflationary times, there's heavy growth times, there's, you know, slowing growth times. It's it's very dynamic and being able to be nimble in that and know what where you want to participate and what your views are because it's also very difficult to counter trend trade against your long-term views. So, if you think one way, like sure, the market's going to go against you at different times and if you can sidestep those, but just catch the meat of the other moves, you're fine. So, I think that's like something I I've been thinking a lot about lately is like just having way more patience and just waiting because like you can have a quarter that makes two, three years worth your returns and you can also give it all back if you're like stuck in the wrong mentality.

[00:38:56]You know what I regret is I was talking about space before everybody else.

[00:39:03]>> I also sold that.

[00:39:06]>> Granted, I have some >> space lab stock or whatever you mentioned like >> Yeah, >> man. We were we were kind of mentioning as a joke and it's like I don't know. I never even >> I wasn't >> I was not I was totally mentioning it as a real thing like when I was I mentioning Rocket Labs every week for two years. Yeah, Rocket Labs. And >> I'm like, >> the best the best call of our show's history, and I never even owned the thing.

[00:39:31]>> I'm sure there's one guy that watches this who like bought it and is like, you know, filthy rich. Please reach out and give us a shout out.

[00:39:41]The other one was uh I recorded uh in September, October, November of 2024. I recorded a full hour on the AI data the Bitcoin miners pivoting to AI data centers.

[00:39:54]>> Yeah, great.

[00:39:55]>> I was I was long that for various times, but like today Leo pulled his new biggest position was Nebius.

[00:40:04]I want to like, you know, do bad things to myself because I literally looked at that chart and I owned it in April 25 to May 25 and sold it for like >> some small.

[00:40:16]>> We accepted it. I got to give it a shout out is we accepted the shout out to the situational awareness guys first of all.

[00:40:23]Great. But we also were the first ones to talk about them and talk about the treatise. though.

[00:40:28]>> This is what this is when I wish I could just turn off the part of my brain that's like a tactical trader because like I you're just like, "Oh my god, this this trend is going to be incredible for the next two years, but then after two weeks it's like I I I have to fight myself and it's just like it's so hard to hold these things on even though, you know, like even like the I don't know like the the the memory the AI memory stuff like I've done very well in it over the last couple months, but I've overtraded it as well. Like I I could have probably made more if I just sat on my hands and didn't do anything and didn't look at anything and like went to the beach, but I didn't do that.

[00:41:01]>> When you're plugged into 247 like news and in your thinking about like >> credit spreads and Trump derailing things and oil price shocks, it's really hard to to just be agnostic and say, "I'm riding this." like I I I think you can also get duly hurt being dogmatic about that stuff and you know riding it long term. So I'm happy with I'm happy with my return.

[00:41:26]>> Yeah, that's the thing. It's also it's also hindsight because there I'm sure there's other times in my life where there's something that I cut early that I made good and actually protected the gains and like that's also what keeps me in the game is that risk management because there's 10 other times where I dodge these bullets that I don't even think about. Um, and so even though I may not have made quite as much as I'd like could have technically, it also has kept me in the game a lot longer. So yeah, I mean beggars can't be choosers, I guess.

[00:41:53]>> Totally.

[00:41:53]>> And there's and the draw downs associated like there's been some nasty nasty pullbacks that like yeah riskmanaging the position is is prudent like and it's very difficult. I would say too the other hard thing about being from a macro perspective is like there are times where I get thematically like I would say the majority of my my trades and views and positions are one to three month swings and around big macro assets uh like could be a bearish mag seven like we had for a couple months there and that did really well or the bullish metals you know those those are like three to four month trades that you can you size up because you're watching the trend really nicely, etc. But then there are times it's hard to mentally compartmentalize the different types of trades and and thesis you're putting on because that's very different from like, hey, I'm super bullish this trend for two years and knowing, you know, you want like to see these moves, you have to hold it for the two years and it's very very difficult to trade around. But that's it like solar or semis or whatever. um you really have to like tune everything out. And so it's almost like having two different parts of your book that I find helpful is like I just literally put things on different trackers and sometimes accounts to be like, "Okay, this is for this pocket.

[00:43:16]This is a two-year view. I'm accumulating, maybe even send some of my trading profits over to this account that I can use to buy dips and then this is like, you know, a different totally pocket of capital." But it is hard when you're playing all a lot of different assets to always be dialed into specifically what this trade is and not get cold feet when you know something you buy it and something goes up 20% in a week and you're like okay plus also how are you supposed to underwrite that like the 3x levered ETF AUM for the sector is going to go from 40 to 120 billion in a month and it become the retail darling like >> there's tons of trades The majority of trades don't become the retail darling.

[00:44:00]>> Yeah, that doesn't happen. And and yeah, you don't think about the fact that you saved yourself from those. I gotta say this because my old my old boss Mark Hart I think he's because he's he's one I think he's one of the best thematic investors ever but he he he's got a whole formula for this which is like he's got he basically created a different type of formula for valuing things which is access awareness uh patina which is like does it have like this like gravitas right uh Then access awareness.

[00:44:37]Um, patina TAM like how can it the ability to like grow it has to have like a massive you know right tail and then um use as collateral is the last one. So he uses these as like indications when in like he calls them concentric circles of adoption when you have access open up like take Bitcoin for example like Bitcoin was just a bunch of like crazy people you know, trading this thing. And then you have like an an ETF, right?

[00:45:08]That's an access change. So that's a new circle of adoption. And then like custody was a big one, which is like secure security and custody. Can you hold it securely? And like if you think about something like space, you know, that's like access changes like you the the launch costs drop, which is what made space kind of access to space change, right? And then you have a new pocket of like ETFs came and then you had you know you know venture investors and then you had these applications and like those concentric circles of adoption allow you to like be like okay there's new investors here as price jumps psychologically to new levels and and he was like when you know price like for for you know say say something like crypto and the clarity act or whatever you know that cause like a restriction of access, right? Or any sort of regulation where it like drops lower, then you have to be like conscious of it and get out. But I've always thought that was like the best framework of of thematic investing and how how to trade it too, you know, >> like once it, you know, you get that access change and then you get, you know, it's a regulatory access change or is it, you know, a custody change or people you can borrow against it. That's a huge one.

[00:46:31]That's just like all those things are like red flags that most fundamental investors don't think about. They're just like, "Oh, did the earnings go up?"

[00:46:39]You know?

[00:46:41]>> Yeah. I think the entries for me too, how I my when I always do the best in in those areas or trades, it's always coming from just absolutely like critically attractive entries where you remove so much of the stress if you're buying this thing that's pulled back into a moving average in a multi-year bull market that's, you know, not yet the front page of the Wall Street Journal. Maybe it's the eighth page, but you think it's going to move to the first page. You know, you have for the space example, you have the SpaceX IPO four months out. You know, there's going to be hype going into it. But when you get those ideal entries and you're patient, you've been watching it, then you can get in. You hopefully get a quick move away from wherever you bought it from and you're just playing with house money and you don't have to care so much about the ziggs and the zags if you get in good. If you if you're chasing or fe you know having operating with fear that you're missing out and you're panicking to get in, you're going to get a poor entry on some wick higher that you think is the breakout. It's going to reverse in your face bottom there when you sell and then go again.

[00:47:50]And so for me, I think in these things, it's just the entry is so important because they're so volatile. any given year. It might be the best theme consistently, but you're going to get some ridiculous entries into these high beta things and and waiting for those is what's really difficult, but really makes it makes or break something.

[00:48:13]>> Well said. Well said. Um, all right. I know we got a we got a hard stop here, so we'll we'll wrap it at that. But, um, always a great one, guys. Great great to be back. And, uh, >> Yep. Good to be back, baby.

[00:48:27]could be back.

[00:48:27]>> I think I think the next few months are going to be uh I'm seeing some things set up that are are interesting and and uh there will be a baton passing at some point over the next few weeks I think from semis and that doesn't even need to be market down but uh you know I think other things are going to we have a lot of catalyst next few weeks. So >> I was going to say I don't even I'm not bearish on the market in general. I just think there's going to be a massive sectoral rotation just given how like it with credit spreads this low it's hard to really have like a you know volageddon type thing >> but you can have a major like I I think we saw a lot of the software stuff like snowflake caused a big squeeze in in software and I could see there be like a deleveraging of other frothy sectors and a short squeeze and and like sometimes that's all it takes is something to go well somewhere else. Anyway, >> well said. Yeah. Yeah, I agree.

[00:49:32]>> All right, guys. Have a great weekend.

[00:49:34]>> Later, bros. You too. Take care.