Is AI Actually Saving The Stock Market? — With Tom Lee

Tom Lee is the chief investment officer at Fundstrat Capital and head of research at FSInsight. He joins Big Technology Podcast to discuss whether generative AI wave is actually holding up the stock market and what would happen if it stalled or fell apart. We discuss what an AI 'Black Swan' event would look like, whether the bubble would pop, and what happens if AI gets too good. Tune in for the second half where we discuss how Lee predicts stock market movements, why the market is holding up well, and whether bitcoin has room to grow. For complimentary access to Tom's daily insights, market alerts, live webinars, and stock lists, you can visit ⁠⁠fundstrat.com/tom⁠⁠ --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. Want a discount for Big Technology on Substack? Here’s 25% off for the first year: https://www.bigtechnology.com/subscribe?coupon=0843016b Questions? Feedback? Write to: [email protected] Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

  This episode is brought to you by Genesis. What does it actually take to put Agentic AI to work across an entire enterprise? I recently spoke with Genesis chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, head of enterprise business solutions at Voya Financial, to go inside a large-scale Agentic CX transformation, including the business decisions, trade-offs, and lessons along the way. You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay?

• 0:43Alex Kantrowitz?

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• 1:03Alex Kantrowitz?

  Is AI really holding up the stock market? And what happens if it fails or stalls? Let's talk about it with legendary strategist Tom Lee, the chief investment officer at Fundstrat Capital, who is here with us in studio today. Tom, great to see you. Thanks for coming down.

• 1:18Speaker 01

  Great to see you, Alex.

• 1:20Alex Kantrowitz?

  So I want to start just by testing this truism that people have been saying about AI and the stock market for a long time, which is that the only thing holding up the stock market is the AI trade. You're somebody who looks at this all the time. Is that true?

• 1:34Speaker 01

  It's true and it's not true.

• 1:37Alex Kantrowitz?

  Okay.

• 1:37Speaker 01

  Because like, for instance, if you measure it by net income contribution, it's pretty broad-based. You know, the financials are growing earnings very strongly this year.

• 1:48Alex Kantrowitz?

  So banks?

• 1:49Speaker 01

  Yep, banks. Industrials are contributing a lot to earnings growth. Of course, tech is, and tech... Is a big contributor, but not 100% of tech spend is AI. A lot of it is maintenance capex and expansion capex and, you know, the catch up for spending that's been deferred because of COVID, et cetera.

• 2:08Alex Kantrowitz?

  So a lot of the capital expenditure that we're seeing, right? Because we see that big tech alone, the magnificent seven alone is going to spend something like $350 billion in capital expenditures this year. A lot of people say, oh, it's 350 billion in AI spend. But what you're saying now is it's a little more nuanced than that. Some of it's AI spend, but some of it is just keeping up what their operations are relying on?

• 2:30Speaker 01

  Yeah, I mean, but as a narrative, AI makes sense that it's a US story because most of really there are, there's only two places where AI innovation is taking place is the United States and China. And in China, we don't have that many direct investment plays there. So if someone is looking for reasons to be overweight the US, it is AI. But that's different, in my opinion, than AI is driving the stock market.

• 2:57Alex Kantrowitz?

  Okay.

• 2:58Speaker 01

  Like it's driving the narrative, but it's not necessarily driving the market.

• 3:00Alex Kantrowitz?

  How much of the stock market is driven by narrative? Because I, we're going to have some people here who are very familiar with investing and some who are more on the tech side. So just for the broader audience, is the stock market like a story driven thing? Or is it totally based off of the fundamentals and the numbers?

• 3:20Speaker 01

  So if I, let's say do approximate percentages.

• 3:24Alex Kantrowitz?

  Okay.

• 3:25Speaker 01

  So let's just say that there's two ways to value markets. One is the underlying earnings and the second is the expectations of either how good the existing numbers are or how much they can grow. So in other words, that's all the narrative part is essentially valuation. And to me, they, the adage in the stock market historically has been it takes a whole lot of E to offset PE.

• 3:56Alex Kantrowitz?

  Meaning?

• 3:56Speaker 01

  Meaning that earnings can move five percent or 10% versus what you thought. But the reason the stock might go up 50% is more because of narrative. So I think that in like a very simplistic sense, narrative drives stocks more than earnings do over the intermediate term. We can see it in stocks that essentially have turned shareholders into customers, like stocks like Tesla or Palantir define, they defy people's fundamental understanding of earnings because the valuation of the stock relative to its earnings seems far greater

• 4:37Speaker 01

  than someone can explain, but that's because these have really compelling narratives.

• 4:42Alex Kantrowitz?

  Right. And so with earnings, we're talking about profits.

• 4:45Speaker 01

  Yeah. And Alex, I might be forking here, but.

• 4:51Alex Kantrowitz?

  Fork away.

• 4:52Speaker 01

  I believe Tesla and Palantir and stocks like Hems are proof that money is not how you measure the value of a stock. Because if money is determined as the earnings per share, the value of a company isn't just the amount of money that it represents. It really represents a customer's trust in that, in the actual business model.

• 5:17Alex Kantrowitz?

  Okay.

• 5:18Speaker 01

  And so that's where, that's where PEs can actually be much higher, even for a level set of earnings.

• 5:24Alex Kantrowitz?

  So I'm going to go now, now that we've had this discussion about what creates a value, I'm going to go back to my original question, which is how much does AI, how much is AI responsible for where the stock market is today? Because I asked you that question in the beginning and you began by saying, well, we're seeing earnings in banks and other places in the economy, but as far as the narrative goes, that's all artificial intelligence. And if we go back to 2022, we're in a place where we were seeing runaway inflation. I don't know if it was slowing growth, but there people were talking about stagflation as if this was a thing that could persist. We had the Fed raising rates, making the economy, you know, with the intent of slowing the economy down. And then in comes ChatGPT. And what happened since then?

• 6:08Alex Kantrowitz?

  I think the S and P 500 is up, what, 50% since then? So with that context, I want to ask you again, how much is AI responsible for where the stock market is today?

• 6:18Speaker 01

  Yeah. And again, I'm going to point out. It's the narrative, like that's really what people talk about, but it's not even what's not necessarily driving share price gains. I mean, a few stocks have, of course, done very, very well in terms of share price gains. But the reason I'd say it's not necessarily the thing driving the stock market is that there's other narratives that do drive multiple expansion. So for instance, if we had this AI story, but we thought the Fed was going

• 7:00Speaker 01

  to continue to tighten and actually reduce monetary liquidity, then we wouldn't actually have a rising stock market. I don't know if AI could power through a Fed that would be trying to kill the economy. Or if oil went to 300 because of some geopolitical event and was at a sustained level, and so we had a recession, I don't know if we could have a market doing well. And I don't, as strange as it sounds, I think it would be tough for the AI trade to work just because cost of money would be so high, or you know, you'd have a lot of companies getting super cautious and then AI would be forking and

• 7:43Speaker 01

  developing somewhere else outside the US. So the answer is narratives drive prices, but AI isn't the only sort of story in the stock market.

• 7:57Alex Kantrowitz?

  Okay. So if I'm reading it right, what we're seeing is that AI has been a, so I'm sorry, I'm trying to parse a little bit about what you're saying, but when you said yes and no, I think the answer that you're giving is actually no, that The AI story is a nice thing that's happening on top of a bunch of other positive things. For instance, the Fed becoming more dovish and making these moves to lower rates, earnings actually increasing across the broader economy, not just in big tech. And so then maybe artificial intelligence, this idea that this moment could lead to like real productivity gains, that just gives it like an extra boost on top of the other things that are happening.

• 8:42Speaker 01

  Yes. Yeah. I mean, AI is part of the narrative, but there's a lot of the narrative for the markets. And I do think one of the reasons, like, let's say that a lot of your viewers are bearish. And they're bearish and they've been trying to expect the stock market to go down, or maybe they sold stocks in April. And then they're like, well, the only reason markets are going up is AI, and I think they're already overvalued. They're missing that there's a lot more to sort of the narrative of the S and P that explains why stocks are doing well. So that's why AI is important, but it's not the only story in the stock market.

• 9:20Alex Kantrowitz?

  So just as we sat down, you had mentioned that we've seen a black swan event every year since 2020. I guess COVID, inflation, the list goes on.

• 9:35Speaker 01

  Yeah, we had COVID, which was 2020. Then we had the bullwhip supply chain effect, which is that we shut an entire economy down, then reopened it, and all of a sudden, people didn't have visibility through the entire chain, so there was a lot of double ordering. That bullwhip typically bankrupts and creates cyclical swings, but we didn't have that, which is amazing. Then we, as you said, we, in 2021 to 2022, the fastest surge in inflation almost ever, right? This was almost exactly like the 70s. Then the fastest rate hikes in history.

• 10:15Speaker 01

  Four of four of those events should have caused a lot of companies to fail or earnings to decline. S and P earnings grew that entire period. And then number five was tariff liberation day because that was essentially like the Cuban Missile Crisis of our generation, right? Like, the entire world was held hostage to a singular decision. And yet, many people predicted recession, right? Remember all the economists suddenly said 60% chance of recession?

• 10:44Alex Kantrowitz?

  Right.

• 10:44Speaker 01

  And then a lot of people said, well, set your clock and 30 days inflation is going to go through the roof. Or you're going to have good shortages. And, you know, we're now well past 30 days and inflation's been tame. There hasn't been any shortages and companies are raising earnings estimates. So that's the fifth black swan. I mean, all of these, before they happened, we would have said the S and P should go down, it should be a bear market. And none of these have actually led to a sustained bear market.

• 11:10Alex Kantrowitz?

  And by the way, it's interesting that all of them are supply chain related?

• 11:12Speaker 01

  Yes.

• 11:13Alex Kantrowitz?

  What does that say?

• 11:15Speaker 01

  Well, you know, it's, we, something to keep in mind is the S and P 500 is a lot more sensitive to the manufacturing economy. So even though, like, we say the US is a services economy, and most of what we do is like services, actually, most of how S and P makes money is, actually, as you said, it's through the supply chain.

• 11:37Alex Kantrowitz?

  But is it manufacturing in the US? Or is it the, there are companies that will effectively create the designs and then outsource the manufacturing to places like China?

• 11:49Speaker 01

  Well, see, in that sense, it's actually still a manufacturing economy. Like, technology is a manufacturing economy because you have to make, you have to turn things into silicon and then build data centers. You know, so it's, it actually is a supply chain.

• 12:07Alex Kantrowitz?

  Right. So it doesn't matter, it's a manufacturing economy, but it's a global manufacturing economy?

• 12:13Speaker 01

  Yes, that's right. Manufacturing is definitely not constrained by geography.

• 12:17Alex Kantrowitz?

  Right. Okay. And then that's why supply chain is so important.

• 12:21Speaker 01

  Yeah.

• 12:21Alex Kantrowitz?

  Because if you're so reliant on stuff moving back and forth, then if there's a hiccup in your supply chain, or if you increase the cost of shipping from one country to another, like you would with tariffs, then you get into trouble.

• 12:34Speaker 01

  By the way, most people may not realize this, but, you know, money has to move through a supply chain.

• 12:38Alex Kantrowitz?

  Talk more about that.

• 12:39Speaker 01

  Well, let's say that you're

• 12:43Speaker 01

  A bank in Asia and then you want to move money to the United States. You have to move it through an intermediary. And then it, then from there, it gets moved to another intermediary. So there's a supply chain. In fact, if you're a global bank, so take Barclays or JP Morgan, and you have money in, let's say, Japan, and you want to move it to the US, you have to use an external intermediary to move the money. Banks can't internally transfer the money because it violates OFAC or FinCEN. If a bank has money in Chicago, a branch in Chicago, and they want to move it to Texas, they have to move it externally through the supply chain back into the bank.

• 13:26Speaker 01

  Otherwise, so like you'd think, oh, they just do an internal transfer because it's all accounting and money is like imaginary in a sense anyways, it's just digital, but they can't, they actually have to move it externally first.

• 13:39Alex Kantrowitz?

  Okay, I think we're going to probably put a pin in this and then come back to it when we're going to talk about Bitcoin later in the conversation. But the reason why I brought up these black swan events is I want to run an idea by you that's come up in some of the discussion around artificial intelligence and tech. And this idea is that if AI progress stops or collapses, that could be a black swan event because you have the valuation of some very big companies being held up on the expectation that AI is going to work. Nvidia, Microsoft, well, not Apple, but Meta has definitely played there. Alphabet is getting, I think, probably, well, maybe mixed reviews on AI because of threat and search.

• 14:24Alex Kantrowitz?

  But a large part of what people call the Mag Seven has had a valuation bump because of AI. And then you think about the private funding. I mean, SoftBank is in the middle of, you know, we think this 40, 40 billion, they're going to deploy a trillion into AI, 40 billion into OpenAI.

• 14:43Speaker 01

  Yeah.

• 14:44Alex Kantrowitz?

  And if, and a lot of this is based on this expectation that AI will do people's jobs and become like the equivalent of human beings in many different disciplines. If that doesn't work out, then the bet, I don't want to say goes to zero, but doesn't work out, there are probably a lot better ways to put that money to work. So is it? Possible that an AI stall leads to another black swan event? Or is that overplaying the AI story?

• 15:18Speaker 01

  I mean, I can picture some black swans driven by AI.

• 15:22Alex Kantrowitz?

  Yeah, talk about that.

• 15:25Speaker 01

  So AI could create a black swan if it's too successful. Because it's going to create PhD level workers at a cost that breaks all economic models. Right? I mean, what is the value of our work if something that is not us can do it better? And then if it's combined with like a robot, then it can complete all tasks that never tires, never needs vacation. It'll outperform every human. And in that world, and of course, if it gets sentient, then it really is a threat to

• 16:09Speaker 01

  like our modern civilization. Or it could even make the definition of money unimportant because you, robots don't care about money. Right? So that I think is like one black swan outcome is that it's terrible. But what's the percentage? Of course, you know, guys like Elon Musk and a lot of the books written about this, like the coming wave, put the odds low because humanity hopefully intervenes. The second way it's like that you've described, the setup is that the bubble bursts in AI. And I think that's going to happen for sure. Wireless and internet already give us the template because wireless was an exponential growth industry from 1990.

• 16:53Speaker 01

  And the growth didn't slow till, let's say, 2015. So it was one generation, 25 years of compounding growth of 40%. The wireless ecosystem from infrastructure, handsets, software, carriers, the towers, all peaked one-third into the cycle relative to the S and P. So they all became market performers. All they peaked all the same time. Nothing will break away. But then 10 years into the cycle, two groups broke out of wireless and captured the value. The tower industry, which was like a 10-bagger relative to everything else,

• 17:37Speaker 01

  and Apple, which was late. Apple was only a second-chapter wireless story. So to me, the AI story is everything's going to peak at the same time, probably one-third into the cycle. But then in that period of consolidation and shakeout, then one or two industries truly pull away and capture the value again.

• 18:05Alex Kantrowitz?

  And so what does that shakeout look like? Seems like it could be ugly.

• 18:09Speaker 01

  Oh, yeah, it's going to be. Well, we know that you have to create capital loss for investors, like the internet bubble bursting. So when the internet bubble burst, it only triggered a mild recession, that was like in 99, because the loss was concentrated in tech mainly and some telecom. And it really hit some geographic regions very specifically. The reason we had a bigger recession after that was because of 9/11. But it really would have been a mild recession. You know, like, that's why the GDP data was fine. And actually, like, 90% of stocks were doing OK. In fact, small midcaps actually positively gained during that period of time

• 18:53Speaker 01

  because the internet bubble bursting didn't take down the economy. I think if the AI bubble bursts, you're not winding the clock back to zero. But it may have burst because it may be bursting because someone decides to do containment, like, pull the brakes on this and saying, like, we're too close to generative AI or we're too close to sentience.

• 19:16Alex Kantrowitz?

  You mean artificial general intelligence?

• 19:18Speaker 01

  Yeah, sorry.

• 19:19Alex Kantrowitz?

  Do you think that this industry is even capable of pulling the brakes? I don't.

• 19:26Speaker 01

  I think people are gonna have to make some decision, cuz you're right. I think AI safety, like if we look at employment and AI safety, I think it's one, less than, not even 1% of all jobs filled.

• 19:41Speaker 01

  If you look at the financial industry and say classified job is safety, it's more than half of the jobs is safety. So the AI industry has to invest in safety. But you're right, there's like zero incentive for safety right now.

• 19:56Alex Kantrowitz?

  Cuz the financial industry doesn't have like an open source version of finance that's trying to build the same thing and

• 20:01Speaker 01

  Yeah.

• 20:02Alex Kantrowitz?

  give it away and it's sort of keeping pace with

• 20:04Speaker 01

  That's right.

• 20:05Alex Kantrowitz?

  their innovations.

• 20:05Speaker 01

  And like we did, if we did a simple thought exercise, exercise and said, if you want to train morality of AI using internet, it's going to be the most unmoral entity ever because it sees that to gain and win has nothing to do with integrity. I mean, if you trained AI on the Bible, for instance, you would raise a highly ethical, you know, entity. So I think that's what we have to sort of fork as a society is like, do, how much sentience do we want something to have that actually has no moral guardrails, right?

• 20:43Alex Kantrowitz?

  Right. So the other side of it is like, like I mentioned, maybe the technology doesn't work as planned and doesn't get to this, this part. And that, I think it could mirror that same thing with, that you mentioned with wireless where there were expectations of the technology that weren't gonna come to fruition until a decade later. But that, when, when you start to see that, when you're one third of the cycle, you peak then. How do we know that we're one third of the cycle in with AI?

• 21:11Speaker 01

  Yeah.

• 21:13Speaker 01

  Well, I think,

• 21:16Speaker 01

  like, I can sort of give you some guidelines that I saw in the late 90s. You know, that maybe we can just say, roughly use it again today, but. So in 1997, I wrote this report called The Mobile Data Report, which was actually The first report that Solomon Brothers ever produced about like how the wireless industry could actually like replace computers, like it's like, you know, what you could, mobile data, like what you could be doing. And, you know, like, we ended up, like, companies like WorldCom used this report to do their wireless strategy. But we thought mobile data

• 21:56Speaker 01

  could be like a $40 billion business by 20, I forget, you know, 15 years out, so 2010 or whatever. And it turns out that like, mobile data is like, turned out to be vastly bigger. But the stocks didn't do that well. And actually, the companies that captured mobile data were, was like Meta, which didn't even exist in the 90s, right? It was OmniSky. That was the company in the 90s, and Palm Pilot, but they ceased to exist. So Palm Pilot would have been the first iteration of an iPhone, right? So I think today, or back then, what I noticed was people had had to play with their models to justify valuations.

• 22:41Speaker 01

  So cost of money had to go to like 5%. And then the terminal PE, or the, what you call the terminal multiple, was higher than the best stocks were trading at today. So you had to re-rate the entire industry to justify the valuations. So you knew that someone was going to take a loss because these are unrealistically funded models. So, you know, Nvidia's not crazy today, you know, because it's 30 times earnings, which is not a premium. I mean, Toyota traded at 40 times earnings for years in the 90s, just making cars. And Nvidia is not making a car. You know, they're making a really difficult to replicate chip.

• 23:25Speaker 01

  So I guess we're not there yet, but you'll know because everyone's having to fake their model to explain why they're still buying the stock.

• 23:33Alex Kantrowitz?

  But let's talk about the private companies. I mean, I know it's private, so everything is different in the private market. But OpenAI is in the middle of this. We know they're at least getting 10 billion, maybe 20, maybe 30, maybe 40. They're losing, they lost 6 billion last year. They're probably going to lose money this year. They're not going to make money, according to their projections, till 2029. Now, if they work and they reach AGI, great. If they don't...

• 23:58Alex Kantrowitz?

  What happens?

• 23:59Speaker 01

  Yeah, well, fortunately, like, let's say, you know, the OpenAI and the peer group collectively isn't multiple trillions, right? So it, but it is, you know, nearly a trillion ultimately when we get to the peak evaluation for all these things. It's not that different than what happened to when the internet bubble burst. Fiber industry really was required, consumed so much capital. I don't know if you follow the C-Lex back then, but they were digging up rail lines, digging up cities to lay fiber.

• 24:39Speaker 01

  And then people said, after the internet bubble burst, there's so much fiber, we're never going to use any of it, like, we have so much excess capacity. But after the bubble burst and fiber prices collapsed, a couple of things happened. You know, the second owner of a hotel made money, so the people who ended up owning these, and then because you lowered the price, there was a lot of innovation. It created travel companies, you know, like Expedia wouldn't exist without, Netflix couldn't exist without collapsing fiber prices. Although Netflix actually never paid for carriage, but, you know, I mean, like, internet streaming became profitable. And so I think that will happen with a lot of code, that it may be rerated, as you said, because it's so open sourced.

• 25:24Speaker 01

  And I'm not making a prediction, I'm just saying that that's what to look for.

• 25:29Alex Kantrowitz?

  So let's just talk briefly one more, about one more thing when we talk about this potential black swan event with AI. And it's going to your first point of it becomes too successful. So you mentioned that, like, okay, if AI can do PhD level work, then basically people can, won't be able to make money working and society could fall apart. The story that the AI companies tell is that we'll have abundance and everybody will have exactly what they need and you can have one person that will do whatever they want because they'll have these warehouses, data warehouses of geniuses behind them. Why, why, so when you went to the black swan possibilities, you didn't take that side,

• 26:13Alex Kantrowitz?

  you took almost the other position. Why is that?

• 26:15Speaker 01

  Well, I think it's possible that it's exactly what you described, which is all of our needs are met.

• 26:24Speaker 01

  Without needing to work, so housing and food and I don't know, a lot of recreational activities. It means the monetary system probably ceases to exist. I mean, because then, for instance, do you need to go to get an Ivy League education? Or do you need to be the best student in your class when your robot's always going to be smarter than the smartest human in the class? You know, like, it's going to change what we define as achievement. Like, why do we work hard? I mean, it is, it's, some people might consider it Nirvana because, let's say, the 10% of

• 27:07Speaker 01

  the people do aspirational, like, they live their life aspirationally. Like, that's, when we grew up, you know, not everybody wanted to be the best. But when you look at societal impact, or in a company, like, my former employer, which had 200,000 employees, the adage was always, 20% did 80% of the work. Or really, like, 8% did 90% of the work, right?

• 27:33Alex Kantrowitz?

  Yeah.

• 27:34Speaker 01

  Well, that, there, there's no incentive system for that anymore in a world of abundance. So, I do think it, the consequences, money may stop mattering.

• 27:44Alex Kantrowitz?

  And then, if we're able to do whatever we want, then why wouldn't there be a situation where everybody gets everything they need? If money doesn't matter?

• 27:54Speaker 01

  Sure, but then, stock, like, stocks may not matter.

• 27:57Alex Kantrowitz?

  Yep.

• 27:58Speaker 01

  You know, like, or, what is a company any, anymore?

• 28:02Alex Kantrowitz?

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• 30:03Speaker 01

  It's it's not a group of highly skilled people. And if it's a group of high skilled robots, well, anyone can copy the code. So then there's no advantage for a company. I mean, it's it's it's actually probably

• 30:18Speaker 01

  like one of the some people might say that's a good, I think that would be kind of a very dangerous outcome.

• 30:25Alex Kantrowitz?

  Okay. All right, I definitely want to talk about which AI companies are going to win and touch on a little bit about why the market has been so resilient. And then maybe talk a little bit about Bitcoin. So let's do that right after this. And we're back here on Big Technology Podcast with the great Tom Lee, the Chief Investment Officer at Fundstrat Capital, also the Head of Research at FS Insight. Tom, it's great to have you here. I've been looking forward to this for a while. So I think that, just to tell folks who you are, I see you on CNBC all the time. You're a CNBC contributor, as am I, and you have these amazing moments where like you'll show up on Squawk Box and be like, the S and P 500 is going to go up, what, like 1% or 2% tomorrow? And then it does. How do you know these things?

• 31:10Speaker 01

  You know, a lot of it is evidence-based because we do a lot of sensitivity analysis to try to understand where we are in markets. So a lot of our statements that we make are high-probability statements. But for that to actually happen is luck, in a sense, right? Because something that has an 80% chance of happening doesn't prevent this being one of those 20% days that it doesn't happen. So, right, because if something, let's say if something happens 90% of the time, and it's happened a million times, but the next three times it doesn't happen, so like those

• 31:54Speaker 01

  three calls fail, statistically, it's still going to stay at 90% for accumulated history. So like, it is always risky to say something has a 90% chance of happening, but that's usually the reasons we make these kind of calls.

• 32:08Alex Kantrowitz?

  And just quickly, and a very high level. So when you're ready to say, okay, the S and P is going to jump, and there's like an 80% chance that's going to happen, what signals are you pulling from? Like you said, you're looking at the sensitivities and different evidence.

• 32:20Speaker 01

  Yeah. Well, a lot of times, markets make big moves because of surprise. So we have to, like today, we're seeing it today with like Tesla. And, but the reason there's a surprise is that, in a general sense, there's something that, say, anchors the valuation of a company. Let's say it's earnings, or this S and P, like, let's say that what anchors it is the Fed's dovish, okay? But then we worry about tariffs and recession. So like, that's pulling down the market.

• 32:54Speaker 01

  You can always look for what will counter that argument of recession. And like for us this year, it was the high yield market. Because high yield spreads need to widen to like 800. The spread over treasuries has to be 800 basis points. So if the 10 years at 4%, high yield would need to be at 12% to tell you that a recession is almost guaranteed. But high yield during the tariff turmoil only widened by 150 basis points or so, maybe 200, which is just a growth scare, if even. So the reason we stayed bullish into the April low

• 33:36Speaker 01

  was because high yield said the chance of recession is probably 10%, whereas the economists were saying it was 60. And we could tell by positioning and what stocks were selling off. The S and P down 25% has priced in like a 60 or 70% chance of a recession. So that's how we can kind of go on and say the market could make a full recovery because high yield is telling us there's not a recession and it's a better economist than economists.

• 34:05Alex Kantrowitz?

  Okay, so it's just looking at some data points and being like, all right, if this is what people are doing on in the bond market, for instance, then therefore we think that even if the headlines are afraid or the research reports are pointing to doom, then these signals show us a different path. And it kind of gets to like the broader market here. You've, like you mentioned, you were bullish in the April low, which means that when, just because I explained for our non-finance listeners, when the market went down and, you know, we were in full bear market or correction territory, your belief was things were going to come back and they have come back. And I think you mentioned to me that you said that investors, this was previously, we've talked previously, and investors were frustrated with the bounce

• 34:50Alex Kantrowitz?

  because they're looking at everything and they can't figure out why the S and P 500 is actually positive. For the year. And honestly, sometimes I can't either. Like, we're talking again, this is Monday, June 23rd. The episode comes out Wednesday morning, the 25th. We're talking literally in the aftermath of the US bombing Iran, and the S and P 500 is up on a Monday with the prospect of a broadening war. I don't get that. But the things that you pointed out, where the Fed is still hawkish, people think inflation is high, oil could go higher, and you said stocks have moved without explanation. So what gave you the confidence to believe that we weren't going to see a deeper dip with the market and predict that it's come

• 35:34Alex Kantrowitz?

  back? And I think your belief is that it will continue to go up?

• 35:37Speaker 01

  Yes. So, we do have a published history of our research, so clients, our clients can check, fact-check us. But as the market was falling after Tariff Liberation Day, it was falling in a waterfall decline. And so we wrote very early that there have been 12 similar waterfall declines.

• 36:00Alex Kantrowitz?

  What's a waterfall decline?

• 36:01Speaker 01

  It's a stock market that falls more than 10% within, I think we did it as a two-week period. It's really rare to basically, like, literally cause a plane to drop, you know, 10,000 feet. And almost every waterfall decline is a V-shaped bounce unless there's a recession. So that's why we got so keyed up on this high-yield market, because if we fall, but we don't have a recession, that just means everyone just panicked. They did a fire-ready aim. And so we argued you'd have a V-shaped recovery. And a V-shaped recovery is a symmetric bounce back to the old highs. And of course, everyone argued

• 36:44Speaker 01

  against it for logical reasons. They said tariffs, they're not going to be solved for a year, you know? The Fed's not your friend. The Fed is gonna, there's no liquidity coming like in 2020, so you can't have a bounce. There can't be any fiscal stimulus.

• 36:59Alex Kantrowitz?

  2025, no liquidity?

• 37:01Speaker 01

  Well, no, in 2020, the Fed did like, Fed did a lot of QE, and they're like, there's no QE coming. But we said that history says you have a V-shaped bounce, especially if there's no recession.

• 37:11Alex Kantrowitz?

  Okay.

• 37:12Speaker 01

  So that's what made this so hard for people to accept because the Fed was hawkish and we still had a V-shaped bounce. I think that's the real lesson. The Fed liquidity is a myth. You don't need Fed liquidity for stocks to recover. I'd say that's really my takeaway from the bounce. And then for this week, there is an old adage that when it comes to war, you sell the buildup into war, but you buy the invasion. Right?

• 37:46Alex Kantrowitz?

  That's a crazy say.

• 37:48Speaker 01

  Or they say you buy when the guns fire, you know what I mean? And but that's true. So we were advising our clients that you sell the buildup, but you buy the invasion.

• 37:58Alex Kantrowitz?

  Why do people buy the invasion? Is it because when the buildup happens, you imagine the worst-case scenario and the war doesn't end up in the worst-case scenario often?

• 38:07Speaker 01

  I think the simple thing is like it's pulling off the Band-Aid. So you're more worried about how painful it is, but when it comes off, nothing's changed.

• 38:15Alex Kantrowitz?

  But what if the war is really bad?

• 38:17Speaker 01

  Well, so here it was our calculation, which I think maybe people agree. The US wouldn't take action if they thought it would daisy chain into a prolonged war because there's no appetite. And Trump clearly said he doesn't want to pull us into a war. So if they're taking action, they've either signaled ahead to Iran that this is a limited action, or they know that whatever action they're taking is decisive and limited in scope. So that's why I could see why you would buy the invasion, right? And it's, I mean, who knows? I mean, there's a lot of signs that maybe we did help indicate to Iran it's limited.

• 39:01Speaker 01

  Because you know Iran had the trucks and the US was aware of all these trucks moving material, but they didn't stop it. So it was sort of like, look, we don't want to topple the regime necessarily, but this, whatever, we're going to blow this thing up and. I don't know. I'm not a political expert. I'm just saying I can understand why we're rallying today.

• 39:21Alex Kantrowitz?

  But to do this job well, you have to be, you have to game plan a little bit for like, or you have to get into the minds of leaders. The Iran strike is one example. Another example, of course, is what you just said about tariffs, which is that I think this idea that we would, if we have this like very quick descent in stocks, that typically they bounce back without a recession, well, that assumes that effectively that Trump was going to take his foot off the gas pedal on tariffs.

• 39:50Speaker 01

  Yes. So we also had been pretty clear in our client communications that he was going to walk back tariffs.

• 39:57Alex Kantrowitz?

  So how do you make that determination?

• 40:00Speaker 01

  Well, part of it is guess.

• 40:03Alex Kantrowitz?

  Okay.

• 40:04Speaker 01

  Because I don't, I don't sit in the White House and I'm, you know, I don't know what's happening, but I do know that we could look at it at the prior first term. And I also had some belief that outside of Navarro and maybe one other, there wasn't broad-based support to try to reshape the entire economy around tariffs, especially because tariffs weren't legal. And so we were actually early in flagging that this was an unprecedented use of tariffs, which meant, and as you know, subsequently has been shown that it, it may

• 40:47Speaker 01

  not survive court challenges. So that's why we thought eventually there would have to be some dialing back.

• 40:54Alex Kantrowitz?

  Just a quick aside, since we've done a couple of forks, it is interesting that tariffs was the first moment there was some daylight between Elon and the administration that continued to build when it came to the big, beautiful bill.

• 41:07Speaker 01

  Yeah.

• 41:07Alex Kantrowitz?

  Do you think Elon kind of? Maybe this is a crazy idea, but do you think he kind of like jumped on the grenade in tariffs and like publicly bashed them to sort of start a rollback, even if it meant the end of his partnership with Trump because they were too important for Elon's business to continue? Like, the rollback was too important for Elon's business because of his partnership with China and the supplies coming in from outside.

• 41:35Speaker 01

  Yeah. Look, that could, you never know, Washington, because you know what? There's a lot of misdirection.

• 41:42Alex Kantrowitz?

  Right.

• 41:43Speaker 01

  So that's very plausible. What I would say is, I would say it's clear that the White House was enchanted with the idea of using tariffs. But, as much as they war-gamed it and they thought how everything would react, like all these other countries would react and how the constituents react, at the end of the day, they no doubt had an off-ramp, too. And as opposition built, they chose to take the off-ramp. Like, you know, it probably would have been wrong, and many did assume this, is that Trump is gonna stick with tariffs and that's it. Come on, you know? No matter what happens to a world economy, it's kind of preposterous for people to have taken that stance.

• 42:25Speaker 01

  It would have made more sense to people to be up in arms, but realize that he's gonna have to have an off-ramp. And, you know, the ultimate off-ramp is scapegoating somebody. And I think the ultimate scapegoat would probably be Navarro, if they have to get a full off-ramp of tariffs, so.

• 42:44Alex Kantrowitz?

  What's your view on what's gonna happen with tariffs from here? Because there are some deals, but there are still some big tariffs that are being applied to the US economy, and I think we're in the middle of one of our 90-day pauses. It's hard to keep track these days. So maybe things could go back on?

• 43:01Speaker 01

  Yeah. Well, you know, I think Washington's used to a lot of this extent. And continue to extend.

• 43:08Alex Kantrowitz?

  TikTok ban extending into perpetuity.

• 43:10Speaker 01

  Look at the debt ceiling. I mean, like, it's the history of Washington. And, you know, even in finance, there's the term pretend and extend. I mean, if you, if there's some event and you want to delay it, you just keep extending and pretending. So, you're right. I would say no one should be up in arms if we have an extended pretend. So, the threat of tariffs remains because, at the end of the day, he can do a different channel to actually implement tariffs. So, there's no reason you lose leverage by extending it another 90 days.

• 43:42Alex Kantrowitz?

  Are the US and China too interlinked to get into a serious trade war?

• 43:48Speaker 01

  I would say there probably is a cold reality that if someone's trying to use tariffs to prevent China from making progress on AI, it's not going to work.

• 44:00Alex Kantrowitz?

  But what about more broadly?

• 44:02Speaker 01

  And if anyone tries to use tariffs to harm China from gaining economic power, we know it can't work because its supply chains can move.

• 44:13Alex Kantrowitz?

  What does that mean?

• 44:14Speaker 01

  Well, it's, we'll be, it'll be like a whack-a-mole. If we're trying to tariff China, but then they move manufacturing to another country, do we try to prevent that country from having economic access and close their borders? You know, I think, at the end of the day, it's, we're trying to use the wrong instrument to cure a disease.

• 44:40Alex Kantrowitz?

  Well, it's like the thing that happened with Apple. US tariffed China, Apple moved production, or really, assembly to India because it was Foxconn doing the assembly there, the parts they brought in from China. So, what do you think the right, I mean, what do you think the right move would be for the United States if they're trying to tackle some of the, I think, what is it? The power, the manufacturing that they're losing?

• 45:04Speaker 01

  Yeah. Well, you know, I think people forgot like sort of like the conversation that was happening in the 2008, 9, 10 period when like Apple was opening manufacturing overseas. And, you know, Tim Cook or Steve Jobs, you know, said many times, it's easier to open a plant in China than it is in Wisconsin, you know, because the EPA has so much power to prevent you from doing things and there's so many regulatory hoops to jump through that it wasn't just the labor arbitrage, it was literally the ability to actually just

• 45:43Speaker 01

  build a plant. It's very difficult in America. So I think tariffs don't offset the regulatory burden that many companies face doing anything here. So the answer, really the best answer is make it easy for American companies to build and that means reduce friction. Tariffs might be adding a lot of friction to the process.

• 46:07Alex Kantrowitz?

  That's fascinating. Yeah, it makes sense.

• 46:08Speaker 01

  Right.

• 46:09Alex Kantrowitz?

  Be, I mean, I think there's a balance. You want to take care of the environment. I don't think China has as big of a dedication of that as the US does, but oftentimes you can put power in the hands of these bureaucracies and it gets abused.

• 46:22Speaker 01

  Yeah. And so one of my friends was a private sector EPA lawyer and he passed away, but during that period of time, I had several lunches with him and he says, Tom, what people don't understand is the EPA can literally prevent any merger from happening because they can raise an environmental concern that has nothing to do with the actual business. And so you had basically enormous power wielded by folks who didn't necessarily care about letting technology stay in America. And so, and it wasn't necessarily that it's polluting, it may be because...

• 47:00Speaker 01

  The guy's close to some garment, you know, someone who runs a garment factory doesn't want the garment to go out of business. So it's, you know, it's non-economic friction. And, you know, today, robots should literally make labor not the reason you can't do any production. Because you know, China, I'm sure, you know, you know more than me, Alex, but like China's iPhone manufacturing advantage is they, they move huge populations of female workers to, to produce phones because they have the finger dexterity, but they can only like work for 90 days because they burn out from the intensity. But, you know, robots now have, you know, the same dexterity. So you don't, that's not the constraint, like

• 47:45Speaker 01

  to be building iPhones in, in China.

• 47:47Alex Kantrowitz?

  Yeah, I think when we talked about black swan of AI becoming PhD level, to me, I would say the even more near-term labor concern is that robots are getting real good.

• 47:58Speaker 01

  Yeah.

• 47:58Alex Kantrowitz?

  And we are living in, I think, probably the last few years where an Amazon warehouse will have a human picking an item out of something that comes to you via robot, and then putting it in a bucket, and then taking it out of that bucket, and putting a label on and shipping it. We're gonna hit a point where that's gonna be completely automated by robots, whether it's humanoid or a human, human-like hand.

• 48:24Speaker 01

  Yeah.

• 48:25Alex Kantrowitz?

  That does that.

• 48:25Speaker 01

  That's right. And remember, a robot gets paid the same salary in every country. It is a completely, what I would call, a fungible commodity, right? It's not, there's no pay differences. So whoever can make a robot that does this is now exporting a global labor force.

• 48:47Alex Kantrowitz?

  Yep.

• 48:48Speaker 01

  And of course, that means you can bring a lot back to the US, too.

• 48:51Alex Kantrowitz?

  So my sense is that China is pretty far ahead on humanoid robots.

• 48:55Speaker 01

  Yeah.

• 48:55Alex Kantrowitz?

  When you look around the world, do you have a sense as to where these might come from?

• 49:00Speaker 01

  Yeah, it's gonna only be three, maybe four countries. It's China, USA, Japan, and Germany. Now, I would say, over time, there is going to be concern about the ethical safety of a robot. And that's why I think a Western-developed robot will be more widely adopted than a non-US one.

• 49:25Speaker 01

  You know, uh, cause you never know if there's like a hidden like switch that turns it into murderer, you know, or one that turns it into spy.

• 49:35Speaker 01

  You know, a hidden chip, hidden code. So I think that's why arguably China's AI is way ahead of the US cause they've had better surveillance and therefore their robots will be more intuitive. But then, you know, can you trust a million of these robots in America, you know, like?

• 49:53Alex Kantrowitz?

  Yeah, go ahead.

• 49:54Speaker 01

  I'm just like, I'm just, I'm not trying to be a conspiracy theorist. I'm just saying.

• 49:59Alex Kantrowitz?

  These are real issues people are gonna have to deal with.

• 50:01Speaker 01

  Yeah, I think, I think provenance matters, you know, cause it's provenance. Uh, is this like a sleeper spy? So.

• 50:09Alex Kantrowitz?

  This is my sort of crackpot theory of the case, but I think that we are underestimating when we talk about humanoids.

• 50:19Alex Kantrowitz?

  How violent human beings will get against them. We just saw in LA, there were this, this burning of the Waymos. You can look at that at a bunch of different ways. Uh, I think it's being underappreciated how that is in some ways a symbolic revolt against automation and big tech. And if, if you, let's say, okay, just putting this in a, in a story context. You work in a factory. A humanoid robot comes in and takes your job. The next day you see a humanoid, let's say, delivery robot walking down the street. You don't, can't provide to your family anymore. You know that thing has cameras on it. You don't care. You're, you're tipping it over at the very least.

• 51:01Speaker 01

  Yeah.

• 51:01Alex Kantrowitz?

  It's gonna be very, it's gonna be, if, if this happens, it'll be the most difficult tech rollout we've ever seen.

• 51:05Speaker 01

  Yeah, because you're exactly right. There's gonna be a distributional consequence of a robot. So until we get to that world where someone says there's abundance, there's first displacement. And yeah, if people are displaced and they can't be re-employed and they're idle, why wouldn't they be angry? You know, so I.

• 51:27Alex Kantrowitz?

  Yeah, it's the history of the world. That's what happens.

• 51:29Speaker 01

  It's could be very, it could be organized sedition, like people could be trying to blow up robot factories or sabotage robot, robots have to charge. There's probably gonna be real estate where robots go to get charged. So that's maybe where people, you know, attack.

• 51:44Alex Kantrowitz?

  Yeah.

• 51:44Speaker 01

  You know, where robot taxis park, you know, who knows? It's, you're right.

• 51:50Alex Kantrowitz?

  We've already seen it in some ways with the Tesla's, well, that's kind of totally unrelated. So let's look into your crystal ball for a moment and talk a little bit about what's going to happen in the near term with the AI wave. So it is interesting. I've heard recently that there's a real dispersion in terms of where the gains are coming from in the magnificent seven in this AI moment. So if you look at the companies that are up, you have Nvidia up 7% year to date, Meta up 13% year to date, Microsoft up 15% year to date. The companies that are down, Amazon down 5%, Google down 15%, Tesla down 15%, and then Apple down 17%.

• 52:31Alex Kantrowitz?

  And if you're trying to assess like, well, I mean, obviously, it's not all AI related, but the ones that are up definitely have the better AI story. So do you think that we're going to see like the magnificent seven sort of split off into the AI winners and AI losers?

• 52:46Speaker 01

  There's definitely going to be winners and losers. Some of the loser categories will turn into winners. Some of the winners will turn to losers because we were deceived because something forked.

• 52:59Alex Kantrowitz?

  Okay.

• 53:00Speaker 01

  One name you probably didn't mention, but should be considered an AI winner is Netflix.

• 53:04Alex Kantrowitz?

  Oh.

• 53:05Speaker 01

  Because, well, one, because of course Netflix is probably using a lot of AI as a, not necessarily producer of AI, but you know, it benefits from it, but it more reminds me of Domino's Pizza. So like, you know, the theme of the last 20 years has been, there's been a labor shortage around the world, and that's why like wages are higher. So you'd think staffing stocks should have done better, but like stocks like Robert Half have underperformed the S and P. So like, if labor was a theme and you buy Robert Half, you lost money. But if you bought Domino's Pizza, you bought one of the five best performing stocks over the last decade. So it was better to feed the worker than to supply the worker.

• 53:50Speaker 01

  Netflix is more like a Domino's Pizza story.

• 53:53Alex Kantrowitz?

  Interesting.

• 53:54Speaker 01

  Yeah. But, but Apple, like for instance, is interesting because I know maybe it's derating because they think, well, they're not in front of robots and they're not in front of robot taxis and they're not leading in AI. But you know, Apple might do what they did in 2007. They weren't cutting edge and making the first mobile phone, but they, in 2007, after the bubble burst, introduced the iPhone. And so. Maybe they'll wait for AI valuations to come down or the innovation curve to slow and then Apple gets the best and takes the lead. So I don't know.

• 54:33Alex Kantrowitz?

  Now, I want to state for the record that this is not an investment advice podcast. Informational purposes only.

• 54:39Speaker 01

  Yes.

• 54:39Alex Kantrowitz?

  So take what you're hearing and view it in that lens. But you've put together a very interesting ETF. It's called the Granny Shots ETF that allows investors to play on some of these themes.

• 54:49Speaker 01

  Yes, that's right.

• 54:51Alex Kantrowitz?

  Talk a little about that.

• 54:53Speaker 01

  So Granny Shots, ticker G R N Y.

• 54:56Alex Kantrowitz?

  Why is it called Granny Shots? Is it a shot so easy that a granny could make it?

• 54:59Speaker 01

  In a way, yes. It's named after the way of shooting a free throw unconventionally,

• 55:06Alex Kantrowitz?

  underhanded. Yeah.

• 55:07Speaker 01

  Popularized by Rick Barry, NBA Hall of Famer. But the idea of a granny shot is that doing a granny shot is the correct physics way to throw a basketball. And that's why your completion percentage is higher. Rick Barry was 90% for three free throws. So we decided that when we looked at how market performance was over the last, actually several generations, thematic investing explained performance better than macro and stock picking. So meaning it's better to identify the things driving the market and own the strongest stocks. For instance, the Gen Z, the Gen X trade, which I'm a Gen X, was just internet.

• 55:49Speaker 01

  Buy internet as a theme rather than try to buy like a drug stock or something at PE of 10. So we constructed the seven themes that are the most important to the market. And then we find the strongest stocks in each. But a granny shot has to be a stock linked to two themes. So essentially, it's a 35 stock list. I look at it as these are the 35 most important stocks in the S and P. Forget the other 465. And since inception, Granny Shots has outperformed. The S and P year to date at Granny Shots is up 9%. Morningstar ranking, it ranks as top three percentile.

• 56:33Speaker 01

  Since the April low, it's a one percentile step, beating 99% of funds. So I think it's really proof that our approach to thematic investing, which is what Fund Strat does, and Granny Shots was originally a research portfolio for six years before we launched it, shows that if you know the most important themes anchoring ideas, you can outperform. And AI is only one of seven themes. So it's just why when we talk about is AI driving the market, I can point to many other things that have really been driving performance.

• 57:05Alex Kantrowitz?

  Okay, now, before we leave, we have to talk a little bit about crypto. So you and I were both at this investment forum that Stephanie Link from Hightower put together. It was a great event. And there were a few things that you said that stuck with me, and we've talked about a bunch of them today. But one thing that you mentioned is you advised everybody to buy some Bitcoin and that Bitcoin has a lot of runway left. I have said on the show for a while that I was skeptical of this Web3 idea that you can build on top of the blockchain, and I'd love to hear your thoughts on that. But to me, I think that Bitcoin running up to its 101,000 per Bitcoin right now is pretty

• 57:46Alex Kantrowitz?

  remarkable, and the fact that it has surged even as a lot of the Web3 hype has collapsed, maybe it follows that path that you were talking about as to like, things fall off after one-third of the way through the cycle, but something ends up coming through. So I wonder if Bitcoin is like that in your mind, whether it is a thing that comes out. And then, sorry, this is a long question, but let me just give you my thought on why we might be towards the top of Bitcoin, and I'd love to hear your argument against it, which is that we basically have a president in the White House that is as pro crypto as you could ever get, who's launched his own coin. Maybe we could talk about that another time.

• 58:28Alex Kantrowitz?

  But basically, the question is, everything that Bitcoin maximus of want to happen has happened. It's not being traded by mainstream financial institutions. So why does it have an opportunity to go up from here?

• 58:43Speaker 01

  I think Bitcoin's utility is going to go up exponentially in the next 10 years. So, one of the reasons Bitcoin has risen to 100,000 is just simple network value. When we first wrote about Bitcoin in 2017, and Bitcoin was under 1,000, we had said it could get to 25,000 by 2022 because it's a network value asset. So, we just said, if you model number of wallets and activity per wallet, which explained 90% of the move Bitcoin from 2009 to 2017, you would get to 25,000 in 2022, and you can get to the six figures later. And that's true. It's still like 87% explained by those two variables.

• 59:26Speaker 01

  But Bitcoin is now about to become a lot more useful for two reasons. One is it's becoming less regulatory burdened, right? The White House is really creating it as a strategic reserve asset, and companies are putting in their balance sheet because it's the way people used to have real estate owned in retail. Like, that wasn't a thing, but then people realized it was valuable to own the real estate. Like, some retailers are more valuable because they own the building. That's what Bitcoin is, your working capital is. But banks are also quite interested in Bitcoin because of stable coins.

• 1:00:08Speaker 01

  So, stable coins might be the Web3 app that's really recreating financial services because, one, a stable coin works better than a regular dollar. You don't have to send it through a middleman to transfer. Yeah, that's right. Now, if you want to move billions and trillions, you just use the stable coin market, and it's proving to be more profitable for a bank. Circle, like, I won't comment its valuation, but as a net income, or Tether is a better example because it's not public. But how do you trust those Tether people? Like, you don't really know what's going on. Well, that's where, see, this is where blockchain comes in, that blockchain has proven you don't need to know the counterparty, you just have to trust the code.

• 1:00:50Speaker 01

  And so, Tether, from a net income basis, makes more money than most financial institutions. I think it's, would be the third most profitable financial institution in the world. Wow. So, what's a better bank, right? What's a better financial services model is building it on the blockchain. So, I think... Stablecoins is the killer app that's proving, because Bitcoin anchors everything. Because you don't need a stablecoin unless you had Bitcoin. So Bitcoin and building financial services on top of stablecoins and financial services companies are getting it now. Even Walmart and Amazon want a stablecoin because it's actually quite profitable to

• 1:01:33Speaker 01

  have one, that you are changing the financial system through crypto.

• 1:01:38Alex Kantrowitz?

  So Bitcoin's not at the top?

• 1:01:41Speaker 01

  Yeah, so if you, again, model this out and utility, because remember, stablecoins is only a $250 billion market today. So you realize that stablecoins collectively are the 12th largest holder of US treasuries. They own twice as much as Germany, for instance.

• 1:02:02Alex Kantrowitz?

  Wow.

• 1:02:03Speaker 01

  So the US government does, in fact, want stablecoins to proliferate because it's a guaranteed long... Stablecoins never have declining assets of US treasury markets. And dollar dominance, its dollar dominance is only 27% in GDP terms. It's 88% in traditional financial market trading. 80%, it's 100% of the quoted pair in crypto. Dollar dominance is stronger in crypto. Stablecoin usage is only 20% in the US. Almost 60% of stablecoins trading takes place in Hong Kong, China, and Japan. So you can see that it's creating more demand for dollars outside the US.

• 1:02:47Alex Kantrowitz?

  And therefore Bitcoin will continue to go up?

• 1:02:50Speaker 01

  Yeah, because Bitcoin secures the entire blockchain.

• 1:02:53Alex Kantrowitz?

  Okay. Tom, we gotta do this again. I think we could spend a whole hour talking about Bitcoin, but I'm so glad you came down here today and spoke with me in person. We're going to do a couple of webinars for your FundStrike community, which I'm really...

• 1:03:38Speaker 02

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• 1:04:06Alex Kantrowitz?

  That's coming up. Yes, that's going to be this actually Wednesday, on the 25th, so the day this airs. And Alex, I'm really excited about it. You know, I can't wait to do it. I'm definitely excited. We should talk about the killer robots when we're on there. But, but yeah, let's just keep talking and thanks again for this really insightful conversation about AI, the stock market, crypto, and tariffs, all the things. So I definitely leave today much more, I think, illuminated on where things are going than I was before. So thanks again, Tom. Great, thanks. All right, everybody. Thank you for listening. We'll be back on Friday with Ron John Roy to break down the news. Until then, we'll see you next time on Big Technology Podcast.