Pod Insights The Pomp Podcast #1197 Jordi Visser On The Intersection Of Bitcoin, AI, Debt Limit, & Banking Crisis About this episode Jordi Visser is the President and CIO of Weiss Multi-Strategy Advisors. In this conversation, we talk about a brand new idea Jordi recently wrote about, which includes the intersection of bitcoin, artificial intelligence, debt limit, and the banking crisis. This is a fascinating conversation about how he sees new technologies and old problems coming together. Weiss also has $4 billion in assets, and Jordi reveals where they are invested given this new thesis. ======================= Pomp writes a daily letter to over 235,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/
Transcript 10,814 words · 4 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:02 Anthony Pompliano? What's up everyone. This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. We have no advertisers on this podcast, so it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Jordy Visser is the President and CIO at Weiss Multi-Strategy Advisors. In this conversation, we talk about a brand new idea that Jordy recently wrote about, which includes the
0:43 Anthony Pompliano? intersection of Bitcoin, artificial intelligence, the debt limit, and the banking crisis. This is a fascinating conversation about how he sees new technologies and old problems coming together, changing the way that people are thinking about not only the world we live in today, but where the world is going in the future. Put on top of that that Weiss has $4 billion in assets and Jordy reveals where they are invested, given this new thesis. I really enjoyed talking to Jordy, so here is my conversation with Jordy Visser.
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1:43 Speaker 02 Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.
2:06 Anthony Pompliano? All right, guys. Bang, bang. I've got Jordy back for round two. Jordy, I thought a great place to start is the debt limit crisis. Obviously, people have heard about it. They might not know exactly what's going on. I think you're putting a lot of weight on this. You think this is a very big moment in the financial world. Explain kind of your view as to why are you so focused on that debt limit crisis?
2:26 Speaker 03 Well, first of all, the it's good to be back, but I this is a good time to be back on because the debt ceiling right now is going to be become a major news story, almost assuredly. I guess there's a small possibility that Washington decides to not be polarized and let everything kick the can down the road, but it just seems, based on the track record, that we're gonna have a moment that people are gonna get scared about this concept of agreeing to raise the debt ceiling because the debt continues to rise in the country and particularly after the rise from the pandemic where we needed it to go up significantly. If you remember Joe Manchin, basically at the beginning of last year, really kind of put his foot down and said, I we don't need more inflation.
3:11 Speaker 03 And if we keep spending in this reckless manner, we're gonna have more inflation. Well, obviously, we did have more inflation. We canceled some of the spending we were gonna do. And so the debt ceiling is just taking that story and bringing it up as kind of a story for the next presidential election. So it comes at a time when you've got a banking crisis and the Fed during its time of doing QT and raising rates to stop inflation had to take a little exit off the Garden State Parkway in New Jersey and do a little bit more dumping of money to deal with the banking crisis. So I think the fact that it's happening at the same time, it just comes when people are losing trust in the banking system. And I think the debt ceiling is gonna bring some of that back to roost in terms of you can't spend forever.
3:56 Anthony Pompliano? Well, so when we talk about that debt limit crisis and kind of what's going on, what do you think will happen? Are you in the camp of there's gonna be a US default? Do you think it'll be avoided in like the 11th hour? What do you kind of at least preparing yourself for?
4:11 Speaker 03 Well, again, I have to so I have this non doom and gloom belief. And I probably when I was younger, I spent more time thinking there's no way they can keep this debt going forever. But the reality is the debt fuels innovation and growth. And so there's a direct relationship. And so I think they'll eventually come to some agreement, even if. There is some technical default where they find ways to pay it off, but they have to go through some backdoor channels. The printing press is something people have heard. I don't believe there's a printing press. I believe there's multiple printing presses. And that just means a variety of ways for them to make sure that all debts are paid off. So my guess is it'll be the same thing as ever. There'll be a,
4:53 Speaker 03 you know, a reality congress of Washington that'll go on. Uh, and that'll be drama, but eventually they'll just kick the can down the road. They'll agree to raise it. There might be some spending changes, but in the end, we all know that this never lasts very long and the debt keeps getting higher and higher.
5:08 Anthony Pompliano? As we look at uh kind of that debt limit, uh you're highlighting this idea that people may lose some faith in the US system. They may have some questions, some uncertainty there. Although, you know, the percentage likelihood of a default is still low, uh it does beg the question, hey, what's going on here? At the same time, you mentioned the banking crisis and that to me seems much more acute. People were very worried about their deposits. We saw massive tens of billions of dollars outflow from certain banks in a single day. Are they related? Are they different? How do you look at the banking crisis in light of kind of the debt limit stuff?
5:43 Speaker 03 Uh, I view them as very, very similar and I'm going to give you a, a, a simple analogy. I've been trying to explain to people about banks because somehow or another people have always just trusted that banks are safe. Um, and I'm going to convert them into my world of hedge funds. So if, if, if a hedge fund were to go out and raise um $200 billion, which is effectively deposit size that Silicon Valley Bank had. And they took that $200 billion of overnight liabilities, meaning everyone could come in and take the money at that day if they all wanted to. And they went out and they invested it in 10-year illiquid securities that were yielding higher than the overnight rate.
6:23 Speaker 03 Well, everyone would say, well, that's definitely a, a problem. Well, the reality is every bank does the same thing. They take deposits in. It's overnight or daily liquidity and they invested in things that are less liquid. And so if everyone came into a bank, it's just a, it's at the end a run. Is a lack of trust. And so I think there's similarity in the fact that what's happening is through social media, through transparency, people are learning about this risk more and more. So back in two thousand eight to two thousand nine, during the banking crisis, if you wanted to go figure out what was happening with Lehman Brothers, you picked up the newspaper, the physical newspaper.
7:03 Speaker 03 The iPhone had just come out. Most people didn't have it. There was no way to just get full transparency and there was certainly no speed of information. It was a slow moving thing and that was pretty fast because you did have the internet, so you could go online, but you didn't carry a computer around with you all the time. So it didn't speed up the information. What's happening now is through transparency, through speed of technology, people get scared very, very quickly and it's very easy to take your money out and to move it somewhere else. So everyone has learned that with SVB and I think with the government, you have the risk of a similar thing that people start realizing that wait a second, what actually happens during a debt ceiling debate? Because the last one that
7:43 Speaker 03 really mattered was in two thousand eleven. And again, two thousand eleven is when iPhone finally surpassed BlackBerry. And so you still didn't have this speed of information. So I think the transparency, the speed of information leads to more mistrust, especially with something that, if you remember the zeitgeist thing on what the fractional reserve banking system is, people are learning that it is a levered Ponzi scheme.
8:06 Anthony Pompliano? As you see the banking crisis play out, we have seen immense amounts of support from the deposit insurance fund, from the treasury, the FDIC, the Federal Reserve, I mean, just the list goes on and on and on. All these people stepping up and saying, don't worry, the financial system is safe and sound. We stand ready to provide all the support. Is that stuff just all inflationary? Like, is that ultimately just going to drive even more issues that then are compounded by debt limit, kind of force that hand even more? Or is maybe the support more of actual support and isn't going to destroy kind of the more macro environment?
8:42 Speaker 03 So this is where I kind of jump off board with most people. So we had inflation. And believe it or not, as of right now, it appears to be transitory, much more than than maybe people thought. So you go back two years ago, the Fed saying transitory. And then it got a little bit out of whack. We printed an enormous amount of money. M2 and the fiscal side grew at seven to nine trillion dollars, which is the same amount of M2 growth we had seen from 2010 to 2019. We did it in effectively two and a half years. And we had supply bottlenecks. So of course, we had some sort of inflation. It got higher than what people wanted, but there were three structural forces that remain that if the Fed weren't to find a way to print money,
9:27 Speaker 03 would eventually win out, in my belief. And those are, those are things that don't change. Demographics, people don't get younger. In fact, if anything, believe it or not, life expectancy is shrinking. So demographics and the health side of it is getting worse, not, not better. You have the debt. Assets can fall, but the money you owe on the debt does not fall just because the assets are falling. So the debt is enormous, the demographics are there. And then something that you're very familiar with, that your listeners are familiar with. Exponential innovation has been happening and going at a very fast pace. That's deflationary. And with artificial intelligence accelerating at this point in terms of opening it up to more and more people in usage, I just don't see how that won't overwhelm whatever the Fed could do. So I think the Fed is fighting a battle
10:13 Speaker 03 always about deflation at this point. And as much as we have transitory inflation, I don't think those three forces will let up. And one of the reasons that you went into the situation with SVB is because those deflationary forces absolutely positively came into play because stocks went down last year. That started the whole situation. The Fed had to raise rates that knocked bonds down. And now we're in a situation where you've got a very big, you know, problem in your hands. So.
10:40 Anthony Pompliano? Are people actively seeking alternatives to the US-based financial system? Like, are they saying to themselves, not only am I uncertain, I'm nervous, but I'm going to move capital elsewhere? And so things like gold, Bitcoin, et cetera, that are seen outside of the system become beneficiaries of that? Or is it still just talk, but not a lot of action yet?
10:59 Speaker 03 A, I think it's been happening.
11:03 Speaker 03 The Bitcoin paper came out at a very important time of mistrust. And I think the time period since 2008, when the paper came out just after Lehman, has really been, you know, 15 years or 14 years of a lot of mistrust. Whether it was the EU situation, we had to print money to keep that one situation. China's had to print money and then raise their money supply dramatically to keep their housing market or real estate market from falling down. Basically, the governments or the central banks of the the the three major economies, China, the US and Europe. And then if you throw in what Japan has been doing for the last 30 years, they're trying to keep up from the debt deflation thing taking over.
11:46 Speaker 03 So I do think gradually what's been happening, more and more users are migrating to the crypto world and they're looking for another alternative. And rather than get into this polarizing binary world of one versus the other, you still can't function in the crypto world, meaning you can't go to the supermarket. You can't do a bunch of things that you need. So when you have a $450 trillion game going on, which is the fiat system of assets, that's the total sum of all the assets, according to Boston Consulting Group around the globe. And you have a crypto world which has about 1 trillion. One's growing fast and the other one's not growing. And the 6040 model is kind of a good gauge for how assets in the fiat system are doing X real estate.
12:30 Speaker 03 And if you go look at what 6040 has done since February of 20 before the pandemic, it's barely up. Bonds and stocks have kind of offset each other. And Bitcoin was about 10,000, it's now 27,000. Ethereum, I don't remember what the exact price is, but you're dealing with over 1,000% in Ethereum. So I think the crypto world has grown significantly and will continue to grow. I think people want it all to happen today, but as I I said before, it took five years for the iPhone and the iOS system to take over BlackBerry. And I think people want this to go faster. This is a different game and it's going to take another 10 to 20 years. But I think the outperformance will continue to happen in the crypto world as as an alternative, along with gold for the time being.
13:10 Anthony Pompliano? So you recently wrote a paper and it's called SVB Chat GPT and the Future of Trust, the Bitcoin Moment. Now, what's fascinating to me about this, SVB debt limit and Bitcoin. There's a lot of people connecting those three things. You included Chat GPT from OpenAI. Why are you looking at artificial intelligence as a key component to this thing that you're calling the Bitcoin Moment?
13:30 Speaker 03 Well, the first thing is I have viewed in my world of allocators and pension funds investing. Just to give your viewers slash listeners an idea, the United States right now makes up about sixty to seventy percent of the MSCI world stock market, meaning if you as a pension fund in Germany are benchmarked to MSCI world for diversification, you currently have sixty to seventy percent of your investments within the stock world in the United States, because our companies are bigger than many, many GDPs of the world, particularly with Microsoft and Apple.
14:10 Speaker 03 So part of the belief in technology with artificial intelligence and the blockchain kind of accelerating right now is I view them as a decentralization moment. Now, when people hear decentralization, some people, you know, view this as it's not going to happen, it can't happen. Well, any scheme that's going to work, whether it's the Fiat scheme or whether it's another competitive scheme, it just takes trust and the rest of the world is going to benefit dramatically from the decentralization of things like ChatGPT. It allows a kid sitting in Africa to create amazing ideas as long as he can access data, because he has this engine. So we used to need data scientists and coders to do a lot of this. Now you just need ideas.
14:53 Speaker 03 You're taking the art of coding and you're making it something that's commoditized, which allows other countries to come up with ideas to solve problems. And I think they're sitting there with brains that didn't go through the same school system, which in my opinion, you know, forces people to have a rigid thing like a major, where ideas are really kind of global. And so I have viewed this moment for the Bitcoin moment as a moment for artificial intelligence and blockchain to start the real passion for decentralization through the US no longer having the dominant place for technology and innovation, and that it's going to spread. And when people hear this, they think, well, you're negative on the US innovation. No, we'll still be a global leader in innovation. I just think the rest of the world is going to grow at a faster pace in this,
15:36 Speaker 03 because they depended on our technology and now they're going to have stuff which is going to allow them to speed up the competitiveness.
15:43 Anthony Pompliano? You ended this letter with the following passage. You said, "Trust in the stories of the pillars of the fiat system is breaking down. Each day, the belief in the government's ability to keep the leaning tower of leverage from falling is driving talent and capital to a new path in the cryptocurrency world. I think artificial intelligence and the deposit flight in the banking system are both moments that will accelerate this distrust and be a significant inflection point for the Bitcoin story told in the decades to come." When I read that, what I took away was, one, these are trends. This is not a static photo in a moment in time. So the banking deposits is not just about what happened on Thursday and Friday before SVB collapsed. It is part of this trend of loss of trust in the banking
16:26 Anthony Pompliano? system. The debt limit crisis is not just about this specific debt limit crisis, but the overarching trend of loss of the US government's ability to control debt and various other things that they're doing. But also Bitcoin is a moving target as well. There's a story there. It's not a static evaluation of it. How do you look at Bitcoin's kind of rise over the last couple of years, right? Obviously, pre-pandemic, I think Bitcoin was drastically seen as kind of a toy by many people. There weren't a lot of kind of macro, kind of Wall Street hedge fund managers that were talking about it openly to the public. That all changed in 2020 going into 2021. How do you evaluate that time period now?
17:05 Speaker 03 Yeah, it's really interesting because when you go through it, the whole point of writing the paper was that there's a lot that's happened since 2020, and we get caught up in the growth rate of things. So, you know, we had M2 grow by an enormous amount in a short amount of time. I tweeted today that last month, or I'm sorry, in March, it was the largest percentage decline in M2 in the country going back to the 1950s. We had an over 1% drop in M2. Now, 85% of M2 is bank deposits. So to your point, we have bank deposits that are declining. But if you go back and look at SVB, the story that
17:46 Speaker 03 people hear is SVB collapsed and they lost 200 billion of deposits. Part of the story was they only had less than 50 billion in February of 2020.
17:57 Speaker 03 They gained a hundred and fifty billion dollars of deposits during the pandemic. And they had to turn around and invest that money somewhere else. So when you really read the story, people get focused on the collapse. I get focused on how could a bank attract a hundred and fifty billion of deposits during a pandemic when people can't leave their home? And this was obviously the printing of the Fed, the helicopter money that Ben Bernanke had had had put out. And so when you look at it and you go through and like, okay, so the deposits went up dramatically. Now they're declining, but the decline has never happened before. And that's the thing people have to realize is that I look for things that are new. The decline in deposits is a new thing. The regional banks are falling and people see them in the news.
18:42 Speaker 03 And you have a lot of smart people saying it's not going to stop. That cannot be minimized as an event. It cannot be minimized as something that's important. Those regional banks, they're part of the decentralization movement because who are the banks that benefit? It's Wells Fargo, it's JP Morgan, it's Bank of America. It's all the the big five and the the too big to fail banks. And so that has led to people looking for another alternative. And if you want to use an analogy, I use the BlackBerry iOS. Think about your grandparents and the people that were maybe in their seventies and eighties, who refused to get an iPhone, who didn't use Uber. They were looking for taxis and what eventually got them to force was to change were two things. And I have my my stepfather is eighty nine as of last week.
19:26 Speaker 03 And he did not use an Uber, I think, until twenty nineteen, just before the pandemic. And if I asked him why, he eventually reached a point. He's like, well, this thing has lasted for ten years. So I guess I got to do it at some point. He got an iPhone in two thousand eighteen. It took those events, but then there was one other thing. It was the fact that it was cheaper. It was easier. And I think that's what's going to happen with with Bitcoin is more and more people are going to see that it's easier, that it's becoming an OG by being around now for fifteen years. So it isn't going away. And when they start highlighting or they start paying attention, which is why I included the numbers. If you include crypto Bitcoin as an asset in your portfolio, you've done exceptionally well over the last ten years, but even over the last three years,
20:11 Speaker 03 you've done exceptionally well. Only last year would you have done poorly. And again, Amazon was down close to fifty percent last year. So it's not like this was isolated to this. This was innovation.
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20:53 Anthony Pompliano? When you look at the past performance, can it continue? One and two is how do you start to try to measure what your expectations there would be? We have a programmatic monetary policy, so we kind of know what Bitcoin is going to come into circulation. Demand is the big variable. So how do you start to try to wrap your head around that as an asset allocator?
21:12 Speaker 03 All right. So I'm going to give you the formula that I've shown in my videos that I do kind of once every two weeks with charts, just to highlight what I view as a macro person. Bitcoin is and there's a lot of people that I would say are completely in the web three blockchain crypto world that I speak with that don't view it that way. But I think they're starting to come to the conclusion that the funding for any growth in the crypto world comes from the fiat world. So you have to follow charts in the fiat world that represent the growth of Bitcoin. So to me, the first one is when innovation is doing well. So right now, if you wanted to pick a chart for that, when the NDX, which is the innovation
21:55 Speaker 03 index, is outperforming the SPX, which is dominated by the older industrial parts of the economy, when that's outperforming Bitcoin is generally doing well. The second thing is the focus that I said with two things on the United States. If you believe that the US, that the rest of the world is catching up and they don't have as much faith in the US, then you've got number one, the Fed and how that's being viewed. Well, the banking sector and kind of needing to print, they're watching that. They're going to watch the debt ceiling. So I think people's confidence in the US will continue to decline around the globe, particularly in Asia. The next thing is the dollar. When the dollar is weakening, typically Bitcoin has done well. I don't think-
22:34 Speaker 03 People realize this, but the two big major rallies in in Bitcoin since two thousand fifteen occurred in two thousand seventeen and two thousand twenty. We're going, we started another one appears in November of twenty two. Those all were times that the dollar was weakening. Now, November of twenty two also happens to be the time that Chat G P T was released, and I think that has an impact too, as I mentioned. But you're you're at a point now where I think Bitcoin is gathering because people are losing trust in. The U S. And then finally, this goes without people realizing, but I talk about this all the time. This year in two thousand twenty three, seventy percent of global growth. Will occur in Asia. China and India will will be the bulk of it, but you're dealing with other countries in Asia that continue to grow at a rapid pace.
23:17 Speaker 03 And China in particulars M two has grown by five trillion dollars since October. So we talked about the U S growth. China is the single biggest money supply country on the on in the plant on the planet, almost double the U S at this point. So when China's money supply is increasing, which was not happening last year. Bitcoin typically does well. And right now, all of those things are pointed the same direction. You have the A I innovation side. You have the Fed under attack along with the dollar because of the banking sector and the debt ceiling. And you have Asia dominating the growth because of China's reopening and the printing of money.
23:51 Anthony Pompliano? As we see all of that growth in China and other places, we saw Pakistan go ahead and ban ownership of Bitcoin. We saw China come out very, very strongly and kick out all the miners. We saw Nigeria. Ban the trading of cryptocurrencies. We've seen India talk about doing it. These are countries, some of them are very fast growing. Some of them are already very large population wise. Some of them are very high penetration of mobile. Is it a thing where the government and the people are separate? Or should we actually put value and credence on the fact that some of these governments seem to be taking abrasive steps towards something like Bitcoin?
24:26 Speaker 03 So I first of all, if you go back and look at all the times that China's done something that would be negative for Bitcoin, it still goes up. And everyone who has kids, I'll always say the same thing. The one way to ensure your kid does something is to tell them they can't do it. So every time that a regulation comes that you can't own Bitcoin, or you can't do this, people will find a way to do it because that must mean it's something that is absolutely a viable alternative to the government because why would they be seeing otherwise? So when you get into the global growth story, and this is my favorite kind of comparison, there's global growth this year and global growth this year for the world will be 70% Asia. The crypto users
25:08 Speaker 03 of the world, almost 70% are in Asia. And this again gets back into the point that there's a global belief by a lot of people that attend events for allocators and for hedge funds and all this stuff that the US dominates technology because that's what happened in 2000, really from 1994 with Netscape all the way up to even without China last year. I believe the crypto thing is a growing universe of people outside the US. Axie Infinity was an example of it. The fact that Africa has 38 million users and the US has 45 million users. You cannot ignore the fact that the growth and the dominance is the rest of the world in crypto. And so they may not have as much money and China is a big money player. The US is a big money player. The rest
25:53 Speaker 03 of the world, they don't have that much money. So it takes a while for it to grow. But I think the new phase is that innovation will be driving it. And I absolutely believe that immutable data has never been more important because of what happened with SVB, because of AI picking up. And I think that's where the intersection of the blockchain and AI run together. The more that you have something like ChatGPT, which can create fake stuff overnight, can create hallucinations, immutable data becomes even more important because you have something that can create so much fake data very, very quickly. And so they almost work together. And that's why I think for Asian, for even the governments, they're going to be forced
26:35 Speaker 03 To move to the blockchain and I believe any investments in the blockchain indirectly impact Bitcoin because the money stays inside the system. So I think there'll be a lot more investment in the blockchain. You and I spoke briefly for a minute beforehand, but just this morning, the fact that Goldman Sachs and Microsoft joined on a new, you know, on, on forces on a blockchain network. I think people have started watching that Microsoft keeps being brought up in everything. And with their investment in OpenAI, it just kind of feels like people should be watching more wherever their name is stuck in because I think it's going to keep popping up in places like this with the blockchain.
27:09 Anthony Pompliano? How much does like the Federal Reserve or other types of what I'll call traditional macro data points matter in a world of innovation and technology? So as we saw, obviously, the top of kind of the last bull market, both in Bitcoin and cryptocurrencies, but also in the tech sector and in the stock market was kind of Q4 2021. Obviously, the Fed stepping in saying, hey, we're going to tighten things, kind of put a damper on the party. Going forward, when you get this kind of explosive growth, when you get true innovation, does the Fed's kind of impact get muted to some degree? Are they able to manipulate interest rates or conduct quantitative easing that can really have as big of an impact as maybe an environment where there wasn't so much innovation happening? And how much do you kind of pay attention to?
27:53 Anthony Pompliano? Okay, we got technology on one side and kind of all the innovation and exciting shiny stuff. And then we almost got kind of like the boring blocking and tackling of like, what's the Fed going to do? And what's global liquidity going to do in order to make decisions? Overlap or no?
28:06 Speaker 03 Yeah, so I'll just kind of give my views on what last year was more than anything. And I think you should use SVB as kind of the, the poster child of what happened with innovation. Because why did they take in $150 billion from 40? It's not like every bank grew as fast as they did in deposits. Those deposits were coming into the technology innovation space, which had received enormous amounts of money because of the printing that went on. So when you all of a sudden add a bunch of printing into the system of trillions of dollars at a time when everyone's sitting at home and the old economy is not being used. Used in any way, the old economy has debt.
28:48 Speaker 03 Well, of course, the only place that benefited was technology and software and seeing at home and crypto and all the things while we were all locked in for a pandemic. Then the second that we were allowed to come out and the second that the supply chains were allowed to kind of normalize. We had the lag effect of inflation because we were spending from our home. So. I don't think last year in terms of the move in innovation was a negative thing. I think it was more repricing. If you go look at where the MDX is and you go look at where all of this stuff is, they've basically equated to like a thirteen to fifteen percent annualized gain. Since before the pandemic, meaning the NASDAQ is up since the pan- since February of twenty twenty.
29:28 Speaker 03 But it went up way too much for a pandemic, then it corrected and now it's starting to go up again. So. Last year was not about rates going higher. In my opinion, it was not about inflation going higher. It was the fact that the Fed was so far behind the curve that they had to play quick catch up. And for those of you who don't follow kind of what's happened in June, uh, June fourteenth of last year, the Fed funds rate was one percent. Currently it's five to five and a quarter. The ten year rate. Back in June fourteenth was three and a half percent. It's currently three and a half percent. So short term rates went higher, but long term rates did not go higher. And you hear a lot of things in the press about the inversion of the yield curve, but the reality is for me.
30:09 Speaker 03 The market is now building in the power of innovation and the deflationary forces that come with it. I just left a conversation with one of our commodity traders and you've read a lot about we're running out of oil. That was all of last year's theme, yet oil's gone since Russia invaded Ukraine. From a peak up near one thirty, one forty, and it's been sitting around seventy dollars. And the question is, if you believe that chat GPT is really going to be able to us for us to solve complex problems. What's the probability that in five years we haven't come up with some solution? Uh, on either the efficiency of extracting oil, the efficiency, the efficiency of using oil or something that comes in as an alternative. I would say the power of compounding ideas is growing rapidly. And so you should have oil that.
30:51 Speaker 03 Five years from now is not as big a problem. And I think that's what's happened, uh, is innovation is starting to reassert itself right now.
30:57 Anthony Pompliano? How are you starting to use some of these technologies internally? Right? You guys run a business, you run an entire investing practice. Obviously, something like ChatGPT has all these promises that come along with it. There's artificial intelligence. I know that you are even going back and learning even more about coding and kind of software development, etc. Like, explain what you guys are thinking could be ways for you to use it internally, not just as an asset allocation.
31:19 Speaker 03 Yeah, I mean, artificial intelligence and what's happening with the with ChatGPT has just allowed us to do already so many things focused on efficiency. So I do these these videos every two weeks. As I said, there's about 30 charts I go through with pictures. I did one today, so charts of what's happening in the economy. Why it doesn't look like there's any systemic risk despite what you're reading in the paper? So I actually, I use actual data to do this. Now, to do it, I do it myself. And the reason I was like, you know what, I gotta start coding again. So I gotta go back to my Python class and get reading. Because there's now things that you can connect GPT to, to allow you to just come up with the idea and let it do the chart.
32:04 Speaker 03 And that's what I want to do is why should I keep going through trying to create these charts by seeing a pattern and then matching it up? When I can just let artificial intelligence find a pattern that matches up? And I'll just direct them in that manner. So we're doing it on that front. We're also doing it on optimization and portfolio construction. We're also doing it on trying to find things that maybe people should change up. Like, have they become too correlated to a given factor that's out there or something that's moved? Help their decision making. I think the biggest thing it's gonna do is really impact human human decision making. So I spend a lot of time on behavioral decision making. I think a lot of the losses that happen in a period where
32:47 Speaker 03 things are less predictable, which is, I think, what's happening, where just things are changing so quickly that your decision making takes away a lot of alpha from your ability. And so a lot of the stuff we're focused on is on efficiency. It's not thinking we have the Holy Grail of of backtesting something or going through it. Everything in markets is about behavioral decision making because it's a paramutual system. One thing goes up, another thing goes down. The odds change every day. I still believe humans have an advantage, but I think their weakness is their decision making. And so we're spending a lot of time on how to optimize their decision making or to highlight the things that they're doing wrong to see if they can make some changes.
33:25 Anthony Pompliano? Do you think artificial intelligence can eventually do your job? Or do you think that it's something where it will, it may take time? It can augment, but you're still going to need kind of a human to hit the button? You're still going to need a human to make the final call? Like, how far can this go? And I don't think it's probably next year we're talking, you know, maybe we're talking 10, 20 years from now. Like, could it really replace investors and asset allocators? Or is it harder to see that right now?
33:51 Speaker 03 I think I learned a while ago that anything past five years, the probability of having any idea of what's going to happen goes down so dramatically that I try to stay, especially when technology is changing so quickly. I try to stay with inside the, the one to two year, maybe three year area. But with things like energy or let's say longevity, you know, solving things, those are math problems to me and it's just a function of getting there. The job because of, I mean, let's put it this way, autonomous vehicles should already be on the road. And the only thing stopping them from being on the road is not the technology, it's humans. And it's, I think humans will slow down the process.
34:33 Speaker 03 But do I think that the job of everyone in any industry will either be replaced or you'll be working more in line with computers? I've always had a belief that human plus machine has been impacting the workforce for a long time. Artificial intelligence is another technology. We all know the positives that come with it, but we also are scared to death and the negatives that come with it. And so the regulations will slow it down. Everything, there's going to be major issues that pop out of it, I'm sure. And I think human beings will still have that trust factor that people want. Because I referenced the book Sapiens in there. And Sapiens is about us and we need stories.
35:18 Speaker 03 And as someone who goes out, if you try to go to an investor and say, hey, I have this artificial intelligence, here are the numbers it put out the last 10 years and this is what it's done so far this year. Give me money. People are gonna say, well, what does it do? Say, I don't know. It's artificial intelligence. It's just working. People don't like that story. And so humans need to be involved if for no other reason for the comfort of the stories and hearing them. And that's gonna take a long time to get through. So the same way, we don't trust the government and we don't trust the banks. We don't trust computers either. And so I think as much as artificial intelligence will be important for a world, I don't think it can replace humans until time has gone by and people really can't differentiate between computers and humans. And I think that's a long way off.
36:00 Anthony Pompliano? Yeah. You said earlier that humans are gonna slow it down. What do you mean by that?
36:06 Speaker 03 We, we value certain things that that computers don't. So autonomous vehicles, if you go through it, if one person dies in an autonomous vehicle, it's a major story. And it doesn't matter if in the same night that one person died, that there were seven, seven other deaths within the same city that happened for drunk driving or something along those lines. We don't equate them the same way. And that's just gonna take time. And I think people are gonna have inertia out of fear, out of fear of death, but also out of fear of losing their jobs. And at the end of the day, we both know that people vote based on their fears and they vote based on what they want. And so if you want to protect your job,
36:51 Speaker 03 you want to vote for people who don't agree with allowing AI to be brought too fast. And that's why other countries that don't have that voting side, or in China's case, aren't trying to keep control. I believe the two countries that will have the hardest time or create the biggest regulations will be China and the US because they have the most to lose. And I think the countries that will benefit the most, I lived in Brazil for two years. Their problem was about education. It was about the government and corruption, a whole bunch of different items that I think artificial intelligence and transparency can help with. And because people there have had such a bad side at some point, their fear is not participating.
37:30 Speaker 03 And they're getting the freedom they can that I think is there. I've, I've said, I really do believe the crypto world to some people on the planet is like what the, what America was to people and they came over here, a land of freedom, a land of less centralization, less control. And I think that's gonna be where many of the great ideas are coming out of. So I think China and the US will have the people that slow down the process through regulation and through fear more than the other countries.
37:54 Anthony Pompliano? One of the best ways that I know to kind of think about, you know, where the future is going is to look at young people. And so let's say that a 10 year old or a 15 year old came to you and said, hey, I'm really excited about the world. Like, what should I do? Whether they wanted to be an investor, or maybe they wanted to build a company or whatever. What would you say for them to go study? Is it just learn software development and pay attention to AI and Bitcoin? Or is there maybe some more nuanced things that you would give in terms of advice of what young people could go do to be prepared for the future?
38:22 Speaker 03 I have a 17 year old son who wants to go to school for computer science. And luckily, the schools he's choosing all happen to be in Boston, and they're very difficult to get into. They're almost impossible to get into if you go in as a computer science major. And what I've been trying to explain to him recently is that I think the arts are going to be far more important. I believe that. If you think about what ChatGPT can do with writing, I write a lot. I do a lot of content. I do, we have, we have a podcast, I'm on that. I'm always trying to find ways to bring new ideas and kind of fresh ideas out. Well, writing has become so much easier.
39:04 Speaker 03 So when you type ChatGPT and writing, most of what you get is about the plagiarism side and it doing it and how schools are going to fight it off. That's the negative side. For me, it makes it more efficient. If I come up with a two paragraph idea and I ask ChatGPT to edit it and expand it. Now I'm getting a lot more connections, dot connections in there. And then I can read that and I can expand it more, but the idea was still mine. So what I've talked to my son about is to make sure that the arts are a major part. And I'd rather have him an art degree or something in the arts, psychology, whatever, combined with a computer science degree. And that would give him the ability of that storytelling that I think. And that's the thing that I do believe at the end of the day, humans need, they need storytelling.
39:49 Speaker 03 They need the ability to communicate with each other. And kids, more than anything, have access to data in a very quick way. But none of my kids called me up saying, hey, is this SVB thing a big deal? But my parents did, my friends did, everyone else was wondering what it was. And that's why for kids, I think they already have the computer skills. I want them to get more involved with the arts. And so that's the way I've kind of approached it.
40:12 Anthony Pompliano? What type of books are you spending your time reading right now, given how fast the world is moving? And what makes me think about this is, I think a lot of people previously thought robotics was going to be disruptive to manufacturing, et cetera. But I also think that there are a ton of folks who now are saying, wait, if artificial intelligence is going to be powerful, if Bitcoin is going to take decision making out of the hands of Federal Reserve and central banks, it changes maybe the type of information that becomes interesting or the things that you read. Has there been any change or what are the books you're spending your time reading?
40:46 Speaker 03 I've had this thing that I've said on my podcast for years, which are, now has never been more true. Books are a waste of time. There's knowledge in them that is incredibly useful, but to get through Sapiens, which is 500 pages, would never happen. If you haven't done this, and many of your viewers, listeners have probably used or have blinkist. I don't know how blinkist can survive anymore because you can say to ChatGPT, give me a summary of Sapiens. Give me the chapters in Sapiens. Give me the, it will do it for you. And if people haven't done that, that is the easiest way to consume knowledge. So what has happened for me over the years, I have themes that I care about.
41:30 Speaker 03 Longevity is a big one for me because AI, I believe in it. And secondly, I want the most cutting edge research for my own health on what I should be doing. So I spend a lot of time reading on futuristic things that will have an impact on me like that. Now I'm doing a lot on coding and certain GPT plugins that I can use in my world. So different things like OpenBB is something I'm spending time on, which allows you to kind of do some of the things I do with charts. I always have a different area. I spent probably 200 hours over a very short amount of time, which meant about 14 hours a day over the course of two weeks during times where I was home for the pandemic on Web 3.0. I didn't know enough about it, but you can learn an enormous amount without going into a book.
42:15 Speaker 03 And I've always called it, I like rabbit hole learning. It's why I didn't like school. I'll make a connection to another topic and then I'll go. Read about it. So as I'm sitting here and I'm reciting a bunch of data to you on everything ranging from the size of the Fiat Ponzi scheme to how much China's money supplies grown. Those numbers come from me kind of ping pinging around to data that I think is having an impact. And that's the way that I learn. And so I've given up on books a while ago, but I do kind of use chat GPT and I did use Blinkist to get the summaries. I was always a Cliff Notes person when I was a kid, so.
42:48 Anthony Pompliano? I was the exact same way. I've gone the opposite, though. Now I start reading a lot more, kind of more in depth, but there's not a lot of kind of nuanced new information. Many of the books I read are a little bit older, and so you really got to kind of be careful that you don't get sucked into just that alone.
43:04 Speaker 03 Uh, Jordy. To give you an idea, I've watched probably thirteen YouTube's today. Like, that's what that's the way I consume information now, and they've ranged from coding to how to use a voodoo floss band for my knee. Whole bunch of things, but that's the way I consume a lot of information.
43:21 Anthony Pompliano? On one X or two X speed?
43:24 Speaker 03 So with YouTube, it's all one X on all any books and stuff. Everything is two X. So if I do get a book that I really want to consume, I'm the same way. I'm like, all right, I just don't want it to be more than three hours, so I'll do it on two X.
43:36 Anthony Pompliano? Yeah, that is, that's incredible. When you start thinking about asset allocation, what have you guys been changing over the last, you know, call it six months or so? Are there certain things that you're tactically set up for outside of what we've been talking about or things that you're intentionally avoiding? Because you think that maybe something bad's coming there?
43:54 Speaker 03 We, so things change rapidly. I'll just say right now with where things are. We do. So I don't think there's going to be a recession that matters, meaning so a recession that matters to everyone, since they're probably like, wait, I just read that it's definitely going to be a recession. My definition of a recession for everyone out there is where we lose at least one and a half percent of the workforce. That means we'd have to lose about 2.5 million jobs because there's about 150 million people working. I don't think that's going to happen. And the reason is because we have a labor shortage. If we do have it, it may happen over time. And you will see artificial intelligence take away some jobs over the course of the next five years. But in the short term, any new innovation usually leads to more.
44:40 Speaker 03 So because I don't think there's a recession, but I also think inflation has peaked and is coming down. And the banking crisis is acting as a credit contraction thing. We may see a technical recession where we actually have a negative GDP number or negative couple of negative GDP, but not a systemic recession, which means something like the great financial crisis or the pandemic. Uh, but something that's more moderate. And if that's the case, people should be focused on innovation. If you want to go look at, you know, a um, how the NASDAQ is trading and how Microsoft is helping the NASDAQ. You really have to remember in 2009, we had an innovation boom because the iPhone had come out during the great financial crisis.
45:21 Speaker 03 And then coming out of it, Apple led this massive rise. So we've really focused on, believe it or not, technology holding in there very well. I also don't think since there's going to be a recession that you're going to have any negative type move on uh, the old economy stuff. So commodities will be fine, but the real thing that we're focused on is that the stock markets in the rest of the world will outperform the US. For a lot of the reasons that I said, and then the final thing is uh, unless something changes quickly on the banking crisis and the debt ceiling. I would expect that the dollar is in a kind of permanent weakening trend. Uh, it won't collapse. But I do think more and more money will be draining out of it. And again, that's one of the reasons why I'm positive. Actually, all of those reasons why I'm positive about Bitcoin at this moment.
46:06 Anthony Pompliano? When you look at Bitcoin specifically, um, what is the strategy in terms of uh, kind of allocating to it? Are you guys trying to trade it? Are you trying to buy and hold it forever? Is it, we're buying it and we have some kind of, you know, price target? Like, how do you think about this asset, which, you know, you're very bullish on? It seems to have this like exponential growth to it that seems very different than maybe a traditional stock or something like that. Um, there's some risks when it comes to uh, regulation or various other things that people are talking about. How do you wrap your head around like, what is the strategy once you said, okay, I need Bitcoin? Is that as a trader or a holder or what?
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47:13 Speaker 03 So we manage about $4 billion and our mandate is not to have anything in the crypto world. So we don't. Now, what I'll say is, number one, that's what makes it good about me writing about it and going through it is I'm not some zealot who's, you know, got his entire life job involved in the crypto world. I'm actually in the fiat world 100% with our investors. I have my own personal investments in the crypto world that I believe in. But the way I translate it back into the fiat world is what I said. I believe innovation and micro. If you want to be long Bitcoin at this point, I think you want to be long AI. I think you want to be long innovation, which means the NASDAQ or the NDX will outperform
47:55 Speaker 03 the S and P. If you believe that Bitcoin is going higher, then the Fed and the dollar will be places that you just are taking the opposite side of and believing that the Fed is going to have to print money to keep this bubble from bursting. And that means that although we won't have high inflation, we're definitely going to have more money printing going on because it's going to become necessary as people lose trust. And that's one thing we didn't get into math and that's what people should realize. The US has about, as you're learning, $18 trillion of deposits. That is the bottom part of the Ponzi scheme. So that funds the fact that the household net worth in the country on top of $18 trillion is 150 trillion. Well, that's the fractional reserve banking
48:40 Speaker 03 system, which the banks provide leverage to allow to assets to go up that much. The deposits are leaving. As the deposits leave, they're going into the money market funds. Money market funds don't give you the leverage. You can't get leverage from it. It's just sitting in. Something kind of like theoretically Bitcoin. So if you move it in there, yes, you're getting a yield, you're getting paid on it. But they can't go lend that money out. So you have this money that no longer is part of the fractional reserve banking. So the more that that goes on, leaving deposits, M2 goes down, it puts pressure on the levered Ponzi scheme. And so the only way for it to do is the Fed is to add the money back in to keep the assets from falling. Because if the household net worth went from 150 trillion to 100 trillion, we'd have a serious systemic recession.
49:22 Speaker 03 So I believe that the dollar and the Fed needing to print money is another way that we're long Bitcoin here, believing that those two things are going to go on. And then finally, if you believe in the Asia growth story and the emerging markets benefiting from the decentralization of technology away from the US having a monopoly. That's another way to be long Bitcoin. So that's the way that we kind of deal with it without having to be a zealot on crypto. So.
49:47 Anthony Pompliano? Where can we send people to find you on the internet or find out more what you guys are doing?
49:51 Speaker 03 All of the content that I do is on is on G Weiss, G W E I S S dot com, including the videos that I do every week. But you can get access to the papers and everything there. And then for those people who like podcasts, In Search of Green Marbles is our podcast. And it goes on once a week. It's about 20, 20 to 25 minutes. It's covering the markets and all the big macro global themes, the Fed, China, things along those lines. And then I can be, people can follow me on Twitter. I think it's at this or underscore way, something like that. I don't know. They can find me in there somewhere.
50:30 Anthony Pompliano? Jordan, I always appreciate talking with you because you come out of the kind of traditional financial world and you have a great understanding and mastery of how to allocate capital in that world. But you're one of the most open minded people I know in terms of being able to look at all this new technology. And rather than run from it, you actually run to it and you say, hey, what is this? And you kind of turn it over and look in it. You're trying to really figure it out. And the data point to me that just speaks volumes in terms of how you approach this stuff is you're literally going back to learn Python more. So that you can then go and use the technology. And I just wish that more people in the world had that kind of attitude of, look, let me go get my hands dirty. Let me actually use this stuff and then I'll form my opinion, right? And once you kind of get to that, that opinion, it's got a little bit more substance behind it than just, hey, I read a headline and now I feel like, you know,
51:16 Anthony Pompliano? I'm the the next great pontificator when it comes to a certain new technology or new market opportunity.
51:22 Speaker 03 Yeah, I I appreciate that. And for those of you who, I mean, I'm fifty six. Anyone who's picked up Chat GPT and tried to play with it. When I first asked it a question, it basically told me I was an idiot. I and literally, I was like, what time does the Nick game start today? And it gave me the wrong answer, and I think it did it intentionally. And I remember looking and I was like, you know what? That's a search engine thing. Why am I doing this in here? And I started playing more with it. And then I started talking to a lot of people on how to get the most out of it. And they were the ones that said, you're gonna have to code in Python, but you don't have to be like proficient. The whole point of it is that if you can do enough in it to get it to go, you're gonna be able to do an amazing amount of things with it with some of these plugins.
52:07 Speaker 03 So that just said to me for the first time before, if I wanted to go back and learn Python to be a that to to really work with my data scientist, it never seemed like a good use of time. I wouldn't be using it enough because I'm too busy with the GPT plugins, I absolutely will have it, and that's where it's gonna be. And because I do so much work that I can be more efficient on, I think that's the key to any technology. It's why I cook. It's why I do anything. If you think you can do something to make your life more efficient, to make it cheaper. I don't like going out to dinner as much as I used to because I've become a really, really good cook. And it wouldn't have been without technology, because most of the ways that I learned how to cook happened through watching it on technology and YouTube and watching the way ingredients and everything went through.
52:52 Speaker 03 A recipe is just words. But actually, watching someone do it gives you the pattern recognition. It gives you the memory, but it also sees how it goes. And that's why things like the Food Network were so popular. The thing about YouTube is the more that my son told me he didn't need my help on things because he was just gonna look it up on YouTube. That was the point that I realized, oh, my gosh. I really have to make sure that I'm not leaving the way to learn in technology because technology has opened up the ability to learn much, much faster. And I think if you learn much faster, your brain stays sharper, you stay younger, and I think it makes you less intimidated. And honestly, it makes you less rigid. So that's the reason why I do it, and I appreciate the fact that you you commend me on it, so.
53:33 Anthony Pompliano? Lifelong learner. Those are always welcome here. Jordy, thank you so much for your time. We'll definitely do this again in the future.
53:39 Speaker 03 Appreciate it, Tom. Thanks so much.
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