Hello listeners. Welcome to another

episode of Geopolitical Cousins.

>> Oh, and I didn't warn you, but I'm

having a beer. Cousin, it's good to see

you.

>> Wait a minute. Wait a minute. Wait a

minute. Hold on a second. I can I can do

that.

>> He can do that, too. Let's do it. It's

been a long week.

>> I'm going to drink an Oxymoronic beer.

>> What's that?

It's a Texan classic shiner

but light.

>> Very [laughter] nice.

>> I think that's a oxymoronic. And hey,

Shiner Boach, free advertisement.

>> Let's go. Let's

>> throw me at least a six-pack for free.

>> Yeah, please reach out for sponsorship

opportunities, everyone. I'm still

trying to get the spotted cow people to

pay attention. I keep on blowing them up

on Twitter and every once in a while

they like something that I put on there,

but uh not quite yet. I I want to do

like an episode with them. I want to go

to the Nllores brewery and like walk

around and talk about the geopolitics of

beer. So, if anyone knows anyone who uh

is in is at Naris, please uh please

connect them. Okay. So, cheers to

cousins. Cheers to Fridays. Cheers to my

favorite uh cabinet official, Scott

Bessant. We're starting with you,

Scotty. Um, we're starting with Scotty

because uh the US Treasury uh announced

uh two days ago that it would at least

double the amount of longerdated

Treasury bonds that it would buy back

from investors from $2 billion to $4

billion per operation between September

9th and November 4th.

>> Um yeah. Yeah, exactly. Um the news came

after the 10-year and the 30-year US

government bonds both hit 20-year highs

in terms of yields. Uh yields went down

a little bit. they're back up to where

they were before the intervention. I

know we'll talk about that as well. My

favorite moment though was when he was

speaking to the media and he uttered the

sentence, I'll quote him, "We have a

spike in oil prices that I don't really

understand." End quote. Which confirms

what I've been saying on this podcast

here for over a year. Cousin Scotty just

doesn't know. He doesn't know. He's

admitting he doesn't know. We know he

doesn't know. He doesn't know what's

going on. Um, this is a little more

investy than we normally get cuz usually

we're trying to go for the layman. Um,

but this is really important like when

the Treasury like reverses course like

this and also when the Fed and the

Treasury, are they on the same page? Are

they not on the same page? This affects

everything in the economy. So, I think

we have to break it down. I mean, some

many listeners will know what this stuff

means, but because I think we should

approach this from the point of view of

somebody who doesn't know what we're

talking about, doesn't know what it

means for the Treasury to purchase back

bonds, doesn't know why it's important

that the 30-year is at a 20-year high,

and back into it that way.

Uh, I hope that you spliced in your

favorite clip, Matt Damon.

>> Don't worry. I I will I will be telling

uh our producer to splice in Scotty

doesn't know as much as he wants. He has

cart. Just Just throw it in in the

middle of

>> Is that the greatest cameo in Hollywood

ever? I mean, Tom Cruz in Tropic

Thunder, I mean, but that's not a cameo.

He's actually like he has a role. He's

he's part of the cast. But Matt Damon as

just a random punk rocker in Euro Trip,

the whole movie is just good for that

song.

>> I mean, it's really been it's a

forgotten true American classic, but it

both Tom Cruz and Matt Damon, the reason

it's so good is because they both went

for it a thousand%. They really like

nailed it.

>> Uh, the reason that you don't uh like

Scott Bessant is effectively because you

do suffer fools. you give them slack for

being foolish and you you believe that

Scott Basson should actually know

better. Um, and I actually think he is

the best cabinet member because I prefer

uh that the world does not descend into

Kadis. So, as far as I'm concerned,

Scott Basson is holding off Cberus with

one hand and pushing, you know, what's

his name? Shaon back into the boat of

the river sticks. So he is the only

thing that really calls us away from um

from certain doom. So

>> I I I hate to break it to you. If Scott

Besson is the only thing holding us back

from certain doom, doom is upon us. You

might want to start prepping.

>> Well, look, I think uh

let's go back to your point. So

basically what's happening 20-year high

for the 30-year um the 10 year is also

making, you know, highs. Um, and the

reality is that if you extend both of

those to the 90s, in the 90s they were

higher. And so, like, it's okay. We will

somehow survive. Uh, why does this

matter? It matters because the 10-year

yield and the 30-year yield, um, the

yield, the price, the the little

percentage point you see quoted is

effectively the interest rate at which

most of the US economy, including the

government, borrows. Uh now you dear

listener if you have a mortgage you

don't borrow at the 30-year or at the 10

year. You borrow at uh some sort of a

spread between the 30-year and what the

mortgage rate is at. So that's also gone

up by the way Jacob above 7%.

>> And the whole premise of what Scott

Besson was trying to do last year was to

get the mortgage rates down. In fact,

when he got appointed as the Treasury

Secretary, one of the things he said

was, "I don't really care about stock

market. I care about the bond market.

which is correct you know because the

consumer borrows at the log end the the

the the corporate borrows at the log end

and so it is really it does matter.

However, all that said I think that uh I

think Bessant and many in the media so

both Treasury Secretary Besset and

people in the media may be overreacting

you know.

>> Okay, tell us why.

>> Well, so the borrowing rate has been

steadily increasing this year.

But there's a couple of things that are

also going on at the same time this

year. Like the US economy is objectively

on fire.

Last year we had a little hip in the

labor market. Last year things didn't

look that great. I think last year the

AI capex story saved America from a

recession. Let's just say. I mean I

don't I don't want to hold on to that

very dearly. Not a high conviction view.

But I think last year was iffy. This

year it's not iffy. This year we've got

a lot of things happening uh that

suggest that actually it's not just AI

capex story the growth is broadening

through the economy and so yeah

borrowing costs tend to go up when

they're when the economic growth is

stronger so first and foremost I just

want to say that's one of the reasons

why I think the tenure is going up. The

second reason is going up probably. Uh

and again there's no silver bullet here

and I'm not like some bond like you know

maven. So just you know I'm trying my

best. The second thing that's going on

is that as one of my uh good friends on

Wall Street and client said six months

ago to me is like yo the 10ear yield is

going to go up. Like oh why? I wonder

why. Because hyperscalers are going to

start borrowing a lot of money hundreds

of billions of dollars in order to build

data centers.

So what's happened over the last 12 18

months is that you know hyperscalers

went from spending their cash like stuff

they had in the cushions of their couch

to having to borrow. So the US

government is now having is being

crowded out.

There's more demand

you know uh there and and rather to put

it in correct terms there's more supply

of longdated quality bonds. So their

price is going to go down which means

the rate at which the government has to

borrow is higher. The the government now

has to compete in other words with

Google

with with Alphabet with Apple with

Amazon for uh for you know willing

investors in government debt. And that's

where I that's where I don't think this

is about 40 trillion. This is not about

deficits because as my good friend Ryan

Swift who's my colleague here at BC

Research said a couple of days ago when

I asked him and by the way he is a bond

maven so legitimate bond maven when I

asked him hey Ryan why is the 10ear

yield or 30-year going up he was like

well it's not because of debt and

deficits buddy

because the US has been in a deficit

crisis since I've had a career in

finance so nothing happened over the

last six months to suddenly justify like

panic and that's where I I think Scott

Besson's intervention I think is not

necessary and uh it's actually a form of

like doubbish stimulus if you will

because if we do suppress this rising

yield you're suppressing it at a time

when the economy is actually okay where

where consumers and households and

corporates can actually borrow at this

rate and so you're actually going to

juice up the economy right and then and

then we come to the last bit of why this

is happening and this is the part that

is appropriate for geopolitical causes.

The part where you were like why when

you said that Besson doesn't know why

oil prices are going up. It's like look

if I am he said he doesn't understand

why.

>> I know I know I know which is beautiful

like and obviously he's trying to say

like this is crazy you know like oil

prices should be well behaved. President

Trump is awesome and God bless him. He's

got to do that. Come on man. He's got to

keep his job. Like give him a break. But

listen,

>> he doesn't have to keep his job. There's

nothing that says he has to keep his

job. very successful in other way.

>> We will literally go down the river

sticks into Hades, bro. Like that. Like,

but okay, fine. We disagree on this.

It's fine. We're drinking brews here.

It's all good. It's all good for good

fun. Look, the other reason that the

10ear and the 30-year are up is because

there's a [ __ ] war in Iran, you know,

and you can literally chart the 10ear

yield over the last two years and you

can put a little vertical line where the

war started.

And that was the bottom this year and

we've gone up. So borrowing costs for

American consumers and American

corporates is going up for a number of

reasons. But of course, one of them is

because President Trump went into this

war. But but I don't think and this is

where a lot of bond traders and people

on Wall Street are going to disagree

with me because I'm going to get a

little qualitative and voodoo. I don't

think it's, you know, it's not about

mechanics. It's not about inflation.

It's not about oil price. It's the

vibes. Jacob,

the bond market is reacting to really

bad vibes. Now, we've had three selloffs

in the bond market over the last 24

months. Three. One, I called # sick

call. Love it. Human steepener. I'm

awesome. Literally told all my clients,

the Fed starts hiking and I'm like short

duration. That was a big call from

September of 24 to January of 25. the

bar market absolutely got its face

ripped off. Scott Bessent as a human

being was worth like 80 basis points

worth of a rally. What happened in

September of 2024? The the people of the

world realized that Camala Harris is a

terrible candidate. Literally, it was in

September and the bond market freaked

out because like, oh my god, here comes

populist Trump. he's going to spend a

lot of money and it and then they tried

to like finagle this with Doge like you

know Elon Musk showed up he's like I got

it and the bond market like went up even

more cuz like we don't trust you

>> and then boom President Trump finally

decides to appoint the Treasury

Secretary and he decides not to appoint

Harvard Lutnik

instead chooses hedge fund manager macro

guru Scott Bessent and literally that

calms down the bond market it calmed

down the bond market the second time.

So, it was the bad vibes. It was like,

"Oh [ __ ] here comes populist Trump with

his populist ideas. Bond market sells

off and then boom, he puts a finance

minister, Treasury Secretary." This is

very Brazilike. If this sounds to you,

if you're an investor and this sounds

like emerging markets, that's cuz it is.

You know, like Lula wins the election in

Brazil and then we're all waiting to see

who's his finance minister to know

whether we should short or long the real

the currency. And so, that's what

happened. Trump comes comes in, the

market has a little wobble. Not because

it hates Trump, like generally speaking,

the market thinks Trump is great for

stocks, but he is legitimately bad for

bonds and he was last time as well. And

so the bond market has a riot. Waits for

Scott Besson to get appointed.

Everyone's happy. Then fast forward to

2025. The second selloff of the bond

market on Vibes

was liberation day.

Now, this is a curious one, Jacob,

because tariffs are supposed to raise

revenue to the government. Tariffs are

supposed to slow down growth.

Tariffs are supposed to, therefore, be

good for bonds. Yields should go down.

But they went up. Why? Because on

Liberation Day, Howard Lutnik held up a

sign made by Chad GPT that put tariffs

on [ __ ] penguins.

>> Mhm. So again, the bond market reacted

not on the math, not on like, oh, how

much are we going to make if there's a

35% tariff on penguins? No, no, no, no.

The bond market was like, holy [ __ ] you

use chat chickp

Howard, what the [ __ ] are you doing? So

the bond market sells off, and then

Scott Besson gets appointed to be in

charge of this, by the way. I know you

keep criticizing him, but he keeps

saving us from the bond market.

And then the bond market settles down.

Once Howard Lutchnik gets sidelined,

Peter Nvar gets put in a cage somewhere

in the White House, right? And Scott

Besson is now in charge of the

negotiations, everything's fine. So

those are two selloffs that I would

argue mathematically if you're like a

bond investor, if you're like a old

school bond person who comes in, opens a

Wall Street Journal after a game of

squash, and you read what the FOMC

minutes were. You know, if that's who

you are, you couldn't have predicted

these two sell-offs. And then we have

this

>> I want to be that. Can Can we play

squash in the morning after we read the

wash?

>> That' be sick, dude. And then steam. Do

a little steam, you know, like after

squash you and I just like towels around

talking to like

>> I haven't had a regular squash partner

since I lived in the UK. That sounds

wonderful. Anyway, sorry. Didn't mean to

interrupt.

>> To be clear, I cannot play squash, but

like I will I

>> I'm good. If any listener, if I'm coming

to your city, you are such an elitist.

>> Let me know.

>> Yes. I bet you also play golf, Shapiro.

Come on. [snorts]

>> Of course. I took golf lessons when I

was young. I'm quite dangerous. Scott B.

Scott Bess and I could play squash while

you're out there doing whatever it is.

>> All your credentials as a plebeian have

gone out. I do not play either one of

those.

>> I never claimed to have credentials

here. I'm I know who I am.

>> All right, that's fair. Okay. So, so the

third sell off on vibes is the war. Now,

Scott Essen is correct in a way. He's

he's curiously amused by where the oil

prices are. I hear you. But it's not

about oil prices. the 30-year and the

tenure are not responding to the the oil

prices which by the way have declined.

They're reacting to incompetence of the

administration just like they did with

the liberation day and just they did

when you know President Trump went to

Vivvec and Elon to solve the fiscal

crisis and that's why I think that Scott

Bessant overreacted and this isn't going

to be solved by intervention by the

Treasury. The Treasury doesn't have

enough by the way firepower to do this.

The only the only institution that could

actually temper the yields is the Fed

and it would have to do so in a pretty

brutal way with QE yield curve control

and all this technical stuff which we

don't have to talk about. what Scott

Besson should do easy easy he can he can

save us 40 50 base points just like he

did when he got appointed by the way

just his mere presence mere

human embodiment of Scott Besson walking

to the White House lowered yields by 50

basis points in January of 2025 he can

do the same thing this time around if he

walks into the White House and tells

President Trump yo whatever the Iranians

want just give it to them [ __ ] it that's

it that's how you're going to calm the

bond market because not about oil

prices. It it is it is about oil prices.

It is about growth. It is about the fact

that US economy is on fire. It is about

hyperscalers. But it's also about the

vibes coming out of the White House

which is this incoherence. And look,

bond traders don't like that. They don't

know what where the war is going. Bond

traders don't know like many bond

traders and God bless them. They know

[ __ ] I have no idea. But one thing they

don't care about is like politics and

geopolitics. They're late to this game.

Like I once talked to a sophisticated

bond investor who asked me, "What does

the American Senate do?" And by the way,

he was American. The thing is, bond

investors just hate uncertainty and

they're like, "We don't understand what

you're doing in Iran. We don't see when

it ends. And quite frankly, we're

worried you're going to have to triple

down on this conflict. Commit troops.

Commit fiscal or jets. Spend more on

defense. All of this is uncertain. I'm

out. I'm out." And so that's how you fix

this. I don't think you fix it with uh

whatever it is that they're doing right

now with these interventions, these

little you know like these little

technical moves like he also JPY

intervention. I think Scott Bessa did

that in Japan also for the same reason.

He's basically telling the Japanese if

you defend the yen please don't sell our

bonds sell something else. I'll help

you. Everything is designed to keep the

lid on this but like you can't you

cannot keep the lid on vibes. You got to

change the vibes. [snorts] Yeah, he's

fiddling while Rome is burning. He's

rearranging deck chairs on the Titanic.

Um, he's not I mean, there's a whole

bunch of whatever metaphor I can throw

at this to say what he's saying. I I

have a few things to push back on. First

of all, you had like a Boris Johnson

moment there when you were talking about

chat GPT. Like, you pronounced it the

way that Boris Johnson does. I thought

that was amusing and I just wanted

listeners to to to hear it. It was nice.

Second of all, you said something about

>> Maybe that means that Boris Johnson is

permanently uh half a beer in.

>> I'm sure he is. He would be a dream

guest. Would it would he not be so fun

to talk to? Like no matter what you

think about him, it'd be incredible. Um

but uh so if anybody knows I actually

know somebody who knows Boris, maybe

I'll I'll reach out and see if we can't

entice him. But um you said, you know,

Baniel's

>> he has nothing better to do. So hell

yeah, he should come on political.

>> I think he's plotting he's plotting a

return, I think. But we'll see. Um, but

you know the difference between now and

the '90s, uh, Bill Clinton balanced the

budget in the '90s. Uh, and now we have

a really, really big deficit and debt.

Out of every $1 the US government

collects, we now pay 20 cents of that on

the debt. Uh, more than on national

defense. Um, I think what annualized

interest payments in the US debt have

surpassed, you know, a trillion dollars.

So, it's just not the same. And it

doesn't seem that we're going to get

>> any fiscal responsibility there. So, I

would I would first say that. The second

thing I would say is

>> if you can just hold that thought for a

second.

>> I'll hold it. I got a I got a little

note here with all my rebuttals here.

Don't worry. [snorts]

>> Well, you're right that he did balance

the budget. We went from a peak of 7.9%.

Down to by the end of his presidency

like 6.7%.

So even after he balanced the budget,

the tenure yield was higher than it is

today. You know, like in absolute terms.

So all I'm all I'm going to say is like

let's pump the brakes on like 4.7% being

the end of America. Like it's it's

>> yeah it's it's not the end of America

but you know 4.7 or whatever it's going

to be in the context of the debt that we

have today versus then and the debt that

we had then those are materially I think

you're comparing apples and oranges

there. I would be more worried you you

can be worried about something and it

not have be the end of the world or the

end of the United States as we know it.

Um, I would push I would ask you what

your basis is for saying that the US

economy is doing well outside of AI and

data centers. Um, I was doing some

research on this this week. Um, you

know, if you look at a June Commerce

Department report that I've been

obsessed with, um, annualized outlays on

data centers are up 21.5 billion from a

year earlier. outlays on all other

private construction, which includes

everything from houses to shopping

centers to hospitals, have fallen by 101

billion over the same time period. Um,

data center construction is more now

than what we're spending on public

transportation. So, we're spending more

on data centers than we are on roads and

bridges and ports and all these other

things. And I think part of this is why

the data center eye is coming. And I

want to talk about that, too. It seems

to me that if you strip out data centers

and AI, uh things are not going well in

the economy generally speaking,

especially with inflation sort of

rising. And I would also just go back to

what you really made a point about with

the second derivative, which is the rate

of change. One of the reasons the market

has been so blasze, I think you're right

about this, you were on it from the very

beginning. Um the market is so not just

blasze is ripping is because we went

from you know $300 billion worth of

investment from the mag 7 in AI and data

centers to this year 700 750 billion um

the big technology podcast which is

hosted by Alex Caneritz a former fellow

Cornelian um threw out that the

projection for next year on that is 1.5

trillion which sounds awesome except to

your point about rate of change oh wait

we went from 300 billion to 750 billion

to and like the the rate of change is

starting to slow down a little bit or at

least in that thing which is why next

year market is not going to look so

good. All I all I would point out what

I'm throwing back to you is we've got

Republicans and Democrats turning on

data centers. We've got data centers

that yes the capex is there but we've

got shortages in on the power grid on

raw materials on memory chips on

everything else. And if you take the AI

story out of the economy doesn't look

good at all to me. Why? Why am I wrong

here? What am I not seeing?

>> Um, okay. So, first of all, 70% of the

US economy is the consumer and you're

correct to focus on the AI capic story

and obsess about it because it's

contributing about 0.6 to 0.9

percentage points to quarterly real GDP

growth. It's a lot. It's the most since

the 90s.

So, you're right. Like I do agree with

you. I think at some point that second

derivative turns negative negative. not

just like lower but ne and that's when

you know um we're going to be in trouble

but last year last year uh real personal

consumption expenditure was coming down

it's stabilized so 3mon% change

annualized of US real PCE is at 2 and a

half real disposable personal income uh

has come down because of inflation but

um real retail sales actually on 3 month

percent change are skyrocketing and a

12-mon change have also rebounded. So um

in terms of you know that that really

matters to me because it it means that

consumers are still not retrenching on

the consumption labor market.

Um we're starting to see some real

movement in the labor market.

Unemployment rate came down which is

obviously backward indicator. However,

we have a lot of forward looking

indicator at my firm BC Research.

They're all hooking up uh quite

aggressively. Uh so the labor market is

looking like it's firming. Um by the

way, jobs plentiful versus hard to get

has come down from some of the pandemic

insanity, but they're still like in a uh

good space. We're not in a recessionary

uh

balance on that ratio.

um payroll's growth is looking all

right. it's rebounded and again a lot of

the weakness in 25 seems to be coming

down and then Fed capex intention um

across different regional feds is also

hooking back up which suggests that uh

you know the AI capex story is

broadening and so you're right when you

look backwards it seems like AI capex

did crowd out a lot of investment in

everything else but that's because a lot

of businesses did not have confidence

last year to do a lot of capex and so

now capex intention are broadening.

Anyways, that's a lot of mumbo jumbo for

those of you listening to this for

geopolitics. It's it's not really

relevant. I mean, I think uh I think

you're right, Jacob, that next year we

could very well have um you know, a lot

of questions being asked by the economy,

but it's not this year. This year, the

stock market's up. Uh labor market is

firming up, and it seems like there's a

broadening of the economic expansion.

So, that would justify why the tenure

would go up anyways. Um but I hear you.

I think uh debt and deficits are

obviously an issue. They're an important

issue. Um it's just that nothing really

happened over the last four months that

I would say has taken us to some sort of

a critical uh uh moment where the bond

market has to and must riot. Um I think

it's more just the things I've said.

Growth is good. A lot of hyperscalers

are crowding out the government. So

there's more basically supply of high

quality debt which means that its price

goes down right supply and demand. If

you have a lot of some product demand is

the same then the price of that product

is going to decline. And when the price

of bonds declines their yield goes up

the the price at which uh the issuer of

that bond the price at which they have

to like basically repay it increases.

You have to pay more. That's what's

happening. and and and I get Scott

Bessent obsession about it. Um I get why

he thinks this is really really

important and I guess get why he's

intervening. My point which I know you

agree with me on my point is simply that

there's an easier solution. If you are

worried about all these things then you

have to end the war in Iran. That's it.

War in Iran is the catalyst for the bond

selloff over the past six months. And uh

you know I don't think that that can

really be uh contended and I don't

really think that you can kind of pour

out of one bucket to another. The macro

context right now is already kind of

bearish for bonds anyways. I don't think

that you can um you know really use

technical

things with which to uh calm down the

bond margin. Um I actually think what

what makes this um geopolitical because

I also hear you but I think what makes

this explicitly geopolitical is um is

China because it's not like yes the

second derivative is going to turn but

you know what might make the second

derivative turn faster. If these Chinese

frontier models are able to show that

they're able to do 80% of the

performance of the US frontier models at

a fraction of the price and with less

compute because they're not as advanced

as the US models. It seems to me that

China's openweight approach to AI hits

these US AI companies where they are

weakest and is hitting them now at the

moment where the only thing that is

keeping that is pushing us through the

negative impacts of the war is this

story and there starting to be lots of

holes in the story and I think the other

problem for Besson and this is really

the reason I don't like him and is the

reason that I hate myself for what I'm

about to say. The only one who I think

deserves some credit here is JD Vance

because he's the only one who had the

balls apparently in the room to say this

is a bad idea. Iran is a bad idea. You

didn't run on this. It can't be

effective. And he's gotten punished by

Trump for this and embarrassed by Trump

a little bit before this. Scott Bessant,

if he was keeping us from the river

sticks, should have kept us out of the

straight of Hormuz, which President

Trump is tweeting about as the next US

territory. And look, no matter what he

does, no matter what song and dance he

does, or he's going to buy yen, or he's

going to do this, that or the other

thing, unless he can get President Trump

to stop with the Iran nonsense, and he

has not been able to yet, to your point,

this is just going to get worse. And as

the AI story starts to turn, and as US

populist politicians decide they want to

attack the AI story, which I want to get

into that because I find it asinine,

suddenly like the the problems for the

economy start to stack up for me in ways

that start to make me nervous. So that's

why I'm like that's why I think it's

geopolitical and it's why I push back

against it is very like

>> everything's cool. It's not cool. It's

bad.

>> No, it's absolutely geopolitical. I mean

I we we're in complete agreement with

that. I mean the war in Iran is the

reason it's the catalyst. Look first of

all you have a bond bearish macro

context. That's your point. It's not the

'90s like there is more debt. Deficit is

large. So you're completely correct. I

would say that bullish

macro context is also bad for bonds.

>> Yeah.

>> Like when when things are good, the

borrowing rates go higher, not lower

because there's more demand for debt.

Why are AI companies issuing bonds?

Because they are bullish because they're

optimistic about the future. When

there's optimism in the future,

borrowing rates go up because everybody

wants money. Everybody wants leverage.

That's the way to think about it. So

debt is high as you say 100%. Things are

better than they were last year. That's

just the fact you know like you were

gone. You listen to me spitting a bunch

of data. Like that's the second thing.

The third thing is the war in Iran. And

you're absolutely correct. Like what the

reason that I have faith in Scott Besson

is that the last two times bond market

calmed down. He managed to have these

conversations behind closed doors. Not

in public. Clearly. I mean I like I I

mean I'm maybe maybe I'm wrong but like

who decided to remove Howard Lutnik from

tariff negotiations and make Scott

Essent in charge? Well, by the way, the

Treasury Secretary should not be in

charge of negotiating trade deals that

that's not their perview.

>> I don't know if the reporting here is

true. The reporting on that at the time

from the Wall Street Journal and others

was was basically I'm paraphrasing it

and making it a little sillier than it

is, but not that much more. basically

was that Pete Navaro and Howard Lutnik

were down on the other end of the White

House and Bessett like snuck into the

oval and was like, "Here's all the

reasons that you shouldn't listen to

these guys. Please listen to me and do

what I say."

>> But that but okay, so he did it before

and I I'm hope that he's going to do it

again.

>> Yeah. Although there is there is

something to be said for the reflexivity

of it. Like how many times can he do

that? Because the fact that he's out

talking to the media and saying, "Well,

I don't know." Like that means he's not

in the room where it happens telling

President Trump what to do. President

Trump is doing things and Scott Bessant

is trying to fix things around the edges

to protect

>> and that's why Yeah, that's why I'm

saying like the tools he's using right

now intervening in the yen and

>> tinkering with how many 10 and 30 bonds

you repurchase like that that is not

going to do it.

>> Well, I also I also I also just not to

interrupt you, but like you know the

other you you called him a guru. Um he

had what a 90% decline in his hedge

funds assets. I'm looking at the

performance here of Keysquare over the

time that he was managing it. Um,

>> yeah, but that doesn't really make

sense. I think managing a hedge fund is

hard. Cousin, I could do better than

this.

>> You could do better than this.

>> I don't know about that.

>> I don't know. I think

>> Oh, yeah. Please.

>> There's a difference between being an

operator of a hedge fund and a chief

strategist. And I think he is um like he

knows what he's doing.

Maybe the role he was in was not the

role he should have been. Either way, he

>> Fair enough. That's fair. I just can we

agree that his performance does not

allow him to be called a guru?

>> No. No, I disagree with that. I think

he's absolutely

>> a guru.

>> His performances at the Sorza's fund is

legendary.

>> Well, and who is that because of him or

is that because of Sor

>> George? It's because of multiple

reasons. But look, we don't have to get

into this. The re the reality is that

last year we could have gone down the

very dark path with the tariffs.

>> Mhm. He landed the plane on that. I

expect that eventually his interventions

in the yen and in the US bond market are

not going to work. And by the way,

that's that's a consensus view of Wall

Street. They've already not worked. The

Treasury's yield is back at 4.7%.

Which means that at some point there's

going to be a conversation in the White

House either by Bessent or someone else

with Donald Trump and they're going to

say like, "Look, man, the bond market is

the ultimate constraint. There's a

strategic petroleum reserve that's a

constraint. There's popularity of this

war which is a constraint, but the

ultimate one is the bond market. And

that's why this is a geopolitical issue.

The reason this is a geopolitical issue

we should talk about is because every

time the White House [ __ ] around,

it's the bond market that helps them

find out like right. That's what I'm

getting at. Like that's what is really

going on. And there's no way to save

that with like little technical nerdy

you know tools. Now your point about

China and modeling I I actually disagree

with that.

>> I think that actually I I actually think

that will [clears throat] extend the the

AI capex story and I and and I think it

is extending it

>> open source model. See like the problem

right now the problem right now is that

AI is quite expensive for most American

corporates. So, um, the top 1% of

American corporates spend 7,500

per employee per month, the top 1% on

AI. The top 10% go from that 7 and a

half thousand US dollar figure to 600.

So, the top 10% spend 600 bucks per

employee per month. The rest the median

the median spends $6 no sorry $11

something like that like 10 bucks per

month per employee. So the the world

you're describing Jacob where like open

weight open source models show up and

are a lot cheaper

that's really bad for open AI and

anthropic and I agree with that. I agree

with that. that's a reason to like not

be in those two firms perhaps, but it's

certainly not a reason to short the

stock market or expect capex to go down.

In fact, what may very well happen as

the cost of com of of modeling, as the

cost of using AI collapses, the

hyperscalers are going to have to build

even more data centers because they're

fine. They don't care how much like a

refiner doesn't really care what the oil

barrel costs. they they make money off

of the crack spread. So hyperscalers are

still going to charge for the data, for

the compute, for the energy, for the

water. They're going to still charge for

all of that. So if you are uh a company

using Chinese models to deliver some AI

tool, you're still going to have to pay

Amazon for the hosting, for the cloud,

for this and that and the other. And so

I actually think that the world you

described if true will hurt investors in

like frontier models but actually we

lower the cost and then more and more

corporates are going to be like you know

what I could not afford AI when I had to

use clawed but now that I can use this

like white label you know like kind of

HB AI

uh like you know I can actually afford

to eat this model like, you know, I

couldn't do it when it was gray pupan

mustard, but now that it's like HB

mustard, I'm actually going to give my

kids this this condiment. And so that's

what I think is interesting about what

you're saying. It could actually extend

the life of the Capic story.

>> I I I agree where you end, but I think

the the road traveled from where we are

to where it ends is a little more

bumpier than you're talking about. And I

think you already said why because so

much of this is vibes. Yeah. Yeah.

>> You said it already because when we're

talking about vibes with the AI economy,

if it has shown that open AI and you

know uh and anthropic, they're not going

to get AGI and they've been faking it

till they make it. Uh it's, you know,

it's a stretch to call it the style, but

I sometimes struggle to see the

difference between Elizabeth Holm

saying, "Hey, I'm eventually going to

figure this out." And them saying, "Hey,

we're eventually going to figure out how

to monetize these things."

>> You have that.

>> I know. I'm I'm I'm reaching there.

Tropics revenue run rate hit 65 billion

in the last

>> 65. No,

>> I know. But how but how are they going

to be profitable in the long run is what

I'm talking about. I'm saying that if if

the underlying story there starts to

collapse course and then we're getting

rate of change uh you know deterioration

when it comes to the capex. Uh on top of

that, supply chain disruptions because

yeah, they can say they're going to

build more data centers, but you got to

wait five years for transformers and

memory trips are sold out till 2027. And

by the way, we just announced that we

like North Korea more than we like South

Korea. We can get back to that in a sec.

So like you start like like stacking

these things onto each other like I

think you could have a very serious

market reaction and even have what you

say which is the net is positive. the

net is that more and more people are

going to use AI, that compute is going

to be cheaper and it's going to cause

incredible gains and productivity and

growth in the broader economy. I think

you can have a market that freaks out

and still have that happen. But I I

agree with where you ended. I just the

path from here to there it seems to me

is a little more

>> cousin Jacob.

>> Cousin Jacob, you're 100% going to be

right. There's no future where you are

wrong. Okay. Um, and just just just so

everybody understands, I was a lite on

AI like two years ago. Skeptical last

year, but I changed my view when the

data changes and hyperscalers are

[ __ ] minting money off of data

centers. They're minting it. It's been

confirmed that cloud services are going

through the roof. And everybody says,

"Yes, Marco, but so much of that is open

AI and anthropic." False. It's all

actually less than 10%.

But half of it in the future is

anthropic in OPI. True. Yes. More than

half of future data center is like based

on their needs. But if you're right,

then Chinese open models came on or so

whatever French open model, who cares?

Somebody else will have to build those.

But here's the here's the truth. Here's

the truth. You're going to be right no

matter what. And that's because if you

read this book, engines that move

markets by Alistister Na, this is a very

Scottish, very bearish economist, you

know, no one's more bearish and camogeny

than Scots. This book, which by the way,

my good friend Murray Scott from

Auckland, New Zealand, helped with all

the data,

uh, this book tells you 300 400 years

worth of history. And it tells you that

every capex cycle that was uh based on

the new technology ended in tears. And

the reason for that is that we have

never as humans said we have built

enough canals. We have built enough

railroads. Let's stop. And we've never

done that in our entire history. We

always overbuilt. And part of the reason

is that it's not centrally planned.

So hyperscalers are competing Jacob for

one with one another. If they could

collude, if they could collude, they

could maybe appropriately size the data

center buildout, but they won't do that.

So, they will eventually overbuild. The

the reason that I think it's very

dangerous though to have a bearish view

on this that's not data informed is

that, as you said, we got to find out

where that second derivative turns. And

what happened over the last couple of

months is the data center growth in

revenue is so strong I think that it's

been pushed off into late 27 if not 28

you know

>> and so that's all I'm saying all I'm

saying is like

>> you know like for the time being the

numbers are just so juicy and so good

but eventually of course and the

difference for an investor you know for

you if you're sitting uh just if you're

like just sitting around and thinking

about what you do with stocks it's

perfectly okay to just pull out and and

and do what Jacob is telling you. Why

not? Like there's other ways to invest

your money. Save it. If you miss the

next 40% upside in the stock market over

the next 12 months, but then the stock

market falls by 60%.

Jacob just saved you 20% decline, right?

So like, yeah, I agree with you, but not

even I'm not even saying that. I mean I

I I feel like you and I are ending up in

the same place, but to to play devil's

advocate a little bit to your view. I

mean, one of the You're right, like data

centers, minting money. Okay, great.

We've also though seen that specifically

the Mag 7 are shifting from, you know,

pure cash funded buildouts to debt and

offbalance sheet finding because they

are thinking about demand.

>> This is why the bond yield is going up.

Yes. True.

>> Exactly. And and then we start to get

into like timing and when does the

revenue happen and when does the

profitability happen. Like it's nice

that Anthropic had a quarter that was

profitable. They're not really

profitable. These companies don't

exactly know

>> is happening right now. Jacob, look,

cloud revenue jumped 43% in Q2 of this

year. 43 [ __ ] percent off of a base

of 350 billion. Do you know how

difficult it is to grow revenue by 40%

when you're already making 350 billion?

>> Yeah, but what's the profit growth,

cousin? It's it's high as well. It's

astronomical. In fact, and by the way,

by the way, that's unsustainable.

And that that that is why. And you know

what? Look,

my view is a consensus in a way. That's

why the market well actually it wasn't

consensus. I mean, two weeks ago, we

were flat for like two months, three

months. Over the last two weeks, you

know, the market's like gone up quite a

bit. Uh three month, sorry, two weeks,

three weeks, whatever. Um but yes uh

analysts they have very very positive

earnings like it's it's there is

disappointment coming. No doubt. No

doubt. I just think you and I maybe like

if you had a million dollars and if I

had a million dollars I feel like you

would definitely maybe only put 100,000

in stocks and I would still keep 600,000

in stocks. I think that's where we

differ. That's it. And and and I agree.

>> No, I I would get a little more

surgical. I would say that the picks and

shovels for what you're talking about

like somebody who makes transformers,

get ready. It's going to be fun. Like

commodity markets, really interested in

commodity markets, like the actual

physical construction part of the

economy that is tied to all these

things. Great. Also, like would be

really interested in small to

medium-sized entrepreneurs who are going

to use AI to completely disrupt things

like accounting and legal services and

all these other things. Like that's the

containerization analogy that you and I

have gone back and forth on a couple

different times. So, I'm not saying

>> yeah,

>> like get out completely. I'm just saying

the Mag 7 has been leading the way and

their capex has been leading the way

>> and and the vibe is these huge revenues

numbers that you're talking about from

OpenAI and Anthropic and I'm just kind

of like I think there are better places

in in the market to think about these

things. That's that's what I'm saying.

>> Well, can I can I go back to one of the

things that you said about geopolitics?

So this is one of the things that you

were making geopolitical. But also the

other thing I think is I think that

there's a sense in the White House when

it comes to the bond market there's a

real concern that there could be a

selloff of the US dollar and

>> yes

>> and what I mean by that is bonds, US

bonds. So um I think the Trump

administration where I give the Trump

administration a lot of credit and so

you know you and I had an episode where

we talked about the national security

strategy. There's this real finally

recognition

that the world is multipolar.

I think that's from a foreign policy

perspective at least limited military

interventions. I mean even the fiasco in

Iran, one of the reasons it is a fiasco

is because they wanted it to be super

limited but then their goals were too

big and now there's this huge gap in

that. Um, but for the most part, it's an

administration, I've said this before,

very similar to the Obama administration

that's okay retrenching in some way,

shape, or form.

>> Uh, blah blah blah blah blah. But I

think parts of the administration, um,

particularly those that understand how

finance works also understand that if

the world is multipolar and if America

is going to now be more limited, there

are potentially financial consequences

to that. I mean, one of the things about

holding a US treasury if you're a

foreign country,

it's like a call option. It's like get

out of jail free card. If you put all of

your surplus that you get from trade,

from trading commodities or manufactured

goods into US dollars and bronze, then

when something goes wrong, you can call

up Uncle Sam and say, "Hey man, these

pirates outside are messing up with my

trade routes. Come and help me."

And so I think that that is another

portion of that. I don't I don't see a

massive um sell-off by foreigners in US

bonds. China's been very very careful to

do this very slowly over time because

they own so much of it. They don't want

to hurt themselves. But I do think that

there's this instinct in the

administration to kind of like prevent

that from being the consequence of a

global multipolar regime. And my answer

to the Trump administration, like if

they ask me, well, how would you do it?

I would say, well, don't do stupid [ __ ]

around the world, like that's easy. Even

though the world is multipolar,

let me give you a counter. Even though

the world is multipolar and America is

no longer the hedgeimon and you cannot

call Uncle Sam and have them come in and

save you, even though that's all the

case, there's still reasons to be in the

US dollar. Number one, it's the most

liquid market, which is kind of a lame

excuse, but let's just say there's a lot

of it. Number two, everybody accepts the

dollar, even though maybe America's not

going to come and rescue you if you need

to buy some fighter jets from Sweden.

Like the Swedes will take the dollar in

exchange for the Grippin. Number three,

it is a great place to put your money

because it's a country that innovates,

that has laws and rules and so on. So if

you want to retain the dollar as a

reserve currency while becoming a little

bit more isolationist, a little bit more

selective, a little bit more like cool

with multipolarity, just don't do stupid

[ __ ] Like be a reliable partner, you

know? Don't tell South Korea like, "Hey,

we're going to stop having exercises

because, you know, Kim Jong-un is cooler

to party with. Like you guys are lame.

Kim Jong-un throws great parties. Dennis

Ramen's there. So [ __ ] you. We're going

to go party with him." Like so that's

you know by the way last year in 201 you

you do realize that like your entire

argument is okay like uh you could have

this just don't do stupid [ __ ] and they

can't stop doing stupid [ __ ] like this

the [ __ ] is getting stupider by the day

I was on stage on Thursday and somebody

asked me about this North Korea thing

and I I even said in my presentation I

was like I know I'm supposed to come up

here and explain geopolitics to you and

I put up a picture of the tweet that he

made about North and South Korea and I

said I don't know how to explain this

and then the moderator afterwards asked

me well don't you think that's just

Trump being Trump and that it's not

really like

uh follow what he does, not what he

says. And I even said to this moderator,

I was like, you know, I have a cousin

named Marco who uh you know, he often

goes at me for my Trump derangement

syndrome, and we've uh you know,

diagnosed him with Trump derangement

syndrome, derangement syndrome, and dear

moderator, you have this affliction.

Like, this is just an absolutely crazy

thing. Like, like don't try to find

logic in this. Don't try to find the

secret.

>> But you know why it's crazy

nuts? But let me just let my TDSDS

really wash over us.

>> Yes.

>> Like the reason it's the reason it's

crazy, Cousin Jacob, is that in 2025,

you managed to convince South Korea to

pay you $200 billion in FDI over the

next 5 years. And by the way, [ __ ]

slow clap to Scott Bethson and Donald

[ __ ] Trump for getting $200 billion

out of South Korea. Well done. But then

why would you say this next thing?

>> Well, and and just last month we were

talking about uh spending hundreds of

billions of dollars so that they could

help us rebuild the navy destroyers and

other things like that. And then we turn

around and do this thing. I mean, I I

just want to dwell on this this tweet

for a second. You know, President Trump

said, "I recently asked the president of

South Korea if they would like to join

us in the denuclearization of the

Islamic Republic of Iran, and they said,

"No thanks." If I was the whatever the

equivalent of the secretary of state is

for South Korea, I would write back a

note that says if you would like to join

us in the denuclearization of North

Korea, we will be happy to join you in

the denuclearization of Iran, but we

have bigger fish to fry. That is, they

have a nuclear weapon. Like what what

are you doing?

>> Yeah, South Korea doesn't want to. I

mean, they want to make peace. But look,

look, you're look look here here's my

point. My point is this.

The British pound remained the world's

reserve currency.

>> Yep.

>> Well into the 20th century,

United States overtook the United

Kingdom as the largest economy in the

world when like 1890s.

I might be wrong on this. I'm sorry

everybody. But it was it was well before

first and second war I think. And then

the United Kingdom,

>> United Kingdom had to help its cousin

France in the [ __ ] fields of Flanders

and all this [ __ ] That was really

painful. Then came the Great Depression.

That was really painful. Oh, by the way,

there were strikes. The Labor uh party

came in. Winston Churchill

put him on the gold standard again. And

I mean, it was just a [ __ ] disaster.

And then World War II comes and Britain

almost loses and gets invaded by the

Nazis. Like all of throughout this

entire period of time, the British pound

was the reserve currency of the world.

It takes a lot for the rest of the world

to abandon. In other words, you don't

have to be the most powerful country in

the world. You don't have to uh have the

biggest uh military. You don't have to

even be the hedgeimon. You just have to

be [ __ ] reliable, have good laws, and

let foreigners own your assets and

you'll be good. People will be like, "Ah

[ __ ] we like the cut of your jib. You

know what? I'd like to buy a house in

Monteceto and come with my wife and hide

from the British royal court. I'm going

to do that in California." Like, that's

the kind of a place you want to be, even

though I'm a clown. Like, that's what

you want to do. That's the kind of

country you want to be where anyone can

buy assets. It's liquid. There's a rule

of law. Somebody impinges on you. And

then and then people will be like,

"Yeah, okay. [ __ ] America can no longer

be the global policeman. That sucks. Too

bad. I guess I'll have to fight on my

own with these pirates." But they're

still reliable. And that's why I think

what's interesting to me is that, you

know, the solution to this quote unquote

problem is very simple. Just don't do

stupid [ __ ] And as you say,

that's difficult for this White House.

>> They can't stop. He literally can't stop

himself. By the way, the Germans never

invaded Britain, by the way, cuz they

lost the Battle of Britain. So, they

they they didn't quite make it that way.

>> But they almost, as I said, they almost

did. They almost got invaded. I said

they almost got invaded by now.

>> Did you say almost? I thought you said

invaded. My bad.

>> No, they got almost. And by the way,

they lost the Battle of Britain because

they made a mistake

thinking that they were losing. They

were actually winning. And if had they

kept going, uh the Royal Air Force was

out of out of planes. They were like a

month away from losing the Battle of

Britain. and then they would have sunk

all their navy and they would have

invaded and been successful. But Hitler

was also had a pension for doing stupid

[ __ ] and then decided to not follow

through with the United Kingdom and of

course invade Russia.

>> Yeah. Uh well, I mean he needed the oil,

but I Yes, you're you're absolutely

right. Um I I don't know. I I hear your

point, but it all falls down on the on

the administration just not stopping

with the stupid things. And I think I I

said this did I say this on the podcast?

I maybe I didn't say this on the

podcast. If if this administration was

governing like Trump 1.0,

okay, it wouldn't be a golden age, but

they actually would be killing [snorts]

it.

>> They'd be like everything would be going

great

>> and and they're not.

>> You have TDSDS.

>> Well, I have TDSDS for for Trump one.

Like Trump one was the one who was

trying to wind things down. Trump one

was Yeah. He was uh speaking loudly and

brandishing a non-existent stick. He

didn't want it. it was all threats to

get to negotiations. Remember the first

time around with with Kim Jong-un? Um

that's not what's happening now. Like

you can't say that he's an isolationist

or that he wants to withdraw or

retrench. He got us involved in a major

conflict in the Middle East that is

sapping US strength uh by the day. And

he's continuing even after it's a lost

cause. He is upsetting allies around the

world and making countries look at the

United States and think that it's not so

dependable with how volatile that he's

been. So, I just don't think the

argument holds up for him. And like I

said, that the true irony is that all

these other things like he could have he

could be taking credit for this AI boom

and if he had just kept things the way

they were before,

>> everything's would have been everything

would have been fine. And it's just not

it's not happening.

>> Um, and I don't and I don't know what

that means. I don't know if things I

mean, is the world naive enough to

revert back to normaly the way that it

did after Biden took over after Trump

1.0 you know, or has something

fundamentally changed or you know, it's

sort of like you're talking about the

dollar's reserve status is in some sense

part of inertia. It would just be harder

to find alternatives. So, just stick

with the system and let it ride. What if

we get a president Rubio

uh in the next cycle who starts to

govern like an old school, you know, he

he is an old school Republican? Like he

has closeted some of his his views to

try and align with Trump and be close to

the seat of power, but he's like the old

as close as you can get to like an old

school 1990s uh Republican. What if he

takes over and what if he tries to put

things back together? Does the world

respond to that or does the world say,

"Nah, you're crazy. Like we've already

seen your true colors." I I don't know.

I've been wrestling with

>> I think it's the latter. I think it's

the latter. And I think that it's the

latter for two reasons. First of all,

objectively speaking, Trump is right.

The US should retrench. And even this

Iran situation, you know, you called it

he got us into a major war. Let's pump

the brakes on that. Like you can count

the number of

>> Americans. I don't think you can pump

the brakes on that, cousin. I mean,

we're withdrawing carriers from the

Pacific to take them to the Middle East

because the carrier that's been there is

on the verge of because things are so

bad. We're exhausting interceptors

missiles. It's going to take us years to

build things back up. Like, this is

before we get to the energy costs and

the food cost. It's a real thing.

>> How many American servicemen have died

in this conflict? Should I use my

fingers to count them?

>> Uh, I mean,

>> some have.

>> Well, yeah, but like

>> I'm thinking hard lecturing. How how

many men does it take? Like, well, is is

more than one enough? Yeah, I I hear

you. Like we're not it's not Vietnam.

We're not drafting people.

>> No, but that's what's important. But

it's important. Like literally like the

reason I like that's a very liberal TDS

view because liberals and people with

TDS must they must have evidence that

Trump starts wars. They must.

And yet I'm saying like no, I'm sorry,

but this is like, you know, like this

could be ended in like a month and then

your view is going to look really

stupid.

Like literally, and we know this, this

can be ended like this, just they're

going to give Iran what they want. I

mean, that's the point. The bond yield

is where it is. The SPR is where there

is. The reason that people are jumping

off of Abraham Lincoln is because we

haven't committed enough troops to the

region so that they can be rotated out.

I mean, the new aircraft carrier came in

>> and also because apparently there's

problems with resupply because the

Iranians have been hitting our bases in

the region. So, they don't have any

supply and they're stuck on the boat for

eight months. But

>> but that's all. But yeah, no, fine.

Fine. No one's disputing the

incompetence of the operation, but the

incompetence is part of the fact that

the US is not willing to make this a

major combat.

That's the point. It's just isn't it's

not a major combat and it's off and on

and now we're off again and we were on

like two months ago. like this is maybe

6x

NATO's attack on Serbia like you know

and nobody nobody would say that that

was a major combat operation like that

like yeah it lasted four months but it

was over and then we moved on look what

I'm saying is this why is this important

it's actually not an important point the

issue is they are aware that the world

is multipolar but they're just not

willing to kind of like you play by

those rules necessarily.

>> Well, let me push back again here

because I actually think it is important

and and this gets to why I dislike Scott

Bessant so much. I agree with you that

Scott Bessant knows the world is

multipolar. The reason he was going

after the trying to prop up the yen is

because he knows that Japan holds I

think they're the top holder of US

treasuries.

>> Yes, they're the top of US treasuries

right now. He doesn't It's China is

number three. It's Japan, the UK, China.

Who do you think is number four?

If it's Belgium, that means China is

number one.

>> Belgium is number four.

>> Yeah, that's China. So, China's number

>> Belgium is China.

>> Okay. Well, you'll have to explain.

Okay.

>> Yeah, that's that's the way that they

get away from being number one, but

they're actually number one.

>> Yeah.

>> Well, the math. Okay. Well, it's clo

it's close then. Anyway, but the point

is I agree with you. Scott Besson thinks

the world is multipolar. I think people

in the administration believe the world

is multipolar. President Trump does not

believe the world is multipolar.

President Trump believes No, I don't

think he does. I think he believes the

United States is omnipotent and anybody

is going to cow to him and his awesome

power and to the awesome power of the

United States and he can just tell the

military to do things and things are

going to get done. And I think that's

part of the disconnect here. He's got an

administration that is trying to respond

to this world and they cannot contain

him and he's continuing on with policies

that are manifestly unipol right down to

the tariffs. like the tariffs are not

something that you do in a world at

least the way that he has done them is

not a policy that you pursue unless you

think that everyone is just going to

cave to what you're talking about. I

don't think he sees a multipolar world

at all.

>> Well, I mean look um there's ways to do

Iran then if you truly thought that you

were omnipotent. I mean one would have

been to send 200,000 troops.

>> Yeah.

>> You know, so so I I

>> I don't know. He's he's he he believes

so much in American power that he

doesn't think he has to do that. He

thinks he just has to bomb them in the

power plants and they're going to come

to the table. And he's been wrong now

for how many months? And how many more

months is he going to be wrong?

>> Well, I think I think look, we're going

to have an answer to this question. And

if in 3 months, like there's a there's

basically the end. This is like on the

back. I mean, it's already on the back

burner. I I don't know what to say. Like

the United States of America has not

increased its troop presence in the

Middle East in order to win this

conflict. So clearly he doesn't want to

do that or he understands the

constraints. Um but to me to me this is

this is a debate that's like the front

of the page oped debate. That's why I'm

not interested in

>> Yeah.

>> You know like the what you said though

was does this continue if Marco Rubio

wins? And so to me like that that's

where like my framework doesn't allow me

to give him credence or catalyst or uh

agency, you know, like so and what I

mean by that is like I don't think

whether Trump thinks the world is

multipolar or not is irrelevant to me.

The world just is. And so there's just

limits to American power. So I don't

understand how Marco Rubio would change

this. And to your point, the other side

of this, there are too many other

countries that number one don't trust

the US now.

But also, I think that like

things are in motion, cousin Jacob.

Things are in motion. The Germans are

spending on infrastructure.

>> The Chinese are building UAE pipelines.

Money is being made off of the idea,

whether I'm right or you're right, who

gives a [ __ ] Money is being made off of

the concept that Americans are not here,

that Rome is falling and all roads

cannot lead to Rome. We need to rebuild

and make new roads. And this is why we

can't go back to the Joe Biden years. By

the way, Joe Biden years were like

whatever. Like, let's leave that aside.

We cannot go back to Clinton or Obama or

Bush years because there's too many

people around the world, too many

careers, too many businesses, too many

corporates who are already committed to

this rebuilding of Rome's roads because

now we have to have a road to Beijing,

road to Moscow, road to Brussels, road

to wherever. And that means that come

next president, it could be AOC, it

could be also, it could be Budajage, it

could be one of the Democrats, liberal

internationalists like someone like

Budajage who is, you know, Pete. Pete is

an old school Democrat. He's not a new

school Democrat. He worked for McKenzie.

He was in in the US military. He

believes in liberal internationalism or

Marco Rubio. Pete Budajage, Marco Rubio,

let's say one of them becomes the

president and they go to Europe and say,

"Guys, guys, guys, forget all that.

We're back, baby. The Germans are going

to be like, "Yeah, we're not going to

change, dude. We're already building

this infrastructure because we thought

you were gone. We're already rearming

because we thought you were gone. And

now too many careers, too many

businesses, too many revenues and

earning statements are going to be

dependent on this new world." You know

what I mean? And that's why I just I

don't see how it changes.

>> Yeah, I I agree with you, too. At least

on that.

>> All right. Well, where where do we wrap

up from here? Do is there anything else

you want to talk about before we say bye

to the listeners?

>> Uh,

no.

>> I know we were flirting with talking

about next episode we're going to talk

about Ukraine and Russia and the Black

Sea with a little bit more depth. Oh,

the the last thing I wanted to touch

with you before we go, I I I alluded to

it twice and I didn't come back to it is

um the remarkable

um political about face on data centers

from both parties. Um, I expect it from

the Democrats, especially from the the

left wing of the Democratic party and

but now it's starting to get into the

moderate wing of the Democratic party. I

mean, you had Josh Shapiro, no relation,

um, you know, executive order in

Pennsylvania, I think it was banning new

data center construction. I forget

exactly what it was, but against data

centers. But then you had Greg Abbott

the next day talk about all the data

centers that he had canled. And you had

multiple Republican politicians come out

and burnish their credentials on data

centers. Um, and I actually, if you look

at the latest Gallup survey, 71% of

Americans say that they don't want a

data center in their backyard. I joked

at an event earlier this week. I think

if you do that survey five years from

now, 71% of Americans will be pissed off

that they don't have a data center in

their backyard. But I don't I'm not a

political consultant, but here's some

free political consultant advice to both

Republicans and Democrats. Data centers

and AI are driving the economy and the

local geographies that will do best in

the United States are those that are

most equipped to participate in this

economy. This is a great and wonderful

time to be a champion of data centers

and to force these companies to also

improve communities as they build the

data centers. This idea that you're just

going to ban them because you want to

show that you're against them and you're

you're burnishing your populist

credentials. A, it's going to be really

bad for an economy that is running on AI

and data centers. And B, I think it's

going to look really bad in about two,

three years, but nobody's listening to

me on this. There's definitely this

ground there is such a ground swell of

anti-data center sentiment that people

are asking, well, is this all Chinese

propaganda that is trying to turn

Americans against the data centers

because they self-sabotage themselves? I

got I got asked that question multiple

times this week, and I haven't done the

work to assess it. I'm sure there is

some of that uh there as well. But I

wanted to ask you about that because

it's been a real speaking of vibes, it's

been a real vibe shift against data

centers. And I'm not one who's going to

be on the side of hyperscalers. Like I

think I've even said on the podcast,

Meta is building a big data center in my

hometown in Georgia. It was front page

of the New York Times a couple months

ago, it's jacking up the water prices

there. A couple guys don't have um

couple families that are like down the

street from my old house like don't have

water now because of all the damages

that happened as a result of the

installation of these things.

But I'm I I see the data like no if you

if you have a moratorium on data centers

the economy is going to suck. So is that

really what politicians want to stand

for? Like why do we have politicians who

want to stand on economic suicide at

every single level of government? I

don't I don't get it.

>> What what's interesting to me is that

but that would prove you right of view.

Don't you want I mean this is the

easiest way you'll be right.

>> I guess so. I don't know. I guess this

is this is where Jacob just reveals he

is not a nihilist because if I was

bearish about AI, I would want this to

happen. But Jacob actually cares about

humans living in this country. Um so

first of all, I think you're the only

human being other than me to have the

same view which is that like yeah,

everyone's against data centers now, but

like five years from now maybe like AI

is extremely hated.

But it's hated because I think Sam

Alultman made a really critical mistake

and and his ilk, the tech bros, they

tried to basically raise funding for

their models by telling everyone they

were creating God.

Like AGI is coming, AGI is coming. And

oh, by the way, all this like, oh,

they're breaking containment and causing

cyber. Like that's like they're so

excited to tell us. by the way. They're

like, "We apologize. Another model broke

containment and just like ravaged some

poor corporate, you [laughter] know, and

it's like, guys, we get what you're

doing. You're trying to tell us how

[ __ ] cool you are and you're creating

God and Frankenstein." Um, and they did

that because one of the reasons you want

to invest in one of these, it's like,

"Holy [ __ ] if there's like 0.5%

probability that this company is going

to create God, I better throw like 10

billion at it." you know, if I'm a like

I gotta throw something at it just so I

have like a chance, you know, if if this

god decides to uh launch humans into

space. So,

I think that that advertising and that

like real pressure on like just regular

Americans that they were all going to

lose their jobs

like that soured the view towards data

centers and AI in general. And I think

that because I'm not a techno optimist,

I don't have this view that AI is going

to like cause people jobs because I

don't have that. I think it's going to

be modestly productive. It's going to be

like pretty decent and we're all going

to have to use it. I think that Yeah,

you're right. I think actually the view

is going to change because, you know,

like who uses AI? I mean like I see like

my wife uses AI, you know, she uses it

to like remodel stuff maybe too much,

you know, and and that's a great example

of how I I actually do think that

there's a corporate case, but there's a

household case also. I think consumers

are going to start paying 2030 bucks the

way they do for Netflix or Disney. I I

think like hundreds of millions, if not

billions of people on planet Earth will

be paying 10 to 30 bucks a month for AI

because it's it's it's useful. it's

cool, whatever. And so at that point,

like 12 months from now, 18 months from

now, 24 months from now, 36 months from

now, when you haven't lost your job

because of AI, but it's become kind of

indispensable. Yeah, I do think you're

right. I think the views are going to

change. So it is kind of uh interesting

but but my question is if 30% of

Americans are okay with data centers

next to their home like America is a

very big place and there's places where

like there's counties in Texas as you

know where like a thousand people live.

>> Yeah.

>> If I'm anthropic I'm going to that

county and I'm being like do you all

want 100k?

Cool. Can I build six data centers?

Cool. And that's it. like why are we

worried about this as and by the way

it's funny because the way I say it it

seems obvious but I would say that every

single client I've spoken to this month

has brought this issue up. This is now

the hottest issue in finance especially

long-term investors like pension funds

and so on.

>> Yeah.

>> Like they are really really concerned

about this. This is this is something

that every client brings up. Uh, but I

just don't see why it's a problem

because I don't know, maybe I'm missing

something, but why don't you just put

all the data centers in North Dakota

>> or I mean this is this is why we're

cousins. I I I am so I very rarely have

high conviction views, but I just don't

think this is going to be an issue in a

couple years time. I the one of the

examples I've been using is you remember

right around the time with the pandemic

everybody was freaking out not everybody

but there were a large number of people

who were freaking out that 5G caused

cancer and there was actual sabotage of

5G telecom towers because of all the

evil or that our headphones are going to

give us brain cancer because of

Bluetooth like we just latch on to these

stupid ideas like most of the people who

say they don't want a data center next

door they don't even know what a data

center is they don't know how it

functions they don't know the parts of

it like it's just kind of there so I am

I think that in two three years time

we'll be on to the next thing. I think

it's a it's a populist cudgel for these

politicians going into the election and

I see how they're using it and I think

what they're playing on is kind of what

I alluded to earlier. They see all of

the capex going into data centers. We

have, you know, trust in US political

institutions has been steadily going

down since Lyndon B Johnson and Donald

Trump has proudly carried this trend

going forward. So increased mistrust of