Today's number 63. That's how many hours

Americans spend in traffic each year. Ed

Trust story. I was driving down in

Florida with my 13-year-old son. And of

all things, a dildo hit the windshield

and trying to protect his innocence. I

said, "Oh my god, did you see that bug?"

And he said, "Yeah, I can't believe bugs

have dicks that big."

[Music]

>> What' you do last night, Ed? What' you

do? I went to your book launch, Scott.

>> Say more. You're not getting up that

easy.

>> I had an incredible time. Uh I met many

of your friends who are wonderful

people. Uh you had your 92nd Street Y

uh performance with Ben Stiller. I don't

know what you'd call it, but I do know

that it was the fastest sellout in the

history of the 92nd Street W.

>> I don't like these commercial metrics,

Ed. That was so nice, wasn't it? I I was

really happy with that.

>> I had a great time. It was great to see

you.

>> You forgot that I was on the Daily Show

right before that.

>> I forgot. Yes, that's a very good point.

You were on the Daily Show.

>> Second time I started crying this week,

Jordan Ker actually had to reach across

and grab my hands.

>> That's a good look.

>> I'm a little annoyed that they're not

putting you on with John Stewart,

though. They're giving you sort of like

the the John Stewart's Edson's to

interview you. What's going on with

that?

>> John Stewart intimidates me. I think I'd

be too nervous. But yeah, I love I love

Jordan. And he just his type of humor

really and I get the sense I kind of

relate to him that maybe he was tall and

didn't have a lot of social capital in

high school. So I sort of relate to him

like a little too tall. Um and he's got

a 5-year-old kid. Yeah. I like God I

love I think they're they've done such

an amazing job with their backup cast.

God, how do I find better people? Memo

to self. How do I get better people?

Yeah. I'm about to I'm about to head on

the pivot live tour. Seven cities in

seven days.

>> When is the markets live tour happening?

>> We'll do one next year. I think I think

we'll do one in Q1 of next year. So, uh,

if you're watching this YouTube, tell us

which cities we should go to. I just

thought it was so funny. We're doing

Toronto, DC, New York, Boston,

Chicago, San Francisco, LA, and I

thought the funniest comment was, "Why

do you hate Arizona?"

Thought that was so funny. We'll do it.

Phoenix 2026.

>> Yeah. So, if uh for those of you

watching this podcast, we're going to be

doing a Prop Markets live tour and uh

whoever has the most comments from any

city. We don't care if it's Madison or I

don't know, whatever. Uh Little Rock

will come to that city if we get a lot

of comments.

>> Who going to be the groupies?

>> Well, this is the problem. This is what

I'm scared of. Uh, don't tell her I said

this, but whenever we do a live tour,

more people come up to see me than Cara,

and it really pisses her off. It really

pisses her off. And I have this really

awful dread that the same thing is going

to happen to me with you.

That if a line is at any point longer to

get a selfie with you, I'm going to

freak the [ __ ] out. There was a very

interesting moment for me when we had

the the South by Southwest

event where someone had your book and

they brought it over and they asked me

if I could get they could get my

signature and I I was like, "What am I

supposed to do with this?" Cuz it was

your algebra of wealth. I was like, "No,

I can't do this. You got to get you got

to give this to Scott."

>> I can just sense it. People are

constantly coming out to me and like on

the street they're like, "Prop G,

where's Ed? Where's Ed?" And all these

all these women and gay men are like,

"So, is that single? Is that is that

single?" Because, you know, I don't just

a crazy idea. Do you want to set up a

total stranger who just accost you on

the street with your podcast co-host?

>> That's a great idea.

Well, look, I'm I'm very excited for

that. Um I I think I think I'll need I

think I need a few more years before I'm

at that level. Scott, I I'll be honest

with you. I don't think I'm anywhere

close,

>> brother. I I hate to say anything nice

about you, but you are literally like

Muhammad Ali meets I don't know, LeBron

meets Messi at your age compared to

where I was when I was 26.

I was just out of grad school. I had

started a market research firm. I

pivoting to a strategy firm. I was

working out of my apartment. I had no

idea what I was going to do. when I was

my highlight was I used to take my dog

for long walks and my girlfriend at the

time was supporting us and uh she wasn't

that happy about that. She was she was

pretty she was pretty cool about it but

I don't think she was really happy about

it. Uh you know when she came home she

wouldn't be like do me you indigent

loser.

That wasn't an enormous turn on for her.

I'm starting a market research I mean a

strategy. I mean an e-commerce company.

The internet. The internet. The

internet.

I was I was I don't want to say I was

flailing, but I was definitely doing

what you're supposed to be doing in your

20s. I was workshopping my career trying

to figure out what to do. So, you're

>> I was thinking though, 26 is the age

that you started uh it was profit,

right?

>> Profit. Yeah. Yeah.

>> Yeah. Which turned out to be a massive

success. I feel like 26 was kind of a

big that was a big year for you. No, I I

haven't started a company. I mean, I

sort of semi started a podcast, but

>> well, I don't know. You're you kind of

own this little business and you're

you're extracting the majority of the

margin by telling me you're having

coffees with Andrew Ross Sorcin, but

don't be threatened as we're going into

bonus season. I love how you dropped

that little gem. Boom.

But yeah, 26 was a huge year for me on a

lot of levels because I moved in with my

girlfriend. I got a dog, which is the

first time I anything was dependent upon

me for like like I I remember thinking

at one point, you know, my friends were

like, I got one out and we got

ridiculous [ __ ] truck. We're like,

let's go to Vegas. And I'm like, yeah.

And then I'm like, oh wait, if I do

this, my dog will die. If I head to

Vegas right now for two days, there's a

living being at home that is dependent

upon me. And also, my mom, that was the

year my mom got very sick. That kind of

changed my life. Um, yeah, that was a

big

>> That was a Wow. Yeah, that was a lot of

big things.

>> Yeah, it was the early '9s. We were

coming out of recession. Get this, when

I graduated from business school from

the House School of Business, 40% of uh

the graduates had a job on graduation

day. And now when the kids graduate from

Stern, they like it's whether they have

three offers or five offers. I wonder if

that's going to change cuz all the

things we've been talking about in AI.

>> Yeah, exactly. I think that's just about

just beginning to change now in the last

year or so, I would say.

>> There you go. Maybe that's a good segue

into what why people actually listen to

this podcast. Should we get

>> That's a good idea. Yeah, we let's talk

about what we're supposed to talk about.

It was a week of red flags for OpenAI.

First off, the deposition of OpenAI's

co-founder, Ilas Sitska, was released,

which shed new light on his time at the

company and the drama around Sam Alman's

firing. In the deposition, Ilia

referenced a memo stating that Alman was

fired due to a quote loss of confidence

and also alleging a quote consistent

pattern of lying. So that was not good

for OpenAI. Meanwhile, Sam Alman

appeared on Brad Gersonner's podcast.

We've of course had Brad on on our

podcast, too. Uh and Brad Gersonner

pressed him about OpenAI's financial

commitments, their spending plans, and

he was quite visibly frustrated. Let's

look at the clip. How, you know, how can

a company with 13 billion in revenues

make 1.4 trillion of spend commitments?

And you've heard the criticism, Sam.

>> First of all, we're doing well more

revenue than that. Second of all, Brad,

if you want to sell your shares, I'll

find you a buyer.

>> I just enough like, you know, people are

I think there's a lot of people who

would love to buy opening eye shares. I

don't I don't think you

>> including myself. including myself

>> who talk with a lot of like breathless

concern about our comput stuff or

whatever that would be thrilled to buy

shares. So I think we could sell you

know your shares or anybody else's to

some of the people who are making the

most noise on Twitter whatever about

this very quickly.

>> So that wasn't great. And then after

that the company's CFO S Sarah Frier she

went viral after she told the Wall

Street Journal that OpenAI is seeking

support from the federal government to

help finance future data centers. She

later kind of walked those comments

back, but that is what she said in this

interview. So, Scott, we've discussed

OpenAI's precarious financial situation,

and we've discussed that at length, the

fact that they're generating, as Brad

said, around $13 billion in ARR,

according to the most recent reports.

Sam Oman says it's more than that, but

they're also spending more than double

of that currently, and the plan is to

spend more than a trillion dollars over

the next several years. So the question

we've been asking repeatedly on this

podcast, how on earth are they going to

pay for all of this? Well, Brad

Gersonner asked that question directly

to Sam Artman. You would think that he

would have at least a canned or

rehearsed answer.

His answer was, I think, horrendous. I

mean, I couldn't think of a more

defensive,

frantic,

uh, kind of sociopathic response is what

I would say. If you're trying to shake

investors confidence in open AI, I would

say this is how you do it. Flustered,

concerned, very triggered, etc. First,

let's just start with your reactions to

those three things. The deposition, what

we learned about the firing, the

appearance on Brad Gersonner's podcast,

and then of course the CFO saying that

they are going to need a a federal backs

stop.

>> All of this is a signal headed towards

an IPO. The company's definitely going

to file in my opinion sometime in 26

because the valuation based on those

revenue multiple is getting to the point

where no institutional investor is

probably going to want to buy more. So

they stop at the last stop of where it

could potentially become a meme stock

and that is disconnect from any

underlying valuation metrics and that is

the retail market. So I do think they're

going to go public. when you are on an

earnings call and someone asks you a

fair question,

you no CEO that I've heard uh who who

holds on to his job turns around and

says, "Well, if you don't like it, you

can sell your shares." That's a rare

misstep for Sam. And I think it probably

reflects some of the stress he's under

right now. Probably having to get

subpoenas and depositions where

>> his co-founder is saying that he's can't

be trusted, that he lies, and created a

chaotic environment. That can't be fun

for the guy when he's trying to, you

know, justify a half a trillion dollar

valuation, getting incoming from the

press, is somehow trying to wallpaper

over the fact they said they weren't

going to do porn. But wait, someone told

me I can increase usage by 20% if I

offer porn. I mean, the guy has got to

be under a lot of pressure right now.

And this was a moment where he lost his

[ __ ] from an investor standpoint. You

don't tell investors, "We'll sell your

shares because guess what? They will if

you can't answer." That is a fair

question and it should have been

something along the lines of, "Well,

actually, if you look at other companies

that have become trillion dollar

companies, we're further ahead in terms

of zero to a million users. were faster

0 to 10 billion than any company in

history. Our ability to raise capital he

could have come up with a bunch of

responses that said actually we are

trading at a multiple of revenues that

is extraordinary. I want to acknowledge

that but it's not unprecedented. What is

unprecedented is some of the metrics

we're delivering against. He had a

chance to respond in a thoughtful

metric-driven way. Even if it was hard

to justify the valuation, he could have

said uh no, this is a self-fulfilling

prophecy. We're the fastest 0 to10

billion dollar company in history. This

technology is going to make everything

else look like small ball and some

evidence that we can in fact justify

this valuation is X Y and Zed. And this

is this has happened before. And even at

these valuations, other investors who

have invested in these type of valuation

at similar companies at similar points

in their life cycle have made money. He

could have he could have and should have

had that teed up. This is not this isn't

like an unexpected question that your

valuation and multiple on revenues is

really rich. That question, not only is

it a fair question, but it is the most

important question in the markets right

now because the the answer to that

question, how are you going to pay for

it is the question that determines the

entire stock market right now. the fact

that the stock market has returned that

that AI has been responsible for 80% of

the stock market returns since chat GBT

was launched. The fact that the

valuations of Nvidia and Oracle and AMD

and Microsoft, all of the best

performing companies right now, the fact

that those valuations are determined by

these contracts that have been not

signed but handshake agreed upon with

OpenAI, the $300 billion that they say

that they're going to pay to Oracle. I

mean this question, not only is it like

fair and an obvious question that's

going to come up, but you have to have

an answer to that question. Sam Alman is

the high priest of AI right now. And AI

is essentially, as we've discussed many

times on the podcast, AI is what is

holding the stock market together and

also holding the economy together. I

mean, we've discussed the stats about

how if you didn't have AI, GDP would be

flat this year. He was asked the

question.

He completely fumbled the answer. And

you say, well, it's a tell that he's

under a lot of stress. Agreed. But also,

maybe it's a tell that he doesn't have

an answer. Maybe it's a tell that when

he got that question, how are you going

to pay for it? The answer is he doesn't

[ __ ] know how he's going to pay for

it. and he doesn't even believe that

he's going to be able to pay for it. And

that is the question that we have been

proposing on this podcast constantly. I

mean, we we we added up all of the

investments that they have in the

pipeline, the cash that they have on the

balance sheet. It's about $150 billion.

So, they're short $1.2 trillion. And

yes, they're going to go IPO and they're

going to raise money in the public

markets. You can't raise a trillion

dollars in an IPO. It's not going to

happen. So what they have to do at this

point is they have to go out and they

have to find different forms of

financing. We had another tell where the

CFO says, "Oh, maybe we'll get a backs

stop. Maybe the government will bail us

out. Maybe the taxpayers will be the

ones who pay for this gigantic AI

buildout that is holding the entire

stock market together. Or, and this is

my belief, they're going to have to go

for some debt. And not just some debt,

but a [ __ ] ton of debt." And that could

be the beginning of the end for the AI

bubble. That could be how the whole

thing unravels. And we when we look

throughout history, that is generally

how it goes. And we've discussed that as

well. We talked about it with the

railroads and the electric grid and we

talked about it with the internet. But I

think that this was a big moment in the

AI story where he had his chance and

maybe he wasn't that well prepared

because, you know, it was just a a

podcast with his buddy, but he had his

chance to assuage investors and be like,

"No, no, don't worry. I know what I'm

doing here. I know what this looks like.

I know how everything that you guys are

talking about, but just just trust me.

Everything's under control." He did the

total opposite. He had a meltdown. And

what wasn't included in that recording

is the fact that a few minutes after

that, he randomly bailed on the podcast

and left the Zoom.

>> Poor little Sam.

Sam's like, "I'm out of here. You're not

being nice to me." It's like when Trump

left poor Leslie Stall. He couldn't he

couldn't handle the hard-hitting

questions from an 83y old journalist.

I mean, a couple things here. This is

super interesting. Um, so Sarah Frier,

the CFO, she has some splaining to do.

She's had a bad day because she clearly

communicated that OpenAI is seeking

federal support to backs stop. She said

that the depreciation rates of AI chips

remain uncertain. Raising debt to

purchase them is costly. Government or

private sector guarantees can really

drop the cost of the financing. They

might be able to secure government

backing. Trump loves this [ __ ] He loves

thinking he's innovative and using your

credit card to sustain or to juice these

companies that right now are driving the

S&P. America's a giant bet on these 10

companies. So Trump has a vested

interest in keeping the, you know, the

music spinning. And also to be fair, if

you look at Apple, if you look at

Google, if you look at Amazon, they're

built on the backs of tax taxpayer

subsidies.

Apple is built on a technology that cost

tens of billions of dollars that

taxpayers paid for such that we could

deliver an ICBM missile into the

Kremlin. GPS was was initially conceived

to give missiles the ability to go like

to hit its target within 4T. And then

they said, "Oh, wait. Maybe we could use

this technology to triangulate off of

the satellites and do things like help

cars get where they need to be and help

people get cell coverage everywhere in

the world. Apple's been massively

subsidized by public taxpayers. Well, I

think I mean if we're making a

comparison, what you're describing there

is government money that was used to

create technologies which were then used

to build the products that we're

describing. But it wasn't it wasn't a a

a a bailout.

it, you know, it wasn't just here's

hundreds of billions of dollars for you

to do the thing that you're going to do.

It was like here's technology that we've

built as the government and you can now

use it in your products. Right,

>> Ed? I just want you to know it's going

to impact your future earnings if you

thoughtfully contradict my logic.

Okay, fair point. Fair point. Let me

skip to what I'm doing. I'm not giving

investment advice what I'm doing. I have

been for a long time thinking about do

you know I think it's called direction

they do all these kind of innovative

ETFs where they figure out a way to

short things or have triple the exposure

and their fees are higher which I don't

like to pay but they're very innovative.

So the ETF XMAG by Defiance ETFs is is

not a short of the Magnificent 7 but a

large cap uh X Magnificent 7. So it

basically holds large cap stocks

including the 40% of the mega caps

because at some point the S&P 490 will

have their day. So the QQQD by Drexion

is a bare 1x ETF targeting the inverse.

So it's minus 100% of the return of the

Magnum and 7 index. I am trying to

figure out a way to go short the Magnus

10. Why? For some of the reasons you're

talking about they just gotten out way

over their skis and these circular deals

feel like late stage. I don't know if

it's 98 or 99, but I feel like if I can

hold on to these things, these short

vehicles long enough, I'll be, you know,

I want to hedge my exposure right now

because if these things come down,

there's going to be nowhere to hide.

Everything is going to come down. When

40% of the S&P is riding on 10

companies, if they get cut in half,

nobody gets out alive. The the the

strafe and shrapnel here is going to be

extraordinary. The moment there's any

sort of check back or slowdown or the

consumer base enterprises who are all

signing up for these expensive site

licenses from open AI or anthropic the

moment they announced their the moment

PepsiCo CEO says we made these huge 10

20 50 hundred million investments in AI

and in the LLM site licenses chips

whatever and we're scaling it back

dramatically because it hasn't offered

the RORI we expected. If a bunch of

other companies jump in and say, "Yeah,

actually it seems true here." These

companies, I mean, the if the music

stops, there's not only not any chairs,

there's like there's like hot coals

they're all going to sit on. It's going

to be ugly.

>> It is a house of chords which is built

on AI, which is built on open AI, which

is built on Sam Alman and his response

to that question, which again is why

that question is so important. It's just

so phenomenal how bad the answer was

when it's it's not just AI resting on

this, but America, it's actually the

presidency. I mean, so much is riding on

this. Uh, but just go into like how the

bubble would pop. You're just you're

saying that you think the bubble would

pop and so you're saying you're thinking

about shorting um some of the some of

the big tech stocks. I mean my view

markets can stay irrational longer than

you can stay solvent and as we've

discussed I just don't think there's

actually that much alpha in going short.

I just think my recommendation is to

stay away from that stuff but you know

have at it and there are people who made

a lot of money.

>> I want to be clear though I'm not Jim

Chenos. I'm not trying to find alpha

here. I'm not that guy Michael Bur or

the big short guy who by the way just

took a huge position shorting Palunteer.

What I would what I'm considering doing

is quite frankly just as a hedge. I

don't like to short either. the the

natural trajectory of the market over

the medium long term is up and you

constantly have to ask yourself what

could go right as our friend Josh says

but I do think I I feel like no matter

what we do right now if you're invested

in the markets almost anywhere you're

uncomfortably levered to the magnificent

10

>> that's right

>> and so I like the idea of putting 1% of

my net worth in a short basket and that

way if [ __ ] really gets real and my

whole thing goes down 40%, I'll get 10

or 15% of it back.

>> I like that. I think that's a good idea.

And and you're in uncomfortably

leveraged to open AI as well. But just

going to like how the bubble could pop,

how the whole thing could come crashing

down. I think one thing that that is

important to recognize is the way that

these things happen. It's not like you

see a a sequence of bad earnings calls

and earnings reports and then suddenly

everyone realizes, oh, it wasn't what we

thought it was. What has to happen, and

Josh Brown has talked about this with us

before, there needs to be some narrative

shock to the system. You need to have

some spectacular story, some spectacular

event which hits people all at once,

causes this massive shock to sentiment,

and then suddenly everyone starts

pulling their money out and it starts

this chain reaction. That's how this

always goes down. Like just the most

recent example would be FDX. You know,

Sam Bagman Freed, who was the high

priest of crypto at the time, he has

this big blow up. Everyone says he's

fraudulent. He goes to jail. this

unbelievable story that captures the

imagination of millions and that's what

brings the crypto markets down. Another

good example would be uh Everrand in

China. Another recent example where they

had this massive blow up. They went

insolvent. They had $300 billion in

liabilities and then that was sort of

the moment where suddenly all the

investors in China freak out and then

you see this big big correction in in

the Chinese stock market. So, for the

bubble to pop in AI, you're going to

need a story. You're going to need

something that is spectacular that

captures the imaginations of the

investment community.

If you had to bet on a story happening,

it is the implosion of OpenAI.

I just there is there is nothing else.

Well, Nvidia if if a chip if they

announce that purchases of chips if

somebody if again a Chinese manufacturer

or someone else or a northern European

or a US manufacturer or even Amazon

which is now producing AI chip says

we've come up with a comparable chip at

60% of the price and Jensen for the

first time has to announce that sales

seem to be slowing

there there's points the attack surface

here of vulnerability is pretty broad

because when the bubble gets this

inflated it doesn't take a lot to pop it

right Right.

>> And what we forget is that that's not to

say this isn't an amazing company.

>> That's right.

>> And leaders in a technology that will

change the world. A standard unavoidable

part of the cycle is the following. A

major 12 month destruction in value. And

that's why it's dangerous to lever up

and buy these things on margin because

as long as you can wait out these things

and in fact it's a great company that in

the technology that ends up being a

seminal technology you can hold on you

know hold on for dear life right so for

example Amazon and Cisco from 99 to 2001

lost 90% of their value Amazon if you

held on to your Amazon shares you

recovered and then some it's up whatever

100x since then but let me just go

through some these are one-year declines

times of these companies. In 2022, Meta

lost twothirds of its value.

>> That was crazy,

>> right? In that one year, real recently.

Why? Post Apple iOS privacy changes.

They crushed their ad targeting.

Remember that? They turned off whatever

it was, opt-in or opt. And also, the

Reality Labs metverse losses ballooned

and investor confidence credit lost

twothirds of their value. By the way,

since then, up three or five fold.

Nvidia in 2022

lost 58% of its value. It was a chip

cycle downturn. Crypto mining bust

export controls to China. It rebounded

massively the following year as the AI

boom took off. Netflix just three years

ago. Just three years ago, Netflix saw a

draw down, a destruction in the value of

its shares of 70% in a 12-month period.

Subscriber loss for the first time in a

decade. growth to value rating, um, uh,

growth to value rerating and rate hikes.

What is every amazing company in the

midst of a technology boom that has done

incredibly well, the best performing

long-term holds, what do they all have

in common in a 12-month period? They

were down at some point between 50 and

70%.

But the problem is, if these guys go

down 50 to 70%. If they follow the cycle

of every other tech company in history

that has had reached these types of

valuations and they come down 50 to 70%

in a 12-month period, hold on tight,

says the global economy because it's no

longer a company worth, you know,

Netflix at the time was worth probably

100 billion going to or 150 billion

going to 50 billion. It's a company

worth 5 trillion going to two trillion.

It's a $3 trillion destruction in value.

They're going to lose the GDP of

Germany, one company that will send a

chill across another dangerous

concentration in our economy. And that

is the the consumer confidence of the

top 10% who are now responsible for 50%

of consumer spending. And I go, I don't

feel as rich as I used to. I can take my

spending down, my discretionary spending

down, 50 or 80%.

You can't, Ed. You're spending the

majority of your income on rent and

trying to do a little investing and

living in the cost of living in

Manhattan. You could take it down 10 or

20%. You can't take it down 70 or 80. So

what do we have at some point? These

companies are going to experience this

type of draw down. Except it is now so

much more. It'll the this isn't the

ripple effect of a stone. This is the

ripple effect of the, you know, the

Millennium Falcon or or Starship cruiser

crashing into a lake. Starship, that's a

I think that's a Star Wars reference.

Are they called Starship Cruisers, Ed?

>> I think that's right. Yeah.

>> My ability or my desire to short some

even if it's a little amount. I just

want mental health insurance cuz what I

see here, and by the way, these

companies could double in the next 12

months. I don't know. But if these

companies get whacked and go through the

same cycle as every other great

technology company, the impact it's

going to have on everything is going to

be much more dramat. There's going to be

no PNG is going to be off 20%. I mean,

everybody there's going to be nowhere to

hide. I would also add though that the

difference between a company seeing like

a 50 to 60% draw down versus a 99% draw

down and going out of business, the

difference between those two companies

is always leverage. It's which company

was financially managed such that they

were able to withstand a downturn. And

this is exactly what Andrew Rossin talks

about when we had him on and he talked

about what went wrong in 1929. the

companies that go bankrupt that just get

completely wiped out. It's always

leverage. I mean, Everrand, which I just

used as an example, great example of

that. The most indebted company in the

world, $300 billion in liabilities, lost

99% of its market value. Lehman Brothers

is another good example. I mean, some

banks made it out alive, but Lehman

Brothers was so overly leveraged, 30 to1

at some points. And so when they started

to see the defaults on the CDOS and all

the mortgage back securities, they were

insolvent. They couldn't pay back their

creditors. And then it started the chain

reaction. And again, this was too much

debt, too much leverage, and long-term

financial mismanagement. So I think for

sure every company is going to be

susceptible to a downturn. But I think

the question when that happens is which

of these companies are being responsible

about the amount of debt that they're

taking on. Which of them are making

accurate and responsible projections

about how they can cover their losses in

the future if there is a downturn? If

there is a drop off in demand. I think

you look at many of the big tech

companies. I think you look at Nvidia

and Meta and Microsoft and Google and

Amazon. These companies are expertly

managed from a balance sheet

perspective. So yes, they might see some

draw downs, but they're not going to get

wiped out. I mean, the these companies,

they have incredible technology teams,

but also incredible financial teams.

Open AI is a [ __ ] train wreck from a

financial management perspective. And it

is.

>> Ed's going gangster. Why would you say

it's a train wreck?

>> Look at the numbers. They want to spend

$1.4 trillion. They've got $13 billion

in revenue.

>> How much of that though do you think is

just marketing? It probably is, but the

market is pricing off of it. The market

is pricing in a $300 billion contract to

Oracle. So even if it's just marketing,

the market believes it isn't. The market

believes it's real. And Sam Alman is

going around and saying it's real. I

don't know if you saw the Financial

Times report, but the Financial Times

learned that they're not even seeking

legal counsel on these deals. They're

having their head of product lead these

deals with AMD and Nvidia. uh they're

having Greg Brockman figure out the

paperwork. They don't have a financial

team. And then of course they brought in

Sarah Frier, the CFO. She said, "In

order for this to work, we're going to

need a backs stop from the government."

That is like all of the red flags of a

company that is not figuring out how to

manage their balance sheet in a

responsible uh and and and reasonable

manner. I mean this is the l this is the

biggest red flag in AI by far and that's

says nothing about the technology says

nothing about the product which is

amazing and which I use and everyone

uses but the question being like who who

gets wiped out in a downturn it's the

companies that are overleveraged and

openai is that company

>> I wonder how much of it quite frankly is

trying to this fake signal and manifest

success that the market will believe

that if this guy is willing to sign a

contract for 300 billion. I'd love to

see the terms and conditions of this

contract,

>> please. Well, exactly.

>> Well, you got to think I wouldn't be

surprised if Oracle and OpenAI said this

is more like Trump's favorite word, a

framework. It's a framework. And that if

if quote unquote they don't need it or

they have a little bit opt out, they got

to give them notice. I think that

agreement is basically they said I know

let's announce that you're you're buying

$300 billion worth of Oracle compute. It

it'll send my stock up. It'll increase

my net worth by $93 billion. It'll

signal to the market that you as someone

who has insight into your uh revenue

growth and the subsequent demand it

inspires.

I don't the more I listen to you Ed

quite frankly I think you're right. I

think this is the mother of all [ __ ]

jazz hands these agreements. And this

week was our proof. I mean, he was

offered the opportunity to correct that

and he bailed. He freaked out. He said,

"Sell stock then." And then he left the

room.

>> When Trump comes back from a meeting

with Shei and says, "Okay, they've

agreed to continue to ship rare earth

materials or or delay the suspension of

rare earth mineral exports by a year."

And he comes back and which means it's

still they're still like pointing at at

us with a guncocked. Um, basically he

comes back and he says, "Oh, it's it's

him and Bent go on all the shows, say an

amazing agreement, historic leadership."

And the reality is he didn't get dick.

Basically, she knows he's she's like,

"Look, this is bad for us, but what we

have that you don't have is I can starve

tens of millions of people and I'm still

going to be in power." If [ __ ] Nvidia

gets cut in half, you're going to have

real trouble. Uh, you're going to lose

Congress, right? and probably your, you

know, Vance or Rubio or whoever you

anoint is going to lose. So he, again,

his big error was she, I'm getting off

script here, was not understanding their

willingness to sacrifice. But I'm I'm

kind of with you as we kind of un I

don't know, unfold all of this stuff. It

does appear like there's a lot a lot of

jazz hands going on. But what's funny is

what happened with Trump is that the

markets originally priced everything in

and then the the taco the toification

came in and then they said screw it.

We're not going to price this anymore

cuz we don't believe it. The question is

when does that happen with AI? When does

the tokation

of AI happen where you start seeing

these press releases and these handshake

deals? We're going to spend hundred

billion dollars on AI. At what point

does the market just go, you know what,

dude, we don't really we don't really

buy it. So far, not happening at all.

You could announce a multi-billion

dollar contract with a hyperscaler

tomorrow and the the stock will go up

invariably at least 5%. That's just how

it works right now. But the question is

when does that run out? What is going to

be the moment? And I I I will tell you

my my prediction then let's move on

because we got more to get into. But if

the bubble pops, my prediction is the

reason it will pop is because of an

implosion at OpenAI. It was because they

said they were going to spend 1.5

trillion. They made all these

commitments. They borrowed money. They

haven't borrowed that much yet, but they

will. And that will be their downfall,

as it has been for many companies

throughout history.

We'll be right back after the break. And

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We're back with ProfG Markets. The

Supreme Court heard arguments in the

tariff case last week. Multiple justices

expressed deep skepticism that a 1970s

emergency powers law gives the president

sweeping authority to impose tariffs.

Here's just some of what they said.

>> It's a congressional power, not a

presidential power to tax. And you want

to say tariffs are not taxes, but that's

exactly what they are. They're

generating money from American citizens

revenue.

>> AIPA is a sanction statute. It's not a

tax statute where Congress gave away the

store. Congress knows exactly how to

delegate its tariff powers every time

for 238 years. It's done so explicitly,

always with real limits. AIPA looks

nothing like those laws. It uses

regulate which Congress has used

hundreds of times never once to include

tariffs and it lacks the limits of every

other tariff statute.

>> You're admitting that there is some

non-legation principle at play here and

therefore major questions as well. Is

that right?

>> Very limited very very differential

limited is what and again the the phrase

that Justice Jackson uses it just does

not apply at least.

>> I know but that's where you started off

and now you've retreated from that as I

understand it. Uh uh well I think we

would as our frontline position assert a

stronger position but if the court

doesn't accept it then if there is a

highly

>> can you give me a reason to accept it

though that's what I'm struggling and

waiting for. What's the reason to accept

the notion that Congress can hand off

the power to declare war to the

president?

>> Well we don't content that again that

would

>> well you do you say it's unreable.

There's no manageable standard nothing

to be done and now you're I I think you

tell me if I'm wrong. You backed off

that position.

>> Uh uh uh uh maybe that's fair to say.

So, it wasn't a great showing for

Trump's legal team, and we know that

because by the end of the week, markets

were pricing just a 23% chance of the

court ruling in his favor. Before the

hearing, it was closer to 45%. This is

per prediction markets. So just to kind

of like go over the arguments that are

being made here. Basically generally

it's agreed that you need Congress to

approve major policy economic policy

decisions. But the government is saying

that doesn't apply to foreign affairs.

It's a foreign issue. The plaintiffs are

saying no it is a domestic issue because

as Sodtoayor was saying there tariffs

are attacks on US citizens. Uh there are

some other arguments at play here, but

the the the the

summary here, the TLDDR is didn't go

great for Trump and for Trump's legal

team. And then if you just look at the

prediction markets on Kashi, the chances

that Scotas will rule in favor of Trump.

They have gone from 45% to now 23%.

>> In a weird way, we talked about on this

pivot and car's view was this actually

would be good for Trump. It would give

him an elegant way out of this mess that

it would it would basically well the

Supreme Court I don't agree with him but

basically unwind what is probably the

worst economic decision in a long long

time. Well, let me just say what I'm

doing.

>> You're not buying the refund claims, are

you?

>> I feel shamed.

>> No, no, no. Because that's an amazing

investment trade. I was going to bring

that up. Is that what you're doing?

>> Uh, that's what I'm trying to do. A

market is developing in the private

markets to purchase claims. So if you're

Mercedes of Wisconsin and you're

importing or made Mercedes USA, say they

do a $2 half billion business in

Mercedes, I don't know what it is in the

US. So they're importing in and some of

them are domestically made. So maybe

that's maybe that's not the right

analogy, but you get the point. If it's

15% and they're bringing in 200 million

of Mercedes a month from Germany,

they're paying a $30 million tariff.

If this court case ends up going against

Trump, then essentially the Trump

administration is going to owe Mercedes

of USA uh $30 million a month or say the

tariffs have been when did liberation

day happen? I forgot.

>> April 2nd.

>> Okay. So that call it call it 6 months

of tariffs. Then the government owes

Mercedes USA $120 million.

>> That's the important thing here. If

Trump loses, not only does he have to

revoke the tariffs, he actually has to

return the tariff revenue that he

brought in. He's going to have to issue

refunds to all the people who paid the

tariffs.

>> Well, there's some question here and

that is it's not immediately A equals B.

Even if they rule against him, that

there could be nuance where maybe the

government doesn't have to pay it back.

Maybe the government and we've seen

Trump do this, refuses to pay it back.

So even if the the case is ruled against

them, we don't know the nuance of the

remedy. It might be you can't continue

to do this, right? or they might say all

right they have a legal claim and then

the individual companies have to sue the

government which I mean I over anyways

it's not immediately a fed plea I think

if in fact I've been thinking a lot

about this trying to game theory it out

but there's a private market developing

but unfortunately you have to right now

it looks at least the stuff I've seen

that I've been shown you have to invest

at least $10 million so you have to put

together an SPV if you don't have the 10

million self and these claims are

trading in the private market for

anywhere from 5 to 30%.

And I think

the greater likelihood is somehow these

people don't get their money back.

>> But I think there's a greater than one

in 10 chance they get their money back.

So, if I can pick these things up, these

claims against the Trump administration

for tariffs that were charged illegally

based on the court Supreme Court

decision, if that in fact if they deem

them as illegal, that I think there's a

greater at this point one in 10 chance

that that this claim will be um will be

refunded. It might take a couple years.

It might take two or three years in

court, but I like the asymmetric upside

here.

>> And very similar to the FDX claims that

you made a killing on back in the day.

But just to sort of explain how this is

working here. So if you're a company and

let's say you owe a dollar in or you

paid a dollar in in tariff revenue. Now

there's a question of do you have a

claim now to receive a dollar back? And

what Scott is going and doing is he's

buying that claim from you for five

cents or that's the plan. There is a

market right now where people say I

don't think I'm going to get my money

back. I want a little bit of money right

now. So I'll sell you the claim for 5

cents. And so I think it's an incredible

arbitrage opportunity. But I was going

to bring this up to you. I was going to

say maybe you should look at this. Um

you you you took the words out of my

mouth. You already are looking at it.

>> And I like these deals cuz they're hard.

And that is so it's unlikely would be a

claim. It's unlikely Mercedes USA would

sell the claim. What's a more likely

seller is a chain of 14 hardware stores

in the southeast has been paying, you

know, over the last 6 months has paid $7

million in tariffs. And if you show up

and say, "I'll give you a million

dollars for these claims." They're like,

"Fuck it. I don't Yeah, fine. Give me

the million bucks. cuz I need to operate

my business and I've already paid the

money and I've already sort of

incorporated into my cost my business.

This guy's going to give us a million

bucks and yeah, good luck to you trying

to get that money back. So my guess is

though since DOT is ruling and quite

frankly after this podcast you're going

to see you're going to see this is the

kind of thing that a a diameter capital

or an Apollo

come in with a team of 12 analysts and

NBA interns and they just crawl all over

the US trying to find these claims and

make really big bets. So, I'm wondering

I'm trying to figure out if I can

connect with a fund that's already doing

this and call them and say, "Hey,

remember me? You know, I advised you on

the Yahoo deal."

Can

>> I was your keynote speaker in 2014?

>> Remember when I was talking about

happiness and how relationships are

everything back in 2019? Remember me at

your that conference you held in August

in Tucson? Wow, that was great.

No, I think it's an amazing trade and as

as Scott Goodwin, diameter guy said on

on the podcast, the whole game is

finding forced sellers and to your

point, there are a lot of small

companies, small to mediumsiz companies

that have been put under so much

pressure because of the tariffs. I mean,

you look at the difference in the way

that the the the small caps are

returning right now versus the large and

mega caps in the stock market. tariffs

have [ __ ] one group in particular and

it's small and medium-sized businesses

who are going to need some liquidity

soon. So, the idea that they would I

mean I I'm sure there is a market uh

where these smaller companies are down

to sell these claims for cents on the

dollar. So, I think it's a great trade.

We'll be right back. And for even more

markets content, sign up for our

newsletter at profgarkets.com/subscribe.

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We're back with Profy Markets. Robin

Hood posted earnings that topped

expectations after doubling revenue

year-over-year. The stock is one of the

best performers in the S&P this year. It

has soared 450%

since Trump's election. A key driver of

that momentum is prediction markets.

Events contracts traded on Robin Hood

more than doubled quarter over quarter

to 2.3 billion as election speculation

pushed volumes to all-time highs. Khi

and Poly Market also saw record volumes

in the past month, surpassing the

presidential election of last year. And

now, Truth Social, Trump's social media

company, is rolling out its own

crypto-based

predictions platform. So, Scott, we've

been talking about the gambling economy.

You talked about it with Kylo Scandal

and all of these uh trading apps, uh

these platforms which facilitate

gambling betting. You've got Robin Hood

and yes, people are investing properly

on Robin Hood, but also there's a ton of

options trading, a ton of crypto

trading. As we discussed, events

contracts trading, people betting on

prediction markets. That stock is up

230% this year. Coinbase stock is up 50%

in the past 6 months. Cali's trading

volumes are up 150x since last year.

There has been an explosion in what we

would call the casino economy over the

past few months and much of it is

certainly to do with Trump and his sort

of pro- casino economy policies. I just

want to get your reactions here. What do

you make of the proliferation of this

market, crypto plus prediction markets,

sports betting, options trading, all of

this stuff that is exploding right now?

>> Uh I just think it's out of control. And

now the problem is I don't think you can

evantilize a 22-year-old. I think they

get to make decisions, including stupid

decisions. But I think they need to be

educated about the risks they're taking.

So gambling has the highest suicide rate

of all addictions because most people at

if you developed a meth addiction, we'd

figure it out and we would try and move

in. You could get on your phone and get

addicted to gambling and lose

everything. You know, guy spends his

kids college fund, mortgages his house.

No one has any idea and he decides,

"Okay, I'm in too deep." Highest

addiction rate. Uh yet there's no

dedicated federal budget for gambling,

addiction treatment, or research. By

comparison, the National Institute for

Drug Abuse allocated 1.6 billion for

drug addiction research, and the CDC

allocates about 310 million to tobacco

control. And because there's so much

money in this, it runs unregulated.

personal bankruptcy filings increase uh

by 28% in states where sports betting uh

gets legalized. So basically

bankruptcies surge by almost a third the

moment you legalize

gambling. It also disproportionately

affects young men and low-income people.

Approximately 15% of US adults age 18 to

34 have problematic gambling behaviors

compared to only 2% of people aed 55

plus. 20% of male gamblers have a

gambling problem compared to just 8% of

the female gamblers. You can see above

immature prefrontal cortex. Households

with lower savings balances spend 32%

more in gambling as a share of their

income than high savings households

looking for a way out. But it's

increasingly difficult to regulate this

because we know we no longer call it

gambling. It's been rebranded as a

prediction market. And these are

casinos. They're more interesting. They

might feel more substantive to bet on

the outcome of the mayoral race. But be

clear, folks. This is gambling.

According to Cal Street, prediction

markets are not gambling, but a form of

financial market exchange. Yeah, [ __ ]

you. We're not that stupid. This is

gambling. Whether you're gambling on the

Jets or Mandani, it's gambling. So, the

most profitable companies in the world

all do the same thing. They tap into an

instinctual flaw and they start

monetizing this flaw despite the impact

it has on consumers, whether it's

tobacco companies getting people

addicted to tobacco and then spending a

ton of money to try and argue that

nicotine wasn't addictive and then when

our mothers and our sisters continue to

die, we finally figured this [ __ ] out.

The same thing is happening here. And

the thing that got me initially kind of

inspired is the wrong word, but very

interested in this is Alex Karns. And

that is this young man, a 19-year-old. I

think he was a sophomore at Oklahoma

State. Nice kid, no history of mental

illness, good family. You know, you see

this kid and you just see your son. I

don't I don't care who you are. You see

your kid and you see like, okay, there

by the grace of God go my kids.

Bought options on Robin Hood. got

messages saying he was down $60,000. He

wasn't. They were errant messages. Spent

all night, sleepless, emailing Robin

Hood to try and get some sort of

response from customer service because,

you know, they're in the business of

hyperscaling and because they didn't

place any sort of regulation or any sort

of safeguards. They didn't get back to

the kid and the kid the kid leaves a

note for his parents saying, "I don't

want to leave this debt for you." And

throws himself in front of a train.

These are the people we want to trust

with with an addiction. These are the

people. So, we have Trump

uh the the the crime family Trump and we

have the menacious fox at Robin Hood

uh deploying at scale using technology

a drug that is highly addictive. So, I'm

I'm horrified by this [ __ ] And I think

it I think if Congress had any stones or

anyone under the age of 9 [ __ ] 5

years old that actually understood what

is going on with young people and

especially young men here, they would do

their goddamn jobs and prevent a tragedy

of the commons and weigh in with

legislation or at least agegate the

[ __ ]

So, this is I think this is hugely

distressing. I think this is the next

major opioid scandal.

>> I mean, gambling is pretty bad for

society. I mean, like, it's pretty

indisputable. I mean, consistently leads

to financial ruin. As you said, one of

the most common causes of bankruptcy. As

you said, in states where sports betting

is legalized, bankruptcy filings have

risen 28%.

disproportionately affects poor people,

disproportionately affects young men,

one of the most predictive causes of

domestic violence, also one of the most

common causes of suicide. Uh, but we

kind of like it because it's fun. Now, I

think one of the big questions is like

what counts as gambling? Clearly, we

agree mostly that there should be some

form of regulation or at the very least

we should like draw some line in the

sand as to what is gambling and what

isn't. I had the founder and CEO of

Koshi on firsttime founders and we

talked about this for a long time and he

has a very interesting perspective. Of

course, he's biased because he runs

Koshi. His view is it's gambling when

the house is involved and Koshi isn't

really gambling because you're not

betting against the house. You're

betting against other people in the

system. You're matching traders up with

other traders similar to the way the

stock market works. But I think my view

on gambling is you know it's gambling

when you see it. I mean day trading,

options trading, especially very

short-term like zero day options

trading, sports betting, crypto trading,

meme stocks, meme coins, prediction

markets, all of this stuff is gambling.

It's it's gambling in one sense or

another. And we could talk about the

very specifics of how actually the

transaction works, but when you're just

kind of betting on on something

happening or or something going one way

or the other versus investing over the

long term, putting your money and

letting it sit there and building an

asset base. Those are just by nature

very very different things. And I think

it is clear that people are interested

and very excited by the gambling stuff

right now. Many reasons why that could

be. I'm sure the the fact that young

people just don't have the economic

prospects that their parents and

grandparents did, that certainly plays

into it in large part, that sort of

explains the crypto obsession and the

memeto obsession. But I think the thing

that is so interesting and what has

changed this year

is now the government is behind it.

There is a very obvious support system

for all of these types of gambling

platforms and gambling mechanisms. I

mean, Don Jr. is an adviser to Kelshi

and to Poly market. Trump Media is

launching their own prediction market.

Trump is getting into crypto. He's

pardoning Changpang Xiao who plead

guilty or Binance his company plead

guilty to money laundering. He's

pardoning Justin's son. He's launching

his meme coins. So, the government and

the administration is deciding for one

reason or another that we like this

stuff and we should have more of it. We

should deregulate and defund the CFTC.

We should deregulate and defund the SEC.

We should invest in prediction markets.

We should create our own prediction

markets. We should have society gamble

more. And I think the big question for

us citizens is why do they want that? I

mean, most most people are in agreement

that this stuff is dangerous. And many

Americans say it's it's flatout a

problem. Actually, 43% of Americans say

that sports betting should not or they

say that the fact that sports betting is

legal. They say that it's bad for

society and it's gone up and up and up

in recent years. So, we're all kind of

in agreement like this is at the very

least kind of dangerous and yet the

administration is pushing it. I guess my

question to you, why do you think that

Trump and the administration has decided

pro- gambling, pro- casino economy, pro-

prediction markets, pro- crypto, pro

meme coins, all of these things that

while yes, they can be kind of fun every

now and then, in a lot of cases, they

lead to the financial ruin of thousands,

in some cases millions. Well, I'm going

to go out on a limb here and say that

perhaps his own economic enrichment

supersedes his care concern for for uh

the public. I know that's a that's a

stretch,

but look, we know why he's doing it.

He's doing it he's doing it for money.

And what I would say to young men is

that sacrificing

and investing is a means of having less

anxiety in more relationships in your

life, more healthy relationships.

Gambling is going to reduce your mental

well-being.

It's going to make you be seen as

undependable by friends and potential

mates. And it's going to result in a

level of self-loathing if you're not

careful

that oftenimes leads to extreme

depression and even self harm in some.

You know, if you're listening to Andrew

Huberman and Peter Atia and taking the

right supplements and creatine and

getting the right sleep, it's all for

[ __ ] not. If you wake up one day and

you're broke because of really stupid

decisions you made in search of dopa and

have convinced yourself that you're

investing, not gambling. No, you're

gambling. And I'm not going to

infantilize. If you want to gamble,

gamble. But call it what it is and

assume you're going to lose it all. You

want to do these things, you need to

assume you're going to lose it all. The

danger is when you think this is

investing and you're going to make

money. You're not. These companies

aren't building anything. The reason

they're worth so much money is that over

time everybody loses.

Everybody. No one beats this market

these markets over the long term

>> unless you're on the platform.

>> There you go. Those are the winners. So

if you're going to gamble, buy Kelshi or

or probably market stock. And you could

argue that's investing even. But these

companies are preying on young people

and and instinct that hasn't caught up

to industrial production. So anyways,

just be honest with yourself. Are you

gambling or are you investing? There's

this quote from Alexander Hamilton 1792,

which I love. He said, quote, "There

should be a line of separation between

respectable stockholders and mere

unprincipled gamblers."

I just find it hilarious that this has

been around for hundreds of years and we

know where Alexander Hamilton stands on

it. Let's take a look at the week ahead.

Scott, we'll see earnings from Rocket

Lab as Space Mobile. So, these are these

um space companies that we've discussed

in the past. Also, Paramount Sky Dance

and Disney. Any predictions?

>> Well, I already said it. I I think the

the market for claims against uh tariffs

paid is going to become an active

investment market and I think it's going

to do well for those the price may

already I mean I get the sense I've been

working on this for a few weeks. I get

the sense my guys are going to call me

back and say oh prices have doubled like

sellers have caught on to this and I've

jacked up their prices. But I think this

is going to become a really interesting

market that we're going to hear about

that's going to be actively traded. And

I actually think that even if before the

decision, I think there's going to be a

lot of people who trade who I think

these things are going to go up even

before the decision or the collection of

revenues. I think they're going to start

to trade up. So I think the best stock

right now or the best investment and

granted most people don't have access to

it because there's certain minimums and

it takes time.

>> 10 million minimum. Put me in the SPV.

>> Yeah. But this is what will happen. A

bunch of people will create SPVS and

charge fees and give access to real

retail investors. You're about to see

claims against tariffs become an active

private asset class.

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