It says "Going live". Live. It will

turn on now. Oh, looks like it's

started. Good and wonderful evening,

everyone. Drop a plus if you can hear

me. And, as usual, we’re going to beg

someone to run an AI and make timecodes

for us,

>> so someone—anyone—does our work.

>> Yes, my hands just aren't wired for

that, and honestly, I'm too lazy to

deal with it. So, we’ll ask for help.

But at least there are no donations. So

>> for now,

>> for now. Yeah, when this all crashes,

we’ll ask for donations. We can. Yeah

.

>> So. Are there pluses? Can you hear us,

guys? Let's check. Got it. Chat. Aha,

everything is fine, looks like the

pluses are coming in. Well, my friend,

I welcome you to the first—to the 1st

of October.

>> Thank you.

>> A wonderful month is beginning.

Starting right off with a career

question. Did you buy TLT today, or

yesterday?

>> Waiting, still waiting.

>> Do you think we’ll go even higher?

Well, we easily could, I think,

>> because already some...

>> I’m not betting on it, per se, but to

say that this is the limit to buy the

ten-year, I think it’s too early,

>> because, you know, 5.3. Our friend

Gromin was shouting about 4.8, half a

percent higher. Volatility, by the way,

isn’t that horrible yet, like 109,

110. No, well, 110 is much higher than,

I don’t know, 70. We were at the

bottom, yeah, this,

>> I think, no, well, this guy, what’s

his name, Bassman, right?

>> Who invented that V-index.

>> Harley. Harley.

>> Harley, yes. He says himself that at

around 130, I think, he has this

breaking point level

>> for this volatility. So we’re not

there yet, but we’re heading there,

right? I mean, volatility isn’t just

in one direction; these are

fluctuations in both directions. Well,

there might be a trend, yes, but you

know, that’s why it’s growing. I

don’t know about today, but this

volatility is rising, which is

naturally a problem for liquidity. And

most importantly, considering the

structure of those holding Treasuries

today, it’s a big problem because a

large part of the investors are hedge

funds, and many of them are in the

basis trade, as you know,

>> which, to put it mildly, doesn’t like

volatility. Volatility is kryptonite

for the basis trade because your

derivative portion starts to be valued

differently since it’s grown.

>> Yes. Well, basically, in a nutshell,

what a basis trade is: regular

allocators or, as they’re called,

asset managers usually enter this

market via futures, while hedge funds

play the opposite game. They buy spot,

sell futures, and play the narrowing.

So, well, as this spread narrows over

time, they earn money on it. But for

this, you need some massive leverage

for it to generate any real profit at

all. And there’s a discussion about

just how huge these volumes are. I mean

, there’s talk—and what I’ve seen

, at least what Gromen often writes—

that a very large chunk of all these

Treasurys being pushed into the market

ends up with these guys, who are

extremely sensitive to volatility

movements. And I was reading

CrossBorder yesterday; they wrote that

this shadow banking, which is floating

around all over the repo markets, has

seen a slight, though minor,

contraction in liquidity for about a

couple of weeks now. I mean, there’s

no serious stress, but it is sort of

present. Although

>> Yes, sorry,

>> Go ahead, keep talking.

>> Please.

>> No, well, there are liquidity problems

in general, right? I mean, it's not

like there’s a lot of it. Plus, a lot

of what comes in is being gobbled up by

the real economy as well. Yes, all

these buildouts and so on—power grids

, everything related to energy

generation or whatever—that takes

money that is being injected into the

economy as well. So,

>> But you’re speaking from the theory

that Meta doesn’t care about paying 8

or 9%for all of this. And so they suck

up liquidity that would otherwise have

gone into the Treasury market, and they

absorb it for themselves at higher

spreads.

>> This is also just competition for

capital, right? And it’s clear

there’s more of it because these data

centers are being financed more and

more through debt, right? So that’s

the competition. Plus, competition from

the Gulf countries has actually grown.

They are actively financing themselves

there because, well, their revenue and

cash flow aren't terrible, but they are

worse. They are definitely worse. And

you just, well, you know, need the

money to plug some budget gaps. But

that is, again, competition for

Treasurys, right? I mean, if you buy, I

don't know, a bond, you didn’t buy

Treasurys with that volume, so to speak

. So, yes. Uh, but I’m talking more

about liquidity in general, yes. I mean

, if you look at it, Europe is

basically sucking out liquidity, right?

I mean, those ridiculous programs are

still running, plus they’re raising

rates. The Americans, yes, they sort of

finished QT, started QE in some form,

plus there are those Treasury buybacks,

right? So there’s some management of

this going on, and it is flowing in,

but the growth level isn't enough to

talk about any real upside for

financial markets, let me put it that

way. So, what is this more about? And

the fact that you have additional

competition in the dollar for yield

only makes it all worse. Well, from the

perspective of the Treasuries market.

Ah,

>> yes. So you have less demand for dollar

assets that are fundamentally similar,

right. Well, again, like Saudi

sovereign debt, right. Well yes, it

gives you a premium of some percent,

sure, but the essence is the same,

it’s still sovereign debt; the Saudis

can’t print dollars, hence the

premium. But, you know, again, if you

bought that debt, you didn't buy

Treasuries. Well, on the other hand, if

you look at the same, let's say, TIPS,

right, when you have real—real yield

>> touched a nerve there, yeah,

>> yeah, your real yield is over 3%. Uh,

but that’s kind of—

>> I don’t buy it, man, I don’t

believe in TIPS. I think it’s

absolute. Well, listen,

that’s enough. I also had a question,

you know, I’ve always viewed those

break-evens with, well,

>> with no enthusiasm, let’s say, right.

I looked at those five-year break-evens

over time, well, during COVID and all

that. During COVID, break-evens showed,

I don’t want to lie, but something

around 4.5%. A five-year break-even in

2020. So, even in some sort of

retrospect, this is a bull indicator,

it has absolutely nothing to do with

reality. Therefore, when people talk to

me about positive real rates, I don’t

really understand what they’re

telling me. I don’t, well, right now

the five-year break-even is at, what,

2.3%.

>> No, I’m saying, going out to the long

end, somewhere into the twenty or

thirty-year. Uh, well, look, if you

take the perspective, say, right now

this fellow Biyanku popped up and said

that, like, now at these levels bonds

look really sweet. It's clear that

Rosenberg is getting a massive thrill

seeing yields like these. And basically

, if you look at it, well, that

discussion that, you know, Mike Green

is leading about passive flows: when,

due to rising yields, you get an

automatic under-allocation to this

sector, meaning the bond drops in price

and less capital goes there, and

consequently, this underweighting just

keeps on going. And, from the

perspective of looking at a reversal,

plus if we add that everyone is

currently sitting in shorts on rates,

and you've got rates at some 95th or

98th percentile historically for shorts

. So, it practically begs for a

potentially good, nice short squeeze

when tomorrow some negative NFP comes

out, like minus 200,000. Yeah, yeah,

that could happen.

>> And we'll fly in the opposite direction

, because,

>> well, by the way, by the way, I think

there's a non-trivial probability that

this NFP is going to be pretty lousy. I

even saw something in the data that

points to that. I don't even remember

which release that was. Listen, uh,

well, how long have we been discussing

this long end with you, like, the whole

time. For as long as we've been

rambling, you know, we keep discussing

it, and rates just keep going higher

and higher. Yes.

>> Yes. Maybe, uh, maybe there is some,

you know, if you are trading on, like,

short timeframes or speculatively, yeah

, well, maybe there is some opportunity

there, but I don't do that, as you know

. I don't trade those ranges. For me

and for us as a business in general,

the allocation is strategic. And for me

, well, for the last, I don't know, 2-3

years, our main principle has been the

short end. Well, relatively speaking,

it doesn't matter which paper you take,

it needs to be on the short end,

precisely because I thought that rates

could easily, especially on the long

end, you know, just drift off due to a

lack of demand. It wasn't a question of

, like, some problems with funding or

liquidity or anything like that. It was

purely that kind of story. Moreover, we

even shifted some of the long-term

securities we held into the short end.

Well, all sorts of them, yeah, it

doesn't really matter,

dollar-denominated ones.

>> No, well, the logic here is quite

simple. If you're betting on a

potential drop or reversal, it's better

to stick with two-year notes and wait

for the first one.

>> Exactly, in any case, you'd want, you

know,

>> Yeah. That's...sorry, go ahead. No,

don't say that, we're just start...

>> No, you go ahead now.

>> We haven't talked in a long time, and

now everyone needs to catch up with

each other, right? No, I'm just saying

that from the perspective of...I'm

actually, right now, even though things

are shaky, we're forgetting one thing:

there's always a "September effect" in

bonds where sell-offs occur; for the

last 7-8 years, it has always been very

pronounced. The second thing is that...

...

>> the fiscal year, right, is ending

around this time.

>> Well, possibly. I mean, I haven't seen

a single decent explanation for why

this happens, but there is this sense

that in September, there's always some

kind of outflow. Maybe it's related to

that. And the second topic is why I

remain quite bullish on the market

outlook, because raising rates—what

comrade Vorse did, which in my view is

a suicidal move—actually, contrary to

expectations, when you raise rates,

financial conditions are supposed to

tighten. But in reality, because the

yield curve is flattening, you get the

opposite effect. Meaning, your

financial conditions remain easy

because for all allocators, it makes no

sense to hold duration. And you're

driven into this damn private credit,

you're driven into those meta-bonds,

you're driven into the S&P itself. And

it turns out that, given the huge

deficit and the trillion in interest

payments being pumped into the market,

that money is flowing precisely into

risky assets. If you even look at

indicators like cross-border flows,

basically everyone is sitting in risk.

I'm not saying it's good, but simply

when we say that a rate hike should

lower or tighten positions, we actually

have an inverse dynamic due to high

debt and high interest payments, which

is likely supporting these markets

quite well.

>> Well, yeah. Well, about the rate, you

know, I think that needs a separate

session about the Fed, the rates, and

why they do it. It's a big one. Well,

listen, I think that with the rate,

like, uh In general, this whole logic

that you raise the rate to fight

inflation is so strange to me, because

it's very important which inflation

you're talking about, what kind of

inflation it is. And in the classic

example, why raising the rate works is

because the inflation is natural. Yes.

Meaning the economy is performing so

well, it's so great, you know,

everything, or some segment of it is

growing so much that, well, you know,

people are being hired, their salaries

are rising, they start spending, buying

goods, goods get more expensive, and so

on, right? So, at that moment, if that

is the reality, then you can raise

rates to actually slow down this

consumer boom a little bit. Well, like,

you know, to show society: don't spend

too much, don't take on debt, and so on

, and just calm down, right? So

that’s the idea, that’s the idea.

Today, the inflation we are seeing is

absolutely man-made. I mean, it's

various kinds of wars. And it's the

American tariff policy, which is

absolutely inflationary. Well, no

matter how you spin it, in the end,

it’s inflationary. If you keep them

as they are and don't change them, you

still have higher customs duties. You

pass that cost onto the goods, you get

this hoarding dynamic, right, you start

buying in advance. I think there is a

lot of that right now too. You can

clearly see it in GDP, you know, those

estimates, that the growth in

inventories is, like, higher,

>> yes,

>> and all that. So people are starting to

expect this inflation. And in that

sense, a breakeven of 5%, 2.3%per annum

looks stupid. Yes, return

>> I don't know, I disagree, because I...

you’re right when you mention that

classic theory, the so-called

wage-price spiral, where inflation

leads to an increase in income. If you

look at the charts, yes, we...if you

look back at the seventies, that’s

what happened. If we look at wage

growth and inflation now, they are

moving in two different directions. So,

by and large, the chair that the entire

middle class is sitting on is being

kicked out from under them.

>> The very idea, the very idea of

fighting inflation through the rate,

you know, you're killing that idea

because it works differently now. And

also, you know, I was thinking, if you

compare the last rate hike cycle to

today's—well, the last one was

post-COVID, right—basically, they

gave out cash to everyone, people went

out spending, buying, investing, and

all that. And, well, it was a situation

where the consumer had a surplus of

money, you know, just savings, whatever

. But now it’s the opposite: you have

a situation where, yes, there is

inflation, but it’s man-made; it’s

because of what you’re doing yourself

. And people, on the contrary, don't

have money. Well, a large part of the

population doesn't have that money. And

, you know, if you recall all the

promises from this administration, like

, "I'll give you a bonus on tariffs,""

I'll give you this,""I'll give you that

." Now it's like, "Elect me, the right

party, and I'll give you money too."

Yeah. In reality, nothing is being

given, only promises are being made.

Yes, nothing is actually landing in

people's pockets. So I would say this

is the opposite situation to the

previous cycle. Naturally, if you raise

rates in a situation like the current

one, you're just hitting the consumer

over the head even harder. You're not

helping them at all. You're just making

a man-made situation even worse. You

created it yourself.

>> Absolutely. Yeah. Well, you see,

there's another factor at play here.

When we talk about the 2022 period,

when the Fed started raising rates,

inflation had already begun to slow

down automatically. So they started

raising rates into slowing inflation.

Plus, if we talk about why inflation

started to slow down, well, the

economic growth we've had over the last

20 years has been, let's say, anemic;

if you look at the long-term ten-year

moving average, we keep going lower and

lower. We’ve reached some kind of

peak, the peak of globalization, and

this peak keeps reducing the growth

rate, while the level of total debt in

the system keeps growing. And that is

where your first imbalance occurs.

Accordingly, right now, through

artificial intelligence and the

trillions being poured into it, you

have some kind of artificial support.

But it's so narrow that if you look at

a chart—Hussman did this very well—

it shows record profits for all

corporations, while at the same time

you look at private sector and

government debt. And you end up with

these two pincers closing in. So, your

corporate profits are basically an

inverse function of the ever-increasing

debt levels at both the consumer and

government levels. And it's clear that

this trend cannot continue indefinitely

. And that's why we're observing—guys

, what wage spiral are we even talking

about? Instead of having growth, you're

just busy extracting every last bit you

can from the customer until they drop

dead. I was watching a documentary

about Uber, about how it used to be

such a dump, how many trillions or

billions they burned through, not

knowing how to run anything. And then,

all of a sudden, super profits. And now

they've looked at what's actually going

on there. Basically, you have a 70-

dollar ride, and the driver gets 25.

Out of those 25, they take insurance

from them, another 25 for this and that

. So, they say they take 20%of the ride

, but in reality, they're taking 60%.

And so, this Uber thing becomes

completely unprofitable for you. And

everyone is saying, "But people don't

have any work." So it's like a gig

economy where, you know, you're just

trying to stay afloat on anything. They

have a massive supply. And all these

guys who want to be drivers, they just

squeeze them for every last drop of

juice. Yeah, the whole economy is

really built like that. They try to

bend every person over just to squeeze

out one extra drop from you.

>> Yes, but it's always been that way.

It's just very obvious now.

>> Now it has just become very obvious

because the rebalancing mechanism is

completely broken. And everyone

realizes that something is seriously

wrong. And what's most interesting is

that most people have plans, you know,

plans too.

>> There's some hope that something will

happen, we'll go back, and everything

will be wonderful. Well, I don't know,

I see a lot of people like that,

although...

>> No, listen, we started with whether

it's a good idea to speculate on the

long end of the duration, or...

>> Yes, but in that logic, it is a good

idea, because if you have a contraction

, you know...

>> I didn't finish, our concept for many

years, well, for several years, is like

2-3, maybe 4 years, I'd say the average

, a weighted average maturity, well,

maybe 3 years. And again, that applies

to all bonds. Well, our reality is such

that we have many separate accounts; we

don’t take money onto our own balance

sheet—that’s our approach. We use

power of attorney to make allocations

in our clients 'accounts, at brokers,

or at banks. Accordingly, I have a

dilemma: to get into the long end, I

need to do it systematically and

strategically. I can't just do it in

one account and not in another, right?

I’m an honest person, so if I do

something, I do it for everyone.

Accordingly, I need a very good reason.

And not just to speculate because the

yield is low or high, but why I am

doing this systematically. And I

don’t see that systemic nature yet,

in the sense that to buy the long end

—theoretically, there is no limit to

the yield there. Well, if you look at

it philosophically. But there is a

limit to patience. There is a red line,

some figure that nobody knows. Even the

participants at the highest levels

don't know this figure. This is the

level of long-term yield, say, ten-year

, at which the system breaks in the

sense that systemic selling begins,

because of a lack of liquidity, because

of a hole that needs to be plugged. And

in this sense, the basis trade is very

important, because I actually checked

who has the most basis trades. Do you

want to guess who it is?

>> Citadel.

>> It’s Citadel, yes. But Citadel is a

good example because they don’t just

have the basis trade, right? So if they

lose on this thing, which is supposedly

low-volatility and super-predictable,

they will have to cut something else.

You know,

>> Is Citadel run by Cohen or who is it?

>> I always forget his name.

>> I always get it mixed up. Well, never

mind, it's not the point. Griffin is

that bug-eyed guy. I saw him in

Florence this summer, actually. I

thought about approaching him, but

decided it wasn't worth it.

>> To shake his hand.

>> Yes. Yes. I didn't want to,

>> I didn't want to ruin the guy's day,

clearly. He was on vacation and looked

so happy. I think, yes, I didn't

approach him after all. But yes,

Citadel is, you know, the king of hedge

funds, right? Meaning they have all

sorts of things, and if they have a

hole in something like that, well, they

have to cut something else then. And

this is where the mechanics begin; like

, I will definitely jump into the long

end at some point, you know, 10, 15, 20

years—I’ll definitely buy that

eventually. Uh, but I want the American

government to tell me they’re in

trouble, you know, that they’re

borrowing at such and such a rate. Well

,

>> yeah, well, as usual, the front end

will twitch first. Well, again, we can

argue about how high it will go, but

ultimately,

>> I’ll even—sorry, let me add—I

wouldn’t even be surprised if the Fed

, for example, cuts rates, the Feds,

and the long end rises at the same time

. I wouldn't be surprised by that at

all,

>> because

>> they’ll have to, they’ll have to

tell the market where the limit of the

long-end yield is. They’ll have to.

Well, you see, I think that’s part of

what we’re seeing now; I don’t know

how pronounced it is, but we’re

seeing it in French bonds right now.

Plus, you have to consider that Comrade

, that Comrade Bessent, literally—I

don’t want to call him a total d-word

, you know. But there is that photo,

right, where he’s in those pilot

glasses, in front of the American flag,

like, "I’m the casino now, and if you

want to play, you’re playing against

me." But I don’t know, he worked at

Soros himself, and he’s perfectly

aware that this is just an invitation

for a bunch of people to try and crush

him. No, but you just—listen, for me,

he’s a disappointment, right,

considering his, well, his

>> complex resume,

>> yeah, there’s a beautiful word in

antiques, uh,

>> how did it go,

>> all the old stuff,

>> everything, yeah, it's gone.

>> Well, never mind. I mean, his

experience, his CV implies he’s a

super-professional and all that, but in

fact, he’s a super-fail. Well, by my

standards, you know, everything he

promised didn't happen. All those "

three arrows" of his, and all that, how

he was going to turn it all around.

>> That "well-forgotten old" stuff, those

three arrows, seem like nothing now.

>> Yeah, not a single one hit the mark. Uh

, I even checked oil this morning, and

it didn't hit the mark either, not at

all. Well, he had that oil production

thing. Uh, and I consider him an

incompetent guy. Well, roughly speaking

. Uh, accordingly, everything he is

doing, like these buybacks, well yes,

for a while it worked as a kind of

volatility suppressor, but it seems to

me it doesn't work anymore. Or they

need to increase these volumes

dramatically. And volumes can only be

increased dramatically within the TGA

account, which isn't infinite and from

which you still need to pay the bills,

you know, so, yes. But here, by the way

, on this topic, we have a little—I

understand what you want to say, but I

don't see any dramatic picture here.

For me, the fact that they climbed into

the long end. Well, first of all, of

course, the volumes we discussed there

are childish, and it’s simply the

signaling power that they will, in any

case, get in there if they need to. Uh,

we shouldn't forget here that,

>> that,

>> well, again, look: from the perspective

of buybacks, if you look at it again,

the higher the yields, the more

aggressively I would be increasing the

purchase of these bonds right now,

because you’re buying them at 50

cents on the dollar and refinancing

with the short end. By and large, you

are just burning the long end, which

gives you more control over the entire

curve, to put it mildly. I think, I

think, you know, there are two goals.

One goal is to change the term. Well,

that you have, like, more debt on the

short end. That’s clear.

>> And why not? This has no effect on,

well, you know, borrowing. It's the

same debt. You bought one, you sold

another. Well, it’s kind of a zero

effect, right? So that’s one. But the

second, which is completely different

and much more important—I believe in

this, yes, you can argue about it, but

I believe in it—is an attempt to

reduce volatility, yes, because they

are buying these "off-the-run" things,

which are illiquid, and simultaneously

providing a bid at a moment when demand

is low. Yes, even if it’s small, it

can be important because that is

exactly what is needed to, you know,

balance the market.

>> For this, for this debt, there is only

that much demand, yes,

>> and you have to cover it without any,

well, you know, third parties, let’s

put it that way. So in that sense,

it’s kind of working, but the index

is higher now, the rate is higher. And

I guarantee you, if tomorrow he comes

out and says, well, what was the last

volume he announced, or 6 billion or

something. Eight.

>> Yeah, something like that, I don't

recall.

>> He'll say something like 20 billion. I

think the market won't care. I think

the market will say: "That's not enough

, you know, give us more." How much?

>> Well, I don't think he's doing it for

no reason, because, first of all, you

...

>> Listen, three times, he increased these

volumes, clearly expecting a reaction,

because there was a reaction the first

time. But the market absorbed it. That

volume is too low. That's really not

enough. That's not what we're talking

about here. Yeah. We're talking about

deficits. A deficit of 2 plus, you know

, one could argue about it, let's see

what it is this year, but definitely 2

plus. Well, like,

>> well, I'm like, again, from the point

of view, look, okay, buybacks at the

moment, I don't know exactly what he's

buying up, but I can imagine that...

>> the curve is steep. One of the main

sellers is Bank of America, which is

still 20, which...

>> Wait, hold on, it's an auction, like,

you can come in, place a bid, offer

your bonds, and then they either take

them or not. Something like that. Well,

it doesn't matter who it is, friend,

which bank or whatever.

>> Wait, no, no, it is important, because

if you look at the structure of the TGA

, that's actually a secondary issue in

my view, because if you look at the

large banking sector, you have two

control instruments, right? On one hand

, you say: "I am easing regulation." So

they relaxed the SLR, now they'll also

relax...other credit-related things,

>> and they'll just force the banks into

it. And you need to create conditions

where banks will agree to absorb this

issuance. It's not...it's quite simple

if you look at the TGA that he's

spending, it's generally a useless task

, a useless element. Americans are

paying 40 billion dollars in interest,

so the TGA, well, roughly speaking, yes

, because it's like 800 billion, it's

all borrowed, no one needs it at all.

They could cut it in 5 days, they could

reduce this TGA to 100 billion and just

set up revolving credit lines with

those same big banks. If there are any

payments here, they can easily push

them back and forth. And there you have

700 billion that's just tied up and

sitting there like a sack on their

chest.

>> Whatever the balance of this account is

, it’s not as important as you

rightly say, but look, it’s still a

question of how much you have to pay in

bills and how much you have to borrow.

>> Yes. Yes, but we are currently in a

situation where it’s clear to

everyone that these trillion-dollar

deficits are not going anywhere;

that’s impossible. Accordingly, we

are entering this, like that Flydubai

flight where the two pilots were just

going at each other. So, you are

dealing with,

>> I still never understood if it was just

the crew, yes, those pilots or what, or

if someone...At first it was a

Ukrainian and a Russian, then it was

some guy who was shouting "Allahu Akbar

." In general, it was some kind of

>> very specific nightmare.

>> I gathered that the passengers somehow

got out of that story. Something like

that.

>> Ah, well, I stopped following it at

some point. So, anyway, I’m getting

back to my point. That’s why the

basis, in principle, it can be caught

at some point now in the initial stage,

because they introduced the Standing

Repo Facility. That is, if, in

principle, the large dealers’ balance

sheets are cluttered, which is a fairly

real risk in the current situation,

then, in principle, you will just go to

the Fed, and your refinancing is, in

principle, unlimited. And so, from that

point of view, the system is now much

more stable than it was in '08, because

these topics are actually well thought

out. But most likely, as usual, the

elastic on your underwear will snap not

where you expect and are holding it,

but somewhere else. So, it’s

interesting to see what will eventually

come of it. I agree with you. I am

ready, you know, to make a bet. If the

index hits 150, we will see some kind

of failure in the market. Someone will

be publicly dying out and liquidating

various kinds of positions.

>> Oh, that’s 100%.

>> I mean, it’s inevitable, you know. I

think that’s how it will be. I think

that’s our path. I think we’ve come

pretty close to it. And again, coming

back to the idea, this question worries

many: when to buy TLT or believe in

some story, I believe that we need to

wait for an actual

>> admission of defeat, you know, there

will be a window, it will be short, I

think a couple of days, maybe a week,

when it will be possible to do

something, but they will effectively

state that level. they’ll just say it

. And at this moment, yes, it is most

likely a super trade.

>> Yes, we agree on that. Well then, let's

move on. Uh, we won't drop by our

beloved Europe or the Baltics;

there’s nothing to see there. Uh,

it’s sad, sad, the elections are soon

. I don't know what you're talking

about.

>> It’s interesting what you all will

choose there. Will we even choose?

>> That’s how I would pose the question.

>> Wonderful. We have all these disputes

going on here, Friedrich Merz is really

catching flak. His rating is plus 11,

but the Germans are like that.

>> Well, of course, he is, you know, this

phenomenal bald guy. He is very

confident, considering his deplorable

situation. I watch his interviews,

it’s as if nothing has changed, you

know, he’s really pushing his own

narrative. It's amazing.

>> Look, the most interesting thing is

that despite his rating being around 10

%, 40%say he shouldn't leave his post.

Meaning, you're a jerk, but go ahead

and keep working—that principle. And

right now there is a huge scandal. Well

, sort of, this Friedrich Merz party.

There is a second young politician here

, Philipp Amthor. He's like in the top

five of the hierarchy there. And, well,

ARD or the German Channel One was

filming a four-part documentary about

Friedrich Merz's party. And this young

guy, he’s sitting right there in the

chancellor's building. He was showing

his office. It’s like a football

field out there on the balcony, which

overlooks the Reichstag, or it’s

located near the Reichstag. And he

shows that, like, the first thing he

did when he moved into this office, he

bought himself a so-called, uh, basket,

what is it called? A basket. A beach

basket. That is, on the northern

beaches of Germany, you have these

special seats, well, made like

armchairs, they look all enclosed. And

you sit like you're actually in a

basket. And you chill in it, look at

the sea, and all that. I mean,

seriously, it’s a rather expensive

pleasure. And he was showing it off,

talking about how wonderful, good, and

handsome he is. And then it started,

they say: "You've completely lost your

minds, we have diesel at 2.50, 2.60

here." And this guy is walking around,

in general, it's like Marie Antoinette:

"No bread? Let them eat cake." That's

how it turned out. And they are getting

slapped in the face from all sides

again now. In short, we have a lot of

fun here, but the real fun is in France

.

>> Well, it seems to me, it's the same

problems, the same story, that they are

absolutely indifferent to their

population, you know, they don't think

at all about the consequences of their

actions. Ah, well, I don't believe in

elections, if you ask me. I'm a cynic

in this sense, and I think that it's

the elites who decide everything

everywhere. The question is, what kind

of elites, what they are—party,

business elites, or some others,

cultural, religious, it doesn't matter.

>> Well, they decide everything. Uh, so

for me, for example, these successes,

uh, what is it, AfD, yes,

>> yes,

>> it's called, well, it's not the voice

of the people, it's most likely that

some elites chose these guys so that

they, well...

>> Well, it’s just an expression of

protest, because everyone understands

that everything else doesn't work.

>> No, first of all, it doesn't work, and

secondly, it's the voice of the elites.

For whom the rules of the game have

changed. You know, if their model used

to suit them, they earned more, then

it’s obvious that today these elites,

well, they were essentially told in an

ultimatum that the terms are different

now, that other people will be earning,

not you. And this is their reaction,

most likely, which isn't bad. It’s

like, well, it gives faith that, well,

market conditions, market rules are

returning, you know, you’re for

yourself, like, you want things to be

better for you. That's not bad, I think

.

>> You, my friend, are an optimist, it

seems to me, considering, well, look,

you...

>> Are an inveterate optimist.

>> Listen, if I weren't an optimist, I

wouldn't be able to do my job. Well,

it’s simply impossible. Well, I don't

know, I'm not an optimist at all, and

I'm doing fine.

>> Well, I am an optimist after all,

>> are you? Then, as an optimist, tell me,

please, what is happening and how do

you view the situation with French

bonds? What’s optimistic about that?

>> Well, it's the same thing. Well, it's

the same thing as with American bonds.

It’s a lack of demand for

long-duration. Duration. I think the

bond market as a whole understands that

we are getting closer and closer to

financial repression. And these numbers

, well, like, you know, okay, I just

don't remember how much the ten-year

French sovereign debt is yielding right

now. Well, how much, 4.5, maybe you

remember, I don't. Like, approximately

or how much? You don't know? Well, okay

, it doesn't matter, we could look it

up, but I'm incredibly lazy to do that.

The specific figure doesn't matter, we

can use the ten-year US Treasury note,

which also went up. Uh, what's the

point? These 4.5%won't cover future

inflation. That is the essence of

financial repression. That is why

>> that is why they aren't taking on

long-term debt. Yes, but you have a

different situation in France. The

Americans can manage and implement

their own monetary and fiscal policy.

The French are limited in that regard.

>> Well, Europe could do it in theory.

>> But can you imagine that in the current

situation, the Germans will bail out

the French, or will they most likely

give them the boot?

>> Yes, easily, I see it. That's easy. The

problem for both the Germans and the

French is that both France and Germany

are in the eurozone. Meaning they cut

off their own exit route by adopting

the euro. You can't even theoretically

calculate the consequences of leaving

the euro for an economy like Germany,

for instance.

>> Most likely, these would be negative

consequences, primarily for Germany,

and for Europe too, because it would be

weaker, not as export-oriented, and so

on and so forth. But it's also a myth

for Germany that it could somehow be

competitive on its own in current

reality. That would be something

impossible.

>> No way, what are you talking about? We

have all kinds of things happening here

, it's wild. Alright, right now, it's

mathematically impossible. It's not

just impossible. With some cheap energy

resources, one could still somehow

believe in it, but even then with

difficulty, because it’s not just a

matter of energy; it’s a question of,

you know, the internal system, policy,

compensation, labor costs, bureaucracy,

and regulation. Well, there are just a

bunch of problems there.

>> Yes. Yes. Well, that train has left the

station anyway, so,

>> accordingly, well yes, if you

understand that, well, listen, I don't

rule out absolute idiocy from the

authorities, right? I mean, any idiotic

decision can be made, but if you think

rationally, it's not really an option,

right? Leaving the EU is not an option.

And in principle, if you're saying that

France and Germany are clashing, then

that’s the collapse of the EU. Well,

that’s your favorite Khazin, that’s

his scenario, so to speak. Yes, Hans

Christian Leonidovich.

>> Well, "favorite" in quotation marks,

yes,

>> you just like to mention him. This time

I, you know, beat you to it.

>> Well, he is one of my favorite

conspiracy theorists.

>> He’s a good guy, honestly, he’s a

good man. Just understand the goal, I

didn't say anything.

>> You just have to understand his angle.

He seems like a decent guy to me.

>> I guess.

>> Yeah, I guess. Okay. And China, uh,

China is like, uh, shaky, the data is

poor. Fixes, I read today, Gavekal

wrote that they are starting mortgage

stimulus programs. So, apparently,

things are really bad there. And the

data, in reality, if you also consider

that they are most likely lying about

this data, then the situation there is

probably just completely dire.

>> Well, that's your old theory, that they

fake the data. Well, like, I was just

listening to Cofinas' podcast, Hidden

Forces, this week, and he had this guy

Logan W. on. He wrote the book "Broken

China," and I downloaded it, but

haven't read it yet. And he has, like,

a strictly Chinese focus, looking at it

from the perspective of political

dynamics, how the banking system

developed, and how the banking system

is funded. But what we see, say, in

China itself, is that while rates are

falling, you still have a sharp decline

in lending; consumer loans are dropping

, the speed of credit growth in the

economy is falling, and the rate of

investment is slowing sharply. In both.

And so you realize that this factor of

overproduction, which keeps this whole

structure relatively stable for the

moment, is just waiting for the moment

when all the other economies that are

supposed to absorb this start to kick

back and try to put a spoke in the

wheels. Well, like, relative to, maybe,

the US markets, maybe it doesn't look

so bad there from a long-term

perspective. But, uh, if you look at

the data, it's also a real "Oh boy."

Well, maybe the Chinese long bonds,

where yields everywhere else are rising

, but these are the only ones falling.

Well, that's super important, you know,

such a dissonance is not without reason

. Uh, a low rate is, first and foremost

, a sign of high demand for this debt,

actually. Well, if you think purely

mathematically in terms of the

price-yield ratio, well, someone has to

be buying them for the rate to fall.

You know, at that rate, someone has to

be buying them. Yes, but you have this

as an automatic allocation. If you are

a major financial player looking at

this economy, you have a complete

system of overproduction and an

extremely weak domestic consumer market

, what are you going to do when you

also have capital controls on top of it

—you can buy bonds and gold.

>> Well, it's conditional capital control.

I don't—I'm not, I don't believe in

it, that there is capital control. I've

had enough dealings with both Hong Kong

and China. Everything moves there, if

you want it to. But regarding the data,

they're not super, but they're not

terrible, right? I mean, they are, okay

, it's sort of...

>> probably not what the Communist Party

wants, but it's okay. If you look at

exports, exports are booming, right?

Whether they're booming because of AI

and all that, that's another question,

right? I mean, all that memory, all

that stuff needed to build all these

>> data centers and so on, it’s all

related, but exports are growing

regardless, and that’s pure money,

it's just pure, plain profit for China

as a state.

>> Yes, absolutely.

>> So, it’s not all negative, you know,

there is some positive too.

>> No, what’s interesting. Oh, right.

Sorry.

>> So. Yeah. And, well, listen, I like

China. We hold China. From a valuation

perspective, it's it's just that if we

had any portfolios with the yuan as the

base currency, I would buy their bonds.

Or theirs, or some state-owned

companies, you know, just because

it’s a clear story in yuan. And that

largely explains these low rates. I

mean, if you are trading with China,

you’re some big, you know, another

big country trading with China, you

have to buy everything in yuan, you

know? So, all these innovations of

theirs regarding the CIPS payment

system, bond issuances—I mean, they

regularly issue yuan bonds, right,

Hungary, or someone else, UBS, I saw

they issued yuan bonds. Why? Well,

because of the predictable monetary

policy and a large market that’s

ready to gobble it up, you know,

regardless. And from the perspective of

a financial institution, a small, small

interest.

>> Well, it’s only going to increase.

Well, if we're talking about the bond

part, yeah. I like the stocks. They

haven't moved anywhere all year. Even

down some, like minus 3-4%. But I look,

I look at these valuations, and for me,

it's just, you know, free money.

That’s what I would call it.

>> The most interesting thing is that a

report came out. And again, what we

don't think about, these huge IPOs that

are happening now, right, I mean they

have these, what do you call them,

these

>> Yeah. Yeah. And it turned out that the

financing structure of these startups

was always semi-state-owned. Meaning

the money for these startups was

allocated by these provinces. And it

turned out that one of them, I don't

remember, I always get them mixed up,

some province,

>> it worked, yeah,

>> they somehow squeezed out one and a

half annual GDPs of the entire province

from two IPOs. So all their real estate

problems quickly take a back seat.

>> Well, yeah, but the question, again,

you understand how this works. It's a

one-time expense. I mean, they'll blow

it on something now, and then it won't

be there anymore. Wait, but in fact,

they did earn it. Well, what

>> In fact, yes, of course.

>> Well, you can, like, invest in

something, infrastructure, build a

hospital there, something else. That's

cool. I personally really like the

Chinese model. The fact that it's

localized, you know, that you have

these local municipalities, it's clear

that like many countries, they are huge

, you know, these territories and the

number of people and money, but you

still have local decisions. This, I

think, is the right approach for

absolutely all countries. I am

generally in favor of everyone adopting

such an approach because it simply

makes life better. It specifically

makes your life better. You have, say,

a streetlight that isn't working. You,

you know exactly which guy to call to

get it working, you know? And that's

cool. I, I think this is a super

correct solution. I think it needs to

be implemented everywhere. Okay, I'll

say it.

>> You're a bit too kind today, my friend.

You're actually, you're raising, you're

raising, you're raising some suspicions

in me.

>> I'm causing disgust.

>> Ah, well, I don't know. I, okay, I will

change.

>> Question, question, the next question.

Then if we are talking about China,

then it's clear that all these topics

with artificial intelligence, I think,

maybe let's discuss this last and then

move on to questions. Uh, with

artificial intelligence, this whole

topic, with OpenAI. And that was the

article you sent me, right, about

>> about, about how this Son from SoftBank

, Masayoshi Son.

>> Yes. Yes. And how, and how, and how,

for the most part, the entire financing

structure is, by and large, dangling on

>> Yes, this could be such a critical

moment.

>> In a nutshell, guys, if that’s the

case, well, anyway, here’s the

article, I can post it in my Telegram

channel. The point is that the main

sponsor, or the financial backer really

pouring money into OpenAI, is

SoftBank’s Vision Fund. It’s

Masayoshi Son, who brilliantly financed

Wirecard, for which he almost got his

head torn off. But he decided that

wasn't enough, he went into AI, and he

did actually have success with Alibaba

as well. He caught Alibaba at a great

time, yes. And so it turned out that he

took out 40 billion in short-term loans

specifically for the OpenAI IPO. And

now, with the leak or the Wikileaks of

the OpenAI prospectus, which showed

some truly atrocious numbers—which

actually happened this week, right,

everyone looked at Anthropic and

scratched their heads, saying, "Guys,

what are you doing? You have 40 billion

in turnover and half a million comments

on all this." Well, it’s madness,

really. And now the situation is that

he needs to refinance this loan. Banks

are starting to experience...interest

rates have risen,

>> yes, absolutely. So right now, I

don’t know if he has refinanced or

not, but he currently has two loans on

the market at 8-9%interest, and the

banks are starting to get a little

shaky in the knees. So, if this

financing structure—God forbid—

encounters a liquidity stress and the

guy can't raise money to refinance,

this whole house of cards could

collapse. It might not collapse, but

the rates are insanely high. And

besides him, this huge private credit

industry is tied up in it, a huge

industry, with all the insurance

companies involved. These life

insurance companies. The money, when

you pay your monthly premium, is

aggregated and directed into these

private credits, into certain private

equity corporations. And by and large,

the risk there is spread out to such

levels that everything is hanging by a

thread. Defaults in private credit are

rising. The official data shows 6.3%,

but there is talk that about 50%of all

loans in this sector are in the

restructuring phase. Or, as they put it

, right now, they are, for the most

part, unable to pay interest. Loans are

being extended, and interest payments

are being reduced. So there is

definitely real stress there. The

question is when it will rise to the

surface. Last year it started with the

Blue Owl. A wonderful name for a bar

for the Latvian parliament, where could

one open it?

>> We don't need that, we have all kinds

of colorful people here.

>> Well, it characterizes it more or less

perfectly.

>> No, honestly, BL is a cool name, I

think. Why not? I can totally picture

the logo. Listen, real estate has a ton

of problems right now. Commercial real

estate, there are these constant

phenomenal stories, where something

cost 100 million in 2020 and now they

bought it for 15, you know, just crazy

numbers like that.

>> Yeah.

>> And that, I think, is the main pain

point, even if you add these AI-related

data centers, but that’s kind of meh,

yeah. Do you think they’ll drag it

out with Anthropic? Will they bring

them to market, or…

>> Well, I think they might bring them out

. It would be very in the spirit of

America to do that, you know, a final "

goodbye, America" kind of thing. Oh,

>> but who’s going to buy that? The

valuations there are absolutely insane.

>> Well, passive flows. Well, how does it

happen automatically? Well, it gets

automatically added to NASDAQ. S&P

dumped it, but NASDAQ will add it. Any

passive strategy tied to NASDAQ, one

way or another, will just buy all of it

, and that's it.

>> Well, by and large, they should pull

the stunt Musk did when he said NASDAQ

would take them in 45 days, not after

six months of profitability. And

everyone realized perfectly well that

it’s an excellent arbitrage. We get

in at one price now, and in 45 days,

passive flows will just take us out,

and we’ll be laughing all the way to

the bank. Or maybe you bought in on

some pre-round, you know, at a

different valuation. And you’re

waiting for this IPO to cash out. Yeah,

I think they might. It’s very much in

the spirit of the current American

approach, but it doesn’t change

anything. It just inflates the S&P,

NASDAQ, and the indices, but it

doesn’t make Anthropic profitable,

you know. It’s just, well, something

that’s waiting to be revalued in line

with reality. Or it will start making

money, yes, like Uber, for example. For

a long time, you know, it was there,

everyone didn't believe they’d be

profitable and so on, but then again,

you mentioned the drivers today who are

getting screwed. So again, how

profitable is it really? I mean, it’s

profitable now, but if all the drivers

died off, well, probably not. So,

>> uh, well, let's say it's just a vision

of the future. Scale is needed, then

people will start buying. I don’t

believe people will start buying this

junk en masse. I just don't believe it,

because, well, my experience—I'm not

claiming anything, I'm no "waifucoder,"

I don't make videos with it, I don't

make images, music, I don't do any of

that, you know.

>> For now, anyway. Personally, my

colleagues get into all that, you know,

they enjoy it. But I use LLMs in, well,

in my daily work, you know, for some

tasks. I use Gemini, I use that free

Google thing, and it, well, it solves

all my problems. And I believe my level

of prompts isn't, well, super high, but

it's above average, right? So, if it

solves my tasks, then it definitely

solves them for the average user. Why

would you need this ChatGPT? I mean,

you have these—and I'm not even

talking about the local Chinese models,

right? You know, the ones that are 10

or 100 times cheaper. Where is the ROI,

where is the ROI for Anthropic or

OpenAI? It doesn't exist. Objectively,

it's not there. I read last week that

Reuters is launching its own LLM.

>> So, well, you have competition coming

from everywhere, you see? It's coming

from everywhere, and you're just trying

to spin a narrative. I think all this

talk about them being, you know, some

kind of danger—like what Dario from

Anthropic was saying—that’s not

about danger at all. What kind of

danger could there be? There is no

danger, it's just a linguistic model.

It's nonsense. It's not

>> The danger is that he won't be able to

cash out in time.

>> That's his main danger. Yeah. Yeah. And

I think, well, how. What's the idea?

Let's ban some models that are

competitors, the ones that are cheaper.

And who are those? Right now, those are

the Chinese ones, yeah. And let's, well

, socialize all of this, right? So, if

anything, let the government give us,

you know, I don't know, loans or pay

subsidies, because we are very

important, necessary, and in theory, we

could destroy humanity. Yeah, I think

it's all because there is no moat, you

know, no barriers to entry for anyone

else. There's tons of competition, and

monetization isn't happening. So, well,

that's where,

>> that's where I think it all stems from.

It's more about just taking out those

guys

>> who are trying to get close to the

trough,

>> well, that's impossible. It's like

trying to fight the internet, you know.

Anyone who wants to will just install

the model themselves anyway. Well, you

can't fool people, right? You can't

force them to use this expensive stuff

of yours.

>> Wait a second, I'm being told we have

no sound. One second. That's something

new.

>> I hear you perfectly fine.

>> No, it’s just...

>> Has the chat been silent for a long

time?

>> Wait, wait. Just a moment. Oh. Don't

look, it’s not for long.

>> No, everything is fine.

>> They're lying, just turn it off.

>> No, I, I...No, I just checked the

YouTube stream. The sound is there,

>> everything is there.

>> Sounds like sabotage,

>> doesn't it? I see.

>> Who were you butting heads with? You

had some nemesis you were buying TLT

with, what was his name? That's his

doing. It’s him writing.

>> Listen, that TLT stuff ended 3 years

ago, and it just doesn't seem to die

down. You know, remember the narratives

? At first, I remember everyone...

wherever the information went,

sometimes I come across it. They used

to say 40%of companies in the Nasdaq

were zombies about six years ago. Then

we had a talk about very active zones,

>> right. Then we had a conversation about

Silicon Valley Bank and what's

happening with commercial real estate.

I was looking at this one bank in

America, and their exposure to

commercial real estate is just through

the roof. And now I see that the media

isn't covering the commercial real

estate market at all. And if you look

at it, you know, every six months, half

a year passes and everyone forgets

about it. There are no updates, nobody

cares. Everyone just ran off. Now it's

artificial intelligence. The question

is, what will be next? What's the next

topic? Well, probably,

>> you know, I think elections are

probably important in this sense,

because this administration has gone

all-in on this artificial intelligence,

right? I mean, it really gives a boost

to the GDP there. Well, there is a

clear political effect from this. I

don't know if it's true or not, but

yesterday someone was circulating a

photo on Telegram of Trump signing an

executive order on this

superintelligence.

>> Above the signature, it said "The

United". "

>> The United". Not "United", but "Unnited

States". So they managed to make a typo

in that document. Honestly.

>> Wouldn't surprise me at all. I almost

expect such mistakes from this

administration, you know, there have

been so many already, let's just finish

it off. But in the context of support,

well, say if the IPO doesn't go well,

for example, and, well, again, what

kind of IPO? You see, if they do an IPO

like SpaceX, that’s not really that

much money. So, yes, the valuation is

high, but the float is so small that

what, what does that change? It doesn't

change anything. You don't have any

more capital. You know, if we're

talking about that kind of IPO, it's

possible. If we're talking about an IPO

that has, well, I don't know, a 30%

float at this valuation, I don't

believe there's demand for that. I mean

, where would it come from? Who is that

? You need to sell something for the

public to buy it. And why? I just don't

understand why. Well, yeah,

>> that's why I'm so doubtful. But if the

elections are, say, negative for the

current administration, if there's a

Democratic Sweep or something like that

, well, I think support for this sector

will drop sharply right away. That's 2

years ahead of, you know, such

uncertainty. And these talks about them

bailing out Anthropic or OpenAI, I

think they become much more complicated

, yes, because there will be too many

questions. Why, you know, well, the

whole story seems to be getting more

complicated to me. And to what extent

do they need, if they aren't monetizing

and have some problems, to what extent

should they be supported by the state?

Well, I don't know. I believe that no

one should be supported by the state;

it should all be left to the market.

And as long as, if there's no demand,

there's none.

>> A beautiful future, that's what we're

going to talk about now.

>> Well, I would like to see a world like

that, you know, it's a better world, a

more honest world. It's just that

>> wanting doesn't hurt, as they say.

>> So,

>> let me, let me dream.

>> Yes. You are our optimist, after all.

Uh, let's run through the questions.

We've already been chatting here for an

hour, you and I. So, the first question

was—let me just write it down. The

first question was from Jeff Snider

about the yield curve. Uh, what to

expect? I wouldn't really want to get

into that right now. In general,

actually,

>> listen, sorry, let me interrupt you

right away. That was one of the few

pieces of Jeff Snider's analysis that

I've liked in his recent lectures. The

curve.

>> About the curve. It's actually true.

What he says there is a very good

observation. And the curve is lousy,

but to put it roughly, it doesn't

really signal future growth at all,

>> right. But unfortunately, Jeff has gone

a bit mainstream. And that's the most

disappointing part, because I've been

reading him back when he was at that

place in Alhambra, Florida, back then.

And unfortunately, he's just followed

the general path now. Back then he

wrote such intricate things that it

would blow your mind, it was so

interesting to read. Now he has drifted

a bit into the mainstream. But yes,

>> I was never a fan. But it's true, what

he writes about the curve. Well, listen

, if it stays like that, that's also a

question. It’s like that now, but

tomorrow everything could change, you

know. Yeah,

>> but yeah, it is interesting.

>> Gold.

>> Yeah.

>> It’s shaky, it’s shaky. People are

even asking about 3200, 3500 here.

>> Well no, I don't believe it. If that

happens, it's the opportunity of a

lifetime, if that happens. But I don't

believe that something like that will

happen. But I can easily see some kind

of test below four. Well, I don't know,

how much.

>> Well, that's the consensus. If we dive

under four, under four, then you have

to buy it all up like crazy.

>> Therefore, most likely, that won't

happen. I would say that gold is

behaving, well, unusually strongly,

considering what is happening. I mean,

if we really believe in those real

positive rates—I don’t believe it,

I’ll emphasize that again, I think

it’s absolute. But, let’s

say, if we believe that real rates are

positive, the rate hike cycle, the

dollar is strengthening a bit against

it, gold should be at 3500, but it’s

at 4200. And that, for me, is a sign of

strength. I think that, well, let's say

, this 4000-5000 range, that's

something to start from, it's what I

start from. If we see it well below

four, I will use it as a super

opportunity to buy more.

>> Well, in the long term, if we look at

the system and understand where all

this is heading, it’s impossible to

ignore gold.

>> It's impossible to pass it by. Yes, yes

, in that sense I really like the way

Triqul thinks—you know, the guy who

worked at Sprott, a well-known goldbug.

>> And he is very funny, he’s an older

guy, we’ve chatted a couple of times.

He’s cool, you know, a pleasant guy,

>> easy to talk to, he’s got a sense of

humor. And he always says, "Well, if

prices are lower, that’s great, if I

want to buy." It’s like, you know,

you get a discount at the store, but

for some reason people get upset, you

know. And he always laughs at that,

like, how can that be, you know: in a

store you're super happy about a

discount, but in the market you get

upset because you already bought it,

and now it's cheaper. You know, that

whole story starts up.

>> Well yeah. So I think that yes, if that

happens, then that opportunity must be

used somehow. I'm already ready to use

it, but I'm not sure it will happen.

Going below four is a lot to ask. I

definitely don't believe in 3200.

>> Well, you see, as an allocator, you are

more flexible. I'm just sitting with

those thousand bucks, and I have no

intention of getting out of it.

>> Well, that's great, perfect. So, in my

view, higher, higher, higher,

ultimately higher, for sure. The

question is the timeframe, how long it

will take, it could take years, and so

on. But

>> listen, I think it's the kind of

situation where you can be both; you

can be an allocator and also try to

catch these movements a little bit.

Well, we at least try, and sometimes we

succeed, though I wouldn't say always.

And I think it's easier for me to do

that because our derivative structures

force us to look at market valuation,

you know, what the market is actually

thinking, in that sense. And then it's

easier. I told you about that peak in

gold and silver,

>> but it was clear that if you were

looking in the right place, it was

obvious it was too much. It just

couldn't last that long.

>> It was clear that there had to be

>> some kind of pullback.

>> Exactly. And again, if you aren't

looking at these things, it's harder to

do and simpler just to hold. That's it.

But I wouldn't wait for 3200. 3500

might happen. Maybe.

>> What about crypto then? Crypto is

holding up well too. Bless you.

>> Yeah, it's holding up.

>> Even though with liquidity, as everyone

writes, there should be more liquidity

for crypto to fly, and here we are,

>> it's moving quite well even without

liquidity right now.

>> Well, from absolute, if we're talking

about Bitcoin, from the absolute local

low, it's higher. Yes,

>> it's higher by like, how much? It was

60, now it's 80, something like that.

>> Well, 50.

>> It depends on where you measure from.

If you measure from 120, then it's a

loss, right?

>> Yes. Well, in principle, over the last

couple of months it has really

>> bounced back nicely.

>> Well, from the very bottom, if you take

it, from the oversold, then yes, we are

like

>> But the discussion is leading from the

sun. Bottom or not a bottom

>> been and whether we will go lower or

not go lower,

>> I don't know. I won't pretend that I

know, but I still think it's a function

of liquidity. I mean, if we, well, and

again, yes, NASDAQ is at all-time highs

,

>> we can't forget about that, right? I

mean everything, all this tech stuff,

it's not like it's crashing, so why be

surprised that Bitcoin is a bit higher

on that, yeah. I don't see any

dissonance here at all. If liquidity

stays the same as it is now, I'd say

it's a negative factor for crypto if

nothing changes. It could change, sure,

they might lower the rate, I don't know

, start QE, Europe might also start

some QE, but in that case I think one

can believe in it. But again, for me

there is this NASDAQ S&P 500 factor. I

think we are somewhere at the peaks,

right? I mean

>> regarding NASDAQ, so you think the

markets

>> I think we'll have a good move to the

upside still.

>> Well yeah, you see, I have kind of two

opposing thoughts in this regard. On

one hand, I believe in debasement, I

believe that currencies are being

devalued. If currencies are devalued,

most likely productive stocks in that

base currency grow, you know, they can

be, like, tremendous, right? I mean,

you could have a negative repricing in

gold, for example, but higher in dollar

terms, but for that gold would have to

be, I don't know, 10,000, like, yeah,

that is possible. At the same time,

there are a number of metrics. that say

we are historically close to a top.

Well, for example, I'm showing you that

Investech guy there,

>> and he has this interesting indicator

of market depth. Well, internals, yes.

Like, how many

>> Winners vs Losers, yes, yes.

>> And it's at minus one, like, this

metric of his. This is, well,

historically it's a rare top signal.

And I can't ignore it, you know,

because historically it was like that.

Maybe this time it won't be, it's not a

one-hundred-percent indicator, but

>> no. The fact that we are at a top,

>> yes, that we are at a top, that's clear

, but if you look now just at, again,

some technical parameters, by and large

, the market breadth is very lousy. You

have a large number of companies that

are sort of trading at their lows, the

market seems to be holding up, you have

>> high concentration,

>> high concentration. But then again, if

you look at it from that logic, uh,

well, I'm not saying we'll know when,

sooner or later it has to crash

properly. But in the logic that if we

proceed from the fact that we've had

since about August, here, if you look

at the indices, many have seen a pretty

decent correction. And, accordingly,

one could say that a certain period has

just passed. we hit the lows from the

point of view of some technical

indicators. And in this logic, if we

don't see some super-mega stress, and

if we imagine, let's fantasize, say,

that, uh, Iran and Trumpy reached a

deal, that's a super positive thing.

And plus maybe, yes,

>> and plus, historically, those Octobers

that fell during Midterms, they were

basically all more or less bullish. So

from the perspective of the tops, it's

clear that everything is overheated.

From the point of view of this pullback

that we've seen in the last couple of

weeks, it could be just like when, in

COVID, everyone knew there would be a

vaccine, as soon as it was announced,

everything took off. So for you, in

fact, the probability that the level of

negativity already priced into the

market is so high—Rosenberg

calculated that, in principle, they've

priced in almost a 1%rate hike next

year with all these corrections. And,

accordingly, the possibility for a

reversal, a short squeeze in the

indices, or some positive momentum, is

huge. So I'm not saying it will happen,

but due to these extremes that have

formed, they could really produce a

positive picture. On the other hand,

you look at the VIX, despite it being

at its lows, with all this overheating,

the VIX is practically nailed to the

floor. And if it goes up, if the dollar

suddenly jumps, and we are at 101. So

there are many variables, which I

understand, yes, but still,

>> well, a rising dollar is hardly good

for the American market.

>> No, no, it's clear it's not good, but

in principle, everyone is long on the

dollar too.

>> Look, I'm not trying to predict where

the Nasdaq will be, or if it's a top or

not a top or anything else. I just have

, well, a dissonance, yes. I mean, on

one hand, I can easily see how indices

grow through the basement, well, your

purchasing power of currencies just

falls because it's being printed. And

history shows that in these cases, I

don't know, Weimar, Venezuela, well, a

bunch of these examples, when the local

currency crashed, and the stock market

index, well, company valuations grew

precisely because the currency was

devaluing. So that’s one side of the

story. If so, then stocks, most likely,

in dollar equivalent, if we're talking

about America, they’re growing, right

? But it’s like, you know, it’s the

same thing as financial repression on

bonds.

>> I mean, yeah, they’re growing, but

>> did you actually earn anything or not?

Well, you earned in dollars, but if the

dollar fell against some underlying

assets, then you didn’t earn a damn

thing. You lost, you know, it's the

same thing. And so, on one hand, I have

that idea, and on the other hand, I see

this overbought state, I see

concentration, I see poor depth,

breadth, call it what you want. I see

these rare, rare top indicators, right?

I mean, I see Ray Dalio, who’s saying

we need to ban everything around us.

And he has the best model in modern

times, which is not the best at all.

You know, if you compare price to

quality, and we know that it was the AI

hype that pulled this index higher for

the last two years.

>> So, there are a bunch of reasons to be,

well, at the very least, cautious,

right?

>> No, well, structurally, I absolutely

agree.

>> Well, yeah, and so I get this

dissonance. And when there’s

dissonance, well, the Solomonic

solution is, you know, don’t buy,

don’t sell, you know. I’ll watch,

I’ll watch what happens.

>> Alright. And how

>> and we, and we just started crypto,

right? I mean, if you believe that

Nasdaq is falling, well, significantly,

say 20-30%, I don't see a scenario

where Bitcoin grows. But

>> that is simply impossible,

>> unless, no, but if you don't factor in

the total dynamic that the world is

ending and people are running like in

the pandemic, something like that, I

can imagine it, but a dip will happen

in any case initially.

>> If, if during a pandemic, if they hand

out money à la pandemic, then

everything grows, right? That’s a

separate scenario, it’s not in sight

yet.

>> Okay. And how then, if we look at all

this complexity? You, your favorite

topic, oil. What, what do you think

about oil? Because, well, I see that

they aren't coming to an agreement with

Iran, some unclear signals are coming

in that something is being divided,

maybe they will agree, maybe they won't

. There’s a very serious conflict

going on between the Houthis and the

Saudis. And it seems like there’s no

end in sight to this nonsense there

either. I mean, if you look at it

structurally, uh, it's a nightmare. You

look at the spreads, diesel is over 100

dollars, uh, there's no diesel. There's

a Damocles sword over Europe that Trump

might slap an export ban on diesel. And

then what? Well, winter will be tough

regardless of what happens next, it

won’t be simple. That is already

clear today. You can make this winter

worse. It could be a warm one, just due

to weather conditions, or a lousy one.

If it's lousy, it basically makes

everything twice as bad right off the

bat.

>> It won't be a cakewalk, no, this winter

definitely won't be good. Uh, well, in

terms of heating costs and so on. And

the further north, the worse it gets.

So, if we're talking about our home

country, well, it's a total disaster.

>> Oh, I’m already waiting for people to

start posting winter utility bills from

Estonia. It’s going to be a very

amusing topic.

>> My family got lucky. I, well, sort of

shared that joy with you. We sold our

family house, and I am just so happy

that I won't have to think about those

bills, like, in the winter. I think it

will be bad. Regarding oil, well,

listen, since we started, we’ve been

talking about this oil the whole time.

You know my position on this,

>> that's what they're asking.

>> Ah, okay. Well, in principle, I would

separate crude oil from all the

distillates, because those are slightly

different markets, and they have their

own nuances. Well, like diesel or jet

fuel or something else. These are, like

, nuances of individual countries, well

, geography, or something else. I have

less enthusiasm for oil. We bought

heavily, well, to speak in direct terms

, we bought around 60-70. And in

principle, this story worked twice

since the last, well, since these

conflicts started. I think there is a

lot of manipulation in oil, both

through physical releases, well, the

strategic reserve, and so on. And from

the perspective of positioning on the

CME, it’s clearly visible how, long

before Trump's statements, someone is

shorting or doing the opposite. So,

this manipulation exists. Do you think

we've topped out on prices?

>> And I don't think we have. I think that

our floor has risen. If you remember, I

always, well, before, when we were

testing 60 and below, I always had this

idea that this was the floor, that 70,

60, 50, somewhere around here was the

floor. Simply because additional

production was impossible at those

levels. Well, roughly speaking. That