We've got Dan Drifus on the show. He's

with Fortnite Capital.

>> We're going to be measuring human

progress by how much electricity we

consume. The semiconductor industry, I

view that as an industrial or

infrastructure company. I mean, it's

effectively a factory. We try to figure

out where the world is going and then we

try to figure out what we're going to

need to get there.

In the next 10 minutes, I am going to

try to teach you about critical

minerals, commodities, our incredibly

fragile infrastructure here in the US

that is going to require trillions and

trillions of dollars of investment if we

want to achieve our technological

objectives, our reshoring,

re-industrialization objectives, and our

national security and military

objectives. news. But first, a little

bit of history.

We are at a very significant inflection

point right now in US economic growth

and what it's going to look like. really

from the early 2000s until just a few

years ago, the US went through

effectively what I think was an economic

miracle where we created so much growth,

so much market cap, so much value

without really having to invest any

capital at all. I mean, think of all the

companies that were created with no

capital. You had Google with the search

engine. You had Meta with social media.

They bought WhatsApp for $30 billion

with 12 employees, you know, no capital

whatsoever. You had the streaming

platforms. You had the food delivery

platforms. You had Apple computer which

was Capital Light created trillions of

market cap. You had software as a

service. Absolutely no capital required

to create all that value. And at the

same time we were creating these

companies, at the same time we were

doing that, we were literally tearing

down all of our critical infrastructure

and moving it overseas to China. So we

were really doubling down on that

capital light mentality. But then it

sort of started to come back to bite us,

right? We had COVID, we had the Russia

Ukraine conflict, we had the tariffs,

now we have the Iranian conflict. And

every time we had one of these

geopolitical flare-ups,

inflation spiked like a rocket. You need

a telescope to see how high inflation

went. And it never came down. And the

reason for that is we let our supply

chains get way too fragile and way too

weak. And there's no resiliency in the

supply chains. And now we're at this

inflection point where we want to

reshore everything that we tore down and

moved to China. We want to

re-industrialize. We have this

technological compute revolution that is

infinitely more infrastructure intensive

than compute was in the last

generations. And this is creating this

really wild demand shock for

infrastructural critical minerals

commodities at the same time where

there's a supply shock because we just

haven't invested in this stuff for so

long

now.

There are so many capital cycles going

on at the same time. I've never seen

this many going on at the same time in

my career. We have the aerospace cycle.

Boing and Airbus have a trillion dollars

of backlog over the next 10 years. Now

throw in the space economy which is

going to compete for the exact same

materials and backlog that Boeing and

Airbus are trying to source. We have the

grid right anytime it gets a little bit

cold in Texas. The Eurot the Texas

grid's not connected not connected to

the rest of the US grid. Every time it

gets a little bit cold that grid shuts

down and they're freezing in the dark.

Then we've got, you know, here in

California,

Paradise, California, that power line

that caught on fire and killed 300

people. Did you know that that power

line was over 106 years old? There's

parts of the grid in this country that

are over 106 years old. And here in

California, if half the people buy

electric cars or there's robo taxis and

we all go and plug them in at 6:00 p.m.

after work and turn up the air

conditioning, we're just going to kill

the grid. Boom. We're going to kill it.

We're all going to be sitting in the

dark. So, the grid barely works for what

we need it for right now. And we haven't

even started talking about the tsunami

of demand, electricity demand that AI is

going to bring. And there's power

generation. You know, we've let China go

and build multiples more power

generation than what we have here. And

this is a trillion dollar plus capital

cycle. That's probably going to be a

trillion dollars every 10 years for the

next 30 years. data centers. This is now

a trillion dollars per year. Per year,

all infrastructure, all all commodities.

Then there's semifabs. Um the CPU is

making a huge resurgence. CPU intensity

is is going up like a rocket. And and I

I bet you this number is way too low.

$750 billion. I bet you that's going to

be measured in the trillions. And then

there's defense, right? Everybody, you

know, Taiwan's turned into a porcupine.

Japan's raising their defense budgets.

Europe's raising their defense budgets,

the US raising their defense budgets.

What the similarity is amongst all of

these end markets is none of them will

work without critical minerals. None of

it. None of this can happen. And so

here's the problem.

Last April,

China announced that they were going to

cut off exports of some critical

materials to the US. Samarium,

Gandelinium, Turbium, Dprosium, Lutium,

Scandium, Yitriium, herbium, silver,

just cut it off.

And we're close to a lot of big

industrial supply chains.

and the cut off of Samrium cobalt

magnets, we learned that the Ford Motor

Company was within days, literally days

of their entire production line shutting

down, the whole Ford Motor Company. And

same with McDonald Douglas, too, by the

way. And this put people in the

Department of War, Department of Energy

into a panic.

And to their credit,

they're doing something really

aggressive and really important. They

are now going around to small resource

owners across the US and into Canada and

they're knocking on the doors of these

companies that were left for dead in the

last 20 years and they're saying here is

three pieces of paper. The first piece

of paper is an equity check that we're

investing into your company so that you

can go and start converting your

resource into a mine.

And then the company says, "Oh, that's

great. Wow, that's that's that's a

shock. But you know, the problem is I've

been waiting on my permit for the last

20 years. Nobody wants to give me a

permit. They say, "Oh, look at the

second piece of paper. There's your

permit. Go and start building right

now." And then they show them a third

piece of paper and then the company

says, "What's this?" And they say, "This

is an offtake agreement. Take or pay

with a minimum floor price that's going

to guarantee you a very high internal

rate of return on your project where you

can keep all the upside above the

minimum price. But here's a minimum

price that you can go out and raise a

bunch of capital to get this thing

fasttracked and up and running. Now,

China has an absolute grip. It's

absolute on all of these critical

minerals.

And it's going to take at least 10

years, probably 20 to catch up. But we

got to start somewhere because we just

can't have China leading over us and

squeezing our testicles every time that

we don't do something that they don't

like and say, "We're going to cut off

your exports. So, we're going to cough

our exports of critical minerals and you

guys are going to freeze in the dark.

So, I give a lot of credit to the

administration for doing this. And

really, you know, I've done commodities

now for 25 years and I've never seen

something like this happen before. It's

truly what I call a vuja day moment,

which is the overwhelming feeling that

none of this has ever happened before.

So, here's copper. This is the king of

metals. This is just one example. We

need copper for everything. You know, if

we want clean energy, you know, solar

power per megawatt takes five amounts

five times the amount of copper than a

typical base load CCGT gas fired

turbine. Same with wind, seven times the

copper uh data centers for a 1 gawatt AI

factory. Now, you need 50,000 tons of

copper per gawatt. And we're going to

start building 15 gawatts of these

things per year. Per year. So 50,000

tons per gigawatt and 15 gawatt is

750,000 tons of copper that we're going

to need for these things. Do you know

what the copper supply was last year? It

grew only 500,000 tons. And this is just

the data centers. Then electric cars,

you know, if we're going to have robo

taxis everywhere, an electric car

consumes five or six times the copper

than a traditional internal combustion

engine. And then there's the military.

In the Ukraine Russia conflict, did you

know that we used more explosives than

in all of World War II? Did you know

that? And the artillery shells of these

explosives, guess what they're made of?

One of them's called the copper head.

Very cleverly named after a poisonous

snake. They're all made of copper. Do

you think we go into the battlefield and

recycle that copper? No. That copper's

gone. So, we need this these metals for

everything that we do. Now, where are we

going to get it? Going back in human

history to Mohenjo Daro,

we have mined 700 million tons of

copper. 700 million tons of copper over

the past 10,000 years. Now, 80% of that

copper, we could probably get it all

back if we wanted, but what we'd have to

do is we'd have to tear down this

building. We'd have to rip up the grid.

We'd have to tear down the buildings in

Europe, in Japan, in China. And we could

get all that copper back. Sure. Then

we'd be doing this conference in a tent.

So how are we going to get it? Well,

right now copper demand is 30 million

tons per year. About 4 million of that

supply comes from recycled copper.

Copper the rest of it is 26 million tons

is mined. And if we just grow in line

with GDP, so forgetting about data

center upside, forgetting about green

energy, solar upside, just growing at

GDP like we used to. Now listen

carefully. That means over the next 18

years,

we're going to need 700 million tons of

copper. Over the next 18 years, we're

going to need as much copper as we mined

in the last 10,000 years. That means

we're going to need five worldclass mega

tier one mines coming online every

single year. And you can go and gro this

or chat GPT this. You can count on one

hand and have some fingers left over

uh the number of tier one mines that are

coming on between now and the end of the

decade. So I don't know what they're

going to do because it takes 7 to 12

years to build a copper mine. The

existing copper mines are dying. You

know, the big mines in Chile over a

hundred years old. The grades are

depleting.

And um this is going to be a major major

challenge and an upcoming bottleneck

right today. All the rage is in memory

and HBM and NAND prices are going

vertical because that's the bottleneck.

Now if you want to look around the

corner and see the next bottleneck

coming, I strongly urge you to look at

copper.

And so um here we are. A supply shock

meets a demand shock. Commodity cycles

typically last 15 years. and have

multiple hundreds% of upside. We're only

a few years into this. This is just

really getting started. And I want to

say one more thing, right? We spoke

about demand.

We're having this demand shock. We spoke

about supply. But what we haven't spoken

about is how we're destroying the value

of the US dollar. Since co we have

absolutely destroyed the value of our

fiat currencies. Today we have $40

trillion of government debt that's

growing at $2 and a half trillion

dollars every year. On top of that we

have a hundred trillion dollars of

discounted present value of the future

social liabilities. So Medicare,

Medicaid, Social Security, pensions

that's also growing by $2.5 trillion a

year. So you have two half trillion of

growth on the federal debt, $2.5

trillion of growth on the social

liabilities. The US government only has

$5.5 trillion of tax receipts every

year. And so what's going to happen the

next time we have a recession where tax

receipts go down and spending has to go

up, we're going to print giga dollars.

And in the 1970s, we had this problem as

well. And the way we did it is we just

debased the currency through some

inflation, through some growth. And the

currency lost 70% of its purchasing

power. And commodities and hard assets

and infrastructure will protect your

purchasing power in that kind of

environment. Go and look it up in the

1970s. What was the best performing

asset class by a mile?

That's your homework. So with that, uh,

thank you and, uh, look forward to

chatting with you guys.

>> Shabbat, I think on the prediction show

you, um, did was your call I forget

which category it was, but you

definitely had

>> I thought the best performing asset was

going to be copper. Yeah.

>> Yeah. Pretty

>> And that's before I talked to Dan.

>> That's right.

>> Which is saying something. Well, you

know, I I think the copper price is

easily going to double from here. I

mean, I've seen I've seen malibdinum go

from a dollar a pound to $33 a pound.

So, a double is no big deal.

>> Yeah.

>> And so,

>> take a take a step back. You said

something really interesting backstage,

which is if you look at everything that

we're doing right now, we're barely

going to keep up with just the natural

energy demands of of humanity, right?

just explain that thesis the way that

you framed it in the back.

>> So, here's the issue. We have not

invested

in upgrading and modernizing and

hardening the electric grid since post

World War II. We just let it go. You

know, the last two, three, four

administrations were sleepwalking and

haven't done anything to harden this

infrastructure. Now, if we simply just

want to achieve our objectives to

re-industrialize,

reshore, electrify, when I say

electrify, that just means replacing

your old gas boilers in these buildings

with heat pumps, which every commercial

building is doing. It means, you know,

electric car penetration going up. It

means using your your your electronic

devices more. Not even talking about AI.

Not even talking about AI. We're going

to have shortfalls. just from that.

>> Just from living our life.

>> Just from living our lives.

>> So, what happens? Blackouts, brownouts,

>> blackouts, brownouts, and we're going to

have to

>> rising electricity prices.

>> Rising electricity prices. But, you

know, you brought up a really great

point I thought on one of your shows

where you were talking about how the

utilities are just really gooseing up

the cost to do everything so that they

can report to their regulator and earn

that ROE on the higher capital base.

What's really interesting I think is

really underappreciated

is that's where all the inflation is

coming from. It's from the transmission

and distribution from the utility

because power prices over the last 20

years, even after the rise we've just

had, power prices are still down.

They're definitely down in real terms,

>> but they haven't really gone up much in

absolute terms. And so when you're

talking about going up,

>> making it is still cheap. It's getting

expensive.

You're getting it to people because you

know the labor the labor by far in a way

is the biggest bottleneck. Craft labor,

right? What do we tell all our kids to

do

>> you know in in the last 10 or 15 years

they liber

the northeast? Yeah. Big mistake. And so

I'm curious um from the audience in your

homes how many people have put up solar

andor power walls? How many people have

actually done that? So that's about half

the crowd. How many people, second

question, are planning to do that in the

next year or two. Okay. So that's

another 20%. So it's pretty obvious this

is obviously a fluent crowd. They are

routing around the grid. Is the solution

to this energy independence in the

>> great you know the home in the business?

Businesses are not waiting for the

government. So maybe the grid is going

to be like this weird archaic

infrastructure and it's just going to be

a groundup solution.

>> Well, you're going to need the grid no

matter what for industrial use. I mean,

that's that that's the foundation of

industrial use. I mean, the scale of

what we have to do just for industrial

use. Here's a good stat for you. So, a 1

gawatt AI factory if you wanted to do

all solar, right? And I'm a big solar

bull, okay? If you want to do all solar,

because solar's capacity factor is 20%

because the sun doesn't shine all the

time. With a capacity factor at 20%, a 1

gawatt data center needs 5 gawatts of

solar. Each gawatt of solar takes up

7,000 acres. So at 5 gawatt, that's

35,000 acres. That's bigger than San

Francisco. So where are you going to

find the people? You know, where you

going to find that's that's the biggest

bottleneck we have, by the way, is craft

labor.

>> Yeah. What about generally scarcity

breeds innovation? there's been a

conversation or I've seen some startups

that are talking about new technology

and mining to access I think

traditionally rare earth uh is kind of

the pitch but everything we need is in

the earth below us it's just that we

only mine the stuff that's on the

surface is the the general thesis is

there a set of innovations that you

think are coming to market that are

going to ultimately unleash more

productivity than we see because we're

still using the same technology we did

100 years ago to get this stuff out of

the ground

>> for for some commodities. Yes. You you

brought up rare earths. So So coming out

of the 14th century, there were these

guys called alchemists. Remember then

they said they could turn lead into

gold. And back then the periodic table

was just four elements. There was water,

there was fire, there was air, and there

was earth. Now fire, you could figure

out what it was. The air was pretty

pure. The water was pure. But every time

they saw something in the earth, they

didn't know what it was. They called it

a rare earth. And so rare earths are

everywhere and the technology to extract

rare earths is going to allow us to have

a huge abundance of them. But the

problem is processing them. That's the

problem. The Chinese have all the

technological knowhow to convert what

you take out of the ground and convert

it into something that we can use. And

so there's always going to be, you know,

some element of conversion that you're

going to need with something like

copper. the market is so big that it's

really difficult to find a technology

that could solve that problem overnight.

>> And if we are having just to thread a

couple of topics we've been talking

about on the pod incessantly about if we

do have uh this rivalry with China and

they are the provider and that's the

brittle part of the supply chain we can

solve the problem of job displacement

not apocalypse displacement.

people in America who want jobs. These

are going to be incredibly high-paying

jobs. And we can start bringing the fabs

from Taiwan here, which we're doing. And

we're going to bring both to North

America and I understand South America

from a friend of mine who's got an

automated um mining um system. Uh Adams

Travis, we're going to be able to just

create a large number of jobs here. So

maybe you could talk a little bit about

what impact we keep talking about how

behind America is, but what happens to

China if we stop buying

>> here and we start

>> building what you said is is is very

important for this whole jobs debate.

The craft labor that we're going to need

is going to be

almost limitless for what we have to

build. And there's really no other way

around it, right? The the you know, in

many ways, like look what happened in

the 2000s, right? We tore down all our

factories and moved them to China. And

who got killed by that? It was the blue

collar craft labor. It created all kinds

of unintended consequences. Fentanel,

uh, you know, wealth gaps.

>> Pennsylvania.

You know, the coasts were making all the

money in the heart of the country. the

salt of the earth was was getting

killed. What's ironic today is that same

part of the middle country, those people

that got displaced are now getting entry

level salaries. You know, if you go to

Quana University and you're top of your

class, you're starting out at 150 grand

right out of high school. And the jobs

that they're doing, ironically, are the

jobs that may or may not be displacing

some of the early, you know, lower level

white collar labor. And so, so the

tables the tables have totally turned.

And so look, it's it's an it's an

efficient market. The jobs are going to

flow where the money is and the money

right now is is really coming into this

area.

>> Can we talk about a couple of other

areas? What's your take on

uh other forms of energy? Not gas, coal,

nuclear, hydrocarbons.

I mean the demand pool seem like if just

based on this maybe the most reductive

takeaway is everything.

But then how do you Dan differentiate

like why were you why did you say for

example you're super bullish solar? What

are your thoughts on nuclear? How do you

trade all these off these different

sources of energy?

>> So we're we're swimming in natural gas

in this country. We can build solar uh

you know that's that's not the

bottleneck and nuclear you know we we

can't really build it. We can't even

build the containment vessels in this

country. The Koreans can do it but we

can't do that here. So there's always

going to be these big bottlenecks in the

system. And whether you're talking about

solar, whether you're talking about NAT

gas, whether you're talking about

uranium, we're going to have the raw

inputs like the natural gas that we

drill from the ground. But what we're

going to be short of is the critical

minerals to build the nuclear power

plants. We're going to be short the

silver, for example, to build these

solar panels, especially if we start

launching data centers in space, right?

These are going to consume incredible

amounts of silver. But right now the

silver supply demand dynamic is we

consume a billion2 ounces a year. We

supply a billion ounces a year. So

there's a 200 million ton deficit per

year and we only have 600 million of

above ground inventory left. So the

clock's ticking. We got three years left

guys before we just stock out. And then

the solar story is where do you get the

silver for the photovoltaic cells? So

for our kids and for the country

generation tool belt for us allocating

get some exposure to copper silver

minerals and then there's a bunch of

service providers in and around that

area that we should be investigating

over the next year.

>> Don't forget the labor the service

providers that's a big one.

>> Okay. How do you allocate capital?

You're at the front end of owning what

mines and production but then also the

end use cases. Like how do you decide

where to not play? Because a lot of

these things, it looks like these are

incredible end markets, but you can get

run over. Like if you're in the wrong

part of the market,

there's supply shocks, there's supply

shaping by China, there's price dumping.

It can be all obvious and you could make

you could lose a lot of money, too.

>> Yeah. Look, you really have to

understand supply chains. And I think I

think to a lot of people out there, the

supply chains are this sort of weird

mystical concept. And I still think a

lot of urban Americans still think a ham

sandwich comes from the refrigerator.

and they don't think about the 30

million pigs every month that are

getting slaughtered outside of Chicago.

>> Don't get free started.

>> But, you know, you got to understand

where the pinch points are in the supply

chain, number one. And number two, I

think you have to really make sure that

you're not going to get technologically

disrupted where you can find, you know,

I think this was to Freeberg's point

where you can find something that's

going to replace that tightness in the

supply chain.

>> Give it up for Dan.

>> Well done. Very, very informative.

Thanks, bro.