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This episode is brought to you by indeed. Stop waiting around for the perfect candidate. Instead, use Indeed sponsored Jobs to find the right people with the right skills fast. It's a simple way to make sure your listing is the first candidate. C. According to Indeed data, Sponsored Jobs have four times more applicants than non sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsored job credit@ Indeed.com podcast. Terms and conditions apply.
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A KFC tale in the pursuit of flavor the colonel made his $10 Tuesday bucket so full with eight pieces of juicy, crispy chicken or tenders that it might just last you till Wednesday. If you've got that kind of self control. I mean some people want leftovers, others are more into right nowers. The Colonel lived so we could chicken 10 bucks 8 pieces. One big deal with KFC$10 Tuesdays prices
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and participation may vary.
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Taxes, tips and fees.
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What does it really mean to be a neighbor? It's just everyday people, you know, it's just people who are retired. They have a couple hours in the afternoon, so they're gonna do patrols. And it's people who are, you know, real estate agents, you know, driving around like trying to track how ice is moving and alert neighbors when things are not safe. The rise of mutual aid in times of crisis. That's this week on Explain It To Me New episodes Sundays, wherever you get your PODC.
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Today's number? 219. That's how many hours it takes on average for adults to go from friends to best friends. Today's other number is 1,000. That's how many hours I've spent with Scott Galloway. However, I still haven't made it out of the acquaintance zone.
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Money market madness.
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If money is evil, then that building is hell.
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The show goes on.
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Welcome to welcome Back Crafty Markets. I'm Ed elson. It is February 19th. Let's check in on yesterday's market vitals. The major indices paired gains after the Federal Reserve minutes were released. The official record of their last meeting revealed rising concerns over inflation. It also shows several officials may want to raise rates if inflation persists. That news sent treasury yields climbing. Meanwhile, Bitcoin fell to roughly $66,000. Okay, what else is happening? Anthropic and OpenAI have grabbed most of the headlines recently, but Chinese companies have been busy releasing very powerful AI models of their own. It seems that Lunar New Year, which began on Tuesday, has become China's unofficial launch season. Alibaba kicked things off with Rin Brain, a model designed to help robots understand the physical world. They also unveiled Quen 3.5, a coding and agent focused model that is up to five times faster than its predecessor. Meanwhile, ByteDance dropped Sea Dance 2.0, a video generation tool, as well as Dubao 2.0, its deep reasoning model. And then Zhipu released GLM5, which is engineered for agentic intelligence, the through line behind all of these announcements. All of these models are reportedly matching and even beating U.S. competitors on multiple key benchmarks. Okay, here to break down this season of launches, we're speaking with Profg Media's very own Alice Hahn, host of the China Decode podcast. Alice, good to see you.
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Hi, A.D. and happy new Year. Happy year of the Fire Horse.
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D
Happy year of the Fire Horse. That seems to be part of the story here, which is right as the lunar New Year shows up, we see tons of new models coming out from these Chinese companies. These new AI models, Sea Dance, Duba, GLM5, I mean, a lot of these names are kind of dominating the headlines, at least in China. What do you make of these new AI models that have come out of China? How important are they? What do they mean for consumers and investors?
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F
Well, Ed, it's definitely true that Chinese AI has bolted from the stables, to borrow a horse metaphor. And as you rightly say, we've got a couple of models that have just come out, Japan's GLM, we've also got Quinn, the new Qin 5 Max model that's come out. We've also got new AI video generation models that have taken Hollywood, I think, by huge surprise and shock and consternation. But generally, when I look at the models and I've been using them in the last few days, what's clear to me is that they have improved, they are faster, they are more cost effective. If you obviously compare them to the closed proprietary models offered by OpenAI as well as by Claude, for instance. But really my frustration with this debate is that it's apples to oranges people are going to use the Chinese models differently. I think the fact that Brian Chesky, the Airbnb CEO, says outright a couple months ago that a lot of these engineers are using this for agentic chatbots because it's cheaper and faster seems to suggest that the use cases for this are very different, the Chinese models, that is, than the American closed models. Firstly, a lot of engineers and just everyday people are using and experimenting with the Chinese models. Quinn, for instance, they're downloading them locally, fine tuning them, and using them for their particular use cases, any kind of projects that they may be involved in it's got improved privacy because they're downloading it locally. It's cheaper, often 10 to 20 times cheaper than what's offered by OpenAI and Claude. So really they're using this very differently from say potentially you and me, Ed. I use Claude a lot, the enterprise level, because the reasoning is exceptionally good when it comes to the geopolitical analysis, the financial analysis that I'm involved in. So the way that I think about it is that the American models are really focusing on precision, on reasoning at the highest level as a really quest for AGI. The Chinese models are really figuring out how to create a market in which everyday people, engineers, corporates even are downloading them locally, experimenting, fine tuning and just capturing the benefits of cheaper, faster models. So I don't think there's a direct comparison. I think that a market exists for both these models, so to speak, to coexist.
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D
One of the things that we're also seeing is just the benchmarking. I mean, I can't tell how seriously I'm supposed to take these benchmarking leaderboards. It seems that things are constantly shifting. But when you look at the leaderboards, when you look at the stats on which is the best model, which is the best performing, the fastest, however you define best, I'm not sure how they define it. The Chinese models tend to be the best, or at least they tend to be at the top of the rankings. What do you make of that? Does that mean that the Chinese models are better? Does that mean they're going to overtake the American models? Or again, is this perhaps maybe apples to oranges and these benchmarks maybe don't make sense?
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F
Well, I love that you asked that question, Ed. I think often that the benchmarks can be red herrings. There's a good Harding principle in computer science that is applied to this which suggests that even although they may meet those benchmark goals and exceed the other models, there are certain unquantifiable goals and performance outcomes that they may still be inferior in certain respects to the clauds and the OpenAI's of the world. So again, back to my previous point. I really think that if you care about privacy and cheapness and speed, maybe you go for Quinn, you go for Japal, you go for Kimmy. But if you care about frontier cutting edge reasoning precision, then you are still going to favor the clauds and the OpenAI's. So it's really different universes that they inhabit. And I think benchmarks can often be red herrings, even although there's incentive for these models to come out and say that we're exceeding the benchmarks of other rivals and competitors. But again, cost is something that is directly comparable. It's no surprise that the Chinese models are 10, 20 times cheaper. And I think that that with cost deflation, inertia will continue to favor the Chinese.
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D
At what point will the, will the cost really change and shift the way the market works here? I mean consumers, I think they know about OpenAI, they're beginning to know about Anthropic and learning about Claude. So there's maybe some brand loyalty there. But, but I feel like at a certain point if you're presented with an option that is 10 or 20 times cheaper, you go with that option. So I guess what I'm a little confused about is when is that going to happen? Is that not going to happen? Is that not a giant concern for a company like OpenAI or Anthropic or even Google with Gemini?
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Yes, yeah. But I do think when we look at technology diffusion and value creation, the way that the software economy really came out of the US and US dominated that and the value created by software, it's really I think going to be the clauds and the OpenAI's that benefit from the enterprise part of the value chain. The enterprise can pay for it and they tend to be stickier in terms of the subscription. So I think that we'll end up in a world in which maybe the majority of the value is captured by anthropic, by OpenAI. But that doesn't mean that there won't be anything left in the table for Alibaba, for ByteDance, for Kimmy. It's just a different market that they're inhabiting. And we haven't even talked about some of the other use cases. There's now Chinese AI Chatbot toys. That is going to be a big market I think and certainly it marries well with China's manufacturing and hardware capabilities. You said toys, so they're toys. Yeah, they're these toys that are being sold that can speak directly to children and teach them and interact with them. I don't know if you've ever read Neal Stephenson's dialogue Diamond Age, but it's this kind of AI primer that is part of this story. We're already living in that diamond age, so to speak, in this sci fi realm that is one area and then another area in which the, the I would say OpenAI and Anthropic have not been as competitive is in multilanguage. If you look at the models coming out of China, it makes sense because they've been trained a lot on, on multi language English, Chinese and other language data sets. They tend to be better at, at other languages. And so if you're a, a global company where you care about a Chinese Asian speaking market, that could also be quite an important distinction.
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D
One name we haven't mentioned which was very popular about a year ago, seems to be less popular today is Deepseek. Where does Deepseek sit in all of this?
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Well, I think Deepseek is still a leader. They still have a lot of the high level AI talent and that counts a lot when you think about the AI competition domestically and globally. I do know for a fact, although I'm not sure if I should say this, that Deepseek is working a lot with local governments, with government bodies in China to integrate AI into local public governance. And I think this is coming at a time where you know, Ed will be watching with bated breath in the next two weeks or so because the 15th Five Year Plan is going to come out and it's very, very clear now that AI plus is going to be a huge cornerstone of the policy for the next five years. So AI in every realm, including in public governance and public service and utilities. So Deepseek is still a player, but I think the latest models coming out of Alibaba, even Kimmy, show us that in China at least, the AI race is hyper competitive. It's not just a duopoly or even centered around three players, which is increasingly what's happening it seems in the US is many different players and I think they can capture different parts of the market.
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All right, Alice Han, co host of the China Decode podcast. Alice, thank you. Appreciate your time.
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Thanks so much, Ed.
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After the break, the Euro may take on the dollar. And for even more markets insights, you can subscribe to my weekly newsletter. Simply put@edwardelson.substack.com.
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We're back with Prof. 2 Markets. President Trump's chaotic trade policy has rattled Europe and some countries are weighing new methods to push back. For Sweden, that means reconsidering its use of the krona as its currency and switching to the euro. The country's finance minister just backed a formal inquiry into euro adoption, which would strengthen the country's trade ties to the EU. A full embrace of the EU's common currency would also be a vote of confidence in the euro. Euro just as the dollar's dominance has fallen into question in the past year, the euro has climbed 13%. Meanwhile, the dollar has declined 9%. So for more on what this currency plan in Sweden means, we are speaking with Robin Brooks, senior fellow at the Brookings Institution and also former Chief FX Strategist at Goldman Sachs. Robin, thank you for joining us from property markets.
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C
Yeah, my pleasure. Thanks for having me.
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So this is decision or we haven't reached a decision, but at least Sweden appears to be mulling over the prospect of ditching the krona, which they've had for years, and moving over to the euro. It appears that this kind of has to do with the relationship between the US And Europe or at least global uncertainty. This seems to be somewhat a response to that. Take us through why this is happening. Why is Sweden considering this?
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C
So, as you know, a bunch of European countries got together back in the 90s and they decided to form a common currency. The euro was formed and began in 1999. There were a bunch of countries that did not join the euro when it was created. The uk, where I'm guessing you have a little bit of a connection, and then Sweden, obviously, Denmark, Poland, Czech Republic, Hungary. So it's not first of all any kind of outlier status to not be in the euro. Countries at the time had referenda on whether joining the euro was a good idea. Sweden did one in 2003 and it was rejected by a margin of 56% of the vote was against joining the euro. The margin in terms of popular opinion polls now has moved in the direction of joining the euro. You're totally right about that. That's mostly about geopolitics. So a fear that in particular Russia's invasion of Ukraine just makes the world less safe. The US is less of a predicament, predictable ally. And so it must be that some Swedes think joining the euro gives you that extra safety. I think that's. If that is what's going on, then I think that's poor reasoning because the euro is really just a system of currency pegs. It doesn't confer any kind of safety. You just have to ask the Baltic states, for example, Estonia, Latvia, Lithuania, do they feel any safer from Russian invasion because they're members of the euro? No. Poland. The finance minister just said, we think the Euro is a great idea, but we prefer to be on the outside than on the inside. So I think whether or not from a geopolitical point of view this is a smart decision, I think is totally up in the air.
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D
It sounds like dumping the krona. Taking the euro would mostly be a symbolic gesture to say we stand with euro Europe and that it wouldn't really have much impact or whatever impact it would have would maybe not even be good for Sweden. Is there an element of de dollarization or debasement in this whole conversation? I mean, one of the big themes we've been exploring recently is the fact that increasingly people are wary of the dollar. They're concerned about debt levels in the us they're turning to things like gold. And I just wonder if the euro as the next most popular currency, if there's an argument to be made that we should be transacting in euros, maybe people in Sweden think that that's the reason why you switch over to the euro. Is taking on the dollar a part of this conversation at all? Or is that also a red herring?
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First of all, I think you're asking exactly the right question. There's a survey of central bank reserve managers. So these are. Picture all the sovereign wealth funds in Asia, all the central bank piled up tons of dollars in other foreign exchange reserves. These guys manage trillions of dollars. And this survey is done by the imf. It's once a quarter. And it surveys what is your allocation of your reserves to dollars versus Euros versus Swiss franc versus Swedish krona, et cetera. And the amazing thing is that with all the noise last year, you know, just think back to Liberation Day, the big drop in the dollar in April 2025. And then, you know, as we went through the year, the altercations that President Trump had with the Fed. The massive rise in gold prices that we saw after October. In particular, the allocations that foreign reserve managers are making to the dollar have been totally stable. There has been no flight from the dollar. There's also been no flight into the euro. That's pretty remarkable when you think about all the noise that we've had. So I think the lesson that I draw from that is the hurdle for the dollar to lose reserve currency status for there to be serious dol placement. It's pretty high. But again, for Sweden, this is a really big opportunity. Sweden traditionally has always been considered kind of a high beta currency. It's super volatile. You didn't really want to hold it because it banged around all over the place on news most recently. So over the course of the last six, nine months, the Swedish Krona has started trading like the Swiss franc, so like a safe haven currency. So when global uncertainty goes up, for example Liberation Day tariffs, Swedish Krona actually does well. So I would put the Swedish krona in the same bucket as gold, silver, platinum, you name is this safe asset. What exactly is going on with dollar debasement, I think is a separate question. Incidentally, the DOL is up today because the FOMC minutes talked about hikes and that surprised the market. So I think there's clearly a flight to safety. What exactly people are fleeing from isn't quite clear yet.
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D
Yeah, it's interesting because I mean foreign exchange currencies, these are conversations that are typically in the purview of investors, Wall street think tanks, economists, et cetera. But the de dollarization question has generated a lot of heat and a lot of people are interested in it. And I think because it communicates a possibility that this world order that we've all known and lived with for so many years, where the US is the dominant power, there is a hegemony of America. It's reflected in the strength of this currency that that may be coming to an end. And I would add a lot of investors, investors are making trades off of this macro possibility, which is why we're seeing what we're seeing with gold. But it sounds like you as a real currency expert, as the chief FX strategist, former chief FX strategist at Goldman, it sounds like your view is that maybe this is a little bit overdone if you're actually looking at the global reserves of the dollar, that actually this is more kind of bulk than butt. Right?
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C
Well, we know that in the United States fiscal policy is kind of out of control. Yeah, debt is On a trajectory that is not good at all. Deficits are out of control. The thing is, that's true for many other countries, too. Yeah, everyone is in trouble on fiscal. And so in a relative sense, the United States is worrying, but relatively speaking, it doesn't look that bad. So when you look at, for example, risk premium in the bond market on Treasuries over other comparably measured government bonds in other countries, actually, the United States smells like roses. That sounds crazy. So I think where we are is that there's a debasement trade trade for sure. It's just not clear whether that debasement trade is against the dollar or against all fiat currencies together.
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Yeah, I think the question I always return to is, sure, maybe it's bad. What's your alternative exactly? Is it the euro? Is it the yuan? Is it bitcoin, which is also kind of bad as a form of currency? Is it actually gold? These are all, all very interesting questions. We are out of time, but thank you for joining us. Robin Brooks, senior fellow at the Brookings Institution.
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Thank you.
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D
So yesterday we discussed this feud that is unfolding between the AI company Anthropic and the Pentagon, or more specifically, the Secretary of War, Pete Hegseth. And before we end here, here, I'd like to unpack that story a little bit because I think it tells you a lot about where we are in this AI moment. So just to refresh your memory, one of Anthropic's biggest customers is the Defense Department, which is paying hundreds of millions of dollars to use their AI tools. But as of this week, Secretary Hegseth has threatened to cut ties with Anthropic. He has even gone so far as to put them on the supply chain risk list, which is a label that is usually reserved for foreign adversaries. They're also threatening to cut ties with any company that does any business with Anthropic at all. In sum, Anthropic is now on the administration's shit list. They do not like them. The question is why? Well, it all centers around two main disagreements. Number one, Anthropic has told the Pentagon that they do not want their technology to be used used for autonomous lethal weapons, I. E. Robots that kill people. And then, number two, they also don't want their technology to be used for domestic mass surveillance, I. E. Spying on American citizens. And according to the Defense Department, this is a deal breaker. In fact, such a deal breaker that they now view Anthropic as a potential risk to America. America. So there's A lot that is concerning about this, the fact that we're now requiring that AI be used for things like drone strikes, also that we're requiring that AI be used to spy on Americans and surveil them. These facts are scary in and of themselves. But what is perhaps more striking is the hypocrisy here. The fact that this is coming from an administration that has long stated that this is exactly the kind of thing we need to avoid the threat of, of government surveillance, of big tech surveillance. Trump himself said that one of the goals of the campaign was to, quote, monitor our intelligence agencies to ensure they are not spying on our citizens. Jim Jordan warned of the, quote, collusion of big tech and big government. J.D. vance, the Vice president, cautioned about companies, quote, using artificial intelligence to surveil Americans. He said, I worry about invasions of privacy. So this is exactly the thing, thing that MAGA was supposed to prevent, this collaboration between the government or the deep state and also with technology companies to surveil the American people. And now we find ourselves in this very ironic position where an AI company actually doesn't want to move in that direction. They don't want to surveil citizens. They're down to work with the government, but they're not down to spy on Americans. And for that, that they are being punished. Now, we can dwell on the hypocrisy here. It is quite striking. But that might also be missing the point. I think the larger point is we now know where this is all headed. And that is despite the virtue signaling, arguably from both sides, about the need to rein in big tech, to reduce the surveilling powers of the largest corporations and of the government. I think it is pretty clear now, now that is not going to happen. AI will be used for weaponry. AI will be used for autonomous, lethal drones and operations. AI will be used to track Americans, to spy on Americans, to surveil Americans. This is simply where we're headed now. And I should also be pretty clear here. Most other companies aside from Anthropic, are on board for this. This companies like OpenAI, companies like Xai, Google, and of course, Palantir, they are all down. Now, the only thing that might get in the way here is the same thing that I wrote about in my newsletter this week, and that is the American people. As I've written, AI is becoming increasingly unpopular. Less than half of Americans say they like AI. Less than a third of Americans say they trust AI. And it could be that this is the straw that breaks the camel's back, that voters decide, actually, we don't like this direction. We don't want this technology. We don't like how it's being used, and therefore we're going to do something about it. We are going to vote you out. That could happen. And I think the political ramifications of AI is now something that investors need to take, take really seriously. We can't really ignore it. Having said that, there are still many Americans that don't really know about AI, that perhaps don't really care about AI. And so until this reaches a boiling point, I do think that the current trajectory is the most likely that AI will become fused with government. It will enable a surveillance state. It will be used to track people, target people, and sometimes kill people. Everything that Magus said that they were supposed to prevent, ultimately that will transpire. That is where the trend is moving. And barring some extraordinary event, that is likely where it will end. Okay, that's it for today. This episode was produced by Claire Miller and Alison Weiss, edited by Joel Patterson and engineered by Benjamin Spider Spencer. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. Thank you for listening to Profg Markets from Profg Media. If you liked what you heard, give us a follow. I'm Ed Elson. And tune in tomorrow for our conversation with Aswath Demodera.