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Luke Groman
You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Probably should be. Probably should be.
Host (possibly Jason or similar)
Mr. Groman, where, where do we even start? We have a big meeting in China last week. We have yield curves blowing out in Japan, in the uk, even here in the United States. And we have this backdrop of this re industrialization and AI build out and it's kind of hard to grasp what's going on. At the same time you have this supply chain disruption because of what's going on in Iran. And it's been harder than ever for me to figure out where the signal is because I've been playing with AI. It's incredibly powerful, made me way more productive. We're looking at yield curves. We've got a new Fed chairman transitioning in and you're looking at the yield curves. It's like there's so much potential here, but it feels like the boogeyman of sovereign debt is going to throw a wrench in the plans of this build out.
Luke Groman
Yeah. If you ignore what's going on with sovereign debt, everything looks pretty good. Which is sort of like. Other than that, how is the play? Mrs. Lincoln? That really I think is the economic question of the moment, which is when are they going to start printing money into an inflation spike to cap bond yields? They're gonna, they're gonna have to. I think there is zero chance that Warsh, etc, Trump et al are gonna come in and go, you know what, 10 year yield and the bond market, they're, they're Liz trumping us. Right, Liz trussing us. And so we need to go. We said we're going to do a trillion and a half on defense and we're going to cut it to 800 billion. And you know, this year we're set to spend almost 5 trillion in interest and entitlements alone, which is nearly all of receipts. Boomers, sorry, you lose. We're going to cut it by 30% so that we can pay our interest to foreigners. Good luck. That's never going to happen. And so if that's never going to happen, you know, and by the way to do the correct math on it, when you, when you look at total receipts of the US about 5.2 trillion, by the way, 200 billion plus of which probably going away if tariffs go away, you're looking at, yeah, about 3.8 trillion in entitlements, Health and Human Services plus Social Security annualized, and you're looking at about trillion 4 interest annualized. So you're over 100% of receipts. So defense is another. Call it 1.1 trillion annualized right now, to get down below, you know, if you look at, you know, to call it a 3% deficit, you know, from GDP deficit from 6%, then you got to cut 3% of GDP, right? So you got to cut, you gotta cut 3% of. I don't know, what is that? 3% of 28 trillions. 8.4, 840 billion. Excuse me. So, right, so 6 million. Yeah, I think it's 840 billion. So you gotta cut 840 billion out of the budget to get to a 3% deficit. Can't cut interest without cutting rates, which will make inflation worse. So the only things big enough to cut are defense and entitlements. So defense and entitlements together are about 4.9 trillion. You got to cut 840 billion out of that. So it's just short of 20%. 20% cut to defense, 20% cut to entitlements. And you can do it permanently and immediately. And then you got to basically suffer through the pain of the recession, slash depression that follows and hope that it doesn't lead to the deficit going right back to 6% because your receipts are going to decline because government spending is 25% plus of the people cut back on spending because they're not getting entitlements anymore, defense lays people off, et cetera. So you're gonna have a recession and deficits blow out by 600 to 1,000 basis points, typically in a recession. So it's very possible you could, even if you went through all of the political pain of that the math strongly, strongly, strongly suggests that if you even could do that politically, which you probably can't, you would end up cutting 3% to try to get the 3% and you would end up 12 months later with your deficit at somewhere between 9 and 13%. Thank you for playing game over. So when you run through that mental exercise, it leads you as place, okay, they are going to cap yields. And that's why I think this Iran thing was such a bad idea is, and why I don't Think it was thought through from the stab, from the point of the bond market in particular, which is you were going to have to do that at some point and prior to this you were able to, you know, forecasting rate cuts and inflation had fallen back down. And now like you're going to have to cut rates or you're going to have to print money to cap yields into an inflation spike. So look, maybe this is what needed to happen. I could argue that it does. But people need to be ready for double digit inflation. And then the question is, when do they do that? They're going to do it when. And if I'm them, I probably do prefer doing it after a bit of a twist in the wind right after you take the air out of some sales. So when you get to your 10, 12, 15% inflation, maybe it doesn't get there in two months time because you've let risk assets twist in the wind. Maybe I'm wrong, maybe they'll do it faster than that. But that's the question of the day. This Iran war has brought forward this bond market problem. Now
Host (possibly Jason or similar)
I think that's a big question for me is how are they going to cap yields? Because as we saw in September 24th, they lowered rates 10 year, 30 year, jumped on that. And that's what I worry about is their ability to cap yields limited, obviously without going to yield curve control, which I think you've been saying for many years, is what they're going to have to do. And then that begs the question, is it going to be viable? Is it actually going to work? Or are people just calling BS on sovereign debt markets in general, looking at what's happening in Japan and playing out that process happening in other countries forward and pulling the pricing of that forward by calling BS on just sovereign debt in general.
Luke Groman
There's ways you can do it. I don't think they would ever want to do explicit yield curve control. They may not ultimately have a choice. But that's sort of the Hotel California. Once you check in, you can't check out. But the one way that I think is being discussed and Wall street sort of loves because it's their guy doing it, is Kevin Warsh. Warsh cuts rates. Warsh shrinks the balance sheet, which means he's selling bond. Right. So the long end will rise further. So you're gonna get a steepening in the yield curve. And then war changes the regulations for banks so banks can buy more Treasuries and that without reducing lending to Main Street. Right. And so that is like the grand then you know, that's the, that's the macro Fed. Yep. These are not the droids you're looking for. It's the Jedi mind trick, right? Like hey look, we're shrinking the balance sheet. Well not really because you're the regulator of the banks. You're cutting, you're cutting rates, you're shrinking your balance sheet, but then you're just moving it over to their balance sheet and taking the regulations off so they can still lend to the Fed or lend to the federal government by Treasuries and lend to Main street at the same time. That's inflationary. That's basically just QE through the banks with better marketing and, and that's fine. Like that's probably what needs to happen. That's one way you could do it. Because the banks ultimately don't care about real returns, they just care about spread at least until inflation really gets extreme. At that point they might start to care. But you know, if, if the government tells, the Fed, tells the US banks that, you know, listen, inflation is 4% right when it's actually 12, as long as they can make their 200 basis points, 250 basis points front to back, they don't care. Now if inflation's frigging 20 or 25, not that I think that's what it's going to get. That's where you get into questions of listen guys, we're not going to make a 30 year mortgage with inflation at 20% because it's gone in frigging five years, six years on a real basis. So there's ways you can do it that aren't explicit. Yield curve control markets won't care and that's at the end of the day and inflation won't care. That will show up as what it is. And in the meantime like you said, we've got this emergent re industrialization happening, this build out of AI which is both very aggressive but also I think fragile. Look, China could come out tomorrow and have a really attractive offering. That blows up the economics of that. And now a lot of this stuff is dead financed and that could be problematic, you know and, and you know if these with valuations of, of of it trading where they are, you know, not necessarily individual stocks but look, tech is like record high percentage of the equity market. US equity market is record high percentage of the world market. US equity market is record high percentage of the gdp. So on sort of these, these big picture valuations, like we're in friggin la la land picturing and like no bad news, nothing's ever going to go wrong and the economics of the model is going to make sense no matter what. Maybe, I don't know, but for the moment it looks pretty good.
Host (possibly Jason or similar)
Well, does. Well, that's. I wonder if the wrench is being thrown in the re industrialization cog as we speak again because of Iran. If you look at the supply chain disruption for things like helium, specialty gases, chemicals, motor oil, I mean, I think you were tweeting about it, we covered it as well. They have warnings going out that there's going to be a 40% supply reduction in motor oil by the middle of the summer. We have sulfur shortages which is big for fertilizer production. Freight brokers are having a liability shock with the insurance or the ambiguity of how to actually navigate the straight of Hermuz. And then on top of that it looks like we have mother nature beginning to step in with it with a massive El Nino like switch hasn't been seeing in a century and a half which will just exacerbate the supply side. So no matter or not, if the will to do this build out exists, the supply side may temporarily at least, or maybe it's more medium term, slow that down as well. What does that do for all of us as well?
Luke Groman
Yeah, and I think there's a real key question around that I think are sort of two things, like the longer it lasts, the more these second derivatives happen, right? Where you, you know, random idiots on the Internet are like, oh who cares about a 40% shortfall of motor oil? And you're like dude, you understand like 70% of the dollar value of goods in this country move via truck. You know, just start randomly taking out sort of the ability of the reliability of, of internal combustion engines, be they. And I'm no expert on, you know, what, you know, diesel uses this motor oil. And so just broadly speaking, though I didn't realize it was as narrowly sourced motor oil that is from one part of the world, but apparently it is and that is there. So there's that sort of second derivative dynamics where there's something called Liebig's law of the minimum which is if you're short one part, it's a matter of scarcity. It's not a matter of oh, this screws Europe before it screws America or this screws Southeast Asia for it screws America, it doesn't matter one part it goes down and then things start going down here. So that's sort of one of the questions around that. The other thing that I think is one of the most epic. I don't know whether it's denial or propaganda about this all, but, like, part of the reason Hormuz isn't open still is because Iran has more fire control over the Gulf than anyone wants to frigging admit. And, you know, when I first started saying this two months ago, people think you're crazy. And like, here we are, it's going to still be closed on June 1st. Like, I had a conference call with Institutional Investor prospect back, like March 6th, and I said, listen, based on what I'm hearing, if I'm you, I would start stress testing your portfolio for Hormuz to still be closed on July 4th. And it looked like I pissed in their Cheerios. It was like, wait, what? Like, you understand, you're saying hundreds of millions of people around the world would starve to death later in the year. I said, yeah, I understand exactly what I'm saying. But I'm telling you, based on what I'm hearing, there's a very good likelihood that's the case. And, you know, at the time, no, nothing. But there's still this sort of denial around, well, it's just insurance. Well, yeah, it's insurance because insurance companies don't like their boats going kaboom. And we, you know, so I think there, that's kind of the, to me, as I look at, is it going to reopen? Is it not going to reopen? I still see a lot, at least here in the Western media and certainly on X, that it's our decision, like Liberation Day, right? Like, hey, when's things going to flow again? When's Trump going to change his mind? And he snapped his fingers after the Chinese did the rare earth thing. And, and you know, the several big retailers went to the White House in April or early May of last year and said, dude, you're going to have frigging empty shelves by Christmas. Knock it off. And he changed his mind. He started a fight. He and the Israelis started a fight. And like, they don't get to walk away from the street fight by going, okay, we're good. Now, like New York Times reporting, 90% of the missile locations along Hormuz are still active. And you've got the Russians resupplying them via the Caspian Sea. And you get the Chinese are probably resupplying them on some level, if only humanitarian, but probably some other mixed use or dual use goods through these rail lines. And it's not enough to sort of replace what they're having taken out, but it's Enough to buy time at a time where we don't have time. The bond market's saying hey, the Samuel Jackson meme right TikTok mfer right here, here, here we are. So that to me is the wild card is I think in the next month there's a moment that's coming where Western markets and go oh Iran actually does have a say in this. These are mar.
Host (possibly Jason or similar)
The.
Luke Groman
The Hormuz is still closed in part because Iran still does have a very notable measure of fire control over straight of Hormuzzi and then people I think you know that's gonna be an interesting moment, right? And you know you're seeing us by time, right. We're talking about taking Russian oil sanctions off again today. There was a story that we were maybe we're gonna take Iranian oil sanctions back off. You know reported in Iran denied here. Who knows it's fascinating. Maybe we're taking Iranian oil sanctions off on Monday and then we'll, we're talking about maybe bombing them over Memorial Day weekend so we can, you know, we can do it with a three day weekend so the markets are closed and the 10 year doesn't sell off any worse than it already has. But anyway I'm rambling a bit but I really think this important within that hey, the supply chain, the supply side there's a day coming where markets are going to go oh Iran actually has a say in this and it's not significant say and the Iranians know from here on out every day that follows like they've taken all their pain up front their pain is going to be sort of linear, especially getting supplied through the back door by a couple of allies Western markets, we're on the clock.
Host (possibly Jason or similar)
Well that's what I mean. I think it's becoming clear because just observing was like whenever the 30 year was getting around 5% you'd have a truth social post like hey ceasefire, it's all going to be over. Don't wor. That's happened like two or three times and now we're well over at a 5.127 on the 30 year and there hasn't been any announcements. I think it'd be interesting to get your thoughts on the big meeting in China last week. I think many people were thinking that maybe the US would go and talk to President Xi and say hey, convince them to open up the strait. We'll make some concessions on our end. And I think my read on it is like not much was accomplished there. Maybe some chip deals, maybe some more clarity on Taiwan, whether Or not. We like that. Clarity, I think, is another question. But I think it's pretty clear that Taiwan is a red line effect. That that's the first thing they talked about. But yeah. What are your thoughts on China as it relates to not only the straight of Hormuz, but this time that we find ourselves in this, this geopolitical fraying in the multipolar world expanding?
Luke Groman
Yeah, I, my understanding is that the meeting was a much bigger deal spun as a much bigger deal in the American press by the administration than it was to the Chinese. You know, the Chinese, you know, Trump, I didn't realize this till over the weekend, but Trump was just the latest leader of a parade that's gone through there. You've had Starmer, you've had Macron, you've had Mertz, Trump, you've got, literally, apparently Trump was like wheels up, barely. And it was announced that Putin's coming either this week or next week. And my understanding is that meetings in China don't get scheduled. Like, you know, it wasn't like Xi got off the phone with Trump and called Putin. Like that was already on the books. Pakistan is going there as well in the next couple weeks. And that I think is noteworthy, even that Pakistan is said to be the mediator to this whole thing. So I, I'm sure they probably discussed the Iranian situation. I don't think it's as desperate a situation for China as it has been made out here by some people in the US not least of which, which is, I think everyone and their mother is going, okay, we're done with this whole, you know, the US has been dicking around in the Middle east for 25 years. Like, I don't know what their infatuation is with it, but this is nonsense. We're moving, we're moving away from it and we're going to move to more EV or, you know, EV solar, battery, like get away from fossil fuels. And who's that benefit? China plays right into China's hands. Nobody has the supply chain in EV batteries, solar that China does. So when Europe's like, fine, you want to try to choke us out, great, they pick up the phone, they call China and, you know, I wouldn't be surprised to see some massive trade deals around, you know, solar, EV battery stuff into Europe. You know, they can figure out the latency issues and the intermittency issues. Not latency, but intermittency issues around, you know, EV or around, sorry, solar and battery storage and balancing out grids. Like it's, that's you know, that's just an engineering problem. And that engineering problem is getting much, much easier. To your point earlier about AI, you know, you plug those problems into AI and let it run and it'll figure it out much faster than it used to, right? Then it's just a matter of pick up the phone, call China, say we need this many solar panels, we need this many batteries, we even need this many, you know, transformers, you know, and here, you know, we'll sell you a bunch of Airbus jets or whatever the hell's on the other side of it, whatever. And I think you're gonna see that around the world. I think, you know, India, India's got a fossil fuel problem, so much so that they're talking about cutting fuel. You know, Modi, right, got on the, got, got on the wires last week and said, hey, please stop buying so much fuel and please stop buying gold, which are their two biggest import issues, putting them into a trade deficit. Well, you fix the oil thing really quickly, you know, ring, ring, hey, China, we want to buy a bunch of, you know, solar and battery stuff from you. And we're going to mandate, you know, that, that India go 80% EV or something like now. Okay, great. Where are they going to buy the EVs from? I'll give you two guesses. First one doesn't count. They're going to call China. No one else has the manufacturing capacity. And oh, by the way, the byd, et cetera, of the world are so dirt cheap, no one else can make them that cheap. So I'm coming around to the view that contrary to this, the initial view in the west that, oh, we've choked off China's oil, I think all we've done is push the world into China's arms as it relates to the entire ev, solar battery grid dynamic. And so I'm not sure China's in a great hurry to open this thing, number one. And I think that might have been a bit of a miscalculation in the West. Now China's not, the economy is just treading water. So this just, you know, this just sort of keeps them afloat, but again, it keeps them afloat. So, you know, let's see.
Host (possibly Jason or similar)
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Host (possibly Jason or similar)
this last week on a show on Thursday. But again, talking about the western press coverage of this like massive meeting, Jensen Huang calling it probably the biggest meeting of two nation states in civilizational history. And just thinking of the optics again, I think the Trump administration was trying to show a strong hand with a lot of their cabinet heads and obviously CEOs of many of the largest businesses in the US showing up. But I'm reading that, I'm like you're trying to flex hard going all the way across the world and it doesn't seem like you have the leverage. Here is the way I read that. It's like you feel Compelled to put on a big horse and pony show on Chinese soil to try to project strength. I don't know if you read it that way too, but everybody in the media was rah rah ing it. But if we have all the leverage, why do we need to do this?
Luke Groman
That's kind of where I'm at. I've got a good relationship who made the point to me, this is years ago that I guess back in the original Gulf War, the US had the Saudis fly all the way here to basically sort of press the flesh to sort of thank and help pay for the war.
Sponsor Announcer
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Luke Groman
So contrast that. Right. They couldn't just wire the money. Wanted them to fly here for the optics with this, which is. Oh, by the way, the second straight time we've gone there. Right. We went to, we went to Seoul, South Korea in October, I recall correctly, nine months ago, eight months ago. And now we're going there again. And that's not an easy flight. Right. So if we've got all the car. My view of it was in agreement with you. If we have all the cards, why are we going there?
Host (possibly Jason or similar)
Yeah.
Luke Groman
And everyone, by the way, everyone's going there. Uk, France, Russia, Germany, Pakistan.
Host (possibly Jason or similar)
Well, which I think the last time we talked, I think AI, it was becoming much clearer than it was the six months prior when we had last caught up then, that this is real, it's happening, it's going to lead to a ton of reinvestment on American soil. It's deemed existential. And one way that people were positioning it six months ago, and I think still today, is if you're looking at the sovereign debt crisis and you're looking at all of our spending that we're doing, the one potential positive externality, special variable is basically the ability to grow our way out of it with AI. And I think over the last three months specifically, or actually since the turn of the year when agents really took off, it's becoming clear that yes, there's a real they're there. But as we just mentioned, the supply side could throw a wrench in the growth and the build out of the infrastructure. But then on top of that, like the effect on the jobs market, I think is becoming clearer to the point where you had Ken Griffin on stage last week, who was a bear on AI in January, saying that they're doing work that would take months on the research side at Citadel in a couple of days. And he was actually a little depressed learning about this, thinking about how many people are going to be necessary to run his business. In the future. And so then you have that factor as well. The labor side of things come into the picture and you could paint a really grim picture in the next two years with all these things coalescing together.
Luke Groman
I found this, I saw that clip. I thought it was a hugely important clip. I don't know if you saw it. Dan Loeb third point basically echoed the clip. He quote tweet and he's like, oh yeah, we've been doing it too, right. There seems, you know, there's, there's, there's AI doomers and there's AI sort of champions, I guess, if you will, you know, that we've seen out there. And you know, one, one I saw recently and it was actually Marc Andreessen who's a brilliant guy and obviously a champion of it and he's been pounding the table that it's not going to disrupt the labor market. And I think he's a brilliant guy and I think he's talking his book and wrong. Somebody made the point and he quote tweeted it showing new slide rules. 1952 IBM engineers. Advertisement look, each one of these is increases the number of engineers by 50 because they can work so much faster with the new slide rule. And people, it didn't destroy engineering. And it was kind of like, yes, and let's put this in its appropriate context. 1952 was just seven years after the end of a 30 year period where literally 10 to 15% of the people alive in Eurasia in 1913 were dead. You killed 10 to 15% of population in Eurasia from 1914 to 1945. Two world wars, a variety of political revolutions, famines, etc. And you completely destroyed the industrial base of anybody who was competing with the Americans across Eurasia. And oh, by the way, much of those 10 to 15% that were killed were working age men. So yes, you introduced a slide rule in 1952 and it was all after you killed 10 to 15% of working age men or of overall population. It was probably closer to 20% of working age men across Eurasia. Excuse me, and destroyed all the factories and industrial base except for in America. Now tell me how relevant that comparison is now versus then like, and this isn't like doomerism, this is just realism. And so now you're going to introduce something way more productive, you know, productivity driving than a slide rule. And to everybody, by the way, and like, yet everyone has the industrial base. China's got too much industrial. We're trying to build industrial base. Europe has an industrial base. That's being hollowed out as we speak. You know, I look at this and go like, yes, you are going to drive massive productivity, but the amount of unemployment you're going to drive. Right? Same argument. You can be mad. Like, well, you know, gosh, we, you know, the industrial revolution drove people off farms in the 18, you know, from 1850 to 1900. And they were fine. Like, yeah, because 10 to ultimately 10 to 15% of them were killed in wars because they were trying to like adjust the economics of that world. You had. It was so. Technology was so disruptive, it blew up four empires, right? There were four empires in 1913. By 1918, three of them were gone, they were dead, one was mortally wounded that we took over for the UK. And so like, I look at this and go, I think AI is ultimately, I think it is massively productivity driving. I think it is massively changing and living in the Rust Belt. I think Marc Andreessen and these others are smoothing over and I think they're smoothing it over. I don't think, I think they're being cynical in the way they're smoothing it over. They're way too smart not to understand this. And so if they come out and tell the truth about what's about to happen, guess what's going to happen. The politicians are going to get involved. They're going to actually have to pay some sort of, you know, tax into some sort of sovereign wealth fund or, you know, fund. And they don't want to do that. They want to put all the money in their pocket. And like, I, look, I suppose I get it. If I was them, I actually wouldn't support that. I would support putting the money in a fund because I don't want a bunch of white collar workers outside my gated house with pitchforks and guns in two or three years, which has already started with Sam Owen OpenAI out in San Francisco, by the way. But they're way too smart not to know that that's the case. And so I think they're cynically talking about, hey, there's not going to be a big job apocalypse. And because, you know, they don't want the politicians vote, there's going to be a. Like, come on. Like. And well, people will just retrain. No, they won't. No, they won't. Million Americans kill themselves with opiates. That's what they do. Like, like, and I don't want to get like, too like doomer, like depressing because it really is. But like, look, that's. It was one thing when Luke Groman says, oh, Luke's just a doomer. Well, is Ken Griffin a doomer too? Because guess what? He sounds a lot like Luke Groman four months ago. And now he's like sort of catching up to what this is going to do. I don't know the right answer, but that to me again, I always take it back to the sovereign debt side. If we were an equity based system, no debt, not debt based, and if debt was really low, who cares? It's a issue to be dealt with, but it's not systemic. But with debt levels where they are, sovereign debt levels where they are, 50% of receipts coming from employment heavily in the services type stuff, that this is going to disintermediate, this being AI it's absolutely a systemic threat. And to continue pretending it's not going to. It isn't doing anybody any good.
Host (possibly Jason or similar)
No. I think it's already manifesting in many ways the K shaped economy meme that people have talked about to your point about some like Marc Andreessen sort of glossing over it. You do have Elon out there saying we need universal high income, which is an oxymoron, but we don't have to get into.
Luke Groman
Yeah, I haven't figured out what he means by that, but at least he gets the problem. Like, I actually think he really does care or tries to care. I really do. Yeah, what is that? Universal high income. Right. I can't take him to me. All I need to know about universal high income is you go back to the show the Incredibles. I don't know if your kids have watched the Incredible Jet, right, Where the guy's like, if everybody's a super, then nobody is. Right. So if everybody's high, ultra high income, great. Why not just do that now? If that's the solution, just do it now. And the answer is, it ain't the solution.
Host (possibly Jason or similar)
No, that's what I think there. Nobody really has one right now. But again, like the exacerbation of the inflation reemergence, I think it's going to force people to figure this out rather quickly. We're going to head into Memorial Day weekend with the highest price per gallon in recorded history. Again, I think you've covered it well. But the food inflation is beginning to creep up. But the brunt of that will not be felt until the fall of this year when you have a full crop cycle come and go and the sort of effects that it has on spending. And then you look at the financialized side of it, like the market, you look at where margin trading is how much leverage is in the system, where things are trading. It looks like we're not at dot com bubble levels yet in terms of multiples, but if you look at some ratios, I think like the Shiller ratios, pretty, pretty inflated. And obviously there is some dislocation between the whole of the S P 500 and the, the few stocks that are actually tied to AI and the infrastructure build out. There's a dislocation there and it's, it makes you wonder. And again then you have Kevin Wash coming in saying I want to lower rates but not expand the balance sheet. And it's just finding it really hard to see how he's not forced to do that. And if inflation is creeping up and you have all these job market disruptions hitting at the same time, what does that scenario look like? Is it the 1970s echo inflation with a different flavor and put on crack because of the speed of AI?
Luke Groman
I think it's Brazil 2000, that's what I think it is. Or maybe UK 1956 Suez moment where inflation for the UK from 56 to 76 Hager was almost 7% a year. That's what I think. Right. Because the other crazy thing about AI is look, this is no longer just an American tool, right? This isn't the 1990s where America's got all this technology and then everyone else is just trying to survive in Eastern Europe and in the former Soviet Union. And China's still coming out of being a backwater and you know, Southeast Asia is just starting to really rip and grow with the tigers, what have you. Like Japan was on its keister still. Like South America was still, you know, you know, Third world, fully Third World. You know, AI is like, everyone can use it, it's distributed, right? So now you're competing around the world for the first time. So this isn't just going to be like, well, so what does this mean? Well, I think the deep seek moment of January 2025 is a perfect example, is what happens if any day you could wake up and be like, oh, China just rolled this out, it's way better and it's cheaper and it blows up the economics of sort of everything they're doing over on this side of the world with AI. There's nothing, no reason that can't happen. You know, now the people in that world will know much better how close they are to that. Assuming none of it's been classified by China. Right. Like we're, you know, and who knows, we may have stuff that's way Better than we have classified. I strongly suspect that's the case. But that's like the, that's, that's. When you look at the valuations of Tech Today vs Tech 2000, I agree with people saying like, yeah, hey, these things are generating cash. They're not that expensive. The margins are enormous. You can justify the multiples for that. I agree if you look at it in isolation. But take a look at employment in the 90s versus employment now, which is to say in the 90s these were truly productivity drivers. You were seeing productivity grow and employment grow. You're not seeing that now. You're not. And so it's accruing to the K shape. And so essentially like the difference this time or the bubble this time a U.S. federal debt to GDP in the, in the 90s was maybe 40%, 50%. And the tech boom into the bubble was driving a productivity gain and an employment gain and supporting the tax receipts of the United States government. This is a bubble where the participants are not expensive. Right? Like we just said, I mean slightly, but not like nearly as like stupid expensive as some of the, you know, Cisco's and Sun Microsystems of the world. So I'll call it from 96 to 2000 levels. But these tech companies are actively borrowing money on net, right? Some of them are still cash flowing, but more and more they're all getting close to having to borrow the money to spend on this stuff, the hyperscalers. And they're borrowing money to undermine the tax base of the United States government. And doing that at a time where debt to GDP is 120%, where true interest expense is 100% of receipts. That's where the bubble is this time. And the strains, when that bubble starts to strain, what are you going to see first? Are you going to see crashing stocks first? Are you going to see spiking sovereign yields across the West? I would argue you're going to see the latter. You're going to see spiking sovereign yields. Now what do you do? Take us back to our first discussion. You're going to cap yields, print money to cap yields and an inflation spike or are you going to let yields rip? Because I don't know what the number is on the 10 year in the U.S. but there's a 10 year number on the U.S. where everyone in tech's going to be like, I'm out. Why take all this risk when I can, you know, that China's going to disintermediate me or that, you know, these guys can't refinance at 7% because, you know, the 10 year's up to five and a half. I'm out. I'll just buy the 10 year at five and a half. And so to me, that's where the risk is in this and that's where people that are having this debate. Well, it's not like the bubble last time. Well, yeah, I know it's not. And it doesn't mean it's not a bubble. It just means to me, it's almost like a second derivative bubble, right? Like if we saw job growth, if we saw tax receipts benefiting from this, it'd be one thing. You're talking about taking jobs that are paying multiple hundreds of thousands of dollars a year and replacing them with something that you can subscribe to for 20 bucks a month. Like you're undermining the tax base of the United States at a time when the United States cannot afford to have its tax base eroded at all. And that to me is like the, that's where the bubble's going to break. That's where we're seeing the strains already, in my opinion.
Host (possibly Jason or similar)
Do you think Bent has a grasp on all this?
Luke Groman
I would guess he's an extremely frustrated man right now because they were, you know, he laid out very clearly what he wanted to do as Treasury Secretary. Both from sort of like three arrows, right? 3% real growth, 3% deficit, 3 million barrels a day of more oil production, bring oil prices down. He said, judge me by the ten year, right? February last year. I just put a tweet up earlier today about that. February 25th. Judge us by judge our economic policies by the 10 year yield, not by the front end of the curve, not by anything else. Well, the three arrows is now the O for three arrows and they're going to be the O for three arrows. Inflation's ripping. Ten year yield is to what, five year highs or near it. Fail, fail, fail, fail. And this Iran war has completely taken the initiative out of his hands
Host (possibly Jason or similar)
for
Luke Groman
a lot of different things. Number one, he talked about the possibility of a grand currency deal with the Chinese and others. And now we're not in the driver's seat anymore on that. We've given away the initiative on a currency deal to pursue this nonsense. And so I suspect he's extremely frustrated. He's a brilliant man, there's no question about that. He's also shown a tendency to get hyper focused on a single thing to the detriment of all others. And then being wrong because he was so focused on that one thing Whether that be, you know, China. I mean, he's been a China bear for a long time. Whether that be some of the things we just discussed. Whether that be energy, some of these other things. Like. So I, I think he knows this, but I also think he's probably frustrated because a of, you know, I think the Iran war throws a spanner in the works of all of what he was hoping to do. But I also think he's come to realize, like, Washington is not Wall Street. You know, you make a decision as a hedge fund manager, boom, you put it on, you take the position. It's just, you know, it chews up everybody, right? It chewed up Elon, right? How often did we hear, well, it's going to get fixed because Elon's going there. He's our best guy, you know, and Elon's frigging brilliant. Like, nothing stops that dude. And Washington chewed him up and spit him out in what, two months, three months, four months maybe? That's so like, I suspect Besant knows a lot of this and I suspect there's not a darn thing he can do about most of it. He's, you know, they're getting overtaken by events as a result of the ill, ill fated decision to go into Iran.
Host (possibly Jason or similar)
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Host (possibly Jason or similar)
I think that's one of the. One of the things that many people are hoping for wash getting into position at the Fed is that Druckenmiller's good old boys are back together. They're going to be able to work together to, to navigate these tumultuous times. And I don't know, it's just to your point. I think Iran was a massive misstep. But then there's others that will point at like, oh, look at all the oil. That's the oil deals that we're making and reinvigorating the American oil industry. And we're setting up all these deals that are making the Middle east less systemically important than it was in the past. You have, what was it, the UAE leaving OPEC a few weeks ago, basically signaling that they want to let people drill more to help bring down oil prices, which should be good for the us but it seems like there's a lot of balls in the air and trying to juggle them perfectly. It's getting harder and harder as each day passes.
Luke Groman
Yeah. And for me, again, you always take it back to the bond market. If we tried to do this 30 years ago, low debt. We have the leeway, you know, are we going to, you know, are we going to give swap lines to everybody? Like I thought that was a huge moment. UAE coming out and saying, look, either you give us swap lines or we're going to move over to China. We're going to, we're going to start pricing oil and gas and yuan. And boy, did you know, Bessant and the team jumped right to that. Right. Hey, swap lines. Oh, done. Which I thought was an interesting read on leverage. I think it's also an interesting read on the sensitivity of US asset markets. Look, the UAE is rich. They could sell dollar assets for a long time to finance their income shortfalls. Where do you think the 10 year would be if UAE and others started really dumping Treasuries? I mean already people are like, look at the dominance. Everyone flocked to Treasuries. I don't know if you saw the chart. Japan sold more Treasuries in the first quarter than they've sold in like four years. Which, oh, by the way, was the last time oil spiked because of the Ukraine war. Right. So I think we're about to get. What's today, the 18th? It'd probably come out today at the end of the market. At the close of the market, the foreign holdings of Treasuries for March. That's gonna be a real interesting number. I would bet you a couple of my cars, my wife's car, my car that it's gonna show foreigners sold a lot of Treasuries.
Host (possibly Jason or similar)
Japan is being forced to.
Luke Groman
They have to, right? People say, well, we'll sell them the oil. Well, yeah, but still it's a double entry bookkeeping reality. Great. They need oil, we sell them oil. What do they buy it with? Dollars. Okay, great. Well, they're giving us the dollars for the oil. Where are they getting the dollars? Well, they have to sell something. They sell Treasuries, they sell dollar assets. It's just a double entry bookkeeping reality. So that has a policy trade off to your prior point is yes, we will send a lot more oil to other places. And foreigners. Who, you know, foreigners. Oil importing creditors of the United States will sell Treasuries to buy oil. And that's fine, but it also means there's going to be $9 trillion worldwide of foreign held Treasuries bidding for American oil. And what happens when that happens? It's simple. You pay $7 a gallon for gasoline, maybe 8. And not in California. California, we might be double digits now. Is that the Right thing to do. It's good for energy, it's good for stimulus of look, more EVs, more solar panels, all that good stuff. Sure, where's that going to come from? America ain't making that stuff. Come on. Tesla just got out of the frigging EV business. All but the little one. Right. They're moving on to robots where most of the components are made in China but we'll set that aside. China's gonna do all that business. How's that hurting China? I don't know but it sounds good, right? It's, you know, it's not true but it's, but it sounds good. So I, you know, it's just such
Host (possibly Jason or similar)
a.
Luke Groman
I think there are less chaotic ways it could have been done. But that's why I sit in the seat I sit in.
Host (possibly Jason or similar)
Yeah, well I mean this begs the point. What do these nation states do for reserve assets moving forward? Obviously we had gold spike into the end of last year go above 5,000. I think it's sitting at 455 right now. It looks like it's consolidating after coming off all time highs. Obviously silver ran, Bitcoin ran at the end of last year, it's down I think anywhere between 35 and 40% right now from its all time high. Do you think there is going to be a recognition that sovereign debt as reserve assets is. I mean there already has been, if you look at to your point, foreign nations selling U.S. treasuries, what that nets out to on an ongoing basis. But is the mind share around alternative reserve assets going to get stronger moving forward and if so, what does that mean for gold, bitcoin, silver even moving forward?
Luke Groman
I think it's going to start at gold silver because it's needed. Ultimately it's counterproductive if you really bid up silver. I think silver is going higher, don't get me wrong but half of it, half of its use being industrial use, it starts to be counterproductive if silver is used as a reserve asset. So I don't think silver is going to be a reserve asset in any real way. I think it's start with gold and I think it's started, I think it's accelerating. Obviously gold's higher than Treasuries and global FX reserves as we speak that surpassed that last year. I think it's going to continue simply because there's just trust is breaking down and if you don't hold it, you don't own it. And the repeated weaponization of the dollar and Treasuries and FX reserves, et cetera. So I think it'll start with gold and I think you'll see trade net settle in gold. I think you'll. China has that framework completely set up. It continues to boggle my mind that it's like hiding in plain sight. There's a yuan clearing offshore yuan clearing bank in every single major gold hub, London, Switzerland, Singapore, uae, Hong Kong, and of course in Shanghai. Why? Well, because if China's paying, you know, more with yuan, particularly in commodities, there's going to be commodity producers ending up with some excess yuan and they're going to need to do something with it other than buy Chinese goods with it, solar panels and batteries and ID etc. And they're recycling into gold. You can see it clear as day. If you look at Switzerland's gold exports to Saudi Arabia, it's astonishing. Chart, right? So there's an offshore yuan clearing bank in Switzerland and Swiss gold exports to China, they are like this over the last four years since we sanctioned Russian FX reserves, which is interesting because I had two different people that don't know each other, they're long time veterans in the oil market. Say to me, and I quote, the Saudis were horrified, quote horrified by the US sanctions of Russian FX reserve. And so now it looks like you've got Saudi net settling some portion of their oil sales in gold. That's just a fact. If you look at the trade flows, if Saudi purchases of gold from say Swiss exports of gold from Switzerland to Saudi are like that, some portion of Saudi's oil exports are getting settled in gold. Why? Well, they're either converting dollars or yuan, it doesn't really matter. It's which Chuck E. Cheese token you use to buy the gold. Doesn't really matter. But my point is the Chinese have facilitated to make it very easy to do that. And so that to me is the roadmap. I think that's going to continue. I think the Chinese are going to continue to do that. I think others in Asia will do that. And I think what we're seeing in if you call up a chart of the two year Japanese government bond yield against gold over five years, they're the same chart. Japanese people are very monetarily sophisticated, they're smart people, they know where this is going. They did the same math Kyle Bass did on Japan 15 years ago. Once it gets to a certain number, they're screwed. There's no way out. So what do you buy when you buy gold Now? Bitcoin I think is ultimately, I think going to serve that role as starting with the people, if you will, rather than the officialdom. But in the short run, it trades as sort of high beta tech. And if rates are going up on high beta tech, not good. Rates are going up on high. You know, on Bitcoin is not good for now. Now ultimately it's going to be really, really good because there's nothing more bullish for a neutral reserve asset than sovereign insolvency. But between here and there is the $64,000 question.
Host (possibly Jason or similar)
Yeah, right. And to the point about weaponization of treasury assets against your geopolitical adversaries. I mean, we're seeing the headline over the weekend out of Iran was that they're going to use Bitcoin to settle this Hermes Safe Insurance.
Luke Groman
I didn't see that.
Host (possibly Jason or similar)
Yeah, I'm pretty sure it's legit. And this is two weeks after OFAC coordinated with tether to freeze $344 million of tether. That was believed to be the IRGCs. And I think the point, it's like a double whammy of in own goal because I think the genius act and this leaning into stablecoin infrastructure by the current administration and the US banking system is with the hope of like, hey, we need to drive demand for these Treasuries at least on the front end of the yield curve. And they're already weaponizing their ability to freeze these assets. And you're like pushing people outside of the US border away from it almost immediately.
Luke Groman
It reminds me of the scene in Naked Gun, right, where they slap their heads and everyone face palms in the audience with Leslie Nielsen and O.J. simpson, what have you. Yeah, and there's another sort of contradiction in there that people aren't talking about yet, which is on one hand, stablecoins are going to save us because we're going to able to get all this demand. Now on the other hand, Warsh is going to save us because he's going to cut rates at the front end and he's going to sell off the balance sheets to drive up the long end and he's going to remove regulations on banks and banks are going to buy a bunch of Treasuries. Okay, but now with clarity, we're trying to also undermine the United States banking system by being able to pay interest on stablecoins, which I had a very veteran banking analyst last week be like, dude, if they do this, you could see bank runs in place. Places like this is, you know, as people take their money out of banks and put them in stablecoins. To get paid because it's backed by the government. Like you don't know what you're creating. So like what do you want? Do you want stable coins to buy treasuries and T bills or do you want banks to buy treasuries and T bills? Because right now you're two different hands in the same administration are sort of working at cross purposes to do that. And I don't know the right answer. And oh by the way, let me layer another one on there. All of the, you know, emerging market people are going to buy stable coins on their phones, right? And you know those are gonna be back. No they're not. Because you want to know what? Because in four months they're not gonna be able to afford friggin food because you invaded Iran.
Host (possibly Jason or similar)
You.
Luke Groman
And so now you attacked Iran. So now food costs are up, energy costs are up. So you're, you're undermining the emerging market. People that are supposed to be like stockpiling dollars to buy T bills, they don't have any savings. It's going to go to buying them wheat, it's going to go to be buying them soybeans across the developing world. That these were going to be the people buying hundreds of billions of treasuries through stablecoin because they want the American dollar. Yeah, they want the American dollar. You know what they want more than the American dollar? Friggin bread, Frigging gasoline, Frigging diesel. Like there's. I'm getting worked up because I just watched the commentary relative to the actions of the government and they're not equating to like, okay, see how these things interact with each other. So like the Trump administration says they want this and then yeah, you sanction tether and then you invade it or you attack Iran, you hurt your buyers of T bills throughout the emerging world because they can't afford food. Thanks. Nice job, guys. Heck of a job, Brownie. And then you know, you've got, you're trying to undermine the banks with clarity on one hand while also getting the banks to buy more treasuries with what Warsh is doing. What? Like what's the plan here? Right? Is that even we're.
Host (possibly Jason or similar)
We.
Luke Groman
We love Modern Family, right? What's the plan, Phil? What's the plan? What, what are we doing? Because it looks to me like you're just effing it up as you're going along and just making it up and flying to sound. What's the strategy? I don't know. Doesn't make sense to Me, I can't. And in the meantime, what's the Chinese plan? Trade whatever you want, settle it in gold here, take the gold home. Because to me like, like, all right, yeah, I'll just do the gold for now. You know, America, call me when you're sober.
Host (possibly Jason or similar)
Well, to that point, how do we get sober in your mind? What needs to be done? What can we do to dry out here,
Luke Groman
Here too? It's cross purposes, right? Like people are like, look at how much China's producing. Yeah. What did China do to do that? Well, they crushed their housing market to try speculative housing capital into manufacturing more. They crushed the consumer. Stock market's done crap like well great, so all we have to do is crush housing and crush the stock market and then we can actually have non inflationary reshoring of the American industrial base. And you're like stock market backs the treasury market. Wrong, next answer. You know, well we can crush housing, banks blow up. Now what? Wrong answer. Next answer. Like, so I, I, I think the answer is ultimately. We. Effectively cap yields. Like we, we just like, just keep going. Like, okay, like if you're going through hell, keep going, you know. All right, fine. The beautiful, right, so you have worse come in, have worse cut rates. Here's what's probably going to happen. Here's this will piss off everybody. Warsh is going to come in, he's going to cut rates. Place is going to soar, but they're going to lie about it. Place no be running 12 to 15% easy. But they're going to tell you it's four, four and a half. Warsh is going to sell bonds into that. So the long end will rise. Banks will step in and buy those. They'll pull the, pull the regulations. Besant, etc. Will try to cap gold and bitcoin despite them being pro bitcoin administration. We're the most pro bitcoin administration in history and they are, except they won't be because they'll be capping it in price because they're going to want the funds to flow into the tech bubble to keep that going, to try to drive that. Unemployment is, you know, we will go from a no higher, no fire market to a no hire and fire market in the job market. Gold will be capped where it is. The Chinese will just keep waving it in. Bitcoin will actually not rise despite the inflation. It will, you know, we'll have, we'll have, and remember we had the 58k crowd, whatever it was for two years. We, we'll have the whatever the, the, the 58 to 72k crowd for the next two to three years while they do this.
Host (possibly Jason or similar)
How will they cap, how will they cap bitcoin prices?
Luke Groman
I have no idea, but they will. And gold will trade 45 to 47, 42 to 5, whatever, trying to drive the capital all in there. Meanwhile industrial production will hum in this country, inflation will rip in this country. The ten year will trade no higher than 4.7%. 4.75% maybe. Now that's, that's. I could see something like that happening. My base case is that what we're going to get is stocks up huge in dollars and stocks down in bitcoin and stocks down in gold. I don't think they'll be able to control bitcoin or gold ultimately. I think there's been some version of what I just described already sort of been happening underway. Can they continue to do that forever? No, because they don't control the supply chains. China does this.
Host (possibly Jason or similar)
Yeah, it's is out of all your years of analysis and following markets. How would you describe this environment right now?
Luke Groman
Unique. There are elements that rhyme with, with the first quarter of 2000. Absolutely. Around some of the tech stuff and the breadth and what have you. But remember we were very low debt, we were at peace. Like I've told my boys Mal, my boys are 20, 25, 23 and 21 this year. 20 this year. That was peak America like 95 to like 01. It was like that was peak America. Not to say we'll never get back there but like that was you know, just one darn thing after another since then. Right. 9, 11 and bond crisis, stock crisis and the war and the great financial crisis Syria and like just one darn thing after another. And so this is happening, this, this bubble esque type environment is happening into very different geopolitical. We are no longer the only game in town. We were the only game in town in 2000. Like Russia was on its ass. China was still nothing, you know, still coming back. Europe was like eh, right. They just formed the euro. They were figuring out what they wanted to do when they grew up or what they wanted to be when they grew up. You know the boomers hadn't sort of, you know the entitlements hadn't sort of blown up the fiscal side, you know, the cereal. We still had free markets. Like the markets aren't free. Like come on. We still had democracy. Right. Like people are like well we have, we're democratic so we're going to win this great power Competition. Like are we, are we really democratic? Like do democracies have foreign powers dropping tens of millions of dollars into a house vote in Kentucky? We're a democracy asterisk. That's what I would say. We're democracy esque. All these things are different. That's why it's so unique. We've never had this transformational technology which is both exciting and horrifying at the same time. We've never had the geopolitical sort of balance. We haven't had a great power competition. A real great power competition. And don't tell me about Japan. We were militarily occupying Japan. China and Japan are apples and oranges. Soviet Union in some ways, yes, but here too the Chinese against the Soviets, it's not even close. The Soviet economy was never on a purchasing power parity basis close to the size of ours. Chinese have already vastly surpassed ours on a PPP basis. You've got the, you know, the sort of the entitlement side where you know, which is leading to generational warfare. Right. We've got the biggest, richest generation in human history is getting 80% of federal government spending to them even though they're already the richest generation. You know, we've got the first American generation where the kids are less, going to be less well off than their parents. There's all of these things that are different and unique into this high debt situation. America's never had 120% debt to GDP after World War II. We were 110 and we got it down to 55 in five years. So it is historically unique.
Host (possibly Jason or similar)
Well, to your point, I know we were discussing your oldest son before we hit record and you don't have to expand on what we're talking about specifically, but I'm just curious because it's something I think about a lot with Gen Z. Are their, their views on this life, coming out of college, being in college, how, how are they viewing things? They, but I mean I'm sure because they're your sons, they're, they're a bit more optimistic because I, I, I trust that you raised them the right way to think, the right way to approach stuff. But do they have commentary on their generation and what the, what the vibe is?
Luke Groman
You know, and it's hard to tell, right, because 25 year old there's always some element of nihilism, right. You know, at that age, no matter what. So it's hard to tell like how much of it is that age versus this generation they're acutely aware of, you know, sort of the relative, the generational stuff. You know, their grandparents are rich and they're poor, to be blunt. They. And the Internet is so powerful in that they can sort of like look up and say like, okay, where, where, how were you doing when I was this age and what have you. And yeah, every, under, every generation has its, as its, has its challenges, for sure. I will tell you, I think there is a growing understanding and fear of AI. They understand that it's there, they understand it's coming. It's almost like, you know, like Jaws where you haven't seen the shark yet, but you've starting to see the bodies wash up on the beaches and like, you know, that ain't a motorboating accident. Yeah, I mean, it's, it's. I don't want to put words in their mouth. You know, we talk about, you know, a lot of these serious things, right? Like, you know, three draft age boys, they've been concerned all year. Like, you really, you know, do you think they could possibly do a draft? Like, you know, that kind of thing? I don't think they would. It's, it's just a, I think a pretty weird time for them because there's just, it's a period of, for that generation, it's just such rapid change. You got a lot of kids that went to college and are coming out. Like we, we know somebody, they, they got a economics degree at Yale and then they got an advanced degree in Yale. They speak three or four different languages. They can't find a job. That has never happened in the history of America. I don't, you know, I would be willing to bet good money that somebody with two advanced degrees from Yale University, multilingual, three or four different languages and they can't find a job. And there's a lot of them of their friends can't find jobs. Why there's a whole bunch of what the American economy is. AI does better administration, math, science, does a lot of it better, a lot of it cheaper. And so, yeah, eventually it's gonna be great for everybody as we grow up. But between here and there, it's like Lord Farquaat, right? Some of you may have to die. And that's a sacrifice I'm willing to make.
Host (possibly Jason or similar)
No, that's why I love talking to you, especially about the kids, because I'm gonna be close to the beginning of my journey with raising children. My oldest is six now, youngest is eight months. So I've got some time to figure it out. Something I think about constantly. It's like, okay, like what should you even be learning to be prepared for this, this world when, when you, when you go out on your own 12 years from now?
Luke Groman
I think it's all about just maintaining lines of communication with them. You know when it was funny because, right. Like when my, when my oldest was seven, we moved into this house and this was our pine box house. And I signed the mortgage the week Lehman went under. And I didn't know I was going to have a job in six months. Months. And so like, they're running around loving the house. The second One was so 7, 5 and 2. And they look back and they're like, God, the world was insane. Dad, how did you. Like, we didn't know that. I said, I know. Your mom and I, you know, we didn't talk about it around you. I wasn't sure. I thought I just signed a mortgage I wasn't able to pay back. I was not going to have a job. Who knows? World's crazy. But. But they never knew. So, like, there are things that kids need to know and things that kids don't need to know. So, like, that was one thing we did. And then as they got older, we started having more of these conversations. Hey, do you remember this? That, that vacation we went to in, you know, when I was getting ready to start Fftt. We went to this vacation up in Niagara Falls, which for us is like a three hour drive. And we rented this house on, and it was like $92 a night. And it was like, that's what fit in the budget because we were saving money because I was not going to take outside money from investors. I wanted to be able to write what I wanted to write. And I said, remember that vacation? We did it because we were literally like scraping money together, putting it all away to get ready for me to leave my job, have my salary go to zero without taking you boys out of school, without taking money out of your college fund. And they're like, we didn't know that's why you did that. We just thought the arcade was awesome. Like this shitty little arcade in this house with like two video games. And they thought it was like the greatest vacation history. So that's another thing I would tell parents is like what you view as like, good or bad is not what they do. Like what they, they just want to feel loved. They want to be with you. They want to enjoy an experience and it doesn't have to cost a gazillion dollars. So. And then as they continue to get older, I just tell them, like, look, like the only thing I ask of you, just keep getting up like you're gonna get knocked down. Well, now we're just brutally honest about, like, listen, AI, this, that, the other. And, and like. And honest, like, I don't know, this could. I could be totally wrong. And this is all gonna be awesome. And, and, and. But I'm gonna tell you what I think. And all I'm asking is just get up. You're gonna get knocked down. Get up. You'll be fine. And if you can't get up, you call me and I'll help you get up. Like, that's, that's about it. So it's, I think just tell them what they need to know and then start telling them things and then openly share. You develop that relationship. You support it, you show it, you model it with your. With your wife and your spouse, whoever that might be. And you know what communication looks like, what a good relationship looks like, you know, with your parents, you know, with them. And you teach them to empathize and you teach them to be flexible. You teach them to critically think. And then, like, you hope for the best. And it's scary as hell.
Host (possibly Jason or similar)
It's scary. It is fun. There's a lot of fun. I think that's a good.
Luke Groman
Oh, my God, it's amazing. It's the best thing. Like, it is. It's the best thing I will have ever done. It's the greatest honor of my life. And it's just like, you're like, well, when they're older, then I won't worry. Like people ask someone ask me one time, when do you stop worrying about. Because I had. We had kids relatively young. When do you stop worrying about them? I said, you'll stop worrying about them when you're in your grave. That's it. Maybe that's it.
Host (possibly Jason or similar)
The.
Luke Groman
The worries change. That's all. You know?
Host (possibly Jason or similar)
Yeah, no, I think this is good. A good grounding topic to end the conversation on because that's really what matters at the end of the day and trying to just keep. Keep your sanity and anchor back to family, make sure that you're being good present father or mother, and doing your best to make sure that you're steward. Steward them in the right direction as we go through for sure these crazy changes in the world. The world's going to change. It always has changed. It will always change. But I think understanding how it's changing is important. That's why I love catching up with you.
Luke Groman
Well, as soon as you figure it out, you let me know. I'm just trying to hang on.
Host (possibly Jason or similar)
I will, I will.
Sponsor Announcer
This was great.
Host (possibly Jason or similar)
Thank you again for your time. I always appreciate it.
Luke Groman
Luke, thanks for having me on. It's great chatting with you as always.
Host (possibly Jason or similar)
All right. Peace and love, freaks.
Sponsor Announcer
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Date: May 20, 2026
Host: Marty Bent (probable)
Guest: Luke Gromen
In this episode, Marty Bent sits down with macro analyst Luke Gromen to discuss the dire state of the global bond market, persistent inflation, sovereign debt crises, geopolitical tensions (especially around Iran and China), the role of AI in the economy, and the implications for Bitcoin and other reserve assets. Gromen provides granular analysis and forthright opinion on the intersection of monetary policy, geopolitics, technology, and generational change, with a focus on why the current environment is historically unique and precarious.
Timestamps: 00:07–06:34
Timestamps: 06:34–10:45
Timestamps: 10:45–17:12
Timestamps: 17:12–26:09
Timestamps: 26:23–37:03
Timestamps: 35:08–42:30
Timestamps: 51:53–57:12
Timestamps: 57:12–61:42
Timestamps: 61:42–66:08
Timestamps: 69:47–77:54
"If you're not paying attention, you probably should be. Probably should be. Probably should be."
— Luke Gromen (00:17)
"Other than that, how is the play, Mrs. Lincoln? That really, I think is the economic question of the moment…"
— Luke Gromen (01:37)
"People need to be ready for double digit inflation. And then the question is, when do they do that?"
— Luke Gromen (05:28)
"It's the Jedi mind trick, right? Like, hey look, we're shrinking the balance sheet. Well not really because… you're just moving it over to their balance sheet."
— Luke Gromen (08:06)
"Iran actually does have a say in this… The bond market's saying hey, the Samuel Jackson meme right TikTok mfer right here, here, here we are."
— Luke Gromen (15:53)
"If we have all the cards, why are we going there?"
— Luke Gromen (25:14)
"You're going to drive massive productivity, but the amount of unemployment you're going to drive..."
— Luke Gromen (31:41)
"You're talking about taking jobs that are paying multiple hundreds of thousands… replacing them with something you can subscribe to for 20 bucks a month. Like you're undermining the tax base of the United States at a time when the United States cannot afford to have its tax base eroded at all."
— Luke Gromen (41:56)
"Nothing more bullish for a neutral reserve asset than sovereign insolvency… but between here and there is the $64,000 question."
— Luke Gromen (56:43)
"America, call me when you're sober."
— Luke Gromen (61:36)
"Peak America was 95 to like 01... Not to say we'll never get back there but like… just one darn thing after another since then. Right. 9/11, bond crisis, stock crisis, the war, the great financial crisis… This is historically unique."
— Luke Gromen (66:08)
"You just want to feel loved. They want to be with you. They want to enjoy an experience and it doesn't have to cost a gazillion dollars."
— Luke Gromen (74:22)
“If you’re not paying attention, you probably should be.”