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- [00:00]
A
Back after a week off due to our attendance at the Bitcoin 2026 conference. Still recovering honestly from a week in Vegas. I think four days in Vegas is three days too long.
- [00:15]
B
It didn't feel like a week off, I'll say that.
- [00:17]
A
No, it did not. Good time though. I thought the vibes were high at the conference. I thought despite what many people were saying online, the people on the ground and the conversations that were had were pretty high signal. I think a lot of the power players in the industry were, were there and there was a lot going on in the side events and the happy hours that I was happy with. Were you happy with it?
- [00:37]
B
I was happy with it, yeah. Solid. I call it like a 7.8 out of 10.
- [00:42]
A
It's pretty good. Yeah, it's pretty good. But we missed last week. We got two weeks of headlines and news to digest here, two timestamps to go over and I think we'll just jump right into it with a continuation of a theme that we've been talking about quite a bit and I think it is accelerating at a quickening pace and I think the broader markets are beginning to realize that this is a theme that is likely here to stay and that is the industrialization, the re. Industrialization of the United States with a heavy hand from the federal government. And the signal that we've gotten over the last two weeks is the. What's the word I'm looking for? The. Not incitement, but the, the. We can cut this out. What. What is the word I'm looking for?
- [01:31]
B
Encouragement. Like the.
- [01:33]
A
No, there's, there's an official word. Enactment. The enactment of the Defense Production Act. There we go. So we have it here. The. I don't believe this has been used in many decades, but it seems like the Trump administration is saying, hey, we are going to enact the Section 303 of the Defense Production act for a number of things, as you can see here on the first slide, grid infrastructure, equipment, supply chain capacity, natural gas transmission, processing, storage and LNG capacity, as well as the development, manufacturing and deployment of large scale energy and energy related infrastructure. With everything going on in the Middle east and I think more importantly the race to win the AI wars. The Trump administration has identified key parts of our economy, our industry and the supply chain that need to be bolstered if we are going to win that race. And this particularly revolves around energy, which is the base of everything we're going to be doing here.
- [02:32]
B
Yeah, and this isn't even all of the EOs from two weeks ago I couldn't even cram them all on the slide. There are several more, but yeah, it's all related to critical infrastructure, grid capacity, oil and gas transmission, development, assets, all the things that are basically the baseload infrastructure and kind of layer one of civilization that we've spent the last few decades for various reasons kind of deprioritizing and hollowing out in the US all that's getting very clear increased attention at the federal level, at the White House. And if you read through these eos, they're still fairly broad. It's authorizing the Department of Energy to do certain things and we were talking about in Vegas, it's still unclear exactly what results from all these things. But this is just furthering the theme that we've been talking about the last few months of just industrial policy coming back to the U.S. we haven't seen anything like this in 50 plus years. And you see it as well with the, what I thought was a really interesting quote from Jameson Greer who's the trade rep for the US who's doing most of the kind of negotiating of tariffs and all the gives and takes and the dog and pony show of negotiating with all these different allies and trade partners. I think this just really captures the moment that we're in right now where he says when people complain about he's got this plan that he's promoting now that the administration's promoting for all sorts of very interventionist national policies and internationally coordinated policies around setting price floors and having kind of trade clubs effectively to counter let's say adversarial nations. They don't say it explicitly in this article. Greer doesn't say it, but basically China to deal with all that. He and the administration have this idea of these very kind of heavy handed things and getting pushback clearly from let's say Atlanticist allies in Europe who are used to doing things very different way. And he says what you're talking about is cost efficiency, which is why we're in the situation we're in. We have to pay a national security premium to get where we need to go to have a secure supply chain. And I think there's a lot that you could debate in that that we're not going to get into. And I think it will make the Misesians in the crowd kind of cringe and perhaps rightfully so. But I think it's just a really good snapshot of where things are right now. And I still think the mainstream investment community has yet to fully grok that this is where we're headed. But this idea that cost efficiency above all else just in time, inventory margin expansion above all else, that's out the window relative to what the state sees as a need for security. And that's become clear in the last year, especially given the trade war and given everything that the ways that China has responded with its rare earth dominance, that national security is going to mean security over these critical minerals and baseload energy that powers the defense industrial complex that ultimately implicitly supports the dollar. And you see it here too with the EU complained about it to Jameson Greer and then literally a few days later that week announced on their own page that yeah, we're going to go ahead with this strategic partnership that includes border adjusted price floors, standards based markets, very terrifically European language offtake agreements, price cap subsidies, all these things that are very again interventionist and very kind of anti class liberal economics again for better and worse. And I think that's going to have a lot of implications that we'll get into. But I thought it was important to hit those few headlines that we missed last week because I think it just really highlights the environment we're in and just further momentum for these themes that we've been talking about.
- [06:11]
A
Yeah, and I think it is weird. Like you said, it goes against the norms of the classical liberal economics view of how markets should form and how certain goods should be brought to market. It's very heavy handed, centralized sort of mandate from the federal government. But I've been reflecting a lot on this and obviously having been in bitcoin mining for eight years now, I think it became clear to me in 2018, 2019, 2020 that the state of the United States grid systems is lacking and in desperate need of reinvigoration. And I'm a big believer that we need to have multiple turns on the amount of energy generation and power generation that exists within the US borders. And so part of me is for cheering this on because the free market hasn't really leaned into that critical infrastructure in the way that I think it should have over the last three decades. And especially with bitcoin mining and AI COMPUTE being on the top of everybody's mind and thinking about the demand that exists for AI, specifically where it is today, where it will go over the next couple decades, I think it's become pretty clear to people that demand for that compute is going to far outstrip supply, definitely at current rates. But even if we continue to expand generation and grid capabilities and so I don't know, what are your thoughts on this? Like I'm sure we've all seen the charts of China's power generation growth over the last two decades and it is hockey stick growth, the likes of which is, is awe inspiring to be honest. And I see what they're doing over there and it does worry me a bit that they're leaning into it very heavily and we seem to be lagging behind. And so again, I'm a, I come from the Austrian purview, I like free markets. But I do think the recognition of the, the inefficiencies, the sort of inadequacies of the grid in the United States and power generation more broadly, identifying that and focusing on it is worthwhile.
- [08:24]
B
Yeah, for sure. I mean, I've thought a lot about this over the last year and I think part of the issue that makes this discussion tough is that we are so far beyond like the status quo is so far beyond being developed by a true free market that it's almost like a moot discussion. It's kind of like the same discussion that people have about US Healthcare and positing that the US is the free market healthcare system and Europe is the socialist healthcare system. And clearly here are the pros and cons of each based on that. I think that's a complete false framing too. There's massive, massive intervention in all forms of or all verticals of US healthcare. We're very far from a free market in virtually any industry. And I think certainly on the critical industry side, the manufacturing side, the power side, the grid side, you've talked about it for years on tftc, the degree to which having one country's fiat currency as the reserve currency of the world and treasuries being the default reserve asset effectively creates USD Dutch disease that heavily incentivizes moving manufacturing, moving those industries and pretty much any heavy industry, any capital, intense industry out of the US into other countries. And I think China played that hand wonderfully and basically used mercantilist policy to compound that trend and gain an advantage relative to both the US and the
- [09:37]
A
rest of the world.
- [09:38]
B
While I think a lot of maybe elite decision makers were lining their pockets with the temporary positive results of that. And I think that game could be played for several decades. And it worked out well in terms of rocketing US stock prices and prices of financial assets. But obviously it's had significant consequences that we're now dealing with. And ironically, this monetary system that we've been in, this financial system we've been in, which again, it has fiat currency at its base, I think already is Far from a free market system, but ironically, that relies on the power of the US military, which functionally and increasingly relies on infrastructure that the US military doesn't control and can't in principle even recreate quickly. So that's why I think you're seeing a lot of this in a vacuum. Do I love a lot of it? No. But I also would say, well, would I have loved 1971 to not have happened? Would I have loved 1945 to not have happened? And all of these things, 1913, all of these different inflection points in US monetary history and the development of the financial system? Yeah. Would I have loved things to have gone a different way in the last century? For sure. But we're not there. That's not the world we got. And so the question is, how do you get from here to there? And I don't necessarily think that just writing more white papers on the Keio Institute website or the Mies Institute website will necessarily by itself, kind of get us to any sustainable situation. And I certainly don't think that a world dominated by the CCP is particularly friendly to any of the ideologies and viewpoints that you and I would think are very important. So, yeah, mixed feelings on it. I think that, like I said, there's a lot that could be said about it. But I also think probably as we go forward, the right framing is not like, should the free market do this or not? Because the market has already been so radically suppressed by that and by climate policy in the US and Europe for the last 20, 30 years. All these things we could. This litany of things we could talk about. So, yeah, I'm just trying to get outside that framing, that this is like we're somehow leaving the free market behind, that unfortunately, that ship sailed a very long time ago, I think.
- [11:41]
A
Agreed. But getting to the point, you alluded to it earlier, how are we going to pay for all this and what effect is that going to have on broader financial markets and in commodities as well?
- [11:50]
B
Yeah, I mean, this is another tweet we can breeze by, but just I thought it was worth highlighting as it relates to how we're going to pay for this. Under Secretary of State Jacob Hilberg highlighting this recent announcement of a massive forward deployed industrial base in cooperation with the Philippines. And it's going to be allegedly a third the size of Manhattan. And you know, the location of that is obviously strategic, given how relevant the Southeast Asian area corridor is for us in a variety of ways relative to, relative to China. So it just kind of goes along with the thing we've just been talking about. But yeah, to your question, like, we're racking up, you look at this, you look at the defense budget expanding 50% next year, if Trump has his way, all of the industrial policies that include like offtake agreements that we just talked about, various subsidies, price floors, you're racking up more and more cost to kind of fix the plane while it's flying in the air.
- [12:43]
A
Right.
- [12:43]
B
And I think if you flip to the next slide, you're starting to, I think, get a sense of it's all in development, but you're starting to get a sense of where we might be kind of getting the funding headroom for this. This past week, we saw U.S. debt to GDP officially hit more than 100% for the first time since, I believe, the 1940s. And so it's to ask, where do you get the headroom to further expand budgets for this? And I think this development, with the UAE and various other Asian countries, Gulf coast countries as well, allegedly, per Wall Street Journal reporting, asking for or inquiring about establishing standing USD swap lines, and then Treasury Secretary Besant coming out and saying, yes, that's happening and it's going to be a tool for dollar dominance, and they're very interested in doing that, is, I think, starting to sketch out how that circle gets squared. We've got a new Fed chair coming in and Kevin Warsh, who has talked about wanting to shrink the size of the Fed balance sheet. I still think that's somewhat questionable in the long run whether he'll actually do that or whether that's just a means to seem like he's not going to just be a Trump yes man. But let's say that that happens. Let's say the Fed is no longer the insensitive price insensitive marginal buyer of US debt. It increasingly looks like the US is trying to wrest control back of the offshore dollar market and bring it back onshore to export it again in a way that the US can control, rather than allowing it to kind of run wild outside of the US's purview. And I think you look at the UAE, you look at Japan, Korea, the Gulf states, a few other big ones, Argentina, potentially Brazil. We've talked about on the show in the last few months, this network of countries into which the US is getting its tendrils, especially financial tendrils, do those become, can you get those guys on sides? Can you get those guys further entrenched into the dollar system and more committed to taking on using trade surpluses. They have to further fund the US Capital account. And I think the UAE headline is just the latest step kind of in that direction. So yeah, I think it's going to look different than what we've seen in the past 15 years, the past 20 years of just constant Fed balance sheet expansion that may still happen, but increasing. It looks like the ways that this gets paid for will become much more kind of geostrategic than just the Federal Reserve bank of New York arbitrarily expands the balance sheet by a trillion dollars overnight.
- [15:14]
A
Agreed. And I think I'm very happy you highlighted it this week in the newsletter because I don't think it's getting enough tick as well. But again, going to your point, how do we pay for this? I think one of the critical components are going to be getting energy prices under control and obviously with everything that's happened in the Middle east and the Gulf over the last three months that a lot of people are worried that the price of WTI and Brent is going to run away. We're going to hit 200 barrel oil and obviously we've shifted a ton of production here to the United States over the last two decades. We're that exporter LNG is a, is a very bright spot for the United States and it looks like we're leaning into that, but to the point of getting energy prices under control. You wrote about it, but I think this is something that is another thing that many people aren't paying enough attention to that it's pretty massive. The UAE announced that they are leaving. They left OPEC as of May 1st, so last Friday. And their energy chief says they're still committed to oil price stability. But I think OPEC defections are pretty big signal out there as OPEC is something that the market has come to believe is here is just a foregone conclusion, something that we have to live with. And if OPEC and that sort of consortium of countries that work together to sort of stabilize oil prices at a certain range that is typically beneficial for producers, which means higher prices, that could signal that price fixing isn't going to exist. We're actually going to get a market where oil and gas trade freely based off of supply and demand. And I like to get your take, but in my view this is a signal like hey drill baby, drill price be damned, it's a free market now.
- [17:02]
B
Yeah, I mean I think this is the headline of the last two weeks is this UAE headline and it's funny, very interesting that it would come on the heels of the reports of negotiations on the dollar swap lines. Right. One could imagine, one could look at the correlation and say perhaps those two are related, perhaps one was a condition of the other. But Yeah, I mean UAE's been, the UAE or its predecessor have been in OPEC since its founding. I don't think they were a founding member exactly, but within a few years thereafter, like, I think they joined in like 65 or 67 or something. So this is like a 60 year relationship. To your point, the fixture of market structure and energy. There's no one trading anything today that does not remember a pre OPEC world. So this is a fixture of markets and you're seeing your first defection of it from a key member. And the obvious implication would be this, this nice chart that I put there on the bottom. There's now potentially headroom to drill a lot more, to pump a lot more and supply a lot more to the market. That 1.4 million barrels per day, that by itself is not going to entirely plug the hole that we're dealing with in the straightforward moves, but it's meaningful. And especially on the margin, it's significant. And I think it also signals like it at least makes you start thinking as an energy trader or as an investor, as a capital allocator, as a businessman trying to outl. Is this the start of something? Right. Like this puts pressure on the rest of the members to potentially consider something similar. This is why it's so hard in practice to keep a cartel going in the free market is like the incentive to defect is so high. And so I think that's another long term piece. You have to ask yourself over the next couple of years, is this just kind of a one off or is this in the first of several dominoes to fall? But either way it's definitely on the margin, bearish for the price. Oil, right. Like it's, it's, it should tend to drive, you know, more supply, which is going to be a key, key point as we think about the how do you pay for it Question. Because, you know, it's all well and good to announce all these, these initiatives, this industrial policy, but if, if you do that while you've got an energy choke point that's still not been figured out and you run it hot aggressively and you know, oil to your point goes to $200 a barrel, that's going to throw a lot of wrenches in, in actually just getting that done. Not to mention the treasury market, which you need to behave if it drives a massively inflationary environment that's going to be an issue on a bunch of fronts. So, yeah, I think this is the other big unlock that has to be figured out is how do you keep an energy regime that allows you to achieve the goals that the US Wants to achieve? And this is, I think, a meaningful step toward that.
- [19:33]
A
And then if we're right in our thesis that what we're seeing broadly is really a meta war between the US And China, I mean, I think this affects OPEC plus mainly Russia the most. And it's a way to pull a lever to lessen Russia and China's leverage over the global economy. So if Russia isn't able to sustain their domestic economy via their oil industry with opec, if OPEC were to remain in its states and the cartel was successfully able to artificially elevate oil prices, that works out well for Russia, which by extension works out well for China as well. So you can see this being a lever pulled to weaken that leverage between those two superpowers.
- [20:19]
B
Yeah, I think that's right. It's got potentially multiple benefits on that front. And if you flip to the next slide, I think this is a pretty remarkable one, too. This chart, let off the timestamp this week, speaks for itself. Ten years ago, US was net exporting nothing. And now this puts us basically kind of in league with Saudi Arabia and the biggest producers in the world, the biggest exporters in the world. So all on that same theme of US Energy dominance goes back to the executive orders we talked about at the beginning focused on further ramping up supply. I will say it looks like rig count in the US hasn't really moved meaningfully over the last couple months. I think there may be some argument that oil majors are somewhat. They've been burned before, and they're maybe somewhat slow to start deploying more capacity in response to all this. But definitely, I think if you look at those, if you look at where the administration's heading, if this continues, I don't really expect that to continue that much longer. I think we're definitely headed to a world of the administration prioritizing making this chart. The number needs to go up on this chart, I think, a lot.
- [21:26]
A
Yeah, drill, baby, drill. Moving on to. I mean, those seem to be positive. If everything plays out the way the Trump administration wishes it to, for oil and gas markets, it seems like it will be good for the US Economy. Lower oil prices, obviously heading toward midterm elections. Everybody's looking at what they're paying at the pump and they're not happy. And this is being expressed in approval ratings right now. So maybe these moves will be successful and bring down the price of oil per barrel between now and November, which should lessen price at the pump, which should bode well. But one thing that seems unavoidable, one of the negative externalities of the war in the Gulf is the, the knock on effects of the oil and gas byproducts and the supply chains that they touch. And one of them being fertilizer markets with helium production being material materially hindered in Qatar specifically. And this is beginning to express itself in the affordability of fertilizer in US Farmland across the country. So it seems like we have a chart here. Percentage of farmers unable to afford all needed fertilizer. And across the country it's, it's well above 50%, minus the Midwest region where it's just below.
- [22:39]
B
Yeah. And again, just as the last chart spoke for itself, this one kind of speaks for itself too. We don't want to go on a victory lap for the US Here too prematurely because there are, as we've referenced in the past, significant constraints from doing this. Trump doesn't have all the cards. Trump doesn't have all the leeway. He needs to just do whatever he wants. You're seeing already the downstream effects of the disruption out of the Middle east in a way that people are going to feel potentially really meaningfully. And let's see how it really plays through. There are kind of lagging effects to this, but this is if prices at the pump are too high and also prices what you need to eat are way too high, that's going to be tough in midterms for the party in power or the incumbent party. So this is definitely worth watching. Both just as a citizen of these United States who will have to deal with that and think through that, but also as you game through over the next six to 12 months, what's the menu of policy options? This is going to be a big constraint on what Trump and the Republicans can actually get done to the extent that this really flows through and starts hitting people's wallets.
- [23:46]
A
When you consider supply chain disruptions in food supply chains and then going back to how we're going to pay for this, hopefully we get oil prices down. But again, if we're doing this reindustrialization leaning in, there's going to be a lot of money printing and then the supply chain disruption is definitely going to add some price inflation. Already seeing it at the pump. And based off this chart, it would not be shocking to see food prices rise pretty materially in the back half of this year. So pay attention. If you're not paying attention, you probably should be. And we've got a steep backwardation here in oil and gas markets.
- [24:23]
B
We can probably skip over this. This was just a good chart from Alex Campbell. Kind of telling you right now the market is suggesting that this disruption is effectively temporary. And looking at the headlines out of the uae, I think the backwardation increased. And so that's market telling you supply of oil is going to get looser over time. So this is kind of what you would want to see if you were running the Trump playbook. But again, that's over a multi year period. Right. And unclear exactly how it plays out in the next three to six months with all these variables we just talked about. But I think if we flip to just this is once again a bitcoin show. Everything is ultimately a bitcoin lens. If we look at a world where we're seeing the growing, the green shoots of a system that's going to find new ways to expand dollar claims worldwide, we're not going to a system where the monetary base, broadly defined is going down. That number has to go up in some way, regardless of who's funding it, whether it's the Fed explicitly in the way that we're used to, or trading partners in a newly defined trading block. We're going into that type of market and work with a government that has strategic priorities that are very different than the ones that we've seen over the last couple of decades. It's very hard for me to look at all that and think that that's net bearish for this asset that we're focused on that has the provably scarce, globally available, distributed and has a variety of applications that I think are getting greater recognition that we can get into, particularly with the government saying, perhaps dubiously, perhaps credibly, we can talk about whether some of this is actually worth how meaningful some of this is. But the fact is that the DAW and the Pentagon are paying much more attention in some way to Bitcoin against that backdrop we just described. So I think it's just a very, very interesting and important time to be not forgetting about Bitcoin and remembering what it can offer.
- [26:16]
A
Well, we didn't tie it in the beginning of the conversation, but I think everything we discussed earlier, particularly as it pertains to the enactment of the Defense Production act for our portfolio specifically, it would be a bit shameless here. I mean, companies like Giga, Upstream Data, Satoshi Energy, Cathedra who are operating at the intersection of energy production and data center construction, both in the bitcoin mining and AI worlds. It's massively bullish for bets that we made years ago. And I think we put our dollars behind these companies because we recognize that this sort of energy theme was going to emerge and be pretty strong. And this was before I even took off for the way it did. And we had no idea that Trump too, would be as aggressive as it has been in the first year, in a couple months. But I think as it pertains to 1031 portfolio, we're extremely well positioned to take advantage of all these tailwinds, particularly at the intersection of energy and compute.
- [27:20]
B
Yeah, for sure. And, you know, I think the simple intuition behind a lot of those bets was that we are going to need more energy, more power and more infrastructure to make that happen. Kind of before, to your point, before, certainly before that was consensus and before anyone, you know, had ever heard of ChatGPT. And so it's, it's great to see that getting validated. You know, I don't necessarily know that. I think these are interesting headlines that we're flagging here. I don't know that, like classified bitcoin skunkworks projects of the Dow or Bitcoin as a tool for power projection. If you listen to this stuff, it sounds a little blockchain, not bitcoin. I don't know that the understanding is fully there, but I think the awakening is happening and I think it's just a matter of time before everything that you're talking about is better understood by some of the people in power. And yeah, I just think that it positions bitcoin really, really well right now. It positions our portfolio really well. And I think if you go to the next slide too, just to close out, it's a tough time. It's a tough look to me to be bearish bitcoin right now with everything we just talked about with, to Miles Suter's point at the bitcoin conference, Bitcoin payments really starting to take off and adoption among square terminals with legendary investors again reiterating their affinity for bitcoin. Even despite the recent drawdown, with ETFs continuing to pull in massive amounts of inflows, it's. It's a tough look to me with everything that we've talked about and all that going on fundamentally under the hood, to have kind of a bearish read on bitcoin right now.
- [28:52]
A
Agreed. And I think we're already being proven right with our bets at the intersection of energy and compute and I will put it out there. I think another big theme going back to how are we going to pay for all this? I do think that using Bitcoin as a collateral asset in credit structures to fund some of these endeavors. I don't know that we'll jump straight to it in the energy sector, but I think we're already beginning to see it in the commercial real estate sector and other sectors of the U.S. economy, residential real estate as well. But don't sleep on the growing trend of Bitcoin as a collateral asset and structure credit products to help fund a lot of this and to help make the economics work for long term infrastructure development. I think that is something that is non obvious right now is a place in the market where we have capital behind companies playing at that intersection. And I think that'll be the next big bitcoin related theme that the market wakes up to in the next three to five years.
- [29:53]
B
Yeah, absolutely. I think there's a lot of latent untapped potential for bitcoin on a variety of fronts. And as a collateral asset I think is probably the most obvious near term trend where you'll see that.
- [30:04]
A
Yeah, John, we did a good job. We crunched two weeks and 35 minutes. It'll be cut down a little bit. So we did a good job. All right.
- [30:11]
B
Bullish as always.
- [30:13]
A
Bullish. See you guys next week.