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- [00:02]
Austin Campbell
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Austin Campbell
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- [00:31]
Austin Campbell
Hey everyone. Welcome to Bits and Bips, where we explore how crypto and macro collide one basis point at a time. We're here to discuss the latest stories in the worlds of crypto and macro, but remember, nothing we say here is investment advice. Check unchained crypto.com bitsandbips for more disclosures. And before we begin, a quick word
- [00:53]
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- [01:40]
Austin Campbell
all right, everybody, welcome back. I'm your host, Austin Campbell, high Scholar of Zero Knowledge Consulting. And with me today are Rahm Alawalia, Maester of Wealth Leader of Lumina, and Chris Perkins, Golden Hand of Coin Fund. We're going to start today with a segment we're calling the Iran Off Ramp. Question mark. So what happened? This morning, Trump announced that the US And Iran have had, quote, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle east, end quote, and is postponing all strikes on Iranian power plants and energy infrastructure for five days. This came just hours before the 48 hour ultimatum to Iran to reopen the Strait of Hormuz or see its energy infrastructure destroyed. Iran had warned any such strike would trigger decisive and devastating retaliation across the region. So this de escalation, or excuse me, this de escalation was notable for markets. We had futures ripping going from being in the red to in the green before the open oil crashed, dropping below $90 a barrel, gold came back down. Bitcoin surged up from the weekend low of 68,200 to above, I think 71k around the highs. And to frame this, Lynn Alden has talked about the flywheel of chaos framework where in her March 2026 newsletter she framed the Iran conflict as a potential toxic combo calling for sustained energy disruptions, the cascade into consumer spending displacement that forces both liquidation of treasury reserves and quite frankly just reduction in economic activity that forces people like the Fed into a stagflationary trap. The base case there is a gradual print phase with balance sheet expansion and a quote, big print of two plus trillion if necessary. The key risk though is if the straight stays closed for months. This appears to be moving back right now. So what I want to start with Rahm. You've been watching the market all day. What is the market making of this? Does it think it's a real off ramp? Does it think it's a head fake? Like what, what does it need to see to unwind the war concern?
- [04:11]
Rahm Alawalia
Well, the markets got out of indecision. It closed very close to where it opened. That's happened a lot, you know, over the last few weeks. A lot of the actions overnight, you know, oil dropped about 8 to 10 points depending on what you're measuring. Then it stops the market to repricing information quickly. You know, there are parts of the market where the storm has moved on, including technology areas like there's legitimate value out there and we've been accumulating some names in those pockets and quality names that long term investors would want to own. I mean they're stepping in there, so we're seeing that too. It really is quite extraordinary though. It is really extraordinary history unfolding. Trump said that he has quote 15 points of negotiation that they've established. The Iranians denied that. Then Trump denied the denial of the Iranians and there was an individual named in the parliament that they're working with and there's no agreement on the most important terms around who will control the strait. Trump said we'll both control it and then maybe we'll just control it and there's no agreement on the uranium and what happens there and maybe we'll go there. So those are not part of the 15 points. Clearly those would be the most essential points of these 15 points. One would think. Yeah. So Trump, Trump is doing the great taco, the taco of all tacos. This is like the burrito supreme and he is doing it with confidence. And chutzpah and just looking straight to the camera with no flinching and just winging it. I mean, it's incredible. This is incredible. The books that will come out of this, the movies, we're living in history here. We have the Trump put. The Trump put us here. We've seen the Trump put. You know, Trump does not want Marcus to crash and he stepped in after, I think Bussin had a pretty weak interview and he looked tired and haggard yesterday on a Meet the Press interview. So it's in the hands of the irgc, also in the hands of remote field commanders that might make decisions independent from the IRGC and the Parliament and members of Parliament. There's reporting that in Pakistan there's a meeting with the US delegation, an Iranian delegation that's set up in the coming weeks, that you've got a number of countries including Turkey and Saudi Arabia and others attempting to influence Iran. There are some tankers that have moved through the strait, including one from Saudi and Saudi Iran are rivals, by the way. So that's meaningful signal. There's still a lot more to see here. Will insurance be offered to these carriers now? A lot's in the hands of Iran. A lot is in the hands of Iran now. And you know, it's, the news cycle is flipped entirely from Epstein a few weeks ago to now. It's like get the price of oil down and Trump is doing the greatest taco of his career right now. So we'll see, we'll see what happens
- [07:26]
Austin Campbell
as we observe Trump starting to say what is the right way to say this? Things being directly contradicted by the Iranians at times and confirmed at other times. Back to something that we've been discussing previously. Do you think what we're seeing here is a fracturing of the Iranian regime? Are we seeing multiple voices starting to emerge inside Iran where the reason we're having this fragmented of a conversation is that they are no longer speaking with one voice, especially as we've been, for lack of a better way to put it, just bombing the hell out of them.
- [08:01]
Rahm Alawalia
Look, no one really knows, right? But you know, you have the irgc, apparently the hardliners are in control now. Then you've got the parliament and then you've also got the junior level staff that quote, unquote, don't want to go back, don't want to go into work. I can understand why. And then Trump earlier said, we took out group one and then group two. I mean, it is extraordinary. And you're negotiating in Twitter, right? And the Iranian Foreign minister last night said the Strait of Hormuz is not blocked. And it looked like that was a white flag coming from Iran. And Trump responded to that with this alleged 48 hour discussion. And you know the interesting comment Trump made in those remarks this morning on the tarmac, he said, quote, unquote, if this works, somewhere in the middle you could almost see a glimpse of light. It strikes me as a gambit. Trump saw this comment from the foreign minister put together a story around a mutual de escalation. They reached out to us and it strikes me as a gambit. Five day cessation hostilities. Meanwhile, there's Marines on the way. There's a five day timeline. It's a threat of future hammer. And the Iranians have a shot to create some goodwill with their neighbors. They also can punish the US by keeping oil prices high.
- [09:41]
Chris Perkins
All right, really, really interesting things over the weekend. I think the first thing that caught me, Austin, was the timing. And so Trump shows up and he's like, Hey, 48 hours or I'm going to blow up all of your infrastructure. The first thing I thought about is like, wait a second, 48 hours is like on a Monday night, which would be like right after this episode was filmed. That makes no sense because he never does anything when the markets are, you know, generally open. And I would say that during the week they're generally opened. So I thought that was a little bit weird. And so it's not surprising to me that the five day extension puts us back in when all markets are closed except for hyper liquid in crypto. Right. That's when he likes to make his moves and, and he tries to, to be like somewhat less disruptive. Rom, to your point, one of the really interesting things here is that within five days, like the 31st MEW, Marine Expeditionary Unit, which has a battalion of Marines and artillery battery that will be closer to getting on station. I think the 11th Mew is coming in as well. So you have like two battalions of Marines. The thing about Marines is that they, they don't love like doing what I did when I was in Iraq and like trying to like, you know, police people and teach them about democracy. They're really good at like taking, taking territory, particularly amphibious. Like, they're, they're, they're, what they do is they do amphibious landings. They've been planning this for 50 years. Don't forget that the Marines barracks were bombed by Hezbollah, which is an Iranian agent. So like the Marine Corps has been waiting for this for a while. They're not afraid of A fight. I don't know if they're going to be deployed or not, but, like, everything's kind of coming together for the weekend. It'll be a very interesting weekend from a geopolitical front, but from an economic front. You know, Rom, you mentioned that Bessant was, like, looking a little bit haggard. The reason for that is the tenure, right? He freaks out. Like, what is he obsessed with the tenure? Tenure? Like, I think they can tolerate Brent Oil going higher because it's like an overseas measure. You know, WTI seemed somewhat more contained here on shore, but when the tenure goes, like, all bets are off. That's when Bessant really gets uncomfortable, you know, and so I think that was part of the stress there. And so where are we right now? You know, you mentioned, like Trump said, maybe I'll control it with the Ayatollah. What does that project? It's like he doesn't care about regime change, right? Like, he doesn't care. He wants somebody who's strong, who makes them no longer be a pain, who doesn't have, you know, he put out his 15 points, but, you know, he's not there to, like, you know, facilitate democracy. He wants the Venezuela model. I heard him say that again yesterday. But Venezuela is working great. Why can't it work here? That's the end goal. But what we need is we need that straight to open. One way or another, it's hurting fertilizer, it's hurting oil, and it's really embarrassing. At some point, it's going to be embarrassing because, hey, why does this country have so much power over the world? How come their control? And I think we're in a position. I think the Gulf states are realizing we have a really big problem here. If the US Just pulls out, and we've done this over our histories, we've just been like, you know what? We've had enough by good luck, guys. And I. And I think they're actually trying to move closer to the US Right now because the status quo and what they've seen the Iranians can do without a nuclear weapon is very scary. If they had a nuclear weapon, then they would essentially have control of the Strait forever. And we're seeing what that happens. So the. The status quo is over. Like, things have to change. And I think that has to. The only way through this is if there's a permanent or nothing is permanent in this world, but you have to have a stability and freedom of navigation returned to the Strait of Hormuz one way or another. I think that's what we have to see.
- [13:27]
Rahm Alawalia
You're saying that as your policy objective or your read of Trump's true policy objective.
- [13:33]
Chris Perkins
I think that there. How do you declare victory here? You need to deal with the nuclear side of things. By the way, the Israelis are not going anywhere. That's their neighborhood. They're not going to stop until nuclear. The nuclear issue is taken care of. But across the globe, I think, I think the political and the military objective needs to be freedom of navigation and straight and foremost. And the US Will play a role. I don't know what, but that has to be the goal. I don't see any way around it because right now, like, you have one country that's been really, you know, destroyed holding up the global economy. Now, the other thing that's really weird you talked about this was with their speaker of Parliament and he rocks up and he's just like, you know, talking about. He's going after everyone with treasury bills. We should talk about this because I think everyone in Iran would love to own treasury bills as stablecoin owners. I think that would be great. I think the people love stable coins, particularly. Tether spoke to a student from Libya recently and he's just like, yeah, like, tether saved my family. It's incredible. So I thought that was interesting. But the other thing I've been thinking about is that, like, if you want to know the truth, you generally follow markets. That's the closest thing you can get to the truth. You know, everyone's going to say whatever they want to say. It's very hard to cut through what truth is unless you look at markets. Markets have responded favorably to this concept that Trump is saying, oh, we've de. Escalated and we're meeting, we're having these meetings. At first the press is like, what the hell are you talking about? What meetings? Who are you talking to? But my gut tells me that they're probably talking to somebody because the financial markets are reading it that way, I think. And then you saw this recent reporting that our boy who is Mr. Treasury, the speaker of Parliament and Iran. It does sound like he may have boarded a private jet to initiate some conversations. Is that true or not? I don't know, but I know that markets are responding generally favorably. And, and I, and I tend to believe markets when it's very hard to cut through everything else.
- [15:33]
Austin Campbell
Well, I want to pile in on the markets point and say the interesting, call it market regime has been parts are responding favorably. Parts are falling apart a little bit. If you look at the Asian economies overnight I think we're still pricing some degree of oil disruption. I also don't, I also don't think the 10 year is loving life right now or the 30 year as we look at it. And what's fascinating to me about this is I think reading between the lines of market signals, again, like thinking like a trader in this context, what the market is telling us is that the worst case scenarios appear to be off the table, eg, the strait stays closed forever, like Iran goes full nuclear, etc. But that the best case scenarios are also off the table. That is to say that there's a very quick resolution of this. We don't have some sort of inflationary shock, call it moving through the snake. And I think that comes back to the point of, I agree Trump's probably talking to somebody in Iran, but does Iran even know who Iran needs to be talking to?
- [16:38]
Chris Perkins
Who is Iran? Right, like that's the problem. What do you guys take of like, have you been watching BTC gold ratio?
- [16:46]
Austin Campbell
I have. The colossal beating that bitcoin took on the end of that is now going the other way. As we move into this year, I feel like there's two separate threads going there. One to go back to sort of what Lyn Alden was saying. If we do think there's going to be a significant expansion of money supply. Bitcoin has historically been one of the early detectors. And so bitcoin starting to go back up is something I think everybody should be keeping an eye on. But the second point is that a lot of the people who have been hoarding gold are now the exact same people who would be under pressure from energy. And so if you don't want to sell Treasuries to get aggressive with the United States, what would you sell right now? Rahm, I'm curious what you're making of this divergence between bitcoin and gold and what's going on with the long rates.
- [17:39]
Rahm Alawalia
Well, yeah, gold had an extraordinary sell off along with the commodity complex. Overall, it put an incredible wick today. I wouldn't be surprised if we've seen the lows in gold. I wouldn't be surprised. We've seen the highs in gold too, though. You know, a lot of crowded momentum was hiding in gold because it was one of the few categories I was working along with silver and a few others, I think that just got washed out. That's just where the hot liquidity went. They said, okay, this is working, let's camp out there to do the same thing with Micron. Both of Those gave way. So that's how I look at that. On the East Asian countries, these are most sensitive to oil from the Strait of Hormuz. South Korea was down several points yesterday or our morning and now it's up five points and Japan is up too. I think markets are legitimately in a point of indecision, they're trying to discount what's happening next. It's a period of high volatility and uncertainty.
- [18:48]
Chris Perkins
So where does the hotball money go next, Ron?
- [18:54]
Rahm Alawalia
You know I think the move is to, you know, you don't have to read every tea leaf, right? You can wait, just get small, go after high conviction opportunities that you have legitimate value presented in front of you that you can pick up and say this will be a good investment one or two years from now. And we're doing that like information technology. We picked up Nvidia, it was at 5 trillion valuation in October, it's 4.3 now. We picked up a bit of meta. There are software companies that have 5 to 8% free cash for yield. Their sales are still going up progressive. These incredible insurance companies that are growing double digit revenue, EPS growth. You know there's the morning stars of the world, rock solid businesses like S and P Global and you know there's a number of these high quality businesses that are just that are very cheap. They're also economically resilient. So you know there's a lot of uncertainty. We might be transitioning into an inflation regime. We had the PPI print come out last week, it was at 0.7 versus 0.3 expectation. And you're looking at all sorts of commodities moving higher. So owning quality businesses at a reasonable price makes a lot of sense to me. I think that's what institutions are starting to do. Many of those names I mentioned actually have been moving higher over the last week, unlike the overall S and P. So they're starting to lead the market out of this. But it's still too early to say for many other categories though. Still too early to say for many of these categories that depend on the price of oil. Airlines have been doing well despite oil being in the high 80s too. So this needs more time to process. This needs more time. This is a process, it's not an event. We have to see exactly what does Ron do this week.
- [20:52]
Austin Campbell
And part of what I've been looking at on that front because we keep coming back to the energy price thing is we essentially have from call it April 2025, 0 net jobs and rising energy costs going on right now. And I think the last time in the United States we legitimately had this as a backdrop was probably the 1970s, right, where you had the stagflation era. And that was one of asset prices and economic fortunes just whipping back and forth, right? Like everybody jokes you've got bulls and bears, but that was a kangaroo market, right, where you're going to go up and back down, up and back down, up and back down and ram. As you're talking about cyclical rotations between various sectors, the energy sensitivity, if that's going to bounce around as we're trying to find the political sort of solution, I think to sort of move to the next topic. Doesn't this put the Fed in a very hard spot? Because to look at what is going on there, the Fed kind of has, what's the right way to say this, an impossible task going on right now. A split where if you look at March FOMC rates are held steady, but the dot plot is a massively wide internal split. Right. Seven out of 19, I believe wanted zero in terms of 2026 cuts, while five wanted 50 basis points or more, more. So you're seeing the Fed start to go like this and I think that would depend. Are you looking more at CPI or are you looking more at unemployment? Because being fair to them with regard to the dual mandate, they are again reminding everybody the mission of the Federal Reserve is price stability and full employment. And in a time like these, they are pulling in opposite directions. So when you see this kind of divergence from the Fed itself, what we're seeing here is we're in a very difficult economic situation where both sides are legitimately having an impact. As a result, Powell is warning higher energy prices are going to push up overall inflation. It's too soon to know the full effect on consumers, but he said inflation quote isn't coming down as much as hoped. Inflation Projections are now 2.7% for headline and core up from 2.4 in November. Gas prices are 384 a gallon nationwide. Right. There's some outliers like California, but those are more local problems. Crude is coming back down, which appears to be helpful, but let's see how long it stays there. And Goldman, for instance, raised their Brent forecast to 110 average for March April. Powell also interestingly noted the tariffs are now keeping inflation elevated. Like we're having a double squeeze thanks to the supply side. So I guess my first question, which I'll, I'll put to both of you is we've got seven hawks. We've got five doves and they are diverging in opinion. Can we tell anything from the dot plot? Does the Fed itself even know where it's going to be three months from now?
- [24:06]
Rahm Alawalia
I think the policies overall are inflationary. The divergence just shows the greater volatility. What's not inflationary? You got war, $200 billion in spending requests. That's inflationary. TSM is raising prices. That's inflationary. Micron is passing $250 price point increases onto Apple iPhone. I got a record utility bill last month. That's inflationary. Wheat fertilizer, corn that's going up. That's inflationary. Like a 3% handle on CPI is quite possible. So that's the bear case for the market. By the way, inflation is just toxic for bonds and equities. I do think inflation is going to be higher for longer. Nothing here is disinflationary. The productivity growth is the best story on the disinflation front, but I don't think it's enough.
- [25:04]
Chris Perkins
I mean, look, we're obviously seeing energy prices in the interim skyrocketing. But look, I think this is going to end. This geopolitical mess is going to end one way or another. So it feels somewhat transitory against the backdrop of this new AI economy that is fundamentally disinflationary. Right. So I think they're in a conundrum for sure. I was messing around with the truflation stats and like if you look at truflation and I know we're good friends with Stefan here, it really hasn't adjusted yet. So are we missing the forest through the trees? And you know, against this backdrop, and we saw what Elon put out over the weekend and his massive plans going into space driving AI driving incredible innovation. And if the AI dream comes true, it's going to be highly disinflationary. So I mean there's a case to be made that this is transitory energy shocks that are against the backdrop of a much bigger disinflationary wave.
- [26:20]
Austin Campbell
I mean, so I'll potentially take the other side of that on two points. I agree with you about truflation's current numbers. But if you look at where the market is pricing inflation, it is not like this month, it is on a forward basis. Right. That the energy disruption causes this supply chain sort of breakdown. The other part is as we look at where the inflation will be experienced, I think the United States is probably the least least impacted in terms of a strait of Hormuz disruption. Right. Like again, not saying that I think this is a good thing for the world in general. But the US has both more native energy supplies and more, call it local supply in our neighborhood, especially with Venezuela somewhat unlocked now compared to many others. If you're looking at where problems should be in terms of their reliance upon oil from the Strait of Hormuz, Japan, Korea, the Philippines, Australia, to a lesser extent China, they've got maybe more diverse sources, but there and there I think we're seeing more flashing red indicators which to me leads to more of that chain of effects coming down the road. I think in the United States we'll get the least of that damage. And when it does arrive here, it will arrive on a delay because it's coming through the energy shock in other places. Another important point is the fertilizer one, which I believe we raised earlier. In terms of inflation. You'll only see the impact of that after growing season or at least as soon as the market starts to realize, oh, it's a bigger problem than we thought if fertilizer doesn't get where it's supposed to go. But as we look at food inflation again, like Chris, you know this one well, the US is very food secure from a production standpoint. Maybe corn gets implicated as a crop, but we just switched to soybeans or something else. The growth capacity of the US Breadbasket is world class. The people who are going to get hurt by this are like Africa, Southeast Asia, India, China, where food prices are going to go way up. So I guess to put the question back to you and Rahm, is truflation the thing we should be watching for inflation right now or should we be looking at corporations, call it Asian stock?
- [28:38]
Chris Perkins
Is the Fed care about those global impacts? I mean it's the US Fed, right? And I think you're right that the impact on the US is going to be delayed because overseas, I think in Thailand people were asked not to go to work because energy prices were so high. Asia's getting pounded. You know, countries around the world are getting pounded. The difference between 1970 and now in this country is that we're energy independent now and that's providing that insulation. We have a security, our geography provides security with the two oceans. We have energy security now. And to your point, we make a lot of our agriculture business, which is actually one of the most tech forward businesses if you ever get a chance. It's insane how technology focused these people are also self sufficient. Isn't this all just America first in the end anyway? Which plays right into Trump's plan.
- [29:32]
Rahm Alawalia
Yeah, I'M not sure the 1970s analogy makes the most sense. There's some echoes of it. For sure, there are echoes of it, but the US economy is far less energy sensitive. Chris brought up energy independence. There's also fuel efficiency, a big part of it, just the diversification of energy, the alternative energy sources. We get a lot more output per unit of energy than we ever did before. So that's a big change. There are also echoes of 2022. You had fertilizer and potash prices increase because of the Russia invasion of Ukraine. And Ukraine's like the breadbasket for Europe. So you're seeing some of that happen here. The biggest driver inflation is going to be Iran, because that strait not only transmits energy, but also the components precursors for fertilizer. So that's one more thing to watch. The AI still needs time. Still needs time, right. People are spending apparently engineering salaries on tokens now. That's what I'm reading Now people spend $150,000 per engineer on tokens. I don't think that's everybody, but that's what some of these AI if you're
- [30:41]
Chris Perkins
not spending that, you're not doing your job. If you're not spending 100.
- [30:44]
Rahm Alawalia
That's what they're saying. Message. But we'll see. I don't know inflation is a legitimate risk though. I mean the 10 year has backed up and truflation is mostly focused on goods rather than services. And we're a services economy. So consumers are going to look at the utility bill and food prices have already gone up and these inflation pressures were brewing even before this Iran conflict. So it's, you know, it's a real risk to, you know, be mindful of.
- [31:20]
Austin Campbell
Yeah, to pile in on that point too, Chris. And like what we were talking about with regard to does the Fed care about Asia? I think the answer has to be yes because of how interconnected the global economy is now. Right. I think the last time we just totally punted on Asia and acted like they didn't matter was what the late 1990s and that caused the currency crisis over there. But like post 2008 with dollar swap lines and everything that's gone on, from a monetary standpoint, I think we do have to care one, for that point. Two, if you look at the hawkish plots of the people either saying no cuts or even hikes, they're also looking later in the year. So I think there is some belief from the Fed side that, hey, if we see this train coming towards us, we probably should not be Cutting into that. Right. And then ending up in a place where we're just going to have to massively hike after the fact. I think it all comes back around to what we were talking about of the Fed genuinely doesn't know where to go from here. Like they are trying to, for lack of a better way to put it, do this live. And it's not obvious to me that they're going to go up. It's not obvious to me that they're going to go down because I don't think it's obvious to them. Right, right. Like it's the running joke on Wall street of you can't front run the guy who doesn't know what he's going to do. And I feel like that's what we're observing with the Fed right here.
- [32:46]
Rahm Alawalia
So, yeah, know the back end of the oil futures curve have moved up materially higher, by the way, so markets are expecting higher for longer here. This week is going to be pivotal. I, to see what Iran says the ball is, is truly in their court. Now. If they fire anything at any tanker, oil prices shoot up and asset prices drop. If no missiles are fire this week, then asset prices can recover.
- [33:20]
Chris Perkins
Yeah. And let's not forget, I mean, the damage to the Qatari gas fields is going to take years to repair. So we're already dealing with a, a state that's, that's been a market that's been impacted for a long time. And you're right, both of these sides want ball control and there's a. They can do little things to take that ball control. It's going to be very interesting.
- [33:43]
Rahm Alawalia
Isn't Trump giving it to them, though? He's pretending to have it. He's pretending to have it. I just saw a meme that Iran's propaganda team issued. They showed a picture of a car with two steering wheels with Trump speaking on top of and Trump saying both of us have straight up Hormuz and then the meme has two steering wheels. And I think Trump is, he's letting, he's, he's giving Iran an off ramp and he wants it. Yeah, I would think that the, I would think the IRGC doesn't want more bombs to drop down on them and wants to survive. I would think that that's the path that they want to pursue.
- [34:24]
Chris Perkins
That's what he telegraphed when he said. I told. And I will control it. Right. That, that they will retain. I just. There's this little country called Israel that may not find that palatable. And unless the. Yeah.
- [34:37]
Austin Campbell
And Saudi Arabia, like, one of the things. I know we had mentioned this earlier. One of the things I'm not sure markets are fully pricing in is the shift in, call it political belief within the Gulf region itself. All of the people who previously were tolerating and placating the Iranians just got hit with missiles by the Iranians. I'm not so sure. Like, Israel obviously has their own reasons, but are all of Saudi Arabia, you know, Oman, the uae, Turkey, willing to go back to the way things were after what Iran just did? I'm not so certain that's true. So part of what I worry about here is that the. I know Trump is saying we and the Iranians will control it, but let's be honest, they are not the only chefs in the kitchen at this point, given what has transpired.
- [35:27]
Chris Perkins
Yep.
- [35:28]
Rahm Alawalia
All right, so Israel will go the line with Trump, though. I mean, it seems like they, they got a strike on that energy plant, the second one that wasn't authorized by Trump, and Trump said, hey, don't do that anymore. And Netanyahu said they wouldn't. We'll see. But it looked like a, like, last call at the bar. They're like, okay, let's get a strike in there before they expected a drop in these hostilities. You're now entering was a week, four now. And the timetable, the timetable that Trump initially laid out was like four to five weeks. So. And there, There's a Trump put. There's a Trump put. It really comes down to Iran. You know, they use the language of respect. He said, hey, look, we. They need to respect us. Same language China used and what looked like a mutual escalation. Tit for tat that eventually went away. So Trump is trying to do that here. He's, he's going to talk. He's going to just talk his way through it, and that's what Trump does. The great taco. This is the greatest taco we've. We're going to see from Trump.
- [36:46]
Austin Campbell
All right, well, on that note, I have bad news for our audience, which is that our next sponsor does not, in fact, sell tacos. But we do have to do one more ad, and then we're going to be back to talk about AI. So we'll do that, and we'll be right back.
- [37:00]
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- [38:16]
Austin Campbell
all right everybody, welcome back. We've titled our next segment AI Eats Everything because what's going on is the tech titans continue to go all in on AI. So Elon Musk unveiled a project he's calling Terrafab, which is a 25 billion chip fabrication facility in Austin, Texas, which is a joint venture between Tesla, SpaceX and XAI. He's targeting 2 nanometer process technology and he wants 80% of compute directed towards orbital AI satellites, 20% ground based. No production timeline was given on that one. Jeff Bezos is raising 100 billion for Project Prometheus to buy manufacturing companies and transform them with AI. The targets allegedly include semiconductors, aerospace and defense. Defense. There have been meetings with Middle Eastern and Singaporean asset managers. Excuse me. Mark Zuckerberg is building a personal AI CEO agent to bypass management layers at Meta, retrieving information that normally flow through multiple levels of employees. This is part of a broader push to make Meta's 78,000person org quote AI native and as a result AI is eating jobs. It's even eating jobs in crypto where there were major job cuts at Algorand, Gemini, crypto.com op labs, pip labs, messari and more. Gemini said AI is now too powerful not to use at Gemini and compared non adoption to, quote showing up at work with a typewriter. Recruiter Dan Esco pushed back saying I see no real indication the layoffs have anything to do with AI workforce replacement at scale, but rather saying it's an excuse. And sector contraction has been the problem with job postings having fallen 80% year over year to about 6.5 per day. So where we are now is we have a lot of these things being discussed. We have AI being given as a reason for many of the job cuts and we have people making these physical infrastructure bets. But I'll start with this one. So Elon Musk and Terrafab, is this a real semiconductor strategy? Is this part of Elon's rollout for the SpaceX IPO? Like where on a scale of real to not real, where do we put this thing?
- [40:52]
Rahm Alawalia
I call whole thing is okay, so you need 20 to 25 billion dollars to start a fabric. A fab is one of the most complex technologies human beings have ever created, second to the pyramids. TSM has invested 100 billions of dollars to figure this out. Tesla doesn't have the cash flow either to pull this off. They have not figured this into the capex planning for next year or two. They generate, Tesla does about 3 to 6 billion dollars in free cash flow. There's a range there because their Tesla auto sales are dropping quite a bit. I like their products, but I think they're phenomenal products. So I'm a believer in autonomous driving. I believe Tesla's got the edge there in the us. I'm calling a spade a spade here, but you need to finance investment with either operations or by diluting your shareholders. They're not going to sell $20 billion on the market. Unlike Google, Tesla doesn't have a alternative way to compete to get lower cost GPUs. So I don't think this is going to go anywhere. Elon's also the only one talking about data centers in space. I've listened to quite a few credible people say that it doesn't make any sense. The technology is not there. Jensen, the CEO of Nvidia himself has said that, including people from Semianalysis, which covers the category. So it seems like Elon's just trying to sell more of the future. Tesla Stock's been down 25% in the last one or two months, I think. I had a short on it until this morning by the way. Probably be short again after a rally. So full disclosure there. Again, big believer in the technology, big believer in what Elon's done for human innovation. Right. But I don't think this goes anywhere. It's not real.
- [42:44]
Chris Perkins
On the AI side, I feel like this whole I have to fire all these people because of AI, it's kind of just this. It gives companies an excuse to restructure without having to like really explain the true reason why they want to restructure it has very little to do with AI. It's an opportunity and an excuse. That's just the truth. And that's the case if your business model is not working. I'm not talking about any of those companies in specific, but you can say, oh, AI is coming. I'm going to fire my workforce and restructure. Right. It's just very clean. It's a beautiful excuse. I think that no surprise to anyone on this call, this opportunity really tells me why I'm so excited about crypto. All this noise, all this chasing the hot new toy. And we'll get into Elon here in a second. But I literally just came back from downtown in New York City, where the CTO of DTCC was talking about how they're going to tokenize $200 trillion in assets. Like, come on. And that's happening in real time. We have DAs in New York this week. Every institutional is piling in. I could sense the energy in the room. That's standing room only. Right. And so this makes me more excited to be part of crypto, which is going to be totally integrated with AI going forward in whatever way, shape and form it takes. I think Rom, it's hard to bet against Elon over the years. Maybe you can do it in a very different, I guess, windows perhaps, and make money. I mean, this is the greatest entrepreneur and founder within generations. So I love the fact that he's thinking big. As I watched his presentation over the weekend, there's a couple other cool little Easter eggs that jumped out at me, talking about how he thinks that new breakthroughs in physics are going to unlock other things. He said quantum without saying quantum. And so those are the three technologies that I think about. AI, crypto and then quantum. It sounds like he's starting to get his hand on the quantum as well. You know, where do we go from here? It's also very much part of what we talked about previously onshoring, onshoring, building chip capabilities, onshore resiliency. You know, is this our 1970s moment for energy? Maybe we need to onshore chips. And if Elon's going to do it, who else is if it's not him? So too early to tell if it's going to be successful or not for me. Gets me very excited about so many different things, so many different breakthroughs. There's going to be. When you put all this money at AI that we're seeing, there's going to be innovations and breakthroughs that are going to like that are going to be second derivative and be incredible. That's what I'm looking for. Hopefully some amazing startup founders come out of it. But again, I like this is a crypto and macro show. I get excited about crypto more and more. I hear about all this.
- [45:51]
Rahm Alawalia
Just briefly, a few things. So Net engineers are being hired, not fired in aggregate. If you look across the entire ecosystem. So you're not seeing software engineering displacement from AI, that's one second the companies that are laying off the most engineers are spending the most money on Nvidia and they're issuing debt to finance their cash flows. That's Oracle and Amazon and Meta. This is all about free cash flow. They got to figure out a way to pay the bills. So yeah, this is not about AI displacing human talent. That's not happening yet.
- [46:28]
Austin Campbell
So I'll say the part of this that did catch my eye and was super interesting to me is actually what Bezos is up to. Because I know one of the topics Ram, you've talked about on here before is where will the value accrual from AI ultimately reside in the market? Does it reside with the model companies or does it reside elsewhere? And so as I look at what's going on here, if you have a guy who built one of, call it the two biggest manufacturing behemoths out there, which was Amazon, right, In terms of operations, logistics, supply chains, moving goods from A to B, maybe the other one recently being Apple, which is fundamentally a hardware company itself. And he's looking at this saying, the place I think will have the value accrual is applying AI to manufacturing. Companies are stuck previous generation regimes. That's a super interesting signal to me because remember, his original insight back in the day was wait a minute, why don't I apply the AI to this fragment or not AI, the Internet, in that case, to this fragmented, sort of idiosyncratic, not particularly efficient market called books brought Amazon into the world to massively compress margins and improve things in that space. Is he looking to run that playbook again on manufacturing writ large with AI? That becomes a question to me as he's unveiling this sort of thing. So Chris, you're an investor in early stage companies, Rom, you're an investor in later stage stuff. Is this a sign that the value accrual of AI is not going to go to the model companies, but rather to the people implementing it to improve their own margins?
- [48:23]
Rahm Alawalia
Yeah, the benefits are there. It's the users, the end users. The venture capital firms are subsidizing the real economy, financial services Firms are benefiting. We had someone on our team use Claude cowork To pre fill 20 subdocs with the command, the basic command. Those are the people that we're all benefiting. CLAUDE is losing money. They're handing value to the end consumer because they're gaining so much share from OpenAI. People are cord cutting OpenAI and switching over to Claude. We've done the same. And so it's all this venture capital money is subsidizing the real economy. It's not this esoteric innovation like some transformation in biotechnology. It is basic day to day workflow automation research. We're using it in our investment processes every single day. I'm sure everyone is. It's speed of memo generation, investment proposal generation. So that's where the value capture is in capitalism. The consumer wins. Same thing is happening here.
- [49:29]
Chris Perkins
I would say on the early stage venture side. We always are looking at the intersection of crypto and AI and this space has a lot of promise. Projects like Bittensor and others. One thing that we're watching is things like payments and we had coinbase launch this X402 protocol standard and stripe release equivalent MPP. We haven't seen that take off just yet either, either one of those and one of the things crypto has struggled with for a long time is, you know, it's not if you build it, they will come. I think there's some of that going on in AI as well. And so really looking to see, you know, some of that real product market fit at that intersection. You know, I think it's going to happen. I think Agentic payments is going to be big. We haven't seen that evidence yet, but that's something that I'm really, really focusing on.
- [50:27]
Austin Campbell
All right, so if we're agreeing and Rahm, I agree with you that the history of capitalism has been the greatest benefits ultimately get delivered to the end consumer on that front that like largely a factual statement and that at least some of these announcements from firms then are in some ways call it presaging other concerns or like avoiding the real reason for the layoffs. Do we think Zuckerberg building an AI agent to skip the org chart is going to be a leading indicator for people in middle management both at Meta and perhaps writ large that your days are numbered. Because if like Rom to take your example, if you're eliminating a lot of the busy work, you're freeing up those employees to call it, manage the work that is being done there and then communicate directly about that sort of thing. Are we going to be compressing org charts, eliminating the middle management people and eliminating a lot of the repetitive work and leaving the people who are architecting and designing. Is that the source of these layoffs?
- [51:30]
Rahm Alawalia
Yeah, yeah. Well, one just sorting up the audience. I thought that headline coming out that Zuckerberg wanted to create an AI executive to help him do his job is amazing. Zuck wants to create an AI robot to run Meta. We already have a robot running Meta, so this is more evidence that we live in a simulation. But yeah, look, I think you're going to see the more of the menial tasks go away. That's always the history of this stuff, right? The toll booth collector gets disrupted, the switchboard operator gets disrupted. They move on to a higher value added, more meaningful, more satisfying work life. There's someone in intensive care unit who every 30 minutes must rotate a body. That person's going to get a higher quality of life and it's going to lower the cost of care and delivery. And it's a menial, thankless chore that's essential. So I don't think you're going to see this massive disruption like whose roadmap is going to suddenly evaporate? Have you ever seen technology company have a roadmap, say, okay, we're good now, we wrapped up the roadmap, we shipped our product, we are good to go. There's always new innovation. So, you know, you will still have humans playing the role of setting vision, AI accountability, AI supervision, quality assurance, listening to the customer. Those types of roles will. And work functions will take up more of the time.
- [52:58]
Austin Campbell
Chris, what do you think? Is this bad news for middle management at Meta?
- [53:04]
Chris Perkins
You know, honestly, people are resilient and I, I don't bet against people. They tend to adapt very thoughtfully to innovation and technology. When I was growing up, we didn't have like influencers. Now that's, that's a thing. So I think Rom's right. You'll have menial tasks, you know, maybe travel agents, but then it all comes back. Right. And it comes back in a different form. We're super high touch. The people will want that human connection. They want that super high touch, person to person feeling for certain types of things once you get rid of it. I'm not fussed, but people are super adaptive. The economy will shift, birth rates going down anyway. So it's going to reach a natural stasis and I think it's going to be very complimentary to our civilization going forward.
- [53:52]
Austin Campbell
Yeah. And what's interesting to me is the skill sets that it pushes forward because I have a friend, for instance, who's a founder in the AI space, working on a product that does signals actually for supply chain disruption. So, wow, has that been timely lately, by the way, Echo Labs, if you're in that space. But we were just talking today and she was telling me, I don't think I'm the best engineer in the world, but the job now is becoming more about architecture, more about high touch customer service, more about understanding how to communicate and deliver things from your end clients. And she was saying, this favors me. If it was just a fair game of engineering skills, I'd have gotten my ass beat by some 12 year old in China. Right, to paraphrase. And I think the one thing we're not going to be able to replicate with AI is human interaction, right? Like, even if you have a robot doing your menial tasks, can it replicate the actual act of interacting with another human being, but differently? How soon will the three of us be replaced by AI to do this podcast?
- [54:57]
Rahm Alawalia
Well, yeah, and then, and then what
- [54:59]
Chris Perkins
do you study, right? Do you study computer science like the last generation, you know, needed to do? Do you study humanities now to be more effective in the workforce? You know, I think the easy answer is, oh, now you got to be humanities major because they know how to think. I think that's. I think you just have to be a critical thinker in whatever discipline that you want and that will help you inform and how to best partner in your discipline with the AI. I'm not too concerned about particular discipline losing out.
- [55:26]
Rahm Alawalia
I do get worried about this decline in population and just replacing more and more people with robots. It's easier to have more conflict and war when you've got robots that are soldiers. There's no real cost. And I hope we vector towards society where you continue to have humans in the loop. But if you're having more of this automated lethality, then the cost of conflict declines. That's my concern. When you have population growth, you have more people that have a stake in the system. People in China don't want to see their only child go to war, for example. But Lindsey Graham, who's a boomer, loves seemingly lots of different wars. You know, he's not someone with kids that he's going to see presumably conduct those kinds of wars. So, you know, that's the downside from all of this is, you know, you lose the cost of the site. There's a period where Mark Zuckerberg, he made sure to harvest, hunt or kill all of his food. He had a direct visceral connection with everything he consumed, right? So if he was going to have chicken, he took the chicken and he killed the chicken. I'm not saying people should do that, but you're going to see more mechanistic societies like that evolve where why wouldn't you just continue conflict if the cost of it is measured in $8,000 robots at scale, and wouldn't that increase the likelihood of actors like China then Dustin robots engaging in conflict also? So, you know, I think that's the. That's a risk, a real risk that we need to consider.
- [57:18]
Chris Perkins
So that's the inflationary angle for AI, then Rom,
- [57:23]
Rahm Alawalia
that's the, that's the. I go back and forth on it. On the other side, like, humans make for terrible politicians, right? You, most of them, you can't trust. They don't follow through what they say. You know, Trump was elected to office on a campaign of disinflation, deregulation, and no wars. And you've got economic populism and you've got two conflicts out there. AI might have more accountability, but I do think you need better humans. You still need to have human supervision of these AIs, and, you know, we'll see what happens. I think in the midterms, the Dems have a real shot of taking not just the House, but I think on polymarket, The Senate was 50. 50. I think Americans want something that neither the left or the right are offering right now, which is something that is. It was a type of policy mix that Trump was offering when he ran for office, but delivered by a different personality.
- [58:32]
Austin Campbell
You're seeing the same thing with mom Donnie in New York too, right? Like, ran on affordability. First thing he's doing, trying to spend more and raise taxes. Back to your point on accountability, like, neither party is doing a very good job of that. I will say I am highly skeptical of the poly market Senate odds, because when you drill down into that and start looking under the hood, you're predicting Democratic victories in places like Alaska and Texas and Senate races, which the. For those who have not looked, go look at the Senate map of where the elections actually are. I feel like that one's very much vibes and wish casting. Like, the left has been convinced that Texas is within reach for what, like four Senate elections in a row? And they've just gotten absolutely punched in the face every single time. So I think part of what we're revealing here, Rahm, to your point, is dissatisfaction with the status quo. I don't think it necessarily means things Flip. I think what's getting interesting to me and like, I have students in classes, so I see the onward march of this. And if you're a politician and you're listening to this, pay attention. Both political parties are becoming increasingly unpopular over time, which opens the door for much more radical change than you might expect. Like, if you're an incumbent in either party, lots of people really don't like you.
- [59:52]
Rahm Alawalia
Yeah, yeah. Look, if you're a renegade in your own party, you're also more popular. Look at Fetterman on the Democratic side. Or look at like Anna Paulina, who's advancing disclosure on issues like UAPs, or Thomas Hasse who's leading on Epstein disclosure. Like, those folks are renegades in their own parties, but they are gaining more funding and more national recognition.
- [60:21]
Austin Campbell
All right, well, on that note, because we are slowly cruising towards the finish line, I will hit Chris with this one for our lightning round. Chris, if you were betting on Polymarket Republicans or Democrats for the Senate, I think Republicans still.
- [60:39]
Rahm Alawalia
I'm with Chris, too, on that.
- [60:40]
Chris Perkins
I think once the things settle with the war, you get oil down a little bit, gas prices come down, you get the Clarity act, which I'm excited about. Maybe just me, which I think is happening now. I'm up like from 51 to. I'm around 55%. I think it happens. We had some. I knew this interest thing was going to get sorted completely. Now it's just a matter of the horse trading as we get to the finish line, which could go in either direction. But I think the Republicans stay in the Senate, probably House goes to the the Democrats.
- [61:12]
Austin Campbell
All right, so there you go. We're three for three on that prediction, which is dangerous. So on that note, we will end here for today. So thank you for joining us for this episode of Bits and bips. We'll be back in one week to discuss more about how the worlds of crypto and macro are colliding. Until then, everyone.