Lyn Alden: While "Nothing Stops This Train", Imminent Economic Crisis Is Unlikely

Summary

• Fiscal Dominance: Persistent large deficits keep the system running but constrained, implying a long, bumpy path with recurring mini-crises rather than a sudden blow-up or rapid fix.
• AI Infrastructure: Hyperscaler capex is surging into data centers and tools, benefiting end users more than vendors near term and pressuring asset-light software models.
• Value Rotation: Outlook favors cash-flowing, AI-resilient value names with dividends/buybacks over expensive hyperscalers and SaaS firms facing valuation compression.
• Energy Security: Energy is the key macro constraint; oil, gas, and pro-nuclear policy are essential as AI’s power needs collide with flat Western electricity growth versus China’s surge.
• Commodities & Industrials: Capex for AI and grid buildout supports commodities, energy producers, midstreams, equipment/services, and select industrial/logistics conglomerates (e.g., Japanese trading firms).
• Labor & Productivity: AI boosts white-collar productivity but demands rapid tool adoption; robotics disruption lags, leaving skilled blue-collar roles relatively more insulated for now.
• Global Currency Dynamics: A gradual move toward a multipolar system (de-dollarization) may be inflationary, with policy levers like taxes on foreign capital considered to rebalance trade.
• Portfolio Framework: A three-pillar mix—profitable equities, cash equivalents for dry powder, and hard assets—helps navigate disinflation, inflation, and productivity-led phases.

Transcript

So when I say nothing stops the train, there's actually two sides of it. One is basically the argument that they uh despite multiple attempts they will not like materially and persistently reduce the fiscal deficit. So that's one side of it. >> The other side is kind of the the the other which to say it's also not going to blow up anytime soon, right? So it's not like it's going to spiral into disaster anytime soon. Uh basically that the wheels are going to stay on the track. And so neither to the bull side which is basically the goldilock scenario where they manage to get deficits down or to the bare side that we just you know hyperinflate next year or something is basically saying that those are both very low probability outcomes uh in any sort of investable time horizon 3 5 7 10 years uh and that therefore we're stuck in this kind of middle gray zone of large deficits uh but the system continuing to to fun. >> Welcome to Thoughtful Money. I'm its founder and your host, Adam Tagert. Today's guest has long been warning that the US, as well as many other countries, is now in an era of fiscal dominance. That's when fiscal spending gets out of control like a runaway train. It becomes so large that it becomes the primary determinant of economic growth and inflation, steamrolling over any impact of monetary policy or private sector lending. And today's guest is famous for predicting, quote, "nothing stops this train. But can its momentum be slowed, buying the system more time? And does AI offer a chance to improve the situation?" for answers. We're very fortunate to welcome back to the program Lynn Alden, investment strategist and author of the book Broken Money: Why Our Financial System is Failing Us and How We Can Make It Better. Lynn, thanks so much for joining us today. >> Thanks for having me again. Happy to be here. >> Oh gosh, it's always such a pleasure, Lynn. Um, well, you know, you have been saying for a long time, nothing stops this train. And I think anybody with eyes looking at the system um can say, "Yeah, you know, so far at least Lynn's been pretty darn right." Um let me ask you this. So, so normally I kind of kick these off with what's your current assessment of the macro situation? And that's kind of what this question is, but let me put a little spin on it. Um the administration has been saying, look, you guys should prepare for a really good 2026. We did a lot last year uh that's going to start creating tailwinds for the economy from here and it's only going to get better, right? And of course it's their job to be the cheerleaders and chief, but they have been doing a lot to try to spur economic growth and we'll see whether that bears fruit or not. But is there a chance that if they are able to increase economic growth notably that that could buy us more track for the train, let's say? >> Uh well, I mean it's a good question. One of the factors is if you look at GDP growth, one of the inputs is the the deficit basically overall spending uh matters. Uh so you almost get like a feedback loop there. >> Um in general the nothing stops his train thesis um the basically the the more productivity growth there is uh the more offsets there are uh to the money printing the longer it goes. Um so when I say nothing stops a train there's actually two sides of it. One is basically the argument that they uh despite multiple attempts they will not like materially and persistently reduce the fiscal deficit. So that's one side of it. >> The other side is kind of the the the other which to say it's also not going to blow up anytime soon. >> Right? So it's not like it's going to spiral into disaster anytime soon. Uh basically that the wheels are going to stay on the track uh so to speak that there is a lot of highway ahead whichever whichever kind of um description you want to use. Uh and so neither to the bull side which is basically the Goldilock scenario where they manage to get deficits down or to the bare side that we just you know hyperinflate next year or something. It's basically saying that those are both very low probability outcomes uh in any sort of investable time horizon 3 5 7 10 years uh and that therefore we're stuck in this kind of middle gray zone of large deficits. uh but the system continuing to to run uh and you know the overall kind of inflation calculation price inflation is obviously a very we've we've talked about this before and your other guests have it's a very messy calculation um there's all sorts of of factors and variables that go into it but when it when it's you know putting aside the measurement artifacts basically what price inflation is is you have at least in the modern era you have money supply growth so over the long term it might be 7% per year in a developed country uh and then you have productivity growth which is lumpy uh and it doesn't affect all things equally uh but over time I we have billions of people working we have technology getting better we are better at organizing and doing things in the world so that all else being equal many things get cheaper in that in that kind of um economic sense but then it's offset by the money printing so if if on average you know the 7% money growth but we get 4% better every year at making the average thing quote unquote uh then the net price inflation is something like 3%. Although of course it's very uneven. Uh and I think that's the trend that's going to continue for for quite a while. >> Okay. And let me let me just make something clear here because um I could be wrong, but I think some people might look at the nothing stops this train reminders and they go to a more dire conclusion. But what I hear you saying is is um this train is likely to run for a good while at least for an investable time frame. You know, you should expect it to continue to run. So there's in your reminders that nothing stops this train, you're not saying, hey, there's no trackout sign coming anytime soon that you see right now. >> Uh yes, basically yes. Um the the caveat there, the really big caveat is that it doesn't mean it's without problems or consequences during that time. So people often ask when will the deficit matter. I've been arguing it's already mattering. So literally since the late 2010s I've been talking about how um this will contribute to a period of ongoing political polarization. Uh and that's only gotten more and more noticeable over time. Uh and it contributes to things like the the you know K-shaped economy or the two-speed economy different words describe it. >> And sorry to interrupt. Is is is it is it because of the bifurcation of the economy that you then have the political uh you know turmoil or is it are there other factors coming in as well from fiscal dominance? >> I think there are other factors. I mean the if it was as simple as say rich people on one side and not rich people on the other side we could say it's 100 you know it's caused by that. There's obviously there's a multitude of factors in there. They they I mean they go about all the way to the fourth turning type stuff too. So a lot some of it's not economic. Some of it is just that we built institutions that last for, you know, maybe a human lifetime and then they suffer from internal entropy, corruption. Um, we we lose faith in them. Generally, there has to be some sort of kind of death and rebirth cycle or at least partial death and partial birth that we haven't really gone through yet. So, we have very little trust in institutions. There's technology disruptions on the way we do things. Um there's trade imbalances that have been building for decades that myself and and Luke Ro and others uh prioritize quite a bit in our discussions. Um there there's all these there's multiple other imbalances there. The fiscal deficit is one of the larger ones, but it's by no mean the biggest. Uh but generally speaking whenever not just this one but in any history when you have fiscal dominance when the sovereign itself >> is kind of like longterm structurally insolvent without basically monetizing its own debt to varying degrees. >> That doesn't that doesn't go lightly, right? That the state doesn't just say well we just got to let it run out. I mean that's when the the state gets kind of aggressive. Uh then people get aggressive about what the problem is. Whose fault is it? Uh so it's one big variable among a a mix of variables. >> Okay. Uh so one of the variables that you just mentioned there was trade imbalances. And um I know it's hard to talk about the man um it's hard to talk about the president without people feeling like you're making a judgment call on the man. Um but from a strict policy standpoint um obviously that's been a priority of the new administration is to try to address some of these trade imbalances. How how well do you think they're doing so far? Is this something that is is as far as you can tell net helping and and to use maybe to murder our analogy, you know, adding even further miles of track ahead to the train? Um or do you give them a failing grade? >> Uh so I'm I'm on record and I continue to hold a view that uh it was right for the administration to start prioritizing that. Um before this administration, even though it was a growing issue, there were not that many people talking about it. Uh certainly the you know politicians you know how many how many times did a trade deficit come up in debates uh throughout the 2010s uh for example and and even you know kind of the early 2020s um you know there there are those like again like myself and Luke Gman talking about it because it impacts things a lot um so I think it was correct for them to finally say this is actually a really big topic uh now Donald Trump as a person has been talking about that for decades uh that that's you know he kind of >> since the 80s I think yeah >> yeah he he moves I mean his opin opinions on any given topic is it kind of flows with the wind. That's kind of his that's marketing, but that's one of his actually really consistent topics. Uh that this kind of goes against the exception of of things. So he he's personally had that, but as a as an administration um this is the right time or I mean before was the right time but you know earlier earlier than later uh to start really highlighting it. Um but I I think that the mix of policies they've done doesn't really address the core issue. Uh so um just one is impose using emergency authorizations to impose tariffs. So so generally speaking and the Supreme Court just ruled on this. This has been ongoing for a while. Congress is supposed to be the one that that does taxes. There's there's nuance there. Um but they they've done executive orders for to say okay it's an emergency so we can tariff anyone any amount for any length of time. Uh, and then they often will even cite things like, you know, we don't like how Brazil's doing things internally, so we're going to tariff them more, which goes >> becomes not just a immediate economic tool, but a a tool of political influence. >> Yeah. So, it's kind of like taking something that should be on on Congress and moving it elsewhere. And of course, the the logistics of it is that when you do a tariff, it's it's the domestic importers that are paying it. And then the question is can they pass that on to consumers aka Americans or can they try to negotiate with the foreign exporters for lower prices >> right >> uh most analyses whether it's the Federal Reserve doing the analysis they've done one or multiple investment banks like Goldman Sachs and others do the analysis the vast majority of the tariffs being paid by American firms and to lesser extent consumers of much smaller segments the foreign sector >> um and so it's a it's a tax increase um now it's a tariff can be a tool But when businesses have uncertainty, right? So it's like, okay, you used emergency authorization for ostensibly permanent thing, the Supreme Court's ruling on it. Now they've ruled on it. So they've been in this limbo. Do you like uh, you know, bring supply chains from foreign to domestic, which is very expensive, and then you have, generally speaking, they weren't here for a reason. It's higher operating costs, right? >> And if another competitor says, well, we're going to wait this out and see what happens, >> right? Uh, these are all like uncertainties. So a lot of businesses say we're just going to pause and and see things how things go. Um so I I mean I don't really think that the mix itself is particularly um conducive. You know manufacturing jobs in the US went down very slightly in 2025. Uh industrial production was flat. Um there's no re real major trend towards resour kind of expected to be. I think the best you can do in one presidential term is to start pivoting both the public awareness, the narrative and in some of the direction. >> Yeah. >> Uh it's because I mean it's a multi-deade problem that build up. It's it's actually a very long problem to fix. >> You can't resore in a year. Yeah. >> Yeah. Um but I I think that the the kind of chaotic mix of things because we're even tariffing the things we need to import to build our own manufacturing capabilities is is the challenging thing. Um, so yeah, I don't view the execution as particularly elegant or effective. Um, but I do think that it is a point that's that needs to be elevated more than it has in prior political cycles. >> Okay. So, it sounds like you're giving him credit for saying, look, this was a major issue that had basically been ignored um or, you know, underattended to by prior administrations. So, kudos for making it a priority. Not loving the actual execution so far. Let me ask you this, L. I don't mean to really put you on the spot here, but I'm curious. Um, if um if everybody watching this said, you know what, Lynn, we we think you could figure this out even better. How would you be doing it? What would be some of the core tenants of the way in which you would do this as differentiated from what the administration's currently doing? >> The Well, the Okay, I'll answer that. The short answer is I would fail because um public wouldn't really want the pain of it right away. Uh and that's the challenge is that so I if you back up away from the terrace for a second um basically that we we have the global reserve currency we we we run the biggest fiat ledger that most other countries tie into in various ways >> uh and that gives that ledger like an extra monetary premium. Um and another way of looking at it is the whole world needs dollars. How do we get dollars out into the world? The answer is we run structural trade deficits and so dollars pour out into the world. That's the primary way that all those dollars get out there and then that's how they >> deficit is a feature not a bug is what you're saying. >> Yeah. Uh now it comes with costs, right? So that is a necessary kind of variable in the system. If you want if you want the whole world to use dollars, they have to have dollars to use. >> So uh one is you can just you can do swap lines. I mean you permanent like swaps. You could you could say okay well you know we'll throw dollars at you if you throw euros at us. That's one method. It's not the method we we really use at scale. And the other method is we just we we just buy more than we um sell >> and the difference is dollars is flaw in the world and they get all recycled around. Um and that felt great in the beginning because we're like, hey, we're giving paper IUs to the rest of the world and we're getting goods and services. This is awesome. Um the downside is then they take those dollars and then they buy our appreciating assets, they buy our corporate equity, they buy our real estate, they buy our private equity. Uh so actually what we're doing in the when you do the full accounting is we're buying on average depreciating assets more than we're selling and we're selling percentages of our appreciating permanent capital stock uh to the rest of the world with a dollar just being the intermediary. Um and the when you say who this benefits, right? America is not one thing, it's 300 plus million people. It's government, it's it's businesses, it's individuals, it's different sectors. Uh and so running the the ledger that everyone uses is very good for the government up until a certain point because they they get to sanction anyone they want. They can print money for strategic things, you know, like oil. Uh they uh can surveil everything. So they had the power to say every bank that touches dollars we need you to report to us so we can do global taxation stuff right better than any other country can do that the government loves that those capabilities. >> Um but the downside is that because we are the dollar has an extra monetary premium on it because basically everyone uses it globally or at least every business and government uses it globally uh and some individuals. uh it it makes the dollar kind of structurally overvalued on a trade basis which is how that mechanism forces the the deficits to continue uh which makes it very it's a headwind against lower margin things. So in the US we can still do healthcare and software and financial services uh but we have trouble with lower margin things which primarily includes manufacturing uh which is why all that goes elsewhere one of the big reasons that goes elsewhere. Um, and so one of the challenges is to acknowledge that, okay, maybe that made sense when you're trying to win the Cold War. But then in this kind of global world, the fact that we're we're one country running this big ledger, there's pros and cons to it, and the cons are now as big or bigger than the pros. And especially if you're not the government, if you're not the government, your cons are way bigger, generally speaking, than than the pros. Um, and so one of the challenging things is to say, okay, we want to rebalance trade. That means giving up some percentage of the global reserve status we have. Um, and doesn't mean giving up all of it. Doesn't mean another currency gets bigger and takes it. It means you have a more multi-polar world, >> right? >> Uh, it's kind of like retreating from a position of strength. It's like when Rome says, "Okay, our borders are too big. There's barbarians everywhere." Instead of trying to fight tooth and nail for the next few decades to keep every border we have, maybe we can look at the map and say, "Okay, these are more defendable borders. We're overextended here, but we really should hold this one." And so, and just kind of reize your borders. >> Sure. >> That so my policy if I was somehow somehow in charge of this would be to kind of it'd be like an elegant resizing, which is to say maybe we don't need 800 military foreign military bases. you know, maybe we don't need to be involved in every global conflict. Uh maybe we can focus on our own backyard. Maybe we can emphasize economic vibrancy and therefore be strong in in that other way. Um and uh to basically say, look, if if China wants to do it, use its own currency with its own trading partners, great, stop overvaluing our currency. If if countries want to stack more gold or other neutral reserve assets instead of treasuries, great. Stop overvaluing our dollar. The problem is as you kind of gradually lose global reserve currency or at least become a plurality, you become one of the you know you become the biggest but not the majority of the whole system. Uh tends to be inflationary. Uh you you have a currency devaluation. So some of the things I would do would would be painful for some, but it it'd be part of rebalancing the whole system. And I I just I I think it's going to be hard either way. Like I would I would get voted out of office if I if I try to do what I think has to be done. No, but that's okay. We we want to hear, you know, what is the tough medicine we need? Um, a couple questions on that. Um, I I I just saw a I just interviewed Brent Johnson be the video that launches before yours, Lynn, and uh I pulled up a chart that he had tweeted out um and it was the um percent of US financial assets owned by foreigners over time. I think it started in 1990 and it's it's pretty much an exponential chart at this point. It's not even a straight line going up. Um, >> and you know, Brent obviously likes to bring that up because that's sort of a key part of his dollar milkshake theory. Um, is that the rest of the world, you know, given the dollar milkshake capital, more and more capital from the rest of the world will get sucked into the US. Um, if you were to do what you said needs or or the country were to do, you think needs to be done. Um would would there actually be an impact on our financial markets because we wouldn't be bringing in as much foreign capital here that that foreign capital you know given some of the border retreats to use your analogy that we're using we're sort of shrinking our sphere of influence. So some of that capital would go elsewhere. So would would another knock-on effect be it would also be inflationary but there'd probably also be maybe more secular weakness in our financial markets as a result. Yeah, there was a there was a paper from uh Stephen Meyer. Um it was it was just after Trump was elected and he was going to be his key adviser. He was Trump's key adviser before he was placed under the the Fed for a period of time. >> Uh and he did a whole paper. Uh it was it was a good paper. I I disagree with parts of it, but it's kind of the steelman case for what this administration on paper was looking to do. So we talked about execution before. This is kind of like the the cleanest execution at least from from them. Uh and one of their tools actually was kind of how can we discourage so much investment coming in here. >> Uh and one of the mechanisms you can place like a it's a type of tax um which is to say oh you want to own some of our bonds well we're going to tax you know maybe 50 basis points of the interest that flows out to you and we're going to keep that as kind of like the the cost of running this ledge >> to access our bond market. you being able to access our bond market and to say and more broadly to say and we're going to use that because you know part of this whole thing that is that we you know we keep all the the shipping lanes clear or at least historically that that you know now it's questionable that historically that's what we do. Uh and it's like okay you want to be under our security umbrella. You want to have all your logistics be just kind of like clean and free. >> This is your Costco fee for that. >> This is your this is your cost. Uh and you can do with stocks too. You can I mean obviously and countries do this with dividends all the time. and there's like a dividend withholding tax. Um, and you know, it's kind of a way to say, okay, well, foreigners are not going to get a differentiated thing than than our domestic investors. >> Um, but yeah, you could do an extra layer and say all all that stuff that's flowing out. >> We can place some small amount to say, okay, well, this is the biggest, deepest, most diversified, you know, capital market in the world. Um, what's the point that you can kind of tax it? uh and that actually does affect foreigners unlike unlike the you know kind of the tariffs which are literally taxes on American importers. >> Um uh I think that's actually the smarter direction to start in uh than tariffs uh or you know you can you can kind of do a one-two punch. Um and so it's actually there's that's the downside of so much foreign capital coming in which so if again it goes back to who's winning from this. If you're, you know, an American investor and you have a big stock portfolio, uh, and I I have a stock portfolio from that, that side of me loves the foreign investment. You're, it's like propping up the valuations of the assets I own. That's great. It also makes it so when I travel globally, my dollars stronger than it should be, and I get to, you know, uh, get things cheaper when I, when I travel. Um, but as an as America has as an economic entity, going back to what I said before, when you rephrase that, we are buying on net more depreciating assets than we're selling. And we're we're financing that by selling percentages in our very valuable companies, uh, public and private, uh, as well as credit in those companies or our government. So, bonds. Uh, so we're we're selling appreciating assets for depreciating assets, which is not a not a good long-term trade, but this is a multi-deade trade and there's winners and losers depending on where you are positioned, what industry you work in, um, you know, whether you're government, corporation, individual, and so forth. Um, so my approach would kind of be the the painful medicine of saying, okay, we want to be an attractive place to invest, but we want it to be because of rule of law and because of the vibrancy of our economy and free markets and things like that that that's a and diversified deep capital markets. Um, but we don't want this weird imbalance where the whole world has to use dollars. Therefore, they overvalue the dollar and they invest in our markets aggressively and make it so that we can't manufacture things e economically at scale. Um, so it'd be kind of to try to rightsize that imbalance overall. Uh, but it'd be more about trying to maintain the strengths of what we have uh while kind of balancing things. >> Okay. Um, and one one thing about the current system want to make sure I'm understanding it correctly. Um, you know, you talk about, you know, we're we're essentially giving foreigners the dollars to then buy an increasing share of our of our assets, right? Our stocks, our, you know, credit as well. Um, and that's great probably for a long period of time if you're an asset owner, right? So, as you said earlier, that's kind of a tailwind to to rising asset prices. So if I own asset prices, I mean American owning asset prices, you know, in the near term, I'm I'm happy with that, right? The problem is is you've got two potential expiration dates on that. Um one is which is where you've basically sold off an unreasonable amount of your for your your domestic assets to foreigners, right? I don't know where that line is, right? But but presumably you just keep increasing their share. At some point they own everything, right? Um but along the way, I think probably before that, the the domestic asset owners start benefiting so much more uh at the expense of everybody else. And this is the K-shaped economy, right? The top leg of the K is a lot it's got a lot fewer people in it than the bottom leg of the K does. You add in the inflationary um uh ramifications of all this. uh at some point you probably before the foreigners own everything you get to a point where the the bottom leg of the K just says we got to do something totally different because this is just not working for us. >> Yeah. I mean there's it's kind of like there's there's multiple ways to affect an a balance an imbalance. There's kind of the messy way or there's a strategic way. >> If you act before there's a crisis there's potential ways to kind of land the plane. It's like an emergency landing like you you land you survive. It's bumpy. Uh it's rough but you you land. And the other method is kind >> remains intact. Yeah. >> Yeah. And the other method is you kind of just keep ignoring the problem and then you you you crash and it's a you know it's not maybe not as bad as an actual plane crash but it's a very messy disorderly outcome. Uh and so for example, if you just ignore the problem entirely and you just get rising rising kind of populism, you get rising including the more extreme types, not not the more rational types and just kind of like more polarization, populism, um just just distractions, uh distrust in the system, uh and and therefore more extreme elements. uh then you start going after the core reasons of of the whole thing which is like rule of law, faith in in the kind of the soundness of the capital markets and stuff like that. That's not something you want to give up. That's that's the that's the bad reason to lose those things. Um and so and the other thing is then or the other the more mild thing is you get into a phase I think we're in that now we start kind of picking and choosing winners, right? So you get kind of very top down economic management and there's calls to say, okay, we should stop big pools of capital from buying homes because they're driving up the cost of homes. But that that's I would say that's fixing the symptom more than the the foundation, right? So that the foundation is when you have kind of ever ever uh money that always gets weaker, there's all these entities that will then okay say, well, I'll borrow as much of that as I can and buy better assets with it. So I'm persistently shorting fiat currency and owning assets. Uh and so that's that's the that's the kind of the incentive mechanism there. Um you know if if money is abundant, people will short it and and buy scarce things. Whereas if money is scarce, if you have sound money, um there's, you know, there's less of reason to do that. No one takes out a a mortgage in gold because gold of a very long arc of time generally outperforms the average house. You know, maybe not the prime waterfront house, but most houses. Um but they take out mortgages and dollars even if they don't need a mortgage. They could afford the house but they all finance it anyway historically because why not short fee a currency for 30 years. >> Exactly. And so um it's the more foundational things and in this case it's also when you're running a trade deficit all this foreign capital needs to come in and buy stuff. The biggest one by far is is the US stock market and bond markets or the attractive markets. For Canada and Australia and a few others it's it's more of their real estate market. In the US, it's less so our real estate market, but it still is part of our real estate market. Some some of these big pools of capital uh are include foreign investing uh capital. Um and uh so instead of kind of saying, okay, we want to place restrictions here and place restrictions here, it's better to have kind of a clean thing saying, okay, if foreign capital's coming in and buying these really big asset classes, there's kind of a a tax on it, per se. Uh but then ideally, I mean, and and the Trump administration ran on this. They even kind of floated, well maybe we could replace income taxes with tariffs, for example. Of course, in government, it never works like that. You get the tax and you don't get the replace thing, right? So, you have income taxes and tariffs. Thanks for playing. Um whereas again you can actually if you do this cleanly you could say okay well here's this this new kind of framework that's that's somewhat tax neutral but then it chips away at the imbalance to say okay we're going to make it a little bit more costly to to buy our um attractive financial assets uh for foreign investors uh and maybe include some kind of like just blanket 10% tariff for something not picking and choosing all the time but saying okay this is just how you know this is like a cost but then you you pass that respond to American uh individuals or businesses by saying and here's a a permanent reduction in your tax rate um because we're getting revenue from this other source um and it it goes after the imbalance to some degree. So I mean there there are multiple tools uh but this is somewhat hypothetical because a lot of these tools other than than terrorists are not the ones being used >> right at least not being used now. >> Yeah. Um, all right. I want to go back to Empress Lynn for a moment. Um, and then we're going to enter into territory now from your book. You talked about how, you know, a large part of the problem here is just we have this this money that people know is going to lose value over time, right? And that that provides what I would say in many cases a mal incentive uh for you know players to do things that benefit them individually but don't benefit society necessarily in the long run. So um you're a fan of of sound money. Um if you were put in charge and everybody had to do what you say, what would you have the country return to? Or I should sorry I shouldn't say return to. Um that's a leading question. um what should the company the country turn to as a better alternative to the current fiat dollar? >> Uh it's a good question. I mean in the long run it ideally would be tied to a neutral reserve asset. So historically that's gold and gold is still the only one big enough. Uh you know potentially in the future something like Bitcoin but it's not currently nowhere near big enough. Uh so the best you can do is accumulate some should that ever become big enough to be something you could you could attach it to. I I think moreover it would be about you could also put limits on the growth of the base money supply um that that are you know depending on how soundly you do it. You could do it in law or you could literally do it in the constitution if you want to go to the bedrock and say like >> money supply is not allowed to increase by a certain percentage. >> Yeah. Yep. Yeah. You could you could do that and that's another way you still have this kind of unbased ledger uh but you have limits on it. Now, in practice, and here's another just painful part. I mean, part of the nothing stops his train thesis is we're already insolvent there. There's we can't realistically um get out of this without a default, which is to say there's a certain amount of base money and then there's all these IUs built on top of it. And those IUs are multiple times the the base money supply. And the problem is you you can't go to hard money when you have that crazy IOU base money mismatch. Um and if you default the the problem is that the whole system's circular. So someone's liability is someone else's asset. So for example, treasuries. Uh that's I mean they're they're over the long arc of time they're functionally insolvent, but they are the bedrock asset for the Fed, the commercial banking system, many retirement portfolios, um uh insurance company portfolios. Uh so uh all the things you you think are like valuable that you own are tied to the not treasury is not not defaulting in mass. >> You can't write those off for a default mess because everybody collapses. >> Yeah. And and and the way that sovereigns usually default quote unquote default is they they debase. >> So they say okay everybody gets their units but >> there's way more units now. >> Yeah. You beat it nominally but you just kill the purchasing power of the currency. >> Yes. And then the question is so do you let that kind of bleed out slowly or I mean the kind of the the least messy way to do it was kind of what they did after World War II. I mean during World War II they printed all this money but then they they pivoted hard. They they had more austerity afterward. So there was a massive devaluation but then they had built all these factories. They money printing tried to go more toward the bottom and middle. So like soldiers returning from war it's like okay here's your mortgage support and here you know we're doing all this um >> GI bill and all this stuff. Yeah. >> Exactly. And then here and then outside of that it's like pretty significant austerity. So you don't you don't reduce the debt but you stop adding to it. You've already debased a lot of it and then you kind of grow out of it. Now of course back then they had way better demographics and other factors. So it's much harder today. Um but basically it's okay. It's saying we can we're already insolvent. So, do do you want to just kind of like default in a disorderly way over the next 5, 10, 15, 20 years or do you want to make a couple clean painful decisions? Uh, you know, rebalance social security for example. >> Um, because that's I mean that that goes and solve it in the 2030s. Um, uh, and also I mean want to fix the food system, right? And because the health care expenses are such a gigantic chunk of the the the budget. So you look at Japan for example, they have much slower health care costs even though they're on average 10 years older and they live longer, right? So we we have a very specific problem here in the US with our healthare costs and a big chunk of it is our food patterns. Um and so we have to actually fix the food system which is so our lifestyles are terrible on a relative basis particularly to the Japanese. >> Yeah, it's they're terrible. But then there's also even government inputs that that incentivize them to be terrible. we subsidize like the the unhealthy foods. Um, and it's not an accident that when people go to Europe, they're like, "Oh, I feel so much better on this food." You know, it's in many cases similar food. So, I I would kind of do what what at least there like the new food pyramid, I think, for example, is great. >> Um, but it goes deeper than that, which is, okay, we want to fix food to some degree. At least at least stop incentivizing the bad foods. Maybe maybe replace those with incentive towards the good foods, but at least don't be incentivizing the bad things. work your way up to get lower healthier costs because you're reducing diabetes, metabolic syndrome, uh severe obesity, Alzheimer's, that kind of things that have more of that metabolic food connection than than other things. Um uh and so it's there's a handful of really big chunk things to fix, but the problem is it still does involve an inevitable currency devaluation because even clean sheet of paper doing things correctly starting like next year, it's already essentially um insolvent. So there's going to be like a default and that that's going to be through the basement. >> Okay. So, in your you're sort of describing the emergency landing is is there's a way to do this if you do it sort of slowly enough and gradually enough that you can get the plane to a better place. Still not going to be great, but >> but any but anyone who does it, that's the thing. They they become kind of wor known as like the worst president of the era because like they'll be so unpopular, right? Maybe in the future people like say that that kind of worked, but then the problem is when you do it, you'll probably get riots, you'll probably get this. Yeah. >> Um, and so no one, that's the thing, like I I literally wouldn't be able to fix it even if I was somehow in a position to. >> So it can be frustrating being in our space, Lynn, to spend a lot of time thinking about this stuff and kind of having a sense for what you think should happen, but having a strong sense that it's not going to happen largely because of human nature, right? Um, and I'm just curious, uh, we could, I'm sure, spend a ton of time on this. I don't want to cuz I want to get to a few other topics, but does this make you more resigned to the fact that we're probably going to have some crisis at some point about this and the reforms we need aren't going to materialize just in until the pain of continuing the status quo starts to exceed the pain of the change. >> I do. Yeah. And I think I mean the way I generally describe it is I think we're going to have a very long process of this. basically nothing stops his train and it's punctuated by many crises. Um and so none of those are like the crises the the the fabled you know end of the system and then like the birth of next system but always like little mini crises. Uh and they will keep popping up and get put out and another one will pop up and get put out and just delayed and pop up again and put out. Um potentially some really big ones in the 2030s with like social security and things like that. Um, but yeah, I think I think I I'd place a very low probability that we just do a handful of kind of key major painful reforms that kind of start rebalancing toward the right direction in a kind of clean, elegant way rather than kind of a micromanaging hodgepodge chaotic way. >> Yeah. >> Um, and uh instead we just kind of keep layering stuff on. We we do tariffs without taking away income taxes. Uh or or they say, "Okay, well there's like you see in New York, you know, they'll say, "Okay, well housing is expensive. Let's do a bunch of policies that ironically probably make it more expensive, right? Like let's do things that make it uh disincentivize building new supplier every want to be a landlord. Um so I think we're going to try pretty much across the board including both right and left at times all the bad answers uh sometimes nationally, sometimes regionally. Um, and I think it's going to be a very slow bleed um, as we everyone keeps blaming themselves and trying to figure out whose fault it is and it's it's a bunch of messy answers. >> Okay. So, Lynn, I mean, I've known you long enough that I'm pretty sure on most of these points you felt the same way two, three years ago as you do now. Um, and then of course we've had AI rush onto the scene here. What what impact, if any, do you expect AI to have on the general trajectory here? Can can it actually help us out a lot here? Does it just accelerate us to to the next crisis? Um, how are you looking at it? And I know you you I mean, you you you swim in very technical circles. So, your opinion here, I think, is probably better than most of the people that I interview. >> Well, so I'm I'm on the board of a number of companies. I'm also I I advise or I venture invest in a number of companies and in basically all of them AI is becoming increasingly important uh to be competitive. Um so they're all uh most of them are are hiring less or mildly reducing headcount sometimes. I depends on how fast the other aspects of the business are growing but it's like it is impacting hiring and overall efficiency because you know I think over the multi-year time frame a lot of white collar work it's not that it gets displaced by AI per se but that more of it shifts to overseeing and working with AI tools uh including agents AI agents uh kind of like how there's this big transition where almost all white collar work invol started to be using computers and it's being very computer literate and AI isn't magic. I mean I I there's two things are true at the same time. One is that AI is incredibly impactful and a huge productivity boost. And yet I I mean I was posting on social media today and I'm not the first one to ask this question. If you ask a bunch of different chat tools, AI chat tools, um I need to get my car washed. The car wash is 100 yards away. Should I drive or walk there? Um, a lot of AI tools will say, "Oh, you should walk there. It's short." >> It's like, "Well, the whole point is to get the car washed, right? They they fail the obvious context." Um, and and sometimes you'll sometimes one tool will pass and then the next day when you ask it again, it'll fail because it's not actually >> consciously thinking it. It's doing this whole kind of, you know, the whole the whole kind of probability next next step in there. >> Sorry to interrupt. I I read your your tweet and I thought that was so interesting. Um do you think that is just a function of AI that will continue or is that just you know the development the growing pains with AI here that in a year that that problem will be gone? >> Uh I think that the until they fundamentally do things differently that problem will persist. Now you could shrink it over time. There's already I mean there's different ways to measure this like so for example there's this there's tests that show you know h like how many hours like a task that takes how many hours could be done in a couple minutes with AI and that has increased exponentially over time. So and like you know like another way to put it is if you ask AI to write a short story about XYZ it could do a half decent attempt at it. If you ask AI to write a 300page book, it's going to it's going to be pretty bad because it has trouble keeping in its in its like consistent characterization, consistent intricate plot over that long. Uh, and the same thing's true for coding projects. If you say, okay, make this little widget that does this, it can whip it up. But if you say, hey, I want this like complex architecture for this enterprisegrade thing, and then I want it to have all these capabilities, that's where it fails. But that's that that aspect is getting rapidly better over time. Uh on the other hand, I mean I I've been involved in in kind of testing out AI art generation for for like three years now and there was like a rapid improvement period and then it kind of hit a wall and didn't and it like hasn't and the tools I use a lot of them are kind of the more leading edge ones. They haven't really gotten much better. Now the new thing is like video for example, but the the videos aren't that great. But like there are things that are improving rapidly. There are other things that are kind of just running into natural ceilings that are really hard to overcome because the model itself is just not thinking. And but this goes back to my prior point, which is the tools aren't magic, but they are powerful. >> Kind of like how a computer is not magic, it's powerful. But part of getting the most out of a computer, and this was kind of the whole generational thing, you know, like >> like millennials versus versus, you know, silent generation or boomers. Obviously, people are all different though. um is growing up in an environment or or or if you're if you didn't you rap you take the time to rapidly learn to become just very comfortable with a computer uh because it it takes skill to use a computer to solve problems correctly versus just doing it for you and AI even though I it literally does a lot of things for you there's still a lot of details around one making sure that it's secure right so it doesn't just like go and ask you say to do something it just deletes all your emails or deletes all your files or something so how do you manage giving it access to all your important stuff and not giving it kind of critical vulnerability access. Uh two, knowing how to ask the right questions or or knowing how to seed an agent with the right documents or source material to do things properly. Uh three, to know its limitations enough to spot when it's messing up because it'll usually confidently do wrong things, right? >> So, you have to know enough to know when it's likely going to do something right, not doing something right. Uh and this is built up through reps. uh it takes just using the tools. Uh so one of the key just skills going forward in white collar work especially is someone who just naturally uses AI tools and is familiar with them and knows how to be a very productive employee at whatever they're doing uh because they are familiar with tools in a similar way that in the prior generation familiarity with computers was a key thing. So that's a a long-winded way of saying this is a massive productivity boon for white collar work. um we get a lot more abundance as a society. So kind of like how when tractors were invented and hydrocarbons and all the thousands of manh hours that are in one barrel of oil, uh one farmer can do the work of 10 or 20 farmers. Um and it frees up all those other farmers to do other things and it makes food way cheaper uh for everyone else. This does that for white collar work kind of like how automation did that for blue collar work in manufacturing. Um and it's a disruptive thing. Uh so in some ways it pulls things forward but for the most part it's it's a positive opportunity set. Um as long as someone is taking the time to be familiar with the tools uh seeing what AI is really good at seeing what it's still bad at making sure you're using the tools for your job. making sure that you're the field you work in is one of the more resistant ones to it and not one of the ones that just goes away, right? You know, kind of early on. Uh but overall, going back to my prior thing, when you have when you have debasement and then you have productivity growth, the productivity growth disguises some of the debasement, >> right? >> Um and so on average, the more productivity growth you have, the more debasement they can get away with before it becomes like painful, right? So, >> and that was sort of the nature of my question here. Do do you see enough of a incremental productivity lift from AI for the next however you want to say 5 years, 10 years, 20 years, whatever that they can just get away with a lot more debasement than they otherwise would have. >> I think it's a factor, but I think it doesn't really change the fundamental nature of it because the rewards are going to be so lopsided that you still have that polarization to contend with. Um I think the the biggest factor overall the single biggest factor is energy. Uh so I think from a from a governance standpoint the number one thing a developed country can do is don't don't get energy bottlenecks. >> Um which I think so far this administration is doing well. Uh but it but in general across the board make sure their oil flows make sure the gas flows try to be pro- nuclear. um try to encourage new nuclear technologies that you know don't take 15 years to or more to build a facility like small nuclear reactors whatever whatever the kind of the technological path is starting to inter how much of an electrical production deficit do you think the US faces right now you've probably seen that same chart I have of comparing the US and Europe's electrical production to China and China's we're pretty much flat and they're almost vertical and they're already like three times as much as we >> Yeah that's that's a huge factor in why you can't just snap your fingers and teleport an industrial base. >> Um and then and then the crazy thing that actually understates it because it's not just electricity generation in in China's case, it's also >> like when you look at steel manufacturing, another heavy industry, a lot of that is burning coal and then using that heat directly in the manufacturing process rather than transporting energy first, I mean electricity first and then back into heat. So it's also direct heat generation uh capability. So, it's electricity and heat. Um, and you can't just snap your fingers and teleport all that. And we one is it's expensive and timeconuming to build. Uh, and then ironically some of some of the electricity components we get from China to to build out our our grid better, >> right? >> Uh, and then there's also nimism to deal with, >> right? >> Um, that that people say, "Okay, sure, AI data centers are fine, but I don't want them near me, >> right? I certainly don't want them making my electricity bill go up." >> Yeah. Exactly. Uh and so those that's a big complex regulatory and and social political web to to go through. Uh which is also part of my reasoning for why I think this is actually going to be a long bleed. Um and I do think that that is a bottleneck on AI. And I I point out before the human brain runs on like 20 watts of power, like a third of an old school incandescent light bulb. >> Unbelievably efficient. >> Unbelievably efficient per calculation. Um, and so even though AI can I mean for a century we've had calculators that can do math better than us, right? But with much less processing power, now now we have AI. We've kind of kind of gone up the full stack. It's still very costly per mental calculation or per per, you know, process. Uh, and that's a pretty fundamental constraint. you know, maybe give it another 20 years of Moor's law and and other scaling methods to try to squeeze every efficiency we can get out of that because that is a rapidly improving metric, but it takes time. Um, you know, it's not just what can AI do, it's what can AI do cheaper than a human. >> Mhm. >> Uh, and I think that that's the there's always a hardware side to this. Um, so I I do think that AI is a a very powerful new uh white collar like productivity boost. I I des I describe it as probably similar of scale. We don't know for sure because this is a rapidly evolving field but I would say it's close to the size of the uh manufacturing autom automation boom you know throughout like the 80s and 90s which was then also combined with the offshoring boom right so it's not an accident that offshoring happened when it did because we had better telecommunication technologies which allows a corporation to communicate with its employees all over the world in in pretty high bandwidth ways. you know, it's it's hard to it's hard to run a foreign manufacturing site uh when you're doing it in Morse code, right? But when you have, you know, internet and telephone and all this uh and file sharing and and and so forth, uh you can more readily run just your employees can be in multiple places uh and you have and you have efficient cheap shipping. Uh so that combination of of industrial automation and kind of employee location flexibility uh obviously all that was very bad for some and good for others because it lowered costs. I think that's roughly the scale we're talking about but it's primarily services work. >> Okay. So I want to ask you one last question on this sort of we talking about the light of AI, the potential good it can do. I want to talk about the dark just for a moment. Um but I'm just looking at the time. Um, we're getting near the hour, so I want to make sure I get to ask you about markets, too, but but just real quick in in an unfairly short amount of time. Um, you know, so it sounds like you're saying you think this is going to be a real boon for white collar work. Um, and I'm curious if you think it's going to be a boon for white collar workers. Um, you know, we just had Microsoft's CEO of AI say that he thinks all white collar jobs are going to be gone in the next 12 to 18 months. It's kind of an attention-grabbing headline, but but obviously that's a lot of people's fear here. Um and uh you know, a lot of the purpose of AI is to try to let one man do the work of many um just the way that steam engines did when they came on. Um but when you map the increases in um AI, artificial intelligence, and then you connect them with the physical world through robotics and we have we seem to be on the cusp of an explosion of humanoid robots coming into the the workforce. Um is it going to come on the same, you know, as quickly as Elon Musk is telling us? Who knows? but let's double his time frame and it's, you know, so it's not next year, it's 3 years from now or 5 years from now or whatever. I have a hard time seeing the potential vast amount of jobs both at the white collar level and at the the services level that could get displaced by all this this combination of all this new technology. I have a hard time seeing the majority of that displaced labor finding something productive to do that's going to be paying them as much as what they're making now. Do you share that concern? >> I do share that concern. There's a bunch of questions there. I mean, one, I don't think all white collar work will be displaced in 12 to 18 months um uh or anywhere close to that. Uh, but I do think that it now is the time if someone's a white collar worker to be make sure that they understand AI tools and that they they have time using them. Um, because you're what's what what you're potentially going to lose your job against is someone else who's doing the same job as you, but uses AI tools and therefore has twice or three times the output that that you have for the same salary. >> Um, uh, or has your same output for half the salary. Um, now the the other side of that though is that things that were once kind of expensive, uh, so accounting service, you know, if someone just if you pay someone to go over all your finances for you, that's a pretty expensive thing. Paying law work is pretty expensive. Um, those and sometimes that's even used like asymmetrically. Someone's rich, they can go around suing people that are poor, knowing that those people can't access the they they can't even try to defend themselves properly. Yep. >> Absolutely. And what one thing that AI does is it makes a lot of those things way cheaper. So even though some people have their incomes impacted also the things they buy in many cases all the in this case the white collar services they buy will be cheaper. So the the whole kind of industrial automation and offspring wave it obviously it it caused the rust belt. I mean it actually goes back to the whole dollar trade balance thing we talked about before. But in addition to all that technology, it caused the rust belt, but it also made electronics, plastic goods, textiles, and everything uh dramatically go down in cost. >> Uh both for people that don't work in those industries, so they get the best of both worlds and for people that actually work in those industries. So it's like, okay, your income's disrupted, but also your expenses are are assisted compared to the alternative. And I think it's it's kind of the same thing which is you know design services um accounting services law services all editing services translation services all these services across the board do get way cheaper and then even some physical things get cheaper because they're that company's backend is spending less on accounting and spending less on law and spending less on things. So, so across the board we by reducing the friction we make both physical and services on average cheaper um but then also impact many of our incomes in a way. And of course the the biggest problem here is it's not equal. Right? So uh so the main thing is that some people will be quicker to use those tools and be proficient and therefore stay competitive. Others won't. And then some work in places that are the income gets disrupted before their expenses do. other ones work in a place where their expenses get cheaper before their income gets disrupted. And so it's there's no one answer to that question, but I would just remind people that there's both sides of that and that they're happening at the same time, but in a very bumpy way. >> Uh so I but it is a period of heightened turnover and churn. >> Yeah. So I totally get that and I I agree with you. I think the the you know educated whether through schooling or or or selfwork uh go-getter is going to have a tremendous amount of opportunity ahead of them here in you know coming in this period of transition. What I worry about is, which I'm sad to say I think is probably the majority of people who just don't fit that mold for one shape or another. And up until now, okay, I'm not going to I'm not going to be the next Silicon Valley founder, right? But I can go get a dependable salary at Jobex. I I am I'm concerned that there's there's the potential for so much shrinkage of those jobs where at the margin if a company is like look we we we got a new >> new line of business we want to go into I don't think it's going to be all that long before the default assumption is is okay well I'm going to obviously start that with a technological agent whether it's a software or robot or a combination of the two and I'm only going to look at a human if I absolutely have to at the end of the day and so the people who just sort of want the dependable 9 to5, you know, steady Eddie paycheck. Honestly, I don't know what a lot of those folks are going to do because I just think a lot of those jobs are going to get AI or roboticized away and the companies are going to have a mindset that's basically like, yeah, I don't ever want to hire a human unless you you put a gun to my head. >> So, I agree with a couple caveats. One is I mean, obviously the the extreme case is like the Silicon Valley founder. The more middle case is, let's say you're a programmer or you do some sort of white collar work. Um, you want to have like eventually agents that are trained in the way you do things combined maybe with how leading experts in those field do things. Some sort of hybrid >> that then can do work for you that you oversee, >> right? So, it's it's saying and a lot of people still work for a company. Like I the startups that I am involved with, they're employees at those that are saying, "Okay, I used to do things like manually or I used to do things this and here I have my agent doing it. I'm overseeing it, fixing all the errors that it makes because it doesn't know that you have to you have to drive to a car wash if you want your your car wash, right? So, um that it it there's that middle ground of you're still doing you're still doing the same output roughly what you were doing before, but you're using different tools to get there, right? >> You're you're using AI to help you do it." Um uh and then there's and then the blueco collar side skilled bluecollar is I think one of the slower things to get disrupted because to your earlier question I didn't answer I think robotics takes a lot longer because we just talked about how uh energy efficient the human brain is right the human body is also this self mostly self-healing robot with a a supercomput that runs on 20 watts >> right >> um and understands context for the most part um and the all that helps with edge cases you an HVAC uh expert drives to a house, gets there, that the family dog runs out, they know it's not a threat, they know how to deal with it. They talk to the the human, they make the human they explain the problem to the human, they get the human to agree to pay to fix, they they climb up, they climb down, they they do all this stuff. It's all the edge cases. Um I think skilled bluecollar work has a pretty big buffer to it. Um kind of like how automation really hurt the unskilled like the lesserkl the more iterative bluecollar work. um that's going to hit the white collar work. Uh and then the problem is then a lot of white collar work tries to get into some sort of a little bit more physical work, a little bit more blue collar work and then it can drive down wages. Um but if if someone's in a field that it takes like a lot of training, they have more of a buffer between their salary and this labor shifting that's happening. So the short the the the rough thing is there's no easy way around it. This is a disruption. often depends how quickly these tools get better. Uh I do think I mean there are fundamental limitations to them despite being radically productive. Um and depending on where someone is in that whole employee stack from the Silicon Valley founder to to you know the whole spectrum there. The main thing is to either have physical skills that are very hard to do using the fact that you have a you know 20 watt supercomput and a self-healing robot body. That's one. where years of training is a good mode >> and where training is a good moat years of training or if you're in the white collar sphere you're your training is that you're just fluid with using AI agents um and you're you know if you're an editor you're the best editor in the world because one you know how to edit but then two you know that how to automate the parts that don't take skill >> right >> right so maybe have an AI agent go through and clean all the obvious stuff that a that an intern can do and then you use your human touch should, you know, obviously do it properly. Make sure that that the metaphorical like, you know, you're not walking to a car wash, >> right? So, you finding out ways to make it so that you're the the parts that you're actually adding as a human are the really high impact quality control, conscious thought stuff and that all the lowhanging fruit can just be made super cheap and quick so that you're not being out competed by someone who is using those tools. >> Yeah. And in many ways, you could almost say that like this is this is going to enable experts to be able to spend a greater percentage of their time, maybe eventually all their time, you know, on on the value creation that they get paid for, right? Where every everything that's just busy working gets in the way, I can offload that onto my my agents and I can just focus on the real value. Um, okay. >> Thank you for doing this. That was very helpful. Hard shift here. Um, so as you look out uh to the rest of 2026, it's a midterm election year. We entered it with valuations at at remaining at pretty stretched extremes. The markets have been um turnurning sideways now for a pretty good time here. And we've been seeing um uh capital rotation, you know, leaving bleeding out of some of the uh sectors that have really driven the markets for the past bunch of years and particularly I'm thinking of the hyperscalers and software and moving into more sort of value plays and whatnot. So, you know, with with all that background and any other elements you think are important to note, what is your market outlook at this point in time? Is this a consolidation before we make a move higher? uh are there are there structural parts of the market that you're concerned about? You know, is this maybe a topping pattern, you know, because it hasn't gone anywhere in a bunch of months? What are you seeing? >> So, back in in early November from my research service, I wrote about this capex spending by the hyperscalers. Y >> uh and was like this this actually is a material this is massive shift. Um and so I I became bearish on many of the hyperscalers. Um and I I have been in the camp that I I do think we're undergoing a a more of a value rotation. Now, it's not just value across the board. It's it's like value that's not value traps, right? So, like actually kind of, you know, roll your sleeves up and try to figure out what what is a future proof company that's cheap, cash flow, uh, positive, uh, AI resilient, uh, can use AI and its backend to cut costs, uh, and is in a a good position in that sense. um emerging markets uh while they had a good 2025 so maybe some of the easy money's uh out um I think that that relative outperformance trend with some starts and and stops has probably years ahead to it. Um uh and uh so generally that more value or global focus I think is is good because I think that that the AI capex hyperscaler thing I I think is a persistent issue. the whole 2010s kind of booming market and early 2020s kind of during and right after COVID that was a very kind of like asset light um capex light model where all these mega caps they had network effects so they didn't have a ton of competition you know the >> like the Facebook didn't have a ton of competition with all its platforms and Google didn't have a ton of competition and Microsoft didn't have a lot of competition they had these kind of entrenched network effects they made tons of profit and then they just plowed that into buybacks. Um, and now they have to plow that all into capex and there's there's not really network effects or as much economies of scale uh for like AI providers or or data centers. Um, it's very easy to to switch to another provider. Um, which means that they have to constantly compete with each other way more aggressively than they did before, which over the long run means the consumers and the and the the business consumers win. So like the ones that are not those win the ones that are buying the products because they're basically buying like right now I mean AI companies are unprofitable. Uh and so who's the winner there? Well the ones using AI because they're selling you something that could cost them $30 a month then you you pay $20 a month um and so forth. Uh and so as long as that continues the the end users are the winners as long as you are an enduser and you're disrupting the people that are not using it or using it less or using it wrongly. Um and I think that that trend that continues for a while. So I do think that you want to that there is a valuation right sizing happening. There were there were SAS companies trading at 50 times earnings and even if AI is overblown and those things don't go away tomorrow like they're like lately they're being priced for >> Yeah. if they just go down from 50 times earnings to you know 15 times earnings and maybe they're it depends on the company but sometimes some of them will be get disrupted other ones maybe their growth just slows a little bit because now a company can say well I could use your software or I could use AI to try to build it but I won't do that if you make your price a little lower right >> uh and you change your kind of model of pricing um that they some of them can still survive because they are doing a very valuable thing but not at 50 times earnings Um and so I I think a lot of that is evaluation right sizing. Uh so I my expectation is market keeps grinding for a while. Um and that you want to be in kind of on average cash flow producing things that are paying out dividends and still buying back their stock and are not as not as disrupted by AI or or or having to spend capex to be an AI leader. >> Okay. Um that's super helpful. Thank you. And that all makes sense. Um I'm just curious. I'd like to get your quick reaction to something that Tommy Costa said when I interviewed him two weeks ago or so where he looks at the massive amount of capex that the hyperscalers are spending. You know, they're they're building real things in the physical world, right? That that demand commodities uh to build these data centers and and rebuild our grid and all that stuff. Um, so you know, as you I'm sure know, you know, Tomby's he's a big commodities guy and he's been predicting that commodities were going to enter um a new a new upcycle, which he believes is now underway. >> But he's looking at this capex spend as is almost kind of like a value transfer from the hyperscalers to the commodity complex. Um, so that's another reason why he's really big on the commodities and commodity producers. Do you do you see that somewhat similarly? >> I do. I mean, that's why I've been long precious metals. Um, I've been long kind of diversified commodity producers. I've been long energy producers or transporters. >> Mhm. >> Um or or service companies that that provide services and and equipment to those um types of companies, >> the midstreams and stuff. Yeah. >> Yeah. And I think that generally continues. Um uh now obviously energy has been pretty cheap. We've not really had any bottlenecks in terms of energy production lately uh since you know kind of 2022 when the peak of that was happening. Uh so that's a overall a good thing. Um but yeah, I think it's it's it's not it's it's partially commodities and it's also certain industrials. Uh one of the one of the trades it's run for a long time is is and Warren Buffett was on top of this which was buying the they call them the Japanese trading companies, but they're not really trading companies. They're more like these like conglomerates that own anything rally like a company will own like a uranium deposit and a bunch of like convenience stores, right? It's like this crazy but the the point they actually they own a really a lot of logistics infrastructure. Uh so they're like industrials commodity producers and then sometimes also these kind of manufacturers or retail endpoints. Um and they were trading like six years ago super cheap. Um and they're these cash flow behemoths and they've just tremendously outperformed. Uh and I I've been long that trade as well for for many years. And that's just this quiet part of the market that many Americans have just not heard of. Um, and so it's not always just commodity producers. It's like this whole stack of kind of value stuff that makes just really valuable things and is profitable and was underowned and is now, you know, doing great and getting some sort of valuation rerating. Um, so that includes what you mentioned the whole section that Tavi mentioned. It can sometimes include owning the underlying commodities or it can just mean owning value things that are not getting disrupted and therefore on a relative basis they're outperforming the software stock that got cut in half, >> right? >> Uh just because it it just kept chugging along and spinning out dividends and doing its thing. >> Okay. All right. Well, thanks so much. All right, Lynn, we're at the hour here a little bit over actually. Thank you so much. Um just want to note, we'll talk about this in a second. Um, we're actually going to have you back on Thoughtful Money in the not too distant future because you're going to be one of the featured speakers at the Thoughtful Money Spring Conference. Um, before we talk about that though, the most important question for folks that just can't get enough Lin Alden and can't wait for the conference and want to follow you and your work now, where should they go? >> Uh, lynalden.com. I have a free newsletter and also lowcost research service so people can check it out. >> All right. And Lynn, when I um edit this, I'll put up the link on the the screen there so folks know exactly where to go. Folks, the link will be in the description below this video as well. Um, folks, please give Lyn a huge thanks for giving us so much of her time and her expertise. Please show that by hitting the like button, then clicking on the subscribe button below, as well as that little bell icon right next to it. if you would in addition to signing up for Lynn's service um if you'd like to get some help from a professional financial adviser in perhaps you know if you're thinking about taking some action on any of the macro things that Lynn and I talked about today or whether some of the market outlook uh that Lynn has um if you don't have a good professional financial adviser advising you uh feel free to talk to one of the ones that thoughtful money endorses these are the firms you see with me on this channel week in and week out to do that just fill out the very short form at thoughtful fullmoney.com. Only takes you a couple seconds to fill out. These consultations are totally free. There's no commitments involved. It's just a service they offer to be as helpful to as many people as possible. And lastly, and Lyn, I'll be quick here. Um, as I said, Lynn's going to be a featured speaker at the upcoming Thoughtful Money Spring Conference. That's going to be on Saturday, March 21st. Don't worry if you can't watch live. Everybody who buys a ticket will be sent a re replay videos of the entire event. Uh all the presentations, all the live Q&As's within just a couple hours of the event's conclusion. Uh it is a fantastic faculty obviously uh because Lynn is on it but also and Lynn I'm going to do this from memory but it's pretty good lineup. Uh kicks off with Lacy Hunt. Uh he will do his traditional keynote where he does a graduate level presentation on what where he sees the economy going. Uh he creates a lot of charts bespoke for this. Uh we'll have first- timerrs Ed Dow, Michael Oliver, and Matt Taibbe, the journalist. We'll have um Judy Shelton. Uh she'll be interviewed by Daniel D. Martino Booth. We'll have Grant Williams. We'll have Stephanie Pomboy. We'll have Luke Groman, who you've mentioned several times already, Lynn, who I actually just met in person for the first time last week, which was a lot of fun. But we'll have Luke and we'll have Brent Johnson. Uh we'll have uh Michael How, the liquidity expert. We'll have Darius Dale. We'll have Rick Rule. We'll have Andy Sheckchman. We'll have Melody Wright. There's probably one or two others that I'm not recur pulling up from my mind right now, but as you can see, Lynn, that's a pretty strong lineup. And again, Lyn Alden being the uh the big heavy hitter there. Uh so, folks, if you uh haven't got your ticket yet, please encourage you to go to thoughtfulmoney.com/conference right now. So, you can buy your ticket at the uh early bird price discount. It's the lowest one we're offering. I want to make sure everybody gets that discount before it's gone by the end of the month. Um, and if you are a premium subscriber to our Substack, check out your email. I've sent you a code you can use to get an additional $50 off of that low early bird price. Lynn, thanks so much again. Can't wait to see you in just a couple weeks. Um, I deliberately didn't ask you about digital assets because that's one of the things that we're going to be talking about for the conference. So, folks, if you want to hear Lynn's thoughts about that, go buy your ticket. Now, um, just giving you a chance here to speak to the uh, the the audience of this um, this video. Lynn, yeah, we've got definitely some professional investors here, but mostly it's regular people who are you have worked hard to to build wealth or working hard to do so. Uh, and they want to grow it prudently. Um, but they they don't want to become collateral damage uh to, you know, some of these maybe mini crises that you think we may be increasingly uh running into. What would kind of your parting bits of advice to them be? Uh, one is the I mean the the boring answer is diversification, but there's there's smarter ways to do diversification, which is not to own everything, but to say, okay, here's the major buckets. Uh, here are the things I'm bullish or bearish on, and so I lean into the bullish things. I I've generally been using what I call a three-pillar portfolio. So, one pillar is just profitable equities, pretty diverse, um, you know, paying attention to general valuation trends and and rapid disruption. Uh another one is cash equivalents uh for you know major selloffs to have dry powder to rebalance and then the third one is is hard assets. So that's you know sound monies as well as commodity producers and things like that. Um and that kind of mix protects you uh from a lot of different market conditions. Uh when you have disinflation the the cash or the cash and bonds can can hold up well. When you have inflation it's usually the the hard assets that are doing quite well. And when you have that kind of middle productivity growth, that's when the equities are are doing quite well. And over the long term, that's kind of the more dominant side. Um, and kind of thinking in those terms, I I think is at least kind of the the baseline starting point to to do damage control uh and to see what the opportunities are. >> All right. Well, very well said. And obviously if folks want to sort of see how you are positioning um sort of tactically for any given market moment uh if they follow your research they're they're going to be able to kind of get closer to that pulse. Correct. >> Yes. Yes. >> All right. Fantastic. Right. So again if you're interested folks go click on the link in the description below for Lynn service. Lynn can't thank you enough and again look forward to seeing you in a couple weeks at the conference. >> Thank you. Looking forward to it. >> All right everybody else. Thanks so much for watching.