The Bond Market Is Flashing Danger — And AI Is A Bubble | Jesse Felder
Summary
Secular Inflation: The guest argues the 2020s are an inflationary era driven by demographics, deficits, deglobalization, and commodity underinvestment.
Bond Market Risk: Rising commodities point to higher yields, with the 10-year potentially breaking above 5%, posing volatility risks for equities.
Real Assets: He advocates overweighting real assets—including commodities, precious metals, TIPS, and energy stocks—over traditional 60/40 portfolios.
Precious Metals: Gold is highlighted as a leading indicator for inflation and rates, and a core holding amid persistent inflation dynamics.
Energy Stocks: Oil remains undervalued relative to gold, drilling and capex are still subdued, and the capital cycle favors multi-year upside for energy equities.
Commodities Supercycle: Years of underinvestment in mining and energy, alongside rising materials intensity from AI/data centers, set up a durable supply-demand imbalance.
Deglobalization: Reshoring for national security, especially semiconductors, raises production costs and reinforces inflationary pressures.
AI Bubble: He warns that hyperscaler earnings quality is deteriorating due to heavy capex, data center bottlenecks, and rising power costs, risking a sharp reset in AI-driven tech valuations.
Transcript
I think with this new Iran war, it's becoming clearer to people that, you know, we are in an inflationary age. You know, the 2020s are an inflationary era that is going to persist for for quite some time. Right now is a really vulnerable time for the bond market where we could see interest rates on the long end break out to new highs. Hello and welcome to Wealthy. I'm Maggie Lake. Joining me today to discuss global markets is Jesse Felder, author of the Felder Report. Hi Jesse. It's wonderful to have you on again. >> It's great to see you again, Maggie. Thanks for having me back. >> H welcome to everyone listening. We're going to cover a lot of ground in this. So if you have any questions or you'd like to stress test your portfolio afterwards, you can click on the link and get a free portfolio review. Just go to wealthyondon.comfree. Uh, so Jesse, these are really confusing markets. E, even for some people who've been doing this for a long time, market veterans. I I hear it all the time. We just had one of the best Aprils for US stocks, even though we're at war. And I continue to see headlines that say markets are sleepwalking into a recession or a crisis. What do you see when you look across the global macro landscape? You know, I think one of the things, and I've been saying this for about a year now, is is, you know, it's really important to watch what I call the most important chart in the world, and that's the chart of the 10-year Treasury yield. I'm watching the 30-year closely, too. But I think, you know, everything comes back to that. So many things are priced off of it. You look at it, the the ripple effects of, you know, the trend in interest rates through, you know, every other asset class. And it's really super important to to kind of for that reason. But but I think you know the the the 10-year yield has been kind of in this sideways formation for a long time >> um 30 years as well and you know kind of in this holding pattern to determine you know what is the next stage of inflation look like are we going to have another surge like we had in the 70s or is the Fed going to bring it back down to target and I think with this new Iran war it's becoming clearer to people that you know we are in an inflationary age, you know, the 2020s or an inflationary era that is going to persist for for quite some time. And uh, you know, I think that that the the bond market hasn't quite reflected that, but we're really close on the verge. I think one of the things I look very closely at is the gold prices are really good and commodity prices really good leading indicator of inflation and interest rates. And so this really strong move that we've seen in gold over the last year 18 months was really foreshadowing uh a coming move in the broader commodity space which we're now seeing which leads interest rates and so I think we really could see a breakout higher in yields in response to inflation uh you know forces kind of resurging which would have important ripple effects as I said for a number of asset classes. >> Yeah. I mean, you talk you when when you start talking bonds, you're really talking about the plumbing of the financial system. So, I guess I guess before we dig into that a little bit deeper, what kind of upward pressure are we talking about on yields? Are we talking about, you know, 5% which has been enough to spook the markets certainly before? Are we talking about double digits? I mean, you know, what kind of new era are we moving into? >> Yeah. Well, I think, you know, if you look back at the the 70s, right, inflation didn't just kind of go up and stay high. And I think that's a kind of a lot of people think like, oh, you're an inflationary environment. Inflation is just going to go up and stay there. No, no. We had three major waves of kind of inflation. And uh, you know, so it it that's how it works is you have these cyclical waves in the context of a broader secular trend. And I think that's we're in the middle of that broader secular trend right now. We've been through a disinflationary period since the Fed aggressively raised interest rates in 2022. They didn't obviously do enough to kind of bring bring uh the you know core PCE back down to target. And so now we have these inflationary forces picking back up again and we're we're seeing another wave of inflation higher. And I would just point out it's not just the oil price. It's not in fact I believe that there are these secular inflationary forces that are so much more important in underlying these kind of cyclical dynamics of rising oil prices. Things like demographics um behind me you probably see the great demographic reversal somewhere. terrific book about how the uh the the the shift in demographics, the you know the the aging of societies and relying few and on on a a smaller share of working population to support a larger share of the the global population puts pressure on wages in a secular way that kind of creates inflation over long period of time. We're having you know the deglobalization trends of reshoring of production all these things are inflationary. we have uh divestment over the last 1015 years we've really through ESG and things that were really popular divestment from the commodity space so underinvesting in production of oil and gas and mining and all these things which creates structural shortages so there are a lot of secular forces that are kind of underneath this cyclical trend and so and I think these are really the underappreciated dynamics uh that kind of are are uh arguing that we're in a secular inflationary era and and uh it's just this kind of cyclical upturn that's kind of bringing it to everybody's attention right now. >> So that's super important because we're talking about big sticky trends. We're not talking about the short-term war because I think that that has clouded things because people think oh well if there's a ceasefire which by the way as we speak is very much in question which we should point out but who knows what what will happen. Uh but there's a kind of uh argument that the market's looking through that and it's another sort of temporary blow but um once that passes we'll we will be out in the clear. You're saying no no no that's just exacerbating some really big issues that are out there. >> Yeah. And and I think the Fed uh does appreciate this maybe not to the extent that I'm mentioning. You know, the one other force that I would point out is obviously the debt the the deficit. Um that when you have a deficit of 5% 6% of GDP, you know, you're essentially creating that much new money in debt issuance to kind of fund the the 30% of spending above and beyond taxes that are collected. So you have, you know, this also another inflationary uh force. I think, you know, this is why, you know, you have Nick Nick Triios at the Wall Street Journal kind of reporting that the Fed is clearly transitioning from talking about rate cuts to now talking about laying the groundwork for rate hikes because missing the the target for five years. Uh you're really starting to risk uh you know, people just not believing that the Fed is determined to bring it down. And if you lose faith in the Fed's ability to bring it down, you get this, you know, deanchoring of inflation expectations which people like Neil Kashkari Min Minneapolis Fed are starting to really worry about because that's where you get an inflationary mindset among consumers and businesses and they start behaving in different ways in anticipation of higher prices which creates kind of a feedback loop of inflation. So, I think we're going to start to see more and more talk of rate hikes to deal with this, you know, simply due to the understanding that it's it's much more than than an oil situation. It's a it's a it's a broader thing and you cannot, you know, afford to look at inflationary as a transitory phenomenon again when you've missed the target for five years. And the last time you tried to call it transitory, you know, it became a big problem, the biggest problem in half century. So they're at a really tough point right now where I think they they can't afford to be as doubbish as they'd like to be and the majority of the the the FOMC is starting to come around to that that idea. >> Uh we have a new chairman though who has marching orders from a president who put you who who wants him in there that they need to be cutting. Does that create a problem for the Fed? You know, I I I think that um you know, with Pal staying on, Myron's going to have to leave to make room for for you know, uh for Kevin Worsh to to come on. And so, you're losing pretty much the only real dove left on the Federal Reserve Board. Um, you know, I it's interesting to see these confirmation, you know, hearings because I do think Kevin Worsh probably is doing he's just saying what he needs to say to get appointed. >> When you look historically, he's actually been very hawkish. >> He's even talked about reducing the balance sheet uh far beyond, you know, what Jay Powell's been comfortable with. So, you know, I think his if you look at his history, it would argue he's more of a hawk than J. Powell. If you look at his recent rhetoric, he's actually talks more dovish. But I think, you know, we'll we'll soon find out how much of that is just to get appointed and how much of that is is is real. I think also too, he's going to have to, you know, it's not a one-man show. He's going to have to convince the rest of the FOMC that the productivity gains from AI and things like this are going to offset the inflationary forces out there. And I think that that would be met with a lot of skepticism by the the current uh FOMC a >> as I think the dissents from the last meeting indicated that they're sort of planting a flag in the ground with with that um those comments. So I if if what you say is true and I want to talk about those structural buckets so so folks really understand it. But if what you say is true um why are we seeing stocks rallying? like that's that would seem that would seem to be a complete disconnect from a world that you're describing. >> It's a great question. I think it's I think it's twofold. I think it's one that uh you know the retail buy the dip impulse has become so strong that unless it's obvious that earnings are going to go down. Everybody looks at you know retail investors and institutional investors to you know together look at it like you know earnings are good and there's no reason to believe they're not going to be good for the rest of the year. So this is another dip buying opportunity. And as Warren Buffett said, you know, this past weekend in an interview at the, you know, Berkshire Hathway meeting, we have more gambling in the markets today than he's ever seen in his life. So I think the speculative, you know, the animal spirits are are literally just off the charts after, you know, the pandemic. You really saw them take off with the meme stock, you know, frenzy and all those things. And it really hasn't gone away since then. retail share of trading is at record highs and as uh RER Sharma pointed out in Financial Times this morning the institutional investors for the first time on record have more overlap with retail portfolios than we've ever seen. A third of all, you know, hedge funds and growth mutual funds and things own the same stocks as retail. So there's a lot of crowding into these speculative names and it's all comes back to to to AI. So, you know, people think, okay, the a AI trade trade isn't going away. These companies are still going to spend. They're still going to drive earnings growth. Um, you know, I think there all of that is is questionable and we can get into that >> if you want, but I think as of right now, people think earnings are going to be good, so we're still buying the dip. >> If we are in this inflationary structurally inflationary period that is it's unclear whether they'll be able to handle it. I mean, they're they're going to chase it and try, but if you're in an inflationary period, what what should do well? What should outperform or what what should we own in that kind of environment? >> Yeah. Well, I'm sure, you know, Wealthian's audience is tired of, you know, hearing me say this, but I've been pounding the table for real assets for the last five, you know, 10 years really with the with the gold price. Um and that's just an argument that you know in an inflationary environment when the debt uh is doing what it's doing and the central bank has been ultra dovish for so long um you really want to own real assets in favor of financial assets. So that's things like commodities, treasury inflation protected securities, precious metals, those things all uh in energy uh energy stocks um in favor of instead of you know the broad uh S&P 500 and treasuries and things like this. And it's just astounding to me that literally you look on a five-year look back and what are the best performing sectors? energy and uh gold and and precious metals have have dramatically outperformed the S&P 500 and even the tech sector over the last five years and still you know what are the what is the share in people's portfolios of energy it's 3% of the portfolio it's still it's still nothing and it's energyy's dramatically outperformed technology so I I think that you're going to get to the point where people you know start to transition uh from and institutional investors are already starting to do this. There was a great article in Roy Reuters last week uh with the Black Rockck portfolio manager saying, you know, with the material um uh intensity of GDP going up, you know, to produce more GDP, you're using you need more and more materials. Just look at the AI boom, right? You need copper, you need cement, you need all of these things. You need electricity, which is all, you know, intensive on the energy industry. uh the the material of uh intensity of GDP going up. You really want to own those things that that benefit from that and have also been are you know facing shortages because of the lack investment over the last 10 years. So there is a transition. We're in the early phases right now. I think institutional investors a lot are starting to recognize, you know what, stocks have never the the broad stock market has never been more overvalued than it is today, driven by this AI boom, bubble, whatever you want to call it, you know, transitioning into, you know, these more kind of hard assets, real assets, whatever you want to call them, is uh is is probably a no-brainer at this point and a trend uh you know, uh that's going to last for for uh quite some time. >> Yeah. you know, we uh we we spent a lot of time discussing this very issue here and we have a lot of people in our audience that are uh I would say u feel the same or are very concerned. I mean when you say that sad about um exposure you know this is when we're all taking a hard look across our investments our 401s and saying am I really positioned for this because as you know on that wheel they give you you know in the in the handouts commodities were not really a big part of that. Um, and we actually started a a a network here, a community for people who want to learn more about it, who want to ask questions, who want to find out what they're doing. So, everyone can go to the link to join that community. Um, we have a lot of great stuff going on there because we recognize this has been, you've been talking about it, Jesse, but this has kind of been an under and here's I want to ask you about this. I think this is what happens. People hear what you're saying and think I'm I'm probably underexposed to this or yeah, that makes sense. I'm going to do it. and then semis go up 40% in a month and they're not in them and they say what and they you know so how how do you how do you sort of put that together with that strategy which makes sense on paper and then you see this parabolic move in something like semis and the NASDAQ over the last month >> yeah I I think you know study any of the the great investors see market wizards up here you know Warren Buffett is you know you read all his letters and things and and the time to buy something is obviously viously when it's the most difficult to convince somebody to buy it, >> right? That's going to be the best time to buy something. And so it's really really hard. It takes a certain uh you know, demeanor in being willing to be out of consensus uh and wrong uh for for short periods of time. You know, it's really what it what it requires um you know, to kind of take advantage of the best opportunities out there. And and I think that that's been true for the energy sector really since the energy since energy crashed you know back in 2016 right for for a decade now energy has been a hated sector you know for a while it was ESG >> and uh more recently it's just you know the fact that people think oil prices are going to you know stay low forever we thought you know $50 $60 barrel was you know was going to going to be around forever and I think uh you know in in an environment where uh you know these kind of securing your access to these types of natural resources is becoming more and more important because geopolitics are becoming more and more uh you know heated. uh you know the the thought that the oil price is going to stay at record lows relative to M2, relative to gold, relative to anything else and basically stay undervalued persist dramatically undervalued persistently and definitely into the future is probably wishful thinking at best. And so even when you look at what oil prices is doing today, you know, one of the you talk to somebody like a commodity expert like the guys at Garing and and Rosenwag and they talk about compare these commodities prices together. So you look at the the oil price relative to gold and it's almost at the lowest levels in history. You know, telling you that, you know, maybe gold's overvalued right now, but oil is probably also dramatically undervalued even after the runup that it's had, >> uh, you know, from $60 to $100 a barrel. It's still really, really cheap relative to the gold price. So this is why I kind of mentioned early on I watch gold really carefully because it's a really good leading indicator for the broader commodity space for inflation for for treasury yields and these types of things. And I think that the message from gold is really clear that uh you know you want to own a lot of these other things uh that that are you know typically not even seen of as as al alternatives to financial assets right most people look at the 6040 portfolio and I own stocks and bonds I'm diversified you know well if you don't own real assets uh you know there are periods in history where the 6040 portfolio did did very very poorly you know through the 70s through the uh you you know the the uh you know long periods of time 10 20 years where especially when inflation's running high and the real returns from those assets are are depressed and what does well are things that are are limited in supply like commodities and etc. So, so I think that yeah, it's something that's it's a concept that's really important for investors to kind of wrap their heads around. What is my exposure to real assets? How do I increase it if I if I am underweight? >> I think that's that's an excellent point. So, let's let's talk about AI because it's like the shiny object I think is is is um an issue for people when they're looking to diversify. Do you are do you think we're in an AI bubble and are you avoiding tech stocks altogether or that area altogether or do you see great potential there but also feel like you have to have the real asset side too is it one or the other for you or is it that's a problem that's a bubble and you know there's a >> yeah I think AI is a bubble and I think the earnings the earnings uh estimates right now are a huge um you know uh red herring um maybe the best way to put it that it looks as if earnings are going to be really really good going forward but when you look at the earnings quality of the hyperscalers it has dramatically declined in the last four six quarters and so the way I'm looking at it is basically just compare free cash flow to earnings right a high quality earnings means cash free cash flow and earnings are going up together, right? What we've seen with the hyperscalers is earnings are going up great. Their free cash flow is literally going going towards zero where and so that's basically just a reflection of the capex spending that they're doing. So this just like the.com bubble, right? you get uh you know all of this spending on the buildout of the backbone of the internet you know back in the 90s and today it's the data centers for AI and all of that spending is immediately recognized as revenue and income by companies like Nvidia >> but none of it is being expensed yet by the hyperscalers so you know normally that would that would be offset and it' be like one person's earnings is another person's expenses and it would be kind of offset So what's happening right now is because these data centers are all getting delayed and they're not built is going into all this spending is going into to to uh you know onto companies balance sheets or they're a lot of times using offbalance sheet vehicles to kind of hold these GPUs and things and they're not starting to depreciate them until they go into service. So, we're going to reach a point in time where the spending is going to have to slow and the depreciation charges are going to start to surge. And that's where you're going to see uh earnings for these big companies start to do kind of what free cash flow has been doing already, which is which is plummeting. And so, they have a time right now where, you know, people believe, okay, well, they're going to get the AI revenue growth that's going to offset the depreciation charges, you know, a year from now. But if that doesn't materialize and they don't find these new channels of re of massive revenue growth, then they're going to have huge surges in expenses related to depreciating the data centers and GPUs and things without the offsetting revenue to kind of keep profit margins where they're at. So I think right now I mean if you look back at you 99 2000 we saw this huge surge in earnings late cycle very rare thing. Usually earnings surge coming out of a recession or something. Right now we're late in the cycle. Earnings are surging and it's due to just these timing dynamics of of income and expenses. And what happened in 2001 2002 was revenue growth slowed and all the expenses went through the roof and n the NASDAQ went down 90% plus. And so I think we are in a very very similar dynamic right now where the revenue growth is going to take a lot longer to materialize >> than the market believes and the the heroic earnings estimates out for the next couple years are going to be really challenged um just for the simple fact that you know they're running out of uh you know the data centers are being delayed. They're running out of places to put them. You know, popular sentiment is really turning against nobody wants this in their backyard. In fact, there's a majority of Republicans and Democrats who don't want them in the US at all now. Literally, >> what's happened with supply chains and stuff this when we just came through outsourcing critical supply chains elsewhere, they're still saying they don't want the data centers in the US, >> right? And it's because of, you know, what are the data centers doing? They're pushing electricity prices through the roof, right? there AI is also another dynamic that's driving inflation higher right look at memory prices so all these electronic you know cost of all of our electronics are going through the roof right now because of the AI electricity prices going through the roof and they're spending you know on all this you know building and construction on all these materials and things so so yeah it's it's inflationary and so that's why a lot of people I think are are kind of turning against them but they there's no way they can maintain the growth in spending that they're doing right now unless they find, you know, double, triple the number of data centers they're able to build. And already there's only about, you know, a third of the data centers announced this year are actually have even broken ground. So, I think they're they're really running into a uh a roadblock in terms of actually being able to put these things into use. And what are you going to do? Buy, you know, 30 40 50% more GPUs every year just to put them in a warehouse that you actually can't put into a data center? Uh Sachi Nadella said last year he goes the reason why we're slowing our data center spend is he goes I can buy all the GPUs I want but I don't have warm shells to put them into. I can't build the data centers fast enough to put the put the GPUs into. Said that last year. So, I think we're starting to see that even Oracle, I mean, OpenAI uh has been cancelling a lot of their their compute contracts and data center contracts because, you know, their CFO is worried about them being able to pay for them one, but also they probably don't need that that much compute. Uh, so this is I think we're running into it. >> Yeah, >> this is this is one of the I think this this answers a big question and I think is is a great um explainer if you believe there's a bubble on why um so thank you for that. That was really interesting. When you talk about finding new revenue, I think you said unless they find new revenue, do you believe that it is becoming so critical to everyone's workflow that people will start paying for it? because this is they're kind of giving most of it away for free or almost free. >> Do they raise the tolls and do you think that they'll be so ingrained by then that that would be the revenue needed to to make this math make sense? >> Well, the two big companies um are already doing that, OpenAI and Anthropic, and they have to, right? They're burning so much money that they're running out of, you know, uh sources of, you know, to to fund those losses, right? Opening II had a hundred billion dollar funding round and they either need to go public or they need to dramatically cut their spending because um you know that that's going public is probably their last chance at another big source of capital to fund the literally hundreds of billions in losses uh that that they're running. So, you know, and plan to run over the next few years. And so um you know that's why there's a rush to go public. you know, SpaceX is going to get it done first. Anthropic's probably going to beat OpenAI to the punch >> and then, you know, you know, we'll see if there's even a market for a third, you know, trillion dollar IPO. Um, you know, it's it's there might not even be a market for two of them. So, we'll see. Uh, you know, I do think it's they have to raise prices. Um, Anthropic is already doing that and saying, you know, we're we're switching from flat monthly fee to tokenbased pricing and customers hate it. >> You know, all of their coding customers are already saying, wait, look, you know, I was spending 200 a month and, you know, it worked great and now, you know, it's going to cost me 2,000 a month to, you know, for for each one of my users to kind of maintain. This doesn't make any sense. And but with you know the agentic stuff that people were doing it just was became way too costly for these companies to continue that that pricing model. So I think you know it it really is a commoditized um business uh right LLMs it was surprising to me that uh you know Deepseek announced a new model which is very very comparable to the top frontier models in terms of performance and costs literally a tenth of what uh you know open anthropic are charging Gemini for their for their models. So, you know, it's it's really hard to differentiate. There aren't any kind of network effects like we've seen with social media and things like, well, you you know, you're on Facebook, so I'm going to be on Facebook, and you know, we we don't want to go to MySpace anymore because nobody's there. You know, you don't get that with OpenAI, uh, you know, with with ChateBT or Perplexity or any of these. Like, literally, people are going to go to >> the one that's the the the cheapest. and um it's really tough to differentiate them at that at this point. >> So um so I think yeah with a commoditized business it's going to be really really difficult I think for them to monetize in the way that they've guided in terms of the revenue growth. >> Yeah. What about this? The other issue with AI is what about this idea that um you know we may be in this inflationary period because of some of the issues that you talked about but with the rise of AI you don't really have to worry about wage inflation because it's going to do so many tasks and at least keep a lid on if not actually depress wage inflation. There are other issues sort of you know consequences as a result of that for tax bases but this idea that that will that will hold off on wage inflation. you buy that or no? >> No. I mean, because for the the reason we just talked about is is, you know, you talk to companies uh or you hear from companies that are that are really replacing labor with with AI and they're now saying they're spending way more money on AI than they were spending on labor. >> That's what you just said because they have to >> Nvidia is one and it's because, you know, saying that like their cost of compute has, you know, just gone through the roof uh in terms of wherever they've tried to replace employees and so their costs have actually gone up. it costs more to to replace them with AI than it than it's cost to just kind of keep the employees on. So I I find that difficult to believe. I also think that you know the the abilities of of large language models are also um vastly overhyped. Yan Lun was the head of AI for Meta and he since left and started a new company and he you know he he recently said that you know planning agent putting agentic systems on top of LLMs is is a recipe for disaster because these systems don't understand like the way the human brain works is whenever we're gonna we we kind of get a cue right we we take in you know a cue and our brain says okay based on all everything I know about the past if took this action, it's likely to result in this outcome. AI doesn't do any of that. It just says, you know, statistically, uh, based on this Q, I should do this and doesn't think about the consequences, which is why we have companies, you know, talking about, uh, you know, there's just one last week said, uh, you know, I think it was Anthropic's model deleted their entire database even though the agent had been instructed, never never do this, right? So they asked the agent why why did you do this and said you know I I uh disobeyed your instructions and I did it anyways because there was one little you know glitch and literally deleted the the company's entire database AI has a fat finger too this is giving me some >> absolutely absolutely and so you cannot you can't trust it with missionritical systems you can't trust it with uh you know you know in areas where you know you have an error rate like you know you talk about six sigma you know which you know Japanese uh manufacturers popularized the however many nines of you know n 99.999% accuracy required to kind of be able to implement something in a you know Japanese uh company. Well, these companies are really only the LLMs are only 95 96% accurate in almost any field that you employ them in which is just not good enough >> for for most business uses. um you know we can use a chatbot to you know kind of instead of search and if it's wrong we can say that kind of sounds funny you know maybe that's not right you know two or three% of the time we probably all experience that and that's fine when you're just using it for search but when you're trying to outsource employees and these types of uh you know issues are coming up with you know devastating consequences you realize okay maybe we do need humans in the loop and if this is going to be get more and more expensive it just doesn't make sense. >> Yeah. And and um devastating and then you had me laughing about the goblins gone loose on uh >> That's right. Yeah. We were talking about beforehand that you know OpenAI had to come out and tell its uh you know programming um interface that you know stop talking about goblins. >> That was my laugh of the week. I think it's so funny. So, let's let's pivot back to um to real assets um now that we've sort of debunked or at least got got your thoughts and and introduced a little skepticism into the AI um theory. And we're going to keep taking a swing at that because there are lots of folks on the other side who have compelling reasons too, right? And so that's why it's really important to kind of keep working through this and learning a little bit more each time we go. Um I thought your com comment about divestment from the commodity complex was super important. So um you know how how should investors think about this if we if we it's your your premise that we need to be increasing our exposure to real assets to offset uh inflation and loss of purchasing power across the commodity in in uh complex. Um what is what is that are we now seeing investment that will catch up? Do we need to pay attention to the will to invest the political will and the capital that's needed to invest in this? Could that negatively impact our investments in real assets? How do you think about that part of the equation? >> I'm glad you mentioned the term capital. There's a book I think it's right here. >> We're gonna have to raid your library and do a book called people with this. >> Yeah. And it I mean the capital cycle is something that's so underappreciated and probably the most important driver of these secular trends in markets. It's where is the capital going, right? because capital you know comes into a sector like AI for example let's just come back to the.com bubble right so much capital went into uh you know the the.com that it necessarily depresses future returns right because all that capital what is it doing it's go investing in infrastructure infrastructure creating supply right so you eventually get too big of a supply response supply outpaces the demand for it prices crater and go down. Uh then you go through the bottom of the cycle where okay, capital says, "Oh my gosh, we never want to invest in this ever again. The industry is starved for capital." You went through that through, you know, kind of the the uh 2000s into the early 2010s where technology was kind of a hated sector. Didn't didn't attract much capital. And uh you know, that creates a shortage of supply, right? we're not investing enough in something and so we get not enough of it and demand outpaces supply and you get a big boom uh in in prices that lasts for a period of time. So I think this capital cycle is a concept that's really critical for long-term investors. Um where have we seen capital go in the last five years? I mean we're seeing massive amounts of capital. In fact um who is it? Jim Pollson just put out a piece today about uh how the investment relative to GDP, the investment in new era, you know, technologies, tech, you know, those types of things is twice as big relative to GDP today as it was in the com. >> Wow. >> So, a massive a massive amount of capital is actually going into technology today. It's going into data centers and all these things. What has been starved of capital over the last 10 years is really the mining space, right? I mean, we we haven't invested in copper mines. We haven't invested in uh new oil drilling opportunities, right? The oil sector is another great example that when we had the financial crisis, interest rates came down to zero, cheap capital. Where did all that capital go? It went into shale companies, right? all these we discovered, wow, with horizontal drilling, we can, you know, get all this oil that we thought we couldn't get before. Massive amount of capital went into the energy sector. What happened? We had a huge boom in uh in energy and oil stocks and eventually all of that cheap money created a massive overupp of oil. 2016 oil prices crashed. So, you know, following the money is probably just a, you know, one of the most underrated things investors can do. It's not hard to kind of understand what is what is being dramatically overinvested in, what's being underinvested in, but those are where you're going to find, you know, the what's going to do well over the next 10 years versus what's going to do poorly. And I think it couldn't be more obvious today >> that the investment in real assets has been dramatically, you know, divested, underinvested for 10 years. And, you know, that you've seen the flip side of that in technology. It's another reason why I think it's like 2000 right, is you had uh when the.com bubble burst, that was when commodities and things really took off. And one of the best periods to own energy stocks and precious metals and things was that 2000 to 2010 time frame, which was a lost decade in the stock market. So, you know, these things go in cycles and uh you know, it's it's really hard to kind of maintain a long-term perspective sometimes when you see what the market's doing in the short term. But it it really helps to kind of create a foundation for how what am I, you know, how am I positioning uh for the next, you know, three to five years. >> And ideally, you want to be getting you want to be thinking about increasing exposure before that flood comes in. You want to catch that wave of capital as it comes in, as it transitions. If you can beat the transition slightly, that's going to give you better returns. Um how does globalization that was another factor that you mentioned deglobalization um and this is again a mega trend we talk about a lot we also hear it called resource nationalism economic state craft how how are you thinking about that and does that seem like it is uh here to stay because I think there's some question mark about that >> it's a great question um you know I I think that you know if you were to look at uh you know the forces of disinflation what really drove the disinflation from 1980 till 2020 right that 40-year period you could say Paul Vulkar you know broke the back of inflation really uh established the credibility of the central bank to believe you know kind of make people believe that inflation wasn't coming back um you had demographics the baby boomers coming into the into the workforce right was a huge you know surplus of labor labor which kind of kept labor costs low. Uh but then the offshoring of labor right the globalization we're going to ship production to China to where India to wherever it's cheaper and that's going to allow us to keep costs low for companies. Um all of those things are reversing now and and so globalization specifically we realized through the pandemic that shipping all the production 90% plus of our pharmaceuticals to China was maybe a dangerous idea. you know, we need to, you know, there's certain things where we need to have, uh, you know, national security interests in mind. Um, you know, China being the largest producer of of drone technology right now is another one. Producing drones for Iran, for Russia. Um, you know, we we need to uh for for just national security interests, bring some of that home. I think probably the biggest one I think of is semiconductor manufacturing. It's all done in Taiwan. China believes Taiwan is part of, you know, their sovereign nation and maybe wants to kind of bring it back into the fold someday. And uh, you know, we think the straight of Hormuse Hormuz closing is, you know, kind of a a dangerous economic thing. Nobody believed it was even even a possibility. Uh, and now it's happening. Um, you know, there are people that believe that the same thing could happen in Taiwan where, you know, China says, "Okay, we're going to just take it and uh, you know, there go 90% of your your semiconductors." And how do you run the world, you know, the Western world without semiconductors? You can't. Which is why >> both administrations like Taiwan Semi, you need to build, you know, new fab plants in Phoenix and we need to bring as Intel, we need to make you a national champion. we need to be, you know, bring this manufacturing home because it's just a critical critical issue with, like I said, the geopolitic geopolitical environment becoming more and more uh, you know, dangerous. Um, so yeah, I mean that so that trend of shipping things overseas created disinflation. Now, for other reasons, you know, we have to bring it back to the United States for national security and it's necessarily going to cost more. That's a secular driver of inflation because it's just gonna gonna raise prices, right? It's a lot more costly to produce those semis in Phoenix than it is in Taiwan. >> Yeah. We have a big summit if it goes. We don't know, but it's on the calendar between Trump and Xi. What are you going to be watching for for that? Is that on your radar? And and what are you going to be looking to hear? You know, I I think we've we tariffs um the Trump administration was really looking to kind of try and separate from China as much as possible and then with the rare earths we realized, wait, we can't do that. Uh you know, China had ch in this case, China has all the cards. And um so it's it's really really difficult to kind of u disentangle. You know, we're finding that now too with, you know, Chinese manufacturing of EVs. You look at these EVs that you can Chinese EVs that, you know, basically would sell for $20,000 US and they're, you know, better than a lot of the cars on the market here in the US at twice, you know, 30 $40,000. Wall Street Journal had an article about this, how in, you know, El Paso, you know, a lot of people are driving across into Mexico to buy these Chinese vehicles and say 20 grand. This is an amazing car. The fast ch charging technology is way better. So, you know, we're we're trying to kind of separate from them because of the the the conflict uh of, you know, China is the upand cominging, you know, new kind of potential threat to the global hegeimon and uh and so, you know, but it it's it's really really difficult. I I think that um there's a lot of um you know bluster around uh you know those those types of meetings and I pay more attention to what can they actually do in terms of separating from China versus the versus the uh the narrative around it. >> Yeah. Do do you think China starts to you know so so much of the what we've learned is that you mentioned rare earths is not the supply of them so much as the refining of them what they do with them and that's really where China's cornered the market you can find deposits of this stuff elsewhere in some cases but it's the refining and that sort of you know that that part of the chain that China's really cornered. Do you see China starting to exercise its pricing power on that? It used to be market share and we've saw that with steel. always saw that with a lot of other uh materials and and hard assets. Do you think they start to exercise their pricing power since they have such a strangle hold on these markets? >> I I think that you know, yeah, China's MMO is really they want to be the lowcost producer to make it a no-brainer to you know, so you see that with with everything that they do. Um, and right now I think that's one of the biggest threats to a AI is, you know, China is not, they don't just have Intel. They're literally investing in every uh, you know, major tech company in in China to create the lowest cost, most effective version of large language models and AI to kind of create this uh, uh, you know, competitor to to what's going on. you know what Meta and Google and you know are all all trying to build. So I I think no I think that they they would rather uh maintain market share because that market share is such a powerful um you know bargaining chip >> uh you know if you will to to kind of um give them power uh in other ways. Um, I think they could always say, you know, we can reduce, you know, the amount of, uh, you know, uh, things that, you know, you're you're able to buy, uh, rare earths that you're able to buy or we can raise prices or whatever, but we're not going to do any of that because, you know, you're not going to tariff us in the way that you really want to. >> Yes. I mean, it's more like a bargaining chip, I think. >> Yeah, that makes sense. So, so let's let's finish up where we started out and that is the market that you're watching the the most closely. So, we you we understand the the sort of worldview that you're holding. What does that look like when it comes to bond markets? Why are they potentially so dangerous? And what do you see playing out in the bond market? >> You know, as I said, commodities are one of the best leading indicators of of interest rates by about six months. If you just look at the Bloomberg, you know, commodity spot index, uh, advance at 6 months over the, you know, 10-year Treasury yield, it pretty much tells you the which direction treasuries are going to trend. And that makes sense because commodity prices drive inflation and inflation, you know, affects the bond market. So, right now, commodities have been soaring for the last six months. um you know we and and uh and so that basically says right now is a really vulnerable time for the bond market where we could see interest rates in the long end break out to new highs. And I'm talking about like you know we're we're still under four and a half on the 10ear yield right around 4.4 I think but I think we could see it it it over 5% pretty easily in a short period of time. Um if you get that type of volatility in the bond market that's usually bearish for stocks stock prices as well. And so I think this is potentially just the delayed effect, right? Everybody says, "Well, how's the stock market doing so well?" Well, the bond market hasn't responded to inflation yet because the bond market thinks straight of horses is going to open up, inflation's going to be transitory and we're going to go back to normal. But if inflation, you know, if if people start to realize inflation's not going to be transitory, bond market's going to be unhappy. We're going to get volatility in treasuries. As I said, you could get the tenure yield over five pretty quickly and that would create some volatility in the stock market as well. >> If you have uh rising in if you have commodity prices on the rise, you have inflation on the rise and as a result you get bond markets, bond market yields that go up, doesn't all that just create demand destruction? I mean, how how what what does that cycle look like? And it feels like everything's compressed now. So, do we do we worry about that when we're talking about what a commodity super cycle? How does a commodity super super cycle happen if we are at the risk of demand destruction? >> You know, it's it's um the commodity super cycle happens, you know, because of the the capital cycle. >> Okay? >> The capital cycle happens because we've been so underinvested in these things for so long that in order to secure these natural resources, we're going to have to just start investing more. Um and the the impetus to invest more is the higher prices, right? They say that the best cure for high prices is high prices because it it it requires a uh an investment response, you know, so people say, "I'm going to invest a bunch of money to create new supplies." So I think we're in that early stage where the price signal is here, but we're not seeing the investment response yet. So look at, you know, a lot of the big oil companies, they're saying, "Yeah, like, you know, you look at drilling rigs and things are still near like multi-year lows. They're they're not, you know, there is no supply response yet, which tells me that oil prices aren't going to come down anytime soon. And uh you know, we're we're likely to see this kind of inflationary epiphany ripple across markets um you know, sometime over the next month or two. So that that that part of it is is sort of stronger and offsets any sort of demand destruction that you get or at least will create a sort of longer channel and you get a little bit of volatility in between there as you see people >> and I think I think you're absolutely right. I mean I think if we do get the 10ear yield over five you know five and a half pushing 6% you're going to get a recession. You're going to finally get this recession. And I think that's another thing that people don't necessarily appreciate is that, you know, estimates for pro corporate profit margins over the next 12 months are just through the roof for and it's not AI. This is like literally the other 497 companies in the S&P 500. Their profit margins are expected to surge higher. Well, another one of the best leading indicators for for profit margins that I found is, you know, five-year yields because corporates, you know, usually kind of refinance on a five-year kind of time frame. All these companies refinance their debt in 2020, 2020, and 2021 when interest rates were on the floor. We all going to refinance all of our debt. >> That was five years ago. Where are interest rates today? So there's a lot of debt that maybe is potentially coming up for refinancing. These are the problems we're seeing in private credit right now. I think they they went and funded a lot of companies five years ago that are now saying we can't pay the new interest rates and they're starting to see not defaults but this is why you have payment in kind and you know this kind of the games that they play to avoid showing defaults. Um, but there's a good chance that if companies, especially if the Fed has to start raising interest rates, those profit margin expectations are going to come down because people are going to say all the refinancing of this debt's going to happen at much higher interest rates. We anticipate it, not rate cuts, we're having rate hikes. And so, yeah, you you probably do get a cyclical downturn, but I still think that's in the context of a secular uh, you know, uh, commodities super cycle. >> Yes. And that's why it's very important to talk about time horizon when we're talking about this because they could be two very different things. >> Uh Jesse, this was such a fantastic conversation. I think it underscores um the conversation that we're going to continue having here around the importance of real assets and what we all need to do to sort of educate ourselves. So um hopefully everyone listening um hit the link that you'll see in the description or on the screen and you can join our network and learn more about it. But Jesse, so appreciate your time today. Thank you so much for being with us. Great conversation. >> That was a lot of fun, Maggie. Thanks for having me.
The Bond Market Is Flashing Danger — And AI Is A Bubble | Jesse Felder
Summary
Transcript
I think with this new Iran war, it's becoming clearer to people that, you know, we are in an inflationary age. You know, the 2020s are an inflationary era that is going to persist for for quite some time. Right now is a really vulnerable time for the bond market where we could see interest rates on the long end break out to new highs. Hello and welcome to Wealthy. I'm Maggie Lake. Joining me today to discuss global markets is Jesse Felder, author of the Felder Report. Hi Jesse. It's wonderful to have you on again. >> It's great to see you again, Maggie. Thanks for having me back. >> H welcome to everyone listening. We're going to cover a lot of ground in this. So if you have any questions or you'd like to stress test your portfolio afterwards, you can click on the link and get a free portfolio review. Just go to wealthyondon.comfree. Uh, so Jesse, these are really confusing markets. E, even for some people who've been doing this for a long time, market veterans. I I hear it all the time. We just had one of the best Aprils for US stocks, even though we're at war. And I continue to see headlines that say markets are sleepwalking into a recession or a crisis. What do you see when you look across the global macro landscape? You know, I think one of the things, and I've been saying this for about a year now, is is, you know, it's really important to watch what I call the most important chart in the world, and that's the chart of the 10-year Treasury yield. I'm watching the 30-year closely, too. But I think, you know, everything comes back to that. So many things are priced off of it. You look at it, the the ripple effects of, you know, the trend in interest rates through, you know, every other asset class. And it's really super important to to kind of for that reason. But but I think you know the the the 10-year yield has been kind of in this sideways formation for a long time >> um 30 years as well and you know kind of in this holding pattern to determine you know what is the next stage of inflation look like are we going to have another surge like we had in the 70s or is the Fed going to bring it back down to target and I think with this new Iran war it's becoming clearer to people that you know we are in an inflationary age, you know, the 2020s or an inflationary era that is going to persist for for quite some time. And uh, you know, I think that that the the bond market hasn't quite reflected that, but we're really close on the verge. I think one of the things I look very closely at is the gold prices are really good and commodity prices really good leading indicator of inflation and interest rates. And so this really strong move that we've seen in gold over the last year 18 months was really foreshadowing uh a coming move in the broader commodity space which we're now seeing which leads interest rates and so I think we really could see a breakout higher in yields in response to inflation uh you know forces kind of resurging which would have important ripple effects as I said for a number of asset classes. >> Yeah. I mean, you talk you when when you start talking bonds, you're really talking about the plumbing of the financial system. So, I guess I guess before we dig into that a little bit deeper, what kind of upward pressure are we talking about on yields? Are we talking about, you know, 5% which has been enough to spook the markets certainly before? Are we talking about double digits? I mean, you know, what kind of new era are we moving into? >> Yeah. Well, I think, you know, if you look back at the the 70s, right, inflation didn't just kind of go up and stay high. And I think that's a kind of a lot of people think like, oh, you're an inflationary environment. Inflation is just going to go up and stay there. No, no. We had three major waves of kind of inflation. And uh, you know, so it it that's how it works is you have these cyclical waves in the context of a broader secular trend. And I think that's we're in the middle of that broader secular trend right now. We've been through a disinflationary period since the Fed aggressively raised interest rates in 2022. They didn't obviously do enough to kind of bring bring uh the you know core PCE back down to target. And so now we have these inflationary forces picking back up again and we're we're seeing another wave of inflation higher. And I would just point out it's not just the oil price. It's not in fact I believe that there are these secular inflationary forces that are so much more important in underlying these kind of cyclical dynamics of rising oil prices. Things like demographics um behind me you probably see the great demographic reversal somewhere. terrific book about how the uh the the the shift in demographics, the you know the the aging of societies and relying few and on on a a smaller share of working population to support a larger share of the the global population puts pressure on wages in a secular way that kind of creates inflation over long period of time. We're having you know the deglobalization trends of reshoring of production all these things are inflationary. we have uh divestment over the last 1015 years we've really through ESG and things that were really popular divestment from the commodity space so underinvesting in production of oil and gas and mining and all these things which creates structural shortages so there are a lot of secular forces that are kind of underneath this cyclical trend and so and I think these are really the underappreciated dynamics uh that kind of are are uh arguing that we're in a secular inflationary era and and uh it's just this kind of cyclical upturn that's kind of bringing it to everybody's attention right now. >> So that's super important because we're talking about big sticky trends. We're not talking about the short-term war because I think that that has clouded things because people think oh well if there's a ceasefire which by the way as we speak is very much in question which we should point out but who knows what what will happen. Uh but there's a kind of uh argument that the market's looking through that and it's another sort of temporary blow but um once that passes we'll we will be out in the clear. You're saying no no no that's just exacerbating some really big issues that are out there. >> Yeah. And and I think the Fed uh does appreciate this maybe not to the extent that I'm mentioning. You know, the one other force that I would point out is obviously the debt the the deficit. Um that when you have a deficit of 5% 6% of GDP, you know, you're essentially creating that much new money in debt issuance to kind of fund the the 30% of spending above and beyond taxes that are collected. So you have, you know, this also another inflationary uh force. I think, you know, this is why, you know, you have Nick Nick Triios at the Wall Street Journal kind of reporting that the Fed is clearly transitioning from talking about rate cuts to now talking about laying the groundwork for rate hikes because missing the the target for five years. Uh you're really starting to risk uh you know, people just not believing that the Fed is determined to bring it down. And if you lose faith in the Fed's ability to bring it down, you get this, you know, deanchoring of inflation expectations which people like Neil Kashkari Min Minneapolis Fed are starting to really worry about because that's where you get an inflationary mindset among consumers and businesses and they start behaving in different ways in anticipation of higher prices which creates kind of a feedback loop of inflation. So, I think we're going to start to see more and more talk of rate hikes to deal with this, you know, simply due to the understanding that it's it's much more than than an oil situation. It's a it's a it's a broader thing and you cannot, you know, afford to look at inflationary as a transitory phenomenon again when you've missed the target for five years. And the last time you tried to call it transitory, you know, it became a big problem, the biggest problem in half century. So they're at a really tough point right now where I think they they can't afford to be as doubbish as they'd like to be and the majority of the the the FOMC is starting to come around to that that idea. >> Uh we have a new chairman though who has marching orders from a president who put you who who wants him in there that they need to be cutting. Does that create a problem for the Fed? You know, I I I think that um you know, with Pal staying on, Myron's going to have to leave to make room for for you know, uh for Kevin Worsh to to come on. And so, you're losing pretty much the only real dove left on the Federal Reserve Board. Um, you know, I it's interesting to see these confirmation, you know, hearings because I do think Kevin Worsh probably is doing he's just saying what he needs to say to get appointed. >> When you look historically, he's actually been very hawkish. >> He's even talked about reducing the balance sheet uh far beyond, you know, what Jay Powell's been comfortable with. So, you know, I think his if you look at his history, it would argue he's more of a hawk than J. Powell. If you look at his recent rhetoric, he's actually talks more dovish. But I think, you know, we'll we'll soon find out how much of that is just to get appointed and how much of that is is is real. I think also too, he's going to have to, you know, it's not a one-man show. He's going to have to convince the rest of the FOMC that the productivity gains from AI and things like this are going to offset the inflationary forces out there. And I think that that would be met with a lot of skepticism by the the current uh FOMC a >> as I think the dissents from the last meeting indicated that they're sort of planting a flag in the ground with with that um those comments. So I if if what you say is true and I want to talk about those structural buckets so so folks really understand it. But if what you say is true um why are we seeing stocks rallying? like that's that would seem that would seem to be a complete disconnect from a world that you're describing. >> It's a great question. I think it's I think it's twofold. I think it's one that uh you know the retail buy the dip impulse has become so strong that unless it's obvious that earnings are going to go down. Everybody looks at you know retail investors and institutional investors to you know together look at it like you know earnings are good and there's no reason to believe they're not going to be good for the rest of the year. So this is another dip buying opportunity. And as Warren Buffett said, you know, this past weekend in an interview at the, you know, Berkshire Hathway meeting, we have more gambling in the markets today than he's ever seen in his life. So I think the speculative, you know, the animal spirits are are literally just off the charts after, you know, the pandemic. You really saw them take off with the meme stock, you know, frenzy and all those things. And it really hasn't gone away since then. retail share of trading is at record highs and as uh RER Sharma pointed out in Financial Times this morning the institutional investors for the first time on record have more overlap with retail portfolios than we've ever seen. A third of all, you know, hedge funds and growth mutual funds and things own the same stocks as retail. So there's a lot of crowding into these speculative names and it's all comes back to to to AI. So, you know, people think, okay, the a AI trade trade isn't going away. These companies are still going to spend. They're still going to drive earnings growth. Um, you know, I think there all of that is is questionable and we can get into that >> if you want, but I think as of right now, people think earnings are going to be good, so we're still buying the dip. >> If we are in this inflationary structurally inflationary period that is it's unclear whether they'll be able to handle it. I mean, they're they're going to chase it and try, but if you're in an inflationary period, what what should do well? What should outperform or what what should we own in that kind of environment? >> Yeah. Well, I'm sure, you know, Wealthian's audience is tired of, you know, hearing me say this, but I've been pounding the table for real assets for the last five, you know, 10 years really with the with the gold price. Um and that's just an argument that you know in an inflationary environment when the debt uh is doing what it's doing and the central bank has been ultra dovish for so long um you really want to own real assets in favor of financial assets. So that's things like commodities, treasury inflation protected securities, precious metals, those things all uh in energy uh energy stocks um in favor of instead of you know the broad uh S&P 500 and treasuries and things like this. And it's just astounding to me that literally you look on a five-year look back and what are the best performing sectors? energy and uh gold and and precious metals have have dramatically outperformed the S&P 500 and even the tech sector over the last five years and still you know what are the what is the share in people's portfolios of energy it's 3% of the portfolio it's still it's still nothing and it's energyy's dramatically outperformed technology so I I think that you're going to get to the point where people you know start to transition uh from and institutional investors are already starting to do this. There was a great article in Roy Reuters last week uh with the Black Rockck portfolio manager saying, you know, with the material um uh intensity of GDP going up, you know, to produce more GDP, you're using you need more and more materials. Just look at the AI boom, right? You need copper, you need cement, you need all of these things. You need electricity, which is all, you know, intensive on the energy industry. uh the the material of uh intensity of GDP going up. You really want to own those things that that benefit from that and have also been are you know facing shortages because of the lack investment over the last 10 years. So there is a transition. We're in the early phases right now. I think institutional investors a lot are starting to recognize, you know what, stocks have never the the broad stock market has never been more overvalued than it is today, driven by this AI boom, bubble, whatever you want to call it, you know, transitioning into, you know, these more kind of hard assets, real assets, whatever you want to call them, is uh is is probably a no-brainer at this point and a trend uh you know, uh that's going to last for for uh quite some time. >> Yeah. you know, we uh we we spent a lot of time discussing this very issue here and we have a lot of people in our audience that are uh I would say u feel the same or are very concerned. I mean when you say that sad about um exposure you know this is when we're all taking a hard look across our investments our 401s and saying am I really positioned for this because as you know on that wheel they give you you know in the in the handouts commodities were not really a big part of that. Um, and we actually started a a a network here, a community for people who want to learn more about it, who want to ask questions, who want to find out what they're doing. So, everyone can go to the link to join that community. Um, we have a lot of great stuff going on there because we recognize this has been, you've been talking about it, Jesse, but this has kind of been an under and here's I want to ask you about this. I think this is what happens. People hear what you're saying and think I'm I'm probably underexposed to this or yeah, that makes sense. I'm going to do it. and then semis go up 40% in a month and they're not in them and they say what and they you know so how how do you how do you sort of put that together with that strategy which makes sense on paper and then you see this parabolic move in something like semis and the NASDAQ over the last month >> yeah I I think you know study any of the the great investors see market wizards up here you know Warren Buffett is you know you read all his letters and things and and the time to buy something is obviously viously when it's the most difficult to convince somebody to buy it, >> right? That's going to be the best time to buy something. And so it's really really hard. It takes a certain uh you know, demeanor in being willing to be out of consensus uh and wrong uh for for short periods of time. You know, it's really what it what it requires um you know, to kind of take advantage of the best opportunities out there. And and I think that that's been true for the energy sector really since the energy since energy crashed you know back in 2016 right for for a decade now energy has been a hated sector you know for a while it was ESG >> and uh more recently it's just you know the fact that people think oil prices are going to you know stay low forever we thought you know $50 $60 barrel was you know was going to going to be around forever and I think uh you know in in an environment where uh you know these kind of securing your access to these types of natural resources is becoming more and more important because geopolitics are becoming more and more uh you know heated. uh you know the the thought that the oil price is going to stay at record lows relative to M2, relative to gold, relative to anything else and basically stay undervalued persist dramatically undervalued persistently and definitely into the future is probably wishful thinking at best. And so even when you look at what oil prices is doing today, you know, one of the you talk to somebody like a commodity expert like the guys at Garing and and Rosenwag and they talk about compare these commodities prices together. So you look at the the oil price relative to gold and it's almost at the lowest levels in history. You know, telling you that, you know, maybe gold's overvalued right now, but oil is probably also dramatically undervalued even after the runup that it's had, >> uh, you know, from $60 to $100 a barrel. It's still really, really cheap relative to the gold price. So this is why I kind of mentioned early on I watch gold really carefully because it's a really good leading indicator for the broader commodity space for inflation for for treasury yields and these types of things. And I think that the message from gold is really clear that uh you know you want to own a lot of these other things uh that that are you know typically not even seen of as as al alternatives to financial assets right most people look at the 6040 portfolio and I own stocks and bonds I'm diversified you know well if you don't own real assets uh you know there are periods in history where the 6040 portfolio did did very very poorly you know through the 70s through the uh you you know the the uh you know long periods of time 10 20 years where especially when inflation's running high and the real returns from those assets are are depressed and what does well are things that are are limited in supply like commodities and etc. So, so I think that yeah, it's something that's it's a concept that's really important for investors to kind of wrap their heads around. What is my exposure to real assets? How do I increase it if I if I am underweight? >> I think that's that's an excellent point. So, let's let's talk about AI because it's like the shiny object I think is is is um an issue for people when they're looking to diversify. Do you are do you think we're in an AI bubble and are you avoiding tech stocks altogether or that area altogether or do you see great potential there but also feel like you have to have the real asset side too is it one or the other for you or is it that's a problem that's a bubble and you know there's a >> yeah I think AI is a bubble and I think the earnings the earnings uh estimates right now are a huge um you know uh red herring um maybe the best way to put it that it looks as if earnings are going to be really really good going forward but when you look at the earnings quality of the hyperscalers it has dramatically declined in the last four six quarters and so the way I'm looking at it is basically just compare free cash flow to earnings right a high quality earnings means cash free cash flow and earnings are going up together, right? What we've seen with the hyperscalers is earnings are going up great. Their free cash flow is literally going going towards zero where and so that's basically just a reflection of the capex spending that they're doing. So this just like the.com bubble, right? you get uh you know all of this spending on the buildout of the backbone of the internet you know back in the 90s and today it's the data centers for AI and all of that spending is immediately recognized as revenue and income by companies like Nvidia >> but none of it is being expensed yet by the hyperscalers so you know normally that would that would be offset and it' be like one person's earnings is another person's expenses and it would be kind of offset So what's happening right now is because these data centers are all getting delayed and they're not built is going into all this spending is going into to to uh you know onto companies balance sheets or they're a lot of times using offbalance sheet vehicles to kind of hold these GPUs and things and they're not starting to depreciate them until they go into service. So, we're going to reach a point in time where the spending is going to have to slow and the depreciation charges are going to start to surge. And that's where you're going to see uh earnings for these big companies start to do kind of what free cash flow has been doing already, which is which is plummeting. And so, they have a time right now where, you know, people believe, okay, well, they're going to get the AI revenue growth that's going to offset the depreciation charges, you know, a year from now. But if that doesn't materialize and they don't find these new channels of re of massive revenue growth, then they're going to have huge surges in expenses related to depreciating the data centers and GPUs and things without the offsetting revenue to kind of keep profit margins where they're at. So I think right now I mean if you look back at you 99 2000 we saw this huge surge in earnings late cycle very rare thing. Usually earnings surge coming out of a recession or something. Right now we're late in the cycle. Earnings are surging and it's due to just these timing dynamics of of income and expenses. And what happened in 2001 2002 was revenue growth slowed and all the expenses went through the roof and n the NASDAQ went down 90% plus. And so I think we are in a very very similar dynamic right now where the revenue growth is going to take a lot longer to materialize >> than the market believes and the the heroic earnings estimates out for the next couple years are going to be really challenged um just for the simple fact that you know they're running out of uh you know the data centers are being delayed. They're running out of places to put them. You know, popular sentiment is really turning against nobody wants this in their backyard. In fact, there's a majority of Republicans and Democrats who don't want them in the US at all now. Literally, >> what's happened with supply chains and stuff this when we just came through outsourcing critical supply chains elsewhere, they're still saying they don't want the data centers in the US, >> right? And it's because of, you know, what are the data centers doing? They're pushing electricity prices through the roof, right? there AI is also another dynamic that's driving inflation higher right look at memory prices so all these electronic you know cost of all of our electronics are going through the roof right now because of the AI electricity prices going through the roof and they're spending you know on all this you know building and construction on all these materials and things so so yeah it's it's inflationary and so that's why a lot of people I think are are kind of turning against them but they there's no way they can maintain the growth in spending that they're doing right now unless they find, you know, double, triple the number of data centers they're able to build. And already there's only about, you know, a third of the data centers announced this year are actually have even broken ground. So, I think they're they're really running into a uh a roadblock in terms of actually being able to put these things into use. And what are you going to do? Buy, you know, 30 40 50% more GPUs every year just to put them in a warehouse that you actually can't put into a data center? Uh Sachi Nadella said last year he goes the reason why we're slowing our data center spend is he goes I can buy all the GPUs I want but I don't have warm shells to put them into. I can't build the data centers fast enough to put the put the GPUs into. Said that last year. So, I think we're starting to see that even Oracle, I mean, OpenAI uh has been cancelling a lot of their their compute contracts and data center contracts because, you know, their CFO is worried about them being able to pay for them one, but also they probably don't need that that much compute. Uh, so this is I think we're running into it. >> Yeah, >> this is this is one of the I think this this answers a big question and I think is is a great um explainer if you believe there's a bubble on why um so thank you for that. That was really interesting. When you talk about finding new revenue, I think you said unless they find new revenue, do you believe that it is becoming so critical to everyone's workflow that people will start paying for it? because this is they're kind of giving most of it away for free or almost free. >> Do they raise the tolls and do you think that they'll be so ingrained by then that that would be the revenue needed to to make this math make sense? >> Well, the two big companies um are already doing that, OpenAI and Anthropic, and they have to, right? They're burning so much money that they're running out of, you know, uh sources of, you know, to to fund those losses, right? Opening II had a hundred billion dollar funding round and they either need to go public or they need to dramatically cut their spending because um you know that that's going public is probably their last chance at another big source of capital to fund the literally hundreds of billions in losses uh that that they're running. So, you know, and plan to run over the next few years. And so um you know that's why there's a rush to go public. you know, SpaceX is going to get it done first. Anthropic's probably going to beat OpenAI to the punch >> and then, you know, you know, we'll see if there's even a market for a third, you know, trillion dollar IPO. Um, you know, it's it's there might not even be a market for two of them. So, we'll see. Uh, you know, I do think it's they have to raise prices. Um, Anthropic is already doing that and saying, you know, we're we're switching from flat monthly fee to tokenbased pricing and customers hate it. >> You know, all of their coding customers are already saying, wait, look, you know, I was spending 200 a month and, you know, it worked great and now, you know, it's going to cost me 2,000 a month to, you know, for for each one of my users to kind of maintain. This doesn't make any sense. And but with you know the agentic stuff that people were doing it just was became way too costly for these companies to continue that that pricing model. So I think you know it it really is a commoditized um business uh right LLMs it was surprising to me that uh you know Deepseek announced a new model which is very very comparable to the top frontier models in terms of performance and costs literally a tenth of what uh you know open anthropic are charging Gemini for their for their models. So, you know, it's it's really hard to differentiate. There aren't any kind of network effects like we've seen with social media and things like, well, you you know, you're on Facebook, so I'm going to be on Facebook, and you know, we we don't want to go to MySpace anymore because nobody's there. You know, you don't get that with OpenAI, uh, you know, with with ChateBT or Perplexity or any of these. Like, literally, people are going to go to >> the one that's the the the cheapest. and um it's really tough to differentiate them at that at this point. >> So um so I think yeah with a commoditized business it's going to be really really difficult I think for them to monetize in the way that they've guided in terms of the revenue growth. >> Yeah. What about this? The other issue with AI is what about this idea that um you know we may be in this inflationary period because of some of the issues that you talked about but with the rise of AI you don't really have to worry about wage inflation because it's going to do so many tasks and at least keep a lid on if not actually depress wage inflation. There are other issues sort of you know consequences as a result of that for tax bases but this idea that that will that will hold off on wage inflation. you buy that or no? >> No. I mean, because for the the reason we just talked about is is, you know, you talk to companies uh or you hear from companies that are that are really replacing labor with with AI and they're now saying they're spending way more money on AI than they were spending on labor. >> That's what you just said because they have to >> Nvidia is one and it's because, you know, saying that like their cost of compute has, you know, just gone through the roof uh in terms of wherever they've tried to replace employees and so their costs have actually gone up. it costs more to to replace them with AI than it than it's cost to just kind of keep the employees on. So I I find that difficult to believe. I also think that you know the the abilities of of large language models are also um vastly overhyped. Yan Lun was the head of AI for Meta and he since left and started a new company and he you know he he recently said that you know planning agent putting agentic systems on top of LLMs is is a recipe for disaster because these systems don't understand like the way the human brain works is whenever we're gonna we we kind of get a cue right we we take in you know a cue and our brain says okay based on all everything I know about the past if took this action, it's likely to result in this outcome. AI doesn't do any of that. It just says, you know, statistically, uh, based on this Q, I should do this and doesn't think about the consequences, which is why we have companies, you know, talking about, uh, you know, there's just one last week said, uh, you know, I think it was Anthropic's model deleted their entire database even though the agent had been instructed, never never do this, right? So they asked the agent why why did you do this and said you know I I uh disobeyed your instructions and I did it anyways because there was one little you know glitch and literally deleted the the company's entire database AI has a fat finger too this is giving me some >> absolutely absolutely and so you cannot you can't trust it with missionritical systems you can't trust it with uh you know you know in areas where you know you have an error rate like you know you talk about six sigma you know which you know Japanese uh manufacturers popularized the however many nines of you know n 99.999% accuracy required to kind of be able to implement something in a you know Japanese uh company. Well, these companies are really only the LLMs are only 95 96% accurate in almost any field that you employ them in which is just not good enough >> for for most business uses. um you know we can use a chatbot to you know kind of instead of search and if it's wrong we can say that kind of sounds funny you know maybe that's not right you know two or three% of the time we probably all experience that and that's fine when you're just using it for search but when you're trying to outsource employees and these types of uh you know issues are coming up with you know devastating consequences you realize okay maybe we do need humans in the loop and if this is going to be get more and more expensive it just doesn't make sense. >> Yeah. And and um devastating and then you had me laughing about the goblins gone loose on uh >> That's right. Yeah. We were talking about beforehand that you know OpenAI had to come out and tell its uh you know programming um interface that you know stop talking about goblins. >> That was my laugh of the week. I think it's so funny. So, let's let's pivot back to um to real assets um now that we've sort of debunked or at least got got your thoughts and and introduced a little skepticism into the AI um theory. And we're going to keep taking a swing at that because there are lots of folks on the other side who have compelling reasons too, right? And so that's why it's really important to kind of keep working through this and learning a little bit more each time we go. Um I thought your com comment about divestment from the commodity complex was super important. So um you know how how should investors think about this if we if we it's your your premise that we need to be increasing our exposure to real assets to offset uh inflation and loss of purchasing power across the commodity in in uh complex. Um what is what is that are we now seeing investment that will catch up? Do we need to pay attention to the will to invest the political will and the capital that's needed to invest in this? Could that negatively impact our investments in real assets? How do you think about that part of the equation? >> I'm glad you mentioned the term capital. There's a book I think it's right here. >> We're gonna have to raid your library and do a book called people with this. >> Yeah. And it I mean the capital cycle is something that's so underappreciated and probably the most important driver of these secular trends in markets. It's where is the capital going, right? because capital you know comes into a sector like AI for example let's just come back to the.com bubble right so much capital went into uh you know the the.com that it necessarily depresses future returns right because all that capital what is it doing it's go investing in infrastructure infrastructure creating supply right so you eventually get too big of a supply response supply outpaces the demand for it prices crater and go down. Uh then you go through the bottom of the cycle where okay, capital says, "Oh my gosh, we never want to invest in this ever again. The industry is starved for capital." You went through that through, you know, kind of the the uh 2000s into the early 2010s where technology was kind of a hated sector. Didn't didn't attract much capital. And uh you know, that creates a shortage of supply, right? we're not investing enough in something and so we get not enough of it and demand outpaces supply and you get a big boom uh in in prices that lasts for a period of time. So I think this capital cycle is a concept that's really critical for long-term investors. Um where have we seen capital go in the last five years? I mean we're seeing massive amounts of capital. In fact um who is it? Jim Pollson just put out a piece today about uh how the investment relative to GDP, the investment in new era, you know, technologies, tech, you know, those types of things is twice as big relative to GDP today as it was in the com. >> Wow. >> So, a massive a massive amount of capital is actually going into technology today. It's going into data centers and all these things. What has been starved of capital over the last 10 years is really the mining space, right? I mean, we we haven't invested in copper mines. We haven't invested in uh new oil drilling opportunities, right? The oil sector is another great example that when we had the financial crisis, interest rates came down to zero, cheap capital. Where did all that capital go? It went into shale companies, right? all these we discovered, wow, with horizontal drilling, we can, you know, get all this oil that we thought we couldn't get before. Massive amount of capital went into the energy sector. What happened? We had a huge boom in uh in energy and oil stocks and eventually all of that cheap money created a massive overupp of oil. 2016 oil prices crashed. So, you know, following the money is probably just a, you know, one of the most underrated things investors can do. It's not hard to kind of understand what is what is being dramatically overinvested in, what's being underinvested in, but those are where you're going to find, you know, the what's going to do well over the next 10 years versus what's going to do poorly. And I think it couldn't be more obvious today >> that the investment in real assets has been dramatically, you know, divested, underinvested for 10 years. And, you know, that you've seen the flip side of that in technology. It's another reason why I think it's like 2000 right, is you had uh when the.com bubble burst, that was when commodities and things really took off. And one of the best periods to own energy stocks and precious metals and things was that 2000 to 2010 time frame, which was a lost decade in the stock market. So, you know, these things go in cycles and uh you know, it's it's really hard to kind of maintain a long-term perspective sometimes when you see what the market's doing in the short term. But it it really helps to kind of create a foundation for how what am I, you know, how am I positioning uh for the next, you know, three to five years. >> And ideally, you want to be getting you want to be thinking about increasing exposure before that flood comes in. You want to catch that wave of capital as it comes in, as it transitions. If you can beat the transition slightly, that's going to give you better returns. Um how does globalization that was another factor that you mentioned deglobalization um and this is again a mega trend we talk about a lot we also hear it called resource nationalism economic state craft how how are you thinking about that and does that seem like it is uh here to stay because I think there's some question mark about that >> it's a great question um you know I I think that you know if you were to look at uh you know the forces of disinflation what really drove the disinflation from 1980 till 2020 right that 40-year period you could say Paul Vulkar you know broke the back of inflation really uh established the credibility of the central bank to believe you know kind of make people believe that inflation wasn't coming back um you had demographics the baby boomers coming into the into the workforce right was a huge you know surplus of labor labor which kind of kept labor costs low. Uh but then the offshoring of labor right the globalization we're going to ship production to China to where India to wherever it's cheaper and that's going to allow us to keep costs low for companies. Um all of those things are reversing now and and so globalization specifically we realized through the pandemic that shipping all the production 90% plus of our pharmaceuticals to China was maybe a dangerous idea. you know, we need to, you know, there's certain things where we need to have, uh, you know, national security interests in mind. Um, you know, China being the largest producer of of drone technology right now is another one. Producing drones for Iran, for Russia. Um, you know, we we need to uh for for just national security interests, bring some of that home. I think probably the biggest one I think of is semiconductor manufacturing. It's all done in Taiwan. China believes Taiwan is part of, you know, their sovereign nation and maybe wants to kind of bring it back into the fold someday. And uh, you know, we think the straight of Hormuse Hormuz closing is, you know, kind of a a dangerous economic thing. Nobody believed it was even even a possibility. Uh, and now it's happening. Um, you know, there are people that believe that the same thing could happen in Taiwan where, you know, China says, "Okay, we're going to just take it and uh, you know, there go 90% of your your semiconductors." And how do you run the world, you know, the Western world without semiconductors? You can't. Which is why >> both administrations like Taiwan Semi, you need to build, you know, new fab plants in Phoenix and we need to bring as Intel, we need to make you a national champion. we need to be, you know, bring this manufacturing home because it's just a critical critical issue with, like I said, the geopolitic geopolitical environment becoming more and more uh, you know, dangerous. Um, so yeah, I mean that so that trend of shipping things overseas created disinflation. Now, for other reasons, you know, we have to bring it back to the United States for national security and it's necessarily going to cost more. That's a secular driver of inflation because it's just gonna gonna raise prices, right? It's a lot more costly to produce those semis in Phoenix than it is in Taiwan. >> Yeah. We have a big summit if it goes. We don't know, but it's on the calendar between Trump and Xi. What are you going to be watching for for that? Is that on your radar? And and what are you going to be looking to hear? You know, I I think we've we tariffs um the Trump administration was really looking to kind of try and separate from China as much as possible and then with the rare earths we realized, wait, we can't do that. Uh you know, China had ch in this case, China has all the cards. And um so it's it's really really difficult to kind of u disentangle. You know, we're finding that now too with, you know, Chinese manufacturing of EVs. You look at these EVs that you can Chinese EVs that, you know, basically would sell for $20,000 US and they're, you know, better than a lot of the cars on the market here in the US at twice, you know, 30 $40,000. Wall Street Journal had an article about this, how in, you know, El Paso, you know, a lot of people are driving across into Mexico to buy these Chinese vehicles and say 20 grand. This is an amazing car. The fast ch charging technology is way better. So, you know, we're we're trying to kind of separate from them because of the the the conflict uh of, you know, China is the upand cominging, you know, new kind of potential threat to the global hegeimon and uh and so, you know, but it it's it's really really difficult. I I think that um there's a lot of um you know bluster around uh you know those those types of meetings and I pay more attention to what can they actually do in terms of separating from China versus the versus the uh the narrative around it. >> Yeah. Do do you think China starts to you know so so much of the what we've learned is that you mentioned rare earths is not the supply of them so much as the refining of them what they do with them and that's really where China's cornered the market you can find deposits of this stuff elsewhere in some cases but it's the refining and that sort of you know that that part of the chain that China's really cornered. Do you see China starting to exercise its pricing power on that? It used to be market share and we've saw that with steel. always saw that with a lot of other uh materials and and hard assets. Do you think they start to exercise their pricing power since they have such a strangle hold on these markets? >> I I think that you know, yeah, China's MMO is really they want to be the lowcost producer to make it a no-brainer to you know, so you see that with with everything that they do. Um, and right now I think that's one of the biggest threats to a AI is, you know, China is not, they don't just have Intel. They're literally investing in every uh, you know, major tech company in in China to create the lowest cost, most effective version of large language models and AI to kind of create this uh, uh, you know, competitor to to what's going on. you know what Meta and Google and you know are all all trying to build. So I I think no I think that they they would rather uh maintain market share because that market share is such a powerful um you know bargaining chip >> uh you know if you will to to kind of um give them power uh in other ways. Um, I think they could always say, you know, we can reduce, you know, the amount of, uh, you know, uh, things that, you know, you're you're able to buy, uh, rare earths that you're able to buy or we can raise prices or whatever, but we're not going to do any of that because, you know, you're not going to tariff us in the way that you really want to. >> Yes. I mean, it's more like a bargaining chip, I think. >> Yeah, that makes sense. So, so let's let's finish up where we started out and that is the market that you're watching the the most closely. So, we you we understand the the sort of worldview that you're holding. What does that look like when it comes to bond markets? Why are they potentially so dangerous? And what do you see playing out in the bond market? >> You know, as I said, commodities are one of the best leading indicators of of interest rates by about six months. If you just look at the Bloomberg, you know, commodity spot index, uh, advance at 6 months over the, you know, 10-year Treasury yield, it pretty much tells you the which direction treasuries are going to trend. And that makes sense because commodity prices drive inflation and inflation, you know, affects the bond market. So, right now, commodities have been soaring for the last six months. um you know we and and uh and so that basically says right now is a really vulnerable time for the bond market where we could see interest rates in the long end break out to new highs. And I'm talking about like you know we're we're still under four and a half on the 10ear yield right around 4.4 I think but I think we could see it it it over 5% pretty easily in a short period of time. Um if you get that type of volatility in the bond market that's usually bearish for stocks stock prices as well. And so I think this is potentially just the delayed effect, right? Everybody says, "Well, how's the stock market doing so well?" Well, the bond market hasn't responded to inflation yet because the bond market thinks straight of horses is going to open up, inflation's going to be transitory and we're going to go back to normal. But if inflation, you know, if if people start to realize inflation's not going to be transitory, bond market's going to be unhappy. We're going to get volatility in treasuries. As I said, you could get the tenure yield over five pretty quickly and that would create some volatility in the stock market as well. >> If you have uh rising in if you have commodity prices on the rise, you have inflation on the rise and as a result you get bond markets, bond market yields that go up, doesn't all that just create demand destruction? I mean, how how what what does that cycle look like? And it feels like everything's compressed now. So, do we do we worry about that when we're talking about what a commodity super cycle? How does a commodity super super cycle happen if we are at the risk of demand destruction? >> You know, it's it's um the commodity super cycle happens, you know, because of the the capital cycle. >> Okay? >> The capital cycle happens because we've been so underinvested in these things for so long that in order to secure these natural resources, we're going to have to just start investing more. Um and the the impetus to invest more is the higher prices, right? They say that the best cure for high prices is high prices because it it it requires a uh an investment response, you know, so people say, "I'm going to invest a bunch of money to create new supplies." So I think we're in that early stage where the price signal is here, but we're not seeing the investment response yet. So look at, you know, a lot of the big oil companies, they're saying, "Yeah, like, you know, you look at drilling rigs and things are still near like multi-year lows. They're they're not, you know, there is no supply response yet, which tells me that oil prices aren't going to come down anytime soon. And uh you know, we're we're likely to see this kind of inflationary epiphany ripple across markets um you know, sometime over the next month or two. So that that that part of it is is sort of stronger and offsets any sort of demand destruction that you get or at least will create a sort of longer channel and you get a little bit of volatility in between there as you see people >> and I think I think you're absolutely right. I mean I think if we do get the 10ear yield over five you know five and a half pushing 6% you're going to get a recession. You're going to finally get this recession. And I think that's another thing that people don't necessarily appreciate is that, you know, estimates for pro corporate profit margins over the next 12 months are just through the roof for and it's not AI. This is like literally the other 497 companies in the S&P 500. Their profit margins are expected to surge higher. Well, another one of the best leading indicators for for profit margins that I found is, you know, five-year yields because corporates, you know, usually kind of refinance on a five-year kind of time frame. All these companies refinance their debt in 2020, 2020, and 2021 when interest rates were on the floor. We all going to refinance all of our debt. >> That was five years ago. Where are interest rates today? So there's a lot of debt that maybe is potentially coming up for refinancing. These are the problems we're seeing in private credit right now. I think they they went and funded a lot of companies five years ago that are now saying we can't pay the new interest rates and they're starting to see not defaults but this is why you have payment in kind and you know this kind of the games that they play to avoid showing defaults. Um, but there's a good chance that if companies, especially if the Fed has to start raising interest rates, those profit margin expectations are going to come down because people are going to say all the refinancing of this debt's going to happen at much higher interest rates. We anticipate it, not rate cuts, we're having rate hikes. And so, yeah, you you probably do get a cyclical downturn, but I still think that's in the context of a secular uh, you know, uh, commodities super cycle. >> Yes. And that's why it's very important to talk about time horizon when we're talking about this because they could be two very different things. >> Uh Jesse, this was such a fantastic conversation. I think it underscores um the conversation that we're going to continue having here around the importance of real assets and what we all need to do to sort of educate ourselves. So um hopefully everyone listening um hit the link that you'll see in the description or on the screen and you can join our network and learn more about it. But Jesse, so appreciate your time today. Thank you so much for being with us. Great conversation. >> That was a lot of fun, Maggie. Thanks for having me.