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Daniel Creech 00:10

How’s it going out there? It’s Wednesday, August 26, and you’re listening to the Wall Street Unplugged Podcast. I am Daniel Creech, and I am solo today. The one and only Frank Curzio is out of the office; he’ll be back mañana. You know the drill: whenever I’m in charge, we talk about whatever the flying Florida I want to talk about. Let’s rock and roll. I was going to talk about the owner of the 49ers, the NFL team—Joe, I don’t know if you’ve heard this—he got in trouble in Ohio, a wonderful, beautiful state. Some say it’s the greatest state, I don’t know, maybe some say that. But I will hold onto that tomorrow, tease. I’ll tell you what country music says about that. Instead, I will say: I am a commuter, so I spend some time in the vehicle. I drive back and forth from where I live and where we work here, and don’t hear what I’m not saying.

Daniel Creech 01:04

I have about an hour-ish commute. Half of it, Florida beautiful, literally. I mean, you get to see the ocean a lot. God is the greatest artist, so I’m not complaining about the commute. Typically, I complain about the drivers. And I am a horrible person because, Joe, I will confess this to you, I can literally be listening to the Bible through my speakerphones and want to cuss somebody out in front of me. That’s horrible. That’s reality sometimes, because people be crazy on the road. You guys know what I’m talking about; you don’t even have to drive very far. However, I have to tell on myself: yesterday I was driving and I was coming into Jacksonville, and a guy was cutting over, not paying attention, gave me all—just heated up so I could go on a rant, Joe, and explain why I’m a great driver and everybody else sucks, and if it wasn’t for me we’d have crashes all over. And as he’s coming into my lane, I, you know, let off the gas, was about to brake, and I honked my horn at him, and he had his window down.

Daniel Creech 01:59

And I’m not kidding you, he looks back, and he waves, and he goes, “I just could tell he mouthed, my bad.” And you know what that did? That made me take a deep breath and be like, “Ugh.” Well, now I can’t complain. I can’t keep going down about how great of a driver I am and how horrible this guy is, and he literally just waved and, “Hey, my bad.” And so I got over, and then he was—I went past him and I looked over and I waved and he waved, and then I had an actual peaceful couple of minutes instead of ranting and raving. Humbling, I’m telling you. Anyway, you guys know what I’m talking about. I know you guys do. Some of you are listening to this right now, driving, flipping the bird off to somebody else, and if they deserve it, hey, have at them. But every once in a while, even the old road rage goes the opposite direction. So there is hope out there. I appreciate that. Joe, are you a road rage type guy? Yeah, he’s lying. No, I’m just kidding. All right, let’s get to some meat and what you guys really want to talk about, and that is investing in money.

Daniel Creech 02:59

Now, markets are open in the red a little bit today, but nothing crazy. We had some PCE, some inflation numbers come out. Real takeaway there is: it wasn’t anything too high or too low. It wasn’t an outlier. It was essentially in line. They come in a little hot, but nothing that deserves a lot of attention, in my opinion, right now because of what else we got going on. And that is Nvidia, the king of AI, reports earnings this afternoon after the market close. Everybody will be watching, as they should. My big question is: what will Jensen of Nvidia really take to and sell on the conference call? Now, Frank and I have talked about this in the past, and we reference Elon Musk, who is one of the greatest CEOs, especially when it comes to communicating and talking or explaining what the street wants to hear. And it’s been volatile at times, don’t get me wrong, and he’s taken flak for it. But essentially, on the conference calls, Elon Musk is a genius about addressing and figuring out and telling the street what they want to hear.

Daniel Creech 04:02

It might not always be exactly what they want to hear, but he’s talking about the topics. And when I say all that, it makes me think of what Nvidia’s Jensen will do. Now, he has a couple options here. He can talk about the chips, and the chips are going to—I mean, the numbers are going to continue to impress. Those that say they’re going to come out and lay an egg, I completely agree to disagree. And just for perspective, here’s what the numbers are roughly estimated to be. Now, estimates are different from different people, so don’t take this as the gospel. I’m just doing a quick search here to give you an example. Earnings per share are going to come in around $2.09. That’s roughly 100% higher year over year. So from last year Q2 to this year Q2, earnings are doubling, essentially. Revenue is expected to be around—and you’re going to see different numbers—around $92 billion. $92 billion for three months of sales. That is unbelievable. That’s also up about 100% year over year.

Daniel Creech 05:05

Again, I’m rounding. If you’re caught up in the details, that’s fine. Data center revenue of that 92 is expected to be between $85 and $86 billion, obviously the vast majority of that. So the numbers are not, you know, Nvidia is not going to come out and report $70 billion in revenue or anything crazy like that. You can brag about your chips. Obviously, they’re the king of AI. They’re ahead of everybody. There was an interesting blog post and comments from OpenAI about how it’s coming out with its chip and its testing, and it’s better and bigger and stronger than all these other chips, including some of Nvidia’s, but that’s still early testing stages. That is not ramping up for production anytime soon. I’m not trying to knock on OpenAI here. You guys know I’d love to do that when I could, because they’re an easy target. I’m not. I’m simply saying the competition is coming. Like Frank has talked about, you don’t have sky-high margins and be a dominant player forever without competition coming.

Daniel Creech 05:57

However, Nvidia is so far ahead of the lead. He’s like Wayne Gretzky in records for NHL. He’s so far ahead of second place, it’s almost not funny. So earnings are going to be good. If you talk about chips, that’s one thing. He could also talk about the financing, networking, and network partnership or ecosystem. And this, I think, he’s going to have to address. And if he doesn’t address it in his opening comments, which I think he will, he’s definitely going to have to address it in the Q&A portion of the conference call. Because analysts had better be talking about the circular financing and the questions and concerns and even critics. Again, it’s fine to be critical of something. I believe if you’re going to be critical, you need to hear the explanation of the other side. And so I hope he gets a lot of questions on, “Hey, you guys are circular financing. You guys are loaning money or buying equity or giving money to certain players who in return turn around and buy your chips from you.” Address that and explain why it continue, why it can continue to go on, and why it’s profitable for the ecosystem and the build-out.

Daniel Creech 07:00

Then he’s going to also have to address this power concept and the lack of power, the lack of being able to connect to the grid, to generate power, to build data centers, and everything that goes along with them as quickly as what the market wants. That will be very interesting because when you look at just the balance sheet of Nvidia and the hyperscalers, they’re already doing debt financing, some have raised equity that we’ve talked about. The risk here is not going fast enough and not spending enough. And I know that that sounds crazy, but that is Mark Zuckerberg, OpenAI’s Altman, BlackRock, Larry Fink’s. That’s those guys saying that, not Daniel Krieg here. And so when that’s the environment you’re in, you have to kind of play by those rules of that environment. And I say all that because when you come to the power situation, Frank has been hitting this nail on the head for some time. We don’t have enough power capacity that the street or market wants right now.

Daniel Creech 08:02

So therefore, you have to find ideas where money’s going to flow to fill in that gap. And a couple of stock ideas here, low-hanging fruit. If he focuses on chips and he can revitalize the AI trade, that has gotten some steam taken out of it. It’s taken some punches. You know, in a boxing match, let’s say we’re going 15 rounds here. We’re not anywhere near 15 rounds, but we’re kind of rope-a-doping. AI is getting beat to crap against the ropes right now. As we head into the election midterms, everybody, it’s fun to gang up on data centers and all that right now. This too shall pass, but it is what it is. And we’re seeing Nvidia growing earnings 100% this quarter, trading at not even a market multiple. Things don’t have to make sense, people, okay? They don’t, clearly. I just pointed that out. Now, on the chip side, you got Nvidia, you got Broadcom, AVGO, and you also got Cerebras, CBRS. And I mentioned Cerebras a couple weeks ago on the podcast. It sold off after earnings as management guided towards lower margins during this quarter.

Daniel Creech 09:06

So third quarter should be the low point of their margin guidance, and then they should ramp up. They also had some unlocking of shares from their IPO to deal with, so there’s a lot of volatility. That stock is down. I would definitely have that on your short list. I think that’s a great buy. I need to focus on win and get the timing better, but I really like—there’s a lot to like about that. On the networking side, on the power side, if Nvidia’s Jensen can recharge this trade, then you got the systems and services to it. So if you want to play the power aspect, you got GE Vernova. We’ve talked about that a lot. Joe, is that pullback GEV? Where is GEV right now on the chart side? I don’t believe it’s near its—I mean, it could be near its high, but I don’t believe it’s at its high. Okay, yeah. So it’s pulled back some from its previous highs, obviously holding up well. But then you have Vertiv, which does the cooling systems, VRT. We’ve made a lot of money in that here for Alpha members.

Daniel Creech 10:09

Vistra, VST, is an independent power company. These guys were in the news recently. They had a nice insider buy. You always like to see insiders purchase stock versus selling. As Frank says, you can sell for any number of reasons. You typically buy for one. And then, if you want to play the power play and all that kind of stuff, you can dip into the old politician’s pocket. Joe, did you see Pelosi disclose that she bought Bloom Energy, BE? Frank hit with that out of the park. 10X return. 10, people. Varsity Blues, Joe. 10. 10. BE has pulled back. I still love this stock. And obviously, you can say don’t bet against Elon Musk. You can say don’t bet against Jensen. Do not bet against Nancy Pelosi. That woman is absolutely a fantastic trader, and I don’t know where she gets her sources, but she is spot on. Maybe it’s the glove her husband wears, like that Michael Jackson tribute. Don’t fight that, people. BE is another play on that side. And then also Intel, because you want to follow Pelosi into those kind of positions.

Daniel Creech 11:14

Now, again, numbers are going to be good. What will Jensen say? He’s got to justify the network financing and such. The only other thing I’ll say about this balance sheet, last thing to wrap up, because I don’t want this to be a surprise as it goes more mainstream, because it’s not as mainstream as I believe it should be yet. With the balance sheet and equity raises and all this CapEx that’s going into AI from the hyperscalers, that isn’t even the full story. Because as we’ve talked about, they’re doing—they, Nvidia, Microsoft, all these guys—are doing off-balance-sheet deals, transactions, debt financing, and all this kind of stuff. And that adds up to over a trillion dollars outside. Now, I’m combining the hyperscalers and such like that. I’m combining the off-balance-sheet, essentially liabilities, across the group, and that’s over a trillion. I mean, it’s well over a trillion dollars. That’s completely separate of all the debt and all the financing you see on balance sheet and stuff like that.

Daniel Creech 12:18

That is huge, and Jensen ought to address that and kind of ease the market fears. Again, there is nothing wrong with pointing and saying, “Hey, look at all this money going out. When’s all this money going to come back in? Return on investment, return on equity.” We’ve discussed all that. Nothing wrong with questioning that. Jensen has to defend that and kind of put the market at ease and get this AI trade back into gear, get some more momentum back. I think he will. I don’t think this is going to surge by any means. And the reason I think that is because the massive storm in front of us, if we’re on a highway cruising down and we got blue skies-ish right now, up ahead is a storm. That is the midterms and the jocking back and forth. It’ll all pass. Bull markets will get back into full gear, in my opinion, afterwards, but we’ll see how that goes. Keeping with this chips idea, another thing that I believe should be a lot more mainstream that hasn’t gotten the attention I want it to is the life and durability and value of chips, GPUs, data center racks, etc.

Daniel Creech 13:29

And yesterday, was it yesterday or Monday? I apologize. CNBC had a fantastic interview, and it was earlier in the morning, and it was with Sprout co-founder and CEO Shelley Lee. Joe, I don’t know if you can pull up her website or if you can find that reference, but she was on CNBC and she was explaining her company, Sprout. It started when she was at Duke University, I believe 2014, but she saw how there was dump trucks taking away student, faculty, electronics, laptops, GPUs, whatever. And she thought, “Hey, what a waste.” You know, that whole typical when somebody sees, you know, somebody can see trash, others can see treasure. She started a company to refurbish, resell, recycle. So essentially, from when a chip is made or an electronic device is made, from they get used for their primary source, Sprout then takes it and refurbishes it.

Daniel Creech 14:32

Like an old car is the analogy she uses. Essentially, fix it up to resell for somebody else to get more life out of that. Not essentially for the same use it was created, of course, but a secondary or third problem or situation it can solve. Get more life out of it and then recycle the product in the best way possible, okay? So you get everything out of it and then it goes to trash, or as some people like to call it recycling, because that makes it sound better. This is a fascinating concept to me. And throughout this interview, she talks about how some of her—and she’s been doing this for a while—and she was in data centers and working with data center companies and GPUs and devices before AI went mainstream and got real popular. Sprout, the company she has, the clients are the who’s who’s of data center and hyperscalers. Microsoft, Dell, Nvidia, those are all customers. And I encourage you guys to look this up on their website or YouTube. I think they actually put a link to it on Sprout’s website as well.

Daniel Creech 15:36

Now, the reason this is such a key interview is because there is a huge debate going on between the bulls and bears with AI. And one of those conversations is about—and I think, I believe it was Burry, the famed investor who brought this up. And if it’s not, I apologize. I’m not trying to attack anybody. But somebody has brought up that the depreciating value of these chips, GPUs, are being miscalculated, to put it nicely. And there’s this argument out there saying, “Hey, these new latest and greatest chips are only good for two to three years.” And on the depreciating scale or on the balance sheet, some of these companies are saying they can get four, five, six years out of them. Well, not both of those can’t really be true. And so we have to figure out, “Hey, how good are these chips? How long do they last? What is the actual value of these?” And this is where the meat of this interview was so good. Ms.

Daniel Creech 16:36

Lee talks about how they have done over 46,000 systems year to date, and where they refurbish them. Think of this old car. You get junks, refurbish, rebuild, and then resell. And she said about 13,000 of these have been AI hardware, okay? So you got 46,000 systems year to date. 13,000 of those are AI hardware. And she talked about how a lot of them, they’re seeing a huge influx of 2020 A100 servers, okay? Not to get too caught up in the details, the big takeaway there is 2020. That’s six years ago already, essentially, that she and her company are seeing volumes of these products come in from 2020. She even said, “Let me make it real clear. Obviously, these Florida things last longer than two to three years.” That is put to bed. This is one of the biggest worries or bear arguments for AI, in my opinion.

Daniel Creech 17:40

And this woman is flat out saying it is completely untrue. That is a huge check on the T-chart for momentum and for AI stocks. So your chip stocks, your longevity, this whole thing of we are still in the earnings, early innings of this. Getting back to the 13,000 AI hardware they’ve done, the Hoppers, Nvidia’s product, one of them, she says that three and a half years into its life, they still hold between 60 and 70 percent of their value. Again, let’s use the vehicle analogy. If you drive your car off the lot, you lose value right away. This is saying a three and a half year old car is still worth 60 to 70 percent of its value. Now, there’s a caveat here that I give her credit for. She also talked about supply and demand. One of the reasons hyperscalers are holding on to chips and getting six years out of them is because supply and demand is so imbalanced, where you have demand outpacing supply. You have demand outpacing supply on the chips and the ability to produce chips.

Daniel Creech 18:44

But then, more importantly, as she and others have pointed out, the real bottleneck, the real hiccup, the real hurdle to cross here is even if you can make all the chips that people want or are demanding, you can’t plug them anywhere because you have a lack of power. And that gets back into the whole gigawatts thing and race that Frank and I have been talking about, and Frank’s really hit it on the head. However, this needs to be put to rest that chips do not last only two to three years. It also needs to be put to rest, and there’s going to be outliers and variables here, so just hang with me here. It also needs to be more mainstream that the value of these chips and systems are holding them much better than what a lot of doomsdayers or bears had thought so just a year or so ago. And again, it’s okay to be a critic, but you got to give it time. So does the pace and value of these chips pick up or drop off from here? Well, that’ll remain to be seen. But right now, you do not want to ignore this.

Daniel Creech 19:45

These chips are lasting longer than what many thought, and they’re also more valuable than what they thought. Getting back to the supply and demand thing, that’s when she really hit the nail on the head, in my opinion, about the whole power constraint. And Andrew Ross Sorkin was asking her about, “Hey, supply and demand vehicles, aren’t these new chips going to lose all their value as soon as we can ramp up production?” That’s when she pivoted and said, “Hey, I’m not looking one to two or even five years out. She’s looking 10, 20, 30 years out.” Why? Because the demand for power is really the biggest hangup. And the other thing she said that really stood out to me, which time will tell here, she was explaining how she gave the example of having an H100, which is an Nvidia product chip. She said, “Let’s say I’m holding one of these and it’s a few years old and it’s $20,000.” She then says, “If it has a $150 component on that chip that is no longer available or has been done away with or refurbished or whatever, then essentially that chip that she’s holding is junk and needs to be recycled.” That’s a big takeaway because, and she explained it well, companies are creating chips bigger, faster, stronger than ever, last longer than ever.

Daniel Creech 21:00

But now you’re really going to have to transition and build a network, the server, the process, the entire beginning to end that can last longer than it ever has. And listen, I’m not saying it’s going to be easy. This is way over my head. But you don’t bet against capitalism. You don’t bet against incentives. And that’s going to happen. These guys are only going to get bigger, better, and stronger. And the low-hanging fruit here is who builds out these systems. Well, one of them is one of our recommendations, Dell. And Dell is the company that was mentioned along with Palantir. You can kick me for selling Palantir and taking a big profit because we definitely left money on the table. That’s on me. But Jensen’s Nvidia has said in the past, “The reason that we can build AI everywhere is because of two companies. Those companies are Dell and Palantir. If Dell and Palantir aren’t in your portfolio and you want to play the AI wave,” do I need to repeat that slowly? I don’t know how else to say that more clearly.

Daniel Creech 21:56

That’s the takeaway, people. Have some of those. We did well on Palantir. We can always get back in. We’re doing well on Dell. Knock on wood. The incredible thing about this is this should put this definitely helps the bulls versus the bears in the AI trade. And it helps them out from everything from chips to connectivity to servers to power. And I just wanted to bring that to your attention because Shelley Lee of Sprout, I thought it was absolutely an incredible and insightful interview. So go look that up. I’ll ask Frank his comments about that.

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Daniel Creech 23:45

Switching gears here, Joe, let’s talk. Have you seen all the back and forth between Mr. Bessent and Druckenmiller? He has. Everybody has. Now, just to recap here, Mr. Bessent, Treasury Secretary, came out and made some announcements around the bond market. And you could argue, “Oh, well, it didn’t do anything. It pushed yields lower for a day and then they came back the very next day, etc.” I think that’s totally missing the point. As Mr. Bessent said, it is a signal to the market about, and he even called out some of his buddies in hedge funds and saying, “Listen, we’re seeing some trading in the 20 and 30 years that essentially he doesn’t like. I’m paraphrasing. And he’s just sending a signal to those that, “Hey, you’re not going to push yields up artificially.” This has gotten some pushback as it should because let’s call this what it is. This is government tinkering. This is Willy Wonka and the Wizard of Oz pulling on levers, banging on buttons to try to get this house of cards. And I don’t mean that as, “Hey, don’t listen to me.” I mean this as an easy picture for you to understand what’s going on.

Daniel Creech 24:52

And really, I don’t want to make the mistake of defending Mr. Bessent here because I don’t like the intervention that Bessent and Trump is doing any more than I liked it when Biden and his minions were doing it any more than Trump the first time, going back to Obama, the Bushes, whatever. I’m not trying to convince you of anything. I’m simply trying to get you to think and look at different perspectives. Now, a couple of big reasons on the map as to why Mr. Bessent has to do something, okay? We can argue about what he’s doing. He’s got to do something. Joe, if you would, pull up the sheet that shows the government budget and spending for me. What you’re going to find here is that, and kudos to Darius Dale of 42 Macro, he has been talking about this for a long, long time. And it’s this Ferguson’s Law, this economic history, Neil Ferguson. And he’s got this law that says, “Once a country, the superpower of the world, starts spending more on interest than defense, you’re basically starting the downfall of your empire.” And when you look at this 10-year, this is the deficit to GDP, okay?

Daniel Creech 26:05

Now, you can obviously see a big change here. Pre-COVID, so I’m talking 2016 to 2019, you’re at three moving higher to five percent deficit of GDP. So the amount, the gap between what you spend and what you take in versus your gross domestic product was hanging around three to four for a few years, jumped up. Drunken sailors landed and got absolutely party rockstar driven. Look at that, 14 and a half percent debt to GDP. You can make all excuses you want. 2020, not going to do that. Moving on, we’ve gone from 12, thank goodness we cut that in half, but we are hanging around six percent. Yes, I’m rounding up. Takeaway here is we are significantly higher than we were pre-COVID. And the reason this matters is because when you look at the spending, Joe, if you would pull up the spending, you have Social Security, Medicaid, interest, and then you have defense.

Daniel Creech 27:09

And when you look at these, if you’re following along here and looking at the categories, your Social Security and Medicare are essentially untouchable, all right? So you got 35, 37 percent of the budget right there that you can’t do anything. If you go give somebody a list and say, “Hey, change anything you want to on this list except for number one and number two and number three,” you understand the situation we’re in. Net interest, the interest on our debt alone, which kudos to us, had ourselves on the back 40 trillion. That can’t be easy. I don’t think it’s ever been done. So we got to give ourselves credit for that. We are the best at that. Health, Medicaid, all that, national defense is only going higher. And so Mr. Bessent, he didn’t create this whole problem, but he is in a serious problem. We, our government, is in a serious problem. Deficits to GDP of six percent, I understand we have an escalation and you can even say a war going on with Iran.

Daniel Creech 28:10

There’s another war going on with Ukraine and Russia. I understand that. Overall, this is considered a peaceful time versus warlike times in the past when a lot of these comparisons are made, okay? A lot of these guys say, “Oh, well, we had to do different things in World War I and World War II.” That’s nothing like what we’re seeing today. Not to shudder or ignore the horribleness that’s going on today, but that is not apples to apples. So that’s not serious. The deficit to GDP is extremely high, and the trend is the problem. That needs to be going low. Now, Mr. Bessent is on record for saying that he thinks this could be the low point in deficit to GDP, meaning this six percent number should be the high watermark. Next year, our government runs from October to October, should be lower than the 5.8 to 6 percent. Time will tell. Don’t hold your breath on that. Now, Mr. Bessent is increasing bond buybacks.

Daniel Creech 29:10

We already covered some of these details. The takeaway here is it is a signal that I have the markets back. I think this is a transition from the Fed running markets and basically helping everybody out or helping Wall Street feel good about themselves to the Treasury doing it. And this has caused some pushback from a lot of people, a lot of anti-Trumpers. I get it. And Mr. Bessent is guilty, as all politicians are, of doing the same thing they’ve accused their predecessors of doing. So Mr. Bessent was highly critical of Janet Yellen, former Treasury Secretary, of essentially not locking in longer-term bond rates with debt and funding government debt and deficits with short-term bills. Those bills, as a percentage of our total debt, have skyrocketed recently, say over the last 10 years, which means we need to refinance more and more debt, making an appetite for treasuries and pressure on yields. Okay. Now, Bessent has to do something. We understand that. You don’t have to agree with it, but you have to do something because if the market set interest rates, and I’m talking from their perspective, then interest rates would be obviously a lot higher.

Daniel Creech 30:20

Now, is that the end of the world? No, but it’s the sure as heck the end of a massive bull market. And it would cause a lot of headaches in the stock market, a lot of headaches in all interest-related products. Think mortgages and every business financing, expansion, all that kind of thing. And plus, it would force people to go into basically a recession, which is not allowed anymore. And it’s so politically unfavorable that administrations on both sides are showing you they will essentially do anything to avoid one, okay? Now, Stanley Druckenmiller, Druckenmiller, the greatest, in my opinion, hedge fund manager, and used to work with Mr. Bessent in reports. It’s not hard to find. They know each other. Druckenmiller was a mentor to Mr. Bessent. And now, Stanley comes out with this op-ed in the Wall Street Journal, and he starts saying how, “Hey, this is a bad move.

Daniel Creech 31:25

This is not a good idea for the Treasury to intervene into the bond market.” And his title is, “Let the Bond Market Speak.” And he makes some great points here as he does. This guy’s a freaking billionaire investor. I mean, he’s going to make good points. He’s essentially saying, “Listen, the bond market did not blow up. There’s no failed auctions. There’s no sky-high blow-off in yields. There’s no craziness or broken model here. Yes, yields have been steadily rising. Yes, you look at long-term yields, they’re highest since 2007. We’ve all seen those headlines.” But what Mr. Druckenmiller is saying is by essentially going down this road of tinkering and tampering with the bond market, you’re just kicking the can down the road. You’re not going to fix anything. Spending, debt, deficits, that’s the real problem here. And this isn’t doing anything about it. And of course, he is 100% correct. I mean, he is 100% correct. He’s just a billionaire. And so when he says it, you’re going to listen to it as you should more than if I say it.

Daniel Creech 32:28

He also made some points about the government stepping in and trying to control yields and such. And the cost is going to be much worse, especially down the road. And another great point he made was how temporary government programs are never temporary. So one point he makes in his piece, we’ve talked about this before, is yield management as yield curve control. So we’ve already done this. A lot of people like to argue with me, and that’s fine. I was at a cigar lounge talking about this, and people were calling me a fool until they got their Google machines out. From 1942 to 1951, the Federal Reserve implemented yield curve control. Essentially, you just cap yield and say, “Hey, this yield can’t go over XYZ.” Now, the justification here was because we were coming out of World War II and we were help financing everything and all that. Forget the reason why for a moment. Not that it’s not important. It’s not important for this conversation. Yield curve control has already been implemented here.

Daniel Creech 33:31

What Mr. Bessent is doing is not yield curve control, but it’s rhyming with it. And it’s tampering with the bond yields. And it is signaling that he is willing to do more or essentially whatever it takes to not have a yield blowout, a market blow up before the midterms. And oh, by the way, he’s got to handle higher oil prices and inflation with midterm election coming up. So Druckenmiller explains the yield curve control, how the $4 billion that Mr. Bessent is raising from $2 billion to at least $4 billion is not a big drop in the bucket compared to our total debt. That’s all fine. The real takeaway here is, and what I want to ask you guys to think about, unless there has been a big blow up, why? And I was bugging Joe about this earlier. Joe, you have a former mentee, mentor to mentee. They both know Kevin Warsh very well.

Daniel Creech 34:33

Warsh, Fed Chair, stepped away from an advisory role at Druckenmiller’s family office when he took over as chair of the Fed. Meets with Bessent. They know each other. They obviously meet through their working relationship now. Are we to believe that Stanley, come out of the blue, took Bessent and Warsh by surprise and published an op-ed bashing his policies? I’m telling you, you don’t need Sherlock Holmes here, but something is going on that I admit, I’m not seeing just yet, but something is going on here that I don’t feel like this is the whole story. And we’ll have to see how this plays out. Mr. Bessent is in a tough spot, but that’s the position he’s chosen. That’s fine. He is going to continue tinkering with stuff. And I appreciate Druckenmiller calling him out. I have to ask and share the perspective of it. It’s not crazy to me to think that the smartest guys that Bessent is warning of, these hedge funds essentially playing around and messing around in the long end of the bond market, making money.

Daniel Creech 35:42

Druckenmiller has got to be one of those guys. He’s the smartest money maker there is. He broke the Florida Bank of England. You don’t think he’s going to try to make money in our own bond market? Maybe that position is going against him. Maybe not. Maybe I’m totally off here. I could be completely wrong. But if he’s got a position and it’s going against him, that’s not a negative thing for him to write an op-ed about. And it would justify this. Plus, he is one of the greatest investors ever. I love that he opines and puts stuff out there about what he’s thinking because I think it helps all of us. Now, that’s one aspect of this op-ed that Mr. Druckenmiller wrote. The next shows you how pathetic we are in a society, in a sense. Joe, instead of all the focus being on Druckenmiller versus Bessent and, “Hey, they can agree to disagree and what’s going on,” do you know what is taking over the conversation about this?

Daniel Creech 36:43

It’s the fact that Stanley used AI to write the piece. And evidently, this was found out because people were noticing and said, “Oh, this looks like AI. There’s programs out there that you can essentially screen for.” Joe, help me out here. They basically scan it and see if AI has been used. Over my head on how it does it, but I believe, “Okay, hey, teachers use this for plagiarism and your school homework.” So there’s products out there that can say, “Hey, was this AI or not?” And that turned out to be yes. They asked Mr. Druckenmiller about it, and he says, “Oh, yeah, absolutely. I use it. I’m proud of it.” He calls out his age. He’s in his 70s. He says, “Listen, we all use it in my office.” And he makes some comments about he’s not an English major. He’s an economics guy. And you could tell he was kind of blown off and not seeing the big deal. And I just want to ask you guys, in the world we live in, do you not assume?

Daniel Creech 37:46

And I’m not trying to be rude here. So if I come across that way, that is not my heart. But obviously, I look at headlines and research and the internet and all that kind of stuff all day. I know that some of you have real jobs, real responsibilities, so you don’t take in the information that I do. But are you not skeptical? Anytime you see something on the internet or written or video, are we not at the point where you’re at least skeptical that AI is involved? I would genuinely like to know that. Daniel@curzioresearch.com. Now, we use it. Frank has talked about that. I think you should use it. However, I do understand the perspective that people would like a heads up. You shouldn’t have to just assume it. And so I’ve seen some articles and some comments online that I think are decent that say, “Hey, if you’re going to use AI to write the piece, you should just say, ‘Hey, AI wrote this piece.’ Or should you say, ‘AI, help me write this piece.'” And through different, I don’t know if it’s CoinDesk or Coin Telegraph, but I check a lot of different websites across a lot of different things.

Daniel Creech 38:47

And I have noticed that some of them, through different publications, do put a little disclaimer and say, “Hey, Briefing.com that we use does this as well.” It’ll give a note that says something to the effect of, “AI was used to summarize this,” or, “AI was used for research in this.” And again, I’m not saying I’m correct. I’m saying I would kind of go down the road that that is assumed or the majority or a lot of people would kind of already assume that. But I’m not saying that’s right. I would genuinely like to know. My advice to you guys is believe what’s that saying? Believe nothing you hear, half of what you see, and then you are on your way to being right. I would definitely assume that AI is being used in everything. And now some people came out, especially on CNBC and Wall Street Journal, saying, “Well, AI should be illegal or off-limits to write, but just used for research.” I don’t care where you come down on that. I just love the fact, and I like to laugh at the fact that I’m embarrassed of how some people are A, so surprised and act like, “Oh, well, Joe, this guy might be a rags-to-riches billionaire investor, but I don’t want to listen to him because he uses AI now.” A guy using the latest greatest technology to make his point better and faster to more people is not a good idea.

Daniel Creech 40:09

Come on, people. We are not this low. You can worry about AI taking over everything and ruining jobs and all that. I think that’s totally overblown. You’re still going to be able to dictate great writing. I don’t think it’s going to get rid of the humans. I could be wrong. I know some people are rooting for that, but that’s not my big thing. Let’s switch to all right, we’ll get off of we’re going to come back to this a little bit here. But two major winners from Mr. Bessent’s intervention and signaling in the bond market are clearly gold and Bitcoin. And Joe, if you pull up which one of you, you can pull up whichever one you went to first, gold or Bitcoin. And you can clearly look at the charts here. And hey, you can say, “Hey, this is a violent move. It’s short selling. It’s short-lived or short covering,” excuse me. Some of that is true on the Bitcoin side. But with gold and Bitcoin both, gold here, charts beautiful.

Daniel Creech 41:10

It set a new all-time high, has sold off, went sideways for a short time, and now we’ll see if this level holds or where it goes from here. Everything I said about the deficits to GDP, the spending, and all this kind of stuff that we’ve been hammering, in my opinion, gold trades higher when investors get nervous, either correctly or not correctly, about the world financial system and/or world financial players. So we are the cleanest, dirtiest shirt as the US World Reserve currency. However, and a lot of doomsday dollar people out there, if you believe the World Reserve currency is going down as far as global transactions, holdings, as far as global reserves, and all that, you would be correct. Those are trending lower. However, it is still the big dog and king dollar. Now, if the United States were to lose that because of its excess spending, and it will at some point, the question then is, who benefits and where does the money go?

Daniel Creech 42:24

Well, pardon me for being so short and a smart-aleck on this, but if you think that we’re going to use Russia’s currency, China’s currency, anybody in the Middle East’s currency, the way we’re using the US dollar right now, I completely agree to disagree. Therefore, it’s not like the past where we went from Spain to the Dutch to British pounds to the dollar and then to who else country. I think that’s going to be over a very long term, don’t get me wrong. I think that’s going to be a pie chart of different commodities, mainly gold. You can throw Bitcoin in there, oil, maybe even silver. But inflationary times make real assets go higher. We are obviously in an inflationary time. Okay. The gold price rising is not because of any more fiscal responsibility or any new news. It is simply, in my opinion, the fact that Bessent is going to do something and we are no longer going to lie and we are going to actually say to the market, “We are going to tinker with stuff.

Daniel Creech 43:33

We are pulling levers. We are pushing buttons. We are going to do whatever it takes.” It’s not going to work in the sense of it’s going to fix the problems, but it could work on keeping a lid on bond yields and keep pushing asset prices, i.e., stocks up. But that is going to be a huge tailwind for gold, okay? Because gold is simply sniffing out and going, “Hey, these guys are just going to do more of the same tricks, call it different names. Bessent, he looks good enough. He’s a smart guy. He’s a tall guy. He dresses well. He’s well-spoken. Why not? You can’t bet against him. He’s got all the tools. His big toolkit he likes to brag about.” Okay. Now, going to so gold is number one, and you can look at gold and also gold miners. I had the timing horribly wrong on AEM, Agnico Mines. That is absolutely one of the best and most well-run gold companies out there. And if you listen to the CEO, which his name escapes me right now, I apologize, but it’s a company you should just buy and hold. Switching to Bitcoin quickly.

Daniel Creech 44:36

This thing has caught a bid. And really, outside of the same reasons in gold and there were some short covering we talked about in Bitcoin that helped push that price a lot higher. Also, inflows are showing momentum. Joe, if you would pull look at that. What is that? A month? Gosh. If you could pull up so-so value and just highlight the billions of dollars flowing into crypto since that spike in the chart that Joe just showed here. Great website. You can see the daily. They do it on a bar chart or the daily tabs there. But you can scroll down as much as you want. Yes, there’s been a few out days. Obviously, the red numbers there are showing outflows. So August has had four. From August 5th to yesterday, excuse me, there’s only been four days of outflows, and then every other day has been massive inflows. And so that is one thing to help with momentum. On the Bitcoin side, benefiting a lot similar as gold and such because you have a scarcity, you have limited value, etc.

Daniel Creech 45:41

We’ve pounded that drum enough. One other thing that I didn’t think got the attention it deserves to help with the Bitcoin rally is Michael Selig’s comments. And he is the 16th chairman. I always love when they put the number in front of them when you’re reading about them. I don’t know if that is impressive or not, but he is the 16th chairman of the CFTC. So that is Commodity Futures Trading Commission. And you got this tinkering from Bessent, okay? You got scariness, nervousness about the dollar being a weak dollar and yields and all this kind of thing. And Bitcoin catches a bid. Well, President Trump met with the crypto community at the White House. That obviously helped crypto catch a bid. He also pushed for more passage of the Clarity Act, which has now a September 15th vote. No doubt the market fronts run at that. So prepare for a buy the rumor, sell the news event as we get closer to this 15th of September.

Daniel Creech 46:45

But Mr. Selig, and I apologize if I’m butchering that, he also made comments from the CFTC’s point. And he said, and I’m paraphrasing, but he said, “Listen, President Trump has promised regulation and more rules for crypto for the community and businesses and individuals and customers.” And this gentleman said, “Even if we do not pass the Clarity Act,” and just because it wouldn’t pass on September 15th, if it doesn’t, doesn’t mean it couldn’t eventually pass. He was saying, “If it doesn’t pass, we are taking steps and they are making rules and regulations and suggestions for the industry or companies to be able to raise capital and companies to transact and do everything that essentially they need the Clarity Act for.” I think that that is much more of a reason than is getting credit for on the latest Bitcoin bull or excuse me, the market move.

Daniel Creech 47:47

Now, the positive thing is that gives the bulls in a short time frame, let’s say to the end of the Trump administration, which would be what, 2032? Kidding. Kidding. I’ll give you to the end of the Trump presidency because the good news is if the Clarity Act doesn’t pass, the CFTC can put rules and regulations in place for groups and people to follow through Trump’s presidency. The big negative side, if you do it this way without legislation, is that the next party or somebody that disagrees can come in and just wipe all that away very easily and make their own rules, regulations, and all that kind of stuff. So it would be better if you had the House and Senate pass legislation. But I think the market is taking and listening to this gentleman and saying, “Hey, we still have a lot of momentum and room to run, and you can build a lot and do a lot of you can make up a lot of ground in two years, especially with innovation and capitalists putting their resources and talents to work.” So going forward, pay attention to this Mr.

Daniel Creech 48:57

Selig because he is going to make more comments, in my opinion, and I think they are going to be market moving, and I think it’s going to be very bullish for the crypto, i.e., Bitcoin space. Two, getting back to Mr. Drunkenmiller here in a way. When I went through his 13F, Joe, pull up two stocks here for me, please, because I’m going to give you two trading ideas around the Bitcoin momentum if you want to play it this way. When you look through the 13F, Mr. Drunkenmiller had shares of PURR. So when you pull up PURR, it’s Hyperliquid Strategies. It’s down about 3.5% today. You can clearly see it has participated in this recent run-up. And what this company does is this is a digital what this company does is it uses the hype coin or the Hyperliquid coin, which is HYPE. I don’t know if you can switch to CoinMarketCap, but think of strategy using Bitcoin as a digital treasury asset.

Daniel Creech 50:06

PURR does the same thing, only it holds, excuse me, the hype digital asset. Okay? Now, hype, as you can see here the chart, thank you for that, that has been on a tear. And this is in the decentralized finance. This is a blockchain, and this is kind of your all finance blockchain thing. So financers use this. You can take out loans. You can borrow against it, collateralize, trade, transact, move. It is a blockchain layer specifically for the financial sector. And it is gaining a lot of popularity. During Trump’s press conference with the crypto community just last week, he even made the comment like Hyperliquid’s coming to the US. Galaxy is a big play on Hyperliquid. Hopefully, the success of this company can help Galaxy shares as well. I’ve been a big fan about that, even though it’s frustrating as can be. But this is a now, as you can tell from the chart, this is going to be a very volatile stock.

Daniel Creech 51:10

So if you decide to play in this, just keep your wits about you. Know what you’re getting into beforehand. So position sizing is really key, and then being able to stomach the volatility. But it is a way to play. If you want to look at the hype coin, I believe that’s number nine on top. If you just go to the main page, Joe, is hype number nine? Look at that. Memory serves me correct. So that’s one way to play that. The other one is Bitdeer, and that is BTDR. Now, both of these stocks are found in Drunkenmiller’s 13F. So that’s why I’m kind of attempting to tie all this together. This is a play that you guys are all familiar with because Frank has been exactly correct on this. And we’ve been talking about companies that do Bitcoin mining and provide compute and power for AI data centers. These guys are based out of Singapore, and they have projects for Bitcoin mining but for AI data centers all over the world.

Daniel Creech 52:12

So they have some in Norway. They have some in the US. It’s scattered throughout. This stock has not participated as much as the other ones, obviously. And this is on my radar. Why? Well, because Drunkenmiller has it. And now, take the 13Fs with a grain of salt. He could have technically sold this in that period between the end of the quarter and the filing. Take all that with a grain of salt. However, these guys just came out with news this morning about another AI compute deal and the revenue. Again, you guys are familiar with this story. It’s like DigiPowerX. Fantastic opportunity. They build the shell for the hyperscalers and AI people that need it, and then they rent out the power and basically serve as a wonderful, wonderful landlord for one of the most power is one of the most sought-after components right now. And so these guys continue to sign deals. I love seeing it pull back on more positive news. That tells me this thing is ready to spring up. However, this company needs the market to get back in momentum.

Daniel Creech 53:14

It needs to get back into the AI kind of not craze as in not craze as in like over the top or reckless, but get the momentum back. And a lot of that hinges on Nvidia’s Jensen’s comments tonight. But Bitdeer, I love this as a play, especially as it’s sold off. So if you want to take a small position in this and play this through the crypto momentum, I think that’s a great idea. Also, keep your eye on PURR for all you traders out there because this will give you this will give you reason to celebrate and drink heavily because if you get this wrong, it’s going to hurt. So just keep that in mind. All right. Love me, hate me, don’t ignore me. Daniel@curzioresearch.com. That’s daniel@curzioresearch.com. Do not worry. The one and only Frank will be back mañana. We will be right here breaking down market moving news. Stay tuned. Cheers. 

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