Why Apple Might Benefit More From AI Than AI Companies Will: Bits + Bips

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Welcome back.

As always, I'm your host, Austin Campbell, high scholar of Zero Knowledge Group, here with my co-hosts, Ram Aluwalia, master of Wealth, the leader of Lumida, and Chris Perkins, CEO of Chris, it's Still 250 Digital Asset Management, correct?

Yes, sir.

Yes, sir.

All right, cool.

Today, we're gonna start with the topic that keeps on giving, which is Iran.

The blockade, Yuan myths, and, well, everything else.

So, today, the blockade went live, and the exit ramps are already getting exciting.

The US naval blockade on Iranian ports took effect April 13th at 1:0:00 a.m.

Eastern after peace talks in Islamabad collapsed over the weekend, according to NPR.

As a reminder, rough estimates, 12 million barrels per day normally transit the strait, and now that is going to roughly zero.

Trump warned Iran's fast attack ships, if any ships come anywhere close to our blockade, they will be immediately eliminated.

And Fortune has said this is a big task and a big gamble.

So, the Saudi and the UAE. are working to bypass these corridors.

The Saudi East-West pipeline, which is 7 million per day capacity, is rerouting crude.

The UAE has their own pipeline.

Both corridors are live since mid-March at full capacity, but it does not entirely make up for the strait, and Iran has been targeting both of these exit ramps.

Um, this puts I'm gonna start with this before we get into the details there, which is, what do we make for now of, call it the military and tactical feasibility of this blockade and what's going on in that region, Chris?

Yeah.

Thanks, Austin.

Uh, really interesting things happening.

So, first, we had in the last week, we had the attempts at the talks, they broke down.

Uh, they broke down over nuclear, what, uh, you know, the uranium, we wanted to recover the uranium, we want to make sure they wouldn't enrich.

Totally understood that.

Um, that seemed reasonable from my perspective, but it also seems like the Iranians did not present a uniform front.

Um, but anyway, so, after that, what I'm glad to see is that we haven't destroyed civilizations.

Uh, that's, that's a good thing.

I think, um, And what the administration's now doing is they're really trying to take, put, put a lot of pressure on the Iranians.

I mean, I don't think it was made a lot of sense to have um the Strait of Hormuz.

Look, at the end of the day, we cannot have the Iranians control the Strait of Hormuz.

To me, that, that, that's an international requirement.

We need freedom of navigation through that strait.

You saw the Singaporeans talking about the Strait of Malacca, which is another choke point.

And they're like, we cannot have this.

Straits must be open.

We need freedom of navigation.

And so, by closing the strait via a US naval blockade, you know, it brings into question, you know, who is controlling the strait?

Because the Iranians were.

Um, they were charging commerce as it was going through.

They were making money, they were still able to fund, you know, their illicit activities.

And we've talked about this on the show, using Bitcoin or, or the yuan.

Um, but now the US has said, you know what?

No.

Like, you're not gonna fund your activities.

You're not gonna control the strait.

We're gonna shut this thing down.

We're gonna, we're gonna, we're gonna cut your liquidity, we're gonna cut your exports.

And it, it, I thought, I think, though, it will, it will result in near-term pain.

The Saudis rock up and start pumping oil, um, to the east-west corridor, um, which it, it hasn't, and, and the, and the, and the Emiratis are doing the same.

We, we're not at full capacity, but we are able to meet some of the global demand through that.

Meanwhile, I know, if you saw over the last week, you have tankers rushing to the US to buy US oil.

The markets are hanging in there.

The markets are definitely hanging in there.

Um, so, I think, where do we go from here is the big question.

Um, this will put incremental pressure on the regime.

We still haven't seen that strongman pop up.

It looks like to, uh, General Marx's point, weeks ago, this is not happening overnight.

But the pressure is now increasing.

Um, you know, generally, when this thing, these things kind of happen, that's the people that hurt the most.

Uh, but hopefully, this will get people back to the table.

Um, you know, I didn't read as well, like, like the negotiations are ongoing.

Then when you look at markets, it feels like it's still really uncertain.

Like, it, it, you know, it's a very difficult market to trade.

You still have this pressure stepping on, on crypto, keeping it down as an asset class.

But it feels like we're more towards the middle or the end, not necessarily in the beginning.

So I'm hopeful that it, and it feels like the markets at least are seeing a bit of stasis here.

Um, and, and they've responded pretty, pretty well in the last couple of days.

Um, so I don't know, I'd love to get your take.

Wanna hear, Ron, where you think the situation is, uh, you know, Ron, you've been, you've been very critical of the regime.

Yeah, well, look, uh, I think we lacked a little a coherent plan here, burned down 10 years of Tomahawks and interceptors and all the rest, but I do think this move by CENCOM over the weekend was just clever, if not brilliant.

It was exquisitely timed, moving these destroyers to the Strait of Hormuz during these negotiations when the IRGC can't even convene to formulate a policy.

And to your point, there are factions within that.

There's a part of the regime that doesn't like the fact that a part of the IRGC shook hands with JD Vance.

That's right.

Like, so the CEO is, is, was very clever here and then.

They stuck to the ceasefire when the destroyer was harassed by the patrol boat.

They did not escalate.

And last Thursday, Hexteth in his morning remarks gave what was a very clear and decisive final, hey, look, we're done, we're done.

We are wrapped up here.

Trump and JD Vance was also consistent with that messaging.

And then they followed up with action and not escalating at that very critical moment.

So, if you take a step back, Iran was able to close the trader Hormuz through what I call the Kaiser Soze maneuver.

If you guys have seen usual suspects, the guy is like everywhere and nowhere, like, is he real?

Is he not real?

Like, Kaiser Soze had closed the trader.

Are there minds there?

Are they not mines?

Are there rockets?

Are there guys in the trees?

We don't know.

It's Kaiser Soze controls the trade.

What CEO just did to introduce another meme was that I am the captain, me now.

Like this is my straight now.

So they're creating clarity, and they're doing that control, and they said, look, we're not challenging you, this is a blockade, and now they put the IRGC in a vice.

It's a damned if you do, damned if you don't vice.

They have two choices, they can escalate.

Right now, they've enjoyed calm and peace for the last 2 weeks.

Their cortisol levels have dropped.

They've seen their families.

They're starting to formulate a picture of what the future might look like.

They're glad that they don't have bombs raining down their head.

They appreciate that, OK?

They see that, they say, OK, look, we can preserve this and build off of this, and go back to issuing menacing threats.

Or we can contest and strike back and escalate.

And this is the best move CENTCO could have done.

You can't control the response of the IRGC, but you can shape the incentives.

And they also said they would interdict tankers going to China.

Cause if you're China, as I said last week, I think you're loving this.

You're Putin, like China's trying to broker peace deals now.

Putin's brokering peace deals.

It's nonsense.

It's chaos.

They're, they're soaking it up.

But now, if you interdict those tankers, China has an incentive to get this resolved in a constructive way.

So, I thought the move by CEO this weekend was.

Extraordinarily clever.

The ball is now in the IRGC court.

The IRGC chose not to escalate at the timetable when CENTCOM said they would enforce the blockade too.

So things are looking pretty constructive.

I think the bottoms in for markets overall.

That doesn't mean you don't get a pullback, especially going to Optex later this week.

But I think overall, I think you've, you've got a bottom.

There's so much hedging, so much shorting taking place.

There's not many people left to sell, and I think they're, there are great opportunities out there.

So, I agree with Ron on the market action here.

The fact that this occurred, it seems to have been, Ron, we'll call it relatively well-received by the market, right?

That is to say, this blockade didn't happen, the negotiations didn't fall apart, and we didn't immediately go straight back to hell in the market.

We've kind of been like, all right, let's see what happens as a reaction.

And I agree that what you just said seems to be the key, which is, we're out of the escalating spiral of call it kinetic intensification here with this move.

We've instead now gotten into call it like long-term economic negotiation, because if the Iranians can close the Strait of Hormuz, that's a threat.

But if the United States can close the Strait of Hormuz, that is also a threat.

And that means now the Iranians have to think about their own economics and ecosystem here.

If we just maintain a blockade for a year and don't do anything else, they have a huge problem.

Iran has significant inflation at home too.

They have to address that.

If you don't have a functioning economy, how do you, how do you contest the military?

Yeah, this, this, Chris was talking about this on a previous episode, but this moves the war for both sides to a different layer of the strategic level of war, right?

Because now the Iranians have existential economic risk for an indeterminate amount of time into the future.

And Ram, as you noted, either they end up having to attack the force to try to break the blockade, which looks even worse if they fail, or you've got to find a negotiated solution to get out of this.

It's also interesting to me to see the pressure around this vis a vis their regional, like neighbors, because after they launched rockets at everybody, you know what we're not seeing for the Strait of Hormuz blockade by the US is criticism from the other regional powers like the Saudis are fine, the Turks are fine, like everybody's just kind of like, I mean, yeah, guys.

The Saudis want more conflict, it looks like.

Yeah, if anything, they want escalation allegedly they want to continue, and one would reason that Israel's incentives are also in that direction too, although.

Both seem to be following US direction.

Yeah, we can go home.

They can't go home.

This is their neighborhood.

They got to live there.

And so they're, the, the status quo is just untenable.

50 years of aggression, Iranian aggression has to stop.

So this, this is an opportunity.

Um, one thing I do want to talk about is China.

Um, as you see, I think this is really stepping up the pressure on China, not only on the economic side, if we are now controlling, effectively controlling the strait.

Um, but there were reports that the Chinese were assisting the Iranians potentially with intelligence or even some MPAs weapons.

Uh, Trump's response to that was pretty profound.

He's just like, I catch you doing it, 50% tariff, see how that goes.

And so, I think that China is gonna be on, it, it's gonna play a crucial role to kind of navigate out of this thing because they're gonna want this to stop.

They need those, they need the natural resources.

They need the oil.

Um, so, Trump was supposed to have a, uh, meeting with Xi Jinping, uh, that was canceled, that, that made them furious.

I think it's gonna be rescheduled for May.

All eyes are on that meeting if it happens.

And it's gonna be interesting to see the role China plays going forward.

That they're a reluctant player on the international stage.

That, that, that's, that's not in their nature.

They focus generally internally, domestically, but this is really forcing them to uh be, be on the main stage.

It's gonna be interesting to see how they respond.

Not in an easy place, but they can come out of this in a, in a very good way, um, if they play their cards right.

So, I'm watching, I'm watching China.

I think not just China.

This kind of creates, what's the right way to say this, a pro-peace contingent in a lot of Asia, because Pakistan has every incentive to get this thing to end.

India, quite frankly, has many incentives for it to end.

Japan, Korea.

Everybody wants things to calm back down.

And Chris, as you were noting, uh, Singapore, who I think keenly understands these geopolitical dynamics because they are caught between many large, like powers globally. is making the point that what we need to get back to is free transit of goods, free trade without, call it undue tariffs or piracy or attacks on people.

And they were not saying that.

I like reading their comments.

I think.

In a biased way, they were simply saying like, hey, everybody ultimately is gonna need to find a way to live together here, if this is going to work properly.

So what I'm curious to watch. is how does this unfold for the peace process.

But, you know, Rob, you make the point all the time, watching the market is like a live poll in many ways of sentiment and how the world is thinking about things.

We're not seeing huge distress in the US and we're not seeing huge distress in China or Europe on the back of this right now.

Is your take that markets expect there to be a pathway to peace or at least de-escalation here?

I'd say there's so many bargains in the market that it's hard for these asset prices to go down.

We saw software get clobbered three days in a row, looked like capitulation selling.

Microsoft's up quite a bit today.

The AI apocalypse trade has kind of spent too much time here.

Accenture is up 6 points.

We own both these names, by the way, and quite a few other names like there's, this compelling value.

You know, what's interesting about the last 6 weeks is You had a 9% correction in the S&P, but it's very pronounced in certain categories.

So those categories that sold off the most is where I'm focusing my buys and opportunities and the categories that Held up the most like energy, materials, those and utilities, those should sell off from here as the risk fear premium gives way and people gain more confidence.

So I think that's what's happening.

People are offsides too.

They're over hedge, there's too much short interest.

Uh, and so the bias should be to get long.

So I think dips will get bought.

I do think you will see more red days this week too.

But the bias should be to get long and focus on those areas that are highly dislocated, including categories that are sensitive to oil and sold off because of oil.

If you look at like, like the homebuilder category or the airline category, both very sensitive to energy costs.

They stopped going down despite increased kind of lengthening of the conflict of the conflict.

So it seems to me that a lot of bad news was priced in.

Now, of course, if kinetics come back, you can head back down.

That's of course the case, right?

We're dealing with a lot of land of probabilities here.

Uh, but you've got a couple of days of peace here, and then if you can add another day to that, another day of that, that becomes the new norm.

How about Bitcoin?

That's held up pretty well through all this.

Yeah, it has, uh, I'll add on the Bitcoin front, the other thing that, you know, talking to the bottoms here, um, CME volumes, Bitcoin volumes and bases collapsed.

Those things work together.

Um, and that's a bottom signal as well.

Particularly in this institutional market where a lot of institutions are nervous about trading just the volatility of the asset class.

What they wanna do is they wanna get long.

The spot, the ETF or DT and sell the future.

If sentiment starts improving and people think positively about the future, the future price will rise.

That's when the, the basis, that's when we're in something called contango, where futures prices are higher than spot.

Um, that's when it gets interesting.

But that basis has collapsed.

And so you've seen futures, you know, come down, like the volumes in the open interest have come down on the CME.

That's another indicator to watch.

If that basis starts creeping up, very positive signal uh for the trajectory because then institutions will start taking advantage of it again.

I think Bitcoin's got a bottom.

It's been acting well.

It's taken a lot of negative news.

There's obviously dependency on micro strategy and their capital issuance machine.

Keep an eye on that like every day, every week.

I, I think hyperliquid could be a winner this cycle, by the way, that's my exposure to crypto primarily today.

I think they're taking share from incumbents, they've got good execution, they got the 24/7 trading.

Um, look, you got time this category well though, like the, the, the struggle with this podcast is like the day matters.

Like I wouldn't buy it today.

I would have bought it Friday and maybe, maybe hopefully Thursday I'd buy it.

So it's one of those things you really have to, the volatility is, is high on this asset.

So, you gotta, you gotta time things well.

Buy on red days.

Yeah, I mean, the hyperliquid has been the manifestation of 24/7 markets.

Um, their ability to go live with HIP 3, you know, and people turn to the, to, like, you know, what did I do this weekend?

I, I, when the talks broke down, I look at what the S&P contract was doing.

So, you, you can, it's unlocked 24/7 markets, um, for the, really, for the first time.

Um, crypto prices have shown that, but now we have real-world asset price discovery on the weekends.

Um, and then, of course, the other tailwinds, you know, sadly for them was what happened with Drift.

Um, and so, I know that security is at the forefront.

That's the other thing that we're gonna have to talk about today, I know is around some of the security issues that Defi are facing.

But I think you're right, Ron.

Um, very, very important to see that price discovery from teams like Hyperliquid.

So Speaking of things that are experiencing some price discovery and still causing some degree of fear in the market, we also had a large, uh, drop on Mythos.

Was it threat or is this just marketing?

So, Anthropic gave a preview of Mythos, their new model.

Um, Which has been autonomously finding bugs and things like open BSD, um, some MPEG vulnerabilities, and both of those have been missed, quite frankly, for decades.

Um, They found 181 Firefox JavaScript exploits versus just 2 for Opus 4.6.

This is a significant increase in, call it capability for AI to find various bugs, and they are continuing to manifest.

Now, it's not publicly released.

It's deployed via a thing called Project Glasswing to quote critical industry partners and open-source developers, but There are some critics.

So Ile Research said several vulnerabilities could have been detected by openly available models.

Fortune said the era of AI-driven hacking is already here.

These capabilities are not new.

They're just slightly better packaged.

Um, and that Anthropic publicizes the threat to justify controlled rollout and build a competitive moat from Axios.

So, I'm curious what you guys are making of this thing, um, especially given that Things happened like Besson convening some of the major financial players in the United States to talk about this.

Is this a real threat?

Will it cause problems?

Will it have impacts on some of these entities and their stocks?

I, I think this is incredible marketing.

For anthropic.

It is an extraordinary market.

I read about that.

I Best in convening these CEOs of financial reminded me of like Y2K.

For those that remember, which was a big nothing burger, spent a lot of money and nothing really happened.

It's incredible marketing when, when Claude released Mythos or announced.

The release of it, even that's disputed by it.

Some say it doesn't even exist.

Claude, back to Kaiser Sose, Mythos is a Kaiser Sose.

They're, they're dealing in mythology.

They got this legendary concept.

And they're uh selling it from fear, right?

This is a, it's, it's a masterful marketing that that Claude has done.

When they announced that or it was leaked, cybersecurity stocks went into a tailspin.

Every time Cloud releases a product, these stocks go into a tailspin.

I think again, that's probably behind us now.

I don't know how many products they can possibly release every week.

So 12 days of anthropic, uh, but I think it's mostly marketing.

This is, uh, it's just a lot of hype.

I, I don't think that that many security vulnerabilities are waiting to be zero-day exploited by, by AI.

I don't know.

I, I feel a little bit different.

I feel like um you can't ignore the threat because living in crypto every day, um, you know, one vulnerability could cost you.

Tens, hundreds of millions of dollars.

That said, most of the threats we've seen in crypto are social engineering.

Um, and so that's something to be aware of.

But if, if it is true, um, to me, it's not just a threat, it's an opportunity.

You have to look at it through both lenses.

So, what it tells me is that as a country, we need to accelerate AI.

We need to accelerate crypto because The, as this technology gets better, I would rather corral it, use it to fix our vulnerabilities because as much as they can discover vulnerabilities, AI can also fix vulnerabilities.

And so, I don't know, I'm not aware of any major crypto foundation that was invited to the White House if this was such a threat.

I would expect them to be at the table in the near future.

Uh, but like, we need to embrace these tools.

In a major way, uh, across every single industry, from, not only from an, just to be scared, but to fix the threats that exist.

And there are plenty of threats across DeFi.

We get hacked all the time.

We need to be better.

And so, like, I think this is a humongous opportunity, not just a threat.

They, they want to win back their DOD contract which they lost to open.

This is what this is all about.

It's pretty if I could go long anthropic and short open AI, I think they're both bubbles and both overvalued, but if I could get market neutral on long clawed, long anthropic short open AI, I think we do really well.

Claude is eating open AI's lunch, and they did it because they focused on the enterprise customer.

They had no distractions.

No, bring the guy from Apple, you know, John Ivy, build glasses, build a new hardware form factor, try to compete with Nvidia.

Let's do a fad.

Let's straddle across different customers.

So it's, you know, the execution is incredibly impressive.

What's happening now though is that the demand for token consumption is so high that the throttling usage.

And the quality of output just isn't as strong as it was even two weeks ago.

Like the product market fit is there, but can you charge for value and capture that value now?

That's gonna be the question.

If they can.

Then that's great for semis and a lot of other categories out there if they can't capture that value, and it's really VC subsidizing customer consumption.

Then we're going to have, you know, some issues around the AI trade.

So you're not going to the Worldcoin event on Friday?

Uh, I am in Puerto Rico, I think, so I, I don't have to make that choice, but I, so I will say, Rob, I think you're hitting on something important that we've talked around on the pod previously, which is, as you look at the AI trade.

In addition to the value capture, like, what is the sustainable pricing model?

Like, if this is one of those businesses where to capture a dollar of customer revenue, I've got to spend 150 cents, these companies have a problem in the long run.

And As you look at what's happening with, call it open AI, anthropic, to some extent, Gemini, like throwing the ball back and forth between each other over time.

I think a lot of the competitive advantage is gonna come down to cost structure as people work on things because exactly as you said, OpenAI lost market share to anthropic.

And now Anthropic is throttling people because the math is not working for them as they're trying to grow, and so on and so forth.

And you saw Gemini trying to use totally different chips to train.

And I think what we're seeing here is the competitive arms race is accruing ultimately to the benefit of the consumer.

Like, I still don't remain totally certain that these companies aren't incinerating huge amounts of Capex that they will never get back.

And that the end value will ultimately be in the hands of the consumers.

So I know we've talked about this before, but hilariously, the name I remain the longest in terms of benefiting from AI is Apple, right, because they're just gonna use somebody else's and sell it, and they've got all the devices, so you're gonna have to play by their terms.

Well, look at Google and Meta.

These are ad businesses, and they charge $0 for their products.

So you've got a price cap.

And Google also has an enterprise focus too, so it's a, it's a tough spot.

To be in, but you know, anthropics got the attention.

So, on the note of building for consumers, like I've got a friend of mine who's in the creative space, and one of the hardest things to get people to switch out of is web browsers.

Like, I don't know if anybody's particularly familiar with that market, but I would say most modern web browsers are like, Riddled with security vulnerabilities over time and do all sorts of user data tracking, and there are better options like Brave and Opera, and people just won't use them because the switching cost is too high in many cases, but AI has her using the perplexity browser now.

So to me, if you're building for consumers in the right way, exactly as you were saying, it's like the distribution and consumer capture. is where the value is gonna be.

If you're competing purely on capabilities, I feel like, are you in this forever escalating arms race where you're getting revenue, but your costs scale even faster?

All right, yeah, we saw that with fiber optics in the dot-com era, right?

I mean we had uh what evaluations are based on number of eyeballs.

Right.

I was gonna say, I feel like.

Part of where we're gonna start seeing it now is potentially in advertising cause I want to pick out another market thread.

That we've talked about before related to AI here, Ram, which is, we're starting to come up, you know, as the calendar rolls to when we're gonna start getting results from people, and we would normally get into buyback season.

What is gonna be happening with many of these stocks that for many, many years have had very strong tailwinds due to significant free cash flow and buybacks this time around?

That's a great question.

That's a great question, because last year we had $1 trillion in buybacks, $1 trillion in buybacks and stocks that have buybacks up from stocks that don't have buybacks.

There's a bid to the market, and much of this correction that took place.

Happened during the blackout period when most companies cannot buy back their stock.

It's like that bit matters.

Buybacks are back now, by the way, so like they're on and not surprisingly, like markets are back on too, they're acting normally.

So, I think you raised a great point, you know, it's, it's about positioning the right names, names that still have like free cash flow still matters.

Like Amazon is a good question on this.

Amazon is trying to compete with Starlink.

They're launching low Earth orbital satellites.

They're going to launch a phone.

They're building more data centers, they gotta invest in tranium.

All that is called cap, that's all expense.

Uh, the vision is amazing, but I love the vision, but the free cash fields are low.

So we'll have to see, but on the other hand, you have other businesses where they've got a viable business model and uh a lot of pain has been impounded in these prices also too.

So, you know, everything does come back to cash flow.

I think it's the right metric to focus on.

The CFOs have also got smarter around this.

They, they see what's happening in the market.

So like, OK, I got it.

I gotta watch Cabacks.

I can't overspend.

Um, but, uh, they're, they're still legitimately good opportunities in the market.

Like they're 20 to 30% discount NAVs like you're supposed to buy these assets, like, uh, I'm not saying all the assets, I'm not saying assets that don't have good free cash flow, but there are pockets of the market that have, you know, I would call compelling value.

It reminds me similarly to like April of last year, almost to like the day within weeks, let's say.

Yeah, for me, the market has come to rely in many ways on the bid, right?

Cause if you look at shareholder returns for a lot of things like, say, the MG 7, a lot of that has been propelled by buybacks.

Especially if you're also at companies where they're gonna be issuing stock as part of compensation.

If you're not simultaneously buying back, you're just gonna be diluting, diluting, diluting over time as you do these things.

Um, That to me, I think is the most under-discussed story of AI.

It's not just that all the capbacks went into like, say, Nvidia, right?

But also that it's gonna come out of the buybacks and we're gonna see a much greater differential in the market.

It could be that the lasting effect of rates going up and then the Iran conflict is actually the decay of correlation in markets because for many years we saw it increasing.

Well, so Apple wouldn't be where it is today without those buybacks, and Buffett, if you recall, he exited his Apple position.

And it was almost dollar for dollar matched by buybacks from Apple. $110 billion he was selling that Apple announced a buyback for like around $110 billion.

So they bought now, stocks go up if your capital allocation is productive.

It's the number one driver of stock price returns actually, it's your capital allocation, right?

So, if you're buying a stock at too high a price.

Then your book value per share isn't compounding efficiently.

So there are trade-offs.

You get a nice technical bid, you get flows from those buybacks.

But uh that can create some downside protection, but it's hard to get an outstanding return unless they're buying back their stock at good, cheap, discounted levels.

Which is what Berkshire Hathaway is doing right now and the price of tangible book is just north of 1.3.

I prefer that actually versus some of these other companies.

Yeah, and in the crypto space as well we've seen a lot of projects focus on buybacks because that's the only way they could do it.

It was hard for them to return capital to their token holders, uh, from regulatory perspective over the years.

What I think most people understand is that many of these projects are awful about timing the markets.

And they always buy back at the exact wrong time.

And so, what we like to see is something that's more programmatic rather than discretionary because there tend to be terrible.

From a timing perspective, uh, something that we continue to watch.

I mean, you see the same thing in traditional financial markets as well.

If you look at the people who have done well with buybacks, it's either people who sort of nibble, nibble, nibble, nibble perpetually because they can ensure they do average by using that method.

And if it's an otherwise very profitable business, that's a completely viable approach.

Or it's the people who do exactly what Ron was saying, which is I allocate a bunch of money for buybacks, ideally, somewhat quietly.

And then when the market pukes and I'm down like 20%, I start buying back, right?

You want to have an average level over time and bid at the lows of that range and just sort of sit at the lows and take things in.

They, you know, I think it's a, call it inverse of the problem that micro strategy has, and part of why I get increasingly skeptical of that is they seem to have an Uncanny ability to buy Bitcoin at the highest, right, which to go back to Ram.

Something you've said earlier, like whoever's executing over there, you need to do better.

Like you are call me up.

I will do the service for you for free, OK?

I'll build you a little bot, OK.

But yeah, no, I agree, I agree.

Like micro strategy is a capital markets issuance machine.

Yes, that's what they are.

It's, it is kind of phenomenal.

It is almost like 1/9 wonder of the world.

Uh Uh, but I'd, I, I'd be a little cautious, right?

I think they've got all these tranches like stretch, STRC and STRF where they have a contractual obligation to pay out billions of dollars in dividends.

On the, right, that's the liability side.

That's how they're funding their asset purchases, right?

They have an obligation to make those payments.

But the assets don't generate free cash flow.

So this is like, you know, Chris, we all, we all know this from like 2008 crisis days, like you got, you got a mismatch in the assets that you're financing, and the only way At some point in the future, they'll be able to generate.

The cash to deliver to those bondholders is by selling their common stock.

That's called dilution.

So that's not good for MSTR or it works as long as Bitcoin goes up.

As long as Bitcoin goes up, you're, you're good.

If Bitcoin doesn't go up and you have an you've got an obligation coming at you, you have no choice but to sell at the worst possible time.

You wanna be countercyclical.

You don't want to be pro-cyclical, and markets have all the data too.

Like, you don't wanna trade against Mr.

Market when they see your entire financial position.

They know that you're a 4th seller.

That's not a great spot to be in.

So we can't get away from talking about debts then, can we?

Here we are again.

Exactly what you're talking about, the, the OG debt.

It all comes back to dads.

All right.

So, I was gonna say as, as a final, I'm gonna put this one to Ron cause I'm genuinely curious about your views.

As a final thought on all of this right now with where the market is, right?

We've seen over this span.

Call it energy exposed things get tanked.

A lot of software get tanked.

We've seen some degree of strengthening in things that produce energy, which all of that makes sense.

Another thing we've seen throughout this is call it real yield cheapening and bond prices cheapening.

Do you think where we're at right now is also a place where it would make sense to buy medium to long duration bonds, or is that a trade you're also staying away from?

I'd be cautious on that because inflation is making a comeback and inflation eats at the real return on bond assets.

Add to that the opportunity costs of owning assets to have an 89, 1012, 15% free cash flow yield.

You know, if you want to compare bonds to stocks, you can look at stocks that have high free cash flow yield, and they're real assets and they reprice in nominal terms, so they're more inflation resilient.

The upside you get on a bond is you get your principal back and your coupon payments, less inflation.

Whereas with the stock, it's growing earnings and it's got a attractive-free cash flow, as they do right now, like where we stand today, they have a attractive-free cash flow.

Why would I own long duration bonds?

It's hard for me to make the math square on that.

Yeah, from a personal perspective as a rates guy, the one thing I might pick up right now is tips, but to your point, then you're riding along with inflation, which is a totally different thing.

All right, so tips aren't bad.

I mean, if you believe bad things are gonna happen soon, tips aren't a bad idea, I would say.

All right, so we will talk about whether bad things are going to happen soon more in a moment, but before we do that, we have to go to our second commercial break.

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All right, everybody.

Welcome back.

So, Thinking about other things that are going on in the world that have been pulling in a significant amount of attention from the crypto ecosystem, there is an increasing skirmish happening between World Liberty Financial and Justin Sun, where to walk through the details, um, World Liberty deployed 5 billion roughly WLFI tokens as collateral on Dolomite, a DeFI lending platform similar to Ave.

Co-founded by one of World Liberty's own advisors to borrow roughly $75 million in stable coins.

So the trade briefly pushed the main pool to 100% utilization, meaning that for those unfamiliar with borrow lend protocols, the lenders were not able to withdraw collateral and were essentially stuck in the trade until the borrower repaid.

Though the borrower In fairness, will face increasingly high interest payments or liquidation at some point.

Now, as a reminder, the WLFI token is down 76%+ from all-time highs at this point, according to FX leaders.

Um, and Bloomberg shortly thereafter ran an article titled Trump Linked World Liberty Crypto Project Faces Investor Result.

Broader transparency concerns beyond just sun, but let's get to Justin Sun in particular.

So Justin is, of course, the founder of Tron, but also an early world liberty investor, and he said, WLFI treats investors as quote, a personal ATM and accused the team of extracting value from the community.

He alleges that there was undisclosed code allowing insiders to blacklist wallet addresses and freeze funds without due process.

Justin is probably particularly sensitive to this because World Liberty froze Justin's Sud's wallet last September, locking him out of tokens worth roughly $107 million at the time.

Um, World Liberty is filed back, threatening legal action over Sun's backdoor allegations and then facing several comments online, including Banttag saying, on-chain analysis shows the governance structure is more centralized than publicly advertised.

So I want to start with this one.

Chris, and I want to start with you as a former investor in this space.

Given that they're using their own governance token as collateral and borrows on a platform co-founded by its own advisors, like, how have these things worked in crypto?

How do you evaluate this as somebody who's been an investor in the space?

Like, let's, for a moment, take the, the Trump affiliation out of this.

Just what do we think of the project mechanics here overall?

Yeah, I think what this whole tiff has shown, it truly highlighted the good, the bad, and the ugly of crypto that we've seen for a very long time.

Uh, what's the good news?

The good news is, is that generally speaking, our markets are pretty transparent.

Um, you can stop and you can watch wallets, you can watch cash flows.

And, and therein lies a lot of good things happening.

That transparency allows investors, and now, investors equipped with AI tools to really unpack what's going on, distill it down, and to, and, and that's one of the beautiful things about crypto is you have a lot more transparency.

Um, in traditional markets, I mean, I, I remember some of the things we, we used to deal with, like you had no transparency, you kind of felt something was off.

And then all of a sudden, uh, you know, this guy, you know, Peregrine Financial goes, goes down, or MF Global was doing something they weren't supposed to do.

You never had that visibility.

You couldn't trace the cash flows like you can in the space.

That's the good thing of this all.

You know, the bad thing is that in, in, in the crypto markets, we've seen plenty of conflicts of interest over the years.

Um, And you would, and, and part of that, frankly, is because the industry is so insular and closed in that, you know, even some of the major players, they had to, to create vertical stacks because they just couldn't like outsource custody as an example, like, and so, there's a lot of naturally occurring conflicts of interest in crypto.

Obviously, as we go forward into this institutional era.

You know, there's a lot of, a lot more to play for in this institutional era.

And institutions have much higher standards of disclosure when it comes to conflicts.

You know, as an RIA you have to always disclose outside activities, conflicts, and, and that's gonna be more table stakes going forward.

So, so, that's the baddest, all the conflicts of interest that we continue to see.

And then the ugly is like the, you know, all the crypto Twitter, like screaming at each other, um, which, again, this is not in my mind, um, the best, it doesn't create the best conditions for a project who's trying to appeal to institutional investors.

And so, like, the, you know, the mudslinging, uh, has been around for a really long time in this space.

We would like to see that step back.

Um, you know, I, I'm, I'm not in a position to, to take sides on this one.

I'm still evaluating it personally.

Um, but it does underscore the, the good and bad and the ugly, of our industry.

It's changed, like, we're in an institutional era now.

And if you wanna be institutional-ready, there's certain standards you gotta uphold and um the folks who do it are gonna be just fine.

Did I read correctly that the RGC said they'd be open to settling in in Wolfi token and it was there I saw a tweet.

I saw a tweet like that, I believe it was USD1.

It was USD1.

It was a stable coin, yeah, OK.

But, but also if you read the article they did not specifically mention that there's a relationship between the governance token and USD one, but there was also talk about tether on Tron, right?

So both sides, um, did they actually settle on any of those instruments?

I think that would be a pretty dumb move if they did.

I, I totally get the Bitcoin thing, um, much harder to, to censor, but, um, yeah, I, I, but I think both sides of these guys were involved in the RGC, right?

At least Trump has thumb on the scale though he can like the, the Witkoff family.

Owns the economic entity together with the Trump family.

And their kids, like this is their thing.

Uh, isn't it reasonable to expect that they might influence that adoption?

In fact, there is one of the GCC countries that has some commercial deal that they announced that USD one sometime last year.

I don't know if it had any substance to it, but they had a Some, some notable transaction.

I wonder like this asset is hated so much.

Do I go in the pool?

Do I just kind of go for a dip?

I think it's been hated so much, like everyone sold it.

You know, is, is there, is there some asymmetry here, even though it, I feel like you have to take a shower after you did that, you gotta take a shower afterward, maybe 2.

Exfoliate your skin as well.

I mean, one of the dangerous things in crypto though is it's one of those industries where occasionally the bombs keep bombing.

Like I remember a lot of people trying to buy the dip on that point, right?

And like we saw how that played out so.

I'm gonna actually throw two rocks here, Chris.

I will make some judgments.

Um, and I think losers here include both of the major American political parties.

And the reason I say that is that The Republicans have themselves in a position where the Republican president has his family with an affiliation with this project that now appears to be being scrubbed off of the website, and I think that will raise valid concerns about whether regulators will appropriately go after this, investigate this, or look into what happens here.

However, The whole reason that we're living here right now. is what the Democrats did from 2020 to 2024.

Because if Gensler's SEC had made rules about crypto, had disclosure, made them clear, eliminated a lot of these conflicts, and we know the SEC knows how to do it because they're doing it literally right now as we speak, I think they would have gotten in front of a lot of these problems instead of being behind them.

So it's ironic in a decentralized space to make this statement, but it's part of the reason we're here at all, just a failure of centralized governance on both sides over multiple years?

Yeah, and, and you could also extend that to some of the heat that circles under right now for not seizing uh USDC and they're like, hey, well, we need to have the right legal authorization.

But if you had the regulations in place that gave them the ability to move quicker, we know latency is everything.

That's another example of, of what you're saying, right?

So, um Yeah, but look, on the clarity thing, I was in DC last week.

I don't wanna change the topic, but I was in DC last week and um it feels like every day, uh we get one step closer.

So the CEEA came out, I know people are challenging it now, but it feels like the Republicans are very close to being lined up.

Next step is dealing with the Democrats.

The whole question here is like, every time you negotiate, you whip, you bring it together, it takes time.

And the shot clock's coming to an end.

So, but Patrick continues to make progress down in DC as far as I can tell.

Um, anyway, didn't wanna divert from this subject, but you're right, it's, there's a bigger issue at play.

Clear rules of the road, transparency, uh, I agree with that.

Ironically, I worry.

Like if something major bad happens with world liberty, AKA they've taken this large loan from Dolemite, if they get liquidated and it's left with a bunch of bad debt, does that become a sticking point for clarity as the Democrats will get very agitated about the Trump family activities, the timing on this of like 2 steps forward, 1 step back, 2 steps forward, 1 step back has been remarkable because I, 1, I agree.

I think in DC on at least some of the issues, there's significant progress being made on things like yield.

I think part of that has been negotiation.

Part of that, quite frankly, has just been education because some of the bank trades are now realizing actually, there's some very good stuff for us around stablecoins and what we're able to do to evolve our business models.

I think that's been helpful.

What I worry about is that, Chris, exactly to your point, because of timing, if this were done 2 months ago, we wouldn't be here right now.

Yeah, like I said, I'm not aware of any principled resistance on the Republican side to getting this bill moving forward.

Uh, there's some political stuff for sure.

Uh, so that's positive.

Do you, do you consider Rand Paul a Republican?

I'll skip the jokes for everybody else.

Fair enough.

But, all right.

So, the other point that I want to pick out here, and Ram, like, you literally at Lumina advise people on investments and things like this.

When you're dealing with your clients, when you're dealing with people who I'm gonna call it a crypto-adjacent but not crypto familiar, how is the space perceived nowadays given Like the major news stories that are swirling around, are we seeing more interest from people, less interest?

Do they take it more seriously?

Like, I want a temperature check from somebody who's actually in the pool.

It's probably not a surprise that just given.

How crypto has been caught up with politics and like the Trump family that People are, are more skeptical.

Right, so I think, you know, that's.

That's a, that's a perception that's out there.

I, I see a lot of that too.

Um, but now, with retail investors and even some professional investors who are new to the space, they'll ask me, hey, like, how could you ever invest in a token or in crypto?

Like, why aren't you not just investing in the equity constantly?

Like, that, that makes no sense to me.

And my pushback to them on the, the token, um, or the crypto aspect is that crypto is just a wrapper.

Like, you're taking something and you're turning it, and you're giving it new properties.

Saying that the, that the token or crypto is no good, is like saying ETFs are no good.

Doesn't matter.

ETF is a wrapper, it's what's underneath.

It's what's underneath.

And so, what does that token do?

It gives you 24/7 uh capabilities.

It gives you global access day one to anyone with an internet, you know, respective of your regulatory constraints if you're a security or anything else.

But you, you have to do is we're returning to fundamentals like, but the other thing that we, you know, we talked about the good, the bad, the ugly.

This industry has been terrible about educating.

Terrible.

Um, and, and like, we need to get better at it and explain exactly what I said.

Fundamentals matter, rappers unlock capabilities, and that's how it works.

Like you think your meme coin went to zero, so there's no fundamentals.

Yeah, most interest in crypto happens at all-time highs and their tops, by the way, so I don't know that there's much signal from.

The perceptions that are being shared out there.

You know, it's, it's almost all the time, it's The most interest shows up at the exact worst time 100 and people are running for the hills.

At the best time There's very limited interest right now.

Which is You know, that's contrary and constructive.

I mean if you wanna go back, sorry, go ahead, Chris.

No, I was just saying typically there's some kind of catalyst. um, what could that next catalyst be for retail to come back?

Maybe it's the something, you know, the Iran thing goes away.

You, you never know.

There's always like some little tiny catalyst that kicks it off, um, and then you're right, Ron, like, like price action is gonna, it will lead to the next full cycle.

If you're looking, I mean, there's a lot of reflexivity.

I mean, like, Bitcoin is a part of the financial system now in a very meaningful way.

Like, that's right, like hedge funds, global macro funds.

They, they have to have a view on this.

Right now, can that perimeter extend into other Digital assets is the question.

And yeah, I think you're right, like, what is the catalyst?

So, in the last few years, you had a couple of really powerful catalysts.

You had the, well, we're gonna get replaced Gensler.

We're going to have ETFs permitted.

We, we see the circle IPO.

So you had a nice lineup.

Of not just the wall of worry, but a potential resolution to that.

So like what is it now?

I, I, it's, it's harder to see, right?

Like I know it's tokenize everything under the sun.

I was a big proponent of that, but it goes back to value capture, right?

And there are other themes that are crowding into this.

For example, like defense infrastructure theme.

Like that's capturing imagination, the AI story, semiconductors, the microns of the world, robotics, they are capturing the attention and These are, these are attention assets.

So you need something powerful, like if Iran were to settle.

In digital currency.

That would be significant.

That would be like, wow, like we are all offsides on this.

That would be something that we should all look at in a very different way, this, this asset class then.

Well, let's go back to something Chris actually was saying earlier.

So Chris, you get this question from investors, why wouldn't you just buy the equity?

And here would be my counter to them.

How would one have gone about buying the equity of hype?

Right?

That is not a thing that it was possible to do.

But this is the engine powering 24/7 markets right now.

It's showing up in major mainstream media, right?

It's being used as the barometer.

It's being cited in Bloomberg.

This is actually a pretty significant signal of adoption.

And I'm not arguing that hype is perfect.

And this is not investment advice, but to say there's nothing going on there seems clearly contradicted by the frequency with which it's appearing in the media.

And from a fundamentals perspective, if we talk about what is generating fees and what is buying back tokens, Ram, to your earlier, like fundamentals, fundamentals, cash flow, cash flow point, they're one of the best projects.

And just, you know, for reference, I looked it up while these two were talking.

Three months ago, hype was trading in the low twenties.

All right.

And as of now, when I'm looking at this thing on Coin Gecko, I pulled 43.60 as a price.

And so if we're talking about thematic structures within crypto, one of the things that I'm actually looking for for the next wave of adoption is who has users and who has cash flows, and who is actually talking to the mainstream.

Cause, like, let us be honest.

The cryptomedia landscape is broken.

And I know this because I am a professor.

I literally have students, and all the time they ask me, hey, what is the single source where I could take 30 minutes every week and read about crypto, and that will tell me everything I need to know.

And I'm like, well, OK, so go look at who I follow on Twitter is about the best that I could do for this, or you're listening to a couple of exceptional podcasts and also our podcast.

But like, it's a pretty small list is my point.

If you're, so theoretically, let's take somebody who's been very skeptical about crypto, who's very well known, Jamie Dimon.

If Jamie told you I have 15 minutes to read something on crypto, and you could recommend him one thing that's got to be understandable to him in 15 minutes, is there something reliable?

I think the answer is no.

So part of what We're struggling with here is there are things out there like hype, like Minay, which nobody knows about and has like 12 million users that is pushing around a huge amount of stablecoins.

And it's also because of this educational and landscape fragmentation.

So, actually, Rob, I'm gonna turn this one back around to you because I know this is a real talent you have.

If crypto people want to be able to communicate with regular investors, what would your advice be to them as somebody who's done very well talking with regular two-legged people about this space?

Crypto entrepreneurs or crypto natives?

Like speaking to call it regular humans in the United States.

I would start with pain points and problems.

Like the main issue with the category from an entrepreneurial perspective is that people keep chasing the shiny object.

We're going to tokenize stocks and take out BlackRock.

As opposed to, say, for example, we've got this $5 trillion asset class called private credit and people can't get real-time measurement of delinquency, non-accruals, payments, loan performance data, credit quality.

It's crying out for a solution and you've got an attentive audience because there's at least $5 trillion worth of investing in it.

So it's focused on problems that real customers have, as opposed to buzzwords, like we're going to have machine to machine agentic AI transact and go shop for me on Amazon because it sounds cool, but it's a problem no one actually has.

Like we got to get out of Star Trek future and say, what are the problems today with banks and credit and money movement and access to financial services.

That a defined customer segment has.

How do we service them with a solution that has a value exchange?

That's the world we need to get to.

Yeah, it's been, that's been part of the challenge of this industry since for for years.

I mean, I remember sitting at my desk at Citigroup at like 2017.

0 my God, I have this amazing technology.

Um, like, OK, like, what do you wanna do with it?

I don't know, it's just so amazing.

Like, like, you can do so much with it.

And, and so, the, the, I would say back then, the, a lot of the technology, you know, was not advanced enough to handle enterprise needs.

But that's what makes this cycle so interesting because now it does.

BTCC is integrating like 4 or 5 blockchains right now.

You're seeing it actually getting, so like the old uh blockchain, not Bitcoin thing, it's actually happening.

Like, the blockchain is getting integrated all over the place.

But you also can't ignore the Bitcoin.

You can't ignore the, the tokens that are accruing value.

And they are.

Um, not all of them.

In fact, most of them don't accrue any value.

But you can't ignore that as an asset class.

Um, and I, and I think as time goes on, the smart institutional, traditional investors are gonna, yeah, first, they're like, yeah, we're gonna integrate this stuff into our rails.

So wait a second, we forgot about these token things.

And that's why I think it's a very constructive setup right now because sentiment, awful.

Worst I've ever seen.

Fundamentals continue to improve on the token side of things, on the native token side of things.

So to pile on to that, I think part of what crypto is greatly underestimated is the complexity and difficulty of transforming financial markets, right?

Like the space notoriously builds 10% of the solution in the easy part and then thinks they're done.

But in a weird way, a lot of the ideas that people started talking about from call it 2016 to 2018 are finally ready for prime time.

Right.

Like, Chris, you know this maybe better than anybody on this podcast, given your background at Citi, but with the Genius Act, with the ability to integrate stablecoins at traditional financial institutions and with traditional rails, we're finally in a world where we can do the remittance use case with stablecoins.

It's 2026, right?

Eight years after people really started talking about it, that at scale, but I think we're finally there.

So one of the things I am also watching for is Call it the things that many of the crypto OGs gave up on long ago may finally now be timely for this industry.

All right.

So on that note, since I can see we are in time, um, we are going to call it here.

So thank you everyone for tuning in to Bits and Bips.

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