Stablecoins as a macro force: Ram Ahluwalia on winners and losers

Transcript

Stable coins are eating the world. There's a new governor joining the Federal Reserve and AI companies are beating earnings estimates by the billions. Are we on our way to Valhalla or about to enter a dystopian recession? Hello and welcome to Milk Road Macro, the podcast that's here to remind you that sometimes it's best to just zoom out and touch grass. I'm your host John Gillan. Today is Monday, August 11th, and we are joined today by Rahm Alawalia, founder and CIO of Lumida Wealth, a digitally native investment adviser that specializes in alternative investments and digital assets. Rahm has years of experience on Wall Street and a reputation for non-conensus investing that's focused on macroeconomics and identifying undervalued opportunities before they become mainstream. Unlike me, Rom is an SEC registered adviser who gives great advice. So, if that sounds

great to you, make sure you like and subscribe. Share this episode with someone who would enjoy it. I also want to remind everyone about the Milkroad Macro newsletter. Macro is confusing. We're here to fix that. The Milk Road Macro newsletter is your shortcut to understanding the big picture, how everything works, and how that moves the markets, delivered straight to your inbox twice a week. So, make sure you hit the the link in the show notes below to subscribe. And uh as a reminder, if you missed last week's episode of Milk Road Macro, we laid out a lot of our framework for how we think about markets. So, make sure you go back and watch that episode. A lot of great value in that. Uh today's episode is brought to you by Figure Markets. Grow your cash like a bank. No lockups, just real returns. as well as Nexo, the platform

that grows your crypto without locking it away. And without further ado, is my pleasure to welcome back to Milk Road Macro, Rahm. How are you, sir? How you doing? >> Hey, John. I'm doing well, thank you. Thanks for having me. It's always a pleasure. Great to see you. >> Yeah, great to have you here. So, look, I I think we should just jump right in. Uh when I reached out initially to to ask what was on your mind, you were very uh very passionate about stable coins, US dollar stable coins with the Genius Act rolling out. Uh and I I was kind of surprised to hear that from a macro guy. Tell us what you're seeing there. What's the opportunity? Why are you so focused on stable coins right now? >> Yeah, well, stable coins are very macro and every decade or so, you have a new

form factor that emerges. Usually, it's the result of a technology innovation. Sometimes it's the result of a change in regulation and a stable coins, you have both, right? So, you had the rise of mobile that was a big deal 10 years ago, propelled Apple or propelled Meta. You know, Fair Isaac, they get paid every time there's a mortgage originated due to regulation. Moody's and the ratings agencies are part of every securization. This is technology and regulation coming together. If I look at stable coins here, we have for the first time in human history, that's how big a deal this is. With the first time in human history where I can send you, John, money without intermediation via a bank.

There's no custody. There's no escrow. There's no third party. and it's done via the internet and it's secured via cryptography. And now due to the passage of the Genius Act, we're going to see a proliferation in stable coins and a challenge to the old guard incumbents that have owned these payment rails. >> Gotcha. Yeah. So, I think that that's a huge piece of technology that's being unlocked there. Um, the competition in the space is already pretty intense. uh there's a lot of people who are in this who are cryptonative circle tether obviously the circle IPO is huge um how do you see this playing out in terms of

like winners losers incumbents new challengers how do you see that shaping up >> fantastic question right and you've got PayPal uh that's involved you have Paxos uh Robin Hood is teaming up with some others to launch their own stable coin uh you have big banks like JP Morgan and City Bank that will issue their own stable coin or team up in a consortia. U and you know by way of uh fun facts and statistics there are 200 fintexs lined up at the OC which is the national bank regulator of the land looking for a bank charter so they can get in the stable coin business. This is a gold rush.

Stable coin investment is as hot as AI. So uh in terms of winners and losers, let's start with who the losers are likely to be. So the losers are incumbents. Uh the Visa stock just hit their 200 day moving average while stock markets are pretty much at all-time highs. Mastercard as well. I don't think that the impact of Visa Mastercard will actually be felt for for quite a few years, but markets price in recent information, they overreact and then over the long haul, I expect we'll see multiple compression. By the way, I bought Vis the other day. So, even though I I have one view, I also have the other view because the thing is too cheap relative to the view. If that

makes sense, right? Not investment advice. It's just entertainment. Okay. The other are the card issuers. So, Visa only gets a small fraction of the total economics that are charged to a merchant when a consumer swipes a card either online or in store. The card issuers are also banks. Those are credit card issuers. They range from the JP Morgans and American Expresses of the world to uh the Capital 1's regional banks uh to the extent they have credit card offerings. So the opportunity and the promise is that the 2 to 3% in what's called interchange income uh will come down. It'll compress. Maybe it's 35 bips or maybe it's 35 cents as opposed to 3%.

And the reason why that's a big deal is that retailers, merchants, grocery stores, online sellers, they have very low net profit margins of about like 1% is the average net profit margin of a retailer. Uh it's a hard business. So if you can cut your cost of payments from 3% down to 1%, it's a significant boost to the real economy. That's why I'm very excited about it. Interchange income is a tax on consumers and it's a tax on merchants and these entrenched networks are igopies. I used to work with these firms in the past by the way. So, but I'm just calling us paid is paid. So, that's one benefit. The second is on

dollar funding and US Treasury funding. So, Secretary Treasury uh Treasury Secretary Scott Bessent said a few months ago that he sees potentially trillion dollars coming in to buy tea bills through stable coin adoption and that this is a way to advance US dollar hegemony 100%. Uh one of the most popular consumer apps in the world in Argentina is an app that allows a worker to accept US dollar back stable coin as a form of payroll. Think about that. They don't want to make a bet on the Argentine peso. They'd rather see USD currency. So, stable coins are advancing global US dollar hegemony. People that think it's the end of the dial and the

bricks are going to compete, they're really uh missing the mark. Um, if you think about like our relationship with China, this has national security impacts. So imagine you're in the US and you pay your counterpart in China on the internet via USDC and the Chinese government can't control that. Now you're starting to wean off Chinese entrepreneurial talent to the US ecosystem. It's not that China has an edge in robotics and EVs and batteries. It's entrepreneurs in China. So it so stable coins are strategic from multiple perspectives.

>> Gotcha. Okay. Uh yeah, really helpful analysis there. I think what I'd like to understand is when you say losers are going to be some of these like larger, you know, techno monopolies on on payments or whatever, these incumbents. Um it sounds like at the same time you're also saying that their customers and clients are going to be winners because they're going to get a better experience and cheaper. Can you talk about that differentiation there about like how it might not be as good for some of the incumbent monopolies or not monopolies but the incumbents but much better for their their c customers and clients? >> Well, here's an example. Suppose you go to a gas station, they say if you pay in cash, it's this price. You pay in credit, it's another price. They have two sticker prices for the same thing.

You're going to see more of that play out at checkout. Let's say you're checking out from Amazon.com. You can pay with credit card. You can pay buy now pay later. Uh you'll see some type of stablecoin option. Now we'll see how what that actual user experience is. It's not going to say stable coin. It'll be an intuitive form factor over time. It'll just be in the background like your IP address. And they're going to start to steer consumer spending and behavior in that direction via rewards. By the way, the rewards we get today are from the credit card issuers. They take that interchange like American Express membership rewards. They take a chunk of that. They let you buy airline seats, let you buy gift cards and merchandise.

By the way, the quality of that continued decline over time. They inflate away the value of these reverse currencies. You get the one capacity control ticket that the airline can't sell. Now, so that'll be replaced by merchandriven rewards to drive more adoption. the merchant. See, if a merchant can close a transaction, the gains are significant. The average gross margin for a retailer selling a given product, not all products, not electronics, per se, but a given product, let's say apparel, is 50%.

Uh, and that's why buy now pay later took off because the merchant said, "Gee, if I can enable my end customer to get financed to buy high dollar item like a fridge or motorcycle, then it's worth me giving up five points of margin to close a 50% margin ticket. And you're going to see rewards being increasingly driven by merchants and team up with other firms to do targeting. So another winner in all this by the way may may be big tech. >> So big tech cannot run banks. There are very archaic laws like the 1964 plus or minus bank holding company act which separates commerce from banking. Now we

have done other countries. Walmart is all over the US but there's no bank branch. Amazon owns Whole Foods. There's no bank branch. Google has tens of millions of merchants on the one hand and hundreds of millions of customers on the other side. They have a network. They have a closed loop network. They could compete against Visa, Mastercard, but legally they cannot. >> Gotcha. >> So, what it's possible that those big tech firms have a a role to play in getting to payments and the big banks don't like that. The big banks are trying to box them out and they haven't successfully.

>> Gotcha. Yeah. I think something that's interesting to me about this Genius Act is that historically in a lot of American legislation, banks have been treated in some way as special or there's been like sort of a moat in a regulatory or legislative um framework around banks and their businesses. Um and in this it seems like there's more much more opportunity for competition. Um there are still some hedges around on some things, but um it does seem like the the United States is trying to encourage a lot of innovation. Um I want to get your thoughts on how the rest of the world is responding to this. Um, a lot of people are saying that the demand and the use for US dollar stable coins is going to be largely from people who are already in the dollar, right? Like you said, customers at the point of

checkout are going to get a cheaper option for payment methods once stable coins become more uh adopted as a as a as a mechanism. Um, but we're also seeing the the European Union and China getting very uh let's say nervous about their own CBDC's pushing those forward, trying to roll those out. I've heard reports recently that China um is trying to do a stable coin for the for their currency as well, different from their central bank digital currency. Uh at the same time, US dollar stable coins market cap keeps rising. We're now over 270 billion, which is another new all-time high. So, do you think that this is this criticism that a lot of this demand for USD is going to be from people who are already in dollars anyway, or is it going to come from other sources external and actually draw in more

liquidity like Secretary Treasury uh Bessant hopes? >> It'll be both. you know on the former the merchants will help drive that customers have a value proposition that'll drive adoption and then internationally it'll be remittances and crossber payments that'll be the segment of the market that can come on board now so in the last week we saw a number of announcements stripe is enabling remittly to process crossber payments with stablecoin you know stripe acquired bridge a few years ago which is enabling stablecoin payments enabling enabling for example SpaceX to uh pay thousands of employees around the world with stablecoin. Western Union made an announcement that they're changing their

approach to payments. Those guys are at risk. If you need a mobile phone, if you have a mobile phone, why need to walk into Western Union branch for example? Uh so I think it's both. You know, the the US dollar is the least dirty currency in the world. It advantages US dollar against these uh other currencies. >> Why do people invest in real estate? because it spits off cash flow. But I'm not here to manage rental properties. That's why I'm looking at Figure Markets. Their new democratized prime product backs your money with real cash flowing assets and returns up to 9% APY. It's the first real world asset borrow lend pool built for everyone, not just institutions. Ready to lend like a bank and get more than the 5% A is offering

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Your assets need a platform built for growth. Join Nexo. >> Gotcha. Yeah. No, I I'm I think that there's going to be a lot of different sources of demand here and we'll have to keep an eye on this and see how it continues to play out. Uh, I want to pivot to something you talked about before, which was funding the United States government, um, which is a big concern in Washington right now. Uh, Trump has nominated Steven Mirren to join the Fed Board of Governors, replacing Adriana Cougler. Um, if if he gets on, which he should, everyone expects him to, he'll serve through January of next year. Um, but he has been very vocal about a lot of reforms and changes he wants to make at the Fed.

A lot of people think he's think he's going to be very much uh in favor of rate cuts um, because that's what Trump wants. How do you think about this nomination? How do you see this impacting markets? Well, >> I think it's a hell of a lot better than James Fishbach, uh, the guy who was at Einhorn, who was like my Quan, like a head of macro. The joke I'd say is like if you ever watch The Office with with Dwight Shrew, one of my favorite shows from 10 years ago, Dwight would always say, "I'm the assistant regional manager." When in fact, he was the assistant to the regional manager. Uh, any case, uh, look, I think it's fine.

You're right. They're going to pick someone that's going to be very dovish and Steve Moran is that uh you know Steve Moran is be in that direction. I I think anyone that Trump nominates is going to be in that direction. You know um you know I thought Moran's paper on tariffs didn't make any sense. It was a word salad. I listened to a few of his interviews. Uh but that's kind of neither here nor there as it relates to Fed policy. I you know I also agree that there's opportunity for transparency at the Federal Reserve. It's coming to light that there was this operation chokeoint 2.0 although part of that was treasury driven right Drone Powell actually approved Meta to issue a stable

coin called DM and Janet Yellen who's the head of the Treasury at the time blocked that that was reported in the Financial Times. At the same time, bank supervision rolls up to Michael Bar, who reports to Jerome Powell, and it looks like banks like Custodia were denied access to a Fed master account. And I can tell you, I've had a number of conversations with bank leaders who have told me how uh they experienced choke point, right? Your access to funding from the Fed would shoot up if you're engaged in quote unquote high-risk activity such as intermediating digital assets, for example.

So, I think it's it's a it's fine. You know, it's a look, the FOMC is a committee. There's a process. Uh, one person is not going to kind of stack the deck in one favor or another. You know, Moran's fine, I guess, is what I would conclude at at saying. And yes, you're right. It'll be he'll be more doubbish. >> Gotcha. Okay. So, now I I think the question on everyone's mind is when will the Fed cut rates? It seems like once we got this revision to the jobs data where 250,000 jobs were taken out and Trump fired the head of the Bureau of Labor Statistics, uh it seems now like uh a red a rate cut is pretty locked in for September. Do you agree that that is an appropriate policy change or do you think that's premature or or misdirected? Like what is your view on

the rate cuts? >> We need to see what happens with the September non-farm payrolls report. So this is a replay of what happened last year at the exact same time. So remember August 5th of last year, there was the backdrop of the yenon carry trade unwind and then you had the July or yeah the early August non-farm payrolls report and there was a miss and then markets were very volatile to the downside and then rate cut probability shot up dramatically. In fact, prior to the most recent non-farm payrolls report, the markets expectations rate cut something like 20% for September and now it's 80%.

So, it shot up on one report. Now, mind you, these reports have a big uh confidence interval around them. And two, there's a lot of seasonality at work. I've noticed this now for three years, by the way. It's always around now. You guys have misses on NFPS. These are statistical models attempting to control seasonality with things like the birth, death, labor model, but you have a lot of dynamics in the economy such as major inflows on immigration the last few years and other things. Um, I don't think you need rate cuts. What I think doesn't really matter as it relates to what will happen. What will happen will det be determined based on the next NFP report. Overall, I don't see economic

weakness. We can go there if you want. Uh there's a lower pace of job creation. Yes. Uh but that seems to be driven by a lower pace of immigration. You can only create so many jobs. It starts at the top of the funnel from labor inflows. And if you look at the revisions, the revisions go back, I want to say five months, which is shortly after Trump was inaugurated and had strong border policies. uh he was effective at essentially closing down the border that has reduced labor supply growth and labor markets clear. What that means is the supply of labor meets the demand for labor at some

market clearing price. That's it. You have less labor supply and you probably also have less labor demand too, but it's really not much to get concerned about. There's no recession here. >> Gotcha. Okay. Yeah. I want to come to the labor market and what you're seeing there, especially as it relates to AI. Um, but before we move on to that, I want to ask one more question about this. I think that, uh, you know, you've you've mentioned Steven Moran uh wrote several papers about Fed policy. Um, and it seems like Trump, Bessant, and Moran have all been kind of aligned around this objective of trying to get some measure of control of monetary policy away from the Federal Reserve and back under the the executive branch within the Treasury Department. Um, what do you think? What do you think the likelihood

of that happening is? What does that look like exactly? And do you think that would be a mistake or would that be good or like how are you thinking about the risks there? >> Wow. Yeah, those are those are big questions. So if you zoom out, you know, Daniel Conorman, no laurate economist wrote this book called thinking fast and slow. He has this framework called outside in thinking and then inside out thinking inside out thinking says look at the particulars of the situation and kind of size up the people and the actors and what'll happen is it good or bad. Outside in thinking says look at the sample across history from a bigger perspective. So throughout history what we know is that if you give the executive control of the money supply they tend to print money. They tend to

do that because they like to win elections. It's easier to print. It's easier to spend. It's easier to kick the can down the road. So from a longer term perspective I'm not a big fan. Like I think it's good to have independent Fed. The Fed also needs to be held accountable though. Quantitative easing was a major mistake. Uh these experience with uh ultra low interest rates was a mistake. But will they be successful at it? Uh it looks like you know they they don't want to remove Powell. They want to wait for a successor to come into play. Really interesting. There was a paper written by one of the potential uh Fed leaders uh who said that Treasury and the FOMC should just coordinate

directly given the deficit interest rate channel. That was really that's really interesting. Uh >> yeah, >> you know by the way they already meet weekly. They already have a weekly breakfast. Now Fed policy as you know is driven by a dual mandate around managing inflation unemployment has no reference to deficits. But the other practical consideration is that the US government's already funding so much of its debt on the front end of the curve. Like practically speaking, you're not going to change where you fund off the curve. You would if like the 10ear dropped massively in a recession. You start borrowing on the long end. Yellen should have done that a few years ago.

She didn't anyway. But on the front end of the curve, you know, are they going to say, "Hey, look, we want to lower the interest expense on the budget." I don't think they would. I mean, you have a there's no austerity here. You've got 8% deficits. That's very stimulative. It's it's adrenaline for the economy. It's adrenaline for capital markets. And if you cut the front end of the curve, you're lowering T- billill income to boomers that rely on that and other others that just recycle their Treasury income to the real economy. >> Gotcha. Yeah. No. So, I think this is something that's really interesting and it's not clear to me how it's going to play out. I think you're right in observing that the Treasury issuance has been for very shorted bills. shortdated bills. I think that's going to continue.

But I do think it's interesting what you said about like maybe just formalizing the coordination between the Treasury and the Fed because the reality is it's we're kind of in fiscal dominance. They're kind of aligned on this already anyway. And how much value is there in pretending that we're not? Who knows? Um I'm interested to see how that plays out because I think the way that the market digests the change is more important than what the actual change is. Um I want to move now to something you'd referenced before about the labor market. Um, in our, uh, Milk Road Macro newsletter last week, we wrote a lot about the recent jobs data. Um, and we broke down a lot about how lower immigration and AI specifically are impacting a lot of things in the labor market right now. Uh, I've seen you write about this and make a lot of

comment on this as well. You've called uh, for a bifurcated economy as a result of AI. Uh, explain what you mean by this. Walk our audience through this this thesis you have and how do you see this playing out as it relates to the labor markets. Yeah. So today we already have a K Street economy. We had a K Street recovery and you see it in public capital markets. You have Mag 7 and plenty of others by the way doing well, but you've got a lot of losers out there. That's going to play out in the rest of the economy. So the basic split is are you AI forward or not? Imagine you're a regional bank. You don't have a great digital banking product. You don't have a stable coin. Uh, and now your

competitors are offering online peer-to-peer payments frictionlessly and a better online experience and a customer service that doesn't involve any integrated voice response. How's that regional bank going to compete and survive? Same goes for others in the industry. So, I think that the AI halves and the AI have nots. The early winners from AI have been the picks and shovels infrastructure providers like Nvidia, like Coreweave, like Taiwan Semiconductor on the semiconductor supply chain. Really just kind of follow the money on the supply chain. They've done really well. They continue to do well. You're starting to see winners really in the last year or so with Meta and Google who've been able to deliver offerings and and commercialize that and

see ROI on their cloud spend. Microsoft has seen that, Amazon has seen that as well and Oracle. So there is ROI and ad spend. Uh now what's really interesting is how financial services will embrace AI. You know JP Morgan has a 12 billion tech budget that's bigger than the vast majority of banks in the country combined. They will be AI relevant. Uh what about others? Uh you know we'll see. I think there's plenty that won't be. Uh I think there opportunities for startups that are picks and shovels players to help that long tail become AI relevant.

That's still very difficult to do though. You you got to rethink the user experience, you know, from front end to back end. Uh so what I'm expecting is greater separation in winners and losers. We already had a K Street economy. We had a K Street recovery. The slope of that K is going to increase even more. you're going to have even sharper winners, sharper losers, more winner take all. >> So when you say K Street, you mean I think K-shaped recovery of like the >> the um the the crash in April and the huge recovery we've seen since then. And what you're saying is that people who are employing AI are are leading that recovery and will continue to.

>> Yeah. Well, the people that will win in the years ahead are those that can integrate AI into their offerings to improve the customer experience or reduce their costs, right? Goldman Sachs, for example, has AI helping to reduce the cost of a IPO S1 filing by using AI to generate documents. What does this mean for like the legal profession? What does this mean for financial services and banking? Uh there are a lot of industries that you can rethink with AI. Nvidia's already have its own data center generating the next chip design. Humans can't even understand it.

So I think there'll be an ex a sharper separation in the winners and losers ahead. >> Gotcha. Makes a lot of sense. >> In the real economy, small caps and midcaps, >> right? Yeah. So this is >> companies you want to think of as technology firm, non-technology firms. >> Sure. Sure. So like the adoption of non-technology firms of the technology will differentiate them from their competitors. Um yeah, that's I think insightful. I I think you you wrote an article recently um where you highlighted the disconnect that's happening between AI AI hype and re real value being created for it. The MAG7 like what you said like some of the biggest companies are are kind of pulling away in valuations and getting more and more inflated in their valuations. Um whereas the rest of the

S&P 500, you know, the S&P 490 call it uh has been flat for several years. How how much of this is speculation and when does it change from being just speculation on AI to being like real economic value that's being created in real meaningful contributions to GDP as opposed to just higher asset prices >> there there is real economic value like number one the cloud year-over-year growth across Microsoft and Google and Oracle is 30% year-over-year so that's ROI ROI for the cloud provider you say hey Ram well those are the picks and shovels players what about the the users is the AI. We'll look at Meta. Meta's ad business is growing very quickly in part to improve targeting due to AI. Chach

GPT, which I think is overvalued. They're obviously seeing strong growth from from AI. Uh, and you've got a ton of startups out there that are achieving very fast ARR revenue growth, even faster than you saw with SAS revenue growth in the prior cycle. Now, yeah, we're not at a bubble yet, but you're going to see a lot of those firms shake out, too, because the velocity of innovation hitting the market is, you know, is significant. You know, in the in the other categories, you are seeing adoption. I mean, there it's hard to talk to someone that isn't adopting AI in some way and refactoring their workflows like everyone is improving their workflows and productivity rates are strong and elevated, which is great.

The only free lunch in economics is productivity rate. If product rate goes up, then earnings growth is higher and there's more room to increase the real income for labor. It creates a higher bid for labor. It's also disinflationary. The productivity rates we see now, we have not seen since 1996, which is about where I think we are in the AI cycle. >> Gotcha. Okay. >> The benefits are real. >> Yes. Yeah. Absolutely. Yeah. Um, so I want to talk about the benefits and and who benefits exactly. Uh there's been a lot of people saying that artificial intelligence is going to lead to a lot of destruction of jobs and loss of jobs turnover in the job market. Um there's a lot of fears that you know the big revision in the jobs data we saw is sort of a precursor to a a recession that's

coming and a lot of lost jobs. Um but there's a lot of other people on the other side of this who argue that AI is going to not like you said increase productivity but also create a lot of new kinds of jobs. Um where do you see this shaking out? Is this like we're in 1996, we're about to have a boom in a whole new industry or is this going to kill a lot of other industries and lead to big problems in the labor market? Like where do you see that playing out? >> It's it's a rapid velocity of transformation. No, I don't think there's a big spike in unemployment. Like when Easy Pass was rolled out to help you get from one state to another, you had the toll booth uh card punchers went away, but they got other jobs and it created more value for the consumer.

You could tell the same story about horse and buggies and and all the rest. So, it's hard to know what that new job is. All people see is the immediate pain and they say, "Okay, maybe this is bad." Uh, but look, unemployment's actually low. Um, where you're going to see is more growth in health care, right? You have aging demographics. Boomers are retiring and you're not having enough kids. The demographic period is inverting. So, you're going to see jobs in care for the elderly and care for the young. Those jobs today cannot be disrupted by AI. I don't think humanoids are going to be online fast enough to provide the tender warmth and care that a human being wants to be able to display itself also. But that's where the growth is. You know, healthcare is

the only category or the last five decades that continues to grow year after year after year. There's no reason uh why that would stop now. There also other industries I think will do really well like travel and leisure, right? Travel and leisure is doing really well in the market. If if if you look at the high end of the market, people are traveling more. the airlines are doing well. The demand for travel and leisure is going to go up because people will have uh more time. Uh so I think that's an interesting area to play. The value of land will will go up because that's truly scarce and cannot get disrupted by AI. certain defense names maybe like Anderil I think could benefit like

refactoring what US weapons platforms look like in the age of AI and drone warfare you know healthcare how do we think about the transformation of tele medicine to AI and we I'm sure we've all done diagnostics with AI you take a picture of a bug bite and you say what happened and how do I think about this you know so that's that's happening um so there's a you know there's a lot of benefit that we're seeing seep across the economy. Uh, no, I don't think you're going to get a big spike in people losing jobs. You will see in certain white collar professions just smaller groups of people and you're going to see the more talented people get more impact with fewer

uh people underneath them. That's what's going to happen. Their scope of productivity is increasing tremendously. you know, there there are lawyers that can crank out docs very efficiently. They don't need a five associates on a deal. Um, that means that you'll have lower people, lower number of people going into those professions over time. You know, the labor market is going to adjust. Uh, that's a normal thing. That's a healthy thing. It'll mean greater value for uh everyone in the economy. >> Gotcha.

>> It'll it could be challenging for apprenticeship though, right? like training the craft of the next generation. It it could be a challenge for like critical thinking, right? I saw a a post the other day how like Gen Z satisfaction is dropping off a cliff at the same time as their social media consumption is increasing and like ability to focus. Like I think if you have critical thinking skills and the ability to focus and you develop that before the age of AI and social media, you have a superpower. like millennials might take over the world because of that and maybe gen.

>> Well, if you're giving it away, I'll take it. Um, I wanna I want to kind of drill in a little bit more on this because I've heard sort of this similar sort of thinking from a lot of people, right? That like the best people in the field are going to be able to amplify their impact and the the lower level jobs are going to be at risk, but there's going to be greater productivity and greater impact from experts in the field. Doesn't this in in your mind or at least in mine doesn't this contribute to the ongoing real problem and perceived problem of wealth and economic inequality in the country and like yeah like how does that how do we how do we protect against that doesn't that make this a big big risk to the market >> John I love the questions you're big

picture you're looking at everything I love it yeah you're absolutely right it >> so that K shape impacts wealth creation and equality if you are a founder or you are a high agency person with a strong work ethic, you're going to do extremely well. That doesn't mean you have to have the wealth to do well. Your cost of entries to anything has dropped. So, that's one way to address this. It's an enabling and empowering tool. If you are an incumbent and you've got an established business, your business may be at risk. Not all those will do just fine though if they're AI forward. But

you're right though overall you are going to see more wealth creation happen at rapid rates. You're going to see more inequality but not necessarily because of AI. There are other issues at hand too and also depends on your market you're in. I was in Dallas last week. It's the number fourth or fifth largest market. There's a lot of talent flowing from California to Dallas. They have a lot of engineering talent. The cost of living is half the price of say New York metro area. There's more entrepreneurship culture, better tax and deregulatory framework. Like if you want to create wealth, think about going to like Dallas or Phoenix. Um, you know, you can you can build a business quickly

and cheaply. Uh, and AI will enable you to get a lot more done. Creatives, I think, will do really well. You know, for a long time, creatives are easy to get disrupted. Photoshop, you offshore the job. But if you have personality or you have content like your podcast, your productivity is going to increase. You're going to have avatars that allow you to multiply your personal brand across different digital channels. So, yeah, I think I agree. Inequality will go up, but I I wouldn't blame technology. I wouldn't blame technology per se. There are a lot of other structural issues at work. You know, we had a student debt is in the trillions of dollars. That was because the federal government under, you know, post 2008 under Obama scuttled Sally May's role

into private education. There's no account accountability to student lending. You could learn whatever you wanted. There's no private Marcus discipline to say, "Hey, look, we're not going to finance studying a random subject that can't get you a job in the real world." So there are other issues at at play. >> Gotcha. I I appreciate the insight on that. I think it's one of those things where it's like, hey, we can see this as a concern. There's a problem coming and maybe the the only real advice you can give someone right now is to try to find the opportunities as opposed to the the the dangers and to lean into those.

>> We're all we're all better off for it, right? If you and I and a million other people were trapped in an island and then Elon Musk showed up and he created wealth and suddenly he's worth a billion dollars, we'd all be better off. we would all be better off, right? If you want to create >> I was gonna say I don't want to be trapped on an island with you and Elon Musk, but other than that, >> we'll have a life raft in the back. Uh, you know, we'll have like skate pod rocket booster, but you know, if you have, you know, you create wealth by serving others. I'm a staunch defender of capitalism. I I was reading Ray Croc's biography. Many people may have seen the an incredible film. It's called The Founder, The Story of Ray Croc. And there's a section of this book where

they say, you know, Ray Croc may have created more millionaires than anyone else by people saying, "I will open up a McDonald's franchise." How many people did that? How many millions of people are millionaires now? Because they made that decision decades ago. And then you have shareholders, of course. They're modern versions of the McDonald's story. >> Uh, I really appreciate the the insight and the perspective on this. We're we're coming up on time here. I have a lot of questions I'm not going to be able to get to, but I I want to get one question in here. You are very famous for being a non-conensus investor and you try to get to narratives before they become mainstream. One that I'll just flag and we don't have time to unpack this too much, but I think your firm was one of the first that identified Ethereum as

being a big winner when the Genius Act finally started to get traction. Tom Lee and a lot lot of others picked that up at a time when everyone was bearish on Ethereum and uh I think that was a great example of this like you know non-conensus forward-looking and and they beat the mainstream to these opportunities. um tell us a little bit about what what clued you in there and then what are you seeing now? What is the the thing that the the narrative that you're seeing that you're most excited about that the rest of the market's missing going into the second half of this year? >> Appreciate it. First off, thank you for the recognition. You know, we were we were very early on Ethereum in uh in June. Um so like the thought process there was, hey, which chain benefits from stable coins? Where's the most

stable coin activity happen? It's on Ethereum. That was it. stable coins actually compete with Bitcoin as a term as a form of electronic peer-to-p peer cash which was Satoshi's title of his white paper. It doesn't mean that Bitcoin can't do well certainly can will but uh Ethereum is a beneficiary because it it is a form of programmable money. Others like Salana will do well too, but Ethereum was uniquely positioned and a lot of institutions on Wall Street, they've been thinking about Ethereum for a long time, right? Like Black Rockck is focused on Ethereum, uh structure products, you can do smart contracts and run payment and royalty streams uh and program that waterfall,

you know, with Ethereum. So, you're going to see a lot of that. A lot of institutions, I think, will adopt Ethereum. So, where we see things now is I think the next non-conensus idea is long-term rates are going to come down. They are. They're grinding down now. Like mortgage rates are coming down. They're quietly coming down. The tenure is coming down. This is two months after Ray Dalio went viral on Twitter with the debt explosion thing. And that was the day that rates talked tiptoed and now they're heading down. So, I think like mortgage refinance companies can do well. You've seen home builders have done really well. Well, if you look at the last three months, home builders have this quiet, sneaky rally that no one's talking about, but other rate sensitive categories as well. So, like I like mortgage refinance companies. I own

better mortgage uh for example, their mortgage refinance. I think I think that category which has been hurt by higher for longer rates is going to benefit going forward. >> Interesting. Okay. So, to kind of tie things up here, um it sounds like you don't see a recession. The the labor market is not going to get destroyed. Um you're very bullish on stable coins. This is going to benefit a lot of consumers at point of uh sale and a lot of other businesses are going to be challenging incumbents. So, there's opportunity there. Um look for ways to benefit from the opportunity from AI as opposed to get caught up in the crisis and danger. Uh and then just keep your eyes on the horizon for refinancing, for rates coming down and and stay bullish.

>> Phenomenal summary. Yeah, I think that's that's great. Look, you might get some summer tailwinds, but overall stay bullish on stable coins. I think you're exactly right. The incumbents are at risk, including the leaders in the stable coin market today. The question is, how do you express a view on that? And it's going to be a private company that no one's ever heard about. It might be a bank at the middle of traditional finance and digital assets. So, you're going to see a thousand flowers bloom. This is a VC uh land grab and we'll have to see who those winners will be beyond as you pointed out the the merchants and consumers. Thank you, John. This is terrific. Really enjoyed it every minute.

>> Absolutely. Where can we send people to find more of you and your work online? >> Oh, thank you. You can follow me on Twitter, Ram Alawalia. R A M Ah L U W A L I A. I know it's a mouthful. Or you can go to Lumida and sign up for the Lumida ledger. It's a newsletter uh I write uh and a release every Sunday at 12 p.m. We're also on on LinkedIn, so Tik Tok and you know where you consume social media. >> Awesome. Thanks so much for being here. Really appreciate the conversation. Thanks for joining us everybody and we'll see you on the next episode. >> As always, if you liked today's episode, please hit subscribe and make sure you follow us so you don't miss out on the next one. There's also a link in the description to our free fiveinut daily

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