What Happens to Markets Now That the U.S. Has Struck Iran? - Bits + Bips

Transcript

My name is Steve Ehrlich, head of research at Sharplink, and also your host. And I've got a really exciting guest for for you today. We have Charles Myers, the the founder and CEO of Signum Global Advisors. Uh Charles is a experienced foreign policy executive. Um he has a long bio, which I'll ask him to to provide in a second, but he was a senior foreign policy advisor to Hillary Clinton in 2016, Joe Biden in 2020, and he also has He has had a distinguished banking career uh among other Among many things, he was the vice chairman of the investment bank Evercore. So, welcome, Charles.

Great. Thanks for having me. Yeah. Um I've actually as you know, I've been wanting to have you on the show for for a little while now because uh the intersection of geopolitics and the economy, it's always hard to ignore, but I wanted to wait for a time that that really made sense. And with everything going on in the world today, both domestically in the US and then around the world, there were high-stakes diplomacy in Geneva yesterday related to Iran, uh stuff going on in Venezuela as well. Uh uh there's a summit in China next uh I I think it's in April, and just everything in the US again, like this seemed to be a perfect time to bring on someone with your your type of expertise. So, uh before we dive in, uh just have to take a very quick break um so that we can hear from the sponsors

who make the show possible. Quick note before we get into today's episode. Bits and Bits [music] now has its dedicated feed. We're spinning off from the Unchained feed and moving to a new podcast [music] and YouTube channel. So, if you want to keep up with our weekly live streams and macro meets crypto breakdowns, make sure [music] to subscribe to Bits and Bits directly. We won't publish there until March, but subscribe today so you can be ready for launch. Be sure to [music] subscribe to the new feeds at unchainedcrypto.com/bitsandbits. All right. So, so Charles, I mean, before we dive in, let me just just quickly, is there anything else in your bio I didn't ask that you think is relevant for the conversation? And I'd love for you to just spend 30 seconds explaining uh what your firm does.

Yeah, no, absolutely. So, we are a geopolitical and macro risk firm. Uh given what's been happening in the world for the last sort of 3 to 4 years, we're spending a lot more time on the geopolitical risk uh part of the business. Um but we're 22 partners in seven offices around the world, uh and we focus uh on um all of the big volatility events that are happening, whether it's what we're about to maybe do in Iran, whether it's uh leadership change in Venezuela, Cuba, Greenland, tariffs, uh elections, the midterms, uh anything that is driving volatility in markets, asset classes, or economies, we cover and we focus on and help our clients try to figure out what's going to happen

next. Yeah, and it's funny. I I actually remember, I mean, almost a decade ago when you were first launching the firm with a mutual friend of ours, Angie Dalton, and I mean, the growth I mean, I've been following progress for for years on LinkedIn. Every Seems like every other year, a new office, a new partner, a new continent. So, the growth has been impressive. All right. So, let let's really kind of dive in here. First, I I guess my first real question is, how do you make sense of everything? In my lead-in, I mentioned like five different hotspots, and there's plenty of others I did not mention. I mean, there's all the issues in the US, all the questions about what's going to happen with the Fed. I mean, the Supreme Court overturning Trump's tariffs, and then we might be at war with Vene- I'm

sorry, at war with Iran again, I guess for the second time in less than a year. Like, how do you make sense of all that as you're trying to understand the interplay with markets and and provide advice to your clients? Yeah, well, I'd say, you know, each situation is is definitely uh different. The dynamics are different, the players typically are different, and the outcomes can be uh very different. And so, in geopolitical risk, there's a tendency um because people like certainty, investors especially like certainty, to want to find patterns. It's also why, you know, we hear quite often from people, you know, you've got to figure out AI for your business, you've got to figure it out. The truth is, AI, as you know, ultimately just recognizes patterns. There are no

patterns. To answer your question, there really are no discernible patterns in geopolitical risk because again, actors, motives, objectives, and outcomes are always different. Yeah. Well, I I guess I mean, I don't know if challenge is the right word, but I mean, I actually studied uh We may have talked about this years and years ago. I actually studied geopolitics in graduate school. I worked for a political risk firm before I really got into crypto and and spent years working at the Pentagon. I mean, you've studied this obviously extensively, too. There are patterns. I mean, whether it's like realism or neocon- liberalism, and and people are trying now to make sense of Trump's foreign policy. What does America first mean in a world where we're kidnapping Venezuelan leaders, uh launching I guess

preemptive or preventive strikes in Iran. Uh I know Marco Rubio uh I I guess a couple weeks ago when Europe was discussing sort of this new sort of like empire-building type of strategy. Like how I'm sure your clients ask you to sort of provide your formulation of what the Trump foreign policy is and how that sort of relates to great power rivalries in this new century. So, what what do you say? Yeah, absolutely. So, just to pick up on that first point that you made, in the past, there were frameworks, uh historical frameworks that actually did work in geopolitical analysis. Um the problem is with uh or the challenge is with Trump being back, uh a lot of those frameworks you have to throw out the window uh because this is a president and an administration that

doesn't follow rules, laws, convention, sometimes the Constitution, but uh also doesn't respect treaties necessarily. Um and I'd argue that even uh before Trump but or during Trump one, but since COVID and the invasion of Ukraine, uh uh the world has changed so fundamentally. Uh the United States today is engaged in classic industrial policy to help secure our supply chains, reshore, uh protect American industry. We're engaged in extreme protection- uh protectionism uh as well. So, so but to so so those historical frameworks or patterns actually uh it's very risky. I think you try to use those and apply those at at your peril in a way. The The one uh framework that uh we use that I

think is very relevant. Um and it's one that's been really hard for I'd say a lot of people in the US and especially uh people outside the US to really get their heads around is uh something we've been saying for 13 months now, which is that America First uh was always going to be and has been now proven to be, but was always going to be about more than just domestic priorities. Most people assumed because President Trump ran uh for a second time as an isolationist uh and on America First, that he would focus primarily on domestic issues. Uh the truth is, America First was always also going to be about foreign policy, and within that, uh pretty aggressive protectionism, uh again, a tariff policy that's been very uh

uh aggressively applied around the world. And secondly, uh a much more assertive, muscular, and I would argue expansionist/imperialist foreign policy. I think looking back 3 years from now, uh we will probably have realized that we will realize that the Trump administration has been the most imperialist expansionist and imperialist since George W. Bush. So, so on this broader question of frameworks or trying to analyze what's going to happen next, keep in mind the one one constant is America First also includes foreign policy, which also includes regime change and the use of military force if necessary. Yeah, it certainly seems seems that way. And we're going to get into a few of these hot-button issues, but um before before we do, I'm just curious, I mean, your client base,

it's a diverse It's a It's across a diverse set of industries, but I mean, there's a few big trading trends that that I've been hearing about. And And this cuts Again, this is mostly a crypto show, but Bits and Bits is meant to be sort of a crossover between broader macro tradfi trends and crypto. Uh I mean, what are you seeing in terms of the sort of defensive and offensive positioning among your clientele? Uh I mean, we've been tracking I mean, obviously gold, precious metals surging. Um what's going on with the the dollar and and treasuries. I mean, clearly again, because this is mostly a crypto show, uh there's a bit of uh I I guess disheart- um disheartening among the crypto industry because Bitcoin and other assets have not quite uh moved in a uh I

guess in a commensurable way with with precious metals, even though um these assets um are supposed to sort of fall along those lines. What What are you seeing? And And how are um Yeah, I mean, how are your clients really kind of approaching some of these these safe havens in in a world of turmoil? Yeah, so I'd say um at the moment, and really for the last couple months, the two biggest trends that we're seeing with global investors, including US, but US and global investors, um is first this uh serious questioning about the safe haven status of the United States.

Um and within that, it's everything from concerns about will we have an independent Federal Reserve through to election integrity, all the way through to is Trump going to try to stay in office for a third term, and is democracy dead in America? The answer is no, of course, but but really deep concern uh about some of the institutional damage that's being done by the Trump administration uh and and ultimately, um you know, uh you know, is that undermining the safe haven status of equities, US equities, the dollar, and treasuries. And so, that theme is in now has a name, which is Sell America. Uh I just got back from 3 weeks literally through the Middle East and seven cities in Europe. I've never seen sentiment uh this bearish towards

the United States. Uh really, and it's not just unique to Europe, it's much broader than that around the Sell America theme. Um and so, uh we're not seeing it yet really in action. The The data doesn't suggest yet that they're really that investors are taking their US overweight down necessarily, but I think there's a lot of concern. Um so, yeah. Oh, I'm sorry. I was going to just follow up on that because I remember Sell America was a really big deal during Liberation Day back in April, and then it it of I guess fell away a little bit when I I guess some of the deals started rolling out or or I guess the the taco trade quote unquote sort of um showed itself again and people remain overweight to the US in

particular because of tech stocks. So I guess what you're saying is still stop that sentiment is there but people are not quite ready to to fully um de-risk from the US or >> Yes, I think yeah, I think you know, any investors that took some of their US overweight down, you know, a year ago into April into liberation day, they did that but still remained mostly overweight and since then that's been the right call because from the low in the US equity market in April, the market's had an incredible run. Um and and so uh I think that what has changed though is that the concern about the US, there's been more perceived institutional damage since last April and that in the governance part of ESG, the governance part of any investors uh investment process in terms of looking

at country risk, the perception is higher. It hasn't yet translated into actual selling or taking that overweight down. So and and if I can really quickly, I think that the concerns, I understand them and I answer all of them. I spend a lot of time, you know, trying to answer them or address [snorts] them but I think those fears are overdone. We will have an independent Fed. We will have uh free and fair elections and the US economy's in very good shape and probably going to grow above 3% this year. So uh but but just to say that's been one of the biggest trends. The the other big trend is the AI displacement uh trend or fear of displacement which is basically a very painful but in a way healthy rolling correction through the AI space that is primarily in software. It's made its way through parts of financial

services. I think the AI infrastructure piece is next which is going to be bigger and more painful um but but those are the two big themes that we're seeing from investors uh at the moment. And along these lines, I mean right before we we went live, uh you had uh Senator Raphael Warnock from Georgia, Democrat in your office and and I know you mentioned that you guys were discussing some of these these key issues. I would imagine a lot of uh people watching here would I guess be heartened to hear that uh there is going to remain a quote unquote independent Fed. Uh I guess perhaps that depends on if Kevin Warsh is uh I guess approved uh to to replace Jerome Powell and uh it seems like that may depend on what happens with uh with the investigation into Jerome Powell. I

mean, what is your sense on that and maybe you could just share a few other key insights that you got from Senator Warnock. Yeah, well, first just on uh the Fed, uh I think Kevin Warsh is an excellent choice. I think he's going to be a great Fed chair um and the Fed will remain independent. It will remain data dependent and I feel very good about that. Um I think that the other kind of related question though and it came up in our meeting with Senator Warnock is the the and it again comes back to that key or central concern about governance in the US and um the safe haven status which is why aren't more of the guardrails working in the US. The only guardrail that's really working in the US today and for the last 13 months has been the bond market. Uh

the the Trump put in Trump two is the 10-year yield. In Trump one, the Trump put was equities. Whenever equities corrected 3 or 4%, the Trump administration would course correct. Today, they care about equities but what they really care about is the bond market. At when the 10-year goes to 4 and 1/2, they will they get nervous. At five, they will course correct on almost anything. And so that's the guardrail that's working. A second guardrail kicked in just last Friday with the Supreme Court's decision on IEEPA on tariffs ruling against the president. Again, the Supreme Court proving that on key issues, they are a guardrail and then third and it came up in our meeting with Senator Warnock is the Democrats are very likely to take the house and a Democratic house next year could serve as another guardrail. We'll see if the

Senate's actually a player or not. So so I think that um again, some of the most bearish assessments of the US are overdone and the guardrails are kicking in and will work. Okay. Well, that's that's good to hear. And uh I guess maybe then you kind of have have an auspicious outlook for the US. Let's let's turn internationally in in the time we have left because that's what I'm really interested in speaking with you about uh there was a high stakes meeting on Iran yesterday I guess between the US and Iran and I believe Oman Omani diplomats were in the middle because the US and Iranian delegates didn't actually speak with each other and I'm love to just kind of get your sense of what's happening there. I mean, I know

there's going to be more talks next week but but Trump um certainly likes to surprise sometimes with with attacks. Uh it's the largest um I I guess military build-up in the region since uh the early 2000s and uh I know some people are wondering if if if President Trump is really willing to theoretically walk away if he gets what he wants from negotiations with that much firepower in the region. Yeah, I would say on Iran um first the meeting yesterday in Geneva led to um an agreement to continue talking and meeting again next week. Uh so I I don't there was no great breakthrough. There was no, you know, major moment um but the two sides are still talking and have agreed to continue. The the broader

question on Iran and whether the US is going to strike militarily, I think um just to to first make a sort of important context point which is President Trump to his credit in this situation as in almost all situations has defaulted to his primary uh objective or his primary uh uh MO which is to negotiate. He always wants to negotiate first. He would like to get to a new nuclear deal with Iran and again to his credit, they are trying very hard the US to get to a new deal to avert the the the alternative which is a military strike. Um and I think that uh you know, in the very short term given that not much progress is being made diplomatically, there could be a a uh smaller military strike to try to force

Iran's hand a bit more. Um but if diplomacy fails between now and say right after President Trump and President Xi's meeting in early April uh again because China doesn't like what we we might be doing in Iran, I I think uh we should expect a major military strike. So diplomacy is still very much on the table, could see a smaller strike but if we don't get to a deal where Iran essentially agrees to no enrichment and a much more limited uh ballistic missile program, uh expect a major strike which will ultimately lead to decapitation of the regime. Yeah.

Um obviously a few follow-ups there and I I I wish I could honestly speak with you for hours about this topic because that's what I used to do for my previous job and in grad school. But I mean, what do you mean by like for instance a limited strike versus a major strike? A lot of people are trying to draw parallels between what happened in Iran and then in Caracas but Caracas I think is 10 miles from the ocean. Um Tehran is is deep into the um the internal part of of Iran. Uh and then again I mean, not to tie We're going to get to Venezuela next anyway but the US seemed to be pretty successful at at getting uh President Maduro's uh I believe his vice president uh to kind of play ball whereas uh Iran with decapitation as as we've both seen

time and time again, that doesn't necessarily mean regime change. It could just uh Ayatollah Khamenei is 87 years old, something like that. So there has to be a successor plan in place and it's not like the IRGC would just go away. So I mean, what do you what do you see there and um and and again because this is a a macro trading show, like like what are you seeing in the markets? How are clients reacting and and are there any aside from just like the impact on on oil, energy, commodities, are there any sort of real takeaways that um our listeners, viewers should keep in mind?

Yeah, so I'd say a couple things in there. First, uh you know, the very stark differences between what we did in Venezuela and what we are likely to do in Iran, just highlight again that there are really no discernible patterns in foreign policy and geopolitical risk because they're very different situations and both our strategy and possible outcomes are very different. Um on Iran, uh limited strike I think means um somewhat surgical uh ballistic, you know, missile strikes on key government buildings, nuclear sites and some military sites uh to force Iran to move faster on getting to a nuclear deal. Um I don't think that's going to work in the end uh so I think it probably leaves on the table a larger military strike in April um and what

that looks like uh I think is to your question on uh are the markets trading this correctly or how to trade it, I think the oil markets have been trading uh the situation in Iran so far very well or correctly which is we have an elevated price of oil meaning geopolitical risk is now there's a geopolitical risk premium in the price of oil uh and has been for the last two months because of the possibility of a strike. I think what was in so I think oil's trading where it should based on the information we have. Now, if we get to a major military strike which we think again would be more like April um once Trump has exhausted all diplomatic uh and other options, uh I think what's underestimated there is how big it will be and I think it'll be two weeks, 10

days, two weeks of shock and awe meaning hitting everything from nuclear, government, military sites uh combined with uh uh a huge surge in in cyber and other asymmetric warfare including a wave of assassinations including the religious leadership. So the goal there to just on the third party of a question on decapitation, what that means is uh ultimately uh uh trying to identify a group of generals that will ultimately negotiate with the US, agree to what the US wants um and be much more >> Um, I the the challenge here is identifying who those people are. And so, one last quick point, um, you know,

decapitation of the regime uh is actually regime change, unlike in Venezuela. That was a leadership change. Uh the risk of it in Iran going incredibly um wrong is much higher, and I think that's where looking out a month and month and a half, we could see a much bigger risk-off move, and I think oil spiking uh probably higher than people expect. And it's Uh I was going to say and and it's I mean it's interesting too. I mean, America first and and Trump has certainly shown proclivity to US military power, but at the same point um he tried to shock and awe, quick strikes, but uh so far has managed to avoid protracted conflicts. And and to be perfectly honest, I mean, when when he took out the head of the IRGC last year, I thought that was going to be a

big problem. I mean, even something like moving the um the US Embassy from I think it was Tel Aviv to Jerus- Jerusalem during I guess it was his first administration. I I thought that was going to create a huge problem, and it didn't. So, so maybe some of us do overestimate the risk. I do want to ask you one I guess one question though. I'm curious what you think of Polymarket and prediction markets because as as you were talking, um I pulled it up on my screen and and there are dozens, literally dozens, of different um markets where you can bet on US strikes on Iran by March 15th, next US strikes strikes like today, uh will come in a be out as a supreme leader by the end of the month. And there's lots of different examples there. I I'm curious your thoughts on on that. I mean, do any of

your clients trade on these markets? Uh Please please. Well, let me just say, I personally, this is not a house view, but I personally am a big fan of the betting markets. I think that, you know, PredictIt's been very good. They've gotten better at predicting uh our election results. And now with Polymarket and Kalshi, they uh you know, these betting markets have uh been they were very precise and very good at the 2024 election. Um and uh you know, I have a kind of a mixed bag on some of this other stuff, including probably some of the hits on Iran, but but but I'm a fan of it. I think, you know, um I I I do think they're going to run into some regulatory headwinds on some insider trading issues. Um and that's a regulatory uh issue, but overall, um you know, uh being able to make bets on uh

political or other outcomes, uh not just sports, for example, I think is is a good thing. Um so, no, I'm I'm a fan. I'll give you one trade that I think is a really uh a no-brainer on in the in in the betting markets. You know, and it's political, but uh Don Jr. uh has a 1% on Polymarket. On Kalshi, I think it's 2%, but but a a 1% probability of being the uh Republican nominee in 2028, that is way too low. That's the same odds today on Polymarket as Kim Kardashian has for president. And I'm here to tell you, he's got a 10,000 at least a 10,000 higher percent probability. So, I would make I would take that trade if if even if the contract goes from 1 cent to 10 cents, you've made money. Uh Don Jr. is a very very viable possibility for the

Republican ticket top of the ticket in 2028. So, now I'm a fan of the betting markets. Again, it's not for everyone. I don't think gambling is good, but it needs some regulation, but I think it's it's been a really interesting indicator. And to your question, a lot of our clients now follow the betting markets very closely. Yeah, I I mean the insider trading Please, yeah yeah. I mean, it's funny. I think I remember the odds on Aaron Rodgers being the vice president. Who was it for? It was the vice presidential nominee for RFK Jr. Was that I think there was a Possibly, yeah. Anyway, but yeah, I'm I'm curious I mean, just the prediction markets um I don't know how deeply you've studied them. I mean, insider trading is is obviously a concern even though the laws on insider trading for what's

something quote unquote regulated by the CFTC is different than than like traditional insider trading laws with the SEC, but um yeah, I mean I mean, according to Polymarket, like Israel is going to strike Iran by March 31st, there's a 63% chance. Um 23% Khamenei is out of Iran by March 31st. Um there's it's a 50/50 probability basically that US is going to strike Iran by March 15th. Do you do you foresee any issues with like perhaps the tail wagging the dog here or like uh or um I mean, there's been so many issues or examples of people front running certain trades and and making a significant amount of money. And I wonder too sort

of I guess like the morality of of betting on on on things things like this. Yeah, I think, you know, again, um just whether it's our, you know, our firm or most the vast majority of our clients to the extent that because we do follow the betting markets very closely, um it's one input. And I think everyone understands that, right? It's one indicator. It's not an overarching indicator. It's not necessarily the most accurate, but it's a really interesting indicator, and certainly should be looked at. Um secondly, there is blatant insider trading. Uh I I you know, if you look at the the one There was one person that made a huge amount of money betting on Maduro being out. Yeah, like like this hours before or something, yeah. Yeah, and and there's been some front running of some economic data. So, there's

clearly some need for a little more regulatory oversight, I would argue. Um So, so but but barring that, you know, on the morality question, look, financial markets and morality have never really intersected. I I don't know how to say that diplomatically, but, you know, at the end of the day, people are going to uh uh invest and bet mostly on uh where they're going to get the highest return. Um and I think the betting markets are kind of an extreme example of that. >> Yeah. So, It's funny. I'll give you a funny example from a crypto point of view that you may not have seen. So, so there's kind of this online sleuth that he goes by ZachXBT. He's pseudonymous.

And he published a big investigation yesterday into um some serious insider trading allegations at a crypto exchange. And then apparently um there was a poly there was a Polymarket market on which exchange was going to be made, and uh somebody made a a very advantageous trade at the right time. So, there was insider trading on the insider trading Yeah. No, it is. It's it's it's fascinating. But uh I think that By the way, the regulation will come or the oversight will come. So, I I I do think that the future is very bright for these these companies. Also, Don Jr. is a paid advisor to Kalshi and the Trumps actually are Actually both. I think he's on both. He's on both boards, I believe.

They they own part of Polymarket. So, I I would say for the next 3 years at a minimum, the outlook is pretty bright. Okay, I know we only have a few minutes left. I want to turn to Venezuela quickly. Um from last I heard, you're going to be leading, I believe, the first foreign um business delegation into the country next year. Um just briefly kind of just talk about uh like what you're looking to to accomplish. And and I think the again, bring this back home to my audience, um I mean, the US is selling Venezuela oil. Um how could all that sort of impact the US economy, the US deficit, especially in a world where Trump's tariffs were just I guess invalidated, and the US could have to pay 100 billion plus back in tariff rebates.

Yeah, so first on Venezuela, let me just say um at a at a broader level, uh part of the theme that I mentioned earlier that America first now absolutely uh you know, applies to more than just domestic policy. It also incorporates foreign policy, including a much more assertive or aggressive one. Um and and within that for our hemisphere, uh the Monroe Doctrine is back, uh and they've renamed it the Don Road Doctrine, which I'm convinced the president named himself. But um the Monroe Doctrine is back, which stipulates that the United States can use um uh has every imperative, moral and other, to dominate our hemisphere economically and militarily, including regime change uh if there's any perceived threat to the United national security threat. Um so, uh on Maduro

specifically or on Venezuela, the Mon- Monroe Doctrine was somewhat, you know, invoked. Um the other thing I would just say on Venezuela is and this is somewhere again where I give the Trump administration a lot of credit because any other US president would have really harped on, you know, on what we needed to do or did in Venezuela by saying it was about democracy, human rights, um it was about drugs, it was about getting Cuba out of and Russia out of our hemisphere. It was about all of those things, but actually the Trump administration really actually said, "It's about oil." And let's be clear, Venezuela was about oil. And it's partly to your uh broader question of kind of how the markets might view this over over time. But >> [snorts] >> um you know, the Trump administration

have had a very explicit and very clear strategy uh energy energy policy to bring the price of oil down into the low 50s. I think oil once we get through what we do in Iran or don't do. But um uh oil will be trading in the low 50s later this year. And part of that is bringing uh much more Venezuelan production on stream, uh ultimately getting to a new nuclear deal with Iran, either this government or a different one. Iran can export more oil legally, and a ceasefire in Ukraine possibly by the end of this year, more Russian oil. Uh the world is awash in oil. I think there's actually a lot more supply coming on, and that's an intentional part of the US strategy to bring down the price of oil to address the number one issue in our midterm, which is affordability. And uh

the Trump administration's done a pretty good job of bringing down the price of gasoline because of the price of oil. So, so um I think that Venezuela is is central to that. Last quick thing on Venezuela, we are taking now 55 clients uh March 22nd cuz of huge [snorts] demand. Any crypto clients? Um not crypto, interestingly. I think it's just a bit early. Uh there is use of stablecoins in some crypto in Venezuela, but it's it's just a bit early. It's mainly um oil and gas infrastructure, insurance, banks, um chemicals, uh and um asset managers that own the defaulted bonds.

>> Uh well, there's rumors that the the Venezuelan government's sitting on billions and billions worth of Bitcoin. So, maybe you guys can can find it while you're down there. >> I will ask. I will ask when I'm on the ground. But but I think the outlook for Venezuela is incredibly bright, whether you agree or disagree with what we did. Uh there is no scenario in which the Venezuelan people would have been better off under Maduro. So, I think the future from here on on Venezuela is they have a guaranteed income stream, which is oil. The only question and only variable is how fast that income stream grows. I think it'll be faster than most estimates. A huge win for Venezuela.

Cuba's next. There will be government or leadership or regime change in Cuba. We are going to get to a deal on Greenland. And you know, we will we will have regime change or leadership change in Iran. So so a lot happening in geopolitics. And I think the one constant is keep in mind this is a much more imperialist and expansionist administration. I I would argue the most expansionist since George W. Bush. And and they're just getting started. Got you. I know we're just about at time. Do you do you have time for for one or two more quick questions?

>> sure. Please, cuz yeah, there were two other things I wanted to ask you before we'll wrap up. Sure. One, I mean, we're we're talking today on a day when OpenAI just announced a $110 billion investment. I saw plenty of this Dr. Evil means like a $100 billion but it did get me thinking again. I mean, last couple decades they were dominated by the Googles and Facebooks. Like those the the GAFA companies or whatever the acronym was it where they became state actors in their own right because of their power. Today it's AI companies, their voracious appetite for data centers, energy, etc.

And they're going to be the new the new GAFA companies. Like like how do you see them sort of playing in a world of now like great power power rivalry. And especially now with like Donald Trump, I think they they're rumors they were going to It was reported in the FT I think right before we came on that they're going to try spin out Truth Social and kind of lead into nuclear energy. So they're getting involved in in all this. Like how does that dynamic play out? And then I I guess just to again be considerate of your time. The other thing I was going to ask too is in this world of like Trump capitalism where the US government has golden shares in things like like like US Steel and is taking 10% of Intel and I think it's getting royalties from Nvidia sales into

China. Like how does all that play play? And I apologize I know it's a bit of a long question but I just wanted to get this thing out. >> it's it's a lot in there. Let me answer them in in the reverse order cuz the the second part is a shorter answer. But again, you know, as I mentioned earlier, the United States today is engaged in classic industrial policy. It started under Biden with Chips IRA and infrastructure. Trump came in, kept most of that and then has put industrial policy on steroids, which is protectionism, tariffs, and government taking stakes in companies. You mentioned a bunch of them. There's also the rare earths companies that the government's taking direct stakes in. And I think we will continue to do more of that. So again, it's very much a part of the industrial policy that began under Biden and is

being accelerated by Trump in part out of national security to secure supply chains, encourage reshoring, and reviving the manufacturing base of America, protecting American industry, protecting American jobs. So expect a lot more of it. It brings me to your first question, which is OpenAI and AI companies generally. I have a very unpopular view of of this controversial view. OpenAI does not have the most advanced or sophisticated technology. And I think ultimately when the CFO last year in November said they may need a government backstop or they would get one. I think that if necessary, the government would take an equity stake in OpenAI. They just raised $110 billion but from three existing

shareholders. Three shareholders that have the most to lose if if things don't go well. And they also raised it at a lower valuation than they initially had hoped to, which is $730 billion, not the 850 they were talking about a month ago. Not a good sign either. So and they're preparing for an IPO. Maybe they do IPO, they'll buy even more time. This cap raise gets them time. We have a long history of US companies IPOing that have no path to profitability. But on OpenAI specifically, the math is just science fiction. There is no Mathematically, I'm I'm willing to debate anyone.

Either be proven right or wrong in the next six to nine months. Mathematically, these OpenAI will not be able to deliver. Forget about earnings. They're not going to be able to deliver on sales estimates to justify the valuation at which they're raising capital today. So So I think that AI is so critical to everything we do and to national security. I think you could see the government become a bigger player there. Not not in terms of regulation. This is a very regulation light administration. But probably needing to backstop potentially take a stake in in in OpenAI.

Which would be very controversial but they would do it. Although I think the markets would appreciate it because if AI goes down, Nvidia goes down, the rest of the market goes down. So I guess Oh, absolutely. The government put on on all of that. Oh, absolutely. No, the the reason the US will bail out will will backstop OpenAI is is exactly what you said. It's it's And And by the way, if OpenAI needs a backstop ultimately, and that would be six to nine months from now, it's it's interesting would not be a credit event for OpenAI. They have almost no debt. It's the collateral damage to everyone else. Amazon, Microsoft, Oracle, you know, the the collateral data centers, real estate developers. The the collateral damage would be absolutely very painful. And and secondly, OpenAI

is the centerpiece of Trump's AI moonshot, which is, you know, Stargate is OpenAI and SoftBank. So So it'll be bailed out for the right reasons if necessary. And we'll see. But But yeah, so I But But overall, I'm incredibly optimistic as most people are on AI. I think the displacement trade which is playing out now is a little overdone, meaning people are just selling everything first and then trying to ask questions. It's going to create some really, if it hasn't already, interesting buying opportunities selectively within software, within parts of financial services that have been hit. And And ultimately like post the internet bubble, you know, what's going to emerge here through some of this somewhat painful correction is will be two or three national champions. And Google by the

way is absolutely one of them. They have incredible technology and they have the resources to keep building. But there will be others. Anthropic is good. I worry about Anthropic's taking on the Department of Defense or Department of War. I understand why they're doing it. I admire them for their principled position on this. Taking on this administration though is usually not been a great strategy. We'll kind of see how that plays out. Yeah. And And actually I think OpenAI just again, right before we came on, it was reported in the Wall Street Journal that they're having similar discussions now with the DoD so they can take on classified information. But Sam Altman seems to want the same types of restrictions. I'm I'm not quite sure how that's going to fit.

>> Understandable. Yeah. Yeah, I mean, otherwise Charles, I mean, thank you for for joining. I mean, before I let you go, I just want to give you the chance to share any other final thoughts on what's going to happen in the rest of the year either domestically or internationally. Or again, I know your firm doesn't primarily focus on crypto. So I didn't want to belabor that topic too much for you. But if you do have any thoughts on on Bitcoin and and how it sits alongside gold or or other types of equities, I'd love to get your thoughts on that as well. Absolutely. You know, I have a again a very unpopular view on crypto generally.

And you know, when you're if you're old like I am and you have are remotely skeptical, everyone just assumes, you know, they say you're too old, you don't understand it. But let me just say on crypto, I think Bitcoin has a big future. I'm much more optimistic by the way on stablecoins. I think the Genius Act was absolutely brilliant. Absolutely incredibly important to ensure that the most liquid stablecoins going forward will be dollar pegged. Very positive for the US as the reserve currency, the dollar as a reserve currency. And I think stablecoins will be the the overall adoption is only going to accelerate. On crypto itself, look, I I where I've come out on this is where I always do, which is, you know, it doesn't trade on fundamentals. It is not a risk hedge. It's not an inflation

hedge. It is not a store of value. And it is not a medium of exchange. No one really buys anything with Bitcoin. The average person doesn't. Maybe many people in your audience do. But But you know, these currencies do not trade on fundamentals. They have incredible moments of bullishness. And then they have incredibly painful periods of correction. I don't know what it's going to take to finally clear some of that out. But given the huge amount of retail and other often speculative money that drives these, especially the bull runs, I'm not very optimistic on the outcome.

Doesn't mean it can't be back up at 120,000 at some point. But it will not be on fundamentals. I'm very skeptical on on these cryptocurrencies. Yeah. I mean, that's something that I think most responsible players in the industry would like to see change. I mean, speculation can be a good thing. But But it also can have a perverse incentives. And I think the goal is to find these like these real monetary premiums or or or use cases for different assets so that you can sort of build models and and find out what the fundamentals are. I know that's something that that people are are working towards. But I I do appreciate your honesty on on this.

>> Can I add one more thing on this cuz you know, again, you know, I came from the sell side. There's a number of sell side very smart sell side analysts that cover crypto. The the reports they've been putting out in this most recent correction have been, you know, saying trying to explain why the why Bitcoin sold off so much is is been have been things like, oh, because of Iran risk. Or oh, because, you know, it's for all the reasons that Bitcoin was actually not supposed to correct. It should actually be going up. So So, you know, I I think that until the average American, not even the average, until you know, a majority of Americans can use Bitcoin, for example, to go out and seamlessly buy something that they need every single day, It will

continue to trade as a very speculative asset. Yeah, no I I again I I agree with that. I mean Bitcoin safe haven, but sometimes it's kind of like the doomsday haven. Like safe haven may not be a strong enough of word. And then again, I mean there's other assets Ethereum, Solana, like other ones that are are focused on other use cases that aren't meant to just be a a safe haven, but it's early. And I I do appreciate your your candor on the subject. Anyway, um Charles, I mean thank you so much for for joining. We'll we'll have to have you back when there are other um geopolitical factors at play. Hopefully not war war with Iran because I I think we both agree that there's going to be repercussions that no one can anticipate there.

Uh but otherwise again, thank you um so much for the time. Thank you to everybody for watching and listening and we'll be back next week with another episode of Bits and Bips the interview. Great. Thanks for having me, Steve. Good to see you. Quick note before we get into today's episode. Bits and Bips now has [music] its dedicated feed. We're spinning off from the Unchained feed and moving to a new podcast and YouTube [music] channel. So, if you want to keep up with our weekly live streams and macro meets crypto breakdowns, make sure to subscribe to Bits and Bips directly. We won't publish there until March, but subscribe today so you can be ready for launch. Be sure to [music] subscribe to the new feeds at unchainedcrypto.com/bitsandbips.