Cathie Wood: This Hasn't Happened Since Before The Depression | In The Know

on this episode. Rapid Real Growth is where we're going. I love trying to put the pieces of the puzzle together, lessons learned in history. We have to go back to the industrial revolution to understand what's going on today. Greetings everyone. It is employment Friday uh and uh it's Labor Day weekend here in the US. So, happy Labor Day weekend uh to everyone. This month's in the no will be a little different in that we're going to be talking about very long-term uh charts. And the reason for this is we're trying to make connections between uh the industrial revolution and this technology revolution. Uh and this is a work in process for us. uh and so I'll probably be posing as many questions as having answers. So uh I think uh we'll be taking this journey together, putting the pieces of the puzzle together uh particularly around inflation and interest rates uh and especially now that we know so much more from Fed Chairman Worsh. uh his Jackson Hole presentation um was quite illuminating and we'll go through that as well and I do think one of the reasons uh economic indicators are transforming here is because we are in a technology revolution and so uh I think we're going to see numbers that are are going to be quite surprising to uh the consensus view out there. The consensus view is that really nothing much is changing. We've been in terms of real uh GDP growth globally at about 3% uh for the last 125 years industrial revolution and um projections and I I guess I'll start with that first chart right now. So you can see this chart and Brett Winton our chief futurist uh uh developed this chart in collaboration with academia or certainly academic journals. Um and what you see here is what I just described. So from for the last roughly 125 years uh 3% GDP growth globally and of course um the developed world has been slower than that. uh China has brought us or kept us at that 3% uh range uh for the last 25 years I would say. Uh and you can see this is a very long-term chart uh going back to a 100,000 BC and of course all of these are very rough estimates. Um but what the chart is trying to communicate is technology revolutions tend to increase uh real GDP growth uh by quite a lot. Uh and yet for the last 125 years um we've been at 3% uh no one was alive or shall I say very few people were alive to experience anything other than a a global GD uh growth uh of 3%. uh you can see from 1500 to 1900 uh there there was uh some innovation uh of course printing press and so forth. Uh so there was a twofold increase uh from the prior 1500 years. Uh so a two-fold increase but the industrial uh revolution gave us a five-fold increase in real GDP growth. So from 0.6% 6% on average during the 400 prior years uh to uh 3%. And you can see now what we believe is going to happen in the next five years. Uh we believe that growth rate is going to at least double and we actually think that's quite a conservative estimate especially seeing the the profound growth coming out of everything AI. uh and because there are five uh five major innovation platforms evolving today. Um you've heard me say them before. So starting with AI, the biggest catalyst, but robotics, energy storage, blockchain technology and multiomics sequencing and and technology broadly in the life science space. So those are five innovation platforms. The industrial in the industrial revolution was more about three major platforms. Uh the setup was the rail explosion in railroads and then after that telephone, electricity and internal combustion engines. So five-fold increase. Um is it possible that we will get a five-fold increase in real GDP growth globally? So 15%. uh we think it's actually possible. Uh we know that Elon Musk is starting to use 10 to 15%. Uh and so anything is possible and especially with Elon Musk and he certainly is driving this revolution in very important ways. But you can see here the IMF is expecting 3.1% growth. So more than two times the consensus expectation out there. uh and that 3.1% rolling into this year is still 3.1%. So despite some of the very rapid growth rates uh in these technologies, the IMF uh has not changed its point of view. Now why am I going through this? Uh it relates importantly to uh inflation and interest rates. Um now it I've just given you the real GDP growth story. This is nominal GDP growth. What is nominal GDP growth? It includes real GDP uh P growth plus inflation. And here you can see a shorter term history uh since the the early60s. Uh and and you can see uh what happened because we went off a gold exchange standard in 1971. You can see what happened to uh inflation which is or I should say nominal GDP growth which included uh both real GDP growth and inflation uh and uh and how far we went into doubledigit territory. Um back then in it was both interest rates and inflation that ended in uh double digits. Uh so here here you can see since then a secular decline 40 to 40 well 40 years uh if you do a trend analysis uh both nominal GDP growth and uh interest rates had been falling and so most people in our business have not seen anything other than until recently until really co uh other than um falling interest rates during COVID there was the last big drop in interest rates and since then of course um we've been seeing a rise. Now the question is uh we've been saying that we believe that inflation is going to surprise on the low side of expectations perhaps going negative and I'll present some charts uh um to give you an understanding of why we believe that. Um but one of the things that's going to be uh operating on the other side of inflation is real GDP growth. We as I as I just mentioned, we think it's going to accelerate quite significantly. So there is going to be a tug and pull real GDP growth up in this nominal GDP uh calculation and inflation down maybe negative. Um, now what you can also see from this chart is nominal GDP growth and the 10-year Treasury yield do do have a from a trend point of view, they are correlated pretty highly. And so the question is where are we going now? Uh and as you can see, uh the 10-year Treasury yield has been really basing. It's been in a a range since uh since 20, I'd say 2023. Uh so we're in our third year of this range, but you can see that nominal GDP growth. Now, I will say have to qualify this is the 10-year moving average. Um it seems to be breaking out. uh and one would expect uh nominal uh or expect uh the Treasury yield to follow it. Now, this 10-year moving average uh has some endpoint sensitivity associated with it. Uh so, if we're right and real growth goes in one direction and inflation in the other direction, interest rates could continue to base around this level. If real GDP growth is north of 7% say into Elon Musk territory uh and inflation is just slightly negative then we will see real uh real yields not real yields 10-year Treasury yields um moving up. It's just the market working. when we were at 0% interest rates and uh we started uh we we started there in earnest during the 0809 time period as we were in that market and really for a lot of the the market after that when rates were moving down um the the Fed was helping that along and uh I think we're going to look in hindsight and say okay that did cause uh big problems s and uh really contributed to the chaos uh uh going into and coming out of COVID. Um so here is an even longer look at long-term uh interest rates. So you can see in the context of longer term history that where we are today and year to date the average is uh around that 4.4% 4% range um is pretty much in the zone of pre uh pre uh going off the gold standard I would say. Uh and uh and so um not surprising to be back here. The market is working. We were on the gold standard and then the gold exchange standard until uh 1971 and then all hell broke loose and now we've corrected that. Now we're coming back to a more normal range. I know that everybody uh when they hear interest rates are going up uh they get very scared that this will have um ramifications negative ramifications for the equity market. But if you'll notice recently, the equity market is hitting all-time highs despite interest rates continuing to move up. Uh and so uh what is that all about? Well, if you break apart long-term yields and you can break them into an inflation component and a real component, what we're seeing is rates are have been going up recently more because of real growth expectations uh than uh inflation expectations. Uh so um again this is just the market at work and uh and we're very happy to see the equity market um holding up so well in the face of rising rates and despite all the talk about the deficit and uh the overwhelming debt $40 trillion of debt in the United States compared to roughly $30 trillion in GDP Um well um I'd like to uh I'll get into that in a moment but before I do just want to make one more very long-term observation post uh post Fed I would say the Fed was created in 1913 um post Fed um once we got through the depression we've been in a world where the yield curve has been positively sloped for the most part unless we're going into a recession. Uh and you can see the the gray shade there is positively slope yield curve. Uh and the red means inverted. Inverted means long-term rates are lower than short-term rates. But look at what uh the world looked like from this point of view uh prior prior really to the depression. uh more often than not the yield curve was inverted meaning long rates were below short rates. Uh and rarely did we see a positively sloped uh curve and uh we believe that one reason for that is we were entering into the industrial revolution. Uh and the industrial revolution had that tendency towards deflation. we're on the gold standard. Uh but there was the the impact of new technologies on the inflation rate. Uh which were deflationary and so long rates reflected more of that deflationary undertoe um and short rates were more uh focused on the real growth, the growth in the real economy. Uh so we think we might be going to something like that now. And you can see in in the pre- um depression period um the yield curve was inverted during those shaded areas which uh that's when real GDP was negative but it was also inverted during periods when real GDP was not negative. Uh and uh you can see we've had our first uh episode there. Um this last goaround we had a highly inverted yield curve and yet we never went into a recession uh post the COVID recession and you know we were looking at that as possibly an indication that we would and in many sectors we did. We know manufacturing did, we know housing did, we know small businesses did, and we know the um lower income consumers have felt like they are uh are in a recession. So, uh there was some impact or some uh forecasting ability of the yield curve to say times were going to be tough for certain sectors, but the overall economy got through it. So it's the first indication we might be back into um sort of industrial revolution times where the yield curve was inverted uh for uh for most of the time more than 50% I think it was more than 60% of the time and the average inversion was roughly uh 100 basis points but you can see um that we got uh much uh uh deeper inversions at at other points in time. Um so here we are shorter term look deficit and uh you can see we've tipped down. Now, one of the reasons we've tipped down, and our expectation was that we would not tip down, but we have, uh, is that defense spending is ramping even more aggressively. And I would say the corporate tax reductions uh are are much more significant than we thought. uh in other words um lots of tax refunds for a lot of building and investment that uh started last year. Uh so that last one is well neither one of them is a bad reason. National security is important and corporate tax reductions excellent that has given corporations huge refunds to reinvest and they are reinvesting. Uh so we do believe though that on balance if we're going to develop a trend here in the deficit that it will be to lower and lower deficits hitting uh the minus 3% that uh Treasury Secretary Bessent has said is his goal for the end of 2018. uh and we believe we'll get there because real GDP growth is going to be much stronger uh than anyone anticipated. Um I'm going to go now to the chart I referenced earlier and that is um talking about this debt as a percent of GDP. You can see the green line there takes us back to the 40s um the late 40s. uh and you can see the debt to GDP ratio is near an all-time record. uh uh and many many headlines are screaming that you know record-breaking debt 40 trillion uh as a percent of GDP not quite record-breaking you can see but it's been hanging in there and co all the stimulus really really took us there and uh we've stayed there and that of course is very upsetting to a lot of people who are uh looking at proflegate spending and fraud and waste and all of that. Now, the purple line here is debt. This is government debt to uh corporate equities. Uh and you know what that looks like. Now, it's not apples to apples. Of course, the government doesn't have uh equities and this is not total debt to to all equity. Um but it gives you a point of view and that is uh the debt uh as a percent of equities has been coming down uh much like it did during the '9s. Uh and in the '9s we were in a very good market uh for equities and in fact in the '9s I think we hit our first surplus um government surplus in many many years. Um so debt to equity is is down and is near actually record lows um except for the late 90s. So what this is telling us is the ability to support the debt has improved because the economy um has been because there has been wealth generation. Now that brings into focus the scary thing going on with wealth taxes out there. We are adamantly opposed to wealth taxes uh mostly because we are so pro- innovation and uh we think that would destroy the animal spirits out there. uh and uh hopefully hopefully that is not where our economy is going because that will give China uh a an advantage over over the US. Um and China is our biggest competitor these days as it relates to innovation. Okay. Now let's uh we're we're going uh into we've sort of started with fiscal policy now. Um looking at fiscal policy and monetary policy on the same chart. So M2 is in the green. That's the growth rate on a year-over-year basis. Uh it is a fouryear annualized growth rate. Uh and so is the growth in federal uh outlays which is in the purple. So, uh, we think that if you compare today to the 70s, there is no comparison. We're at the lower end of this charts range. And so, um, from that point of view, we can take some comfort. Um, but, uh, we do agree that, uh, that as the economy grows faster, federal outlay growth should slow down. uh especially transfer payments and and other social types of payments and you can see money growth just putting that in perspective the last uh four years uh this is not an inflationary monetary growth rate co was uh but we have undone that and um and that is all to the good uh the other thing we like to focus on and we've mentioned this many times uh M M1 growth grow is um as opposed to the 4-year annualized rate that 1.7 on a year-over-year basis it is a little over 5%. uh and as we've mentioned before if nominal GDP growth is going to accelerate uh from uh from fiveish% where it has been recently uh then then that's a that's a demand for money uh will increase and uh M2 we would imagine would continue to accelerate. Um, however, one of the other things we're watching carefully is the velocity of money. The velocity of money is flattening out right now. That's the green line here. And you can see from the uh you can see from the purple line. And in fact, this is the only correlation we've been able to find as we've tried to explain why velocity started uh moving down in the late 90s and really in a trend sense has been moving down since since. Um so it's the labor participation rate. Uh interestingly in today's employment report that did tick up a bit. So that's interesting. Um and uh and yet if it continued to go down because baby boomers retiring and immigrants leaving um then we believe the velocity of money would continue uh to flatten out if not decline. And so when we think about the supply and demand for money, we have to take this variable into account. Now some economists disagree with me. uh probably my uh the most important economist to me uh Art Laugher he thinks that velocity is just a residual. Um I have watched it over the years and have linked it to a number of things maybe the u most important one of which is uh the labor force participation rate. Um, and here's another, again, we've gone through uh this probably every time I've done this uh this series, but the yield curve uh is flattening out again, which is really interesting. And uh we are moving towards that negative area. And you can see we were there and we were all worried about the recessionary ramifications of that yield curve in 23 24 into 25 and we didn't get a recession. Uh so I'll hearken back to the the very long-term uh yield curve chart. We could go negative again because um real growth is accelerating impacting short-term interest rates, but inflation is likely to come down and we'll go through why we we think that uh it's likely to come down perhaps dramatically and long rates will be more affected by that. So long rates could drop below short-term interest rates. So here we'll go to uh inflation and the reason I want to focus on this measure of inflation headline PCE inflation is the Jackson Hole speech that chairman Worsh gave and he is focused on this number and it is at 3.7%. uh and that is high by historical standards certainly the last 30 years um and he wants that down to 2%. So this is a little shift in our thinking um if he really means that he is looking only at this measure of inflation. Um so here's M2. Yes, a little over 5% as I mentioned before on a year-over-year basis. And so and and you can see the 3.7% uh next to money growth. Uh if this measure uh if if this measure of inflation keeps going up, the Fed will tighten more. Um we think it is temporary that the uh that the oil price uh impact from the Iran war is the reason and that it is getting set up to turn down. uh but he has focused us squarely on that and we just have to face it. I'm presenting this one which is it's taking the same measure of inflation uh but it is uh it's called the Dallas Dallas Fed trimmed mean PCE inflation. So what it tries to do is take out the tails on either side high and low inflation. And the only reason I'm bringing it up here is because I believe in his testimony to uh after he had been appointed by the president in his testimony to Congress, he focused on this measure of inflation and you can see it's at 2.3%. Uh so very close to the 2%. Uh so uh we don't think that he's focused only on the the pure headline 3.7%. He has his eye on this one and he probably has his eye on true inflation because uh one of the task force he forces he's commissioned um is to look at inflation measures both public and private. Here's a private measure and you can see that it too is closer to 2% on the headline uh 2.4%. And on core it is at 1.3%. Uh so core is starting to telegraph, hey wait a minute, um maybe you should not think about tightening as your next move. Uh and so we po put all three on this one. You can see what an outlier uh the headline PCE is relative to the others. Uh so stay tuned on that one. Here's one reason we think inflation is going to come down dramatically. Um it is very interesting that despite two wars uh the Russia Ukraine war and uh the Iran war oil has not been able to crack the 2008 price which at at the very peak was 147. um we didn't get as high as the postcoid price uh in in this uh last round with the Iranian war and uh a few things have happened. Abu Dhabi has dropped out of OPEC. It dropped out in May and its production is up 78% since then to a record a little over 4 million barrels per day. uh and Venezuela is threatening to drop out of OPEC. I'm sure encouraged by uh President Trump and uh that's another source of oil that is going to be developed more aggressively and uh maybe make it more to the Western world than to China. Uh and we know that this price signal up in the $80 to $90 range is a a a huge incentive for a lot more production and it is happening. I think in the US we're up at 13.6 million barrels a day. We're exporting over 6 million of those. Um and we were exporting almost nothing in 2015. Uh and so we think that that behind the straits of Hormuz uh waiting to flood the market is a lot of oil and the question is will Saudi Arabia throttle back? We don't think so. We don't think so because we think Abu Dhabi in particular and Abu Dhabi and Saudi Arabia are very competitive. Um it is it has turned its focus to investing aggressively in innovation, technologically enabled innovation and its mindset has been um this uh for uh at least five years. When I visited uh Abu Dhabi was clear they were focused on AI well before the chat GPT moment and they were trying to figure out ways to capitalize on it. Uh Saudi Arabia is uh unlikely uh to basically let Abu Dhabi um push its oil out because Abu Dhabi I believe has concluded that the oil price has peaked. This chart supports that and that uh transportation is moving onto the grid and the grid is not supported by oil. It's supported by natural gas, nuclear, hydro, solar, wind. Uh, and so we believe the demand for oil is peaking, has peaked, is in the process of peaking, however you want to say that. And we believe, we have believed that for quite some time. Uh but we think now the floodgates are going to open because uh Abu Dhabi and maybe Saudi Arabia will want to get as much of their uh reserves out of the ground and capitalize on this oil price before it falls. We would not be surprised to see the oil price drop back to $30, which you see here is uh I think it's the average of the the last 50 years or so. But the process of moving away from oil really started 50 years ago when uh OPEC lifted prices four-fold almost overnight after we went off the gold exchange standard. Uh and so that process has been a long time in coming and I think we're now here. Uh there's another reason we think inflation is going to come down dramatically. It's technology. Look at look at how rapidly these costs are are falling. The the purple one is uh genomic sequencing. It cost this yes in two in 2003 it cost roughly $2.7 billion dollar to sequence one person's genome. Now it costs less than $100 and it's probably going to $10. Uh and then the black line there is a IM inference costs. They're dropping 99.99% per year. Uh both of these costs are starting to get into the health care system and AI through every uh uh industry. Um and uh productivity is uh going to be driven importantly by AI and pro there's nothing like pro productivity as a force against inflation. Now here is the gold price and I'm going back to wash here. Um you can see in green here uh this is the gold price behavior during the terms of uh chairman vulkar and chairman greenspan. Both of them I believe uh used gold as their guide and during that period inflation dropped considerably. we we beat inflation and then what happened now this did start under Greenspan uh but in the late 90s we had long-term capital I've gone through this before long-term capital uh we had the Russian default right before that um and we had had rolling Asian crisis uh and finally we had Y2K so the Fed was and all monetary authorities around the world were fearful that Y2K would shut the economy down, the global economy, because programmers when computers really started making a difference. Uh they they basically thought we would be in the 1900s forever. So they didn't put in one nine uh and we were going to shut down at the end of the millennium. So, uh, the the Fed eased and then of course it eased again. And when I say eased, interest rates went up, but they should have gone up a lot more given the growth and the speculation that was taking place in the uh late 90s. Then we had the tech and telecom bubble and interest rates came uh down during the bust. So, we had many uh many uh easing moves, many more that we should have. And I do believe when history books are written that uh we will conclude that that set off um a loss of purchasing power for the dollar in terms of gold and we saw it more in gold than we saw it in inflation. Um but uh uh we have made up for that recently. And then we saw we saw during um the end of Bernanc's term and Yellen's into the beginning of Powell's uh we saw the gold price stabilizing pretty much in a range again. Uh but CO set it off and as did the Iran war. Some will say the Russian war and our own confiscation of wealth and people just rushing for insurance an insurance policy against the confiscation of wealth. So recently it's been both uh I would say fear of inflation after COVID but uh perhaps more so recently fear of conf confiscation of wealth. Um uh but the gold price going up I know that Worsh does not like and so uh it's it is interesting that the gold price peaked on the day President Trump nominated him and we would not be surprised to see the gold price um stabilize around here, maybe go down. Um uh jury's out on that. We're we're we're going to be in a wait and see mode. Um but if the dollar moves up as we believe it will uh because the returns on invested capital in the US are going up relative to those in the rest of the world. We believe the gold price will come down. Okay. Now I'll I'll just go quickly through the rest of the charts. It's employment Friday. It was a strong report. U 162,000 uh I think the expectation was in the 50 55,000 range. household employment, which captures more businesses. Boom. It was more than 450,000 jobs created. The average work week uh the average work week was uh uh longer and and that means the economy was really cranking in August. Now, this is a three-month moving average of the household employment metric. And you can see on a year-over-year basis, employment has been pumped. But we believe it is uh turning around. And for those who think that AI is going to destroy jobs, um you've got another thing coming. Uh we think it's going to create jobs. And the RAMP uh survey uh suggests that companies that are um harnessing AI AI more aggressively than others, their employment ranks are going up much faster than the others. um labor force has been coming down. So, uh baby boomers leaving, that's not going to stop. And uh for for five years or or so. Uh so this could continue to come down. The im immigrants leaving also a pressure. So we wouldn't be surprised if we're talking about labor shortages in the not too distant future. Speaking of, you can see in the green line here, the unemployment rate uh is still 4.1. That's where it stayed last uh month, but the unemployment rate for the 16 to 24 year old uh cohort uh went back from 85 to 91. Uh so entry level jobs, yes, we're seeing uh we're seeing those some of those disappear. Uh and again just encouraging those people who are looking for work to also go out start your own business to solve a problem that bothers you and use only AI and don't hire anyone and you will increase the probability of getting a job out there considerably and you might even be successful with a new business although only 10% of startups succeed. Um, so here you can see the next chart. University of Michigan, a little bit of a lift in the consumer mood. Maybe because gasoline prices, they're still up year-over-year, but they didn't continue to go up. Uh, you can see average hourly earnings growth rate 3.1%. Still very well behaved. If productivity is in the 2 to 3% range now it means that unit labor costs are not uh going to impact inflation uh personal savings still low although did tick up. A lot of people are in handmouth uh on the lower end of the income spectrum. Uh on the other end of the income spectrum, you've got uh very uh high netw worth uh families enjoying a booming stock market and booming venture funds and so they're willing to dig more into their savings. So that's kind of a bifurcation. I just present this chart to say yes uh ill curve went negative but consumption stayed pretty uh pretty uh hefty growth rate or decent growth rate uh given what's been going on. So this economy has withstood a lot. Um but uh housing has not uh you can see existing home sales here, new one family homes, homes for sale. We thought this line would continue down and yet it's turned around. I think builders uh started building on spec again as interest rates ticked down for that moment in time. I don't I can't explain why this is going on. We thought that builders wanted to clear um themselves of uh all of this uh inventory because interest rates are going up. Um but uh they they they quickly pivoted back to a very little dip in interest rates taking them back into spec building. Uh that's the only thing we can figure out. But there are a lot of homes for sale out there. uh and prices in the new home sales front still going down. On the existing um on the existing home sales, they've been uh accelerating a little bit. We expected those to continue uh following new home home sale prices. Uh but they have not again probably because of high net worth. Here you can see mortgages. Yes, the interest rates went down uh but have come back up. So my guess is builders will want to clear some of those inventories. Here you can see manufacturing PMI. Yes, this uh manufacturing sector is this uh moving from just in time inventories to just in case inventories. Um probably not. The AI revolution is impacting not just uh technology capital goods but also non-technology capital goods. Here's uh here's total uh non-defense capital goods X aircraft. Uh and what we're illustrating here is the breakout that we have seen since COVID in this measure after 20 years 20 to 25 years of topping out at the same range going nowhere. Um and so maybe uh with this technology revolution we've got miles to go. You can see the growth rate uh during uh during the 90s during the internet revolution and uh you can see we're heading back at nearly the same rate now and you can see how long that was sustained. I would start uh the marker for this one around the chat GPT moment a little bit after it. Uh so we've we're only in the first few years of what we believe is going to be years and years of capital spending. Here's the trade balance. I know the president hates the trade balance, but this was predictable. Um, the US is growing faster than the rest of the world. Imports increased, I think, in one month, 3.6%. There were some distortions, but exports fell something like 2.5% or something. Um, if we're going to be growing faster than the rest of the world, this deficit will be going up, but it will be offset with a capital surplus. more uh more individuals and investors, companies choosing to invest in the US. Um as the returns on invested capital go up here. You can see uh profitability is very good here in the United States. This is US. And so this is another reason we will see uh capital attracted here. Now we're going into some market indicators. Still puzzled by this one. metals to gold ratio. Uh now that gold has been going down, I thought we'd see a a a bigger turn in the green line there. We have not. And so that just tells us that something could be going on in China in terms of limiting the growth of metals. We talked about interest rates quite a bit. Um interest rates uh may be going up more because of the US than China. Maybe that's all this chart is saying. And then here, S&P to uh oil. Uh you can see it's hovering near its highs. If we're right on what's going to happen to oil, this is going to break out uh in a very big way. Um from the top of the range that has actually been in place, come to think of it or come to see it, uh since the late 90s and S&P to gold. Uh again here um many of the uh bears uh focused on the deficits and and government debt have been expecting a waterfall in this series uh S&P going down relative to gold uh looking more like the 70s. We disagree entirely on that and we think we're moving in the other direction. Here's the gold tot bills total return ratio and uh you can see how that behaved during the golden age of equities uh um the 80s and 90s. It went down. Uh and we think the same thing uh could happen this time more because of gold than uh than tea bills. uh tea bills um the tea bills interest rates were going down for the most part throughout the 80s and 90s. Uh we don't think that will be the case anymore here. Here's Bitcoin to gold. Um this is uh promising. Looks like a turn is in. Famous last words. I don't want to be I I don't want to be the famous last words here, but it does look uh like a little bit of a breakthrough here. And you know what's interesting and you can see it here the correlation between Bitcoin and gold there is very low very low by historical standards. Um and so to see Bitcoin uh starting to break out relative to gold is very re reassuring from our point of view. You know we're big bulls on Bitcoin. It's a technology revolution. It's uh a a new global monetary system and it's the first of its kind in a new asset class. So we think it has miles to go because of those uh three revolutions. And if we're right on on inflation, the pressure should be on gold will be to the downside. I will say we've been thinking carefully about uh Bitcoin and gold and the insurance policies that both do provide because we think this technology revolution is going to put a lot of companies in harm's way and we think there will be counterparty risk if enough companies uh get into trouble. It's interesting during um the 1800s 200 railroads went bankrupt. So there was so much capital chasing the rail opportunity. We don't think that's going to happen in AI. Um because the difference between then and now is you know the railroads were they were built on a hope and a prayer that a new world would develop uh and that revenues ultimately would come. Uh AI the revenues are are screaming the returns on invested capital in this space are huge today. uh and we see Elon's uh terrestrial data centers uh turning from huge losses to massive profits as it has pivoted or he has pivoted that part of the business for the short term uh into the NEO plowed business. So huge returns on on uh invested capital. I think uh Anthropic agreed to pay 50 billion dollars per gigawatt. That's the equivalent just the 50 billion and I think uh it cost Elon and team somewhere in the mid to high 20. So right there immediate returns on invested capital. Uh so but we do think that there is going to be a lot of creative destruction uh as this new world happens. again robotics, energy storage, AI, blockchain technology, multiomics technology. So touching every one of our sectors uh and so you know if enough funds like private credit made huge bets on SAS um and some software coming companies and stocks are coming back a bit. Uh um Salesforce.com had a a a very nice rebound after um illustrating how important Agentic AI and Slack together um might benefit the that company. Um but it still has a huge legacy software base uh to deal with. Nonetheless, it's not all death and destruction in in software. But we do believe that there are going to be dislocations in every part of the economy. Uh and you know we've been talking about electric vehicles and robo taxis and the impact on uh transportation broadly. We think that's one big sector will see a lot of dislocations. uh but we think every sector will and so this idea of okay where's the counterparty risk in the economy that might acrue to the benefit of both Bitcoin and gold and so we we shall see we think Bitcoin is both a risk off and a risk on asset so in the environment we see we believe this ratio will continue to move up and go to all-time highs uh and then just quickly no no care in the world according to bank credit default swaps. Um so no counterparty risk issues yet. And here's high yield versus uh 10-year treasuries. Again, very low. The credit markets have not been disturbed much by the by the debacle um in SAS for the private credit funds. Um and so uh there's nothing systemic happening here and that's a good thing. That's a good thing to take away. Um, so with that, I know uh this was been a long one to and and part of the reason is I wanted to set up a letter that I I will be putting out in the next few weeks uh and touch on some of those topics here. So those of you who um who do tune in to in the know had a preview uh you get special treatment. Uh and uh anyway uh look forward to the next in the no and wishing you once again a lovely long weekend here in the United States and uh a lovely weekend in the rest of the world.