Jan van Eck: Everyone Is Missing the Biggest AI Opportunity

So, I say stay invested in the market. I mean, that my one exception is if you know monetary policy is going to tighten like crazy, that will hurt financial markets. Of course, if you could predict when the when the budget crisis is going to happen, then then then you get out as well, but that's hard to predict. So, generally stay invested. That's number one. Number two is >> The market saw one of its most violent corrections since 2008 last week. Is the AI bull market over or is a V-shape recovery already underway? Hello and welcome to Milk Road AI, the podcast that knows that the three way that smart investors go broke are ladies, liquor, and Ken Griffin. I'm your host Sean Gilan. Today is Monday, August 3rd, and today we are joined by the great Jan Van Eck. Jan is the CEO of Van Eck, a global investment management firm with $230 billion in assets under management. Jan has served as the CEO since 2010 and is one of the most respected and trusted asset managers on Wall Street. He's going to share a ton of alpha with all of us today. So, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. Jan is already laughing in the background, so we're off to a good start here. And as a reminder, our podcast today is free. That would not be possible without our wonderful sponsors at Securitize, the regulated rails for tokenization, and Bitget stocks 2.0 with real liquidity, real dividends. So, keep an ear out for more information about both of them later in the episode, but without further ado, welcome to Milk Road AI, Jan Van Eck. How are you, sir? >> I'm great. Look forward to catching up. It's been crazy markets. >> It has been. And I thought that would be a great place to start the conversation. The Korean market has pulled back over 40% in 40 days. Nearly 4% of the population of Korea apparently has gotten hit with liquidation notices. Is this the top of the semiconductor market in your opinion or is this just some healthy digestion before we see a V-shape recovery? >> Well, there's lots of different things in that one question, Jan. So, I'm going to just first of all jump to I I do these quarterly outlooks and there are a couple of charts. Um it's funny that you picked Korea. You know, look this was clearly there was a lot of froth in the second quarter. I tend to break up the world into quarters and then, you know, decades. Um and we actually sent out a note saying, "Look, this is probably not sustainable." I think the Korean market right now is around 6,000. Look, it went sideways for like 17 years and then exploded to the upside and, you know, obviously there's nothing dramatic that changed. So, clearly number one sign of froth. Uh I would say Korea in particular, because it's dominated by the memory chip companies, was a sign of So, there's a whole AI ecosystem, obviously, and there's parts that I think are maybe softer and uh you know, kind of stronger and more structural. I always ask the question, if we're looking back in 5 or 10 years, which of these companies in the AI ecosystem have a competitive moat? Which are the survivors? And there were two areas that um I was sort of wary about coming into the end of Q2. One is these memory stock companies and the the second one is the single model, uh if you will, companies, just the uh the front what they call the frontier labs, like Anthropic. Because both are just playing one role in the ecosystem uh rather than having a front-to-back connectivity between customers and compute. So, um the memory chip companies, just to answer the specific question, really benefited. Their profits went up because they upped prices. They weren't able to increase volume that much, John. It was really, "Hey, you need me. There's a shortage of compute and I'm going to raise your prices." And that's okay for a 1-year or 2-year uh you know, game in a corporate America or or corporate world, but um you know, your customers are going to try to use yes less of your product. And secondly, you're going to have competitors. So, even within the last couple of weeks, a very large Chinese memory chip company came to market. It's now the largest cap in China. It was for a while. So, already this week part of the market, even though it was a speculative excess, I think is is being attacked um in the in the ecosystem. >> Gotcha. Okay, so let's unpack this a little bit more. Um I I'm curious your thoughts on the forward earnings of these companies cuz a lot of the companies that have you know, seen these crazy valuations have have seen them come based on the very strong forward earnings. Um but a lot of investors have questioned the quality of these earnings and how reliable these earnings projections are. Where do you land on this conversation? How do you like evaluate the projected earnings from these companies? >> So, let's This is a little bit dated, but I've updated numbers. So, uh first of all, you can see that these are the big powerhouses of the equity markets, right? They're mega caps and their earnings growth, I would call it, is justifying the market. Now, there are two caveats to that. One is that um a lot of this profit growth in Q2, and I'll give you the adjusted Q2 numbers, but Q2 was driven by mark-to-market gains in their portfolios because, for example, Google was one of the biggest investors in Anthropic. So, this just shows earnings growth, but if you do adjusted uh sorry, adjusted operating income that takes out these one-time portfolio gains that these companies, many of them do, you still had really impressive growth. So, Amazon's Q2 year-over-year operating income growth 43%. I mean, that is just incredible. Um Microsoft up 18% operating income, Google up 30%. Again, taking those investment gains out, John, and then Meta is down 8% year-over-year profit. They just were spending a lot of money. They also had some legal expenses that are worth noting. But their revenue, um, they're still growing crazy amounts for a large company. They were growing 28%. So there's two things we need to strip out if you're worried about, um, earnings. One is that earnings driven by by just portfolio gains, gains in investing in other parts of the ecosystem. And let's just double click on that one more time, which is you could imagine a quarter where let's say Anthropic's valuation goes down by half, the accountants, the auditors, the regulators will require these public companies to show that markdown in their earnings. So I suggested investors prepare themselves in one future quarter. I mean, they're not going to go up quarter Anthropic's not going to go up every single quarter, right? So one quarter we could have an earning surprise, an overall earning surprise because their portfolio holdings are down. I think if we start looking at just operating income, again the numbers 43%, 18%, 30% growth in operating income for Amazon, Microsoft, and Google, those are still very solid, uh, you know, backward-looking, albeit, but very solid operating income growth numbers. So that's one, um, thing that we need to do to kind of adjust this earning story. And the second is I just talked about the memory companies, where they weren't growing unit volume as much as they just jacked up prices. And so that's also something that, you know, we think is a is a shorter-term blip. But if you take the ecosystem as a whole, um I I think it's I think we're in really good shape. >> Just going to pause there for a second to point out that the market is showing signs of something kind of different happening. And our analysts at Milkroad Pro are all over it. They spent the last couple weeks making a lot of trades, getting out of some positions, and then getting into a lot of new ones, getting ready for the next wave of robotics, space, or even kind of picking some different AI winners. If you want to see what they have in their portfolios, what positions they're opening, it's just a dollar in Milkroad Pro at the link below. >> Okay, so I want to ask about this. It seems to me like what I'm hearing you say is that the fundamentals are still strong, the earnings are still strong. A lot of investors are wondering is like we are we going to see a situation where these fundamentals continue to be strong, but all the leverage that's been washed out, the overvaluations, that doesn't come back for maybe a long time. How do you see this playing out? Are you expecting a V-shape recovery or like a longer-term recovery on these things? >> I don't know. I think the a lot of the froth is now gone. I mean, we we see parts of the ecosystem, you know, kind of with exuberance and then being pretty quickly punished, right? There's this recycling. So, um I don't have the chart here, but Korea will serve as a good example of this. In the fourth quarter of last year, Oracle, there was a lot of worries, as you may recall, about the financeability of Anthropic's compute needs. And open AI and open AI as well, right? And Oracle and Coreweave were the public stocks that kind of took the pain there. And they were both down 50% in a quarter. So, um over in the course of July, right? You had semis being down 20% and again some of the more marginal players down even more, some of the Bitcoin miners that are transitioning to compute companies got hit a lot more. So, I think a lot of the froth is already out of the market. >> Okay, so the the froth is out, the fundamentals are still there. I want to go back to something Yian that you mentioned in your first answer, which is that some of these companies are, you know, doing well and getting the speculation cuz they've raised their prices, but some of these companies you've pointed out, I think you you've called out Amazon and Google, they stand out to you cuz they have some level of vertical integration at all layers of the stack here. AI sorry customers compute frontier models, and chips. Walk us through the thesis on this and what makes these stand out in this market to you? >> So, as I said, uh you want to look at the ecosystem. I'm you know, I like to talk about history a lot and people keep talking about railroads as you know, kind of quintessential bubble or the internet bubble, right? So, again, what which companies are going to survive? The one thing you need to think about I think is the market structure of the industry. So, railroad stocks in the United States peaked before the technology was built out. So, before the transcontinental railroad was built in the 1860s, railroad stocks kind of peaked in Europe and sorry, in the UK and the US in the 1840s, just sort of big picture. But a lot of those railroad companies, you know, they weren't really a complete ecosystem, right? It was only like the railroad from, you know, one end of Pennsylvania to the other or New York up to, you know, Connecticut. These weren't companies that like really provided the full ecosystem. So, that to me is, you know, the transnational railroads, if you will, are that full solution end-to-end for customers. And so, I think of Google and Amazon from that perspective. They have the Ameri- is all about the American consumer, right? So, do these companies own the American consumer or have a big uh market share? Absolutely, right? Google, Amazon, Meta does as well, right? Then, are they vulnerable or do they own basically the compute that they need to provide those services to those customers in a sustainable manner? Then, do they have a leading hardware, I call it leading software, these frontier lab um models, and they also have some of the physical infrastructure, they're starting to design their own chips. And so, I think those companies are just m- with that vertical, I call vertical integration, you know, more uh have more of an economic moat, they're more protected. I mean, unless they lose their touch with the consumer at the front end, I can't see any technology change where they can't adjust and uh and continue to service your the US consumer, which is the biggest market in the world, right? I can contrast that with um companies like the memory companies or just the chip companies like an Intel or Cerebras, where only they're only really providing part of the ecosystem, and I personally think they're just m- much more vulnerable. And then also those single LLM uh models in the in the third category, they're software, but they're also right now uh they're they're trying to reach into the device device uh and they're trying to they clearly have the customer, at least OpenAI does. Um so, the question is how quickly can they build out the compute? >> Got you. And I want to keep taking each piece of this as we go, but that that's helpful on the outlook for Google and Amazon there and what distinguishes them. But in this hardware section, you you call out Nvidia here, and this for a long time had been the big darling of the markets and has since been, let's say, choppy for a little while. What what makes Nvidia stand out to you? What do you think makes it so attractive here? >> Yeah, I mean, I call it the IBM IBM mainframe of the AI era. Um So, Nvidia used to just be a graphics chip company. And if you've ever, um as I have, run a company in a commodity business, right? Where you're very vulnerable on one product and you're only one part of the ecosystem, you're just dying for that strategic opportunity to be more front-to-end. And so, a lot to me of what Jensen Huang does at Nvidia is to be sticky to customers. So, probably the most important thing is the CUDA software, which is the programming, right, of their of their chips, uh which which their customers, I mean, I'm not saying there aren't competitors, there are, but that's one of the things that's made them more competitive. They're obviously at the cutting edge of chips as well in terms of efficiency, and they continue to to innovate there. And then, they're also, you know, they're sort of the chips oriented towards the training of the models in the frontier labs or the kind of I'll call it use of trained models, what they call the inference. And Nvidia's stretched into those parts of the ecosystem, as well. So, their growth earnings growth is fantastic. Their sales numbers are fantastic. The stock has become very unloved, and I'm sure it's driving Jensen Huang crazy, uh but the valuations I think I still have a chart of that here, um just to show what that looks like. A lot of a lot of a lot of charts here. Um but you can see the forward PE ratio on the on the right-hand side of Nvidia. So, it's as attractive as it's as it's really been, um in the in the AI era, but it's uh its revenue and profit growth is still at the high end of any one of these peers. So, um I still think it's it's one of the core companies of the hardware stack and I'm comfortable. It may not be the top high-flyer, John. It may not go up seven times in a month, right? No no longer given its large market cap, but it's still very core, has a strategic, I think, competitive advantage. And and the other thing I wanted to mention about their behavior. Now, this chart is extremely dated cuz it's like 2 weeks old, but the point of the chart here is that in the black line is IBM's share price. Now, IBM has been core to corporate computing for decades and decades and was basically very slow, but able to pivot from hardware only to software to services. Its stock is not that exciting, which is the black line, but if you add reinvested dividends in, it's very competitive with the Nasdaq. Now, of course, it got slammed 2 weeks ago because they pre-announced a revenue miss, but the story is still there and and Nvidia is is now paying out some of its dividends. It's doing guarantees and reinvesting in the ecosystem, but its cash flow is tremendous and it's returning some of that to shareholders. So, anyway, that's my that's my kind of pitch on Nvidia, John. >> Well, that's really helpful. I think the framing of Nvidia almost as like a relative value stock in the AI trades based on its dominance in the four P's is a really interesting way to look at that. So, I wanted to make sure we got that to our audience. I do want to hear a little bit more about the the concerns you have around some of these names like Open AI and Anthropic, which are like very focused on their frontier models for their valuations. And why do you think that there are some potential concerns for these frontier labs? What's your thesis on on look like? >> Yeah, I mean, I'll tell you two slides. I don't know, I'm on I'm page 14. Q1 was a huge breakout for the Frontier Labs because Anthropic demonstrated that corporate America really wanted their product. And they were showing tremendous revenue growth. But as I show through my very un-clever bullseye, once, you know, you're grabbing that much of corporate America's IT budget, people are going to come after you. And I just want to articulate the threats that came out in Q2. So number one, and I won't go through all the charts here, but number one, obviously at some point corporations are going to try to optimize their spend on AI. I would say they don't really at mass scale have the tools to do that right now. But the idea is that there's there's a term called harness, which gives corporations and gives users more flexibility to pick different um AI LLM models given the tasks. Like just at at VanEck, I'll throw in one example. Like half of what people use Claude for at VanEck is just what you could use a Google search for for free. Right? But once that prompt is up there, they just use it for everything. That's not optimized. I think over the next year corporations will try to optimize their use of these models and not just uh just maximize. Secondly, they're a lot They have a lot of competition, right? It's and it's not a secret. The Chinese um open-source models are very competitive uh with with uh you know, with Claude's quality. At some point, I I think that will dawn onto the market that that despite their tremendous revenue growth, they may not have um you know, a competitive mode on the pricing of these models and they may not be that different from each other. And you may be able to use older models for different tasks in in corporate America. There's only a subset that really needs the latest greatest. Third, uh, I won't go into it, but, you know, some there are some voices out there in Silicon Valley saying that by putting by when a corporation puts all its data into these Anthropic models that they shouldn't be trusted, that they end up being competitor. Um, and it's better to wall off, you know, your corporate data uh, from from the you know, or the the context or the memory, if you will, from, uh, you know, from these model companies themselves, which is another version of bullet one, but it's not exactly the same point. So, um, anyway, with with those points, John, you know, I just think it's, uh, they look to me like I wouldn't want to have a lot of free competitors within VanEck ETFs, right? Um, just as a starting point, I wouldn't want to set up my customer base to be really mad at me and trying to move away. And I wouldn't want I'm going to fight very hard to control, if you will, the entry point or or the, you know, the optimizer of, uh, of these AI software models. Um, but that that's, uh, that's a risk out there. >> I thought this would be a good segue into asking about how VanEck is using AI, because I think every company is approaching it differently. Are you all locked into one model? Are you doing some open source, some closed source? Are you token maxing? Are you kind of trying to control your spend? Where are you guys on the spectrum of all this? >> I would say we're still, uh, to use a phrase, token maxing. Um, I still want people, uh, to to kind of understand and use these tools as much as possible, uh, because adoption, you know, technology adoption by humans, John, is is is uneven and un-impressive sometimes, right? It's usually you know, IT projects fail on Wall Street like half the time and the reason is users just don't adopt them. So, um you know, we've been trying to encourage what I call our champions, those who are building their own citizen software or using these models. Um and then, you know, kind of getting proliferation. Um I would say there's some, you know, just to give you an example of one of the issues that we have, um we're starting to create a lot of agents at Vanax. So, how do you name agents um and separate them? Interestingly enough, um we're using Zoom. Well, we give an agent an email address and then IT has used Zoom as my interface with my personal agent. So, I all I have to do is do a Zoom chat with my agent saying add this skill or whatever that might be. So, I thought that I just I don't know if that's repeatable. One of the inefficient things of everyone writing their own software programs is that a lot of people are writing the same software programs. So, there there's lots of things there, you know, but to me I always say there's data and there's software and there's people. And at the end of the day, you know, data really really matters. So, our data organization, I think is pretty good on the customer customer end and we buy a lot of data um to understand our customers better. And on the investment side, you know, obviously data is super important as well. Uh but it's hard to collect the notes of individual analysts, which I would consider to be proprietary data and then to uh propagate it across the firm. So, push the champions. Uh Uh, don't limit the spend right now is kind of our overall philosophy and then try to I guess currently right now really communicate more across the firm and try in terms of adoption. Uh, so that's that's where we're at. >> Well, maybe in the next episode John, my AI will interview your AI agents and we'll just watch the the podcast after it's >> stop that because of course, you know, two clever, you know, two clever uh, colleagues of mine started having their agents trying to talk to each other and saying like, "Well, what are you doing that's, you know, better than I'm doing?" And our IT department put that stop to that right away. >> Well, it's a it's a strange new world we're all living in it. Uh, I do want to ask about some of these open source models and how this factors into both your use and your thesis on AI. Uh, Kimmy K3 made headlines by getting close to the the Frontier Labs from the United States but at much less cost. Are you guys using open source models or you exploring that? What what's your what's your take on this? >> Not not yet. Not yet. Um, I think we need to adopt a, you know, kind of an interface or a har- harness. Like I would just say we're at this sort of simple stage where we moved from Open AI in February of this year basically to be an Anthropic shop. But I I would I we're definitely going to take that next phase but to move faster we'll probably 3x our Claude usage uh, or something like that um, before IT can kind of build that infrastructure. Of course, some of our geeks are are and researchers are doing open Claude and all that kind of stuff and creating their own environments. But um, you know, there's a there's a big learning curve and the protections on cyber and again some of the stuff I was talking about um, you know, need to be there uh, before we can unleash it. >> Gotcha. Okay, makes sense. Uh, I want to ask you about this. There are rumors which, you know, speculation but they're they're seem to be credible rumors that Open AI, Apple and maybe others are exploring consumer products that incorporate AI. And I'm curious if that would change your thesis at all on on Anthropic, on an OpenAI, if they were able to get to market with a consumer device that that was popular. Is that something you're watching? Do you have a thesis on this yet? Are you still like waiting to see on this? >> I mean, listen, people again what I went back to I said the consumer companies, right? The Googles, the Amazons, the Metas, they they don't want to lose their consumers. And they want to make it as seamless as possible. So I get the the desire for having that killer device. Right, it's been Google Glasses for a while. I I mean, I can tell you what my killer device is and it's Apple already has it. I think AirPods have a lot of intelligence already. I'm connected effectively to my phone through voice, which is I think a very easy interface. And so I think I'm not sure you need to create anything different, right? Because what you want is connectivity to not only to your local device, but all what your local device can access. And so I I I I think I think there'll be a lot of developments in that direction, but I think people already have entrance is my point. And it's hard to get people to change their you know, their physical habits. That's why Apple keeps selling so many iPhones. So if if that's you know, if that's the area dimension to fight, you know, it's going to be hard I think to break through Apple's market share there. >> Real world assets like funds, treasuries, and private credit are still running on rails built decades ago. 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Plus, you get the lowest fees in the market at just .04%, and you can trade them like any other crypto as margin, in earn, in grid trading. Tokenize stocks finally done right. Head to milkroad.com/bitget to get started. >> Got you. Okay. Well, we'll see what happens with that fight. Uh Jan, I want to ask you about some of these like risks and, you know, concerns some people have about the AI bull run. Um the biggest one that I've heard you mentioned once already in your your answers, but a lot of analysts have compared this AI CapEx boom to the railroad boom, and they're saying that we're going to repeat some of those mistakes and overbuild compute capacity. Do you agree with this assessment? Do you think this analogy is flawed? And and how should investors think about discounting this risk in the market? >> Yeah, so if I could just take a step back because I've been answering a lot of questions about AI in general without explaining, you know, if you haven't heard me before, what's the VanEck investment philosophy? So, very simply, I think that, you know, markets are efficient. However, there are some, I'll call them, 10-year trends that are so massive. They're either political or they're you know, government, you know, sorry, political, but I mean my monetary, fiscal policy. Uh so, those are politically driven, or technology. And some of those trends are so massive that they will affect your portfolio, right? The financial markets reflect the real world at the end of the day. So, what are those massive trends that I see? Um basically, AI is one, so that's why I'm very comfortable talking about this stuff. Number two is the rise of India. Um and the biggest risk I see is federal budget deficit. So, those are the 10-year trends. So, why would you overweight semiconductors to begin with? If you're, you know, if you listen to your economics professors, they'd say the markets are efficient. If semis are that important, that would all be priced into the market cap. Well, basically, our view is no, that these big trends are so big that they impact quarterly earnings in a way that you wouldn't see from backward-looking. Because the problem with backward-looking is this is what a proven psychological defect that humans have is recency bias, right? So, we can't see these big forward trends if we only look backwards. That's basically the problem. So, anyway, that's why, you know, we are still heavily leaning into this AI trade. So, when will the AI trade kind of come to an end? And I think it's basically going to be when supply meets demand. So, uh you know, demand is here, supply is here. You keep looking out, you know, kind of a year or two, and it's been, to me, a rolling two-year comfort level that demand is still far bigger than supply. And no one can predict that day, John, when it starts impacting the markets, but that's I still think the stage that we're in, where the growth is tremendous. You're basically seeing a reshape of IT, right? Corporate IT and personal IT. That's a huge part of the economy, and we've got we've got a lot of physical constraints, power constraints, you know them all. So, anyway, so that's why I think this mega trend will will stay in place for a while. Again, lots of rotation within that trend, lots of short-term pain, lots of speculative excess, right? But the big picture, you know, that's that's how I kind of see the the big picture. Now, railroads. Railroads more important to the economy, I think, than AI, but you know, that's because it effectively created one big consumer market in the United States. And it, you know, we can talk about the the effects. I could talk about for an hour. That's a separate podcast. I love I love railroads and understanding the impact of them. But again, going back, not all technologies are filled with a overcapacity, which happened in the internet bubble, or in the kind of excessive fragmentation, right? So, the the railroad companies were Canals were financed with government debt, effectively. Guarantees. That's how the Erie Canal was built. Railroads were actually built with a lot of equity, and they were speculators. And those speculators, you know, would be running around the modern-day people, uh hucksters with PowerPoint slides, you know, effectively raising equity money to build out railroads. But as I said, the market structure didn't make any sense in the sense of like having two railroads go from one end of Pennsylvania to the other is great in the short-term, but long-term it doesn't make it's not a complete solution for a corporation, right? So, or a shipper, or even an individual farmer. So, anyway, that's my my kind of view that uh And now, I recently learned that other railroad industries in continental Europe, for example, didn't grow like that. The regulators and the government basically had it be more holistic and the investor outcome was therefore different as well, which is which is kind of interesting that um America and the UK were kind of the Wild West when it came to railroad promotion. And let me give you some counters, right? Some other technology breakthroughs. The utilities in the United States, we didn't build too many utilities. There wasn't an implosion of utilities. It's we needed a lot of electricity and that would you know, that just grew over time. The car industry arguably, there wasn't a period where we suddenly built way too many cars and the whole industry collapsed. Now, there was consolidation. There were a lot more car companies, right? And then it narrowed and then we had international competition. So there were ebbs and flows, but it wasn't some crazy just because it's a new technology doesn't need mean that the market structure has to be broken. So I I I had to kind of make that point as a counterpoint because people always say, "Oh, it's the internet bubble. When's the bubble? This is the bubble. That's the bubble." And I'm like, "Not all technologies are a bubble. Look, but not all the companies will be a winner." That's my argument. >> Yeah, I think there's a lot of wisdom in that and I think, you know, to go back to your point about the supply and demand economics of it, as long as that gap is there, there there's still a bull run somewhere. So that that'll make sense and I appreciate the the clarity on that. Um I I want to ask you about this. New York became the first state to issue a data center moratorium. A lot of other jurisdictions have started to follow suit. Um and it seems like there's this like growing political backlash, whatever you want to call it, anti-AI sentiment. Do you see this as a significant market risk and and how are you thinking about that as that kind of continues to play out? >> Ultimately, no. Um I do think that local jurisdictions always have this uh not in my backyard NIMBY philosophy. That's that's not new. I think the risk is not state regulation uh because some states will be pro-development and other states will be anti-development. I mean, data centers don't seem to offer major environmental or human risks. I mean, by the way, people were against railroads cuz I thought it was going to tear scare the chickens from from breeding as many eggs. So, there there will be fear-mongering, but I think the the main risk is at the federal level. And it's not that I don't think a government could or a party could come to power that's against data centers, but um I follow China pretty closely, and when you look at the bipartisan consensus around our our China policy, you know, Biden complained a lot about Trump, but did exactly what Trump did when it came to China policy. China is such a fierce competitor of ours. Uh we just created a separate China semiconductor um ETF, for example. They're such a competitor of ours that I can't imagine a federal official or or on a bipartisan basis taking us backwards in one of the industries that we're a world leader in. It just doesn't It doesn't make sense. Um and and there's just too much international competition, but possibility, but low low likelihood. >> Got you. Okay. So, some of the states will make their choices, but the federal level is still positive, and and that's the big thing that matters there. Um I I do want to get your thoughts quickly on this. Uh the the Federal Reserve held rates at their last FOMC meeting. The US 30-year bond market has responded by jumping to highest yield levels since 2017. It seems like the bond market is starting to revolt. How are you taking this market reaction? Are you concerned about the instability in the bond markets? Like people looking at Japan, and I don't want to get the question to be too broad but here, but how are you thinking about the the reaction we've seen from the markets? >> Look, I I I am pound my table on this point, John, time and again. Our federal budget deficits are the one of the biggest risks to financial markets. I'm I'm I'm just an ambassador, right? I'm not talking about the politics of it. The amount of the fiscal deficits that we had in the post-COVID era were would have driven an emerging market country to bankruptcy and debt restructuring. It was 6.5% of of GDP was our federal budget deficit. Um I've been saying that this year it's going to be trending to the low fives as a percent of of GDP, which is kind of at least trending the right way and with tariff revenue and and year-to-date fiscal year-to-date it's performed pretty well. So it's you know, sort of been in the right ballpark of 5.4 5.5%. Uh the US fiscal budget starts on October 1st. So so far so good from fiscal spending, but it has to get a lot better. So that's point number one. But point number two is the UK, the US and Japan long-term interest rates and we are the trifecta of doom because we have the highest you know, we have high debt to GDP ratios. Long-term rates are all going in one direction, which is higher. And it's funny because I've always showed those three. I don't have that chart today, but those three long-term rate charts together and it's uncanny because as you know, over the weekend basically the US said and Japan jointly intervened in the currency markets because Japanese currency was weakening so much. So it's my favorite thing to worry about and you know, just my one factoid when people say, "Oh, the US won't default on its debt." Almost guaranteed we will not meet our obligations because in 2032 we will not have the money to pay for Social Security and payment benefits are scheduled to go would go down in that circumstance by 20%. So there's just no way we can meet all our promises whether we technically default on T-bills and T-bonds or not. So now the question is when do you become concerned and it's so hard to know what's normal or not. So if you look at the 30 year which was what you were talking about real rates are kind of in just in the 3% it depends on what real is so many caveat caveat caveat but let's just say that long-term rates are higher than they've been in the last 10 years since the financial crisis but they're not crazy normal when you take a multi-decade chart view like a 50-year view some of the data series don't really exist. So um it's worrisome but Jan Vanek is you know wary about hitting the panic button too early in terms of reading the market John but as an investor if it's one of your biggest 10-year risks the way you solve for that is you structure your portfolio to protect yourself if that happens cuz you can't read the headline and then restructure your portfolio it's too late. So I know I've been going on for a while short answer short and step I should say is buy gold buy gold I think in that long-term view everything will go down if the government loses confidence everything will go down in the markets it's really a dark dark day but on the other side investors are going to want gold as the alternative and I and I think Bitcoin as well. So that's sort of my my I think it's really important I think it's just a matter of timing it's like the housing crisis a lot a lot of people knew it was going to happen it's just you didn't know when. >> Jan I really appreciate the views on that that's a perfect segue into the last thing I wanted to cover with you, which is some thoughts on portfolio construction. It seems like there's broad agreement that the 60/40 like stocks bond portfolio is is dead, but there's a lot of disagreement about what should replace it, and I'm curious if you could give us some thoughts on portfolio construction allocation in this volatile environment and with all these macro risks you've outlined. How are you thinking about that? >> Yeah, I mean, listen, generally speaking, uh market timing is super important. So, I say stay invested in the market. I mean, my one exception is if you know monetary policy is going to tighten like crazy, that will hurt financial markets. Of course, if you could predict when the when the budget crisis is going to happen, then then then you get out as well, but that's hard to predict. So, generally stay invested. That's number one. Number two is what I've said about the fixed income part of your portfolio, it's completely scrambled because the government now will be the source of risk. So, everything in the fixed income market is built around the risk-free rate, which is supposedly US government bonds. I'm saying that the biggest financial risk in US history will now come from DC. Throughout US history, it's been caused by Wall Street or some sector of the economy like agriculture collapsing and then the government coming in bailing it out. That Now, it's not going to be like that. It's going to be DC that's the cause of the problem. So, that's the problem with thinking about your fixed income portfolio in historical terms. The second part problem with the fixed income part of your portfolio is over the last 40 years, interest rates generally have been doing nothing but coming down. Right? They peaked at the end of the 1970s. That's so good for financial assets to have long-term rates come from the mid-teens all the way down to 1%. Right? So, that tailwind is gone. So, to answer your question, we're overweight equities, underweight fixed income, and we also have a healthy allocation to to real assets. So, think of a sort of like 70/20, um, you know, and then 10% in the real assets or something like that. Um, >> Okay, so >> that's a tilt. You know, you could get more extreme and I'm probably more extreme in my personal portfolio. >> Yeah, and I think more extreme is generally where most people are these days. Uh, but I do want to hear some thoughts on these hard assets because Bitcoin versus gold has been debated a lot for a long time, and I'm just curious where you land on that. I'm going to interview Matthew Siegel, by the way, on the Milk Road Crypto channel for who's the head of crypto at VanEck. So, I'll get his thoughts on this as well, but I'd love to hear your perspective on that Bitcoin versus gold conversation and how you assign a place in the portfolio to those assets. >> Sure. I mean, they're they're related but different assets. So, first of all, let me make the related point. Bigger picture, they tend to behave the same. So, gold and Bitcoin both hit all-time highs last year, and I won't go through other market history, but that's that's there's no coincidence there. Uh, Bitcoin does have its own biorhythm, and you know, John, when I do my quarterly investment outlooks, VanEck diversified, I'm not shy about being bearish on our assets. So, you can look back at the beginning of this year, I said it's unlikely for Bitcoin to have a good year in 2026. But, it did its correcting in the first quarter, and I think this is a great time to accumulate. So, the argument between me and Matt and some other people was, "Well, when do you buy?" And I'm like, "Don't be cute." You know, I think that if you look at the the lower vol of Bitco- Bitcoin, you know, a 50% correction, which is what you've kind of seen into the 60s, is likely. Uh, Bitcoin vol has continued below. So, I think it's done its correcting, um, and it's time to accumulate. If you're if you own it in your portfolio, and you allocate, allocate more now. This is a great time in in my perspective. it's really hard to know, you know, exactly the date. But you're if you get the year right and the magnitude of the correction, I think this is a really good entry point for for Bitcoin. Gold is in this, you know, Gold is re-emerging to me as the number one global currency. The dollar is slowly diminishing. That's kind of my big picture view. Asia, where a lot of wealth is being created, is very gold-oriented. Gold's not going to be replaced by the renminbi, the yen, or the Indian rupee. It's just going to be replaced by gold. And so I it doesn't matter to me if it has a bearish year or two. You know, that just doesn't make me uncomfortable at all. Frankly, I think it's been trading pretty well here, holding the $4,000 price target. So, I don't see them necessarily synced attached at the at the hip, but I think they generally move together and and and I'm excited about both and I think they play really important parts of your portfolio. >> Yeah, one of the reasons I was so excited to talk to you today is that after such a highly volatile event in the market, people want to hear from somebody who has experience in the market. And there's a lot of analysts we talk to who do great analysis, but you're an asset manager and you actually have, you know, things at stake in the market. So, it's really encouraging to hear the the refreshed outlook here on so many things, the the bull thesis on AI, on Bitcoin, so many other things. Thank you so much for being on Milk Road AI. Where can we send people to find more of you and your work online? >> Yeah, well, vaneck.com has our our content. If you Google for investment outlook, you'll find my quarterly deck and I usually have a bunch of slides as well that I that I put out. They're different, John. They basically focus on I think what people are missing. You know, there's a we all curate slides, right? That's almost what our job is, but anyway, so I do that quarterly. And then when I have time, I I kind of recommend podcasts and books and things like that that I find insightful. >> Great. Well, thank you so much for being on Milk Road AI. I hope we can talk to you again and get some updates on charts we're missing next quarter. >> Oh, nice meeting you. >> Nice meeting you, too, Johan. Thanks for being here and thank you all for joining us. I hope you all learned something today. So, until next time, stay safe, stay educated, stay bullish, and we will see you on the next episode of Milk Road AI. Thanks for being here, everyone. Bye. >> Want to stay ahead of the biggest technological shift in history? Subscribe now to get insights straight from the sharpest minds in tech and finance. Quickly you'll note, this show's for educational purposes only. 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