Scott Bessent Could Change Everything w/ Andreas Steno

I think it's a big deal what Scott Messend has done over the past few weeks here. I think it started out as a nothing burger, but then slowly, but surely it has turned into something big. But now it's become so systemically massive that it is now an important part of the market that's too big to fail. And all the central banks have talked about it. It is now, as you said, it's like the core component part of the market here. They also need a solution to the straight of a moose to really unlock all of this. But if we get that, and I could easily say that we'll have maybe three, four months in a row with negative CPI prints at the moment, and that will really allow the effect reserve to do something right. I'm struggling to see how the cycle can stop, and we're not seeing inflation, so it's not like they're going to jack up rates in the middle of this in any meaningful way. To me, this looks just like the '90s, and we saw ISM go up a lot, it cooled off a bit, it then went up again, it feels like this is what's going to play here. I don't see it playing any differently. I'm Raal Pal, and welcome to my show The Journey Man. The Journey Man is where we travel together to that nexus of understanding between macro, crypto, and the exponential agent of technology. I'm a macro guy, I've been doing it for 35 years, and I love the opportunity to talk macro. And I particularly like macro thinkers who have taken on board the new world and understand the impacts it's having. I can see many still trailing it, saying it can't be so. But Andreas, who shares part of Real Vision Pro with me on the Real Vision platform, and is a favourite there, really has been thoughtful about this. And I always love talking to him, because he has a consensus idea, he's generally very right. He's a super nice guy to boo, and it's just a thought partner that I really enjoy spending time with. So let's chat with Andreas to figure out what he thinks is going on with the economy and markets. Join me, Raal Pal, as I go on a journey of discovery through the macro, crypto, and exponential age landscapes. In the journey man, I talk to the smartest people in the world, so we can all become smarter together. So it's time, I say, for that conversation with the great Dane, Andreas, how are you, my friend? Good, it's slightly hot here in Copenhagen. We have nice Indian summers, so that's why I'm donning my Hawaiian shirt, and look a little bit moisty in my face, but other than that I'm good. What is hot for Denmark? Is what, it's 22 degrees or something? Yeah, if we're talking Celsius, right? Yeah, the thing about Dane's, Raal, is that, you know, we complain all year about the weather, and then as soon as we get sunshine and, you know, decent temperatures, we moan about that as well. So we're never satisfied with the weather here. You just got it. That's the same as English people. Yes. So what's on your mind? What are you looking at? Because there's a lot going on as ever, right? In macro. Yeah, you know, I think it's a big deal what's got best and has done over the past few weeks here. I think it started out as a nothing burger, but then slowly but surely it has turned into something big. And, you know, everything he's done over the past few weeks relates to the management of the US Treasury debt. And I think it's more important than ever to stress the fact that it is increasingly difficult to get foreigners to buy the US debt, meaning that they're, you know, seeking alternative buyers. And that marginal buyer right now is mostly a hedge fund. And that has, you know, altered the picture quite a lot in terms of that management. You put out about the kind of carry trade that the hedge funds are doing in treasuries, the arb and stuff, the repo market. People talk about it with Bank of England's written about it, the Fed have written about it, but people don't really understand it. And it's quite an important thing. Do you want to run through a little bit about it? I'd like to yes. I mean, first of all, a hedge fund is not a patient classic investor, right? It's not an investor that will just buy a US Treasury and then sit on it. So what's the deal for a hedge fund when they buy a US Treasury? Well, currently there's a spread between the US Treasury yield curve and the interest rate swap curve. So basically the interest rate you get in a swap arrangement with the bank. That's not usual. At least it wasn't usual ahead of the great financial crisis. We've basically seen such a spread since '09 or there about. As a consequence of regulatory changes making it a lot harder for banks to warehouse bonds and all of those things that were implemented after the great financial crisis. So that spread is interesting for a hedge fund. At least if you can lever it up because that spread is decently stable over time. There's maybe even a scope for that spread to compress now, which I'll get back to. And therefore, these hedge funds to a larger and larger extent buy these Treasury's hedged against the interest rate swap curve and they do that over and over and over via the repurchasing market. And to begin with, I'd like to make it a very simple analogy for people to understand what it actually means when you make a repurchase action with the bank if you're a hedge fund. Take the simple example, Raul, if you have something of value at home, say a watch or something like that, you can go to, I think it's called a pawn shop, not a pornography shop, but a pawn shop. I'm trying to pronounce it correctly. And I don't know with that shirt or nobody's going to know which one you mean. But the point here is Raul, if you have something of value at home, right, these shops, they do exist, these brokerages, they do exist. And you can go into such a shop and say, okay, I'll hand you my Rolex in return for a loan. And when I've returned the Rolex, I'll of course exchange that for the money again. And that's exactly the same exercise you do as a hedge fund when you enter a repot transaction with the bank. You have a treasury, you say to the bank, okay, you can keep that treasury if you allow me to lend against it. And then we'll reverse it after a short while. And you can actually do that exercise over and over and over again. There's only a tiny haircut on the loan right, especially given that it's a treasury, it's a pretty stable collateral, right. So you go there with the treasury, you get maybe 98, 97 cents on the dollar in return as a loan and you buy another treasury. And you can just keep on doing that until you have levered up this trade say 10, 20 times. And then a spread of, I don't know, 30, 50 basis points, something like that actually turns into something meaningful, if it's 10, 20 times levered. The issue here is that it depends on this repo market being incredibly liquid. And of course, also contained from an interest rate perspective, because there is an interest rate on this transaction as well, called the repo rate. And now that hedge funds have become the marginal buyers of treasuries, and it's actually been an ongoing trend for a couple of years at least, we can maybe show the chart on the interest rate swap market is driven by corporates and others. So they're two different markets. So one is the private sector market and the other is the state sector. And the hedge funds are in the middle making that market now when the banks used to in the past. Exactly. And if we look at the trends say over the past two or three years, we haven't really seen a lot of buying of treasuries from Japan. We haven't really seen a lot of buying of treasuries from China. It's on chart three in the slide deck. And we've seen a lot of buying from hedge funds. That is at least the conclusions, I get the conclusion I get to when I watch these numbers out from the US Treasury tick data. We see a big tick up in holdings in the UK. And it's not like the UK Central Bank has bought all of these, right? We're talking funds, domiciled in the UK. So it's a big deal for Scott Besson to ensure that this trade is on. And how do you ensure that? Just to remind people, just a bit of context. Back in the late '90s, very late '90s, we all had the swap spreads on our screens all day. And the reason being is that's what blew up long-term capital is they had this trade on. And the central bank actually had to step in in the end and it was a big mess. It is now, as you say, it's like the core component part of the market here. Yeah. I mean, we're talking trillions now. So it's not a niche market anymore. And these are the Millenniums, the Citadel's, these giant kind of risk-op funds or arbitrage funds or relative alley funds is the known fixed income. Yes, exactly. And I guess the reason why it's extraordinary interesting is that the deficit of the US is now funded by borrow dollars. It's not a savings dollar. It's a saving that is. Yeah, in Alubis is used to buy fresh trees over and over and over, right? So it is very, very important that you keep this market stable because otherwise, yeah, things will turn very nasty, very swift. We've had the repo hiccup in what 2018, 2019? Nine to know. The Fed moved super fast because of this, because the repo market is the bit that holds this together. Exactly. And, you know, everything that Scott Bessent has done this year, from the supplementary leverage ratio reform to the Treasury buyback announcement last week, has to do with this. First of all, the supplementary leverage reform allowed banks to warehouse more of these transactions. It essentially allowed banks to lever up their balance sheet in secured transactions. And the repo is a secure transaction. You have a Treasury in collateral for the loan. So it is, it is seen as a low risk transaction for a bank from a regulatory standpoint. And I have a chart on page six showing how, how big this market has become, right? This is just based on the primary deal is the amount of trillions that we have in repo transactions in treasuries. We're close to three trillion now. And it was, you know, around one trillion, just a handful of years ago, right? So it's a big change. And as far as I can calculate, given these changes that they've made to the regulatory framework around how balance sheets works in balance sheets work in banks, they have probably a trillion worth of additional capacity just because of the ESLR reform. And that's big, you know, that is a way of funding the deficit. It's a way of monetizing the debt, in a sense. I mean, they've made it clear that what they're trying to do is now move the marginal buyer towards the banking system. Because the banking system recycles that into the market and the whole economy moves with it. And that was the whole Steve mirror an idea and the best an idea of they want to repeat what the world looked like in the late 90s and mid 90s where the banking system was the main creator of dollars. And we're slowly but surely getting there, right? If you look at the liquidity creation from banks, especially outside of the US, we've seen a big move towards the private system doing the heavy lifting. And as a good example of it, and you know, you and I always have that discussion, you know, it's always worth watching Japan for like early monetary trends and everything that's happened in Japan over the past couple of years. Rimes very well with what we're seeing in the US now. And that whole wave of private credit creation in Japan has unlocked it in a whole new world for the asset market in Japan. We're talking about Japanese have got new and I've talked about this is they've got a more positively sloping yield curve, which has really ignited it and allowing this to happen the US. We haven't seen a massive uptake in the treasuries held and by the banks because the yield curve's not been steep enough. And that feels like that's what best and is trying to do here is kind of anchor the long end a bit. By a bit of increasing a bit of liquidity and just kind of stay stressing that he doesn't want that to get out of control and hopefully wash the other side ends up lowering the short end. And then they end up with a light Japan had for a long time and anchored yield curve, which is somewhat of a yield curve control, but not ultra control. Yeah, it's a like yield curve guidance. Let's call it. Yeah, yeah. And having said that initially this buyback operation. You know, felt like an operation twist to me. Yeah, that initially I had the view that they would probably issue a lot more teabills to fund these buybacks of 20 or plus bonds. But then I think it was on Monday, a couple of treachery officials hinted to CNBC that well, we could also use the money that we've already issued. And that would be a pretty decent liquidity addition, right, because they hold a little less than a trillion dollars idle at the Fed. And if they use those dollars to buy back loads and loads of bonds, then it is pretty much QE practice, right. Especially if it's not just a temporary liquidity addition, if they communicate, okay, well, we've issued these dollars, we now intend on spending them buying back that that would be a pretty decent cycle pro lower in my opinion. And I think that's everything that they're currently trying to orchestrate is. Is an environment that allows the credit cycle to continue into next year, right, because they know that admitted that there are some late cycle dynamics going on out there and Scott Besson is very well aware of that. So this is liquidity gymnastics aim that's prolonging the cycle. And the other side of this equation, because again, Besson is good, he knows what his job is, his job is to is basically issue US treasurers and then find buyers and he's a bond salesman, right, trying to clear their book. And there is subtle things of what he did when he went to Southeast Asia before going to China, he went to the Koreans, the Japanese and prior to that, he kind of reached this swap agreement with Abu Dhabi. Now, all of these people have swap lines, but what he's trying to make them do is somewhat more special. The orchestration that he went into China with, I believe, is for a week a dollar. And to let the Euro dollar banks, which are the South Koreans, the Japanese and increasingly Abu Dhabi, to have plenty of Euro dollars to lend to China. So he went with a solution to China's problem is like, I'll get you back dollar access, because 50% of their, most of their private sector debt is in dollars. And in exchange, we'll weaken the dollar. Because when you weaken the dollar, everybody wins, because it boosts global demand for goods and services, but the other thing is that's when the central banks acquire treasuries. They need a week dollar to do it, they don't do it in a strong dollar environment, because they're recycling their own strong currencies and buying dollars with them. And so that solves everything for best. You can issue more, he's got the hedge fund trade there, he's got the banks now as a marginal buyer domestically, and then he's got the foreign central banks by this mechanism with the most important ones being Japan. That's why he intervened in the Japanese currency. It's all part of the big picture that people haven't really put together yet, that it's clear that they're aiming for a steeper yield curve, a weaker dollar, so that they can keep this liquidity flowing. I've been banging the drum on this short dollar trade since mid July, it's starting to work. We've also seen spillovers through gold and Bitcoin and other such short dollar bets. And I still think there's more juice in that trade. The issue, and interestingly, I think less than 24 hours after this is released, we'll get the Jackson Hole speech by Kevin Wars. We're yet to see the fact truly playing ball with Scott Bessond on all of this in my opinion. Kevin Wars has been radio silent on everything related to productivity and all of that since he actually took office, right? He turned with that message throughout the whole audition period, but he's been very silent on everything, basically since taking office. But if you look at the theme for Jackson Hole, I think it's called financial innovation and how it impacts payments and inflation and policy, something like that. To me, that sounds like AI blockchain, stablecoins. That's clearly another big demand. That's why Bessond wants stablecoins at scale. He thinks he can get to 3 trillion. Well, that's 3 trillion of bills that can be held by the stablecoins. Exactly. But maybe it's also an opportunity for Wars to talk about productivity, right? That's what I think is coming here. He has to talk about because he's got a job, Bessond's got a job, and it's kind of an agreement, as we said. And his job is to say productivity is going to rescue us. And we need to re-frame inflation to something that works with a modern age. And beneath that means we can have lower front end rates. And maybe he'll give us the first few hints into the work groups that look at the current inflation measurements and how to update them to the modern world and all of that. I think you're absolutely right that they're trying to find a new way of measuring it, also a much more live way of doing it. So we don't have to wait six, seven weeks for lacked information that moves the market and all of that. I actually think it's a pretty good vision that he's laid out. But we need the details. And Friday is obviously a great occasion to deliver over the first few details. Yeah, I mean, they've got the committee's going out to actually do it, but he needs to talk about why he's doing it. And not to say I want to lower rates, but it's like, you know, we need to update the system. And this is the way of doing it. So yeah, I think it makes a lot of sense to see. What was she's going to do? I think everybody's got a role to play here and it's going to be really interesting to see what plays out. But admittedly, Ralph, say a week and a half ago, when Besson announced this Treasury buyback, change and all of that, I found it to be material, but not something that would necessarily alter the asset market trajectory a whole lot. Oh boy, we've seen a rotation since, right? I mean, we've seen a rotation out of, out of capex trades into duration trades. So everything that needs, you know, compressed yield curves and all of that to work. Gold has done well, Bitcoin has done tremendously well since this announcement. And, you know, all of the AI hardware bets have been sort of since, right? Because I don't necessarily think that those two trades go hand in hand as they did prior to all of these yield curve gymnastics. And I've also been fairly vocal about that over the past couple of quarters that the capex trade, all of the hardware names and AI. They need a steep yield curve, but they're also okay with a bare steepening yield curve, the stuff that we've seen for a while. That's not a good environment for software and Bitcoin and gold and all of that. So, of course, in the scenario that you laid out where Kevin Walsh ends up counting interest rates while Scott Besson is sort of in charge of the long run. Both will work in tandem, right? You could both buy hardware and you can buy Bitcoin. But now that we're kind of in between stools here in a sense where either it's kind of a compression scenario for interest rates or it's a scenario where the yield curve will steepen in a more aggressive way and a more hostile way. I think it's a bit more either or capex or Bitcoin in those two scenarios, but I'm personally positioned for the tandem scenario where both can work in tandem because of a bull steepening yield curve where interest rates move lower from the front and downwards. Yeah, I agree. I mean, I do think there is a catch-up trade. I wrote an article called The Great Rotation in GMI about this and saying, look, you know, the front end of all of this is the semis and they're probably going to slow down because the next tier goes up stuff like the application is less. So I think about healthcare and biotech and stuff like that. And that's really worked well and that and crypto was the really undervalued part of that whole kind of tech ecosystem. And it's like you play catch up the moment liquidity starts returning now liquidity is not fully returned yet because, you know, we've just not seen the banks taking on the treasuries in any size yet and stuff like that. But that's when they're trying to orchestrate so the market sniffing that out, you know, the financial conditions are easy again. There they are. And to some degree, I think a deal that solves the lack of oil products coming out of the straight-of-a-moose unlocks all of this during the autumn, right? I hope you agree. And that feels like they've got to do something in the next two or three weeks before the electioneering starts for the midterms. So a quick break in your regular programming. If you're serious about your future, grab my free report called prepare for 2030. I think you've got five years to make as much money as possible and this guy will help you navigate what's coming the link is in the description download it now. Because, you know, we've seen a wave of disinflation coming from the flat oil market, but it's just not disinflation at the pump yet because of the very, very elevated crack spreads. If you look at the diesel price, it's still very elevated. If you look at the gasoline price, it's it's also higher than it should be given where oil trades, right? And the reason is that we have a lot of refinance capacity kind of locked in in the Middle East because of the lack of shipping transit, right? So by the end of the day, they also need a solution to the straight-of-a-moose to really unlock all of this. But if we get that, we'll have, and I could easily say that we'll have maybe three, four months in a row with negative CPI prints on the month. And that will really allow the fact reserve to do something, right? Yeah, and that they've got to be aware of it. It's gone on longer than they expected for sure. I think they were very close to a deal. I don't know what the hell fell apart. Something fell apart. I think it's old regime versus new regime in Iran. And now, Besson's got his nuclear war, you know, from the Treasury on them. I don't know if that's going to work or not. Never stop the Russians. I don't see what's going to stop the Iranians, but. But in the end, yeah, they have to find a solution here. They have to walk away from this and get the sort of deal they want out of it. Yeah. So, you know, my take on it is that this first 30, 60 day memorandum about the standing that allowed for, you know, a decent amount of exports out of the straight of moves, kind of allowed both the US and the Iranians some more patience and these negotiations and that was probably why we we ended up in around two. The Republican guard in Iran, they're, you know, their income solves is basically exports to China through the straight, right. So it bought them a couple of quarters of time at max, the income that they could take in during that first, Miranda, understand it because they're currently not exporting anything at all more or less, right. That's also why both sides do have some strategic patience right now, but they also need a solution both sides right by the end of the day because the Iranians cannot essentially they cannot fund their operations. And you know, even though the Republican card is is very ideologically found it also religiously found it. They also need to be able to pay their soldiers right, and they cannot keep paying their soldiers with this close straight. We also know that all countries surrounding Iran are building solutions to avoid this right now, so they obviously they also need to strike it to you at some point because otherwise the straight will become irrelevant, right. So I, I, I simply cannot, you know, I look at this through, you know, a very cynical game theoretical setup, and I simply cannot. Imagine this area where they don't end up striking a deal because both sides need a deal. Exactly. I just think there's a very high chance and China wants to deal everybody wants this deal to happen because it removes the last choke point in the global oil market. And therefore, oil just doesn't become a geopolitical issue anymore. It just becomes straight supply and demand, and it all goes away and OPEC kind of falls apart and everything just clears. Venezuela oil starts coming to market, you know, you get decent refiners to be able to clean up the heavy crude and before you know it, oil doesn't become an issue for the markets ever again. And that is a very likely scenario. And it's incredibly desirable for everybody. Yes. Yeah. So I've got that. Here's another interesting thing that I looked at is I've been thinking through this productivity thing and the data slow and it's not great. And it dawned on me recently. So what are we trying to look for? Right. We're trying to look for the application of AI and robotics on an economy. And it dawned on me that there is a perfect example of this that has led since about 2018 was Amazon. So Amazon have been the forefront of everything. So they have now almost more robots than humans that will cross next year. So they've scaled like an economy, right, the size of an economy as well, a gigantic company. They've implemented AI, they've got self driving fleets, they've got drones, they've got, I mean, every component part of the exponential age that you can possibly install. And they're running it. So I went back and looked at it in a big article is it for GMI. And what you saw is their profit margins. Troufft, they put their big investment into all of this. And out the other side is their margins has just been increasing all of the time, which is productivity, essentially. And I thought it's just fascinating to say, well, look, there's an obvious example that it's going to work. And people don't believe it yet. No, they don't. And of course, if you look at, you know, some of the official productivity statistics, which, by the way, don't really buy. It doesn't look like we've had a revolution. But if you look at the micro cases, we've clearly had a revolution already. We've had, we have record high, high profit margins everywhere. It's not even known the technology. And yet, the statistical bureau tells us that it has nothing to do with productivity. I don't really buy that because considering we've had the economy's not been growing super fast, household spending has not been great. So where the hell are these profits coming from? And there has to be productivity has to be. It has to be. I perfectly agree with that. The thing that probably also wrong footed a couple of the IPO pitches from the big LLM companies is that we haven't seen a big impact across the labor market yet. But my point is, and you have decades of evidence for this is that. When profits go up as aggressively as they do now, you don't see layoffs, even though you could lay off people without probably harming your business. You'll see them once the profit cycle rolls over. And that's where you'll harvest the productivity for the next cycle. One thing we have noticed is that people won't hire us aggressively. So the labor market doesn't expand in line with GDP or the business cycle, but you don't see that divergence because as you say, people making record profits, yeah, sure some of the tech companies are delayed off a lot of people, but overall people won't do it until they're forced to do it and then they'll really dig in. And that's where productivity almost accelerates once you get an economic downturn, everyone realizes you can operate with half the number of staff. But there was an amazing interview with the business line manager in Scandinavia. And he said that, well, he's basically instructed all of his employees to optimize their tasks with AI. And he aggressively just said, use AI, use AI, use AI every time they had a new task. But then he got the question, why haven't you laid off your employees if they have automated everything? And it took him a little while, but then he kind of indirectly admitted to, well, it's actually a pretty nice thing to be a manager for like 20 people, right? And I think that's exactly why you need to force those outcomes top down in organizations because a line manager, he's not incentivized to lay off people even though they've automated a lot of stuff. But it will only happen once the CEO is forced to, you know, managing people is power as you go. In the end, I mean, you should be, if you're ruthless, want to manage the least number of people possible. But then you don't feel powerful because what people like to say is, oh, yes, I have 500 reports in my business area. As opposed to saying, I've got 5,000 agents reporting to my AI and I'm orchestrating that at top level, people haven't got to that yet. They will do. Yeah. At some point, I guess you can brag about managing 5,000 agents in the bar when you're trying to hook up in town, right? There's a big, you know, generational cliff in that question, I guess, because I guess millennials and Gen C's, they'll end up bragging about how many agents they have pretty soon, right? But I also see the same thing related to digital art versus physical art, right? I've had quite a few employees who, you know, when they were like five, seven units of alcohol deep, they started showing me their weird coins in their wallets and their phones, right? S, some sort of art, right? C, I have this shit coin, right? And they kind of love talking to me about that. I'm even too old for that. You know, I would mind you doing that because one of my biggest investments that I have is my digital art collection. Yes. So, even though I'm not quite a boomer, but I'm Gen X, but I've gone down that rabbit hole deeply. But yes, I mean, digital things can have value in this world. And yeah, other people just don't get it yet. No. You're right. So yeah, it's going to be fascinating to see how companies adapt all of this and how the economy adapts to this. The other thing is I don't know if we measure it in GDP. Yeah. Because I mean, if we look at the sort of, if you've got record profits and they're accelerating, you've got record capex, you've got, you know, sort of records of everything, yet the economy is not really growing, which is not measuring something. But it's a really good question, right, because if you hire a bureaucrat, it's very easy to measure that in GDP terms, right, because you pay that bureaucrat a salary, and that pay slip will directly go into the GDP calculation as is output, is a hers output. How do you measure an agent? I know. I don't think it's easy, and I'm not sure I have the answer. But I mean, look at the statistic put out by OpenAI, I mean, the amount of agents live in the OpenAI ecosystem has quadrupled, I think, over the course of two months. So I mean, something's clearly happening there, I mean, AI bots are now, by far and away, the largest part of the internet, that is not far and away, the largest part of the payment system, but they are creating economic value, you and I know, because we run them. And they're creating huge economic value for us, but it's not captured. And they're even writing stand-run, Millus opinion letters now, so, I mean, they also write part of my stuff, I perfectly admit to that, why shouldn't I use the technology? I get that in my conversation. Why have you used Claw to write this well, because then I can write about five topics for you instead of one, I mean, why wouldn't I? Yeah, it's not like, you don't put your thinking aside to them. You still do your thinking, but they do the writing and the other stuff, or putting together a bunch of thoughts that you put, they put them together into cohere a way, that's just efficiency. You're not outsourcing your thinking, because they don't worry good in that respect, it's very good if you want them to be a partner. And it's like, you know, this is not my first language, right? When I write an article in English, it's probably a good idea that I allow Claw to work with them and improve it and all of that, right? It's like telling me that I cannot use addiction, when I'm not affluent, it's just nonsense. How can I tell you when it's the last time you did, you know, long division on a piece of paper? Nobody does anymore. No, it's like transitioning from pens to typewriters, or let's cheat it, I'm like, no, it's just technologies, just how it works, but people are very weird about it all. So let's, because we haven't got long to go, but what's your view for the U.S. economy now going forwards, in terms of the cycle, liquidity, the things that matter to markets? Because this is what everybody ever wants to know is when, when's it going to stop? What's the risk here? So if you look at, like a little bit more old school business cycle models, my best guess is that the PMI cycle will peak probably in November or December, something like that. But it doesn't mean that 2027 will be a negative growth year. I think it would be, you know, slightly more sluggish from a rate of change perspective, but I don't think that we've seen sufficient tightening for me to really worry about the cycle into next year, and everything bests and has done over the past couple of weeks. The obviously still need to see the details in the coming weeks. Tells me that they're trying to prolong the cycle throughout Trump's remaining period. Rolling bills at the show, issuing bills at the short end, that's more ongoing liquidity. The changes, as you say, sound like these are not short-term fixes, these are longer-term extension of the business cycle. We've got the largest cat-backed boom in history and half this stuff. No. I've brought to the stuff that hasn't been built yet. So I'm struggling to see how the cycle can stop, and we're not seeing inflation, so it's not like they're going to jack up rates in the middle of this in any meaningful way. So to me, this looks just like the '90s, and we saw ISM go up a lot, it cooled off a bit, it then went up again, it cooled off a bit, then went up again before the final peak. It feels like this is what's going to play here. No, I don't see it playing any differently. The funny thing is that if you look at forward expectations for many of the hardware companies, for example, everything related to the cat-packs build out, it seems like most people agree that 2027 will be slightly bigger than this year, and then if you look at 2028 and 2029, it's just a flat line from 2027. And that is the only scenario that won't happen, right? It's not like we'll just play it so, and then, okay, this was the exact amount of spending needed for the economy, either we accelerate or decelerate, right? And I still think it's vastly underpriced that we actually accelerate, in nominal terms, which is the point I've been making, basically two or three months in a row. Yes, we will peak in rate of change terms this quarter. This simple math, I mean, we cannot grow at 200% forever in cat-packs terms, because that would be two numbers that even you and I could not imagine, right? So obviously, that cannot be the case. So even if we grow cat-packs 25% from this base, it's massive in nominal dollars. And I think that's likely what's going to happen the next few years, that we'll grow maybe 15, 20, 25% something like that. Which is huge. I mean, it's a bigger case. capex increase in nominal terms that we've seen ever outside of the last 18 months, right? So it's still huge in nominal. And capex have been so lackluster over the last decade or two that the rates of change looks large anyway. Yes. But as you said, it's actually going to be the nominal change in the end. It's going to be bigger than people expect. And I just don't see what's interesting is everybody, all the naysayers on the capex boom, just like this all circular financing, this is all nonsense. And then you listen to all the depreciation of this stuff. And then you hear people like Andy Jassy at Amazon saying, no, we just keep using the same chips. We need more and more and more. And this is never going to stop. And all of them are saying, these guys aren't this smart enough, not to need to hype cycle. I can understand that anthropic and open AI need a hype cycle, but these guys don't. No, they don't need to hype cycle. And by the way, if you look at the latest investor deck that was lead ahead of the IPO from anthropic, they're close to live. I think they're close to $70 billion in annual recurring revenue. And 15 months ago, they barely had a client. That is a revenue journey that is second to none in history. Also, if you look at it in inflation, just in terms of the, it's the single biggest revenue machine ever seen, and it will far outpace what we've seen from Google and Microsoft et cetera, when they were on their initial journey. It is incredibly fast. So sure, do they need something like 250 billion, 300 billion, something like that to be able to pay for their future compute capacity? Not sure, but it's accompanied up when from zero to 70 billion in a year. And all they say is we're a compute constrained. So what they're telling you is the demand for intelligence is outstripping the ability to provide that intelligence. And you've highlighted that as well in their capacity. There's not enough, there's still not enough data centers, there's not enough power, there's not enough. So look at the only, the only, you know, some category in anthropics accounts that looks a little bit weak for a rate of change perspective right now is called code revenue, but it happened when they became constrained. That's right. So it's the exact reason why they lost momentum. And there's a reason why they paid SpaceX to 3X, what everybody else pays for compute in this panic deal ahead of the summer, because they were simply too late back on their compute needs. And Dario talking about this and he was boasting like we're being really sensible at how we think about the compute and open AI which is like we'll take all the compute and then suddenly anthropic like fuck, we've got the world's hottest product that's ever been and we can't supply it. Yes. And that for that simple reason, I'm tempted to say that I'm more interested in investing in the open AI IPO than anthropic right now, because they have a super compute pipeline. And anthropic still, there's still behind all that question clearly behind what you can see in the models, open AI, because they've got enough inference, we'll deliver an answer much faster than Claude Will and you know, you're not getting rate limited and everything in the rate that you are without anthropic because they just don't have the compute. Yeah, and I think that's a bigger deal than what most people anticipated six months ago, because no one kind of dared to extrapolate that wave of demand into the future, but you know, I still think it's very fair to extrapolate it. My case is the demand for intelligence is the largest of any single product ever produced that it will never stop, because intelligence is going to go into every single thing. People don't realise it, and you know, that chart of the average token price that you first showed me, and we looked at it in detail and realised, you know, what all this is going to show is Geven's paradox. All it's going to show is you can bring in as much cheap intelligence as you want, but the entire pie is going to grow so fast that everybody can hold their margins, and that's proven true. I mean, the frontier models are holding margin against all of these cheap competitors because they're not competitors, because the pie is growing too fast that everyone can provide intelligence to different prices. And how long did it take for the Kibi company in China to tell customers to stay away? I mean, no, no, stop, stop, stop, stop, we don't have any capacity for you. It took like 12 hours, something like that, it was very fast, I know. So anyway, my friend, good to see you, and let's see how this plays out, because I'm with you. I still remain steadfast, bullish here. Yeah, you know, September's in mid-election years, and never great. Maybe there's a hiccup on route, but feels that all systems go. I think the best guess would be that we rally hard into year end after the elections, and then we have a better 2027 than most people project. Yeah, I think that's right. Fantastic. All right, my friend. I will see you soon. Take care. So great conversation with Andreas, as always. And you can see we share at this commonality of ideas of the potential for an elongated cycle, with a few ups and downs on route, that this whole capex game is not over yet. That intelligence is scaling faster than anybody understood it to happen, that the Fed and Besson are going to start trying to change the rule book to enable all of this to keep going. So fascinating times. We'll keep our eye on everything. And on Real Vision, we've both got dashboards where you can track all of the things we're talking about in real time. So enjoy those, and I'll see you next time. You obviously enjoyed the episode, because you're here with me at the end. 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