The Fed Can’t Let the AI Bubble Burst | Luke Gromen

**Luke Gromen** (0:02)
The only way the Fed can get the US out of fiscal dominance is if they cut rates to zero, and they partner with Treasury, so Treasury issues all the bond issuance at the front end at zero rates, which is kissing cousin of printing money to finance a deficit. The high thing on wines, you're going to have a very big stock market problem, you're going to have a recession, you're going to have a rise in unemployment, you're going to have a significant rise in interest rates and a recession, which no American alive has really seen since probably the 70s. Fundamentally, I think what's happening with the fiscal situation is unfixable by anything other than significant devaluation of currency. Warsh isn't going to cut aggressively without a crisis, and I think the crisis could show up as Warsh cutting basis, cut or raising 25 basis points. Look, if you have a long-term view, you should probably be buying Bitcoin now. I, you know, like I said, I'm probably being too cute. I think I can get it cheaper.

**Danny Knowles** (1:00)
Right, Luke, I've got so much I want to get into with you today.

**Luke Gromen** (1:02)
Beautiful.

**Danny Knowles** (1:04)
I think we should start, we talked about this last time around the show, on Bitcoin, because you sold all your Bitcoin. Almost all.

**Luke Gromen** (1:11)
Almost all your Bitcoin.

**Danny Knowles** (1:12)
Around 90 something thousand, was it?

**Luke Gromen** (1:14)
96, 95, 96 something.

**Danny Knowles** (1:16)
And again, I told you this last time, but I thought you made a mistake. You clearly hadn't. But the question is, when you buy back, like, that's how you make this trade a full, like a good trade.
And how are you looking at that now? Sure.

**Luke Gromen** (1:30)
I am looking at it. So strategically, I want to buy it back. I still think it's an energy link, neutral reserve asset for the people. And very attractive because I still fundamentally think what's happening with the fiscal situation is unfixable by anything other than significant devaluation of the currency.
And really, all fiat currencies, to be clear. When, tactically, I'm getting closer, but I still haven't bought it back yet. And the reason is a few fold. Number one, you've got the Fed, and right now, if the Fed starts cutting rates aggressively, I'm going to have to chase it, I think. To be blunt.
So, but that then feeds into where, why I haven't started buying it back very aggressively at any yet, which is Warsh seems like he will eventually do what Powell and Yellen and Bernanke did, but he needs a crisis to do it. He needs political cover. And then I look tactically at the, what's going on in AI, and particularly just in the last two, three weeks, where you've got Chinese competition, you've got rising borrowing, you've got rising rates, you've got slowing collateral price appreciation there in terms of open AI in particular, but others in terms of the valuations, the rate of growth are slowing. That's an issue for me as it relates to Bitcoin.

**Danny Knowles** (3:29)
Okay.

**Luke Gromen** (3:29)
Because I think, A, I think Warsh isn't gonna cut aggressively without a crisis, and I think the crisis could show up as Warsh cutting basis, or raising 25 basis points.
And then Chinese competition beginning to raise questions about AI, because that's the thing. I don't have the training, the background, the intellectual chops, to be honest, to have a debate about, is the Chinese low cost open AI model better? Is it gonna overtake the US models? Is it not? I don't. But I have 30 years of experience in markets and investing. And what I can tell you is the US AI segment broadly is A, debt financed and B, valued, like there are no issues and can be no issues. And the very fact that we can actually have serious people who do have the intellectual chops to debate US versus Chinese AI, et cetera, tells us the Chinese stuff's an issue. Maybe technically it's not an issue immediately today, but the very fact there's a debate is there's an issue. And this segment can't have issues, and it's valued as if it's never going to have any issues. So this is an issue in a sector that's valued like it can't have issues, will never have issues. And thus far this year, part of the reason I sold most of my Bitcoin was it was increasingly trading like a tech stock and tech was making me increasingly nervous.
And fast forward today, I've got a Fed chair who thinks he thinks that Powell, he could have done Powell's job better than Powell did. And I've been clear with you and others. I'm no huge apologist or I think Powell did fine. I don't think he did a bad job. I think he missed an opportunity to just inflate stuff away and take the pain and put the country in a better place. I've been very vocal about that. Warsh thinks he over inflated. And so to my eyes, Warsh thinks he can be inflation tough guy. He can raise rates 25 basis points or more. I don't have a strong view for this week, but and I think that could very well kick the legs out of what's happening in AI.