MacroVoices #526 Matt Barrie: Pay To PrAI

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Macro Voices episode 526 was produced on April 2nd, 2026. I'm Eric Towson. We've got another Macro Voices doubleheader lined up for you, and it's going to be a doozy. President Trump gave an address Wednesday night that surprised the market. So I'm recording earlier than usual this week on Wednesday night, about an hour after President Trump's speech. in which he said that if no deal can be reached, the US plans include targeting all of Iran's civilian electric power generation plants.

Probably simultaneously. That's exactly the red line that Iran has previously said would cause it to retaliate by targeting desalination plants and the UAE's Baraka nuclear power station. Now we know the president's negotiating style is to make dire threats and then walk them back once a deal is reached, so hopefully the threat of targeting civilian power generation infrastructure will come off the table soon.

But overall, my take is that this conflict is heating up, not cooling down as the market was interpreting before President Trump's Wednesday evening speech. And the president was clear in that speech in saying that the US would be hitting Iran very hard over the next two weeks.

if no deal is reached. We're going to kick things off with an exceptional performance by Freelancer.com CEO Matt Berry. who returns as this week's feature interview guest for a full interview on the latest developments on artificial intelligence.

what they mean for private credit markets, why the AI business model is setting the stage for an eventual market dislocation on the scale of the two thousand dot com bus why paper token inference pricing is inevitable, and why it will collapse the current AI business model, and much more. Then for this week's Iran conflict update. Energy Outlook Advisor's founder and managing partner, Dr. Anas Alhaji, returns as this week's second feature interview guest.

And it's going to run just as long as our first feature interview because there was so much to cover after the president's Wednesday night address. So this is going to be a long episode, but a very important one. So sit back, relax, and expect some really exceptional content from both of our guests. Then be sure to stay tuned for our postgame segment when Patrick's trade of the week will take a look at private credit markets and how to play them in public markets which you can actually trade.

And then of course we'll have our usual coverage on all the markets as of Wednesday's close. Please bear with us this week, folks. I've asked our production team to prioritize getting this episode out as quickly as possible, and given the length of both interviews, an editing glitch or two just might slip through the crack. And I'm Patrick Serezna with the Macro Scoreboard week over week as of the close of Wednesday, April 2nd, 2026.

The SP 500 indexed down 24 basis points, trading to 6575. Markets put together an oversold bounce, but will rallies fail with this geopolitical backdrop? We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. The US dollar index down nine basis points, trading at$99.55. the May WTI crude oil contract up a thousand and eighty five basis points to a hundred spot one two.

The May RBOB gasoline up four hundred thirty-nine basis points to trading at three oh nine. The June gold contract up five hundred basis points to forty eight thirteen. Gold's approaching its fifty-day moving average, bouncing from its oversold conditions. The May Copper contract up 162 basis points, trading at 565. The April uranium contract down 12 basis points trading at 8430 and the US 10-year treasury yield up four basis points trading at 437.

The key news to watch this week is Friday's jobs numbers, and next week we have the ISM services PMIs, the core PCE and CPI inflation numbers. and the FOMC meeting minutes. This week's feature interview guest is freelancer.com founder Matt Berry. Eric and Matt discuss the sustainability of the AI business model, why rising risks and weak unit economics could lead to a shakeout similar to the dot-com era, and how AI's impact on software and private credit could create broader market stresses.

And stay tuned for a special follow-up with Dr. Anas al-Haji, where we break down the escalating Iran conflict and its implications on global energy markets. Eric's interview with Matt Berry is coming up as Macro Voices continues right here at macrovoices.com. Joining me now is freelancer.com founder Matt Berry. As usual, Matt has written an excellent paper about AI. This one is called Pay to Prey. That's Pay2PRAI.

You can find that linked in your research roundup email. If you don't have a research roundup email, it means you're not yet registered at macrovoices.com. Just go to our homepage, macrovoices.com, look for the red button above Matt's picture on the homepage that says looking for the downloads. Matt, before we even get into all of what's going on in AI, we've got some news just uh as we're recording this on Tuesday.

evening US time. There's some recent news just in the last day or so, which is you know a lot of companies before they IPO they'll do a little bridge round, eh, ten, twenty million bucks, just to cover some expenses until they get to their actual IPO. OpenAI is planning an IPO. They did a little bridge round. Hundred and twenty two billion with a B dollars.

all time record for a uh private fundraising round. And what is that? Something like a hundred times bigger than any private fundraising round has ever occurred like before twenty twenty five? Why did they need a hundred and twenty two billion just to bridge them from now to their IPO, which is expected in less than a year? Thanks for having me. It's truly is stupendous. I mean, before twenty twenty five, the largest sort of private venture rounds were in the single digit billions.

The headline number is one hundred and twenty two billion raised on a seven hundred and thirty billion pre money valuation. When you get down to the the actual segmentation of kind of what's going on, it's it it seems that it's only about twenty five billion dollars worth of cash. And it seems to be more of a vendor financing than an actual straight cash injection. You've got Amazon, NVIDIA and uh Softbank primarily putting the money in or the in kind in.

Amazon's putting in fifty billion, but that's contingent on open AI. spending a hundred billion, I think, over the next eight years on their compute, which I'm sure won't make Microsoft happy. Uh and it seems like a good deal at least on on paper for Amazon. So there's fifteen billion going in in up front and thirty five billion is furthermore contingent on the company either going public by twenty twenty eight or achieving artificial general intelligence. I'm not sure.

how they're going to really define that. I think the underlying definition is a panel of experts will make a decision, yes or no, which is a bit strange for a financial decision. There's 15 billion down up front, 35 billion contingent on uh going public or AGI uh for a hundred billion commitment the other way around. So it's a bit like a procurement round.

Softbank loves doing these sort of I like to call them sort of Russian stents where they kind of lead rounds and uh mark up valuations to the moon. We saw it with WeWork. We're seeing it again with uh Enron, I mean OpenAI. They've already put in about forty billion, they're putting another thirty billion in, but to raise that money they don't actually have the cash in the balance sheet. So they've taken a twelve month bridge um loan for forty billion.

And they're tranching in ten billion at a time. um over the course of the over the year for a total of thirty billion. And obviously that's kind of just getting them through so to the IPO so they've got a liquidity event. And then NVIDIA is is putting it in kind as they as they uh tend to be doing in all these sort of circular economy sort of deals in the AI space where, you know, GPUs and infrastructure will be provided to the tune of thirty billion.

into the round. So there's about actually a twenty five billion dollar uh round of cash sort of up front and ten from SoftBank, fifteen from from Amazon. We'll see if the rest of the money comes in, but the rest is in kind. So it seems from looking at this.

And if you look at the compute numbers, I mean they truly are astronomical that are being contributed in the form of, you know, either um NVIDIA credits, you know, I think it's like three gigawatts of inference and two gigawatts of training capacity as part of this investment. You know, that's sort of the power that gets drawn by a small country. So

it seems to be what they're trying to do is scale up the the spend on computes so much that they can find a way to bring the unit economics down. Because that's really the key problem in the space that nobody in in the AI compute space is making any money other than really NVIDIA, who does about a hundred and sixty billion of of revenue and a hundred billion of earnings and then T S M C applies the chips to NVIDIA, but but the rest of the space

is actually negative on using the product in terms of the unit economics. So the more you use the product, the more you lose the money. So I think they're trying to make it up on volume.

Matt, I can't imagine any responsible business executive uh signing off an$122 billion deal unless the underlying business model was rock solid. It didn't have any major risks in it. Just happens that you wrote this missive uh over the last couple of weeks called Pay to Pray. I don't think that's actually the conclusion that you reached. Tell us about the economics of

the I'll call it the consumer AI business model, offering AI through chat to people like me who sign up for a max subscription on Claude or a pro subscription on OpenAI. How much money are they making or losing on that? The AI industry is consuming an absolute bonfire of money. It's about six hundred billion dollars a year that's being spent by the hyperscalers on CapEx.

it's reaching a a kind of a point now which is kind of incredible where, you know, the capex is higher than the kind of internal free cash flow. You know, the the fundamental business model that's being pushed in the consumer market and the software development market up until now has really been a venture capital style subsidized model where you pay you either use the free product and then hopefully upgrade to the twenty dollar a month product.

Or you use twenty dollar month products if you're a consumer or a two hundred dollar a month product if you're a power user or if you're starting to do programming. But the problem with with these models are that they take an incredible amount of money to train. And I think we put talked about that in pre previous episodes where you've got training runs and north of a hundred uh million dollars a run, uh, approaching half a billion dollars a training run.

That requires a huge amount of data center build out, a whole uh incredible, st stupendous amount of data needs to go into these models. And so, you know, because the the cheap data that that's scraped off the internet for free is is is basically sort of um, you know, drilled out that to an extent. They have to do licensing deals to get access to that data. Sometimes they do

Dodgy things like anthropics, you know, scraped a whole bunch of books and and scanned them in and they got caught and they had to pay the biggest uh fine, I think, in copyright history. I think it's about one point five billion dollars.

for the illegal scanning of all of all that data, et cetera. So it's incredibly expensive to train. But the fundamental problem is that when you actually use the inference, you basically put queries into GPT or queries into Claude and you run them, those queries are loss making. You can't make it up on volume under the current While we do see, you know, the underlying hardware is on sort of a Moore's Law sort of trend, and Moore's Law, for those of you that don't know what it is, is

you know, every eighteen months to two years or so. Effectively the uh technology that goes into chips allows semiconductors to be produced with finer and finer feature sizes, which e effectively allows the the compute capability in terms of uh processing power to Um effectively double or or the cost to to to to halve every eighteen months. While you you are riding on that sort of Silicon Moore's Law trend, because the models

are in such a brutally competitive environment where there's uh literally zero lock-in, there's ver you know almost zero switching costs. So I can you know, if one day Chat GPT five comes out, I'll switch to that, but then Claude 4.6 open.

comes out and that's better, I'll switch to that and so there's nothing stopping me overnight really just changing the models. Because of because um, you know, of uh of the competitive environment and and so forth, w what the situation basically is that each generation of model i is being rushed out. to kind of get the top of the scoreboard so that all the uh the customers flock to that.

And as a result of that, the actual amount of inference or um tokens burned, if you will, per useful query with each generation of model, while the

underlying compute is getting cheaper and cheaper in terms of uh what you can get done on the chips. Uh the amount of inference you have to burn for a useful query is actually going up quite dramatically. And so you're actually not seeing a reduction in the cost of inference. You're seeing an increase. And that before you consider the the issue with energy and constrained your build capacity for building data centers and uh power gear and uh all all the other things.

And so uh you know, a few people have done various models of how much it costs for GPT to deliver their twenty dollar plans. And even if you c ask Claude itself, you just type a query into Claude saying how much is the underlying compute costs for on a twenty dollar plan with Claude, it will tell you um, you know, m fifteen to twenty dollars, maybe eighty eighteen dollars, maybe a bit more.

So effectively, there's no money being made on these twenty-dollar plans. And when you're a power user, you can burn up to several hundred dollars on the on the twenty-dollar plan. And it gets even worse on these. two hundred dollar plans which are used by programmers now because the the nature of programming is you're streaming tokens almost forever.

And um, you know, the average user on a um on a two hundred dollars tan can burn, you know, many thousands of dollars of underlying compute. And in fact there's a there's a leaderboard called Vibrank. which uh where people compete to see how much money how how much underlying compute they can burn on a two hundred dollar plan. The leading guy on the uh on the leaderboard has burnt fifty one thousand US dollars in a single month on a two hundred dollar plan.

So the issue is that as these models get more and more competitive and new versions come out, you know, you're getting an exponential increase in the amount of inference you've got to burn. And, you know, that is is meaning that these models are not getting cheaper and you're not making up on unit economics. And

So it kind of feels like this funding round is, especially with the amount of vendor financing that's kind of packed into it, it it feels like this is an attempt to really try and scale up the underlying uh infrastructure and uh GPU capability so that potentially you know some sort of threshold can be crossed in the underlying economic so so inference can be profitable. But There's one big problem with all of that, which is is the demand there. And uh and that and that's where we are.

Matt, you said it's a hundred and twenty two billion dollar capital raise on a pre money of seven thirty, so I get eight hundred and fifty two billion is the current enterprise value, assuming an up round, which is what everybody assumes. Hey, we're gonna go just let's call it an even trillion for the IPO.'Cause hey, what's you know, a hundred a hundred billion here, a hundred billion there, and you know, eventually you're talking about real money. But holy cow. Let's say that that open AI

goes ahead a and IPOs sometime this year for one trillion dollars. Are you going to be long, short, or flat and why? It really does feel in the space that we're uh really in the moment where a supernova is uh starting to uh explode and we're probably gonna end up with a giant black hole like we did in the dot com boom the first time around. I mean that's a p that's a the a a trillion dollar evaluation at IPO is absolutely gigantic.

You know, they've raised a hundred and twenty two billion here in this round. They were mooting that the IPO earlier earlier in the year was gonna be a a sixty billion dollar raise in about a trillion, but but you could probably imagine that that number is possibly scoured up a little bit, or they wanna keep it tight.

Obviously,'cause once it gets the public markets, you don't have too much stock unload onto the market. But uh a bigger problem for them is the fact that you've got Elon Musk in the wings. who's not just suing open AI, because it turns out you can't IPO a charity and they've converted OpenAI to a for-profit model and there's a lot of complications around that. But he's also IPOing his SpaceX.

for I think it's one point seven five trillion valuation. So there's a big possibility that a lot of the heat's gonna be taken out of the market when he does his seventy five billion dollar, you know, another one point seven five trillion dollar raise. And it looks like he's gonna beat Open AI to to to going public'cause you y if you if you kinda w look at the news and you know, what's all happening with the ETFs and the allocations and so forth, he's a he's a lot further along. I th I

I don't know. In the olden days, you know, if you would invest in Amazon when it went public or Microsoft when it went public, you know, you had the ability to make a lot of money. I don't know how much uh

is left on the table for the general public when the when the company's v being um vade a trillion dollars when it goes public, you know, w what are you gonna do? G get to two trillion, ten trillion? Well I I think Nvidia's what Four or four and a half trillion valuation and they're the only ones making money in the space.

Matt, the parallels between this and the late nineteen nineties dot com boom before the two thousand dot com bust. are just striking to me and it occurs to me before I go on that we probably have listeners that weren't even born uh when that happened. So for anyone who's not familiar with what happened there.

Wall Street became absolutely obsessed with the idea that the internet is going to be a really big deal. And the thing to im it's really important to understand about this is They got that call exactly right. i i i the internet w the public internet was going to change the world we lived in in ways beyond what anyone could even conceive and they got the call right that it was a really big deal and I think they're getting the call right

Again, that AI is a really big deal, maybe as big or bigger than the public internet. But the thing is even though they got the call right, they started throwing money at dumb ideas without thinking and it just turned into a complete frenzy. It seems like that's happening again here, but in the late nineties it was every tiny little company that had dot com in its name and it didn't really matter whether they had a a business model.

It's different here. It's the big players which frankly have a business model, but as you very eloquently explain in this excellent piece I recommend everyone read called Pay to Pray. That business model isn't viable for the reasons that you just described, or it's not profitable or not likely to be sustainable. How should we think about this? Is it inevitable that a dot com

bust like we had in two thousand is coming for AI and does it have the same dimensions as the one in two thousand? Does is it bigger, smaller, worse, better? What do you think? So if you think about the dot com boom and I was there actually in Silicon Valley in ninety seven, ninety eight, ninety nine, two thousand, I saw I saw it all.

there was a hypothesis the internet was gonna be a big thing and it turned out to be a enormous thing in terms of the benefits to humanity and society and will continue to grow in terms of it as as applications. And And AI is the same thing. A AI is going to be absolutely transformative for humanity in terms of what we can do.

At that time, you know, a company that whose valuation went through the roof was Cisco. And their tagline was we network networks. We talked about it I think at last last Macro Voice. Uh every time you plugged in a a a bit of the internet, you needed to have a a router to to connect up by the the network and Cisco equipment was gonna be everywhere and why wouldn't it be the m most stable company in the world, right?

And the same is with open AI and in a to an extent you think, okay, they've got the best AI models, AI's gonna be everywhere, why wouldn't I open AI be the most valuable company in the world? But then at the same time you also had AT and T. And up until about nineteen ninety six, ATT had a uh sixty percent market share. It it basically built the network it you know, using Cisco equipment.

To connect up the the world. You had three players in the market. And I think it was mentioned at the time by an analyst that they had uh margins that would make drug dealers blush. But the problem was that in nineteen ninety six the Telecommunications Act Regulation Act came in and um deregulated the market.

And then you started having fourth entrants and fifth entrants and so forth and and and people buying companies buying selling capacity to each other, et cetera. And, you know, when you started having the fourth entrant come in and competing on cost the unit economics fell apart. And if you think about the AI compute space, Well, Amazon had it pretty good up until the AI boom. I think its its its CapEx as a percentage of earnings was down to about six percent at at one point.

Now these uh hyperscalers are spending you know, the cloud computing companies are spending, you know, sixty percent of earnings on CapEx, over a hundred percent of earnings on CapEx. They're sending six hundred billion dollars a year. at the moment in terms of a run rate in CapEx and it's hypothesized that by twenty thirty it's gonna be five point two trillion dollars of CapEx, right?

Now when you just had Amazon, you know, really dominating in terms of uh cloud, you know, it was sitting pretty and I think it had about sixty percent market share. Now you've got Microsoft who's taken over and that they're uh a market leader and so forth. Now you've got entrants such as Oracle that's competing on price, and you've got Coreweave and the neo clouds.

And the unit economics are starting to look a little bit shaky. And then you had a big bust in the dot com bust where, you know, all these companies w had money being thrown at them. You're seeing that right now. Any company that kind of has AI in it. you know, business planner is getting these stupid, you know, seed rounds in the hundreds of millions of dollars. I remember when seed rounds were hundreds of thousands of dollars, now they're hundreds of millions of dollars.

Um and you you had like the you know, through the early two thousands you had a a real trough in the in the technology space where where everything blew up and and and was somewhat uninvestable for a period of time. But through that period of time, you had companies like Google and Amazon continued to to grow and double down and Microsoft and so forth and uh ultimately today became very, very big companies. So

I think we're seeing this on steroids right now with AI CapEx and compute and the open AI funding rounds and so forth. And, you know, it's unquestionable that AI is going to be completely enduring and just absolutely game changing for society. But I think the kind of circle jerk of money that's sloshing around between a very, very small number of companies at stupidly high valuations and at a scale that that is just stupendous. is going to potentially end up and a big bus.

Now, I want to focus on that because a lot of people are going to mishear what you just said and they're going to say, Matt Berry said imminently tomorrow there's about to be a great big bust in all of the AI stock. That's not what you said, and it really i rings home for me because the reason that my partners and I sold our software company in uh the summer of nineteen ninety eight is because we knew it was a bubble.

And my plan at the time was to take all of the proceeds and short the NASDAQ because I knew it was a bubble. Fortunately I got talked out of that, but if I hadn't, I would have lost everything, because even though we were right, it Basically the NASDAQ doubled between ninety eight and two thousand before it crashed exactly like I predicted it was going to crash.

What do we do here? I mean, it's d do you go long, do you go short? Uh and I'll say I'll I'll ask the question this way. OpenAI and Anthropic are both expected to IPO probably in twenty twenty six. when they do, you know, is it time to go long or is it time to go short? Because uh, you know, I could make either argument. It seems to me eventually you want to be short, but how do you time that?

That's the trillion dollar question, right? You've got s you've got SpaceX going public, which obviously has Grok and X X dot AI within it. You've got Anthropic going public and you've got open AI going public. That's why I think it feels like a bit like a supernova.

So you we'll end up with a big bang in one way or w one way or another. I mean, you know, I think the issue's gonna be I mean, that some of these valuations, like the open AI valuation, is kind of predicated on the fact that it's gonna capture an enormous amount of value out of the world in order to justify these valuations. You know, these funding rounds are so large and the valuations are so high that

you need to pitch a revenue line that matches them. And, you know, at the moment OpenAI is doing about two billion a a month in revenue. I think it's at a about a run rate of about twenty five billion. I wish they do

you stop using the word run rate'cause I think you've actually got to recur once before you can call something annual recurring revenue. So it's it's doing about two billion a month of revenue, losing you know fourteen billion this year. I think the burn rate that came out today was about is expected to lose seventy million dollars a day this year, scaling to one hundred and fifty six million a day loss.

next year. But in order to to, you know, cross the valley of death and get to the promised land, they've got to show a business model that makes sense. And I think what their business model is going is twofold. W one is that they're going to take a substantial amount of white collar jobs away from humans. You know, some a substantial percentage of jobs in the world are gonna go to AI and that's that's kind of the top line revenue number.

And then the in terms of generating earnings out the other side, the justification is that the infrastructure that's been contributed as part of this hundred and twenty two billion dollar round is at such a scale that only open AI will have the unit economics that will make the inference profitable. So in a c in combination with taking everyone's job and uh having the only infrastructure that can run this sort of stuff profitably.

I think that's the argument for justifying these sort of trillion dollar valuations. Now, I d I don't think Open AI is going to capture, for example, hypothetically, you know, the value in the AI powered drug discovery market any more than AT and T captured the value of the iPhone, right? You know? Um, you know, the underlying um technology

phenomenal, but as Ilya Satskeva said himself, who was one of the founders of OpenAI, that you can just read forty academic papers and ninety five percent of what's out there in AI is uh is published in the in the in the public domain. And that's why every couple of weeks there th there's a kind of a new foundational model that's top of the leaderboard and every once in a while there's a team of people that you have never heard of, the hundred and sixty engineers in the room and Hangzhu like

like Deep Seek that comes out of nowhere and suddenly leads in the leaderboard because it it turns out that there's no sustainable competitive advantage in the underlying foundational models. And what you do need though is you need access to data. Those data sets are now kind of out there in the public or in the case of the Chinese, they probably don't care too much about copyright, so we'll always have a st sustainable competitive advantage.

And I think there's incredible and tremendous opportunity in AI, but it it's probably not going to be in the in these models that that haven't really filled figured out what the business model is. Matt, I think there is a very distinct difference between this scenario and the late nineties to 2000 dot com story, and that is this.

Uh l let's say we don't know whether it's ninety seven, ninety eight, or ninety nine right now, but we know that March of two thousand is coming at some point. There's gonna be a washout in this commercial AI space where th they just realized that the business model wasn't sustainable. and it all starts to fall apart. Well what happened in the dot com bust is we went we had a good solid couple of years of of kind of a technology recession.

where there wasn't a whole lot of progress on the public internet because we had to basically shake that malinvestment out of the system, get back to efficient capital allocation and then, you know, after two thousand two, two thousand three, things started to really take off again. Okay, what if the US government steps in and says, No, wait a minute, w the military applications of AI

create an existential threat to the country if we don't stay ahead of this. We can't tolerate a two thousand to two thousand three pause. You must continue, you must do it under US government funding, but we're not gonna fund the giving away stuff for free to max subscribers on Claude. We're gonna take it over and you know, it's it's just for the military now. We're not gonna have consumer AI anymore.

Is that a realistic scenario or do we need consumer AI in order to train the models in order for the military to get the benefit? You know, what would happen in that scenario where the military says, No, we we can't allow a stock market crash to slow down progress on the military applications of AI. I don't think it's realistic that we're not gonna have consumer AI. I mean the Chinese are open sourcing um their models.

And in fact they've got a the strategy to open source both the software and the hardware. Yeah, and there's been previous leaks of Meta's Lama and and and and so forth. Yeah, I think the interesting thing here is that it won't be the government stepping in. I think that There's one big company that's kind of been sitting in the wings that has a god awful uh AI products and uh it's in everyone's pockets and that's Apple on the iPhone. I think in our last chat.

We talked about how goddamn awful Siri is for s supposedly being your kind of your original chatbot AI assistant and uh and we hypothesized it will continue to be awful in the next year and here we are and it and it it i it it it continues to be pretty bad. But

they've kind of avoided this whole uh getting sucked into this whole CapEx bonfire. And they've really got two levers they can pull. One is one is they're sitting on this cache and they've kind of they can sit back and watch. And and as with the dot com bus, There was a lot of infrastructure that went through to the second and third owners. Where you know, I think that's a good thing owner that builds out the optical fiber, uh, network goes bust and the second owner

comes in and tries makes it to be break even after after purchasing it at at a cheaper price and washing out the underlying sunk costs and then the third owner comes in and and makes some money out of it. And I think you might have that situation in the AI compute space. where if there is a problem with some of these large, you know, foundational model companies, there might be a second or third owner and and Apple would be ideal for that.

At the same time what they've been doing is they've been putting in um some AI silicon into their products and a lot of this compute that's currently being done in data centers, you know, by OpenAIR, by Anthropic uh, et cetera, is going to go to the edge. And it's going to go to the edge for a variety of different reasons. One is that you don't want Sam Altman training on your data. And I th you know, we've talked about before that I think an emperor has no close moments heading to into SAS.

where um, you know, I think l large enterprises are start start thinking to themselves, you know what, I don't want my data in Google Drive and Gmail. You know, it might get trained on. And you're certainly seeing all the major SaaS companies quietly flicking on a switch.

uh in the settings without telling you where you know they're saying by default now, uh we can train on your train on your data potentially. And then you flick it off, but by then it's too late and all your data's been sucked down.

So a lot of that compute is gonna go to the edge, it's gonna go to cer you know, to on prem, you know, in in the enterprise, on compute devices. So it doesn't go into the cloud, it's gonna be on your phone, it's gonna be on your MacBook, it's gonna be on your uh Mac Studio or whatever it may be.

for privacy, for confidentiality, for latency reasons and and the fact that there's some models now that can that actually can fit on that silicon. And, you know, while it might be, you know, one or two generations away, you know, at some point I think real soon

A lot of that load and a lot of that compute that's going to AWS data centers and Azure data centers to run Anthropic and to run to run OpenAI is going to go to the edge. It's going to be on Apple's devices. It's going to be on Apple's laptops. Uh it's gonna be on prem. At the same time Apple's cashed up and might end up being the second or third owner of some of these companies.

Matt, the title of your missive that you just written, Pay to Pray or Pay to Pray P R A I, is actually a reference to the inevitability in your prediction of something called paper token monetization.

What does that mean? What how does that relevant? Explain what that's about. Well, the fundamental business model of Silicon Valley uh venture capitalists uh is to try and win markets. by financing companies with astronomical amounts of money such that um that money gets spent on marketing and uh subsidization of the product. to such a scale that nobody could compete with these Silicon Valley Investee companies or unicorns.

And so total nuclear war is launched on a market. So you can think maybe Uber and free rides in China or whatever it may be. Or, you know, DoorDash delivering noodles to people in Indonesia or you know, Grab or whatever whatever it may be. So what we have here in the AI space is i the subsidization model is that you have a free product. being GPT or what have you

And then you've got a twenty dollar a month product, which I've said earlier, you know, probably cost them twenty dollars to serve, and a two hundred dollar a month product, which probably cost them two thousand dollars to serve. Yeah, y this can't continue forever. It's up, you know, so the so the question is going to be, can we get the unit economics down to do inference? to such a point that these models are profitable before these companies run out of funding.

Now, the problem is that as we've moved into, for example, software development, which um consumes a never ending amount of tokens to write code, because every company in the world is powered by software now.

you know, h there's there's this huge token burn that's happening in these two hundred dollar plans and If you were to try and make some sort of reasonable software like margin, like eighty percent, et cetera, you would have to price these plans not at two hundred dollars a month, but maybe a a thousand or two thousand dollars a month or higher.

at some point the money is going to run out. And I think they had a near death experience in the last couple of weeks. Anyone who and I and I know you're constantly using um GPT and and Claude, et cetera, and you probably noticed the same thing.

You know, in the in the last couple of weeks there seems to have been a bit of a panic from these companies where, you know, you log into your um two hundred dollar plan, you type a couple of queries and then you run out of credit. You've always known that these companies aren't making money on the inference because instead of saying put your credit card in and top up your credit, it puts you in the naughty corner for for seven hours or or longer.

the inevitable destination for these subscription models, which are basically massively subsidized Silicon Valley financed and increasingly debt financed uh business models. is that they're gonna have to move to a per token pricing. Now, you know, and that is gonna cost a lot of money. I think there were some comments in the last couple of weeks on Reddit.

where uh someone who's on a two dollar two hundred dollar plan ran out of credit pretty quickly. He had to get it done, uh he had to get something done pretty you know that night. And so he moved to the API pricing, which is uh using the um uh programming interface. And that that was costing two hundred dollars an hour instead of two hundred dollars a month.

And he thought, gee, I've used a c you know a couple of hours, I've used, you know, five, six hundred dollars. The problem with with that sort of pricing has several dimensions. The first is that already at twenty dollars a month, for a plan, which is 240 US dollars a year, that already prices the product out. from over half the world's population. I mean the the median

global income in the world is about two and a half thousand dollars a year. So at two hundred and forty dollars a year, you're already ten percent of the pre tax income for half the people on the planet, right?

So you're you're already quite expensive. The second point the problem here is that, you know, as uh you know, these programming models which which realistically to make any sort of margin need to be priced in the thousands of dollars a month or maybe ten thousand dollars a month, you have a bit of a problem in the fact that

Yeah, these models do hallucinate. And when they do hallucinate and throw errors, they're very different from humans. When when you use a a hire freelancer, for example, on my website, freelancer dot com, Yeah, you you put in some money, okay, I'm gonna pay you two hundred dollars to build a website for me. And you don't release that milestone until the job is done. And

i if the human can't figure out a problem, you know, they'll they'll ask their friends, they'll try and find a more senior engineer for advice, they'll get on our forums and and ask other people how to solve problems. They'll browse the internet. They'll they'll they'll kind of

he'll clumb their way out of solving problems. And look, they may take they may ultimately not get there and you might get frustrated with them and and want to find another developer to do the job. But ultimately they they their failure modes are are very different from AI. With with AI

Sometimes when it hallucinates, it can do wildly crazy things. Uh about three weeks ago, I had a problem with I with my VPN on my computer. I was using Claude to kind of help me through figuring out how to get it fixed.

I'm a software developer by background. I've got a lecturine degree from Stanford. You know, I I I I do know uh how to program quite well, but I kind of veered into PowerShell commands in Windows 11, which I don't know very well, and I was blindly pasting in Claude and it made me delete my entire networking stack.

And you know, so you have these very crazy failure modes with AI where you either go and loop or it goes away in thinking and and you know it it goes and look you know burns, you know, tenx the inference. you know, try you know, these reasoning chains trying to figure out what's going on. Or it just has these crazy suggestions and and it will look at you in the eye with the eyes of a sociopath on a first date in some regards.

trying to, you know, gaslight you into thinking that its answer is is true when it's it's clearly not the case. It's just hallucinated something rather. And the issue here is that in a paper token pricing model, It really turns software development into a slot machine.

Um if the h if if ultimately you know y y you you know you're writing your app and you you kind of need to get caught to do something rather, you're really pulling the slot machine handle. You don't know how much gonna c how much it's gonna cost you by the time the tokens are all burned and you don't know if you're gonna actually gonna get a um a solution at the end of the day.

And so, you know, I mean, I guess only in Silicon Valley could could they turn software development into g to generate gambling because that's that's kind of where you end up. And the frustrating thing that I think will happen is when you're on the two hundred dollar plan You've got a certain amount of capacity and

maybe it tells you to time out or what have you. Y you kind of know you you're capped at two hundred dollars, right? Um it's very frustrating when it runs out of credit. You've got to find alternative ways potentially of doing things. You kind of know what you what what you what you're up for. When you're pulling the handle onto the paper token model. It could be fifty dollars per spin.

You may go in a circle, you may go in a circle ten times. You know, uh there's all these examples of people go lower X of of um radical crazy things that that that that Claude does geocodebase. And I think people are gonna get very, very frustrated if they have to kind of put a a coin in the machine, pull a handle every time and they get a

non deterministic outcome of whether or you know, o whether they're moving forward in a hill climbing sense to this to their final solution and their final app or the final uh bit of software being developed, or whether they're going in circles, you know, round and round and round and round again.

And I think people are gonna get frustrated. They're gonna go try and find open source models. They're gonna try and find alternative ways to get things done. And I and I think it that that's r really the problem. And while the hallucinations are reducing as part of, you know, each new generation in terms of, you know, the engineering of the infrastructure around the foundational models to reduce those hallucinations.

What is actually happening is the token spend is going up exponentially because you're doing more and more complex things. So you have a much bigger surface area in which you could generate an error. So what I mean by that is, you know, while the probability of a failure, you know, pulling the pulling the handle and the slot machine is getting reduced with the you know the engineering from each um subsequent generation of model.

the number of handle pulls you need to make is is going up exponentially. And so you've got a multiplicative effect. in terms of potentially the impact of errors. I just think it's gonna the question that uh basically needs to be solved now with this hundred and twenty two billion dollar fundraise is can you get the cost to compute way down to get this whole model profitable and will the market tolerate

software development is a slot machine. A lot has been said already by lots of people about the incredible rate of progress and how quickly AI itself is getting smarter.

what I don't think has been discussed enough and I'd like to get your comment on is the rate to which professionals are becoming dependent on it. Uh I think more than, you know, this it's more addictive than cocaine. I remember our first interview on AI when ChatGPT had just come out. And I remember thinking to myself, Boy, Matt's really into this stuff. To me, it's it's a novelty, but I don't think I'd ever actually pay twenty bucks a month for it. I mean it's just

It passed a Turing test, big deal. But uh I uh I I don't think I'd ever buy a subscription. I'll tell you, Matt, in the last several weeks There's been a lot of stress in my life because of this war and family that are affected by the war. and waking up double digits down uh on a percentage basis on my net worth because of something that happened in the market overnight.

Okay, look, I'm a big boy. I've been through that stuff before. I've been through the two thousand eight crisis. It's not that big of a deal. But Claude four point six was going offline and the server wasn't available and I was freaking the F out. I couldn't handle it. I was losing my and and don't you dare insult me by suggesting that I go back. I don't drink Paps Blue Ribbon and I don't do Chat GPT. I mean, I've gotten to the point where I can't live without Claude.

Th this is this seems like a risk. When Claude went down, it's quite interesting actually because the first time it had a bit of an outage was when the data centers got blown up in in Dubai. And you kind of have to wonder yourself what potentially was uh being run in those data centers in the Middle East that caused the outage of Claude. And I do think those companies did have a bit of a near death experience in the last couple of weeks.

in that all of a sudden you had Sam Altman Kill Sora, which was this hyped up video modality model where you could generate uh, you know, clips or, you know, the whole point was you're supposed to be able to type in a prompt and get a movie out the other side. And in fact, Disney paid a billion dollars to open AI for use of the technology and only found out half an hour before a meeting that the whole thing was going to be cancelled.

At the same time Sam Utman killed instant checkout, he's working on some sort of er erotic model as well, which is a bit strange, but it's I think it's Probably one of the the big markets is yeah, is pornography. And he thought maybe he could make some money there. He killed that as well. And at the same time, Claude had this.

big changes in terms of how they did the plans and they were giving out, you know, uh extra tokens in off peak, but in peak they'll kinda cutting you back, et cetera. And then ultimately it seems that they've they've cut back a lot of lot a lot of the lot of the to token budget you get in these models and on the path to this sort of paper prey, paper token sort of uh business model. So I do think they all had a bit of a near-death experience and that near death experience

obviously is what I was feeling or what you've been feeling when you kinda see these models you start using them going, gee, is my access gonna start getting restricted? You know, will I have to pay a lot more money? Will I have to add a add a zero to a to to my monthly subscription? What what I'm gonna have to do a paper query? What what what's going on?

And then of course you've got this financing round which is less cash and and and more infrastructure and perhaps it's a way to kind of help the company kind of limp towards IPO so there's liquidity event so so the you know, the original investors can kind of uh make a bit of a return. It turns out that, you know, this whole uh it's it's pretty funny that this whole AI compute space is predicated on six hundred billion dollars a year of uh CapEx, which is incredibly energy intensive.

when at the same time you're bombing the you know, f uh an area where forty eight percent of the world's energy is and you know, you rely on energy for being cheap in order to have this how you AI boom um work.

Let's move on to private credit. There's a lot that's been said as uh a lot of private credit funds are gating investors that this is AI driven or it's related to clawed code specifically, creating fears that software companies would no longer be profitable. And I have a hard time with this one because This sounds like the claim I remember hearing in the nineteen seventies when supposedly the introduction

of the Hewlett Packard electronic calculator was supposedly gonna put every accountant out of business and uh create vast unemployment of bookkeepers and so on and so forth. And it was the exact opposite. It created more productivity. It seems to me that Claude Code just gave the software industry the biggest productivity boosting tool that they've ever had. And that's the reason that private credit is blowing up. Is that really right? Am I missing something?

Well, I mean there's a few things going on. First of all, the these f funding rounds are getting too big for equity. So, you know, as we saw with the hundred and twenty two billion and all the infrastructure, you know, the vendor financing in there. And so you've increasingly these companies are turning to debt. Uh even Meta had to go and get thirty billion. from Blue Owl not too long ago in order to fund data centers.

'Cause it can't do it off off the balance sheet anymore and the numbers are starting to get too big for equity uh raising. So They're borrowing the money. And not just are we seeing uh record equity rounds, we're seeing record debt rounds. That blew our financing of Meta was the the biggest private credit round ever. The problem is that private credit in these portfolios has got SaaS businesses.

And one of the big pictures that these AR compute companies has is that SaaS is dead, which is kind of ironic when Chat GPT on a twenty dollar a month subscription is a SaaS business. So th it's it's kind of funny funny that they're they're saying SAS is dead when they actually are SaaS business themselves. But there's been some warnings that have come out around these private credit portfolios that pack in the AI. debt as well as the SAS debt because

AI is actively pitching the future of these SaaS companies will be eroded by the fact that AI is coming. So it's causing some instability in the in the private debt markets. And of course, what else is causing instability is rising interest rates in an uncertain world. and a war in Iran, amongst other things.

Matt, speaking of data centers blowing up, let's talk about the Iran conflict, its connection to AI. And particularly in your latest missive, you uh expressed some concerns that there's a risk that potentially this Iran conflict kinda pulls the rug on the whole AI business model. What do you mean? What's going on?

Well, this is where the fifth industrial revolution meets the Islamic Revolution, right? Um a lot of the financing for AI has come from the Middle East and you can imagine now if you're Saudi Arabia or you're the UAE and you have a fiduciary duty to protect your nation and your citizens and your economy. Are you going to be putting it into a hyper rounds of Sam Altman's uh highly inflated valuations, or will you spend it on defense?

energy, rebuilding rebuilding your your civilian and and industrial infrastructure. and potentially going to war to to fund an army. You know, it's quite problematic when, you know, you've got a country that sits right in the middle of, you know, forty eight percent of the world's n energy infrastructure controls the strait, where twenty one million barrels of oil goes through every day.

that can fire twenty thousand dollar drones at scale into anything within a two thousand kilometer range and migrate not just your data centers in the region, but potentially your energy infrastructure into the cloud, literally in a puff of smoke.

Matt, another theme that you have in the latest missive is that you've gotta be pretty smart to really get the most out of AI. What do you mean by that and what are the consequences? When I look at deep down at kind of what what what's happening in the space, I mean that despite you've got a a conflation of few things happening right now. You've got the AI companies.

trying to justify these huge valuation rounds and they're doing that by saying they're gonna take a away a lot of the world's work. Then at the same time you've got sort of mass layoffs happening in the market with block

today with Oracle, I don't know if you saw overnight, but Oracle has announced eighteen percent of their workforce has been has been cut, et cetera. And so you you would not be surprised that the general market has kind of conflated these things and thinking that AI is taking people's jobs away. Now I see AI instead as a tool. It's a very, very powerful

tool. It's yeah, but it's a productivity. Much like the world was, you know, when you went to work and there was no computer on your desk and then you went to work and there was a computer on your desk or you didn't have mobile phones and then you have mobile phones or you didn't have the internet and then you have the internet.

Yes, there is incredibly disruptive and transformative time and some jobs are lost, but you know, just like pretty much all forms of technology, more jobs are created over time. And what I mean essentially by you've got to be smart to use a AI is

Uh uh you know, AI is a power tool and so is a chainsaw, right? You give a chainsaw to a carpenter and they can do a skilled carpenter and they do amazing things. You give a chainsaw to a novice and you can cause all sorts of all sorts of problems, right? And So what I am observing, um, both across my platform as well as within my my engineering team is the the people who are benefiting most from AI are the ones that are highly skilled and

intelligent and know how to use the AI and they're seeing productivity gains which are astronomical. They're seeing, you know, double to triple their productivity and you can measure that in in different ways in in in terms of w you know what they're achieving. the and then as you go down the skill level, you do you know, it is a rising tide lift or boats. So if you are an average copywriter, you you can now be a a good copywriter. If you're an average illustrator

Yeah, you can be a a good illustrator using using these various tools. If you i I make a joke, if you're a if you're an average programmer, well you certainly are a confident programmer now using these tools. But to really get the best out of them, the people who are highly skilled are the ones that are really, really driving the outcomes. And I see I see that for example with with your work and what you do, uh you're writing these missives and books and and and and so forth.

And so I think just like just like technology has over time created a bifurcation in society where you have the people who are skilled and can create technology and that's where all the wealth flows. And you st you know that's why you see these There's companies with huge valuations and um you know and uh the ultra, you know, high net worths in the technology industry.

And then you see a general deterioration at the low end of society. I think this is going to drive even further to an extent. People who really, really know to use AI well are going to capture incredible opportunities in all sorts of different market segments where they can control that customer interface. Well I definitely agree with you. I just finished a writing project, or I should say Claude and I just finished a writing project.

that was considerably bigger than writing my book Beyond Blockchain. It required a lot more research'cause Beyond Blockchain was just my own opinions. It was a lot to it and beyond blockchain took me more than three months. This project took me less than two weeks. And it it's just amazing how much you can accomplish. Although you definitely as you say it takes

some skill to learn how to manage context window exhaustion and recognize the symptoms of it occurring and so forth. So I couldn't agree with you more. It kinda scares me though, Matt, because I think one of the biggest problems that society faces in the mid twenty twenties is the K shaped economy, the tendency that the rich get richer and the poor get poorer. It sounds to me like AI really is going to exacerbate that in the sense that the smartest people

are going to really benefit in productivity from AI. They're going to be uh a whole lot smarter and more capable than they used to be. One guy will be able to do the job of ten or twelve guys. But the ten or twelve guys that weren't that bright and really didn't figure out how to recognize the symptoms of context window exhaustion and their L L M I think it really does take their jobs. And it seems to me like this could become the basis for deeper division in society.

So Matt, I wanna ask you this because as the CEO of freelancer.com and for any listeners who aren't familiar with Freelancer, it's basically a marketplace where people can hire independent workers, whether they be high end expert consultants in their field who are the leaders of their field, or if it's just a guy who'll design a logo for you for five bucks.

you can hire all those different people on freelancer. Matt has a very unique perspective on AI because first of all, he's running a company that uses AI, so he leads an engineering team that's building AI based solutions. But some of the people that his customers are hiring are AI experts that are helping companies to implement AI at a corporate level.

And then some of the more mass uh freelancer, larger group of graphic designers and people that are are making logos and so forth, are users of AI that are leveraging their logo design contests and all that. So Matt sees all of these different dimensions of different people using AI in different ways, corporations and organizations adopting it versus an individual guy in Indonesia who's just trying to make a buck as a graphic designer.

suddenly becoming much more productive and being able to work in different l languages that he doesn't even speak. So Matt sees all of these different dimensions. Matt, from that vantage point that you have, what would you say are the top three things that you've become aware of that the average person who can't see all that stuff uh probably wouldn't think of?

The amazing thing is we're gonna see uh the ability for you to get things done that you could never possibly think of before, right? R rather than just getting a website built, you get a whole business built. The ability for you know, it w I think we're gonna enter a whole new world of uh explosive entrepreneurship where now you know you really just need to have an idea to start a company and you're b the ability for you to be able to execute on that using both AI and also uh accessing humans

powered by AI w will be unprecedented. You'll be able to do it at a cost um that that's cheaper than ever before. So we're gonna enter I think enter an explosive period of of hyper hyper competition and you know, thanks to the Internet and the ability to distribute products or services of the Internet at at scale so quickly, if you've got a great idea, that great idea can take off and you can make a billion dollars faster than any time.

ever in history before. So I think it i it is an incredible time. I certainly haven't seen as yet the complete replacement of someone in a in a job. I don't know, you know, if you ask around, does anyone know any graphic designers that completely lost their job where the dislocation will occur is where you've got highly paralyzable

workflows where you've got thousands of people or hundreds of people doing the same job. So maybe in a call center where there might be ten thousand people or a thousand people in a call center doing the same um workflow, which is custom support, answering of phones, et cetera. With AI, you'll be able to take it from a thousand people down to maybe a hundred people.

You know, if you've got thirty junior lawyers drafting legal agreements in a room, maybe you'll be able to take it down to thirteen people in a room. But I I don't see because of the way I I AI works and goes in circles and the failure mode and the fact that as you burn more tokens you've got more chance, even though the unit rate of of errors goes down, the fact you're burning all these

extra tokens means that ultimately yeah an error becomes more catastrophic and in a way that a human never would make an error. What that means is that I think the ultimate combination is humans and AI. I think it I think it's It's probably one of the greatest productivity tool tools known to man and I think it's gonna open up a whole amazing golden age of building and creating businesses and hyper competition.

Well Matt, I can't thank you enough for a terrific interview. Before I let you go, you run freelancer.com, a public company that trades under ticker symbol FLN on the Australian Stock Exchange. Tell people f who uh are not familiar with it what freelancer does.

And uh how to follow your work. Your latest piece, again, it's linked in the research roundup email. It's published on Medium. It's called Pay to Pray. Uh, you write quite a bit of interesting stuff. Uh w for people who want to follow your work and learn more about freelancer.com, tell us about it.

Well, we run the world's largest uh cloud workforce. So there's about eighty seven million people in that marketplace. We can do any job you can possibly think of from ten dollar jobs to ten million dollar jobs.

Yeah, the mainstream jobs are things like build me a website or build me a an app or um it basically help me start a company uh or grow my company. The biggest things we run, we've got a Moonshot Innovation Challenge program at the high end where we help all sorts of US government departments and

and enterprises around the world solve scientific and technical ch challenges. So, you know, give us your hardest scientific or technical challenge and w and we'll solve it or or you don't have to pay the pri prize out. So the biggest thing we've got running right now was the seven and a half million US dollar uh gene editing challenge for the central nervous system of humans, which we're doing for the National Institute of Health and

and uh and also working with NASA. Actually ironically the when Artemis goes up in the next twenty four hours into space, we worked with NASA to crowdsource the uh mascot from kids all around the world that going up with the astronauts to t to basically inspire kids about space and and and so forth. But if you wanna get anything done, you come to our site, we can get it done and no job is too small, too big or too too complex and it it ranges through to

mechanical engineering or electronic design or whatever you need. And if you want to follow my writing on AI, there's a series of obviously a podcast that we've done together on macro voices on AI. I think this may be the fifth or the sixth. And if you've got a medium uh or sub stack, you better find me and see my asset. And if you just put Matt's name in, Matt Berry, at the search box at macrovoices.com, you'll see a list of all of the previous

AI interviews that we've done right here on Macro Voices. Patrick Serezna and I will be back as Macro Voices continues right here at macrovoices.com. Eric, it was great to have Matt back on the show. Now Dr. Anas al Haji is next on deck for a special second feature interview on the developing Iran conflict and what it means for the oil market. Then Eric and I will be back for our usual post-game chart deck and trade of the week.

Since this extra coverage format seems to be a hit with listeners, we'll do our best to continue it for as long as the situation in the Middle East warrants. Now let's go right to Eric's interview with Anas.

Joining me now is Energy Outlook Advisors founder and managing partner, Dr. Anas Alhaji. Anas, it's been three weeks since we had you on the program for the first Iran war update. It's been one month since this conflict started. President Trump just moments before we began recording this segment gave an address to the American people. Let's start with the big picture update. Since this began, how has everything evolved? How have your views evolved since we had you on three weeks ago?

And what did President Trump need to achieve in this address and did he achieve that? Well generally speaking, we got to frame what has been going on and President Trump basically did not frame it. So either this is about Iran and its nuclear and he tried to make it that way. or Iran part of a bigger picture and the audience basically can choose one of those two.

So either it is about Iran and its nuclear program and the outcome of that basically and its impact on the market are completely different. from the idea that Iran is part of b of a big picture if you look at trade wars, tariff sanctions, Venezuela, Panama, the Red Sea, China, Greenland, etcetera. So is Iran and this war is part of it or Iran is completely separate?

Uh the president today basically tried to make it about Iran, but all of a sudden he deviated from that and he started talking about we don't need the Middle East, we don't need oil from there, buy oil from me. And this makes the the second option basically kind of more credible in this case. Anyway, we'll go back to that later on. And the other issue is who closed the hermostry?

You have only two answers. It's either the United States through the insurance companies or Iran. And it's up to you, the audience basically to believe the one of them. There are evidence on both sides. But one of the ironies here is that when we talk about the details of who closed the Hormuz Strait and we say Iran has no power to close it, then people say, Well, this is a conspiracy theory. It turns out it's a bigger conspiracy theory to say Iran closed the streets.

And we heard the president today saying that Iran's navy is gone. Literally said that. And he said they have no radars, they he's talked about the total devastation. Of course their leadership is gone. All that stuff. So to believe that we have all these attacks and the aftermath of this devastation that happened to Iran. We have twenty eight countries. are in charge of protecting the Gulf and the Hermostrait.

through an organization that is based in bahrain you have the u.s navy you have the indian navy you have the british navy you have the french navy you have the saudi navy you have all the other countries navies in the area and then after all this devastation Iran still controlled the Hurmu Strait. This goes against everything that President Trump said today. So the story does not match. So to sum up, either you look at this war as

uh it's either Iran and nuclear or it is part of a bigger picture of the changes going in the world. And then you look at Hermostrait and say, Well it's uh either the United States and the insurance companies close it and the main beneficiary of this is the United States and we heard President Trump talking about it today.

Or Iran closed it but that does not make any sense and that is a bigger conspiracy theory because how is Iran able to do that after what we heard from President Trump today and the existence of all the other navies? Unfortunately, President Trump today failed to deliver to the nation the message why the war is still going. Uh many people basically expected that he will announce

some sort of an end to the war. We told our clients a couple of weeks ago that all the indications point to a long war and today we got the confirmation. This is not going to end soon. And if it's not going to end soon, there is another question mark about what President Trump said. If everything is destroyed in Iran, then why is this war continuing? What is left to be destroyed? So the impression I got out of this speech that the people around President Trump are not telling him the truth.

and he is living in his own ivory tower without looking at what's going on in reality. And we have countries around the world that are literally having blackouts countries do not have propane to cook. Countries basically are struggling to get a petroleum product. etc. Many countries are worried about food supplies and the president did not even mention it today. This is a global crisis. This is the largest global crisis we have in our lifetime. And the president even did not talk about

And he did not explain to the pe to the American people why this war is still going until now. If everything is destroyed, why the war is not ending? On us, who is actually in charge in Iran and calling the shots? Because we've seen so much conflicting news in the last few days. President Trump before this speech had said very clearly in his Truth Social posts that what the speech was likely to be about is that Iran had requested a ceasefire and that Trump was likely to agree to that ceasefire.

Now preempt apparently trying to preempt this speech. The guy who is still technically the president of Iran, although the president is not really the head of state who's in charge in Iran, it's really the supreme leader who calls the shots. But this guy who is the president Issued a letter to the American people in which

He says, Look, we don't want any ceasefire. We would not agree to a ceasefire. We want the war to be completely over and we won't accept any end until we have a promise of no further attack. So it seems like if nothing else, that whether that was a true statement that reflecting the Iranian government or just the guy who's not really in power anymore, expressing his view isn't clear, but it seems like it did have the effect of taking the ceasefire discussion

out of President Trump's speech. Meanwhile, we're told that who's really in charge of Iran is the Supreme Leader, but that would now be the killed uh Supreme Leader uh Ayatollah Khomeini's son. n nobody's seen him since he supposedly took power. Nobody's heard from him. We we we're told that he's still alive, but we don't know that for sure. Who's calling the shots in Iran and you know, wha how should we interpret the the various messages that we're hearing out of uh the media?

The reason why we call it the Iranian regime, while other in other places we call it government, but in Iran we call it the regime. Because we have the official government and then we have the support coming from various militias and groups of that government. If you sum them up, we call that a regime. So the uh Iranian Revolutionary Guard are not part of the government. But once you put them together they become a regime.

And what we've seen historically is that there are of course differences between the government itself, the official government where you have prime minister and you have president and you have a foreign minister, they they are more diplomatic. while most of the military actions and the attacks and everything else comes from the revolutionary guards who are not part of the government. So historically we've seen that division.

But even within the Revolutionary Guard, there are not really one unit. And what happened is that after the killing of most of the leadership, including Ayatullah Khameni, who is the religious leader, they decided to uh at least for a short period of time to work independently. So they told them, Okay, we have no leadership at this stage, so every group, you are on your own.

So we've seen various groups basically acting on their own, attacking on their own, based on their location, based on their beliefs, based on whatever their leaders We've seen attacks on the Gulf nations. We've seen more attacks on some related to the others, et cetera. And then the current minister came in and said, we know nothing about it.

Probably he's right, because uh there were completely disintegration of the system, at least for that period of time. At this stage, it is very clear that the Revolutionary Guard basically took over the government. So now we can say that unlike in the past where we have a government and then we have the Revolutionary Guard and the others, now the Revolutionary Guard basically literally took care took over the government. So they are one unit right now.

and the whatever kind of nice messages we get, we get from people who have no actual power on the ground. And so everything you hear about the Iranian parliament This is just a joke. This has no impact. So when they say, Oh, we are going to install a tool bo uh uh a tool booth for example and we get to charge two million dollars per ship, etcetera.

This is coming from people who have no power on the ground at all. Unfortunately the uh Western media basically took them seriously and spread the misinformation all over the world. But they have no power. And speaking about Iran's ability to charge for it under international law There is no way that they can charge. There is no way they can charge. And whatever they are doing, if they are getting any money from anyone, this is an extortion.

And the funny part here is if there are governments that are literally Kooperating with Iran and paying them so their ships can pass. So we are talking here about Pakistan, we're talking about India, we're talking about Malaysia and probably others. Why President Trump is not mad at them? Because they are cooperating with those terrorists and the regime that is killing people who killed forty thousand people of its own people. Why?

Because if they are paying them money, then they are supporting the regime. Why? We did not hear a word about that.

Anis, I wanna follow up on a really important point that you made in your last interview three weeks ago. What you explained is that most people assume that uh Israel has nuclear weapons that they could use against Iran, but Iran doesn't have a nuclear weapon that they could use in retaliation.

You explained that iran really does have the equivalent of a nuclear weapon in terms of the consequence of using it, which is that Iran could target the desalination facilities of both Israel and other allied Gulf countries, which, unlike Iran itself, which only gets three percent of its uh drinking water from desalination.

Israel and other countries in the region are extremely dependent on desalination. So if Iran attacks their desalination, they are forcing uh starvation and and just horrible horrible uh humanitarian outcomes, they don't have that same vulnerability with their own desalination plants because they only get three percent of their own water.

from desalination. And so you made the argument that Iran could potentially, if they really wanted to use the proverbial nuclear option, they could escalate to targeting desalination facilities. Now about a week after you made that prediction, Iran made a formal announcement saying If our energy, our civilian energy infrastructure is targeted, we will respond by targeting the enemy's desalination facilities, which could bring about that horrific humanitarian outcome.

that you described. So it seems like this is uh escalating and escalating quickly. Do I have that right? And how do you see this playing out? Uh how how serious of a risk is this? Yes, y you are absolutely right. And one of the issues that we have to really realize is when we say this is a historic event, it's not only in terms of impact. It is historic in various ways. One of them is there are no red lines.

There are the n no one basically had any red lines. The the United States, Israel and the Iranian. Noted lines. And if you look at the attacks of the other countries in the Gulf, etcetera, there were noted lines. So on every part of on the parts of everyone, there are noted lines and that make it mo uh in a sense for another reason to be historic. But one of the other reasons why it is historic, because

nonsense. There are a lot of nonsense going on that we cannot even explain at this stage. We don't know what's going on. For example, Iran is hitting the G C C country that the six countries in the Gulf and some targets in Iraq. They are hitting them because they said, Oh, you are cooperating with the Americans and the Israelis and therefore we got to hit Well, if that's the logic, then we need to explain this.

The Israeli planes that are hitting the targets in Iran and the Israeli rockets basically that are using the fuel That fuel is some of it is coming from Azerbaijan. And Azerbaijan is next to Iran. It's a neighbor. And Chevron is is uh the largest oil company operating there in an oil field. So it is an American company. We saw Iran hitting, for example, a ruisse refinery in the UAE. A waste refinery is a joint venture between Elton and European companies. So there are no American presence there.

And there are no military bases there. Yet they attack it. But why they are not attacking Israbi Jan, who is literally giving the oil to Israel to bomb targets in Iran. Same thing for Kazakhstan, the same thing for Turkey because that oil coming from Azerbaijan basically is coming through Turkey. People saying, Well, Turkey is a NATO member. Well I can tell you. We know that Trump does not care about NATO and Trump does not care about Turkey if if Iran attacks Turkey.

But there are there are d this all this confusion and all those issues that do not make sense at all. For example, attacking uh Salala oil depots in Oman. Salad is like if you if you are in Iran, Salad is at the other side of the world. and it's an all day bow

w why you are hitting it. There are no Americans there, there are no Israelis there, there is no military base there. And how come literally a drone will go all the way across the Emirates, cross Saudi Arabia, cross the empty quarter, go all the way to the end of Oman to the other side where Yemen is and hit the target precisely. So there are too many questions. There are too many things that do not make do not make sense. For example hitting this refinery, if Hormos Rate is closed

And the refinery cannot export. Why you are wasting ammunition, why you are wasting drones or rockets to hit it while the refinery basically is useless? Why hacking a tanker like the Koiti tanker yesterday that's been in the same place for a month? just 200 miles away from her most right. It cannot go away, it cannot go through the home street, it's not even moving.

Why hitting it? While you know it's not going to go anywhere. And was it a mistake? Was it was the objective something else? Was what whatever the case is, there are too many questions that have no no answers. But the bottom line here is the Homer Strait is still closed and that is a big failure for the US policy in the region, regardless of what Trump claimed uh earlier in the speech. The fact that the Homer Strait is closed

Even at this moment, regardless of who closed it, it's a failure of U.S. policy. And there are strange things, again, when we talk about historic events. There are very strange things. I'm going to tell you some, for example. If we go back to the national security strategy, it was released in November, about four months before the war. So I'm going to read this to you from the strategy.

So I'm reading right now. America will always have core interests in ensuring that Gulf energy supplies do not fall into the hands of an outright enemy. Does the Strait of Hormuz remain open? that the Red Sea remained navigable, that the region not to be an incubator or exporter of terror against American interests or the American orla uh homeland and that Israel remain secure. Let's look at this one because this is kind of a really strange statement.

President Trump said we don't need the Hormos Strait, we don't need the Gulf, we don't need any of that. The strategy said we don't want it to fall into enemies' hands. And he did not say that today. This was one of the biggest failures of the speech. You should have said that. But there is a strange statement in this strategy. Of course the strategy is really conclusions of a larger document that remains secret. We don't know what's in it. And therefore this this paragraph

Sungled paragraphs that been omitted. And here is why I'm saying this. The United States historically, if you look at various strategies over the last 50 years, always talked about freedom of navigation in those waterways or the choke point. Notice the following. This is the first time we uh we see a document like this four months before the closure of Perma Strait. saying the Strait of Hormos remain open. It's never been closed.

This statement makes sense if the hormostrait was closed just once in history. So whoever wrote that statement there. They must have something before this paragraph open. If it wasn't closed in history, why you are using this statement remain open. And the other thing is you are talking about thermos trade. Why you are tying Israel to it?

You look at what we have in actual life, we have Israel basically attacking Iran right now and the Hormuz Strait basically is part of it. But the question here is F. Anna Salhati, wrote in June and July. That's months away, months before the the war. Months before the closure of Hermos Ray. And people who can they can go to our Daily Energy Report and they can go to the to our newsletter and they can say

I wrote the twelve day war in June, Israel attacked Iran. China had no problem. Everyone was expecting Israel to attack Iran for the last twenty years and finally they did. But once the Trump administration started attacking Iran, that changed everything. And China was ahead. They knew in advance what's going on. So China basically stopped importing LNG from the United States.

stopped importing oil from the United States. Uh th they were ahead in uh in on Venezuela before the blockade, uh they were ahead on Venezuela before the of Maduro, etcetera. But They been and if you go back to the previous shows we had, probably the last three shows or four, we've been talking about how China was building those massive inventories oil inventories and everything else in preparation for either war sanctions or a major interruption. Now we know. China knew.

And China one of the least impacted countries, by the way, by the closure of the Roma Strait right now, at least in the short run. Once we look at those events and look at the twelve day war, what I've written was China got the message out of the stories that been published in major news media outlets and very prestigious outlets. We've seen a number of stories talking about Iran closing the Hormuz Strait. Again, we are talking about June.

And if you look at those stories, you will find something kind of very strange about them because all of them have the same talking points, some of them in the same sequence. That means there is a public relations company basically was directing that. Why they were doing it. So what I wrote at that time was China got the message. And the message was the Holmes Strait would be closed. But it's not Iran who is to close the Hormuz Reited States. Again, this is written in June and July.

So we have the November documents after that talking about the keeping the strait open and the straits never being closed. And then in June and July we were talking about the United States basically closing the Horma Strait. and then we have the insurance fiasco that we've seen until now. I know that many people were pushing against this

this idea, calling it a conspiracy theory, etc. and they tried really hard to debunk this idea. Here is the issue that they need really to answer. The issue is this, even if you send the Navy to escort ships out of the homeless ships are not going to move without insurance if the insurance remains non-existent

or extremely expensive ships are not going to go along with the Navy because shippers are going to tell Trump or Modi or anyone else who wants to send those Navy vessels telling them look If I go with you and I get attacked and I lose my ship and I lose everything on it.

Will you compensate me? And Trump is going to tell them no. Moody is going to tell them no. I'm just providing a service for you. You should pay me for it. I don't have to compensate. They are not going to go. They need that insurance to exist. and to be cheap enough for them to move. So anyway, you look at it, you say it's conspiracy theory or not, it doesn't matter. They need that insurance. So it is an insurance story any way you look at it.

On the other side, those who are claiming that Iran closed the Hormuz Strait. Again, Trump told us today that Iran has no navy, has no power. Iran we heard the old talk. So either someone is lying to President Trump Or Iran has no power.

On us, there's one more nuclear option that we need to talk about, which is so far in human history. no military force has ever intentionally targeted an operating nuclear reactor. In in other words, the horror scenario, the the terrorism scenario of intentionally dropping a bunker buster, bomb on top of an operating nuclear reactor to turn it into a dirty bomb of sort.

Now, one of the things that has already occurred and by the way, Article fifty six of the Geneva Conventions very clearly prohibits the intentional targeting of any nuclear electrical generation station. You cannot target nuclear electrical generation stations by international law. Except either the United States or Israel, I'm not sure who, has already made at least three attacks, airstrikes on the Basher nuclear power plant, which is Iran's one operating nuclear power plant.

Now, those were not targeting the reactor. If they had intended to blow up the reactor and breach its containment, they would have succeeded. So they weren't trying to do that. They were probably trying to take out the infrastructure and prevent it from generating electricity and supplying it to the grid. But it does seem that they're already violating the Geneva Conventions by targeting a nuclear power plant.

Where is this headed? I'm just really concerned about the escalation that could occur from here. Again, this is a historic event for several reasons and one of the reasons why because there are no red lines. And what you describe is a red line that's been crossed. and is going to be crushed again and again. And as a result, Iran is going to crush this red line on the other side, because as you know, they already listed the four reactors uh in the UAE.

as a target. This this station, like you said, there's to put probably not the reactors because they need kind of special bomb busters or others, etcetera. But uh they literally put that as a target. So there are noted lines and with a war with noted lines, everything is is possible. The issue that I experienced firsthand uh was when I woke up in the morning here in Dallas and I got a flood of messages and emails, people scared to death.

from, oh, what if Bouchar basically explodes and will we get nuclear? And literally some high net worth individuals basically sent me a message and said, Should I put my family in a car and leave? To Oman or any other country. So people b be basically being panicking and that panic alone could cause massive problem because if you are talking about millions of people taking the highways The rumor on its own is enough to cause problems, let alone if it becomes reality.

Well as you said, Anas, uh Iran has announced that if their civilian Power generation infrastructure is targeted. They will respond number one by targeting the desalination facilities of neighboring countries, which you've described as a nuclear like option because of its consequences. Number two, that they will target the United Arab Emirates operating nuclear power station at Baraka or the the Baraka nuclear power station which is outside of Abu Dhabi.

Uh, they've already said that will be a target. And then in tonight's uh this is Wednesday night that we're recording, in tonight's address from President Trump. He said very soon and possibly simultaneously that the United States might target all of Iran's civilian power generation stations. So it sounds like the event that Iran said they would respond to by targeting both desalination facilities and nuclear power plants. is one that President Trump just signaled his intention to escalate to.

This is a very scary moment. It s feels like, you know, a replay of the Cuban Missile Crisis, except this time we actually know about it. Am I exaggerating to say it's that big of a deal? No, but I think we should be very aware of the fact that s today after Trump's speech, I am completely convinced that the people around him are not telling him the right picture.

The way he the he described things are far away from reality. Let me give you another example on how far away from a trailer reality. He said drill behavior. Okay. Drilling activities in the United States been down since he came to office. US production been declining in recent months. So he is completely out of reality, and I am afraid that the people around him are not telling him the truth. Before the speech, oil prices were down.

Right now, after the speech, oil prices are five percent higher and they are going up. The main message of the speech basically is that this is a long war and this is going to continue and the market is pricing it. And I think by tomorrow morning probably many people who were counting on probably it would be a matter of days And that will impact of course the markets, whether you talk about oil, gas, L and G or anything else.

Honest, let's move on now to what everyone's waiting for, which is how do we bring this all together in terms of the outlook for oil prices? LNG energy markets generally, uh if the US is basically from what President Trump said very directly in tonight's uh public address. He said the US will probably walk away from the situation in the Hormuz Strait, leave it to other countries that depend on it. It sounds again, as you suggested, that maybe President Trump isn't getting the full story.

from the people around him because of course th o oil prices are set globally. If the Hormuz Strait is not reopened Energy prices are gonna stay high for everyone, including US voters through the midterm elections. So it seems like the story doesn't add up.

But it does seem like the president intends to walk away from the situation in the Harmuz Strait once they've finished their military operations against Iran, and it's unspecified exactly what that is, but the one thing he did say that was a specific uh indication of intentions. was to target potentially simultaneously all of Iran's civilian energy production capabilities. Exactly the thing that Iran has said, if it happens, is what's gonna cause them to target desalination in nuclear plants.

What does this mean for energy prices? Uh and what does this mean for global energy markets more broadly? When President Trump is talking about others basically coming and protecting the Gulf and opening the Strait. He means only the people he know, and he's talking about European leaders. He's not talking about China.

He's not talking about the rest of Asia. So let's be clear about that. China will be happy to bring its navy and and have control of the strait. This will never happen and the United States will never allow this to happen. He is just mad at the Europeans because they are not helping him. They told him this is his war and he should uh literally work it out because they have nothing to do with it. Even the Gulf states basically told him that. This is not our war. This is your war.

So he is angry at those. But for him to walk away from the Hurmu Strait to leave it to the Chinese, that is impossible. Because if you take the second view where uh uh the attack on Iran is part of that bigger picture in the world and all the changes we are seeing, uh that does not fit with it. And it does not fit with the strategy the the uh national İzlediğiniz için teşekkür ederim.

Right now, there is we have major problems. Of course, if you look at the shortages, we have the shortage right now after all the mitigation. Whether you talk about the pipelines, Saudi the Saudi pipelines, the Malati pipeline, the uh the Iranian pipeline, the Iraqi pipeline, and then you add to it the strategic petroleum reserve releases, uh we are still short about the kind of ten to twelve million barrels a day. That would push prices up.

But as prices are going up, we see demand destruction, we see demand decline. So that will eat up a couple of probably a couple of million, three, four million, whatever the amount is. So that will leave us with a shortage of about eight million. barrels a day. That's for oil. Of course we are short we are short on other things. So we are short on L and G, we are short on NGLs, we are short on helium, we are short on fertilizer, we are short on methanol and all kinds of things.

But this is a global crisis. across industries, across countries and we we've seen the impact of various countries that are suffering right now from power shortages and we've seen petrochemical plants closing, fertilizer plants closing, etcetera. And uh prices will continue to go up simply because President Trump exhausted all his options. So what are the options? The is strategic petroleum reserves? Used. That's it. Now the Secretary of Energy said, Oh, we can draw more.

Yes, drawing more is one thing, but the technical ability to withdraw on a daily basis is not going to change. Draw more means we can draw for longer. So that option is gone. The second option is giving uh say uh giving exemption to Russian oil. All they get to do basically just uh extend that on a monthly basis. So that oil is already in the market anyway, so it has no impact. And then the same thing for the Iranian oil and that has no impact. And then we have the Jones Act.

Companies and refiners been working around the Jones Act for decades. So the impact of it is very limited. So there are no uh livers basically for President Trump to use to mitigate the prices uh except making those statements that to manipulate the market as we've seen in the last couple of weeks and basically that's it. And you can use those statements only for a while and then people w will again crying wolf here.

People will not believe it anymore and therefore the market is not going to react. So prices will continue going up. I'm talking about oil here until we reach the level of demand destruction. And we talk about demand destruction, we also talk about demand decline. The difference between demand destruction and decline is that destruction will never come back. Decline will come back. So we have both those two two acts.

Based on our model, demand destruction basically and major demand decline happens when rent reaches 160. But again, this is modeling. Modeling could be different from reality.

Which means that the reality could be way lower than that. So there is no nothing to stop or prices from going up except the destruction or the decline and all the other part of the story is If this is going to drag on until May, our modeling shows that the whole globe basically is going to suffer a major recession and probably stagflation.

when you talk to economists about the current uh about the impact of the current crisis, the difference between them, both of them, both views see a recession. But they disagree on inflation. So are we going to have stagnation or just a recession? That's where the difference is all. So some people say we're going to have a recession with inflation. Others say no, that recession basically is going to destroy inflation. Regardless.

This global recession basically is going to reduce global oil demand significantly to the level where prices will decline. So yes, we see prices going up until we hit that recession and then prices will decline again. Whatever we said about oil will apply to L and G and natural gas. China for now is immune for the next probably two months.

But all other countries, the suffering, if you look at India, for example, you look at Egypt, you look at Kenya, you look at countries South Africa for example, Bangladesh, Vietnam, the suffering is just beyond imagination if you start looking at the national impact of this crisis. So the world is heading toward that major crisis that we have never seen in our lifetime. Whatever we have right now is not like the early seventeen.

It's not like the Iranian revolution in the late seventies. It's not like the Iran Iraq war. It's not like the invasion of Kuwait. It's not like the invasion of Iraq. It's not like the invasion of Ukraine. This is completely different. And the impact is cross-industries on every level. And so when we look at the oil market, for example, right now because of the...

a massive impact of the crisis. We are not seeing the impact of changes in inventories, for example, or these little things that we used to focus on before the crisis. All of this basically is hidden um under that big, big gorilla that is impacting impacting the market. Once everything's subtle. And once the recession is over, once all of that basically is done completely, we are going to see a major change in energy markets worldwide.

And that change basically i is going to be so strange to us because we, the thought leaders in the market, the analysts and others are completely are going to be out of it. Why? Because what China was doing in the last three years or so, energy sources to national security. And therefore, economics and finance does not make any sense. So they focus, for example, on increasing domestic demand of oil and gas, regardless of cost.

They went like in the massive investment in solar and wind and electric vehicles, not because of climate change. So what happened is when Trump threatened Europe with the LNG weapon because the United States weaponized L and G and told them, Look, if you are not going to give me Greenland, I'm going to cut off L L N G supplies to you. What was the reaction of Europe? Immediately they got the message. So you know what? I need to work on lowering my LNG imports from the United States.

How to do it? Well, one way to do it is to focus on solar, offshore wind, and battery storage and of course nuclear, which is your favorite subject. by the way. And as a result, if you look at offshore wind, does not make any sense. Battery storage on a massive scale does not make any sense when to look at the economics and finance. But when they tell you, look, this is a national security matter,

completely out of it. This is a national security matter now. Canada is doing the same right now. So what we are going to see after the recession or the stagflation that's going to hit the world is that we are going to see every country doing the same. So most countries in the world basically to f uh are going to link energy sources to national security and they are going to emphasize domestic sources. So Trump

Unwittingly, all of a sudden, he gave the climate change people the biggest gift of their lives in Iran and Hurmutz. And before that, of course, the trade wars and the threat of On us b when President Trump began speaking uh this evening

West Texas Intermediate Crude Oil Futures for May delivery. We're trading at ninety-seven dollars and forty cents a barrel. Uh we're speaking in this moment right now, less than an hour after the president stopped speaking. I'm looking at one oh four spot fifty, so more than seven dollars higher uh in this last hour and a half or so since the president was talking. Uh where is it gonna be next week? Higher or lower?

logically speaking, because uh w we are going to have two different forces here. We are going to see because the g the gu the various governments in Europe and the United States started releasing oil from their SPR. So they uh in the last few days, last week basically we've seen the United States government releasing oil from the strategic petroleum reserves and the amounts are going to increase, especially in by next week.

So that's going to have an impact. But what people have to pay attention to, especially traders and investors, is that the impact of this is mostly on price differentials rather than the overall price level. So price differentials basically are going to impact it. What that means is this price differential between uh prices of medium sour crude in Asia and W D I in the United States is going to remain very large.

because the flood of oil coming from the strategic petroleum reserve is going to maintain that difference. And therefore, this idea that Trump has been talking about and the what the national uh security strategy be talking about is going to happen. What does that mean is The strategy and what Trump is talking about is I want my prices, my energy prices in the United States to be the lowest among all my competitors. And that is a fact.

Prices in the United States are the lowest among all other competitors. And the difference is large because there was a time when Asian economies basically were paying over a hundred and seventy dollars for medium sour. while US companies basically were paying around 90. So whatever been said in the national energy s uh in the national security document and whatever Trump said basically it's already happening.

So people say, Well, whether this is a a conspiracy theory or not, forget about it. This is reality right now. It is those price differentials. We should the story is in the price differentials, not in the price lip. And that's where people should focus on. The other issue is when you talk about price differential, whatever is going to be released from the strategic petroleum reserve, we are going to know by the next week whether they are going to release any

light sweet crude. Because what US refiners basically want is really the medium sour. They've been filling the SPR with medium sour. That's what US refiners want. The problem with releasing the S P R that most of the S P R releases are in Europe and the United States while the while the shortages are in Asia. So that's where the impact on price differential is. If you want to take that oil to AJ, you are talking about four to six weeks, will will the war end by that?

And there is a of course question mark by that. the other related issue to this, and of course we don't have to attempt to focus on it, since President Trump basically lifted the sanctions on Iranian oil and water and Indian companies start buying it. Until now we don't know what the method of payment is. Is India going to pay Iran directly? So give Iran more power? That does not make sense here. Is it going to work through a different system?

where uh they can circumvent the payment system and uh Iran will get some goods and services from uh India. Why Trump will remain silent on because anyway the Iranians are getting some benefits out of their oil and he does not want that to happen. So there are big question marks on these trades. and what's going on. And it is very clear that Putin is very happy because he sold more natural gas to Europe.

And uh Russia's exports of pipe, gas and LNG to Europe is going to increase substantially in the coming weeks. And of course with all prices jumping from that makes everyone happy, not only put Well, there's so much that we could talk about. We do have to cut this off for the sake of of time as we've already gone longer than a feature interview. We'll get you back again uh shortly in a in another few weeks time for another update.

Meanwhile, for people who can't wait that long to stay on top of things that we didn't get to today, like what this could mean for Russia, given that this really been a cash cow for them. This whole conflict is going to only strengthen Russia's position. It's going to create massive shortages of Finnish products, particularly diesel fuel in Asia, Australia, New Zealand.

Uh for people who can't wait for your next update, give us the quick rundown of the various different levels of service that you offer at Energy Outlook Advisors, how people can sign up for that service.

For the last four weeks I've been spending a lot of time giving uh talks and presentations via Zoom to to the largest financial institutions and Fortune five hundred companies around the world. and to various clients, etcetera. So those Zoom talks, especially for those who are interested, we can arrange for it and we can talk about the piece and the timing and all that stuff. I'm giving several of them every single day so we can arrange for it.

They can get the updates. They can get, of course, our talk today was general. We talked about general issues. Those presentations are more specific and the answers to the questions are more specific. Also uh we have the our publications, we have the daily energy report. That's mostly for all the individual traders and uh those who are interested in the stock market, in the financial markets, etcetera. It's relatively cheap. uh it is more detailed and people can subscribe To that.

And we have the Twitter subscription too. I put a lot of m materials on Twitter by the way. Uh the subscriptions on Twitter basically are very cheap. It is for everyone who just wants to grab an idea and headlines on what's happening every single day. But most of the work I'm doing these days is giving those Zoom presentations. Of course if someone wants in person we can talk about that too.

Patrick Serezna and I will be back with the trade of the week in the postgame chart deck as Macro Voices continues right here at macrovoices.com.

Back to your hosts, Eric and Patrick Surrey. Bringing on second guests as conditions warrant until the Iran situation eventually settles down. Now you'll find the download link for this week's trade of the week. in your research roundup email. If you don't have a research roundup email, it means you have not yet registered at macrovoices.com. Just go to our homepage and look for the red button over Matt Berry's picture saying looking for the downloads.

Patrick, one of the most interesting points Matt Berry made this week is that AI may be destabilizing not just software valuations, but the private credit complex that financed so much of that software as a service growth. Is there any clean way to express that theme in public markets? And what's your trade of the week? Yeah, and the way I want to express that is through the BIZD, which is one of the cleaner public market proxies for the BDC and private credit space.

Matt's point is that these funding rounds are getting too large for equity. More companies are leaning on debt. and a meaningful chunk of private credit exposure sits against these SAS businesses whose economics are now being challenged by AI. The problem is the BIZD has already deteriorated materially last year and even year to date is down 15 plus percent.

So I don't want to chase it with a simple outright short, especially because the fund carries a high distribution yield, which makes a physical short a pretty expensive negative carry position. So to me, the cleaner expression is through options where we can buy downside convexity and make a more direct market call on the next leg lower. Now the way I'd actually structured that is through the May 15th, 2026 in the money$13 put option.

Which has about 43 days to expiration, with the BIZD trading around$12.10. That option is offered at roughly$1.10, which means we're buying about 90 cents of intrinsic value and only paying around 20 cents in time premium, with a starting delta of roughly 65 cents. So what that does is give you immediate downside participation without having to fight the negative carry from the dividend. And you're doing it with very limited premium decay. In practical terms, it behaves like a synthetic short.

but with defined risk. If the trade works and the BIZD continues to deteriorate, you've got direct downside exposure. But if the thesis is wrong and the market stabilizes or rallies, your loss is capped at roughly$1.10 premium paid. which is effectively similar to running about a ten percent stop on the underlying over the forty three day window. So the idea here is to express Matt's private credit stress thesis.

with convex exposure, avoiding the negative carry of a physical short while still maintaining meaningful participation if this develops into a broader repricing of credit risk. Patrick, every Monday at Big Picture Trading, your webinar explains how retail investors can put on our most recent trade of the week.

For those listeners that want to explore how to put on these trades in greater detail, don't miss out on a 14-day free trial at bigpictrading.com. Now let's dive into the post-game chart tick. All right, Eric, let's take a dive into these equity markets.

Well Patrick, I'm more than just a little bit concerned that futures markets are at least at the time of recording late Wednesday night. uh not taking the uh the potential outcomes in Iran as seriously as I am. President Trump didn't signal a ceasefire or immediate end of hostilities as was widely anticipated by markets.

Instead he doubled down and said very explicitly, if no deal is reached, that the US would be hitting Iran very hard, and he went on to say that that would include targeting Iran's civilian electric generation plant. Probably simultaneously, you know, simultaneous, take them all out at once. that would cause massive civilian casualties and bring rise to humanitarian objections from other nations and the United Nations as to you know why the US had taken that form of escalation.

So I'm really hoping that this is just part of President Trump's negotiating strategy and not his true intention. More to the point, that's exactly the move targeting Iran's uh civilian power infrastructure. that Iran has said in previous statements would cause them to retaliate by targeting both the Baraka nuclear power plant in the UAE and the desalination facilities that many of its neighbors, including Israel,

rely heavily on for their drinking water. And of course, three weeks ago, Anas Al Haji explained why that was such a big threat in uh in our episode just after this war conflict broke out. So in other words, the escalations that are being threatened now by both sides and being threatened imminently by both sides. would lead to massive human suffering and civilian casualties and would be characterized as war crimes well outside of international law.

Of course, we can hope that the president is just employing his usual tactic of making dire threats that are going to be walked back just as soon as a negotiation comes about. But in my opinion, we're playing with fire here, and the president's threats could provoke Iran to retaliate immediately, even before the threatened attacks on its civilian power infrastructure are undertaken by the United States.

I'll be the first to admit, folks, that my own personal very strong anti war politics might be biasing my interpretation of these events because I'm definitely uh reading them to be worse than it seems like the market reaction we've seen so far after the president's speech would indicate based on what futures markets are doing. But I see this as a much bigger deal and a greater risk for widespread human suffering.

than other analysts seem to be willing to acknowledge. So I sincerely hope that I'm wrong. Everybody will uh laugh at me and ridicule me on Twitter, and we won't have millions of people dying needlessly. I'm just fine with that outcome. If I'm right, we could be headed toward a big escalation rather than the wind down of this conflict that markets have been anticipating based on the president's prior statements and social media posts.

So my strong hope is that the White House will have walked back the threat of simultaneous attacks on all of Iran's nuclear electric power generation capability before you even hear this podcast. And I'll probably sound like the idiot in this story who overreacted. And again, I'm just fine with that outcome if it means that we're not going to escalate this conflict. The S P is trading only modestly lower about two hours after the president's speech as I'm recording this.

So far indicating that nobody else is as concerned as I am about what maybe is about to happen here. So let's all hope that uh they're all right and I'm completely wrong. All right, Eric, I'm gonna keep my analysis very simple from a technical perspective. We had a very significant March decline that saw almost a 10% drop in the markets, close to 700 SP points. We were quite oversold. We were close to four hundred S P points below the fifty day moving average.

So typically when the market is stretched that way, it often has a retracement. And so that's what we got here, a bounce. on the upside that uh took a shot towards its fifty day moving average, even though we haven't hit that yet, which still lies around sixty eight hundred on the S P. Bottom line here is is that this is an oversold bounce. There's zero evidence that a market bottom is in.

And so if this uh entire rally here fails and stays below this fifty day moving average, we have to anticipate that another leg down in these markets is entirely on the table. All right, Eric, let's touch on this dollar. The Dixie's ninety nine spots seventy seven two hours after Trump's speech. Not a huge dislocation, no further evidence that the market again is as concerned as I am.

about what felt to me like a much more escalatory speech from President Trump than I and the market were expecting. I don't really have any strong view on what happens next year. I think that the stage is set once this conflict is over. for the dollar to weaken and weaken a lot. I think the US is losing ground in terms of its uh international reputation and there are signs of other central banks really questioning their commitment. to US Treasuries as a principal reserve asset.

Whether or not that actually results in the dollar turning down soon or if we get a massive increase in the dollar index in a flight to safety trade uh that's brought about by a war escalation, I don't know. I could easily see up before down. But I think the ultimate resolution to this for the dollar index is going to be down and down to new lows. Well, Eric, I'm a little more technically bullish here on the dollar than most.

Overall, we've been consolidating along the top of an eight month trade range. But the dollar uh has now a tailwind. We continue to see obviously the geopolitical landscape uh pivot which is causing all sorts of intermarket uh influences, including stresses on economies like the Eurozone. which could see the Euro weaken. If this dollar uh can sustain above this hundred level, uh, and especially break out to a fresh high, which is just slightly above uh the one hundred and a half level.

We can see a a little bit of a shoot on the upside of this dollar to one oh two, one oh three very easily. I think there's some room for dollar to go and I'm uh definitely watching for that follow through on the upside. All right, Eric, let's touch on this crude oil chart.

West Texas intermediate crude spiked up about seven dollars on the president's speech. It had started to retrace. uh around ten PM or so Eastern time. As I'm recording this, it looks like we're pushing back above one oh five, so we're we're up to almost eight dollars. of uh higher oil price than before the president's speech.

Uh, I think it's headed considerably higher. Now if we get the deal that the president has alluded to If they really do have a negotiation underway, which the president didn't really comment on either way, he just said if no deal is made, the consequences would be dire. Hopefully they're he's just using that as a threat to push a negotiation along and perhaps by the time you've heard this the negotiation'll be over and we'll be back down to

ninety dollar crude oil or eighty dollar crude oil. I don't know. It could go down really hard if this is ending rather than escalating. Uh, so the question to ask is whether this conflict is finally winding down or if it's about to escalate. Form your own opinion. As I've said, mine is admittedly biased, but I I'm just concerned by the uh very, very aggressive approach that the president is taking to doubling down on his threats to escalate to attacks on civilian power infrastructure.

Well, Eric, there's no denying that this is going to be directly based upon uh the escalation and what is happening here in the Middle East. Uh from a pure technical perspective, this uptrend is uh very pronounced. All dips are being bought. uh uh the cr crude oil continues to edge higher. At this stage, when we're looking at the the West Texas intermediate here, we could easily see us retest the hundred and twenty dollar high here. uh where uh it printed on a intraday basis in early March.

All right, let's touch on gold here. Patrick Gold has rallied very strongly over the last few daily sessions, seemingly anticipating a window of the Iran conflict. and a removal of the threat of the Fed's hands being tied by oil driven inflation, basically taking rate cuts off the table. And that's really what the risk is, is if uh there's going to be oyst oil price driven inflation

it means that it's not possible to cut rates and that really gets in the way of gold being able to rally because gold doesn't produce any return and it competes with treasury. So as treasury r returns are getting higher, Gold still doesn't yield anything and the cuts that would make uh gold more competitive by bringing down that yield on treasuries are off the table for policy reasons.

So that's the mechanism for why it's happened and indeed gold has been down oh boy, let's see. It was I'm recording a couple of hours later now as we got into this. Uh d from forty eight seventeen all the way down to it bottomed at forty five seventy nine. And as I'm recording, we're back up to about forty six sixty uh five or so. Um, you know, we're we're talking multi hundreds of dollars down, more than two hundred and twenty dollars down, it looks like, at the worst moment there on gold.

Uh, I don't think it's going to go all the way back though, because what we have seen is a a change of correlations. When this whole crisis started, you were seeing oil goes up, gold goes down, and it seemed to be a very tight correlation that more and more people started unwinding gold. One thing led to another. The CTAs were unwinding. A very, very crowded gold trade was forced to unwind. I think that big forced unwinding has pretty much played out now.

Most of the people that were gonna get washed out of that trade already got washed out of that trade. Some of them g started stepping back into it over the last week. They're paying for that this morning. as we're seeing gold prices moving back down as oil moves back up, as President Trump has made it clear that he's not done yet with this assault or situation in Iran.

So coming back to the big picture though, in the end, are we really going to see treasuries become all of the central bank's favorites and they don't want gold anymore? I really don't think so. So in the short run there's plenty of room for a oil price driven

inflation signal to create a tailwind for gold that pushes us back down, but I don't think it's gonna get us back down to that forty one hundred level where the two hundred day moving average is. I'll be very surprised if we end up moving below that level. So my interpretation is that gold is ready to rally back to new all time highs, but you know, up to six thousand.

just as soon as the threat of persistent oil induced inflation is taken completely and totally off the table and the Fed is able to consider cutting again. The market thought that might be just around the corner, and then President Trump's announcement Wednesday night pretty much nicks to that one, at least for the short term.

So now it's no longer looking like oil driven inflation is off the table. Gold is gonna correct lower. It's already down a couple hundred dollars just since the president spoke. The question is whether the lows uh below the two hundred day moving average are coming back into play, and I don't think they will be. What we've seen is

since that test of the two hundred day moving average is a change of correlations where you see oil prices and gold prices going up at the same time, like they used to. So that inverse correlation seems to be coming out of the system. The hot money that piled back into gold over the last few days is probably piling back out this morning.

But I think that we're eventually going to set the stage here for a sustained rally back up to six thousand dollar gold. I just don't know when it starts. I don't know how deep we dip. before we get there. But I think last week on the show I was saying, you know, we could see gold all the way down to three thousand or thirty five hundred. I'll be really surprised if we get uh a sustained move below four thousand at this point. But anything's possible.

Eric, so the that test of the forty eight hundred level on gold was a direct hit of the 50% retracement and the 50-day moving average. Overall, we are in the precious metal space in a correction phase. Now I remain big picture, quite bullish gold and silver, but the price action is showing that we're in the midst of some sort of reversion. We went through a two-year bull phase on gold that was quite an i uninterrupted advance.

And what we clearly have here is the first legitimate market correction in two years on gold. And so at this stage we wanna see how this plays out. These could be a multi-month consolidation, will lead to an extraordinary buying opportunity. But here if we're failing and trading below forty eight hundred, then a retest of its previous low near forty two hundred or even a test of four thousand.

is entirely plausible. Uh again, I would use all those types of drops as buying opportunities, but these are uh the short term risks in terms of the flows. All right, let's uh touch on uranium here.

Well, Patrick, the fundamentals are super uber bullish. Couldn't really be much better and they are getting better day by day as we see more and more US government nuclear announcements, more commitment to nuclear energy. More and more people coming around and looking at this oil crisis and using that as justification to say, boy, we really need to rethink our strategy and focus on nuclear energy is where we make our big investments.

So it it's all going super strong. But I have to acknowledge there is a new risk, a new elephant in the room, if you will, and it's a big fat elephant. That new risk is the outlier risk of one side or the other intentionally targeting and operating civil nuclear power plant as a military target. Now that would be in direct violation of Article fifty six of the nineteen seventy seven additions to the Geneva Conventions, so it would be an act of war if anybody did it.

But guess what? Uh we've already done it. Somebody's already done it. What the Article fifty six says is you cannot target any nuclear electric generation power plant. Uh there are some exemptions for military plutonium production reactors and so forth that can be uh military targets, but if it's a civilian nuclear power plant, like the Basra uh power plant that they have in Iran

It is a uh Article fifty six violation of international law to target that. Well, guess what? They've had three airstrikes. I don't know if it was US or

American airstrikes or both, but they've been hit three times in what as far as I can see is an Article six violation. Now so far they're not aiming for the containment. They're not trying to breach the reactor containment, which would have the effect of splattering radioactive contamination across a wide area and creating a disaster that's bigger than Chernobyl by maybe a full order of magnitude.

That would be the risk if, say, Iran were to send one of their ballistic missiles right through the reactor containment building at uh the Baraka nuclear power plant in UAE, as they have threatened to do already.

Now when they built Baraka, they saw this coming. They've done a lot to harden that plant. But at the end of the day, with your dealing with Mach fourteen supersonic or or hypersonic missiles, They can go through a lot of armor and they cannot be uh shot down with normal missile defenses. So far it is unthinkable that anyone would violate international law and do such a horrible thing. Then again,

Just a couple weeks ago it was unthinkable that anyone on any side would do a truly horrible war crime like, oh, I don't know, let's say targeting a girls' elementary school. But they did that twice in forty minutes. Major nuclear accidents like Chernobyl when they have happened in the past as accidents. have set the nuclear power industry back by fifteen years when they happened. The public gets irrational and fears

that a nuclear accident is somehow going to cause the nuclear plant to blow up like a nuclear bomb. You know, it just doesn't work that way. That's not a realistic risk. But the public perception goes in that direction. So an intentional breach of containment of an operating nuclear power reactor like the ones at Basher in Iran or Baraka in the UAE

could cause a contamination event, an order of magnitude worse than Chernobyl. We don't know exactly how the public would respond if that happens. You know, would they say, Oh, well, it was just an act of war and uh acts of war happen? Or would they say we we shouldn't have these nuclear power plants because they could be targeted during acts of war? No military in the history of uh the human race has ever intentionally

targeted a operating nuclear reactor core and tried to breach its containment intentionally as an act of war. That's always been off limits. Nobody's ever crossed that red line. I sure hope that they don't in this conflict, but as Anasal Haji said, there's a lot of people that don't seem to see any red lines and they're crossing every line.

I c consider this still to be an outlier risk. It's uh something that could happen, but if it did it would sabotage the entire nuclear power renaissance, which in my opinion is the only viable option that humanity has to avoid a global energy crisis in the twenty thirties and forties. So we really need nuclear energy. We need it for our survival. It is absolutely essential to the future of humanity that we not screw this up.

And the way to screw it up potentially is not some accident or poorly designed reactor, but somebody firing a missile at a perfectly good nuclear reactor will make a mess, and if that happens, public sentiment could change on a dime. So as long as the unthinkable doesn't happen, any weakness on uranium stocks from this war is a by the dip opportunity. It's uh the the story couldn't be brighter for nuclear energy than it is right now, unless

we actually have a military strike that blows up a nuclear power plant and splatters radioactive core material all over the countryside. That would be a really, really big deal.

Well Eric, uranium is turning up here on the charts. Overall it's been a structurally bullish chart. It's been consolidating for um almost two months, but uh we'll see whether or not this uh can potentially create this breakout on the upside, certainly looking for that uh bullish follow through at this stage with the primary trend being intact.

Finally, let's touch on copper here. Well, Patrick, we're bouncing nicely off the two hundred day moving average, but still well south of the fifty day moving average, which is now turned down. It's pointed down toward the two hundred. We're still more than a month away from a death cross risk on that chart, but a prolonged escalation of the Iran conflict could bring that outcome.

Let's hope that we get this Iran thing wrapped up soon and can move uh move on here. To my eye, markets across the board are coiled up and ready to respond to the upside as soon as we get a real true all clear, you know, it's We're w we're wrapping this thing up. Iran has agreed. We're all on the same page. A treaty was signed. We're gonna wrap this uh this thing up. I think it takes uh the stock market back to new all time highs. I think it

Takes copper up, I think it takes uranium up. I think everything goes from there. Uh the thing is. President Trump's latest um news, he's he's playing a a tougher ball game than Ronald Reagan was in terms of playing hardball with competitors and is it worked for Reagan. He managed to

do some bluffing tactics that a lot of people thought were reckless and he ended up winning in the end. And I hope that President Trump can be so lucky or so successful, but to my eye he's taking some pretty reckless risks. To me, Eric, copper has uh been tracking uh the precious metals markets for some reason. I mean it's an industrial metal. I'm not sure why such a correlation should exist.

But it ev it seems like tick by tick we're uh tracking copper with uh with things like gold. Overall we got a bounce about the same time as the precious metals did, approached its fifty day moving average. We're in the midst of some sort of bigger global economic slowdown. These with the behavior on the technical charts looking like this.

There's room for this correction in copper to continue. A failure here on copper below 575 leaves uh lots of room for copper to head back down to the five handle on the downside. Patrick, before we wrap up this week's show, let's hit that 10-year treasury note chart. Yeah, finally on that ten year treasury yield, we continue to see it trading at multi month highs. And uh we're right now trading around that four thirty seven level.

Well certainly there's room for some short term volatility here in yields. But I suspect that the uh ceiling will likely hold here in this four and a half to four sixty level on the upside. And so we'll watch for that resistance and see when yields actually start to lighten up. based on potential economic weakness. Certainly this is the struggle of of uh higher inflation prints um and uh slower economy, which one will prevail in the yields.

Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of Big Picture Trading. The details are on the last pages of the slide deck or just go to bigpictrading.com. Patrick, tell them what they can expect to find in this week's research roundup.

Well in this week's research roundup you're gonna find the transcript for today's interview as well as the trade of the week chart book we just discussed here in the post game, including a number of links to articles that we found interesting. You're gonna find this link and so much more in this week's research roundup.

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