Economists Uncut

SPECIAL: Market Chaos (Uncut) 01-27-2025

SPECIAL: Market Chaos – The AI World War Has Begun | Clem Chambers

I think what people need to realise is this is just the first shot in a digital world war. The thing about AI, there’s no second place. I don’t think it’s the Fed making gold go through the roof.

 

It’s the fact that China and the US are going to be at loggerheads and gold is for war. And, you know, international global tension is going to make gold through the roof. You don’t need to have the Fed mess it up.

 

It’s already on the cards that the world’s going to get more and more stressed and governments are going to be buying gold, they’re going to be the big customer, they’re going to be laying it in because gold is bullets. Hello and welcome back to Soar Financially, a channel where we discuss the macro to understand the micro. My name is Kai Hoffman, I’m the Edge AR mining guy over on X and of course, if you haven’t noticed by now, I’m the host of your channel and I’m really looking forward to catching up with Clem Chambers.

 

Today is a really important day. We’re recording this on Monday, January 27th and lots happened over the weekend. We’ve had DeepSea come out with a big announcement and announcing their AI model and it’s really thrown the markets into a tailspin.

 

Like it’s really crashing, Nvidia is down double digits, the S&P 500 is down by 2%, Nasdaq is down three and a half percent. We could call it a black Monday really and we’ll catch up with Clem about what this means, what are the implications, why is the market reacting like this, is this the black swan the market needed or it was looking for. So lots to discuss and on top of it all, it’s a big macro week.

 

We have the Fed, we’re getting core PCE data, there’s some ISM numbers coming out, so lots and lots to talk about with Clem. We’ll all try to squeeze it into about 45 minutes, so stay tuned and get your pencils sharpened, take some notes. It is going to be interesting.

 

Before I switch over to my guest, there’s a subscribe button here somewhere, we do appreciate it. It’s a free way to support us. Thank you so much for doing that.

 

Now, Clem, it is great to have you on the program. It’s good to see you again. Happy New Year, health and wealth.

 

I’m going to say it for three more days by the way, so good to see you again. It’s February, it’s February, it’s a Valentine’s Day almost. Yeah, some people are getting ready for Valentine’s Day, but I’m still in January here, January 27th, so I’m saying it till the 30th.

 

Mind you, in Russia and Ukraine, it’s Happy New Year. Perfect. I told you before in the record, but we’re probably going to put this episode out today, on Monday actually, because there’s so much going on in the markets that we need to address.

 

Let’s start with the big one, DeepSeek made headlines over the weekend. It’s sending markets sharply lower. We’ve had valuations eradicated.

 

I think Nvidia lost about $420 billion at some point, which is the biggest one day loss in a stock. What do you make of DeepSeek and how is it impacting the markets? Well, I think what people need to realize, this is just the first shot in a digital world war. The thing about AI, there’s no second place.

 

You can’t have too much of it. If someone gets more of it than you’ve got, you’ve got to get more than them. This is just the beginning.

 

This is like Sputnik and the start of the space race. They’re not going to need any less Nvidia. They’re not going to need any less AMD.

 

They’re not going to need any less AI hardware. This is just the beginning of that, but it doesn’t mean the markets aren’t fragile. It doesn’t mean that people aren’t going to… Sorry, that was logical what I said.

 

That doesn’t necessarily mean it’s going to totally affect the market. I’m not in this nosebleed stuff. I tend to steal clear of it.

 

I’m a value investor. I like the cheap stuff and I sell it when it’s not cheap anymore. I don’t buy expensive stuff and hope it gets incredibly expensive and then don’t sell it at all and hold it forever.

 

That’s not me. What I do know is that AI, this is just the beginning. There is no second place.

 

People have to think about that. You can’t have too much intelligence. If you’re the smartest guy out there, you win all, don’t you? There’s going to be a technological battle.

 

I don’t want to really use the word war, but it will be a war. There’ll be a technological battle over having the smartest AI. This is the beginning of that, not the end.

 

The thing also to think about, and I think this is actually really fantastic news, is AI can only work on what humans make. Humans make information and AI takes it and turns it into AI. It can’t take AI, not classically anyway, and turn that into intelligence because AI can’t invent its own stuff.

 

It has to be invented by us. Unless you’ve got robots going around the things and seeing what happens, it relies on human knowledge and human inputs. Now, if you look at two things, first off, English has less entropy than Chinese.

 

So, Chinese language is much, not much, but about a third to 50% harder to use for AI because of the way the language works. So, a Chinese AI has to work, in terms of a large language model, quite a bit harder to do its thing. Now, the other thing it has to do is it has to have a lot of input.

 

It has to have good input. It has to have the truth. You can’t pump lies into AI and get it to make the truth.

 

You can’t get it to be intelligent if you pump in stupidity. If you look at somewhere like China, they have heavily censored and moderated data sets because there are certain things you can’t say. In fact, lots of things you can’t say in China, so they won’t have the data for AI to work on to be smart.

 

So, actually, an AI battle will force people who are battling either to steal the data off each other, which will obviously happen, or to let their people free to generate valid data to train their AI on. So, that’s quite interesting. So, if you’ve got North Korea, I mean, what are they going to feed their AI models? Nothing, right? Because you’re not allowed to say anything there.

 

If you say the wrong thing, they shoot you. So, countries that have a limit on freedom and have a limit on inconvenient truths are going to be at a big disadvantage in a lot of AI. So, you know, overall, long term, this is just the beginning.

 

And long term, the need for countries to have decent AI is going to actually be quite a powerful good, because to get that data, they’re going to have to turn to their people as the source of general intelligence to build that into artificial intelligence. And if you, you know, tell people can’t do this, they can’t do that, they can’t go here, they can’t go there, you know, they can’t say this, they can’t say that, their data is going to be, you know, much weaker than a country where they have freedom, liberty, and, you know, a good environment for people to actually apply, use and spread natural intelligence. I mean, after all, the thing that I think about is there’s no shortage of natural stupidity out there.

 

So, a little bit of, well, a lot of artificial intelligence will be a good thing. And I think you’re seeing now the very beginning of artificial intelligence being one of the core things that countries are fighting over or fighting to dominate. And if you believe that intelligence is all about truth, and facts, and reality, rather than somewhat left wing view that everything’s relative, and your truth is your own, and as good as my truth, I mean, that really won’t work with AI, that really will not work.

 

And that’s been a significant, you know, school of thought in the modern world, and in the West, that, you know, there’s lots of different truths, and mine’s as good as yours, and I’m a teapot, and you identify as being a cat, and all that stuff. And that really was not going to cut it with AI. And that goes for countries which say, you can’t say this, you can’t say that, oh, this is truth, and my truth is my truth, and I’ll shoot you if you disagree.

 

So, you know, I think, I think, actually, it’s going to be a bumpy road, for sure. It’s going to be a long road, for sure. But it’s going to be, I think, very benign.

 

Yeah. Let’s talk a bit about how the market reacted to the news of the weekend. Like I mentioned, like trillion dollars pretty much being, you know, eradicated out of the market, just completely vaporized this morning here, and Nvidia down double digits, for example.

 

Like, let’s go jump, maybe discuss the psychology behind that market move a little bit. I think we can sort of agree on that it’s a bit of an overreaction to a degree, especially on Nvidia, we still need the hardware. But psychology wise, like, what does that move mean in the markets today? I’m not a big fan of psychology.

 

I think that’s really overrated. If you have a market that’s gone up a long way, it will be basically fragile, the flow will be fragile, there’ll be a lot of people are perhaps not sleeping well at night. And, you know, you would say that psychology, but it’s it’s it’s can be much more mechanical than that.

 

And, you know, it’s a bit like, people always blame somebody for a fire. They say, Oh, it is arsonists. Well, it was actually a build up of Tinder, and somebody dropped a bottle and that and that made a spark and that made the fire.

 

And so when a market’s gone up a long way, there’s lots of Tinder for a correction. So, you know, people say don’t shout in the mountains, you’ll cause an avalanche. Well, no, the last three months of snow caused the avalanche, you just triggered it.

 

So this would act as potentially as a trigger. The question is, will it actually turn into an avalanche? And, you know, if you’re the sort of person that is bought Nvidia and going to hold it forever, it’s just a buying opportunity. And if you’re the sort of person that’s bought Nvidia, because everybody in the bar said that’s the way to make money, and you state your kids tuition on it, you’re going to panic and run for the exit, aren’t you? So, I mean, it’s it’s really down to what the market conditions are.

 

And I, you see, I think I’ve been saying I won’t be massively wrong here. I think there is a bubble coming into the NASDAQ, and there will be a crash, but not yet. And I think we’re maybe in the in the end of a boom in the sector and about to enter a bubble.

 

And when that often happens, there’s normally a nasty correction. And then off it goes into the final stages of bubble. That’s what I’m expecting.

 

And I can say that and I can believe that because I’m not the sort of person that will actually trade that bubble because it’s too wild. But I think there’s still in the next year or two, a bubble ahead. Another thing you need to think about is that you buy on rumour and you sell on fact.

 

And, you know, Mr. Trump was the rumour. He’s in now. And this is the fact.

 

So classically, this would be the time when the market would correct because he’s in and therefore all that rumour about he might get in and all the things he might do and all the change that might occur. That is the buy on rumour part of a of a bull run. So now he’s in, you get that correction.

 

So often you’ll see someone will say, well, why is the price gone down now? The news, the great news is out. It was going up before the great news when everybody said it was going to be great. But now it’s established it’s gone down because the rumour is more powerful than the fact.

 

And the fact that that Trump is in now, however wildly he’s behaving in these early days and however much he appears to be getting done and however much people are bending the knee to the new imperator, it is the sell on fact moment, perhaps. So I would see that this fragility probably comes from the fact that Trump is in rather than maybe going to get in. And this is the sell on fact moment.

 

Now, how this pays out is another matter. I should think that I should think you might get a few rough days and a correction. Maybe to follow up on what you just said, Clemens, like you said, we’re in not bubble territory just yet.

 

We’re in a boom territory. But if I look at valuations in video of a price earnings ratio of 50, like how do you define a bubble at that point, like when your valuations are already like very, very lofty? It’s when loads of small companies appear out of nowhere at valuations of 100 billion. It’s when things you never heard of that seem a bit ridiculous are getting amazing valuations.

 

A classic example of that in recent times was during the meme stock event. And the time before that was when all the cannabis companies came out and they all went on silly valuations. It’s not necessarily when the big guns are doing well.

 

It’s when the ones you never heard of are IPO at silly valuations. And you’re hearing news of an AI company that’s six days old that’s that’s been invested 500 million into that sort of thing. It is when everything is golden, not when just a few things are golden.

 

And we’re not really in that mode yet. I mean, I don’t see it. Maybe you can point out half a dozen bubble events on the market in recent weeks, but I don’t see it.

 

And it’s also when everybody and his uncle is making money. And he said, you know, oh, my my my postman told me the stock market was the place to be. And I went in and I’ve made 100000 pounds in the last week.

 

Clever. That’s that’s when you’re in bubble territory. And maybe there’s a little bit of that going on with Nvidia, for example.

 

But generally, I don’t I don’t feel that general populous enthusiasm. I mean, much more back in the meme stock times when when that was very bubbly and that was a bubble because, you know, SPAC period, that was a bubble, a bubble in the SPACs and in the small cap market during Covid. And that was a bubble.

 

And you’d expect that to be what would happen in in a broader market and in a bubble phase. So you’d go from here and then all of a sudden there would be like 30 IPOs. They’d all be coming out a hundred billion and you’d all never heard of them.

 

And they’d all be hyped to the moon as being the next biggest thing. And that would and that’s what I think is coming, not necessarily too far into the future, certainly the next year or two. And so to watch out for because if it happens, you can you can trade that and make good money.

 

I was going to say it’s like, does the sector even lend itself to that type of behaviors? Like I’m watching is like I’ve seen a lot of different like I would say AI models, but because they’re all based on a certain AI language already, like a database, like JetGPT based, like the back end seems to be different. It’s not like the dotcom era, pets.com and everybody could start their own domain and actually put a business online. Does the AI even lend itself to this kind of bubble behavior? I’m trying to understand that a little bit.

 

There’s a ton of AI sites out there that are bringing AI to market and you can go on and give them 30 bucks a month and get your rock and roll song, you know, AI rock and roll song or AI picture of an elephant girl with a big broadsword or something or exploding yacht or space. There’s plenty of of AI out there that could be monetized like that. It hasn’t been.

 

But again, that’s probably because of the way that, you know, the market isn’t in the bubble phase yet. And when if everybody was clamoring for those opportunities, they would appear. Oh, there’s no way that Wall Street wouldn’t supply an ever ending stream of rubbish for people to throw their money at.

 

That’s what I’m trying to understand a little bit, because I’m in Vancouver, obviously, like I’m in North America and Vancouver is a hub for disingenuous companies that come up with innovative business models and then list, OK, like and we’ve seen it with cannabis. We’ve seen it with many other things, but I haven’t seen it with AI like where they come out and say, hey, we got this and let’s list on the CSE or the venture or so and just pump this to the yin yang. The only thing I’ve seen is like miners like a huddle or so go online and do that and generate ridiculous volumes on the exchange.

 

But I haven’t seen it with AI. And I’m trying to figure out why that is, because we’re already like a year or two into the AI craze. Everybody’s seen the writing on the wall.

 

Why haven’t we seen that type of bubble behavior? And that’s I’m trying to understand that a little bit. OK, this is not necessarily the answer, but this is a potential answer. I mean, the way that I invest, I never believe I’m completely right.

 

Sometimes I believe I’m only a little bit right. And you only have to be a little bit right in the market to do well. But this is not gospel.

 

This is just a potential. The the stock market tends to eat each generation as it comes around. So you get a hundred people going to the stock market.

 

You know, 85 percent of them get eaten by the by Wall Street or whatever, whatever market. These are the providers to that generation. They get eaten and you get left with 15 percent that carry on going because they’re good at it or they’re just, you know, unsavable addicts.

 

And every generation comes through and they get eaten and some get left behind the game. Now, this current generation may not be coming. The the Canadian small cap market, for example, is dead as a door now.

 

And so is the UK small market that is a door now. And it may just be that the people that would be now doing it in the old days are actually in crypto. They haven’t come to stocks that I mean, they’ve tasted the ambrosia of crypto and they’re not going to come to it because it’s too boring.

 

You know what? No way. No, I mean, coin. Yeah, that can go up tenfold in three days.

 

This is where you want to be. You don’t want to be in those stocks. So it could well be that the you know, the the the buffalo is not coming by this year.

 

There aren’t any buffalo. They’ve all gone somewhere else this time. So there is a chance that the stock market has got its comeuppance because the next generation of speculators, degens, is that I mean, actually call themselves degens.

 

It’s not like people in the stock market think they’re highly sophisticated, getting ripped off. They actually call themselves degens. They’re not coming because they’re in crypto and they’re not going to come to equities.

 

They’re not going to go to Canada and buy the next oil miner that hasn’t got any oil in the next cannabis company that’s full of dodgy people. Hi. They’re just not going to be there.

 

They’re going to be buying Dogecoin or Trump coin or capital hat or whatever it is, or AI agent tokens on Solano and places you never heard of. So I’ve got a sneaking suspicion that that has actually kind of pulled the legs out of the small, crazy Canadian stuff and the AIM stuff in London. But when it comes to the big stuff, that’s a different matter.

 

I mean, the money for what happens is governments push money into their economies through equities and real estate. Yeah, because if you push money, if you give, if you give people that haven’t got money, money, they spend it. Of course they do, because they not only do they need to spend it, but one of the reasons they haven’t got any is that they enjoy spending it.

 

But if you push that money into the rich, they put it in the bank and, you know, get hardly an interest on it. And that money trickles down. You know, they’ve got a house, it’s got value.

 

When they dropped it, they leave it to their children, et cetera. It’s a trickle down. It’s not a run down to the supermarket and buy liquor.

 

During COVID, where I was, because of the handouts, all the liquor sold out and all the beer was in stock was before because the people in that ilk could afford beer and cheap wine, but they couldn’t afford liquor because they’ve got a handout. They upgraded to liquor and all the liquor was out of stock. So that will cause you, you know, inflation in liquor.

 

So you don’t want to push your money out into your economy through that layer because it goes straight down the supermarket and bids prices up. You push into the rich, you don’t need the money, you park it in banks or park it in stocks or park it in real estate. So rich man’s assets go through the roof.

 

And, you know, your housing gets quite hard to afford if you’re not well off. And, you know, your stocks go through the roof because that’s one place to park your money. Oh, we’ve got all this money that’s come out from the government one way or the other.

 

All we do is stick it in the stock market. So your stocks go up and your real estate goes up. And that’s what pushes these prices up.

 

And then you get into all sorts of complicated strategies that cause the Nvidia’s and the Microsoft’s, the Amazon’s of this world. You mentioned Trump coin, which triggered an interesting question in my head. It’s like, are we at peak liquidity? Like when I see a coin go into a billion valuations out of nowhere, that means there’s still way too much money in the system.

 

So I’m curious, like peak liquidity, are we there? Okay. If you want to see how much extra liquidity there is in the market, there’s a very easy way. The Fed kindly provides you a chart of it every Wednesday and it’s called the reverse repo.

 

Okay. Now, to explain it to your viewers, I’m a bank and I’ve got this money. It’s coming in from various places because the government’s pumped it into the economy.

 

And of course, it’s going to end up with me. Now I can lend it out or I can not lend it out. Yeah, but I’ve got it.

 

So what am I going to do with it? Just let it slosh about. Well, no, you lend it to the Fed and it’s called the reverse repo. So you’ve got more money than you can lend.

 

You can lend it. There’s always someone who’s going to borrow it off you and then run off with it. But you can’t find enough people to borrow that money where you think you’re sensible to lend it.

 

And that is excess liquidity. And those reserves get parked with the Fed. And if you go onto the Fed’s website, if you type in reverse repo, it will show you a chart of the reverse repo for 20 years.

 

And you’ll know that most of the time there was nothing there. So there might not even been enough money in the system to have it optimally operate because the banks didn’t quite have enough money. They could have lent it to people, but they just didn’t have it to lend.

 

But then along came COVID and all that money was printed and it flushed through the system. And a huge sums of it ended up in the reverse repo because the banks didn’t want to lend it to anybody or couldn’t. I mean, who wants to borrow money to make a building when their builders can’t show up and build it? So, you know, the money, there was excess money in the banks.

 

And when you’ve got more money, we’ve got more money supplied than money demand. You get inflation. So you can see the reverse repo in excess when inflation was rampant.

 

Now, when the Fed comes and QTs, i.e. starts dragging the money out of the market, here you go. Give me your cash. Take my bond.

 

You don’t want to be having that cash in the system to cause inflation. You see the reverse repo go down, down, down, down, down, down, down, down, down. In the same way as the Fed balance sheet goes down, down, down, down, down, down, down, down.

 

But when it gets near the zero line, that means there’s maybe a little bit more money than needed, maybe a little bit of inflation going on, but not the runaway inflation we had a few years ago. And it’s come right down and it’s slowed as we approach the election, because obviously you don’t want to make a crash before the election. And then whoever gets in will say, and the news will say it’s all his fault.

 

The Fed, they did that. They’re biased. They stole the election from me.

 

So the Fed kind of went in to slow down, slow down its tightening and slowed down. And therefore it slowed down the amount of reverse repo was falling. So it didn’t actually get to the axis.

 

It kind of slowed and it stopped. So there’s some amount of excess money in there, but it’s nowhere like it was nowhere like it was in the same way. There’s nowhere near as much inflation out there as there was because they’ve tightened.

 

And so the liquidity is not maximal. So there is excess liquidity. And of course, if there was a crash, the Fed would pop up.

 

And all of a sudden all this money would appear out of nowhere and the market would be kind of supported. And you can see that when they had the banking crisis with Silicon Valley Bank and Silvergate and all that lot, however long ago, was it a year or so ago now? It seems time passes so quickly. The Fed’s balance sheet was going down and suddenly that happened.

 

Up it went. And then when all the dust cleared, down it went again. And you can see the liquidity actions are in the reverse repo and the Fed’s balance sheet.

 

And you can pretty much guarantee that all the central banks are kind of synced up when that occurs. So they have at the moment the tools to stop financial disasters happen, not without cost. Inflation is a classic cost of resolving emergencies.

 

And so it’s far, far away from all time liquidity. Now, interesting, Clem. I appreciate you humoring my question here.

 

But just back on DeepSeeker real quick, one thing that puzzled me a bit, or not puzzled, but I found it curious, is like the flow of funds. Like where is the money flowing that’s being pulled out of the big chip names like NB and videos of the world? And I’m looking at gold, we’re down a percent, but bonds are up. So it seems like the money is flowing into bonds because the Dixie is down as well.

 

But can you explain that to us a little bit? Like why bonds, like why are bonds being seen as the safe haven? Why isn’t it going into gold or even the US dollar? Well, everything is linked. Okay. So when these things, when Nvidia moves in America, somebody, you know, Corn will move.

 

And you often see this, although you don’t see it so much these days, when somebody fat fingers, I don’t know, a billion dollars at some bank because the computer was plugged in upside down. You will see every market moves at the same time. So somebody will spanner the S&P 500 and you’ll see, you know, tuna futures moving in Tokyo all at the same time.

 

So everything is tied together by a chain of causality, which is arbitrage and all sorts of things, currencies, everything like that. So, you know, when when somebody moves out of Nvidia in dollars, they might be pushing it towards all sorts of currencies so that their that money is nice and safe and spread around and that will move currencies. And then a currency will move a commodity and a commodity will move a company.

 

And they were all they’re already wired up. The banks and the trading desk already have all these things wired up and they already have measures of how the values of these things should move as something else moves. So they go, oh, that just moved over there.

 

This has to move. We’ll buy that then. Oh, and because we bought that, we’ll have to sell that then.

 

And it will go it will cascade through all the instruments there are in all the all the markets that are live. So, you know, everything moves everything all the time because there are trillions of dollars trying to cut little pieces out of dollar bills as they fly by. And that’s what moves everything.

 

So if they’re going to bonds and that is normally a sign that people are just de-risking. So they’re going, oh, don’t like this. You know, I’ll take the money and I’ll stick it in in government bonds.

 

Well, you buy a government bond and interest rates fall. And, you know, you can also be that the Fed is pushing on interest rates to bring them down because there’s been a bit of a bit of a the opposite of a rally, a rally in interest rates going up. And, you know, they have been trying to they have been pushing them down.

 

And then obviously a whole lot of money comes out of of the tech companies and piles into safety and down they come like a lump. So, again, it’s just this huge clock. The financial markets are just a gigantic, complicated clock where every little cog is linked by default to every other little cog.

 

And someone like the Fed is trying to make sure that a little bit of dust doesn’t get in there and stop the whole machine. And that’s what the central banks do these days. And to an extent, the regulators, too, because obviously if you have somebody stick a spanner in there, it’s all going to break.

 

And so that’s the thing that everybody always well, it’s happened since the beginning of time. You get the clock. The clock runs out of, you know, out of control and the whole machine gets broken.

 

I mean, it pretty much destroyed the Dutch economy in the 1700s. Now, we’ll get to the Fed in a second. I just have one last question on the DeepSeek topic.

 

Like is today a buy the dip opportunity or should we just wait this out? Like what are your thoughts on that? I’m not. I do buy dips, but I would, you know, these spicy companies with their 30 times sales and 100 times sales and PEs that, you know, don’t make any much deal of sense. You know, I’m a value investor.

 

I like to buy cheap stuff. I like to buy Intel because Intel’s only, you know, the big manufacturer of silicon. And if you’re going to get a big, you know, argy bargy between China and therefore Taiwan, where all the chips are made, you know, you’re going to want to spread your chip manufacturing back into your motherland, aren’t you? And for example, Intel are the big players in onshore fabricating of silicon.

 

And there they are on their back, cheapest chips, so to speak. So that’s where I look for. And, you know, I think Intel’s up today.

 

So, you know, it’s really the nosebleed stuff that is get taken, taking a hit. And that’s because it’s in a good old, old way. They say it’s high beta, i.e. volatile.

 

It’s volatile stuff. And, you know, that’s a game that people love to play as long as it goes their way. And I suppose there’s a lot of people that are nervous.

 

I mean, people don’t don’t do this stuff diversified. They go all in. You know, oh, yeah, magnificent.

 

Why would I be in anything else? Well, when you’ve got your whole wealth tied to five stocks, they’re all going one way in a big hurry. I mean, that is a recipe for panic. And of course, it’s panic that causes crashes.

 

Are we in one? I don’t care, really. But I think two or three days. Yeah, I mean, everybody’s saying everybody’s saying, oh, panic, panic, panic.

 

So probably isn’t. It’s when it when it all goes quiet and it starts falling heavily and nobody’s saying anything. That’s that’s when you really need to be worried.

 

But, you know, if you play the market game and you take lots of risk, you’ve got to be worried all the time. You’ve got to be worried. That’s it.

 

You’ve got to sit there. And what’s that little pixel on the end? Go up and down, up and down, up and down. And of course, your viewers are not like that.

 

They buy gold, they stack it and they feel comfortable in the fact that they’ve got God’s own money. And, you know, that as far as I’m concerned, is a one way bet for years now. I just read a tweet here on X and said DeepSeek has dismantled the hype in tech and AI, the era of commodities is here.

 

Buy hard assets. Like is that maybe a bit too much too strong? I I think that when you think about what AI means. Yeah, it means a hell of a lot more than hard and commodities.

 

Look, one of my hobbies is treasure hunting. Can you believe I walk up and down fields of metal detectors and find coins and buttons and buckles and and artifacts that are in fields? Yeah. And they’re in fields because everybody used to live there because 95 percent of the population lived on the land and then they invented artificial muscle and everybody moved to the city and the countryside was vacated and everybody changed their job.

 

You know, two and a half percent of the people work on the land now, not 95 percent. And that occurred over 200 year period because they invented artificial muscles. Well, now they’ve got artificial brains and that’s going to do the same.

 

It’s going to change everything. And, you know, it’s it’s just gigantic because imagine you didn’t have a car. You had to walk everywhere rather than have artificial muscles carrying you.

 

I mean, it’s a completely different world. And when you’ve got an artificial brain to carry you everywhere. I mean, the sky is the limit, but it’s a huge change.

 

And and AI is energy. Absolutely. That’s all it is.

 

AI is energy. I can’t remember how many watts a brain is. It’s not that many.

 

But AI is a lot of watts for your increased intelligence. Yeah. And just for a moment, remember when you were at school and they were teaching you a subject, you didn’t like the teacher because the teacher was a bit of an unpleasant type and he was shouted at you.

 

You didn’t learn anything there, did you? And when he said, blah, blah, blah, blah, blah, you didn’t understand it. You put your hand up, say, please, can you explain? You were shut up. And that was the end of that.

 

That subject for you forever. Yeah. Kids are going to get educated by Albert Einstein from the age of three because that’s what AI is.

 

They’re going to get the best teacher teachers being kind to them, teaching them everything they want to know, explain anything they get stuck on. So within 10 years, we’re going to have a whole generation of children whose education is just off the dial in comparison with us. And they’re going to be the people driving the world forward.

 

The best educated, most sophisticatedly educated cohort of all time. I mean, that’s just completely world changing, isn’t it? Let’s get away from AI, Clem. Let’s get away from the good news.

 

Let’s get back to AI. Let’s talk about all the boring stuff. Let’s start talking boring stuff.

 

We have to talk about the Fed. We got a Fed meeting this week. What do you expect the Fed to do in 2025? What are your thoughts? What do you think they will do? What do you think they should do, Clem? Well, I mean, there’s a bit of a wild card, obviously, in the White House.

 

And I would think if he’s got any sense, he’ll stick with Powell because they really do know what they’re doing. I know a lot of people are upset by the Fed and say, oh, I don’t know what they’re doing, incompetent and all that. But read the comments below in a second here.

 

What’s that, sorry? Read the comments below this video once this comes out. Oh, yeah. Well, another way of looking at it, if you own gold and you think the Fed is incompetent, you’re in great shape.

 

Because if they mess up, gold goes through the roof. And I don’t think it’s the Fed making gold go through the roof. It’s the fact that China and the US are going to be at loggerheads and gold is for war.

 

And international global tension is going to make gold through the roof. You don’t need to have the Fed mess it up. It’s already on the cards that the world’s going to get more and more stressed and governments are going to be buying gold, are going to be the big customer, they’re going to be laying it in because gold is bullets.

 

And as you head towards a conflagration, you just can’t, you know, you have to rearm, don’t you? And there will be rearmament. There is rearmament. Europe is going to rearm.

 

But you can’t just build tanks. You’ve got to rearm with gold. Gold is international currency in war.

 

OK, and that’s what will drive that. And it’s going to drive it for years. So you’re in great shape.

 

You don’t have to hate on the Fed to have gold do well for you. But if the Fed is useless, it’s going to double the effect. OK, so, you know, the Fed has got us through 2008, got us through Covid.

 

Yes, there were costs. Of course, there were costs. Everybody sat on that backside for the best part of the year, did nothing.

 

So funnily enough, the only way you could keep that ship on course was to, you know, create inflation like they always do at the end of a war. I mean, the reason that you get inflation is it’s a way of papering over the disruption that you get from, you know, emergencies like wars and plagues. And that’s why you’ve got inflation.

 

It wasn’t inflation. Inflation is not accidental. Never has been, never will be.

 

OK, it’s always created for a purpose. Now they’ve reined it back in again because long term inflation is very, very bad for an economy. They’ve reined it all back in, but they can’t rein it in too quickly.

 

And if Trump has decided that Jay Powell is going to stay in place, which I think possibly it has, then they will lower interest rates, but slower than the market expects. But they will be lowering it anyway because, you know, a little bit of creeping inflation, a little bit more creeping inflation than we used to have will probably be suitable. And so the interest rates are going to come down slower than people hope.

 

Inflation is going to be a little bit higher than it’s meant to be. And that’s all in, you know, all planned out. So you get falling interest rates, but not falling that fast.

 

And you’ll get inflation down, but it will still feel as if it’s a little bit higher than it should be. And that’s going to be what we’re going to get in the next year or two. And then, of course, there’s the huge wild card of what happens with things like all these trade tariffs that may or may not happen and all the spanners that are going to be thrown around the world in the next one, two, three, four years.

 

And, you know, that’s going to make things pretty, pretty volatile. And how that pans out would yet to be seen. I mean, there’s been some exceptionally unexpected moves in the first few days of Trump’s new presidency.

 

And if that’s anything to go by, that will certainly carry on producing lots of sparks and lots of lots of surprises. Yeah, you sort of answered my next question already, Clement. I was going to ask you, like, what are your expectations for the first 100 days? Like the first week has already been turbulent, wild, interesting.

 

Just the executive order signed and the strong arming of Colombia to take asylum seekers back has been an interesting development already within the first seven days. Like what else do you expect to happen here over the next 93 days now here? Well, if you were an options trader, you’d say this is either very, very good or very, very bad, because this is clearly a highly volatile future. I mean, you know, has anybody ever seen anything like it coming out of America? Nothing or anywhere, really.

 

I mean, apart from maybe Milan in Argentina, but that’s South America. You’d expect that. So the sort of things that are happening is sort of like a it’s a dream of certain quarters.

 

But sometimes you better be careful what you wish for. So it’ll either be a massive, massive victory or it’ll be a huge disaster. I don’t think that’s the thing about volatility, right? That’s the thing about taking that route.

 

You’re either spectacularly right or you’re spectacularly wrong. And spectacularly right could be great and spectacularly wrong could be catastrophic. So I think the path ahead is extremely volatile.

 

The potential outcomes are very, very, very unpredictable. And it’s certainly going to be exhilarating. Whether it’s going to be the sort of excitement you actually want is another matter.

 

I mean, you know, a lot of people, they complain about what happens in June 2008 and banks get a bailout and all that. And they don’t realise they got a bailout. Everybody got bailed out in COVID.

 

They don’t realise that they got a big bailout as well. They don’t think they did. They think they were very sensible and they planned everything well.

 

And they didn’t get a bailout really, but they did. And, you know, the point is, if things if the wheels came off, you know, that’s that’s that’s potentially a very bad situation. But anyway, potentially it’s wonderful.

 

I mean, there’s a lot there was there was, in my opinion, a very, very serious decline, slow but steady decline in Western governance over the last few years of, you know, things happening which are really, really rubbish. Yeah. And clueless people are badly running the states of the West.

 

And, you know, that seems to have come to an end now. Hopefully, this isn’t going to improve it worse, you know, because a sharp decline would be worse than a slow decline. But it could go the other way.

 

And I think it’s a real 50-50. But there’s certainly no doubt that it’s going to be, you know, a wild ride. And if it if he pulls it off, remember, the first time around, he didn’t pull it off.

 

First time around, he had all these great ideas and they stopped him in his tracks, right? There was a real gullivan, the little push, pushing, tying him down. He was absolutely hogtied for his first term. Now, doesn’t look like he’s going to get hogtied this time around.

 

And that will either be a really good thing or not a really good thing. And I don’t know, I hope for the best. I hope for the best.

 

I am just a little bit amazed. So we will see. You know, if you’re going to be, I love what they say they’re going to do.

 

I think the outcome has great potential for being disastrous. But my fingers are crossed. God bless America.

 

Now, your audio’s gone, Kai. I muted myself because I was coughing. I do apologize.

 

No, we do need the U.S. to do well. So the rest of the world does well in that regard, in the financial market perspective. Clem, last topic I need to tackle with you here is gold versus Dixie or gold versus the U.S. dollar and just the move in the last, let’s say, two weeks here in the gold price.

 

Was that just a function of the dollar weakening again? We’ve seen a big drawdown from about 110 to down to 107, one of the bigger losses in the Dixie here in a long time. Or is there more to it? It’s just a technical reaction or is there more to it? I come back to this over and over again because for me, it’s a very simple, very perfect model. OK, what is the use case for gold? Now, a lot of people traditionally will say, well, it’s real money.

 

It’s going to be walking around with silver dollars and gold, $20 and coins again. And it’s all going to be remonetized and yadda yadda yadda. And I say, no, that’s never going to happen.

 

But does gold have a use case? Well, yes, it does. It has it in jewelry and everybody loves a bit of jewelry and India buys it for that and et cetera. And not dentistry anymore, yet for silicon chips and all that sort of stuff, it has a use case.

 

But the question you have to ask yourself is why do governments keep it in warehouses, large quantities of it at great cost? Why do they do that? Now, some people say, well, that’s because they’re going to remonetize it. They know it’s God’s money and they know it’s coming back and it’s there because they’re going to remonetize it. It’s just a matter of time.

 

And I say no, it’s there because gold is bullets. Gold is for war. So if you want to stop a war, say you’re an English socialist, you sell your gold off.

 

A country can’t fight a war without gold. It doesn’t have any gold. It can’t fight a war because what’s it going to pay you? Yeah, it’s going to put well, it better win quick if it’s going to pay with its own money or its reserves.

 

Gold is a financial reserve in war. OK, so why is gold going up? Well, because we’re edging little toe by little toe towards war. Yeah.

 

And you can see that out there in the world. You can see that. Why is China loading up on gold? Why is the Chinese government loading up on gold? You could say, well, it doesn’t want the dollar.

 

Well, why does it want the dollar then? Well, because it’s going to be in conflict with America. It’s not good having dollars, then, is it? I mean, it will do, actually, because, you know, quite happily pay a country, quite happily pay with the currency of its foe in a war. But anyway, the reason it’s doing it is because gold is for war.

 

And, you know, as tension rises, as I keep saying, you’re not going to go, well, we’re going to be at war tomorrow. Oh, OK. So how much reserves have we got? We haven’t got any.

 

Did we rearm? No, no, no. We’re going to have a war. You go, oh, dear.

 

Instead, you go, oh, dear, it’s getting a bit sticky, isn’t it? Oh, do you think we should maybe put a bit more money in our military budget? You know, I think that’s a smart idea. Oh, do you think we should be spending a bit more money on research and development on things like drones and stuff like that? Oh, yeah, I think that’s a good idea. And do you think we should be laying in some more gold? Oh, yeah, I think it’s a really good idea.

 

Yeah, because as you as tension rises, so you prepare. You know, it was the rearmament of in Germany that preceded the Second World War that told everybody it was coming. It was the arms race before the First World War that told everybody that the First World War was coming, or at least historians will tell you that’s what caused it.

 

And there were there is right now rearmament in Europe. I was certainly thinking anyway. So they have to buy gold.

 

Europe has to buy gold. Well, China’s buying it already. And I think you’ll be seeing America buying it.

 

Everybody’s going to be every country is going to be, oh, I think I have a little bit more about gold in the warehouse. And that’s just going to push gold up in real terms against all fiat currencies, because there is more demand for it. And the ultimate use case for gold is going to be front and center.

 

Now, if suddenly Trump, you know, and Zaire, the best friends. Yeah, then. And, you know, Iran starts to be sensible and and everybody’s seeing Kumbaya and goes to unite nations and has a bean feast, then gold will come down like a like a lump.

 

But it’s not going to happen, is it? It’s just not going to happen. Does any of your viewers believe that global tensions are going to do anything but rise? And if they’re going to do anything but rise, gold will go up in real terms. Now, if I know this is not it’s not going to get any more sticky than this, but gold is going to be monetized.

 

I think that that’s not a great thesis. But if you were thinking in terms of, well, you know, China wants Taiwan and they’re going to be angling for that. I mean, that’s where all the chips get made.

 

That’s where the AI gets and machines get made. So, you know, it’s it’s there’s going to be many, many years of this geopolitical struggle between the two superpowers. China is now a superpower.

 

It’s no longer the unipolar world of America is the superpower. Russia is gone. It’s only America.

 

It’s China now. And China is a big deal. And and they are very different in political outlook.

 

And they are not going to sit around and be like Europeans, saying, hey, we should all be cool, man. Oh, yeah, it’s just this is what we should all just be like, like chilled. It’s just going to buy gold, aren’t they? Yeah, no, absolutely.

 

It’s like it’s a weird world that we live in. And as you said, like tensions aren’t calming down at all. So we’ll see where this all goes.

 

It’s an old world that we’re back to. It used to be like this all the time. I mean, it’s the history of humanity to run around and kill each other.

 

And it’s only been since the Second World War when it became so obvious that if we carried on doing it, we’d all end up nashes that that people thought it was a good idea to stop it. And now all these years later, everyone’s forgotten how horrific a war can be that they’re starting to think maybe, oh, you know, what was it that they said? Give war a chance. They said that back after 2000 with them.

 

I think it was Rumsfeld said that during the Gulf, the second Gulf War, give war a chance. And that shows you how far people got away from from that sultry experience of the Second World War. Yeah, I don’t know, it’s like it goes against my understanding of the world.

 

And we got these things and we can understand the world. We can look everything up. And yet we have wars like it’s it’s I don’t get it.

 

It’s human. It’s humanity. Like, we don’t need to go into that.

 

It’s the structure of power. And one of the main things that that causes it is people look at maps. And when they look at maps, they go, Oh, if only that corner belong to me.

 

Oh, look at that. It’s over there. Oh, that’s the wrong shape.

 

That should be straight. Map thinking, I’ll tell you, it’s one of the causes of conflict. Absolutely.

 

Clem, I tremendously enjoyed our conversation again this morning. Like really, it was focused obviously a lot on deep sea as it is a bit of a game changer in the markets. I don’t know, I’m losing.

 

I’m using that term loosely. AI is a game changer in humanity. It’s more than the internet.

 

It’s more than all the other things since the invention of the of the steam engine, the internal combustion engine. It’s that big. It’s that big.

 

People have to grasp that if they haven’t already. And think about that and think about the implications of that and how that’s going to affect their life and their investments. Because that is where the money is the big, big money is.

 

You see, you know, the thing about scale, the scale of things is just going to go up. Right. And the numbers are going to go up.

 

The reason there are billionaires now or some or seventeen hundred of them is because the scale of the world has gone up and therefore the numbers have gone up. The Pareto distribution of the way things work means that some things are just gigantic. Well, when you shift that distribution again, I mean, the Industrial Revolution, there are 500 million people on Earth and now there’s eight billion.

 

That’s because of artificial muscles. Well, what happens with artificial brain? It’s it’s it’s a order of magnitude improvement, increase, change. And I come back to the what it’s going to do to the children, because they’re going to be studying exactly what they want to and get all the answers immediately on a one to one tuition with the greatest minds ever been.

 

And they’re going to come out of that process, which starts now. So by the time in 10 years time, they’re going to be in places at 14 that people in university now at 25. Yeah.

 

And there’s going to be this whole cohort of incredibly educated people coming out there with artificial intelligence at their fingertips. That’s going to be that’s going to change everything. Absolutely everything.

 

Absolutely. Where can we follow you and where can we find more of your work? Well, I do a fair bit of writing on Forbes and seeking out for I’ve just started a new financial website called a new FN. And it’s down there in the corner, I hope.

 

And you can get on the guest list because we’ll be opening a quite an exciting new kind of financial network soon. So if you can, if you get yourself on the guest list, you’ll be amongst the first group of people that get to see it. And and you can I’m Clem Chambers on Twitter.

 

And I don’t post often. But when I do, it’s normally something worth listening to. I don’t go, Oh, how rubbish that is.

 

I just go, Oh, this is going to happen or this might happen. That’s interesting. And but so you can follow me on Twitter if you like.

 

Fantastic. Clem, tremendously appreciate your time this morning. My morning, your afternoon.

 

Tremendously appreciate it. And we’ll have you back on soon. And thank you so much, everybody else.

 

Thank you so much for tuning in here to soar financially. Bit of a special episode. We had to focus on deep seek and the revelations of the weekend.

 

Like, why is money moving the way it is? Like, why are people buying bonds instead of gold right now as we speak? And let me take a look at the latest numbers as we speak here. The gold is down about a percent. The S&P 500 is down one point five percent.

 

The Nasdaq 100 is down two point five percent. So a lot of turmoil. This is not as a black Monday as it started out to be.

 

It’s recovering a little bit, but it’s good to discuss and check some trends. Thank you so much for tuning in. Let us know how we did down below and subscribe to the channel.

 

It’s a free way to support us. We tremendously appreciate it and we’ll be back with lots more. Thank you so much for tuning in.

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