Q3，谁会来挑战市场？

What’s freaking me out about the broader indices is that the dollar is getting stronger. This is the trade that absolutely mulched my P&L again and again as an oil trader. I’d have some bull trade, some idiosyncratic thesis, then the dollar would strengthen a bunch and it wouldn’t matter. I would get dildoed.

Never underestimate just how terrifying a rallying DXY can be for your assets, because, let’s face it, at the end of the day, we’re all patting ourselves on the back here, but we’re really just short dollars. Cash is trash. You get long freaking DRAM modules. You get long SPY. You get long biotech ETFs that I’ve never heard of. You’re making 15% a day or every 2 weeks. It’s all a short-dollar trade with various degrees of beta.

1. Portfolio At All-Time Highs: Time To Rotate?

Jonah, what’s going on? I just yelled into the microphone for all those listeners who just hopped on. Hopefully your eardrums burst.

Nice to see you, Avi. At some point, I want an explanation of what that artwork is in the background behind you.

I think I talked about it on the Friday livestream that I did—the 30 minutes where I just talked straight at the camera and somehow had to keep coming up with more topics to talk about. It gave me so much respect for streamers. It’s kind of hard to just talk at a camera with no feedback from other people. It’s kind of crazy.

It gave me a lot of respect for the people who manage to just gab and yap. It also made me realize that sometimes you just need to say words, and the words don’t even need to make sense. People still listen because they just put it on in the background, and they’re kind of just hanging out with you. Then they ask questions, and you kind of banter with them and have fun, kind of like what we’re doing right now.

But it’s so much better. I’ll be honest, I’ll get better at it, but it’s so much more enjoyable with you. It’s a very enjoyable experience having a good counterpart.

Yeah, yeah. I feel the same way. I could never just stream solo. It feels impossible. The guys who do it—Ben Shapiro and Megyn Kelly, whatever those types of people, and just Tucker Carlson, who I don’t like, but I have respect for him just sitting there and talking to the screen for an hour—it’s hard to do that multiple times a week.

Sorry, I cut you off.

No, no, no. I was just going to say I think what I like about our dialogue is that it’s the dialogue we were having before we were recording it, right? We’re just talking markets here.

I think right now what’s bothering me about markets is that I’ve traded the recent price action pretty well. My portfolio is at all-time highs. I’m starting to lose a bit of confidence in my equities positions. I’m just wondering, is it really time to diversify into something else? Not because I can identify a reason why I should. In fact, it’s probably still just going to keep running, but it’s the gut that’s tingling. It’s that weird gut feeling that’s kind of like, “Oh, man, I should really trade around this position.” This ran way harder, way faster, and way longer than I ever would have expected.

I can’t articulate it in a bunch of different ways, but as a trader, let me tell you a story. What makes a good analyst versus what makes a good PM? An analyst can collect 100 pages of evidence. They can tell you exactly why the 10-year is doing what the 10-year is doing, why the inflation breakevens are where they are, why Intel is going up, and why BlackBerry QNX is driving the stock higher. They can tell you every single little factoid that you need to know about the market, but they can’t figure out what actually matters.

What is the core driver of the price? What is really sending us higher? Who’s buying? Why are they buying? That’s the number-one thing that you need to think about when you’re a trader.

When you’re an investor, what you need to think about when you have a long-term time horizon is whether the company that you own is a good company, whether the fundamentals are sound, whether over the next 5 years it’s going to grow or not, and whether the expectations of that company right now are low enough so that that growth is actually baked into the price. That’s obviously an important part of a company. A company can grow 30x, but if it’s priced at 50x growth, then obviously it’s not going to do well.

Right now, our job, Jonah and I, is to try to figure out what has been driving the market and whether that dynamic is coming to a close. What’s been driving the market, I think, is that there was a period of time where every day you would wake up and there was a new frontier model that was released that was absolutely crushing things.

People were joking about how Anthropic was going to take away jobs from everybody. Every week, Anthropic was like, “We’re doing it. We’re doing Claude for finance. We’re doing Claude for this. We’re doing Claude for that.” Everybody was going, “Man, AI is totally going to take over the world.”

Massive amounts of capex are being plowed in. Massive amounts of forward purchases are being made from Google to AMD and Micron, with Nvidia selling chips like crazy. That is still happening, but it seems like that is now at least baked into expectations. The expectations have risen to the point where I don’t want to say that we’re fairly valued, because our conversation and our take on the previous podcast were very specific.

It was that the hyperscalers led the rally, then memory followed, and now it’s about what is actually being impacted by AI. That’s going to be where the value is now, and I think we’re sort of seeing that. I mean, with Intel gyrating like crazy, Micron had a blow-off top: you hit $1200, and you’re back down at about $1000. You’re seeing memory start to compress because the forward expectations have been baked into the price.

The question is, I had a substantial portion of my net worth in Intel, both because of allocation and because it grew so much. In a single-name stock, do I still want to hold that much exposure to memory, or is the risk of downside much higher than it was 2 months ago? The answer to that is yes.

You’re seeing our thesis play out a little bit when you look at biotech. Biotech has done very well since we first talked about it. I think ARKG is up 15%, maybe 20%, since I mentioned it on the podcast. That was 2 weeks ago. Biotech is up, I think, 15% to 20% across the board on a lot of these names, some even more. BBLN[?] is up a ton, I think another 20%.

I’m actually still very bullish on these names. I’m not selling out of them, but I am reducing Intel. I’m reducing Micron. I was bullish on Micron into the earnings. I said that it was very likely that Micron was going to be basically what happened.

You always have to think about flows, because now we’re no longer in the fundamentals game when it comes to these stocks. We’re in the flows game. The day before, what had happened is the Nasdaq was down 3%, and there was clear de-grossing across the board in all of the top memory names.

Heading into earnings, I think it was more likely that there would be asymmetry to the upside, which is what happened. I tweeted it out prior to the earnings. We went up. But now we’re back down. When you retrace a move like that, I generally think that’s probably a bad sign for things to come. It means that people are willing to take profit on these things even though Micron massively crushed earnings.

My view right now is, again, look for the things where AI is having downstream effects. What are the downstream things that are going to benefit? I’ve talked about this on previous podcasts, but Reddit is a great example. Reddit is up 10% today. It’s trading at $191. We talked about this at $160.

Reddit has all the data. You go to Claude, you go to OpenAI, and you ask, “Hey, what’s happening? What restaurant should I go to?” I use ChatGPT to talk about TV shows. It always pulls something from Reddit. You can talk about fan theories about House of the Dragon with ChatGPT. It’s fun.

It’s always pulling from Reddit, right? Reddit has all that data and is licensing it out to these things, and that’s obviously going to be very, very good for us. The question is, again, what are the downstream effects of AI going to be now? That’s where you probably need to park your money.

I’m not sitting here saying that Jonah and I are omniscient. I mean, you know that. We get told a lot how wrong we are, but we’re right a decent amount. Let’s talk about the frameworks for how you should approach the market.

One of them is how heavy in an index should you be versus how heavy in single-name stocks. When there’s a ton of dispersion in the market, and when there’s secular growth happening and you think it’s underpriced, you can probably move over to single-name stocks and be pretty happy about that.

What I'm saying right now is not to go short the market. I'm saying that regime may be coming to a close, right? That regime where, when you look at my portfolio, I hold 20% in an index and 80% in all these random single-name stocks. Maybe what you need to do is just go back to the index and wait it out. Time in the market beats timing the market. Go back to the indexes.

That's my general take on the market right now: that weird little ball-tingling gut feeling of, “Hey, are we overheated?”

Yeah, I have a lot of takes on what you said. I have a large index position because it's something that's smooth enough that you can trade with leverage, and something where you can invest a fortune and feel just fine, right? So it's that position that I'm getting a little worried about. One thing that you said that resonates with me is, when you're starting to get a little bit worried about something, when the gut feeling is tingling, don't just sell. Don't sell for cash. Cash is still trash.

Your advice is to rotate, right? Rotate into something that makes you feel better. I'm wondering what to rotate some of my index position into because it's become substantial. I've been buying on the way up with leverage, and now I'm like, “I don't know what to do.”

2. Fundamentals vs Flows: Why Analysts Keep Missing

Before we get to that—what do you rotate into?—there's sort of another thing you said that I want to debate with you. I don't have a strong view on this, but you said that fundamentals are kind of done for now in the stock market and we're trading on flows, or maybe just in the Micron, SanDisk world of white-hot AI stocks.

That's what I'm talking about specifically.

Actually, when you see price action like this, it normally means what you said, right? When you see it in crypto markets, it means that people have thrown “Does this project make money? Is this project ever going to get used?” to the wind, and they're just trading on FOMO. They're trading dollar signs and sums because they think other people will buy it from them.

3. Find Your Niche: The Best Career Advice For The AI Era

I don't think we're actually quite there yet with Micron and SanDisk and the white-hot AI stocks, and I'll tell you why I think we're still squarely in the fundamental zone with those. It goes back to who's got the money, right? The real big allocators are BlackRock and Vanguard, which run the index funds, but also passive money managers. Passive money managers get fired for deviating from the herd and being wrong. So they basically index a lot of their positions to analyst recommendations.

They're not going to make a bold call because they don't get rewarded the way hedge fund managers do. Passive money is where the trillions are. Hedge funds are just little spits in the ocean by comparison. So passive guys index their trillions to analyst recommendations.

Similarly, equity analysts—it's selection bias. The ones who made the bold calls got fired when they were wrong, and the ones who hedge and wedge, make qualified statements, and say bullish things that are right whether the market goes up or down—those are the weaselly guys and gals who have crafted careers for themselves in sell-side equity research, right?

I'm sorry, I love how you realized that you needed gender equality for your insult.

Yeah. These weaselly guys and their girls. They're weaselly girls as well. Don't be sexist against the girls. Girls can be weaselly.

There was that lady, the one who called the crash. She made a bold call. Was it Meg Whitman? No, or is that the CEO of HP?

No, no, no. There was one lady who made a really bold, bearish call in 2008. She was dead right and became famous, set up her own firm, and then she tried to make another bold call or 2, and she's just been written off into irrelevance. Meanwhile, the hedgers and the wedgers of the equity-analysis world are still sticking around, making milquetoast, middle-of-the-bell-curve calls.

Where I'm going with all of this, Avi, is to say that the people who are the analysts for Micron stock, for SanDisk stock, for Samsung, for SK Hynix—even though they're projecting whatever double-digit percentage compound annual or quarter-over-quarter growth in these companies' earnings—because of the incentive structure, they're just going to miss and miss and miss, and Micron and SanDisk are just going to keep smashing analyst expectations precisely because the analyst community is disincentivized from making the bold call even when it's correct.

So what I'm saying here is, you have a fundamental edge as a 1000x podcast listener, as a retail investor. You can literally just ride this stuff while it beats expectations quarter after quarter, because the entire market structure, the entire capital-market system around these stocks is set up to misprice extreme events like AI demand absolutely blowing through a DRAM bottleneck, right?

I do think that you can actually profit from the fundamentals in ways that huge pools of capital just can't, because you can make a bold call in your PA. So I think for now we're in fundamentals territory. I don't think these things are trading at crazy, impossible-to-ever-achieve prices like Tezos in 2017 or some memecoin. We're not there yet. We will get there. So I think it's probably still a good idea to hang on to those. Now, in terms of what to rotate—

Can I make a point there? This is important because I disagree with it, and it's that fundamental-flow dynamic that you just outlined basically says that earnings are going to consistently underprice what is actually happening. I 100% agree with that. That's true, and that's been happening over and over and over.

Earnings expectations.

Yeah, sorry. Earnings are going to continuously beat earnings expectations, specifically because of the incentive structure that you just outlined exists in the world of finance. That doesn't mean that flows are not what's driving price. For example, Micron beats earnings massively. It goes up 15%, and then it goes right back down.

So what happens is that your dynamic played out: people underestimated the fact that they were going to crush earnings, everyone got very excited that they crushed earnings, but then people had basically made so much money on Micron that they took that liquidity and sent it straight back down.

4. Micron At 7.5x: This Isn't A Bubble Yet

I think that both of these things can be true. There's probably a trade—when you're looking to trade the markets, you always have to look for an edge—and you just gave me a thought of what that edge is: basically, if a stock is down into earnings, buy it because of the dynamic that you outlined. But it doesn't necessarily mean that it's going to be up in a month. I guess that's what I would say.

Okay, so I think we're—I agree with you. It's an important point you made, and you're right. But maybe we're triangulating an important fact here, which is, while you were talking, I went and checked: Micron is trading at 7.5 times forward earnings right now. This is not bubble territory. So the price action is important to watch. I'm not saying that technicals don't matter here or that flows don't matter. I'm just saying we're not at the point where fundamentals don't matter. Fundamentals matter a lot.

Just look at price-to-forward earnings: Micron is very much tethered to reality. This is not a crazy situation yet in terms of the fundamental-analysis world. So when you get the big pullback—MU is down from its peak right now—if I'm looking at the chart, we're down 16%. It's down 8% today. Intel's down also 8% today.

Look, I mean, honestly, SpaceX is down 5%.

Honestly, I think this is a good time to YOLO into a little bit of Micron here for a trade on this pullback. You see my point. I'm just talking about, okay, if price-to-forward earnings were infinity, like it is for every crypto token, maybe you hold off. But Micron's still in fundamental reality, and there's still a ridiculous shortage.

Now, the leading indicator—again, DRAM is just a commodity, just like crude oil, my wheelhouse—is the price of the fully assembled product, right? For crude oil, demand is notoriously hard to model. Usually, when I look at societies, it's just global GDP growth, demand for transportation, that sort of thing, because at the end of the day, the finished product for which the major input is crude oil is travel, right? Movement: planes, trains, automobiles.

Here, the finished product is the server. It's really the server rack that's driving this. Computing has not gone to the edge yet. We're not looking at humanoid robot prices here. You really want to look at what a fully kitted-out standard NVIDIA GB200 server rack is priced at: roughly $7.5 million on the high end. That's up from around $3 million a couple of years ago, and it's probably going to go higher.

There's no shortage of demand for those things. So to me, I just think Micron's going to keep squeezing, and you should use these pullbacks as an attempt to buy in. You should probably track the server-rack price.

You can use Claude to help you out, or ChatGPT, or maybe your favorite Chinese model to figure it out.

5. Who's Coming For The Market In Q3? (It's The Dollar)

Back to the index point, though, what's worrying me a lot, Avi—what's freaking me out, not about this particular segment that's getting squeezed for idiosyncratic reasons, but about the broader indices—is that the dollar's getting stronger. This is the trade that absolutely mulched my P&L again and again as an oil trader. I'd have some bull trade, some idiosyncratic thesis, then the dollar would strengthen a bunch and it wouldn't matter. I would just get dildoed.

Basically, this is happening again now: the dollar strengthening. To your point about what's driving the market, let's pull way back and look at M2 money supply ripping like there's no tomorrow. We've been talking about it on this podcast for 4 years. Any sort of slowdown in the profligacy of our central bankers and Treasury Department executive officials is going to result in a big asset problem.

There are also probably going to be some headwinds coming from the rates situation, with the trajectory having gone from cuts to hikes. Never underestimate just how terrifying a rallying DXY can be for your assets, because let's face it. At the—this is the end of my rant, by the way—at the end of the day, we're all patting ourselves on the back here, but we're really just short dollars.

Cash is trash. You get long freaking DRAM modules, you get long SPY, you get long biotech ETFs that I've never heard of. You're making 15% a day or every 2 weeks. It's all a short-dollar trade with various degrees of beta.

I think that's probably true for a lot of other assets, but one thing that our friend, a friend of the show, Capital Flows, has pointed out is that as the yen is collapsing, the trade is basically: you borrow yen, you put it into dollars, because you get that interest-rate spread. I think that's maybe what's driving the dollar higher.

But that doesn't necessarily mean that we're not going to see continued growth from AI and continued growth in our economy from AI. The dollar is a lot scarier when the economy is being driven by Fed liquidity. Right now, it's not. Borrowing is expensive because rates are high, right? The marginal impact of a rate change right now, or dollars becoming more expensive, is a lot less impactful to the markets than a DXY going up in 2021 or 2022, when rates were low. The marginal impact is going to be a lot higher.

Think about where the flows are coming from. If people are borrowing a ton of money—I'll make this really simple for the people at home—if the core driver of the markets is that people are borrowing capital to put into indexes or to put into single-name stocks, then the dollar going higher is obviously bad for the market. Rates going higher is obviously bad for the market.

If the core driver is that money is quite literally being made right now because of advancements in tech, then it doesn't matter as much. That's what's happening: money is just being made right now. So, it matters a little bit less.

6. Bitcoin's Been Co-opted: The Walk-Out-Of-The-Cage Trade

But you know what it's really bad for? Bitcoin. This is actually why I went on Pomp's podcast. Shout-out to Pomp. He's got such a great studio. He made me look hot. I don't know how, but it was pretty great. Thanks for all the compliments on that pod, and all the hate as well. I got a lot of hate from the Bitcoiners. The people who like Bitcoin really didn't like that pod.

Who can hate Bitcoin?

Because I said I haven't been super constructive on Bitcoin as a long-term hold—as a true long-term hold—for a while. Obviously, I'm constructive on trading it, but we've talked about this on the pod. We've disagreed openly on this.

I'm just less convinced, especially with the prominence of Saylor in the asset, and with the fact that it's been co-opted by Wall Street banks and is owned by them. It doesn't exist outside the system in the same way that it did before. When you have a market where there are real things happening, it's less important to put your money into Bitcoin, because you want to be invested where real growth is occurring.

I agree with you short-term. I've been saying the same as you; there's no disagreement. But over the long term, why would we—I'm still bullish. Are you not? That would be interesting to me.

I guess let's define terms. Over the next 10 years, am I bullish on Bitcoin? That really just comes down to 1 question: Will the Bitcoiners manage to solve their quantum issue? That's really what it comes down to.

Right now, we're not seeing a ton of product. The concept of Bitcoin, obviously, I think is extremely valuable, but that's why Zcash has been doing so well. It presents a solution for all the problems that people are very annoyed with Bitcoin about. Now it's fully traceable by the system, it is effectively owned—the future of Bitcoin is owned by 1 man in many ways—and it does have this quantum issue that's coming up.

Zcash obviously doesn't have these things, and that's why I think people are— that's why Zcash is doing well relative to BTC. The concept of a non-sovereign digital currency will always be valuable. That, in my mind, will always be valuable. I'm just seeing Bitcoin sort of falling behind.

People got very mad about that take on the podcast, but really, to go back to defining the terms, I just think that right now crypto is not necessarily the right place to park all of your capital. When I think about—

Well, it hasn't been for a long time. We went from being all in on Bitcoin at the beginning of this podcast. A few years—

When we first started recording this, we were all in.

And then it was like 50%, 40%, 30%, 20%, and now, like, whatever, who cares.

Over a 10-year period, let me just put the ball back in your court. Quantum can hack into your JP Morgan account, too. They'll have to update RSA encryption to be post-quantum. The same thing will happen with Bitcoin.

Let's say that Bitcoin gets hacked and goes to zero. The devs won't just be like, "Well, shucks. Guess we're all broke and fucked now." They'll probably just fork it, like they've forked it before for various reasons—Bitcoin Cash, BCH, the previous forks—and just be like, "All right, here's a post-quantum one with everybody's holdings kind of back to where they saved the game before the quantum hack."

Let's just revert to the last saved point where we were alive. Why wouldn't that happen? To me, I would assign an overwhelmingly massive probability to that happening. Of course they're going to revert to the saved game where quantum hasn't destroyed all their value, with a little post-quantum trigger in the encryption—and then a post-quantum patch in the encryption, sorry.

As for the rest of it, the non-sovereign currency: you look at what's going on in the world today in terms of the rise of socialism and the rise of asset seizures. Nothing is more portable than Bitcoin.

The crazy thing about socialism—or just socialism and capitalism in democratic governments—is that the proven way to buy people's votes and buy their buy-in, basically, without violence, is just to promise them stuff: to print money, to give them free beer, free housing, free capped rent.

The capitalists do it, the communists do it. To me, it's just a one-way trade for Bitcoin over the long run. The problem, as you identified, is that in the short run we have 1 guy who controls the market. That's unsustainable. He's going to blow up, mark my words. Then whoever's alive to pick up the pieces is going to have a really freaking epic run, in my opinion.

Yeah, we should talk about that in a second—what's happening with the MicroStrategy complex right now. I think we probably get a bounce because of what he's done, but inevitably it sets itself up for a larger problem, where he's transformed himself into, as people have noted on Twitter, a hedge fund—

A really bad hedge fund.

A really terrible hedge fund. Over the next 1 or 2 years—which, ironically, kind of lines up with the 4-year cycle—basically until the AI real-world trade is over, until the robotics trade is over, until the biotech trade is over, until all these other things die down, I just don't think that there's a place for Bitcoin in the market as something that's going to massively outperform.

I mean, if Bitcoin goes back to all-time highs now, it is still radically underperforming memory stocks, right? It's like—there might be a period—

That's not a fair comparison. Of course, if Bitcoin goes—if anything goes back to all-time highs—

Like, over the next 2–3 years, what would I rather put in my portfolio and hold, just closing my eyes? It’s the biotech ETF, it’s the Nasdaq. Over the last 5 years, the Nasdaq has done better than BTC, right?

You don’t have to have only 1 thing in your portfolio. In much the same way as there were people who had gold for 10 years of nothing and then suddenly it went up 5x, you can have some Bitcoin, too, because Bitcoin is probably going to 50x from the lows after Saylor’s done blowing up. You don’t need to be all in.

Yeah, I just caution against the people that are—there’s that meme that I’ve posted before. It’s like the bird is stuck in the cage, but there are only 2 bars, and in the entire rest of the cage there are no bars. You can just turn around and walk out of the cage.

Just walk out of the fucking cage, guys. Stop being so obsessed with crypto. You can trade other things. You probably should be allocated to other things, and that’s really the core of it. Obviously, you can have some allocation to BTC, but don’t make it your personality. I think I tweeted 3 things: Don’t make it your personality, don’t make it your entire portfolio, and don’t forget to look elsewhere.

I couldn’t agree more. Honestly, I think that’s a beautiful way of articulating it. The amazing market setup that we’re being handed here, just by Saylor and the broader macro backdrop, is that you shouldn’t hold a lot of Bitcoin, but you don’t have to, right?

Whenever Saylor’s done blowing up, whatever little piece of your portfolio you’re holding in Bitcoin—let’s say it trades down to $30,000 or $20,000. Let’s say it trades down to COVID levels. I still think it’s going to $1 million as they print more money and try to take away your private assets. That’s an inexorable supertrend.

I think that little bit of Bitcoin might be the best portfolio hedge of all time, and it may generate a fantastic return. Timing that and living off of it the way that you have in previous cycles is impossible, and I completely agree with you. But you don’t need to.

Well, I want to check up on a trade that I talked about 2 weeks ago—let’s say a month ago at this point—when I talked about the HOOD-BTC trade. That trade has done very well, actually, and the reason that it’s done well is kind of for the reasons that we outlined on the—

Let’s take a look at this chart.

This is the backslap segment of the 1000x podcast. It’s the backslap ball pit where we all just hop in and congratulate each other.

Yeah, well, let’s look at the chart. Let’s look at it from June 1 to today.

Over the last month, HOOD’s up 20%. It’s going to continue to rip, and Bitcoin is—wow. Bitcoin’s really down since then. I didn’t even realize. Bitcoin’s down 20% while HOOD is up 20%, so you would have made some great money following that trade.

I’m still kind of—I’m not short Bitcoin, but I’m still in the long HOOD trade. The reasoning is that if you think crypto’s coming back in a meaningful way, if you’re bullish on crypto, HOOD is going to benefit massively. But they also benefit massively from prediction markets, and they also benefit massively from options trading. They’re growing their revenue streams outside of crypto substantially every week, every month, every quarter—quarter over quarter.

They now have lock-in from the Trump Accounts. Not only that, it looks like, in a twist, Micron is actually contributing $250 million to these Trump Accounts. Trump is getting American companies to contribute to these Trump Accounts, right? That’s a big boon for Robinhood.

I’m sitting here thinking, “Hey, Robinhood’s going to do ridiculously well over the next few months, over the next year.” We can probably see all-time highs, and that is my pure-play expression for the crypto market specifically.

Other than that, obviously, I’m still with you on memory. I don’t think it’s over yet, and I think that in 6 months we’re going to be higher. But I’m thinking, “Okay, maybe we’re going down the curve a bit now. We’re going down the curve a bit.”

That’s really probably my top 3 things I’m looking at right now. I’m looking at Robinhood, I’m looking at the downstream effects of AI, like biotech and Reddit as well, and I still hold my Micron.

What bothered me about Micron was that I got some new information on Monday, right? The thing sells off all the way down to $118, and then it absolutely rips to all-time highs, up 20% in basically 2 days. Then it sells off again. It wasn’t that volatile before. We weren’t seeing these types of crazy 20% gyrating moves.

To me, when volatility goes up that much, you have to start to get a little bit nervous about something. If a stock’s volatility goes up, by definition, you should hold less of it, generally.

Yeah.

That’s the only issue that I have with memory stocks right now: They’re really gyrating kind of crazy. That’s new information that I didn’t really have a week ago, so I have to work that into my mental model, unfortunately.

I mean, the way that a CTA will do it—a CTA is called a commodity trading advisor. It’s basically a trend-following fund. They try to keep their daily P&L variance somewhat constant in percentage space.

Even if it’s just up-only every single day, they obviously are max long because the spot price is above all of their trending, moving-average-type indicators. They’ll be max long, but if the up moves become larger and larger, they’ll sell just to keep their P&L variance somewhat constant.

That’s probably one of the most important reasons for people to manage their risk in these white-hot AI stocks. Even if it’s going your way, the right thing to do is not to sell all of it, or even a third of it, or even a quarter of your position. Just try to say, “Hey, if the average P&L of this position was $350 6 months ago—that was the daily variance of the position—and now it’s like $3,500, maybe I should peel a little bit off here and trade around the position.”

It’s good practice, and it helps you take profits and buy low and sell high in general.

Everybody knows the most important thing to do is take profits, because you can’t pay yourself unless you take profits. This is, I think, the reason that we’re having these conversations right now: Things have gone up so much in basically the year to date.

This was one of the best quarters ever for the Nasdaq. It went up 20%. The Nasdaq Composite closed up 19.6% in Q2, its strongest quarter since Q2 2020. That’s pretty nuts.

On the year, we’re still at quote-unquote reasonable levels. We’re up 13%. But again, this is all about single-name stocks. How heavy do you want to be in those names versus how heavy do you want to be in the indexes?

What I’m looking for now is—I’ve held a lot of these positions for a few months, and I’m basically looking to allocate to things that I feel super comfortable holding for this quarter as well. My goal for a lot of these, especially the biotech positions and also the index fund positions, is basically: I hope that I don’t have to sell these for a year. I hope that I don’t have to sell Robinhood for a year and that I can just close my eyes and forget it at this point.

What I’m also hopeful for is that if we do get some fear in the market, if we get some sort of cleanse—maybe the Iran war starts up again. It doesn’t seem like that’s going to happen or impact the market in—

Always a fade, Avi.

It was always a fade, but I’m hopeful that we get some sort of large pullback in the markets, and then you can just buy and quite literally forget about everything. If I can buy Micron at $80 again, I’d just buy it and literally not think about it for a year. That would be great. I would love to be able to do that.

7. Beyond AI: Israel, Real Estate & Hidden Megatrends

I mean, let me ask you a question, Avi. Are you trying to shoot the moon with every single one of your positions, or is anything a preserve-wealth, portfolio-diversification thing for you?

Well, right now, cash is the portfolio-diversification part. Cash and the index fund, right?

I have no cash.

No cash.

I have no cash. I’m levered long, but probably in a lot safer stuff than you are.

One thing I’ve been doing is looking outside the box, trying to think about what to diversify into. Basically, I had sort of an epiphany. I did a little bit of travel. Anybody who listened to last week’s 1000x pod knows that I went to Israel last week.

When you get outside of your bubble, when you go and see new things, you get new investment ideas.

So, a crazy idea that I hadn't considered at all until last week was: what if I sold out of some of the equity positions that had been running for a while and bought a place in Israel? And the reason why? Real estate, right?

You want to buy real estate in a place that is constantly at war?

Yeah, but it's gone up. Well, it's been going up like crazy.

The market in Israel has been going up.

It took a little pause in shekel-denominated terms when the war kicked off, but the shekel rallied 40% or 50% versus the dollar over that period of time because of capital inflows.

What I'm realizing, Avi, is that there are other megatrends besides AI. One of those megatrends—I toured a couple of apartments in Tel Aviv and Jerusalem last week—and what I realized is that anti-Semitism is just a secular trend in society. A lot of Jews around the world—maybe we don't really feel it that much in America. I certainly don't in LA. Maybe you're starting to in New York, but when I was in London, I felt it big time.

I'm sure Canadian Jews and other Jews from places like France feel it as well. It's like, "Wow, I'm not welcome here anymore." And the first thing they do is go and buy a spot in Israel. I'm not here to talk about Judaism or anti-Semitism—we're here to talk markets and money—but I was just thinking that maybe some advice for the average listener isn't to go to Israel and buy an apartment.

It's more like: get out of your little bubble that you're in, looking at markets and clickable things. There are all kinds of megatrends. Society's changing more now than I think it ever has in my lifetime, and there are a lot of megatrends that are pretty easy to jump on.

We can all hop on the DRAM bandwagon. That's pretty easy: you just click Buy Micron stock on Robinhood. You can click Buy Robinhood stock because more people are click-buying Micron stock on Robinhood. But if you want to get super-levered long something, nothing's better than property, especially in a place where there are millions of successful people from all over the world literally fleeing their countries and pouring assets into this one little, small patch of land. It's just trying to think outside the box as I look for diversification, but also for an outsized return.

Yeah, I think that's fair. I think that we're probably going to see it—we've already seen it in San Francisco real estate. This has been talked about ad nauseam, but the winnings from all of the AI gold rush are just plowing into San Francisco. It's nuts.

I've got a friend who's moving out there who keeps trying to buy a place, and everything just keeps getting bid up by $2 million over asking, or 40% or more from asking. It's so ridiculous. But maybe you want to start looking at used Ferraris. The Ferrari Mondial is an $80,000 car. Maybe that's the next play. Maybe it all flows down into cars now, Jonah. I don't know.

What are wealthy people going to buy now, right? I guess that's real estate. Real estate's always a good one.

Real estate's been daddy'd by high interest rates, but there's really no better market for getting long with leverage. You can buy someplace with a 75% LTV loan and just ride the tiger. I wouldn't do that in San Francisco, but maybe Austin, Texas, maybe Los Angeles. I don't know. Where's all this wealth going to go, Avi? There's a lot of it getting generated.

It's a good question. You also have to go to places that aren't going to build, because that's why San Francisco real estate is going up so much.

Yeah, it's small.

Right. You can't build there, whereas in Austin you can just build a ton. Miami's putting up a new condo building every 30 seconds.

That's really why we're interviewing—if you tune in in a few weeks, you're going to hear an interview with A.J. Scaramucci, who's raising a fund for collectibles and buying things like dinosaur skeletons, which is kind of sick.

That is crazy.

I mean, you saw Ken Griffin—I think it was 2 years ago now—

Maybe he bought a crazy dinosaur, like a Stegosaurus skeleton, which is kind of sick.

A buddy of mine works at Citadel, and apparently he shows it off at company parties, lends it to museums, and rents it out. It's pretty cool.

That's actually dope. I'm also trying to get in touch with this guy—I already got in touch with him, but I'm trying to schedule an interview with this guy who's gotten really into Roman coins. Maybe just pick your autistic little niche that you're really interested in and see if you can make money on it.

There are definitely huge benefits to knowing a niche better than anybody else. Honestly, that was your trajectory in crypto: you mastered that niche before everybody else caught on to it. I had my little moment in oil, where I knew more than the average guy.

This is what the financialization of the world is leading to: if you generate deep knowledge in a specific subset of an area, you can end up making a lot of money. This has been true throughout history, but it's really true now more than ever.

If you're best in class at something, you will do well. You have to somehow get into the top 0.1% of whatever sector you've decided to be the best in. If you're the number one collector of elephant statues in the world, or the number one collector of Roman coins, or you know everything there is to know about Archaeopteryx—which was the first feathered dinosaur, the first dinosaur with flight, like the missing link between dinosaurs and birds—if you're the world's foremost expert on the Titanic, pick any random thing.

You can generate a niche audience for yourself, and probably, if you're genuinely the best at it, you'll do well. If you're the best breakdancer in the world and you just post videos on TikTok, you'll do well at this point in the entire world.

One thing I've been thinking about is that people ask me for advice. Twenty-two-year-olds who just got out of college will ask me for advice, and I'm like: pick something that you're genuinely passionate about, because you can't replace passion. Passion is something that you just feel, and other people can see it. You can't really replace it.

I hated that advice.

But it's true now—it's true now more than ever. It wasn't true before, because you couldn't make money being an underwater basket weaver 20 years ago. But today you can make money being an underwater basket weaver, because you'll generate an audience of 15,000 people on TikTok who will love your stuff. Then you can go live and stream yourself underwater basket weaving, and people will pay you $3 because they're like, "Oh, that's so sick."

Because of social media, social media has allowed the monetization of hobbies. I actually think that it's much better advice today than it was 20 years ago. Twenty years ago, it was horrible advice, because there were some things that you just couldn't make money on.

I mean, honestly, it had become such a meme 20 years ago, which is crazy because I graduated 20 years ago—19 years ago. My graduation speech was Matthew Fox, the star of this TV show called Lost, which—

It's probably—wait, what?

It's before your time. Yeah.

No, it's not. I know Lost, but what?

Matthew Fox, the star of Lost, went to Columbia. Columbia has this rule where, unlike Harvard, where they'll accept any graduation speaker based on his level of success, including Bill Clinton, Columbia only takes graduation speakers who went to Columbia or whose children go to Columbia.

So one day you'll be able to get up there and give a speech.

No, I don't think they'd let me into that place anymore. It's too different from what it used to be.

You'll be fine.

Yeah, I'll just throw one of those on. I got a few in my closet over there. My Hamas headbands are neatly folded and clean in the drawer next to my keffiyehs.

Basically, Matthew Fox's speech was like, "Do what you love. I went for a finance interview and I didn't like the idea of working in some office building in finance." Meanwhile, all of us were going into finance because it was 2007. He's like, "And so I decided to just be really, really ridiculously good-looking and move to LA and instantly get hired to star in movies and TV shows, and you should too. Follow your dreams."

I was just sitting there in the audience thinking to myself, "You, Matthew Fox. First of all, if I moved to LA and tried to get into movies, it probably wouldn't work out for me the way it worked out for you, because you're a stunningly handsome guy."

I guess that was the era when Jonah Hill, the fat Jonah, rose to stardom, but whatever.

Jonah, don't sell yourself short. We're both sex symbols here.

I know, I know. We're both sex symbols, but at the time, I was just this goofy college grad. I was like, "I hate you, Matthew Fox."

8. The HOOD Trade & Taking Profits Like A CTA

And then the second part of that advice that bugged me out was, at the time, I was thinking, "What is following my dream? What do I want to do?" I was like, "Well, I like getting drunk. I like going out in New York. Should I become a nightlife entrepreneur?" No. I'm going to go into finance because there's a lot of interesting stuff, and I'd like to be able to afford a rent check and not go bankrupt. I don't have anybody propping me up here.

So, yeah, that advice always effed with me. Now that you're giving it to people, I'm kind of like, "Huh, what would I think if I were listening to this podcast?"

The world has changed, right? I mean, there's going to be fewer meaningful jobs out there for a large subset of people, and you have to think about, in the world of AI, what's going to be a big value add. It's really only the sector of things where people care if a human is doing it, right?

Do you care if you're watching a TV show? You care that the actors are human. If you're getting served at a restaurant, maybe you care that the servers are human. If you're watching TikTok content, maybe you care that the content is produced by a human. If you're watching financial media, maybe you care that it's being filtered by a human. Everything else might get taken away.

I think everybody's probably going to have to be a content creator in the future in some way. They're going to have to showcase themselves, and I'm thinking 20 years down the line, but you kind of have to showcase yourself as a human. Or you're part of the elite elite that's leveraging these AI tools to push forward humanity in many ways.

You kind of need to pick your niche, but I just think of that era, that world where you find a job in finance or you find a job in law, you build a career, and you make your way to the top 1%. It's kind of dying now. You're seeing it with us in many ways, right?

Why do we host a podcast? Why am I here talking to you instead of building a hedge fund? Because I could. I could go out there right now and raise money for a hedge fund and just go run that. I've been offered capital by some people to do it, and I actively don't want to because I actually think that this is the highest ROI in the new world of AI.

Being a real human on your screens talking to you is going to be infinitely more valuable than starting a hedge fund now, at least. If I'd started it 10 years ago, that would have been a different story, but today, at least. I also tend to agree with you. The “follow your passion” advice 10 or 15 years ago was probably not the best advice, but maybe it is today. Again, I've seen a lot of people generate large audiences for themselves and make a ton of money doing the absolute weirdest shit.

Yeah, you don't actually have to be Matthew Fox anymore to have an audience. You don't need to have the backing of Paramount Pictures or whoever, or J.J. Abrams, that huge director. You can literally just have interesting ideas or an interesting thesis.

To me, one thing I would say is: do something. Don't just bet on it. Don't just ride the wave. I know there's a lot of talk in Silicon Valley about universal basic income or universal high income. Personally, having spent some time off from work, it was relatively unfulfilling professionally.

I would highly recommend that, even if you don't know exactly what you want to do, even if you've made a lot of money, even if you're sitting on this podcast, you're an employee at Anthropic trying to learn how to trade, and you just crush it and suddenly you're wealthier than you ever imagined you'd be, you don't take 1 to 2 years off. I would try to take 1 to 3 months, just as a breather if you've just come into some liquidity, and then push and push and pivot and iterate until you find something you like doing day to day.

You can learn from my mistakes. I spent way too much time not working. It was not a good idea. I definitely recommend just getting in the game and trying anything. Even if it doesn't work, meet people, pivot, and learn. You learn more from doing than from sitting and watching on the sidelines.

You learn more by doing. Don't sit on the sidelines. Get after it, guys.