Veteran Investor: 3 assets to BUY for the next decade

I think those people are dumb.

Well, the stock market says they're dumb because all that stuff keeps happening. The stock market keeps going higher. So, they're wrong. Like, the market is the referee. And there was two different opinions. One opinion was that interest rates going higher would mean the stock market would go lower. That's not right. Why do I know that? Because the market is the referee. Market went higher. Oil prices are higher, stock market's not supposed to go higher, right? Wrong. Stock market went higher. So, you just look at it like, forget what my opinion is, forget what their opinion, like the market is ultimately the one who's going to tell you what the answer is. And if you were an observer of the market, dare I say a student of the market, the market is going higher. So, regardless of what your economics textbook said, what your professor told you, what your academic papers, what your theories, none of that matters because the market is going higher. And so, obviously, something has changed. Now, some people will say like, "Well, the market's wrong." And they literally will be arrogant enough to believe that they're going to somehow come and find, you know, some mispricing in the market. They're going to make a boatload of money.

But most people are intelligent. They're just going to say to themselves, well, maybe something I thought about the market is not true or something has changed. I need to go and learn more about this. I need to investigate this. I need to approach it from the perspective as a humble student who is going to be taught. And the market is the teacher. So if you do that, I think that you'll end up finding that a lot of things have changed in the market that make it very different than 20 years ago.

No, I think the AI story is a piece, but it's actually a pretty small piece of what's going on right now. Go back five years. I mean, the beauty of being dumb enough to put your opinions on the internet is they're on the internet. You can look at for years. I have been telling everyone the economic data is wrong. The Fed's wrong. The BLS is wrong. These people can't count. It is hilarious. They tell you that inflation is X and you're like, "Cool. How'd you count that?" And they explain it to you and you literally want to bash your head against the wall because you're like, "These people literally don't know how to count." And so that is true of the jobs report. How many times do you have to come out with a jobs report and then a year later be like, "Oh, sorry. We overcounted by a million." Like what? So all of the economic data that people have been looking at, it's just one big scam. Bad data in leads to bad decision out. And if the data is wrong, which I have been saying for years and years and years, then obviously you're going to get people making the wrong conclusion.

So, fast forward to today. Now, everyone's like, "Well, I don't understand. Do I think the oil price is wrong?" No, the oil price is made by a market. That is a correct reading. Great. Do I think the interest rate is wrong? 100%. I think that the Fed could not tell you what the actual inflation rate is. So if they don't know what the inflation rate is then they have to sit and they have to go come up with here is the interest rate of which we want to set the price of money. How many people experience that actual interest rate? Not everybody. The interest rate then what do people do? They come out and they say well here's what the interest rate is set at and I'm going to be over or under that. So in reality it's a different rate that you're actually paying. Then everyone experiences it differently. And so one of the things that I've been talking about now for years, personal inflation rate. If the government comes out and says inflation is 3.5%, great. That doesn't mean 3.5% for me. I live in New York City. Everything's expensive. Way more expensive than if I lived in, you know, somewhere in Iowa. No disrespect to the people in Iowa, but like I'm jealous of them. They got way lower cost of living. And so is their inflation higher or lower? Well, it depends on what is the mix of goods and services that they consume. And so that person that's sitting in Iowa has a very different inflation rate than me sitting in the middle of Manhattan. But then you go and you look at in Iowa, the guy who lives in downtown Iowa, you know, no-name town has a different inflation rate than the farmer who's dealing with fertilizer prices and gas prices and all this stuff spiking on him. And so it just comes back to this idea of what people are ultimately trying to do is they are trying to make these very kind of broadstroke analysis of an economy. And frankly, the people who are the most confident that they're smart end up being the most wrong. So the Bears, they're like perpetually just wrong. But even more importantly is go look at the academics. How many of the academics have been correct over the last, I don't know, 5 years or so. Almost none of them. I don't think that there's a single academic that's navigated this correctly. By the way, why is that not a big deal? Because the people who are paid millions of dollars a year to navigate haven't even been that good at it. So you look at this like this is a very complex dynamic environment where everything is changing, the data is changing. So the question then becomes, what should you do? Well, many of the best investors in the world, they opt out. They don't play the game. They're not trying to figure out what's going to happen to the stock market in the next 3 weeks. They simply say, "I want to buy great companies that I can hold for a long period of time." Or they buy hard assets and they say, "The government's never going to stop printing money. I'm just going to hold these assets because I know they're going to be inflated because of the government printing." Like the best investors realize the game everyone else is playing is a bad game. It's unwinnable. I'm going to go play a game where I either have an edge or I believe something about the world that other people aren't disciplined enough to believe. Why is Warren Buffett rich? Because he's disciplined. Why are bitcoiners and gold holders and land holders rich? Because they're disciplined. They don't go chase the latest sexiest thing. And so if you bring this back to the AI story, what percentage of people in America use AI? It's not a 0%, but it's not like we have 80% of people using AI yet. What percentage of people pay for AI? I believe the latest number is 2%. Why is that number crazy? Cuz 5% of Americans say that they spend money on sports gambling. So more people in America right now, two and a half times more people spend money on sports gambling than on AI. And you're telling me AI is the say all be all about the economy? I think it's a big part. I think it has a big impact, but I would argue that there's more GDP coming from consumers like the consumer contribution to GDP on sports betting. More dollars are going there when you look at the actual credit card data. So, it comes back to I am as bullish on AI as anybody. But I think that AI all of a sudden became a safe way to talk about this taboo thing which is no, the economic data has been wrong and will continue to be wrong because the people who are counting don't know how to count and the systems that they have put in place are antiquated. So AI comes along and everyone's like, "Oh, this system, it didn't have AI in it." Like, "No, you guys just didn't know how to count inflation for the last two decades." And that's why we got $40 trillion in debt. We got a trillion dollar annual expense. And on top of all of that, they just keep printing money because they're just looking at bad data. And so, hey, let them do what they're going to do. I'm not here to complain about it. I'm not going to change their mind. Just buy the assets that they're going to make go up in price and chill.

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Well, I think most people they believe that productive assets drive returns. That is demonstrably false. The stock market, almost all of the gains in the stock market are driven by money printing. How do I know that? The S&P over the last five years is up about 70%. Bitcoin, gold, and land is up 170%. When you denominate the stock market in gold at various points, including over the last 25 years, gold is either flat to outperforming the stock market depending on what days you pick. So when you think about that for like, wait a minute, how is it that these productive assets that are supposed to be so much better than these non-productive assets, why is it that they have the same or worse performance? It's because it's all money printing. So, your real rate of return is not what you're being sold. And until people realize that, then they're going to go chase all this stuff. Now, guess what? I've made a lot of money investing in private companies, even in public companies. I'm not saying you can't make money. I'm saying on an overall basis, if you're just buying the S&P index, this great return you think you're getting, you see, oh, I got 12% last year. You didn't get 12%. So, you got something way worse than that. And you go and you look at various assets and you say to yourself, what do I want to hold for the next 10 years? Do you think let's let's play a game. Do you think Microsoft's going to be around in 10 years?

Okay. You think they're going to be around in 20 years?

Maybe. I don't know. I literally have no clue. I think that they're doing a pretty good job. Seems like it's a good business. Seems like it's growing. Seems like they've done a great job positioning themselves for the AI, you know, industry, etc. Right, dude. Do you see what is coming out of the labs? Do you see how fast this stuff is coming? What if all of a sudden we just don't need to use Microsoft Excel anymore because the agents just do all the work for us? Is that going to happen tomorrow or not? I have no clue. So, if you just go back like remember ChatGPT came out three years ago. Fast forward to now, it's a whole different world. We have new models coming out, new intelligence. Take for example the recent data, Menlo or Menlo Ventures came out with a study. It had frontier models take an accounting test, do a bunch of accounting examples. It beat 12 different mid-level to senior accountants at doing it. But not just the accountants scored, if I remember the data correctly, the accountants scored a 37% on the tasks and it took them like five times as long. The frontier model scored 100%. And it took them like less than 10 minutes on each task. So you look at that and you say to yourself, are accountants going to go away? Absolutely not. But accountants aren't going to be doing these individual tasks that frankly were just this like rote memorization or was very kind of minute detail. And people are like, what are you talking about? There's no way. Okay, let's go back in time. A hundred years ago, there used to be buildings with multiple floors full of bookkeepers who were writing with feathers and ink numbers and closing the books at the end of each month or quarter. And they were keeping track of revenue and expenses and net income and all these things, but they would do it in physical paper. And it took armies of people to do this for these big companies. All of those people, their jobs got automated away. They got freed up to go do more productive things and it got boiled down into a piece of software called Excel or called Stripe. There's nobody who's like, "Woe is the accountants. We really screwed over the accountants." I don't know the exact data. My guess is that there's probably more accountants or more people working in the finance departments than there was back then because we were able to empower all of these businesses to now allocate their resources, keep track of revenue and expenses and net profit, etc. And then that led to an explosion of more companies which meant that there was more people that we needed to employ not less. So you go back to is Microsoft going to be around? I think so. But I don't know 100% positive that the land, the dirt's going to be around, gold's going to be around, Bitcoin's going to be around. These hard assets that are built on resilience and we're entering a world where there's incredible uncertainty and there's this dynamic changing environment. So Microsoft, I think people have kind of a very specific connotation about. Let me go to a different business, Netflix. You think Netflix is going to be around 20 years?

We don't know. There's people who think Netflix will be a zero 5 years from now. I'm not saying they're right. Right. But like that's a company that I think people are like, "Okay, that's a little bit more in the gray area over 20 years." So you just go through the stock market and you say, "How many of these companies are we for sure positive are going to be here in 20 years?" And how many of them could be disrupted? Because with Netflix, well, what happens if all of a sudden AI content creation comes along? Well, Netflix could embrace it. They could say, "Hey, we're going to put this up, right?" But what if all of a sudden content becomes personalized and now it's choose your own adventure in the content. If now I'm watching the movie and the television recognizes I'm watching with my child and so it plays certain scenes because the kid is there versus if I watched it without the kid I'd get different scenes. Could Netflix embrace that? Is that different? How does that work? All of these things become very different, right? And so then you start thinking, well, what about the viewing experience? Well, what if all of a sudden now I watch Netflix when I'm in my car because my car drives itself? How does that experience change? What if the screen size? You start to play this game, right? So, the reason I say all this is we don't know where the future is going. What I try to do is I try to barbell it. I want to own things that I have a high degree of confidence, are very resilient, and can withstand all the change, all the uncertainty. And then I basically want to invest in things that are trying to ride the wave of disruption, use new technology and create something from scratch that ends up being very valuable in the future. So most of my portfolio is Bitcoin or similar types of assets and private investments in early stage startups. And I think putting those two things together, one is full of uncertainty, one to me is very certain. One is illiquid, small, highly volatile. The other one has decreasing volatility, very liquid, and I think now that it's become very understood, is only going to be permeating more and more into portfolios. You put those two things together, it's kind of like portfolio theory, right? If you put a bunch of risky assets that are non-correlated or volatile assets that are non-correlated together, shouldn't that increase the Sharpe ratio, decrease the risk, and lead to a higher return? That's how I think about investing personally as well.

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You say it better than me. I should just let you answer that question.

Not long enough, Phil. Not long enough.

Well, I think that there's a couple of aspects that are happening. One, if you look at the short term there was a capital rotation from people who were excited about Bitcoin and cryptocurrencies into AI and capital chases returns, right? And so if all of a sudden there's all this value being created every single day, Bitcoin or crypto investors woke up and they were tempted. They said this thing's not going anywhere, it's going sideways to down, all my friends are getting rich buying XYZ company, screw it, I'm going to sell some of this and go over here. And so you got this rotation. The best place to see where this happened was in Korea. I remember talking to somebody from Korea. They were like, "Dude, crypto, that's old news. We gambling on the AI stocks now, right?" And so they like Korea is actually very interesting because it is a dichotomy or kind of like a magnified example of what's actually happening globally. They're just a little bit more public about it. So capital rotation in the short term. I tweeted back, I think it was in May or June. I said, "It is going to be glorious when the AI profits rotate back into Bitcoin. You should go read the comments." People respond at times like you're an idiot. Bitcoin's over. AI is great, blah blah blah, all this stuff, whatever. Well, guess what happened recently? Bitcoin all of a sudden went from down significantly on the year to now it's basically back to flat. Why did that happen? It jumped from $65 to $85,000. AI trades started to cool off a little bit. All the easy money, as my friend Jordi Visser would say, started kind of disappear. It became a little bit harder. Now I got to figure out where are these memory names actually sustainable? How much upside is left? How do I allocate across power, energy, you know, data centers, memory, chip, like all these things? Or hey, this Bitcoin thing's out of favor. What if I front run that? Isn't that going to come back at some point? So you get some capital rotation stuff you got to pay attention to.

Second thing that's happening is with the rise of AI agents now all of a sudden you're actually increasing the addressable market for a lot of technologies. So I would argue that payment companies who are able to embrace AI payments, they're going to do very well because now you just literally have more transactions, more quote unquote users even though they're digital users versus human. Well, same thing is happening with Bitcoin and crypto. So, Bitcoin, stable coins, many of these products, AI agents need digital money. And so, now you're expanding the total addressable market. In Bitcoin's case in particular, you are not increasing the supply. And so, Bitcoin is one of the only assets in the world where when demand increases, supply stays constant. And so, guess what has to happen? Price has to go up in order to accommodate everybody. And so, I think that it will start very slowly, but it'll be one of these things, you know, slowly then suddenly. And you're seeing it like I don't know, we have a public company, inside that public company there are more agents that work at that company than humans. I don't think we're unique. I think that's most companies. And so right now for the most part I don't think a lot of the agents are doing like financial transactions. They're not necessarily buying stuff. That's not like hey, we give it, you know, some sort of credit card or something. But like that's going to change. And so if that is kind of the path here, then the intersection of AI and crypto or AI and Bitcoin is you have an acceleration. Like we're in AI time now. Okay. Well, you need assets that can keep up. Today at 4:00, what's going to happen? Market's going to shut today at 2 o'clock. What's going to happen? The bank is going to put down their little window and say, "No more wires till tomorrow." 2:00. The agents, they working. Let's go. Let's move the money. Right? They don't got time for two o'clock. They don't even know what two o'clock is. So that's the change that's going to happen is you're going to get a move in technology because the actual demand from the market is going to force it.

Well, I think that gold is ultimately just a hedge on government printing. And frankly, I don't have tons of gold, right? It's not like I'm like some huge gold bug, but I just think that Bitcoin, gold, and land, and land in particular, like productive land, I think is a great way to kind of blend the volatility. Bitcoin is much more volatile than gold or land. And so there are years where it's amazing and then there are years where it might drop 40, 50%. And so that used to be 85%, so it's only 40 or 50%, you know, kind of like a drawdown for ants. But you still want to be able to have some things in there that kind of blend that over time. You want to have, you know, some degree of non-correlation. And so I think that that bucket together is pretty interesting for folks.