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Friday was a viewer-questions show, and we had a pile of them. Before we got to any, I asked Doug Casey about Jensen Huang, who has just been pushed out as CEO of Nvidia. That turned into a conversation about the AI bubble, and Doug didn’t hedge.
Doug: “This is not just a bubble, it’s a super bubble. It’s the biggest financial bubble in world history.”
It looks like a coup
The story so far: anonymous sources told The New York Times that Jensen had been in contact with a Chinese woman suspected of spying. The board backed him at first. Then came an allegation of an extramarital affair, and he was out. Doug says there’s now a third allegation on top of that, and he wants to know who is ratting him out, and why.
What strikes me is that the administration apparently knew about the contact for some time and never gave him the usual defensive briefing. If he had handed over anything, he’d be under indictment, and this would be a Justice Department matter, not a board matter. To me it looks like a coup. Jensen backed open-source AI. My theory is that the people behind this want AI closed source, so the rest of us end up paying rent to OpenAI and Anthropic forever.
Doug’s point was that Jensen had bigger problems anyway. Nvidia has been lending money to companies so they can buy its chips, and the whole data-center business looks unstable to him.
“Not just a bubble”
Anthropic is due to go public in a week or so, and Doug has heard it’s six times oversubscribed. That surprised both of us. He says seven founders each plan to sell about $250 million of stock in the offering and keep the rest.
Doug: “So I guess after you cash in for $250 million, I mean, if you had to write off the rest of your shares, who really cares?”
We used to think the SpaceX IPO might mark the top. Maybe it’s this one. Doug’s argument is the one he makes every time trillions rush into one area at once: the mistakes and misallocations pile up, and AI and data centers are related but not the same thing.
Capitalism doesn’t exist
The first viewer question asked whether the unrest in France is socialism out of control or capitalism out of control. Doug says the question can’t be answered as asked.
Doug: “We don’t have capitalism anywhere in the world today. What passes for capitalism is technically fascism.”
He means the economic definition, the melding of the state and corporations, a word Mussolini coined. I’d put France’s protests down to a welfare state whose budgets are blown, now cutting just to keep its bond market from blowing up. That’s socialism out of control. Doug has called Europe a sinking ship for decades, with France the worst player in it.
Is there any safe place to keep anything?
A viewer asked whether Charles Schwab’s new crypto service is a safe place to hold crypto. Binance just lost nearly $7 billion, reportedly to North Korea, and in the last three months a couple of hardware wallets, supposedly the safe option, have turned out to be compromised. Doug took it wider.
Doug: “Actually, you become nervous about how or where to hold any asset. This is a problem with civilization breaking down because when society is based on trust and common values, yeah, you can trust your bank, you can trust a lot of things.”
Gold in your own hands can be taken at gunpoint, and the government can take your house. His conclusion was that maybe all you really own is your experiences and the knowledge in your head. Banking abroad doesn’t fix it either. Every country runs fractional-reserve banks with a central bank and an unbacked currency, so there’s no country without one to move to. Doug told the story of a Bahamian whose family has been on the islands for hundreds of years, watching the OECD and the IMF flush its financial industry down the toilet. My version: it’s the Borg, join or die.
Do we owe the left an apology?
One viewer wrote that he used to call it Trump Derangement Syndrome, and now thinks the Trump haters were right. Doug said you have to have more respect for the Democrats, because they at least do what they say, while the Republicans pretend to be free-market and are Democrat-lite. He wrote early on, in his book Totally Incorrect, that Trump had no philosophical or ethical center.
Doug: “He’s a genuine fabulist where he says things off the top of his head and he thinks they’re true because he’s such a megalomaniac.”
I learned a new word this week: mythomaniac, someone who lies when he doesn’t need to. In his 60 Minutes interview he said immigration is where he can work with the Democrats. This is the build-the-wall guy. I expect more Democratic legislation to pass in the next two years than in all of Biden’s term. Doug thinks I’m right, because that’s how Trump saves his skin.
The money questions
A viewer has a large amount of Canadian dollars in cash and asked whether to hold US dollars for the next year instead. Doug would take the US dollar. Canada is circling the drain faster, and the US dollar is the best-looking horse on the way to the slaughterhouse. I’d add that even cash shouldn’t sit idle. Short-term Treasuries pay around 4%, and Doug says the 10-year pays over 5%, which roughly keeps up with inflation before taxes.
On a US gold revaluation, Doug doesn’t think it would do anything for platinum, which has never been money. Silver, as a subsidiary money, is the open question. Platinum is a supply story if anything: South Africa and Russia produce most of it, and Doug sees South Africa in an accelerating collapse. On the demand side, the US makes about the same number of cars as it did 15 years ago.
Also in this episode
Whether the Republicans wanted to lose the midterms, the market as a casino of one-day options on Robinhood, emotional intelligence, a ban on US diesel exports and who in South America is most exposed (Chile, Ecuador and Peru; Uruguay refines its own), the languages Doug speaks, whether Canada should join the EU, residency in Panama and how the welcome for gringos there has cooled, trading on the Mexican stock market, where a European civil war might start, and the best airlines and hotels. Doug also explains why he’d rather sleep in a rail yard than a Motel 6.
We’re back next week with more.
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This post is from Doug Casey’s Crisis Investing. Hear Doug on our podcast, Doug Casey’s Take.
