Pairs of Aces Ep.35 USD Breakout, Crypto Highs, and the AI Market Bubble Risk

US interest rates, the US dollar, and Friday's upcoming data. There's lots of things going on with the dollar and with the American outlook on rates. And the dollar, I think, is unquestionably driving the forex market, as it often does. >> What most people don't understand about the global financial system is that currencies, if you break them down far enough, are derivatives of the US dollar with almost no exception. We're at a point where something's could break in Japan. And I know the AI bubble is something that we will talk about later. Uh but I think that might be a real >> AI disruption and bubble risk. AI is very much on my mind because my line of work I I encounter it a lot and it's certainly disruptive. It has great potential. It also has some risk. >> Do you really think AI could repay a trillion dollars? And it can't. It's a question. It's become a bag holding exercise. The cost of delivering it, the cost of the infrastructure and the ability to be able to monetize anywhere near that cost, the the two are just diverged. >> I assume it's going to be just like the dotcoms. We're going to see a bunch of these clowns get wiped out and then there'll be like five that run everything. It'll be credit. It'll be credit related. One of the bigger ones will have to fall and then there's panic. cryptocurrency. Is it just going to flop back into its, you know, comfort zone or is it going to bounce and make another breakout? Hello and welcome to episode 37 of Pairs of Aces. I'm Adam Lemon and with me my usual co-hosts Chris Lewis and Joseph Hamid. Hey guys. >> Hello. >> How's it going? >> Good, good. Um, please do subscribe before we get started to our YouTube channel. That way, you won't miss an episode and you'll get lots of juicy market forecasts as well. This is episode 37. Today, we are going to be talking about US interest rates, the US dollar, and Friday's upcoming data. There's lots of things going on with the dollar and with the American outlook on rates. And the dollar, I think, is unquestionably driving the forex market, as it often does. So, that's going to be, I think, interesting for traders, whether short-term or longer term. We're going to talk about crypto and some of the recent highs we've seen in Bitcoin, Ethereum, and a few of the others. Crypto as a sector, whether that's really going to keep going or whether the lack of momentum is just going to see it drop back down into its range. We also want to talk about whether the high interest rates and the uh the very mature bull market, shall we say, and all the controversy around AI might cause a bubble to burst and drag the market down. And then we're going to end with a focus on forex because there's some interesting things going on. As I mentioned, the US dollar, the euro, the Swiss Frank, Frank or Frank, I never can tell. And the dollar croner, Swedish croner are interesting pairs in focus right now. So we'll be talking about that. So without further ado, um the dollar is very much on the agenda and we've already seen you know a few days ago market momentum was moving in the direction of there's going to be two rate hikes and the chances of that were were going up in implied pricing and the dollar was rising to its recent highs. interestingly didn't break its recent high but now since yesterday's PCE data which is a kind of leading inflation indicator closely watched by the Fed came in lower than expected slightly lower than expected but it was significant and there is key data coming up on Friday and now suddenly expectations of a rate hike at the meeting this month in October uh have declined from something like almost 70% a few days ago to 35% though a rate hike is still expected in December and the dollar is strong and some forex pairs are are breaking out to long-term highs in the US dollar at least one and we'll get into that later. You know, I I thought it was I was reading quite a lot into this. I thought, well, the PC under the dollar stock market didn't really go much, you know, in the in a bullish direction. The dollar didn't really go go down. Uh I thought that was telling, but um Chris, I know you've got a different take on that. >> Well, I don't know. There's a lot of different things going on. It's all about interest rates. Money goes to where it's treated best. That's why you see certain currencies getting slapped around like the New Zealand dollar. The RBNZ, sorry, RBN zed is very doubbish in comparison to the Federal Reserve to some other central banks maybe such like the ECB. So, I think the currency markets are finally starting to differentiate between winners and losers. And the US dollar is a big winner for a lot of different reasons, not the least of which is rates, but there's also liquidity issues in certain places that people are starting to worry about. And liquidity means US dollars. You know what most people don't understand about the global financial system is that currencies if you if you break them down far enough are derivatives of the US dollar with almost no exceptions. So the value like if you look at dollar CAD you know Canada borrows for the most part in US dollars. So their currency is a representation of their economy in oil, but it's also a representation of their their current unit of measurements value against the US dollar. That's why when you hear quotes, you know, well, what's what's the looney doing? You'll depending on which direction they're going, but you'll hear it in it's always against US dollars. The yen, you know, same thing. and and the Japanese yen is a pair that I continue to watch and I continue to buy the dollar against the yen on these dips. It's kind of a running battle, but we're I think we're at a point where something's could break in Japan. And I know the AI bubble is something that we will talk about later, but I think that might be a real problem. I And in fact, I think that's a bigger problem than AI. If the if the if the entire situation in Japan gets out of control, that's going to have ramifications in all kinds of places because you run into a situation much like the great financial crisis where people start selling and they don't trust each other because I don't know how many of these you have on your books. You know, in this case, it'll be I don't know who is kneede in Japanese debt or knee knee deep in loans that are priced in other currencies and the banks in Japan may find themselves in a lot of stress. So, that's one of those, you know, where do the tentacles end type of situations. But, as things stand right now, I think the US dollar is the clear winner. I can't imagine too many other currencies I'd rather own, which luckily when I open my my wallet, I see US dollars, so it works out pretty good. But well, I also have like 210 Canadian dollars, but when when I look at this, >> spend it on our cheap coffee. >> Cheap coffee. >> I used to have a Canadian bos used to he used to sit in our office and go, "It's becoming a third world currency." >> That was back in the 90s. >> Really? >> Yeah. >> God, I can't imagine what he'd be saying now. >> Yeah. >> Yeah. Well, it'd be interesting to follow that if you if anybody ever pays attention to the dollar CAD. You know, you might be going to heaven, you might be going to hell, but the Canadian dollar is going from 125 to 75. Like that's the band it's been in since I don't know, probably Canada was was >> it's when when your boss says it, when somebody from the me a member of the public says it, it suddenly becomes a counter signal, right? Once it gets to that level where like the barber and the barista are talking about it. I don't know if your boss was in the markets, Adam, but like >> yeah, this was at Meil Lynch, so he he knew what he was talking about >> slightly different. But uh yeah, when you start getting to that point where that's what happened with Bitcoin. Bitcoin was getting so beaten up emotionally and now it's broken out. >> It made the base during the breakout. The dollar spent the US dollar, the dollar index has spent a year making the most wonderful base really. It's classic textbook base. Spent a year doing that. I can't imagine somebody looking at that chart even if you stripped away the labels, you stripped away the time frame, you stripped away the whatever asset classes, looked at the pure chart and said that's I can't imagine anybody not saying that's a base that can only go up. >> Well, when you when you look at dollar Canada dollar Canadian dollar, what I find interesting and this is a good study of markets how things do change. It wasn't that long ago that if oil went up, you shorted that pair. you bought Canadian dollars, but it, you know, and and oil of course still has an effect on the Canadian dollar, just not against the US dollar because of the massive increase in production of oil in the United States. So now currency traders, if you're smart and oil continues to scream to the upside, it's a little bit different right now because of the recent Bank of Japan interventions. But all things being equal, you buy dollar yen or a CAD dollar yen because you you don't have that oil premium that you once had in the dollar Canadian dollar. Now they move on actual economic fundamentals like everybody else and not just a commodity. Now, the Canadian dollar still, I believe, behaves the same against other currencies. It just so happens that these two economies are so intertwined and now one of them is producing 14 million barrels of oil. I get it. It's a different type of oil and that the oil goes back and forth across the the the order. Anyways, it's just a completely different pair than it was when I first started trading it. It used to be oil up, Canadian dollar up against the US dollar and vice versa. Yeah, >> it's just really easy get you start getting super experienced with these correlations and it can that experience can work against you and you start >> Aussie dollar going back going back to the US dollar in a in a sort of purer way. Um we're recording this on Thursday although it gets published on Sunday and tomorrow of course is going to be non-farm payrolls. Uh do you guys think that what happens tomorrow has any real chance of changing the outlook for a rate hike or are we are we set with you know a small ch on the balance of probabilities it's a likely one hike in December could anything happen tomorrow before we go on air that is going to change that materially do either of you think that's possible >> it's always possible it's never off the table if the number is just like so off off center off consent consensus it can the I mean NFP is the one number that can move anything especially >> yeah last month last month did surprise to the upside if I recall correctly >> yeah quite a bit actually I want to say it was like double >> yeah it and it's interesting because I think it's going to be the same situation if it comes in really hot then watch rate probabilities for a hike next month pick up if if it cools off then it'll have the opposite In fact, it's just one in the most recent because the the the numbers yesterday were PCE down a tenth from what was expected, but GDP was higher. So, that's more of a sign of a healthy economy. We'll just have to wait and see. You know, the these these jobs numbers always get revised later and you hear a lot of noise around, well, it's not a real number. They make a lot of assumptions, but it's the only number we have. If you really want if you really want to to play the currency game, >> do do statistics Canada's employment because it'll be expected to be 72,000. It'll come in like at -20 and then the next the next they're all over the place up there. I I don't know if it's because of the oil fields or what. It's like the only place I can think of that might be worse than RBLs and you know their their revisions are wild. you know, like 50,000, which you know, Canada has a tenth of the population. So, you can only read too so much into this, but it unfortunately, you know, like if you're trading the looney, it's the number you have. It it it doesn't even really matter if it's real at the moment. It just it just is what it is. So, more jobs in America brings inflation up. >> Well, we're seeing um a very high, you know, relatively long-term Treasury yield. I mean, I think it hit 5.29% 29% yesterday at some point and I'm happy about that in a way because I've been long. That's been very it's been a nice little learner. And by the way, rates futures are are one of the most reliably trending instruments you know historically that you can trend trade. So that's that's quite a nice thing to be in. But you know to us 5.29 is seeming a bit high. But of course you know you go back historically everyone says oh it's so high it's going to knock the market down. Well, you know, we're all it's been 18 19% at one point. >> Yeah, we're all old enough to remember the rates 5% 8% 10% the market was still going up. That's not >> our parents bitching about their 17% mortgage. >> Try living in the UK. That was >> Yeah, it was everyone had variable mortgages. >> Oh boy. Yeah, that was it went up to it went up to 18% at one point for about four hours before they caved in. I remember that day well. >> John Major's day. >> But yes. Yes. When I was young and uh I had no creeks in my body. There were no cracking sounds when I bent down and got up. Those were the days. >> You talk about you talk about the late 1900s. >> No, let's call it 1993. I was a spring chicken. Um probably around about the time I got my first back pain. I was like, "What's this?" I was sharing a house at college with a couple of 30-year-olds and they were like, "Oh, yeah, that happens." I'm like, "So when does it go away?" They're like, "No, no, you're going to have that now for the rest of your life." I didn't know what back. >> Can I go back? >> Can I go back to the dollar yen for one second? The reason I've become a little obsessed with the dollar yen. >> You have become very obsessed with the dollar yen. >> It's the only thing I've written about. >> No. >> First thing for a while. >> I've seen the subtext. >> It beats Walmart. >> It's because I mean double digit subscribers. I think like 12 subscribers now. Rockstar here. I should be taking selfies. >> How much are you charging? >> It's free. Honestly, it's it's therapy for me. the the Bank of Japan interventions and the the the Treasury interventions that aspect is not unique, not unprecedented, but it's rare. So when when that happens, that's when opportunity I think that's why I'm seeing these very specific lines in the sand that those interventions are creating in terms of support and resistance. And I think that's why it's such a great pair to trade because we can I can have like fantastic analysis in the S&P, Bitcoin, what have you, but the rarely do they produce these moments of reckoning where it's, you know, you get the big institutions on one side and the market on the other and that produces some really crystal clear levels and that's where trading opportunities arise. >> I want to add to that. Um, Rex has a tendency to revert to the mean, quite a strong tendency to revert to the mean. historically has has shown that especially other currencies except for the US dollar. The Japanese yen against some currencies went down by about 5% last month and when that happens more often than not it will bounce back the next month. So I think there's a pretty good statistical chance that the yen will weaken over the coming months. So I think I think just the technical stats are very much behind your approach though I know that's not really why you're doing it but I think you know it's a pullback within a trend. It's an overly strong pullback. It's central bank screwing around. It's an opportunity, like you say, I'd really second that, to be short of the yen over the coming weeks. At some point, it's going to start declining again quite strongly. And actually, when you think about it, the yen has really made an awful lot of running in the forex market lately. It's been by far, you know, along with the commodity currencies, it tends to be more interesting than just about anything else. And that's been the case for a while, although maybe that's starting to change. Like there are signs of life in in the Euro dollar and cable. Some interesting things happen. >> Dollar Swiss dollar. >> Yeah. Swedish. >> We'll talk about that later. >> It's going to sound like I'm doing this in hindsight, but I wrote this last week and the week before like those are produced like multimonth basis. This long base with a nice V in the middle like these classic technical chart patterns. I say this every podcast recording. You guys going to get bored of me saying it, but like pay attention to these daily charts, weekly charts, because it takes institutions weeks and months to get into positions. And these long-term charts reflect that. All of the noise of like high frequency trading and algorithms and stuff like that, that all gets washed down these longer term charts. It can't, you know, the longerterm charts will reveal long-term psychology and you can trade off them and you can start zooming in. you want to go intraday four hour whatever you want to do 15 minute even the long-term chart will be a super guide to like what's on the you know what the terrain looks like and I don't think I think those I've heard people say price can lie but volume can't and stuff like that and fundamentals can change everything but these long-term charts really reflect this these being institutional positionings and it's hard for those charts to lie >> that is true I I would agree with that which kind of brings me in rather elegantly to our next topic which is cryptocurrency Um, a few weeks ago we saw Bitcoin which had really been kind of down in the doldrums and a few months ago it was looking like it might get towards 50,000 and you know I think we were all kind of gloating about it a bit because we none of us are Bitcoin what's the word for it Bitcoin fanatics people who think it's going to go to the moon and we tend to mock those people and looked like finally they were going to get their comeuppants but then it bounced and we saw Bitcoin Ethereum I think Salana a couple of others hit new multi-month highs just a couple of week a week or two ago and then you know it came off Bitcoin made a bit of a double top at about 87,000 now it's consolidating and I think it's actually quite interesting just technically is it just going to flop back into its you know comfort zone or is it going to bounce and make another breakout you might say it's a bit similar to the S&P 500 which is kind of doing I mean it didn't hit a new high I think the NASDAQ 100 briefly made a record high close low close and then came back. But I I remember when I was getting this agenda ready, I said to you guys, you know, does anyone have any idea why crypto is going up? Like is there any real reason for it beyond a speculative one or an emotional one? And I've never really heard anyone, you know, tell me recently, yeah, this, you know, because of this use case and like we were talking about a couple of weeks ago and we're saying there's nothing you can do with it. It's just like this totem that people speculate on. I feel like it's just going to mimic quite a lot of what the stock market does. It's just another risk asset for people to gamble on. And I think you guys probably agree with me. >> I'll make a prediction on crypto. >> Go for it. >> If it ever did take off, it's going to be a central bank digital currency whether you want it to be or not. It's been the whole the whole the whole libertarian argument about Bitcoin, which I actually support 150% is dead. It's been taken over by corporates, by Wall Street. Bitcoin will never be what it was supposed to be. It just can't. It's it's it got too big. Somebody saw there was money to be made and that's that. I I also to me Bitcoin's a problem looking for a solution, you know, or a solution looking for a problem depending on which way you're looking at it. It just like I don't know. I don't know how you guys are. I know that if I go to Toronto, for example, I can pull out my debit card and I can go down to West Queen West, go to Flu Vogs, buy my wife a pair of flu vog shoes, $500 Canadian, I don't have to worry about figuring out what is that in US dollars. I just use my Visa debit and the bank converts it. You know, the average person isn't going to have a use for this. That's the problem. If I go to an ATM, you know, last time I was up there, I remember I went I was in the distillery district and I went to an ATM and just pulled out $400 Canadian. It did the conversion. I mean, yeah, I probably lost a couple bucks in the conversion. >> Wait, they have a whole restrictive distilleries. >> Well, it's where they used to distill rum. It's actually kind of like It's a really nice area now. It's >> It's beautiful. >> They took Yeah. and and it's actually just south of Korea Town where they shot Kim's Convenient. The there's a big Canadian show up there about a Korean immigrant family that owns >> I've been meaning to watch that. >> Yeah, it's actually pretty it's it's actually pretty funny. So, >> you have to watch as part of the citizenship test here. >> You did. You did what? >> Part of the citizen. Yeah, it should should be really. This is how a proper new Canadian family behaves. No, it's but like I can go to this to I you know I Quebec City, same thing. These are you know the Bahamas same situation. If I can do that then what the hell do I need Bitcoin for? >> Yeah, Bitcoin's been around long enough the technology has been around long enough. The connection the the connection speeds have been around long enough that if if people wanted to actually use it as a currency used as a means of exchange to buy bread or groceries or gas or whatever, they could have done it by now and they haven't. And why not? I I have my theories but the point is that they haven't. >> It's forgetting maybe about Africa. What about Africa? You know >> people in the first world in the first world we have reasonable currency. >> The problem is all the money is in the first world. >> Yeah. Yeah. Exactly. So like the big >> but that that could begin to change. I mean like I have people who who write for me and they ask to be paid in crypto and because it's just easier for them the ones not all of them some live in Africa >> they genu it's genuinely easy easy for them and they have a real need for it and it's a real solution maybe not so much the crypto but the kind of you know non-bank payment methods and processes of which by the way resilience >> but like you know like what Chris said all the money's in the first All the money is in the US, European Union, place like Canada, etc., Australia, where I can't see I can't see in the next quarter of a generation crypto being the de facto means of exchange. But cryp in my mind, crypto is a sentiment asset and it's tradable. >> Agreed. >> There are ways to trade it through a regular forex broker, regular broker, a you can do it through futures contracts. The spreads, I think, are pretty reasonable now. And I think cryp people should look at cryptos by way >> by the way you can get there are futures on the CME in all in several cryptos not just Bitcoin. >> Here here is what puts the Africa Bitcoin question in perspective. According to chat GPT searching 12 different websites I the question was if Kenya were a city because Kenya is a fairly wellstabilized decent African economy. If it were a city, what is its GDP similar to? Anybody want to guess? >> Kenya, East Africa. >> Yeah. Like what city would it compare to GDP? Richmond, Virginia. That's not even a big city. So like I I get what you're saying, but as far as like and and don't get me wrong, I've I've got some lovely neighbors from Africa, a couple different countries actually, and Africa is beautiful and Africa should be a lot richer than it is, but unfortunately it isn't. So it may serve its purpose there. That's what Cardano was supposed to be. Cardano was supposed to be this big thing in Africa, too, and it and it imploded. I think it has a purpose, but not where the real money is. And that's always going to be its weak spot. You know, it's like I can, you know, me being 5 foot seven, there's the old I'm big in Japan. you know, I mean, and I'm not, but you know, I mean, >> the thing about Bitcoin being a sentiment asset is that because it's such a sentiment asset, and it does have real market cap. It's in the hundreds of billions of dollars, it's a tradable sentiment asset, and anyone can look at a Bitcoin chart and trade it like a a real asset. The >> it does behave very technically. >> No, no. So, when I said last in the last recording, I said Bitcoin is making a base where it's it moved down sharp. It made a base and moved back up. And I said, the last time I saw that, it was during the FTX collapse. You can always mirror it. You can look at when the FTX collapse happened. It made this like bucket shape. It's a classic chart pattern. I mentioned this in last week's podcast. And you can look and you just forget about the fact it's Bitcoin. It's not spooky. It's not magic. If it makes these chart patterns, it's it's tradable. And that's what how anyone should look at it. If it presents an opportunity to trade it, trade it. Don't get spooked out. Don't get too crazy about what can it be used, can't it be used when I if I trade the dollar, US dollar, Swedish croner, I'm not going to be I'm not spending money in either of those countries as an individual. I I live in Toronto. You know, the US dollar affects me a little bit. The I'm not, you know, I'm not out there buying Swedish croner for like Swedish croner loaves of bread. Swedish loaves of bread. I'm just these are tradable assets. Remove yourself from use case scenarios. Ask yourself, does it present a tradable opportunity? I think Bitcoin will do that for the foreseeable future. And because it's such a sentiment asset, I think it produces way cleaner chart patterns as a result. >> It does do that. I do believe it it acts more like a technic based. >> Yeah. It's such a beautifully technical pair or asset, whatever you want to call it. >> Yeah. >> Yeah. >> But who's after the big question is how tall are you? Because I'm also 5 foot seven and may maybe it's time to change the name of our podcast. I've always I said it I said at the beginning we should be called the short kings podcast. I'm >> How about the big short >> the big shore? >> The 57 short kings. I am actually also 5'7. That's pretty amazing. >> Chris, I would never have thought you were 5'7. >> This is the great thing about doing a podcast. This is we sit down. People can think we're 6'2 and we'll leave it at that. >> We stand up. I mean, who knows, you know? Who knows? >> Yeah. There's lots of interesting things to talk about with that about high. >> You said something a few weeks ago. I just wanted to go back to it actually. We talked about Big Short. It just came in my head. Something I wanted to mention and I I dismissed Chris at the time. Look, I went back to look at it and it was about how wrong Michael Bur has been. And I went back and I started looking at him again. I I I marveling I don't wish him bad. I'm sure he's a great I'm marveling [snorts] at how wrong he's been about the top of the stock market continuously. There was an old joke about uh what was his name? Gartman. You remember like how you could get rich just by you could get rich just by doing the opposite his calls. >> Yeah. It's I'm I I I'm lamenting the fact I think Michael Bur is genuinely a talented and smart individual. He's he's more than just a broken clock. I know he's been written off as a broken clock. You write once or twice a day, whatever. But it's a pity he's been wrong so consistently about this. And there's a lesson in there somewhere. Don't know what that lesson is yet. >> Well, I think you get stuck into, you know, the markets evolve over time. And when I say evolve, they get more ridiculous and gamble gambling like and I think that's the part that people don't really take into account, you know, just how, you know, fundamentals matter eventually, but they used to be everything. So these guys like Gartman, Bur, Peter Schiff, they all have a point 30 years ago, but that's not how markets work now. It's all about liquidity. >> Yeah. >> Doesn't really have anything to do with anything beyond that if you really break it down. >> I I think when when Bur was right on the the credit crisis, you have these bonds these that had very specific payout periods, a very specific catalyst and dates that would that would mean they would collapse on those, you know, when they couldn't meet those obligations. The markets don't have that. >> The markets can run fumes. Well, you also have to keep in mind that the government came and bailed everybody out in 2008. So, if we would have just had a great depression, we would have a normal market at this point. But they wouldn't, you know, I don't know. Do we finally do we finally see normalized markets after some type of massive wipeout when things get out of control? Maybe, but you can't bet on that. >> The S&P 500, the Ford P ratio dipped under 20. It hasn't been there for a while. And it feels more, ironically, it feels more normal than any other market. >> I'm glad we've got to this point because this is a kind of natural segue into our next topic, which is AI disruption and bubble risk. AI is very much on my mind because my line of work, I I encounter it a lot, and it's certainly disruptive. It has great potential. It also has some risk. And it's been in the news this week because there's a lot of doom saying uh like, oh no, AI is going to kill us all. these great thinkers and experts are forecasting uh Armageddon an AIdriven Armageddon. Um and uh you know the questions being was asked of Trump you know will you collaborate with the Chinese to regulate it and he said no way and you know you still have these vast valuations of companies involved in AI and then you have this argument I really have no view on it of people saying oh it's not even profitable and it's all hype and anticipation of future returns and finally reality is going to catch up and this is all going to come tumbling down and it's going to drag everything down with it for another crash and probably that gets legs because the market has went up by about 30% over the last 16 months or so and that's pretty big rise for a year though they have been bigger. Do you guys worry about an AIdriven crash? Because I know you're you're both, you know, pretty bullish on the market as a whole, even just though the big rises, you know, um, and you you we often joke about how bare markets now last, you know, 5 minutes and then it all comes flying back up. What do you think about where AI is going to go or at least AI in the stock market? >> I assume it's going to be just like the dotcoms. We're going to see a bunch of these clowns get wiped out and then there'll be like five that run everything. I I don't see that being any different here. I mean, how many times have you been sitting at your desk and something comes across? Oh, this new a AI agent or this new thing you've got to try and I'm like, I don't even know what the hell it is. So, that's their problem. Everybody's jumping into the space at one time because a handful of players are going to run the whole thing. But I suspect you've got five, you know. I mean, we all we all searched with I can't even think of the name. I remember using Netscape Navigator, the the >> Navigator. That brings back some memories. I remember that. >> And it was it was better than the alternatives. But it doesn't matter, you know. So, I think it's the same thing. Now, when that happens, who knows? But when it does and when we see massive wipeouts, I'll be looking to buy some of them, you know? But unfortunately, there's some companies out there like Microsoft that can just eat this for a while. You know, they have the ability. Google has the ability to eat a lot of pain in the meantime. You know, if the three of us wanted to start up an AI app or an AI ecosystem, okay, maybe we could produce something better than them, but how do you compete? It's just we don't have billions and trillions back in us. And I think that's what where this goes. I think it's just going to be more of the same names. There might be one or two. You know, o open AI wasn't a thought previously, nor was anthropic, but you know, you'll be hardressed to find a lot of other ones. I think I had a >> I mean, do you think it's just No, go on his >> I I had a commentator rhetorically ask, do you really think AI could repay a trillion dollars? And it can't. It's a question. It's become a bag holding exercise. the the confusion is or the dilemma is is that AI is but the cost of delivering it the cost of the infrastructure and the ability to be able to monetize anywhere near that cost the two are just diverged they've just veered off into different universes >> and at some point it's going to be a reckoning >> which is why I think the big ones stay because they're the only ones that can get the backing >> because because because I think it can pay back a trillion dollars it's just not going to do it this year. I can pay it back in 20, you know, but you also have to be able to drive those costs through the floor. And that's where the possibilities are. It's not it's not going to be, hey, I need to make the better AI. It's can you do it cheaply? >> What most we all have AI subscriptions and they don't come anywhere near covering the cost that we lay on these companies. So >> that's that's true. I mean, you know, it it it's I think it's we're we're in the early stage where you're so glad to have it. You're not really treating it like a product. You're treating it like a miracle. I'm I'm I I sit there and I think, you know, I was on the train. I was on a long train journey home last night and I had the internet through my phone and I was asking AI to I just fed it some data and it it it gave me crunched numbers and gave me graphs. like it would have taken me hours to do it and I'm pinching myself to believe this is real and at the same time it terrifies me because I think but then you know it then suddenly shut me down saying yeah you've it didn't even was it's not my subscription it's like the companies and it was like no you've reached your file upload limit for the week and I thought yeah you know this is it like there's so much you can do with it and it's so fast but it's a question of resources and I'm paying like 10 bucks a month or something or my company's paying and it's like you say it can't remotely be covering the processing cost or I don't think it could be >> um and it's not it's nowhere near if you >> because it's a miracle it it was so useful to me is it going to be the point you know some will start going to the war the prices will go up people will learn to distinguish between them and then you know like you say I can see the scenario you're painting to me what's maybe interesting is what might trigger the start of an AIdriven crash You know what? What's going to happen? Is it going to be like one of them can't meet its commitments and starts to go broke? >> That would be it. That has to be it. >> Yeah, it'll be credit. It'll be credit related. >> Yeah. >> It'll be somebody's bonds, somebody's loans. It will start that way. It will be a bigger one. It will be a bigger one. One of the bigger ones will have to fall and then there's panic. >> But it won't be Google. you know, Google will be able to absorb whatever Microsoft will be a, you know, it could be anthropic, it could be open AI, it could be, I don't know, one of the others. It's that's that's like a mid tier, but somebody has to be the sacrificial lamb. >> Yeah. Yeah. I I I agree. I think it's it's got to be that. >> Yeah. >> I like to think one of one of the scandals, you know, could could bring one of them down. like there was some bad news about Anthropic that was can't remember what it is although it's more about they allowed themselves to be used to do XY or or zed if I can use that letter again but you know like you say it's going to be credit probably not scandal >> I I want to add I know we're talking about AI but remember the stock sorry Adam I'm cutting you off >> no no no I I I wanted you to go ahead I cut you off >> yeah sorry yeah the stock market is more than just about AI and I think the opportunities that to be had when no people aren't looking and I look at the positions that I've paid in the last 12 18 months, last five years in my trading career. It I've gotten into positions when they're not popular. They're not unpopular. People aren't like, "Oh my god, don't go there." But people just aren't paying attention to it. And I feel the same way about the stock market. There's sectors, there's individual companies that are producing real goods and services that have decent peas, have earnings growth, they're just not hot hot, but they're grinding away. And and I I I think where where there's a spotlight in the peripheries is where the opportunities are, especially for retail traders, especially when you start getting under a billion dollars or $500 million of market cap. People the the analyst coverage is a lot more careless. There's a lot more mispricing. There's a lot more overreactions to earnings myths, you know, overselling off a 1% miss in an earnings revenue or sorry, revenue projection. That's where it is. >> Interesting. >> I think for retail trade, I think that's where our edge is. >> Yeah. I I I I I totally uh I totally agree with that. We're running out of time a little bit so I wanted to get into our final topic which is as it should be the forex market. That's kind of our specialtity after all. And I'm going to start this I know we're going to talk about the Swissy and the the Swedish croner but the Euro US dollar is trading at a nearly 18month low. And that is to me the seeing Euro USD breaking out like that is very significant because it doesn't happen that often. It hasn't happened for quite a while, I don't think. And um you know, it trends quite reliably. So I'm short. I think it's interesting. I did want to point that out. You know, if you're trading forex, you might want to think about short. The euro dollar does pull back a lot. So it's usually better to get in on on the dip on the rallies once they fade. Um Joseph, you wanted to talk about the Swissy and the dollar dollar. Um Swedish croner as well. I I had this throwaway comment last week in my in the podcast and the substack as well. If you just look at the long-term basis, I think there's just all I really wanted to say is just pull up a daily chart, pull up a weekly chart, look at the bases that those two pairs have made and I I think there's there's some dip buying opportunities there. Euro USD I'm a little bit wary of it is because it's faked me out a few times. I thought this down >> it can do that especially on the short side. Actually, >> I thought it would happen in June and it just turned right round. I was lucky to get out of break even. I got in a nice point. It moved. I moved stopped to break even and I got I got stopped out. But I was so lucky to get a break even stop. I should have taken a loss on that. That was pure luck. And I Yeah, I right now it's just pointing down, but I think it went back up. I think that that's where the entries are right now. >> So, you think it will bounce back? >> I try I try I try not to trade the Euro dollar because quite frankly, it'll put you to sleep. It just doesn't move. Oh, I remember a time when it did Young Man and Whippers Snapper, >> the summer of 2010 >> or was it 2011 or 2015? I remember I can't remember the ECB did something and it plummeted from like 140 and then I remember there was this mad consolidation around about that level I think a couple of years before that and then it it came flying down. You know, it it does sometimes, but if if you back test them like it is one of the most reliably trending, in fact, the most reliably trending currency pair and it makes sense because it's so big. It's cheap, too. Very low spread. >> Yeah, >> that's why it doesn't move. It just doesn't move. That's why it's got such a low spread. I hate trading the euro dollar and it's the first thing retail traders run to because they see that spread not realizing that you know you could trade a smaller position and get the same action out of the pound yen or whatever pound like I like pound Swiss for example but you just manage your position according to the volatility of the pair and leave it at that. >> Well the euro and the Swiss frunk have traditionally been quite highly correlated although that's arguably been breaking down. I haven't looked at a chart of the two of them next to each other, but that could be an interesting exercise for someone. >> No, I I mean I I would never say never. I mean, if Europe has a a war breakout, then yes, it's going to start moving, but you know, it's just I I cover it because I'm told to cover it. I don't cover it because I traded. I mean, I I probably place like two trades a year. >> Gee, thanks, Chris. I'm so glad you told all our listeners that. Well, no, it's because it's what they want me to to analyze. But like as a trader, I would, you know, I'm I make infinitely more money trading something like the Mexican peso or, you know, the Hungarian foreign. I you there's just more movement and it trends. Like if you look if you pull up the Euro dollar, it's it's a chop vest 90% of the time. But something like the Hungarian foreign that, you know, that can >> there is no currency pair that has trended more reliably than the Euro US dollar. I can I can tell you that for a fact because I've like sideways trends. >> Well, I mean, put it this way. I mean, I'm talking about position, you know, long-term trading, not not uh day trading. It's I wouldn't [snorts] >> Yeah. And I'm more I'm more I'm more along the lines of swing trading. So, maybe that's why. I don't know. I'm I just find the euro just doesn't move enough. It's just not It's not that I can't trade it. It's just that I can make more money trading other pairs. The one thing I'd say about the euro right now is it has made a really really lovely topping pattern over the last several months. Yeah. Problem is if you're talking about the last six, eight, 10 months, it is been while you if you if you're trying to trade in that pattern, there's nothing there. But that it's had it it's had that those months to turn over. >> And I think now we're seeing the opportunity. We're seeing we're going to see the fruits of that labor. >> Yeah. But >> yeah. And it'll trend for a while and then and then wherever it settles it for three months. >> Yeah. Yeah. I like actually I like I find exotics much more Yeah. I'm like I I I like exotics a lot more truthfully or something like a pound Swiss, you know? I like something that moves. I like the I like getting paid at the end of every day. The interest rate difference between the United States and Europe, I mean there's some but not much. you know, a lot of that transaction between the the dollar and the euro are out of necessity. So, it skews the pair, you know, like so I'm looking at the pound against the Swiss Frank. It's trying to break out from a long-term downtrend from 2018. There is some business between Britain and Switzerland, but not like there is between the EU and the United States. So, it becomes more of a a pure play, I think, between the two currencies. I mean, you can you can make money in the euro, but you know, for that matter, you can make money in Euro pound. And I just don't like these pairs that hang about for long periods of time. That's just not how I trade. If you're a short-term rangebound trader, the euro is excellent. So, it just come, you know, if you're picking up 30 40 pips and when it gets those compressed areas that it's so tight, then yes, I I think it's a great pair. But you you could also say the same thing about other currencies against, you know, the dollar CAD's kind of the same way. It'll do nothing for months and then go to wherever it's going next and then it'll do nothing for months. I I just like long trending pairs that I can put my position on and come check the computer in three months because that's really how I make all my money is is through patience. And I know that's not for everybody, but it and and with the euro, it'll drive you nuts. you come back three months, it might be a 100 pips below or above where you started in one of these like 12 months. >> It pulls. There's nothing that pulls back like the Euro dollar. There's just nothing nothing like it. >> No, I agree. I agree. It does chop. But a lot of that comes down to the fact that so much money has to flow between Europe and North America. You know what I mean? Like a lot of that is business and there's a lot of hedging going on because if you are I used to work work with a guy who who worked at a rubbermaid and his two major currencies you know like the trash cans and all the other stuff. Two major currencies were the Brazilian realale and the euro and it was all about hedging. So if he got a better price on the euro he would buy euros but it had nothing to do with making money. It was paying workers in I want to say it was Germany or maybe Austria, but but and then in Brazil obviously it was the Brazilians and >> which is what currency should be about. That's what >> Yeah. Yeah. It's like hey, you know, the euro is cheap right now and we've got to pay you know 30,000 employees four times this year. Let's get some euros in here. So yeah, it's it's a different world. It's it's it's not as exotic as the dollar against South African rand. There isn't a ton of trade between the two, but there's a ton of interest rate differential most of the time, and that I like. So, there we go. >> And on that note, we have come to the end of another episode of Pairs of Aces, episode 37. In fact, >> yes, we have. >> Thank you guys. Thank you everyone for listening. We hope it's been interesting and topical and actionable. This wasn't just some kind of academic exercise. We really There's a lot going on now. So, it's an interesting market in some ways. It is. >> We'll see you in a couple more weeks. Again, I ask you to subscribe to our YouTube channel and don't miss an episode that way, plus get all our analysis >> and other videos, too. >> Every day there >> Chris does. Chris does. And on that note, >> wishing wishing you a great rest of the weekend if you're watching this on Sunday or great rest of the day if it's some other day of the week. Did you just do that? Is that >> happy 2028 if this is two years from now? Yeah. >> We've been the short kings. We're going to go home and put on some platform shoes. >> Platform shoes. >> Now I know that we're all 5 foot seven. I uh I feel so much better about myself. >> Go get my my my kiss inspired plat platform shoes. You know, [laughter] >> next week we're all going to be in platform shoes and makeup. You know, someone's going to be the star. You can be the lightning flash. >> There you go. >> We're not going to leave. Uh yeah, I do I am short of the Euro dollar as I said and I'm short generally too. So on that note, it really is goodbye. Thank you for listening and see you next time. We've been Pes I missed it.