Dialogue with a Macro Analyst: AI Drains All Liquidity from U.S. Stocks, $40K Bitcoin is the True Bottom

Compiled & Translated: Deep Tide TechFlow

Guest: Luke Groman, Founder of FFT LC, Institutional Macro Strategist

Podcast Source: Coin Stories

Original Title: The $40K Bitcoin Bottom Coming?

Broadcast Date: June 5, 2026

Key Takeaways Summary

U.S. long-term Treasury futures have depreciated by 90% against gold over the past 10 years, yet GDP is still growing—this means 90% is not enough. This is the stark warning macro strategist Luke Groman, founder of FFT LC with 30 years on Wall Street, delivers to all investors.

In this dialogue, he provides a cold and coherent analytical framework: on the surface, the S&P 500 keeps hitting new highs, but in reality, it is supported solely by seven AI stocks, while Bitcoin, the "last smoke detector of liquidity," is sounding an alarm.

If you want to know why Groman liquidated most of his Bitcoin near the top but hasn't bought back in, why he believes stocks priced in dollars will continue to rise but fall when priced in gold and Bitcoin, and why technical indicators point to Bitcoin potentially retracing to the $40,000 range, this podcast is worth your time.

Highlighted Insights Summary

Why hasn't Luke Groman bought back into Bitcoin?

• "I bought a little bit, but basically the answer is no. I haven't really bought back in. I didn't sell everything, but I sold most of it."
• "I'm watching. Bitcoin has had a pretty tough time recently."

The Divergence Mystery: Stocks at New Highs, Bitcoin Liquidity Drying Up

• "Bitcoin is the smoke detector of liquidity, probably the last one still working properly, and it's telling us something not good."
• "AI is sucking all the oxygen out of the room, sucking all the liquidity. I think that's also happening to Bitcoin."

The Illusion of Value: How Accounting Boosts AI Valuations

• "The faster you build, the less cash flow you have, but your reported earnings are higher and grow faster—yet you'll be severely cash-strapped."
• "Once construction slows, revenue growth starts to decelerate, the lagging effect of amortization catches up, and then the situation reverses."

Rising in Dollar Terms, Falling in Gold and Bitcoin Terms

• "My baseline scenario: stocks surge in dollar terms but plummet in gold and Bitcoin terms."
• "Over the past 10 years, U.S. long-term Treasury futures have fallen 90% against gold, and GDP is still growing—this shows 90% isn't enough."

China's Control Over Rare Earths

• "Tens of trillions in U.S. stock market capitalization—especially tech stocks, but not limited to them—are all built on rare earths, something extremely small from a commodity perspective."
• "China dominates this field. The reasons they can do this—first, they've been working on it for 30 years; second, they have more engineers than anyone else and fewer environmental regulations."
• "The U.S. government is now explicitly involved in this sector. And historically, when governments get involved with companies, they are rarely good stocks to hold."

The Strait of Hormuz: America's "Suez Moment"

• "My baseline scenario is, this is like a person jumping from a 100-story office building, passing the 40th floor and saying: 'Hey, this feels just like flying, it's great.' What kills you isn't the fall, it's the sudden stop."
• "When you face this level of complacency, this level of inventory drawdown... why hasn't it reopened yet? That's what keeps surprising us 'tail-end people.'"

Why Would Iran Keep the Strait of Hormuz Closed?

• "Rationing demand through price means recession. That's what it implies. And it will be accompanied by inflation—a stagflationary recession."
• "If I'm in Iran's shoes—I've been bombed, I've held on until now, I've prepared for this day for 40 years, dug all those tunnels, they haven't destroyed nearly as much as they thought."

Surge in "Non-Monetary" Gold Exports from the U.S. to China

• "For five out of the past six months, non-monetary gold has been the single largest U.S. export commodity."
• "There have been statements from many Trump supporters saying: 'Look how much Trump reduced the trade deficit!' The trade deficit has indeed shrunk, and the biggest marginal change has been—gold exports."

Building a "Receipt or No Wash" Proof-of-Work System

• "The world is moving towards a 'no ticky, no washy' system. What does that mean? It means—if the U.S. wants rare earths, bring gold, or the next shipment won't arrive; if China wants oil, bring gold, or the next shipment won't arrive."
• "Nobody trusts anyone anymore. And in that kind of world, what does it move towards? You can't rely on trusted ledgers—you need trustless settlement."

When Debt-to-GDP Hits 130%: What Happened in 58 out of 58 Cases

• "Over 150 years, 58 countries have reached 130% debt-to-GDP. To date, 58 out of 58 have defaulted—primarily through a significant period of inflation."
• "If AI isn't going to destroy jobs, then it's not the greatest thing since the internet, and it doesn't deserve these valuations. If it truly is the greatest thing and the valuations are justified, then white-collar employment is about to be slaughtered—and U.S. employment contributes half of tax revenue."

Do Technical Indicators Point to a $40,000 Bitcoin Bottom?

• "If you actually buy back in the $40,000 to $50,000 range, you become an epic legend—because you sold near the top."
• "They predict a bottom around Q3, Q4, roughly in the $40,000 range. I genuinely think we might actually see that level."

Why hasn't Luke Groman bought back into Bitcoin?

Host Natalie Brunell: Let's start with the Bitcoin question everyone cares about: Have you started buying back in, or are you waiting for Bitcoin to fall further? Because its performance in recent days has been quite weak.

Luke Groman:

It's fallen quite hard in recent days. I bought a tiny bit as a small test position, but basically the answer is: I haven't truly re-entered. I didn't sell all my holdings, but I sold most of them. Bitcoin's recent movement—especially over the past three or four days—has been quite tough.

The Divergence Mystery: Stocks at New Highs, Bitcoin Liquidity Drying Up

Host Natalie Brunell: Can you break down why this is happening? We see the stock market with such strong momentum, constantly hitting new all-time highs. This reminds me of the stock market in 2021—new highs every other day. But back then Bitcoin was also performing very well, and we were in a bull market. So what's with this divergence today?

Luke Groman:

I'm not sure, but my working hypothesis is: if you look at the underlying basis of this market rally, it's actually not healthy. The indices are indeed hitting new highs, but bluntly, it's seven stocks. I saw a chart yesterday: excluding AI-related names, the S&P 500 is actually down slightly from pre-Iran war levels. I saw another chart: if you compare U.S. MSCI to non-U.S. MSCI Emerging Markets, and remove TSMC, Samsung, and another large AI or memory-related company from the EM index—what looks like EM crushing the U.S. on the surface, but after removing those three or four AI-related companies, EM is actually getting crushed. This is the breadth issue; we've seen a lot of discussion about market breadth, and I think the market breadth corresponding to current headline index levels is extremely poor. What's ultimately happening is, AI is sucking all the oxygen out of the room, sucking all liquidity, concentrating it in one area. I think this is also happening to Bitcoin; it's a victim of this dynamic. I think Bitcoin is the smoke detector of liquidity, probably the last one still working properly, and it's telling us something not good. Meanwhile, oil is also sucking liquidity—or we should say the Trump administration, the U.S., is trying everything to suppress oil prices, mainly through verbal intervention, Western SPR releases, etc. But oil still rose. Since the war began, even at current relatively low levels, it's up about 50%. So I think oil is sucking liquidity, commodities are sucking liquidity, AI is sucking liquidity. From a liquidity perspective, anything that isn't one of these three or directly related isn't performing well, basically flat or down.

The Illusion of Value: How Accounting Boosts AI Valuations

Host Natalie Brunell: Regarding AI companies, an interesting point is: some say it's a bubble, others say it's not. Their P/E ratios aren't that high, completely different from the internet bubble era, and they believe there's still much room. But I recall you wrote about accounting treatment—something about them front-loading all demand, all investment happening now, but actual revenue generation is many years away. Those data centers need to be built and generate actual growth many years later—but all investment is being poured in now.

Luke Groman:

The issue isn't that real growth isn't happening, but more about the accounting treatment. Because the accounting treatment is that you book construction costs upfront, amortize revenue forward, and expenses are amortized over some longer period. The impact of this accounting on reported earnings is: the faster you build, the less cash flow you have, but your reported earnings are higher and grow faster. But you'll be severely cash-strapped, because you're constantly spending money, even though reported earnings are high.

You can expect to see earnings expectations revised up, stock prices responding; you can also expect them to go from financing with cash, to borrowing, to borrowing more—we're already seeing all that. Where it gets really tricky is when this construction cycle slows for any reason—whether because we can't get physical raw materials, chip supply disruptions, data center permit issues everywhere—whatever the reason, once construction slows, your revenue growth starts decelerating, and the lagging effect of amortization starts catching up, and then the situation reverses. Earnings will decelerate sharply or even start declining, but much of that decline is non-cash, and you'll see cash flow actually improve.

So the question is: how will the market treat this? Will it see "earnings decelerating but cash flow is now healthy"? On one hand, these stocks aren't expensive on valuation, suggesting it might not be a disaster. On the other hand, they have huge momentum and are sucking all liquidity. So if earnings start decelerating, why would I hold them over any other asset that had its liquidity sucked away before? Will capital start leaving this area, flowing elsewhere? My guess is more likely the latter—at that point, they'll be in a slump for a while.

But this also involves a difficult question: when will that deceleration happen? What will trigger it? Many different factors could cause it. And I think there's another complicating factor now that didn't exist in 1999: back then, we had free markets. You could say the government wasn't very involved; it was "peak America." Now the government is deeply involved. We were a unipolar hegemony then; we're not now—we're in a new great power competition. So, back then the internet bubble burst under its own weight. Today, I'd also think this rally will collapse or reverse under its own weight at some point, but it won't be left to burst on its own, because AI has been identified as a key battlefield in the great power competition. That's the tricky part—the government is very likely to intervene, take actions they deem necessary to sustain this construction boom. And that means it will continue to suck oxygen from everything else, creating more problems. Many things remind me of 1999-2000, but there are also things I think are different.

Rising in Dollar Terms, Falling in Gold and Bitcoin Terms

Host Natalie Brunell: Actually, many people say the stock market will crash soon, we're nearing a top, but it sounds like this rally might last quite a while longer. I know you're generally cautious on the stock market, very focused on gold and infrastructure. Do you think gold and Bitcoin prices could be suppressed? For Bitcoiners, I recall you said it might range between $58,000 and $72,000 for quite a while.

Luke Groman:

That was somewhat a half-joking comment, but I also see that when observing current events, it seems the U.S. is trying to push decoupling with China. So, politically, specific things need to happen: you need a weak yen, weak won to help shift capacity from China; you need a weak dollar to drive reshoring. All these should be very good for gold and Bitcoin in essence. But there are domestic forces in the U.S. that don't want to see this, because rising gold and Bitcoin would signal to the world, "You're just printing money recklessly." That would create problems on the funding side of the Treasury market, especially given the move in 10-year yields since this war began.

I think the way they'll achieve it is—expanding the derivatives market, like historically done with gold. Long-term, I don't think they can do it with Bitcoin; short-term, as long as derivatives can be amplified, they can. Someone mentioned months ago that many were selling call options—essentially passive shorting. You're meeting demand: someone wants Bitcoin exposure, but they don't buy Bitcoin itself, they buy Bitcoin call options. Without these derivatives, there's only one way to get Bitcoin exposure—buy Bitcoin. Now, you can buy derivatives, things become loose, fuzzy. Long-term, none of this matters, but short-term it works—depending on what policymakers want to manage superficially. Short-term they can manage the appearance of many things; long-term they can't.

Host Natalie Brunell: Does the stock market need to crash first for gold to start rallying? Or could a scenario happen where all assets rise together, Bitcoin rejoining the rally camp? Or will it be a seesaw, one crashes another soars?

Luke Groman:

My inference is: stocks surge in dollar terms but plummet in gold and Bitcoin terms. In that world, the 10-year Treasury yield would be around 4% to 4.5%—maybe 3.75% to 4.5%—that's what I think is the long-term baseline end-state. We've actually been in this world since 2022, though Bitcoin had a bad 2022. But if you count from when the Fed started hiking, stocks are down about 40% in gold terms.

That's the medium and long-term outlook for the current situation. When you talk reshoring, weak dollar, trade rebalancing—all these things can't happen unless the dollar weakens significantly against the yuan, which is happening; even against the yen and euro. In a free market, these assets would trade that way anyway. But we're not in a free market; the U.S. needs a weak yen because it wants to shift capacity from China; the U.S. needs a strong yuan, they want a strong yuan, and that's happening. So my medium to long-term view is: the eventual path for these things will be—gold up a lot, Bitcoin up a lot, stocks up a lot in dollar terms but down in gold and Bitcoin terms, the bond market stable. Of course, bonds have already been crushed relative to gold and Bitcoin. Over the past 10 years, U.S. long-term Treasury futures are down 90% against gold. And GDP grew over that period, which only shows, a 90% drop isn't enough.

China's Control Over Rare Earths

Host Natalie Brunell: You've also written a lot about rare earths, and China's near-monopoly on the processing chain. You've talked about where these rare earths go: EVs, radar systems, our phones, military equipment, etc. How big is this market actually? If investors agree with your view that we need a lot of these materials, and we currently lack the production and mining capacity for refining—how can they invest?

Luke Groman:

"How big is the market" is a tricky question. From a monetized market cap perspective, it's not huge; from annual import tonnage, not much either. But asking "how big is it" is a bit like an inverted Exter’s Pyramid. Tens of trillions in U.S. stock market capitalization—especially tech, but not limited, even globally—is all built on rare earths, something extremely small from a commodity perspective. So it's extremely valuable, but it's not priced that way. And the tricky part is, China dominates this field. The reasons they can: First, they've worked on it for 30 years. Second, they have more engineers than anyone else and fewer environmental regulations. At least in the early stages; maybe slightly better now in some areas, but still less regulated than the U.S. and Europe. They indeed found very good methods to do this at extremely low cost. It's not just the usual "they have reserves, they refine"; their innovation in refining machinery and processes is rarely mentioned. There are things we can do too: for example, build facilities on military bases, avoid "not in my backyard" issues in the U.S. But even then, there's a long way from start to finish: mines, refining, engineering base, educational base, and the refining machinery you might use—much comes from China, and China might not want to sell it. The final point: The U.S. government is now explicitly involved in this sector. So the question becomes: Will this still be a good business? Historically, when governments get involved with companies, they are rarely good stocks to hold. Of course, this lesson has been broken a lot in the past 12 months, whether Intel or other companies the Trump administration took stakes in performed well.

The Strait of Hormuz: America's "Suez Moment"

Host Natalie Brunell: Let's talk about the Iran war. You were one of the few analysts predicting the Strait of Hormuz would stay closed this long, and I don't think it's fully priced in. There seems to be a consensus now—we still have military power to do whatever globally. But regarding the Strait of Hormuz, it hasn't reopened. The confusion I don't understand is: why? Other countries also suffer from the closure, Iran itself should suffer too. So first, why can they keep it closed so long—it seems the whole world should be impacted because we're an interconnected economy? Also, what did you mean by "Suez moment" earlier?

Luke Groman:

Let me be clear: I was right about the Strait of Hormuz, but my call on the market reaction has been wrong so far. Around March 3rd, 6th, I said start preparing for it, it might still be closed on July 4th. People thought I was crazy. And it indeed will still be closed on July 4th. Actually, I think last night a large broker came out saying it might still be closed by Labor Day. Now, tell me, if on March 6th it was 100% certain it would still be closed on June 3rd, likely July 4th, even Labor Day—how should the market trade? Oil should be far above current WTI ~$95, and the stock market far below. Yields did rise, the 10-year U.S. Treasury yield up 50-60 bps since the war began, Japanese and Korean yields up a lot, we saw massive Treasury selling, essentially to manage current account imbalances from having to import more expensive oil, but not a disaster yet.

It's like a person jumping from a 100-story office building, passing the 40th floor and saying: "This feels just like flying, it's great." But what kills you isn't the fall, it's the sudden stop. In this context, the sudden stop is the moment you hit the bottom of the storage tanks. Exxon and Chevron, and multiple Middle East energy officials, have said, "This is reaching an extremely dangerous point." Exxon and Chevron said within the next two to three weeks... Middle Eastern authorities or officials had similar comments. It won't be evenly distributed. You can already see some supply issues in Asia. And the level of market complacency remains staggering. There was a meme the other day, the bell curve I posted—one end idiots, the other geniuses, the middle everyone, filled with analyst heads (could put my face there too, because I've said similar). But you look at the numbers and think: This doesn't make sense. There's a problem here. The views at both ends of the curve are: "Oil doesn't matter." And "The Strait of Hormuz blockade doesn't matter." Yes, so far. When you face this level of complacency, this level of inventory drawdown—I think this might be the biggest surprise for all of us in the tail of the bell curve: how much inventory could be drawn down, how fast.

Why hasn't it reopened? For me, this remains a huge surprise. Because that's precisely the question the "tail people" keep asking—because not enough good information comes from the ground. Like it took eight weeks to leak that we were almost bombed out of all Middle East bases by Iran; like our air defenses didn't work well; like two weeks ago a Congressional report revealed we lost more planes than previously disclosed. You could almost ask: what's Occam's razor? The answer is, Iran's fire control over the Persian Gulf is stronger than people want to admit. That's what's happening. There's also the insurance factor, but insurers' logic is simply because they don't like their ships getting blown up.

This ties to the U.S. "Suez moment" you mentioned. Again, when I first wrote this in early to mid-March, I wrote it with trepidation—I said this is a risk, could happen late March, early April. Later I changed to: this is now the baseline scenario. Last week, Robert Kagan—founding director of the Project for the New American Century, hawk on Iran, hawk on Israel, loves regime change wars—husband of Victoria Nuland (Obama's Assistant Secretary, also involved in Ukraine regime change, famous "f* the EU" phone call). Kagan wrote two articles within three weeks saying this is a major strategic loss for the U.S. I think he's right. He's not an outsider; he understands war, strategy. He wrote twice; he sees the U.S. will suffer a strategic loss against Iran in the Persian Gulf regardless, and he's trying to get ahead, steer the narrative to "it's all Trump's fault, not the neocons', we didn't want this war." What are you talking about? This is the neocons' ultimate fantasy for 40 years. Now you get the fight you dreamed of, the car you chased for 40 years you finally caught, and you don't know what to do with it.

So what does it mean for markets? After the British had their Suez moment in 1956, for the next 20 years, the UK's median annual inflation rate was—nearly 7% per year for 20 years. It's a loss of status in a sense. It means an acknowledgment—in the U.S. context, the U.S. defense umbrella. "Why should I pay Americans for a defense umbrella?" I think this actually gives the U.S. some real choices—look, if we no longer need to provide this umbrella, we can invest more domestically; those bases, if damaged, we can leave, let others solve it. Of course, "let others solve it" likely means China dealing with Iran, Iran maintaining control of the Strait, multi-currency energy pricing accelerating away from the dollar. That's what it looks like, and why I think it's ultimately structurally inflationary, dollar negative. Because ultimately, if you can buy energy and commodities in your own currency, you don't need to hold as many dollars in global reserves. And if you don't need to hold as many dollars, you need to hold more gold. It also means someone has to buy those U.S. Treasuries. We really can't afford 10-year yields above 4.6-4.8%. So at some point, that "someone" will be the Fed—with printed money, or proxies in the banking system, whatever way. And that will be inflationary long-term—like the Fed's balance sheet ballooning from $800B to $6T over 20 years, all along inflationary.

Why Would Iran Keep the Strait of Hormuz Closed?

Host Natalie Brunell: But doesn't keeping the Strait closed hurt Iran itself? Or are they bypassing via the railway system you mentioned earlier—through China? Why would they keep it closed?

Luke Groman:

This is a contest of who can endure more, a test of stamina. Closing the Strait is not in their interest, but you need some background: Russia is supplying them somewhat via the Caspian, China via the railway system—neither enough to cover all losses, at best a dose of morphine. On the other side of the ledger, you have a world short oil. And the oil shorts are being supported by SPR releases and global inventory draws. So you're in this painful race—inventory drawdown on one side, Iran maintaining supply through the Caspian and rail backdoor to avoid internal political and economic collapse. The common line is "once we hit tank bottom, we'll ration demand via price." I'd say, yes. The problem is those who say "ration global demand via price"—they either won't say, or should know but don't: rationing demand via price means recession. That's what it implies. And it will be accompanied by inflation—a stagflationary recession, and no Western country can handle falling income (which happens in recession) and rising rates (which happens with inflation). So if we hit tank bottom, have to ration demand, we'll be in a bind: Western countries' interest expense goes the wrong way, and federal revenue—Western government revenue—also goes the wrong way, the two lines blow out. In the U.S., at least for now, similar in the U.K., your welfare plus interest expense is near or just about 100% of your fiscal revenue. So your revenue falls, your interest expense rises, and things get very tricky. That's the nature of the painful race between the two sides.

If I'm in Iran's shoes—I've been bombed, I've held on until now, I've prepared for this day for 40 years, dug all those tunnels, they haven't destroyed nearly as much as they thought. Now I have a chance to negotiate—won't be called a "toll," call it an "environmental fee." Look, Iran suddenly cares about the environment, who would've thought?

Host Natalie Brunell: I saw some reports saying they set up some Bitcoin payment system. Is that true?

Luke Groman:

I saw those reports, but not much follow-up. I saw Treasury Secretary Bessent still boasting last weekend about confiscating all their crypto assets.

Host Natalie Brunell: Theoretically they can't seize Bitcoin unless it's on an exchange.

Luke Groman:

If they were doing any Bitcoin operations of scale, I don't think Bitcoin would still be at ~$68,000—it'd be $168,000. So who knows? The other area we've seen massive growth is CIPS—China's Cross-border Interbank Payment System. Transaction volumes exploded since March, indicating lots of transactions going through CIPS in yuan. And that, in fact, implies gold's involvement.

Surge in "Non-Monetary" Gold Exports from the U.S. to China

Host Natalie Brunell: Before we wrap up, glad you mentioned gold again. If gold is used to settle trade, why call it "non-monetary gold"? Doesn't that mean it's monetary? But anyway, can you talk about how we're seeing us ship our gold out, presumably ultimately to China—whether via Switzerland or London?

Luke Groman:

In Q1 2025—when Trump was re-elected—we imported a lot of gold, then gold prices rose a bit. Then from around last October—actually around the U.S.-China Busan meeting—for five out of the past six months, non-monetary gold has been the single largest U.S. export commodity. Bigger than aircraft, bigger than pharmaceutical preparations. The one month it wasn't largest, it was second—after pharmaceutical preparations. One view says: "We're just shipping back gold we imported." Some of that gold was indeed imported due to tariff issues. But I don't think all of it, because gold is a political metal: if you're these players, you call the White House asking, "Are you imposing tariffs?" Even if you don't believe them, you wouldn't ship all that gold from London, Switzerland. Why? And anyway, the tariff issue was resolved in July. But exports only really started massively in October—a slight uptick in Q2, then down, then really spiked in Q4 and beyond. So, effectively, this is net settling trade. We can track where it goes—from here mainly to Switzerland, a bit to China; and what goes to Switzerland and the U.K., their largest export destination is China or Hong Kong.

So, however we want to argue about the nature of Q1 gold inflows, the fact is—it went to China, and at the time we had a huge trade deficit with China, this gold actually reduced our trade deficit, by the way. There have been statements from many Trump supporters: "Look how much Trump reduced the trade deficit!" The trade deficit has indeed shrunk, and the biggest marginal change has been—gold exports. That's not necessarily a problem. This is actually what needs to happen. It just needs to happen at a higher gold price, otherwise we'll run out of gold. But theoretically, Bessent is a smart guy. If the world sells him gold at $4,500, and he has some deal with China—$4,500 gold buys $6,000 worth of rare earths, that's a good deal. Long-term, prices will adjust higher, but similar operations—there are ways to manage. So why "non-monetary gold"? Non-monetary gold must be declared—I think it's an IMF trade reporting requirement. Monetary gold doesn't need declaration. If you're a central bank, you buy non-monetary gold, reclassify it as monetary gold, and it never needs to appear on any report. So it's entirely possible: non-monetary gold has no direct relation to any sovereign, purely Chinese gold demand being met—yet still effectively net settling the U.S. trade deficit, or at least net reducing the deficit with China. Via gold. And it's very possible we've shipped a lot of monetary gold to China we don't know about, no one knows, it's not recorded.

Building a "Receipt or No Wash" Proof-of-Work System

Host Natalie Brunell: Honestly, who to trust is unclear. Data you get from the People's Bank of China, how do you trust it's accurate? Why wouldn't a hostile country say "yes we have this" but how do we know the truth?

Luke Groman:

Where does all this ultimately lead? I think, in today's world, nobody trusts anyone anymore. And in that kind of world, what does it move towards? This phrase is a bit outdated, politically incorrect perhaps—but I'm from Cleveland, so be blunt. My grandfather used to say: "no ticky, no washy," meaning no receipt, no laundry. The world is moving towards a "no ticky, no washy" system. What does that mean? It means—if the U.S. wants rare earths, bring gold, or the next shipment won't arrive; if China wants oil, bring gold, or the next shipment won't arrive. You can see China has been building a system perfect for this for years.

In every major global gold trading hub, there is an offshore yuan clearing bank. London has one, Switzerland has one, Dubai has one, Singapore has one, Hong Kong has one, Shanghai has one. What does that mean? If you happen to have a trade surplus with China—few countries do, except occasional oil exporters, occasionally South Korea—you get some net yuan position. Other countries don't get net yuan positions. You have deficits with China, they hold your currency, you don't hold theirs. But if you do get yuan, what do you do with it? China makes many good things, you can buy good BYD cars, Huawei equipment, etc. If you have leftover yuan and don't want to buy anything else from them—you buy gold. Then you take it from that gold hub, put it in your own vault.

Again, "no ticky, no washy"—no trusted counterparty, no proof needed. That's the old-school "proof of work." It's not efficient, it's not instantaneous, but it's real proof of work—because people have to load those bars onto trucks, hire security, ship to the airport, get plane loads, right? So, when you see news two weeks ago: China's largest courier—equivalent to China's FedEx—is opening a vault at Hong Kong airport that can store 2,000 tons of gold. Would China go for "paper gold," "credit gold"—like the West? Why would their largest courier need a vault? That means... And it's at an airport, by the way, a large vault next to an airport. Why do they need this? They're setting up a global "no ticky, no washy" system because nobody trusts anyone.

I think gold, Bitcoin can ultimately play this role. But I think there are real issues: foreign governments have concerns about exchange backdoors, etc. But ultimately, 70-year-old Putin, 70-year-old Xi, 70-year-old Polish president—will they trust Bitcoin more? Or say: "Bring me the gold, put it right here, next to all my tanks and missiles"? They choose the latter. So I agree, currently no trust, but I think people will still trust things in the other party's vault. In a way, the world moves towards—"Okay, I don't trust you. I won't accept your IOU for settlement. For settlement, I accept your paper, but I immediately convert it to something that holds value, not your promises. Give me gold, or give me something I can actually use." I think that's where this is all heading.

When Debt-to-GDP Hits 130%: What Happened in 58 out of 58 Cases

Host Natalie Brunell: I feel every interview I see of you carries a sense of "doom." Last time we spoke, you said "I'm a bit nervous about the direction of things." I know you paid off all debt, etc. So I feel people have put you in the "doomer" box. Do you see yourself in that box?

Luke Groman:

There's a quote by William Arthur Ward (I think it's him): The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails. I think I'm a realist. We have 150 years of history. Over 150 years, 58 countries reached 130% debt-to-GDP. And as of about three years ago—57 out of those 58 ultimately defaulted, most through a significant period of inflation. I've been in this business 30 years, I can count on one hand—how many times I've faced historical odds of "57 out of 58." And by the way, the only exception three or four years ago was Japan; now Japan is in inflation, and its debt is effectively collapsing. Japanese bond market value is down massively, inflation picking up, rates rising, of course stocks soaring, but their stocks in gold terms are down about 20% over 5 years.

The U.S. crossed the 130% line in summer 2020. Since then, U.S. long-term Treasuries are down about 60% against gold. Another area I often get labeled "doomer": AI. On AI, there's this group of big tech people who on one hand tell you: this is the most revolutionary technology in history, bigger than the internet. And valuations match that. I mean valuations relative to total U.S. market cap, they've gone to the moon. Yet these same people also tell you: don't worry, AI won't impact jobs. Only one of these can be true. Over a long enough time, both can be true. But for the business case of AI—to justify valuations relative to its share of total market cap—they must destroy jobs. They must obliterate white-collar employment; that's the only way the math works.

You look at this and ask: they won't destroy jobs? Then they aren't the greatest thing since the internet and don't deserve these valuations. And once that becomes clear, it creates problems in private credit, etc., for everyone lending to these projects. And if they truly are the greatest thing, valuations justified, then white-collar employment is about to be slaughtered, and at this juncture, U.S. employment contributes half of tax revenue, and we don't even cover tax revenue, or tax revenue barely covers welfare plus interest. Which is it? Every time I ask these tech leaders this question, dead silence. David Sacks was on X the other day saying "AI hasn't caused unemployment." We only created 95,000 jobs last month. 95,000—like Ben Stiller in Zoolander, "It's job growth for ants." 95,000 jobs in a country of 350 million. When I grew up, a good month was 200k, 300k new jobs. That was 20-30 years ago, population 20-30% smaller. So I just look at this realistically and ask: long-term, we can have prosperous AI and prosperous employment. But between now and then, with our debt situation, the math doesn't work, that's the fact. They know it too, they're too smart not to. So why do they say otherwise? Think about it: if they said what I'm saying, what would politicians do? We're starting to see, did you see what Bernie Sanders said the other day? "I think all Americans should share in the AI companies' stock because it's taking their jobs." So you see Andreessen, Sacks come out denying—"there won't be any job losses. These aren't the job losses you're looking for. AI won't take your jobs. Everything will be great." So, you call me a doomer? I don't think it's doom, I think it's realism.

Do Technical Indicators Point to a $40,000 Bitcoin Bottom?

Host Natalie Brunell: I think the problem is always timing, that's the hardest part, the time dimension is the biggest challenge. I'm also called a "doomer" now because I don't think Bitcoin has bottomed. Northstar Bad Charts, they predict a bottom around Q3, Q4 roughly in the $40,000 range, I genuinely think we might actually see that level.

Luke Groman:

Yeah, they're very good technically. If you actually buy back in the $40,000 to $50,000 range, you become an epic legend—because you sold near the top.