Despite all that, our tentacles are still very much wrapped around the globe.

Yeah.

I mean, our clients have benefited in nu- in innumerable ways from an asset allocation approach that more or less since 2008 and, uh, March 2009, has been overweight the, the dollar, uh, US credit, US equities, US real estate, US infrastructure, just across the board.

And, you know, there've been blips in between, but, um, uh, I think there's...

People are always seem to be looking for opportunities to, say, take profits and, you know, so far that hasn't been the thing to do.

Um, when, when you run the numbers, being long the US has been d- enormously profitable.

The only thing that I've ever seen that matches the profitability of being long the US over the last 15 to 18 years was being underweight Japan- When it crumbled from being 65% of global equities in 1989.

Yeah

I'm wondering where you think power demand growth is actually headed.

You know, I'm...

I hate hockey stickers, right? I've always hated hockey stick charts everywhere I've seen them, because they rarely end up looking like that.

Sometimes they do.

And, and solar adoption has actually been even more accelerated than the hockey stick, which we can talk about.

So sometimes the hockey stick approach is too pessimistic.

But if you go back, electricity demand rose at, like 2, 2.5% a year from 1950 to around the year 2000.

[laughs]

Like, what is something that surprised you? Are there any storylines that we haven't talked about now that you think are really important to address?

Well, you know, at, at the, again, at the risk of getting some of your listeners upset, um, we, we had a section on SMRs, uh, small modular reactors, and-I, I think that to me simple, the premise is you can definitely build them.

There's...

Some of them are using the same light water, boiling water reactor technology.

Others use different technology in terms of gas cooling and things like that.

The, th- small modular reactors can be built.

The big debate that matters now is...

goal.To grossly oversimplify this, if we were to look back and compare the impact of decarbonization versus security as the primary force driving the energy transition, which of those do you think wins out?

Um, what do you think, Michael? Is, is he right? Are you concerned like he is? What are your reactions?

It's hard to react to somebody that doesn't have a long-term track record of, "This is when I bought, this is when I sold, this is what I bought, this is what I sold." You know, professors are basically running fantasy baseball teams by coming out in- inter-intermittently and telling you what, who, what their trades are.

It's not real money.

It's not real life.

And so, you know, the purpose of Morningstar and Lipper and a lot of other entities out there is to kind of track the people that actually manage money, how do they do over the long run, um, and things like that.

So it's, it's a little abstract.

I...

Uh, what else should we know in terms of risks?

David Stockman, when's the last time he's been on TV? Do you think that investors have gotten much better at staying invested, at holding through the ups and downs? Or, is their extinction more a reflection of not better behavior, but the market environment?

Well, you know, to their credit, we lived through this period of financial repression, um, that e- essentially put real rates below zero that changed the reaction function in the markets.

And so, a lot of those people might have been right....

if the Fed had, had insisted on maintaining positive real rates, like they had for the prior 50 years, but the fact is they didn't and they were, they were kind of flooding the system with money.

And, um, I think from, fr- from our perspective, 'cause remember I, I, I'm covering both our private clients and our institutional asset management clients, whether it's endowments, foundations, insurance companies, and sovereign wealth funds, and ERISA plans, yes, there's, there's more tolerance to hold through volatility than there used to be.

And there's also less liquidity, and I think people have learned as asset allocators it's very hard to kind of, "Okay, I'm gonna sell here.

I'm gonna wait till it goes down.

Goldman and Morgan Stan- Okay.

Okay.

There's plenty of room and, but look, you're seeing these unicorns all the time that are chipping away at different aspects of, you know, machine learning and generative AI.

One of the most fascinating ones is look at Palantir, right? I mean, Palantir is taking a run at the large defense contractors primarily through its nimbleness and better application and understanding of the intersection between generative AI and defense weaponry.

And, you know, for everybody that thinks about data centers, the massive concentration of data centers in Virginia and in the PJM ISO region more broadly is a very clear indication of just how the national security and defense stuff is tied into generative AI and who their big users are, right? If that didn't matter, there would be a lot more data centers built in the Midwest where 20 to 30% of the time-

Yeah.

... on the tenure, but we still have a banking system where many of the participants went hog wild extending duration on treasuries and agencies at a time of, you know, historically low interest rates because you had this deposit surge from all the Fed bazooka money, and that hasn't gone away.

Now, the Fed, the Fed has proven itself willing to provide whatever emergency facilities.

I actually was a- you know, personally against bailing out (laughs) the VC depositors in Silicon Valley bank.

What do you make of them?

Well first, if you go back to 2007, the last time there was this skyrocketing perception of electricity demand, (laughs) you, you roll the clock forward and US electricity consumption is unchanged versus what it was in 2007, for reasons of, you know, f- efficiencies and things like that.

So I'm...

Now this time around, you're looking at not just the data centers but electrification of some degree of home heating through heat pumps and also electrification of vehicles, and so it does seem like there's gonna be some grid growth.

But there's a huge gap between some of the really ambitious forecasts and some of the lower forecasts, um, which have different implications for what kind of grid build-out you'd need.

From the '50s to the '90s, we had rapid growth in electricity consumption in the United States, and generation, but that was an era when it was, you know, gas, nuclear, and large gigawatt-level plants, and this time around we'd be trying to do it with smaller, uh, renewable and batteries and things like that.

I'm gonna take the under, which is, my sense is that the cost of doing this is going to be so prohibitively high that it, it, it reverse forces certain kind of engineering efficiencies into AI energy consumption that will lower the, their, their practical demands on the grid.

So let's take those together.

What do you mean?

Well, I'm, I'm, by the way, I'm referring to investors in China have to watch for those two traps.

So let's talk about the first one.

A liquidity trap is a general term people use for when you invest in a country and things are going wrong, and no matter how much liquidity they add, it just keeps getting worse because there's an underlying problem that they're not solving.

And when you invest during a liquidity trap, in spite of stimulus, asset prices just keep falling, which is what's been happening in China.

Um, everybody knows the story by now, you know, too much real estate, too much industrial investment, not enough focus on profitability.

Uh, and so far we're not seeing a bottom in residential real estate.

I- taking this group seriously because, you know, I guess I threw a little jab there to RFK Jr., but, uh, taking them seriously, in the biggest picture, what do you think the Alchemists are trying to change about America?