Is The US Government A Business Now?

0:28Hello, everyone. We've got a lot to discuss today. 19 ,799 subscribers, and my goal is to get to 1 million. We're going to do it together, so make sure you hit the subscribe button, and let's get into today's show. All right, so the landslide victory for President Trump in November's election suggested that a large portion of the country was excited. They were excited about the prospect of putting a businessman and an investor back in the White House. Since his inauguration, Trump and his administration have gone to work implementing their plan with a frenetic pace. It's fast and furious every day.

0:59Most of the commentary in the media this year has been focused on Trump's tariff policies. There was intense volatility and uncertainty through the first half of the year. Tariffs were placed on various countries. Then the tariff rates were increased. Then the tariffs were paused. Then the tariffs were implemented again. And eventually some of the tariffs were removed or reduced. This constant change back and forth led to critics complaining that the White House had no clue what they were doing. While plenty of smart people think that critique is true, you could also see the tariffs for what they were, an iterative process during a fluid negotiation on the geopolitical stage.

1:32Another way to say this in pure plain English, dealmakers trying to make deals. Now, I'm not saying whether it was the right strategy or not, but rather viewing the actions through the lens of dealmaking creates a level of understanding and clarity that seems to make much more sense than any other perspective I've heard anyone say. But as any dealmaker knows, the best deal is the next one. And the White House has been busy trying to strike even larger, more important deals than the tariffs. Take the recent announcement of the United States government receiving 10 % ownership in Intel, the American giant that designs, manufactures, and sells computer components.

2:08Following the initial announcement, Trump went on social media and he posted that the government now owns the 10 % stake in Intel without investing any money in the company. That's kind of interesting. Of course, the devil's in the details, though. Critics immediately sounded the alarm. The United States government is now beginning to act like a communist state, they said. The United States government is taking actual ownership of these successful enterprises, and these enterprises are going to end up being state-owned. These critics ignored the American precedent of the government taking equity stakes in companies across industries at different times, though.

2:42According to Perplexity, a few examples of that include 2008 financial crisis, the TARP program. The government acquired significant equity stakes in many major firms, AIG, Citigroup, Bank of America, GM, Chrysler, and many others. It was all part of that TARP program. Now this involves buying newly issued preferred stock and even common shares in exchange for bailout funds. For example, the government became a majority shareholder in GM in 2009. They owned 60 % of the company. They helped control its restructuring, end board appointments, and eventually sold its shares in the following years.

3:17Now, in 1984, the Continental Illinois Bank, in response to a major bank failure, the FDIC took an 80 % equity stake in that business and actively participated in corporate governance for several years before they divested. And then, of course, the CARES Act in 2020 during the COVID pandemic. The government financed critical sectors, including airlines, and often received equity warrants or similar rights as part of the investments. So now the Intel deal doesn't seem as abnormal if you have the historical context. But remember, I said that the devil was in the details. Legendary energy trader John Arnold encapsulated my thoughts perfectly when he wrote, quote, I'm not thrilled about the government giving Intel$11.1 billion for a 10 % stake, but it is better than the original idea of giving them$7.9 billion for nothing.

4:03Now, it's important to realize that the government is not investing cash, but rather they are using previously awarded, but undisbursed funds from the CHIPS Act and the DOD Secure Enclave Program. Think of this as a trade. The government essentially demanded 10 % equity in exchange for the government awards that Intel was already expecting from that Biden area legislation. Now, venture capitalist Bill Gurley also had a good point when he said that if the government is the lender of last resort, they should 100 % take equity and arguably 100 % of the equity. They failed to do this with GM, Goldman Sachs, United and other airlines.

4:35So how do you know if they're the lender of last resort? The company takes the deal. That's what Intel is doing here. So my takeaway from this situation is that the U.S. government is not going to be in the business of taking equity positions in private sector companies all the time. But they do have a history of getting paid for stepping in to help in unique situations. There will be debate whether the idea of securing American leadership in advanced semiconductor manufacturing is a unique enough situation to warrant the equity stake. But most of the investors that I've spoken with, they do think that the government should not be in the business of handing out money without being compensated for the risk that they are taking.

5:10We're not running a charity at the government level. Now, remember, dealmakers will make deals. So this brings me to the news from last night that President Trump is firing Lisa Cook. Lisa Cook is the embattled Federal Reserve Board Governor who's been accused of mortgage fraud by FHFA Director Bill Pulte. This is the first time in history that the President of the United States is removing a Fed Board Governor, and the critics are out in full force. Now, I have no clue if this is legal or not, and my guess is that there will be a large legal battle for the courts to decide what's permitted in this situation.

5:39But the move makes a lot more sense when you think of a CEO firing an employee for being accused of a serious crime that carries decades in jail as the punishment. Again, forget the political aspect for a second, and imagine you work at a random company with the same dynamics were at play. It's nearly impossible to see a situation where company leadership wouldn't step in and remove the employee. So frankly, people have been fired for significantly less in the past. My new framework for understanding what's coming out of the White House is to view it all through a business lens. The iterative tariffs are dealmakers making deals.

6:11The intel position is corporate leadership demanding economic upside for taking financial risk. And the firing of Lisa Cook is a CEO having zero tolerance policy for ethical issues. Now, I'm not arguing that the United States government should be run like a business, but I am highlighting the fact that a large portion of the country thinks it should be. The last administration proved to be highly incompetent when it came to handling crime, dealing with immigration, geopolitical negotiations, and also handling the U.S. economy. They rarely, if ever, fired someone for doing a bad job, and they were mocked and ridiculed constantly on the global stage.

6:45This administration, they're taking a completely different approach. But here's the deal. Only time will tell how effective that this new strategy is going to be. The United States of America is operating a lot more like a business today, and it's going to be very interesting to see how well this works. You know, volatility is one of these really interesting things. Some people fear it and some people love it. And so I recently asked Jeff Park, what is the importance of volatility for investors? He had an excellent explanation, A plus in my opinion. Here's what Jeff had to say about the importance of volatility for the investment community.

7:18Most of us, I think, in the financial services industry are taught to be afraid of volatility or to think of it as something to be less desirable. But the reality is volatility, if harvested correctly, can actually be a very useful tooling for not just risk management, but also for yield generation. And at the core, Bitcoin's volatility is very much a feature. And it is really designed within its monetary construct as to the fact that there are really two tradeoffs you can make in the design of money, which is that if you want price stability, you have to have quantity stability as the thing that you might have to trade away, which is the basic foundation of our monetary policy with fiat.

7:57But the flip side of this is actually if you fix the quantity, well, then by definition, the price has to be the outlet in which there is going to be volatility. And that is in fact, a healthy thing. That is the natural design of what money can be. And so I think Bitcoin, it's garnered a lot of attention, mostly because of the volatility in a way that in itself is a bit of an attention economy in itself. And the reality is, a lot of young people do gravitate towards volatility as a source of alpha, as a source of generating wealth that is not exclusive to just Bitcoin, in my opinion. It's actually fairly present in the retail investing world broadly within the way that people want to express views on small market cap exposures or event driven risks that are coming into play by activism and whatnot.

8:43So I think the unique opportunity here is as institutionalization has taken Bitcoin to higher thresholds of ownership, what is the level of volatility that we can expect going forward? And there I would say volatility is a nuanced definition and metric in itself. Most people think of volatility as the standard deviation in percentage terms of an asset's price, and that can be measured monthly, quarterly, yearly, etc. But it's a close to close observation. What it means is that it doesn't actually accurately capture intraday dispersion. So if a stock went up a bunch and then came down at 4 p.m.

9:21the same day, it would look like it's a zero vol asset. But we all know that was not a zero vol day. And intraday volatility in crypto is just as important as close to close volatility. So that's the first point I would mention about what's really unique about Bitcoin. And then the second thing is there's second and third orders of magnitudes with volatility measurement, too. So, for example, volatility exists in a range of distribution, but just because it steadily exists in that range of distribution in a normal and predictable way doesn't mean it's not a volatile asset either, meaning the jump risks on the left and right tails also quite matter.

10:01So if something is steady for, let's say a month where the volatility is 30, and then one day it has a 200 vol day, some might still say that average blended volatility is not very high. But you and I as humans know that was a volatile stock or a volatile asset or a volatile day. And the beautiful thing about Bitcoin is it actually exhibits a lot of fat kurtosis. There are days when Bitcoin gaps. This is when people get really excited and the volatility and spot relationship often changes during these moments of asymmetric performance. Today is actually a great example. Today is a great example that when Powell came out with his announcements on how he's redesigning and rethinking about the monetary framework for monetary policies, Bitcoin gapped.

10:47It was a big move. 112 ,000 to like 116 or so. Yes, in a matter of basically minutes. And that is maybe not noticeable as a close to close rolling day observation of volatility on a daily. But on the intraday, if you are present for that price action, that was pretty important. Mackie, listen to this. My big takeaway around volatility is that there's two types of investors, those who seek volatility and those who try to hide from it. I tend to be someone who wants to seek the volatility. You can't drive outsized returns unless the assets that you hold are volatile. And so naturally, if you want big returns, you got to go where that volatility is.

11:25Now, we've talked a lot about humanoid robots on this show. I'm obviously very bullish. I think we're going to have these robots in our homes, at our office, and all over the streets. They are going to permeate society in ways we can't even imagine. But now the big dogs are getting into the game. NVIDIA just released a brand new humanoid robot brain. It's on sale for$3 ,499. It's powered by the NVIDIA Blackwell GPU, and it features 128 gigabytes of memory. That is a big deal because all these humanoid robot companies, they need to have better software. And so early adopters of this new humanoid robot brain include Agility, Boston Dynamics, Figure, and many others.

12:04And so anytime that you see NVIDIA stepping in and saying, you know what? We're not gonna necessarily build the robots. We simply wanna tax the whole industry. We wanna provide the software, the memory, the actual intelligence in these robots, it's a big deal for the NVIDIA shareholders. And so seeing NVIDIA get in the game, obviously I'm bullish on humanoids, I'm bullish on artificial intelligence. And now I'm getting pretty bullish about the idea of NVIDIA creating the brains for all these robots. They're coming into society and it looks like NVIDIA, they're selling picks and shovels to all these businesses.

12:38They're gonna be creating the hardware. That's it for today's show. Please remember, We have 19 ,799 subscribers on our YouTube channel. I want to get to a million. Please make my dreams come true. Make sure you subscribe to the channel and I'll see you guys live tomorrow from the desk of Anthony Pompliano.