War in Iran, Trump’s Anthropic Ban, & Jane Street’s Bitcoin Rigging

0:00Michael Novogratz:When you want your spring break to feel like... And your kid's pool day to feel like... And your hotel bed to feel like... Ooh, and room service to feel like... Because at Hilton, hospitality feels like... Your cabana's ready. Would you like fresh towels? It matters where you stay. Book now at Hilton.com. Hilton. For this day. The top 1 % have 40 % of the wealth. The bottom 50 % have 2 % of the wealth. And typically when we've gotten to these concentration levels, the legendary Teddy Roosevelt said, you know, enough is enough. Can we break this up, please? And what happens is these companies, they have a tendency to sit on technologies.

0:47Michael Novogratz:Are you worried about this concentration of power?

0:50Anthony Scaramucci:Elon Musk had said that he thought there was a 20 % chance that you could wipe out half of humanity. A 20 % chance that you could wipe out half of humanity. And everyone seemed to agree to him. And they were like, yeah, but we're not going to really do much about it. And so there is a real cavalier attitude towards what could go wrong amongst this space race that's happening. And it's partly because it's a space race. It's seen as a winner takes all game. And so it's dangerous.

1:17Michael Novogratz:Welcome to All Things Markets. I am Anthony Scaramucci. And I'm Mike Novogratz. Michael, my God, the executive producer of the reality television show known as the Trump administration. Donald J. Trump is always leaving something for you and me to talk about. Right. So we've got another eventful week. Let's start with the Israeli strikes, the U.S.-Israeli strikes on Tehran and other parts of Iran and the coordinated attack by Iran on the countries in the Gulf that have U.S. naval or military installations. Give us an assessment from your perspective as a macro investor. Where do you think things are right now and are you surprised by things?

2:06Anthony Scaramucci:Listen, I think most macro investors kind of expected at one point we'd attack and got a lot of the trades wrong. And so I'll give you my sense. I think Donald Trump attacked Iran because he saw them, you know, murder 25 ,000, 30 ,000 people and had said, don't do it or there's going to be hell to pay. and he wants to be the hero here. And, you know, listen, I'm for him on this one. You know, I don't agree with Donald Trump on everything, but I've never liked the theocracy in Iran. I visited there, took the U.S. wrestling team there. The people in Tehran, this was 12 years ago, who didn't like the black hats, as they called them.

2:56Anthony Scaramucci:And the pressure has been building there. um listen as americans we've learned our lesson around regime change and so this has been couched in their nukes we're got to get their nukes out and in his in israeli cloak but deep down i think and i think america will support him on this he saw something he really hated and decided to do something about it and because of that anthony we're not going to blow up bridges we're not going to blow up power stations. We're not going to blow up data centers. We're going to try to do as little damage as we can to the civilian population. Albeit there was a school with some, you know, I think 13 children and there was a volleyball team.

3:36Anthony Scaramucci:You know, there certainly was, you know, some disproportionate consequences of the attack. But I think we're going to hit the military over and over. They have no air cover so we can fly, you know, really without fear. And we're going going to try to eradicate the Iranian military apparatus over the next two to seven days.

4:02Michael Novogratz:All right. Well, I mean, listen, I want to, you know, like you, I love our troops and the people are in harm's way I'm praying for. And obviously these casualties are not something any of us want. I don't want to overly get into the politics of this, but right now only 27 % of the Americans are supporting. And I think Americans have typically gotten some level of Middle Eastern fatigue because, you know, as you pointed out, the regime changes don't go super well and you're having missile strikes. I don't know. Maybe that will dislodge a 50-year theocracy. I hope it does. I'm not saying, you know, I'm not wishing against it, but I want your...

4:43Anthony Scaramucci:Well, this is more complicated than Venezuela in that, listen, there was a lady in waiting, I'm actually meeting with her tomorrow, you know, Maria Machado. That'll be interesting just to see what she has to say. Now, she's not been been installed, but they had an election. There's an opposition party. You know, Trump decided to keep number two in place for some period of time until they can transition into elections. So it's more stable. We don't have that in Iran. Right. There's not a Navalny. there's not a Marian Machado there's not an opposition leader and you know Reza Pahlavi is a pretender he's not connected to that place for 47 years and so I think that's a mistake to to have any bets on that guy you know I'm not making judgment about him personally I just think that that's not that's not going to work and so we got to see what comes out of of Iran you know Rouhani who had been a more moderate leader at one point could potentially try to show up or uh you know i don't know that politics well enough uh i do think the base case is we destroy all their military capabilities for a long long time and even if we pull out that and see what happens trump will declare victory and the markets won't care like oil will go back down so right now what's been surprised is with oil prices up people said oh shit higher consumer prices and fixed income, which normally in times of war rallies has sold off.

6:19Anthony Scaramucci:And so most macro portfolios had big two-year or fixed income positions thinking, hey, that's my hedge versus geopolitical risk. And that didn't work. Stocks are up on the day. Pretty surprising. That's how strong the stock market is. And so the stock market is saying this doesn't matter that much. This will come and go, period.

6:38Michael Novogratz:And the disruption on the oil markets, even though that's only a 21 mile width of strip in the strait of hormuz uh they don't think that the iranian navy is going to close that off you'll see the flow of oil i think we've knocked off 10

6:52Anthony Scaramucci:of their ships already right what you have to understand is if i can't shoot you down from the sky i can just fly my planes and drones at will and blow you up and with the the intelligence that both america and israel has with the satellite intelligence with the precision of drones and and aircraft uh it's it's literally shooting ducks in a pond and so we will the only thing that is stopping us is how many planes and drones versus how many missile silos that's going to take a week or so but each of our attacks is hitting its target because there's no one to stop them and so iran did something that was actually kind of deviously brilliant it says we we got no other play other than let's mess with the rest of the gulf and see if they get so scared they beg the us to slow down right and so listen if you're in abu dhabi and your whole brand is safety and come live here because it's safe you can leave your wallet on the in the restaurant someone's going to give it back to you and there's no crime and all of a sudden you see debris falling and hitting hotels that scares the crap out of you so that's bad bad for abu dhabi bad for dubai uh but you know they're tough guys that will that will come and go and i think tonight tomorrow night they'll be a lot more prepared than they were uh last night so there's been a bid to markets

8:18Michael Novogratz:uh you know and oil is actually trended down a little bit it's spiked but it's trended down it's been a general bid to markets so the markets is shrugging this off yes yeah i mean nasdaq has

8:30Anthony Scaramucci:unchanged on the day.

8:32Michael Novogratz:Okay.

8:32Anthony Scaramucci:So people thought it was going to be on three, 4%. Right.

8:36Michael Novogratz:Well, and I thought, I thought oil would, would have, would have punched into the mid eighties. It didn't, it didn't, it didn't go anywhere near that. So, um, you know, listen, I w I'm hoping for the best here. I want to switch gears because you know, this, and I know this, and a lot of people listening know this, but our entire military footprint has been changed by AI has been changed by drone technology, has been changed by cyber. Our acquisition of intelligence has been enhanced by AI. And Anthropic, which had over a$200 million contract with the federal government, and even though they're in a fight right now, they have used Anthropic's servers to help coordinate and organize the attack, actually pick targets.

9:24Anthony Scaramucci:That was kind of actually ironic. Like, we're bad-mouthing Anthropic. They're a lefty, woke organization. We're not going to use them. Actually, we're going to use them.

9:33Michael Novogratz:Right. No, we've been using them for the last six months. And actually, in the attack, we deployed most of the stuff that Anthropic has given us. But we now have some tension going on. The president and Pete Hegseth, Secretary Hegseth, are bullying Anthropic. And again, just to set the scene for everybody here. and this is I'm going to give Anthropic's words. Anthropic always wants a human being involved in military target acquisition and the eventual deployment because they don't want to just trust the machinery on its own. And then the second thing is Anthropic has said that they don't want the stuff that they've given to the American military to be used for internal surveillance of American citizens.

10:21Michael Novogratz:Okay, those two things were rebuked by Secretary Hex said to the point where he now wants to designate them as a national supply chain risk. Interestingly enough, the nemesis of Elon Musk, Sam Altman, swoops in there and says, no problem, I'm ready to sign that contract. So square all of that for us. Listen, I think Anthropic has taken a principled stance.

10:50Anthony Scaramucci:and I get a lot of credit for it. Like, I don't think if you asked Americans, raise your hand if you want Terminator 2 machines firing at people on their own will, many hands would go up, right? We just, like, AI is less than a year old for most of us. And now you're going to have, you know, robots shooting people without a human saying yes or no. That doesn't jive with the American public, it doesn't jive with me. And so it's interesting when a buddy of mine, a big hedge fund manager, went to a, this is probably five months ago, went to a crypto, I mean, an AI offsite with every one of Sam Altman, you know, Dario, all of the bigwigs, Elon Musk, Bill Gates was there, Obama was there, 100 people, all VIP discussing this.

11:41Anthony Scaramucci:he was shocked at how cavalier people were on what could go wrong and Elon Musk had said at that point he thought there was a 20 % chance that you could wipe out half of humanity a 20 % chance that you could wipe out half of humanity and everyone seemed to agree to him and they were like yeah but we're not going to really do much about it matter of fact one guy was asked what you're going to do and he said I'm going to buy a buy a place down in New Zealand you're like that's that's the defense. And so there is a real cavalier attitude towards what could go wrong amongst this space race that's happening.

12:17Anthony Scaramucci:And it partly because it's a space race. It's seen as a winner takes all game. A winner takes all amongst those five and a winner takes all amongst us in China. And so it's dangerous. And so I give the Anthropoc team a lot of credit. Like, you know, But listen, Hegseth is acting like a bully and a big tough dude. I'm sure there's probably a court that's going to say, no, you can't designate them as a supply chain risk. And that's usually what we do to Chinese suppliers. You know, that was the last, I think, person we did. It was to Huawei and backed away from that. Half of America is using, including Goldman Sachs, who just did a big contract, he's using Anthropic.

12:58uh and so you know we'll see how that plays out i think that's a lot of bravado it's very similar

13:05Anthony Scaramucci:to hegs is saying even though he went to princeton and harvard all the the i mean universities are too woke you know we're not gonna allow our officers to go there for grad school and for phds and you know i was part of the kennedy school up at harvard's uh public policy uh leadership program that David Gergen had set up. And, you know, I'd say a third of them were military guys and they learned a ton and they added a ton. And it's insulting to think that those guys were brainwashed. They were some of the toughest son of bitches I'd seen, guys like Seth Moulton, who's a congressman. And so this is a lot of political theater from an administration that loves political theater.

13:47Michael Novogratz:So our buddy Neil Ferguson, who you and I both know, he put out a research report this morning suggesting that the government will find a way to walk this back, that it's a little bit too aggressive, and that they will figure out a way to reconcile with anthropic. Do you think that that's possible?

14:04Anthony Scaramucci:Of course they will, because if they don't, the courts are going to smack them upside the head. You know, what keeps happening is, listen, and I'm not, this is a strategy that the administration uses, and they've used it to a lot of, you know, effect, but they push, they push, they get, you know, bold and say outrageous claims, like I invented the question mark, and then they walk it back or the courts walk them back. Like, you know, we still have some sanity in a lot of our institutions. And so I don't think you'll see no army officers at the Ivy League schools, and I don't think you'll see Anthropic being banned from the United States.

14:40Anthony Scaramucci:Anthropic, meteoric valuation,

14:46Michael Novogratz:on track to be probably one of the more successful IPOs maybe history. You think that's still on track, Michael?

14:53Anthony Scaramucci:Yeah, 100%. Like there's not a company right now that isn't talking Claude code. Okay.

14:58Michael Novogratz:Okay. And you think is Claude better than Chad GBT? I, you know, that's, I don't know.

15:06Anthony Scaramucci:One of the hardest things about being a CEO today is ai is becoming so important and most of us don't have the skill set to really understand is claude better i mean ask my guys they're using claude more than they're using chat gpt now but but i don't i don't have the i don't have the wherewithal to to split that atom in lots of ways it's just something i haven't studied in my life and don't have enough repetitions with it um but i you know So it's gaining, you could see Anthropics revenue passing ChatGPTs with the next 12 months, talking to the analysts that are, you know, focused on it. And so they're doing something right.

15:52Michael Novogratz:First of all, it's a way better writer than ChatGPT. But yes, I mean, there's a lot going on with both those companies. Michael, one of my favorite topics, possibly one of your favorite topics. I think the name of your company is Galaxy that does something in crypto so let's go to crypto had a good night we finally had a good night are we going to get beat down again there's this big rumor what I love about the crypto community they are looking desperately for a scapegoat I'm going to provide my editorial opinion here and get your reaction to it I sort of feel like crypto is down because there are more sellers and buyers

16:35Anthony Scaramucci:okay and i think that's the reason i don't i said this the last couple episodes i think 60 000 was a tradable low i'm hoping it was it feels like it was we've retested a few times and now we're trading up on a day where the rest of risk first traded down and so that's promising it's still listen you're not going to feel great about crypto unless it gets through 80 and you know we're still a long way from 80 like that'll make you feel a lot better uh but you certainly feel you know, Ethereum just doesn't feel like it wants to go under 1800. And so we might have had sellers exhaustion. It doesn't mean there's a new narrative that's going to bring tons of people in overnight, but all the crypto hedge funds were short crypto, right?

17:20Anthony Scaramucci:And now they might have to buy back just enough to get back to index because God forbid it goes up to 80 or 100 and they're not in it. They're going to shoot themselves. Right. They got to chase it.

17:30Michael Novogratz:But But, Michael, the new scapegoat, we have a new scapegoat in town. If you go to Crypto X or Crypto Twitter, Jane Street was sued recently. And it looked like in the complaint there was some exposure there describing what they did to Terra, you know, and Luna right in the 2022 collapse. And they are describing, at least in the complaint, a systematic dumping program which was taking place. There's a theory that says this drove Bitcoin down. Okay. I don't subscribe to that theory, by the way.

18:03Anthony Scaramucci:I would tell you this, that Jump, Jane Street, Tower, Citadel, these are the powerhouses of finance. They make Goldman Sachs look antiquated. I would put Virtu in there too, right? Virtu. And there's a few in Europe. they are making so much money pound per pound and they are extracting a tax from everyone else who uses markets. They are extracting that noise by providing liquidity. They're just, they're scooping up the pennies and the nickels at a pace that is just breathtaking. And, you know, they're playing fairly for the most part. Every once in a while, they get their hands slapped because they're cheating.

18:53Anthony Scaramucci:But I would say broadly, they're just faster, more resourced and smarter. Now you can make a decision. Is that good for markets? Is it good for society or not? You know, I'm starting to scratch my head at that because they literally are making so much money. And, you know, I'm not sure what value they pervade other than liquidity. But if you're providing liquidity, but taking a huge lion's share of the profit, that I'm not sure that's a net positive for the market or positive for society. But again, I think they're doing it because they've done so well and they're so smart. They get to hire the best people.

19:31Anthony Scaramucci:They have the fastest equipment and they have almost a perpetual advantage. But it more or less is going to continue, right? Yeah. Unless someone, again, we are going to get to the point of populism on both parties and people are going to say, hey, put a Tobin tax on these. This doesn't this doesn't help. Like India finally said, this feels like the East India tea company coming and stealing all our resources and leaving us nothing else there. Right. Because, you know, I think Jane got in trouble in India early in the year.

20:03Michael Novogratz:Exactly.