The Practical Islamic Finance Podcast

A Turning Point

Rakaan Kayali

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A Turning Point

In this episode, we will cover:

  • Intro
  • DeepSeek AI vs. OpenAI: A Disruptive Moment
  • Market Rebound or Just a Technical Bounce?
  • Federal Reserve Meeting: Rate Decision Preview
  • Major Earnings Ahead: Microsoft, Meta, Tesla
  • Crypto Market Struggles Despite Policy Support
  • Bitcoin Miners: Why Bitdeer Is Outperforming
  • Trump’s Federal Worker Buyout Plan
  • AI and Economic Shifts: What’s Next?

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DISCLAIMER
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assalamu alaikum folks I hope you are doing well today is tuesday january and day two of the world coming to an end after uh the deep seek model release uh which proved that you could do what OpenAI has been trying to convince us was extremely, extremely complex and no one else could do, you could actually do something similar at a fraction of the cost. So the market is still digesting this new information and the nasdaq did rebound today I wouldn't really rejoice with regards to today's rebound it may be a technical uh bounce after yesterday's uh very sharp sell-off uh dow jones was in the green as was the s p we did have a mix of good and bad news here so uh with regards to the dollar index Well, at least year to date, it has been headed downwards. So that's good news. And also the ten year, the yield on the ten year U.S. bond has actually decreased to four point five percent again. uh far removed a lot lower than the high that was closer to four point eight so the dollar weakening the yields on the ten-year falling make a stronger case for equities generally uh the Yeah, somewhat bad news. I wouldn't even call it bad news because the moves were so small. But the dollar index did move up a bit today, as did the ten-year yield. But tomorrow is going to be a pivotal moment. uh forward markets we have a lot going on tomorrow we have the fomc meeting and the fed interest rate decision and then the fed press conference now In terms of the decision, there's a ninety seven percent chance that the Fed decides to just keep rates where they are in this current meeting. What's really going to matter is the tone that they set in the press conference afterwards. If you'll recall in December, that's really what moved the markets. And from that, we're going to see an adjustment in the probabilities for a rate cut in March and the extent of those cuts if they are to happen. So that's really going to be something the market is paying very close attention to. and that is coming up tomorrow additionally tomorrow we have earnings from microsoft from facebook meta from tesla and that's really going to answer a lot of questions with regards to how are these mega companies thinking about deep seek and how has it changed their intentions for capital expenditures and investments how has it changed the trajectory that they've previously communicated to us which was massive investments in things like data centers and in ai infrastructure is that going to change at all or is it going to accelerate it we'll have a lot of Answers to those questions tomorrow. I know I'll be listening to all of those earnings calls to see if I can pick up on hints about what the CEOs are thinking in those companies. And I'll let you know what I take from it. In the meantime, as we mentioned, the markets were kind of mixed. So whereas we saw technology red yesterday, it did bounce back today. Again, it's not really a necessarily cause to rejoice. This may just be a technical bounce. considering how much we fell yesterday in the NASDAQ, around three percent. The rest of the rest of the sectors were actually red today, whereas they were green yesterday. So a switching of the roles there as it relates to crypto. Crypto has, you know, across the board has had a pretty tough time, even though I do think that the the fundamentals for crypto especially if you if you start with the king of crypto uh bitcoin have improved after this new administration assumed office and the crypto friendly policies that it is enacting this will have a a positive impact on crypto on the winners in crypto has not really reflected itself yet in crypto prices but I think eventually it will if we do look at crypto uh btc is right at a hundred thousand as of filming this uh dogecoin is at thirty one cents solana is at two twenty five so we have seen a pullback there Again, this could reverse very quickly tomorrow after the Fed meeting if we get a dovish tone from the Fed. And with regards to Bitcoin miners, we saw a lot of them in the red today. Bitdeer did very well. It was up by seven percent. I do believe that part of the reason for Bitdeer's appreciation versus a lot of the other miners that were losers. It's because of Bithir's diversification. Recall that Bithir also has substantial investments and business lines that are not necessarily associated with AI particularly, but rather cater to Bitcoin mining and they have their own Bitcoin mining rigs and Bitcoin mining chips. And so that's not really impacted by the deep seek revelation. And so I do believe that that is one of the reasons why Bitdeer is appreciating today while other Bitcoin miners are pulling back. That's why you always want to invest in companies that are heavily investing in research and development because they have They typically, if something doesn't work, something else will. And so you can have one company, but if that company is aggressive in pursuing different opportunities, always investing in research and development, always working on the next thing, that's required in order for it to be a good hold longer term. Other companies that are very fixated on one thing know focus is good but oftentimes their universe can turn upside down as we saw with deep seek and what it caused for companies like open ai and as we saw with open ai and what it caused for the business of search and how they had to really adjust themselves Now, with regards to crypto, looking at the themes that were most popular as of the most recent month, store of value was by far the most popular theme. It's not surprising that meme coins took a beating after the Trump coin launch and basically rugging of crypto. you know a lot of its uh holders and and the sucking of liquidity from other meme coins so the investors in other meme coins investors who are interested in other meme coins are more likely to be interested in you know trump's coin and the derivatives of trump's coin melania coin and what have you and um And so that sucked liquidity out of a lot of meme coins and into this new entrant. And so we did see that sector suffer. Speaking of Trump, he is doing a lot of things that will have some big impacts. And I have to say, a lot of them are are needed. So for example, Donald Trump has offered a buyout to all federal workers who don't want to return to the office as long as they resign before February six. Now I know for a fact that a lot of federal workers are getting a paycheck for doing pretty much nothing. And you know, it doesn't feel good to pay, you know, the taxes that we have to pay in the United States, knowing that a lot of this is going to go to very unproductive activities. So this is I mean, and we're running a deficit, our debt is piling up over time. So this is a really needed step, we have to get rid of the fat that's in the bureaucracy. And he said, we're five years past COVID and just six percent of federal employees work full time in the office. So I'm pretty sure the ninety four percent that are not coming in the office are naturally being At least a good portion of them aren't really being terribly productive at home. And they'll probably be better off longer term doing something that is actually engaging to them and they actually feel like they're being productive in. and additionally in trump news trump I I have a feeling this will be a recurring uh segment on our lives uh trump says microsoft is in talks to acquire tick tock has you know two of the least trusted companies uh that I can list are are in talks to create a new entity, perhaps they can call it the spawn of Satan. And Trump still expects to impose February one tariffs on Canada and Mexico, the White House says. Now, this is in response to what the White House claims is very lax and sometimes encouraging policies by these border countries, vis-a-vis immigrants trying to get into the United States. What I do think is that the tariffs on Canada may be more likely than the tariffs on Mexico because Mexico provides more vital components to a lot of industry in the United States. And perhaps those components have lobbyists that will have the Trump's ear and they may encourage him to kind of go easy on Mexico. But the Canada tariffs seem more likely, although to be honest, I hope they don't happen. I think all these countries are better served with a free flow of goods and a more secure border. I think that's good, but a free flow of goods is good for everyone. And last piece of news, perhaps the most important, Flavor Flav. I just noticed this. Flavor Flav defends Selena Gomez and made backlash over emotional video. So make sure to adjust your investment portfolios accordingly. With that, let's go to questions. Salam Hamid. Does deep seek threaten Tesla's AI project? No, I don't think so. I think that, so here's the touchstone or here's the sign, the criteria that I'm going to use to figure out whether or not we need more intelligence. And that criteria is the following. Have we cured all diseases yet? If humanity has not cured all diseases yet, then more intelligence is needed. You know, artificial or biological, more intelligence is needed. And so long as we haven't reached a point where all diseases haven't been cured yet I still think that there's going to be aggressive investing in increasing intelligence particularly artificial intelligence we are invested in tesla the company not in elon the person it's a good it's a good uh It's a good point, EJ, and it's perhaps something that is worth taking another look at. EJ is mentioning that pharma is very underrated at the moment. If you have any particular names you'd like me to look at, or if you're a PIF member, by the way, if you aren't a PIF member, make sure to become one. Link to do so is in the description, and leave a like on the like. Leave a like on the live. Oh, look at Bayer Pharma, which is very underrated. Perhaps I'll take a look, EJ. Hannibal says, Assalamualaikum. Yeah, I do think that AI will enter humanity into an era of abundance and high global GDP. I do think that's true. My thoughts on Apple are that You know, it hardly enough, the fact that it hasn't really followed the other, I think more innovative companies and has been lagging, you know, puts it in a very unique position, I think, to invest in. So the idea here, and I basically spent all today trying to educate myself on this topic, but You know, one of the impacts of DeepSeq is that it has made a lot of inference that previously was thought to require you know, very large data centers, very large amount of compute. It made it possible for that inference to happen, you know, on our phones, on our tablets, on our laptops. And this is sort of referred to as, you know, on the edges. So computing on the edges, as opposed to in a central mammoth location. And so Apple has an opportunity here to be the first in introducing new devices that can actually do this AI inferencing. And this could cause a cycle of upgrading of our phones and our laptops to these new devices that we haven't really seen since the introduction of the iPhone. So if Apple takes advantage of this and the possibility of new devices being needed that can host the computations needed for the AI applications of the future, then it can set itself up for another ten years of prosperity like it has witnessed in the last ten years. But if it misses this opportunity, And then, you know, someone else is going to do it and people will be replacing their iPhones, will be replacing their MacBooks with other devices that can do it. And they will be doing that. And I think the not so distant future. So Apple is really at a make or break point in its history. And all indications about Apple and their management team is that they're not really innovative. So I wouldn't really bet on them to get this right. Juwaira says, Salam alaikum, can you guide about gold? If you want to buy gold, you can buy a gold ETF. One of them is BAR, B-A-R. Cricketer says, may Allah reward your efforts. Well, thank you so much. Oh, that's great. Your interview with Saifedean led me to read the Bitcoin standard, which put me five years ahead in savings. That's awesome. Thanks for sharing that. I'll take a look, EJ. Thanks. Hey, Salamat Rashad. Nice to see you. Wilson asks, in your opinion, how does deep-seek news affect Iron? Well, I do think that the selling point for Iron was the access to power. And now it also does efficient Bitcoin mining. So it is also sort of diversified. Hasn't really poured its investments yet into... transitioning some of its sites to AI and high performance computing. And perhaps the recent at the market announcement that it did, that it could raise up to one billion dollars at the market, was in preparation for transitioning some of its sites to an AI high performance computing capability. So the good news is that it really hasn't made a ton of investments in that regard. And if it turns out that they aren't needed, like some are arguing, if it turns out that they aren't needed, I actually think they are needed. And so they will continue basically on the same path. But if it turns out they aren't needed, they don't. they haven't really done a lot of CapEx in that regard. And they can transition into something else that's more profitable or just refocus on Bitcoin, which I do think that... you know, will reach two hundred thousand this year. So I think that business is, you know, we're still before the top of the cycle there. So for investors holding it, obviously, I'll let you guys know, PIF members who follow our portfolio, I'll let you guys know. But if it turns out that that's the case, I think there's still some upside there before we have to think about exiting. Khaled asked a good question. He says, your comments about buying products of companies that we consider uncomfortable in terms of investing. So, you know, I would say obviously the most, you know, you can't make your life, you know, too complicated. I would say, you know, faced with two products, A and B, that are identical, then I would go with the product belonging to the company that I'm more comfortable with. But absent that, for products that are essential and important, I would go with the best product. That is... so long as the company that we're talking about here, and it really relies also on the reason for the discomfort. As the reason for the discomfort, oh, well, their financials aren't great. Well, then I wouldn't really take that into consideration. But if the reason for discomfort is that, oh, well, they are supporting a genocide somewhere, then in which case I would pass on buying anything from that company. So it also depends on the reason for the discomfort. Faisal says, I think this is the beginning of the global AI arms race. Even smaller countries other than the US and China can compete. I do think that's right, Faisal. And I think that it's both scary and promising at the same time. So you're going to see smaller countries with much fewer people really punching out of what was previously considered its weight class. So highly technical countries with sophisticated technology will be able to compete with much larger countries. using AI and robotics. So it's both a promising and a scary future that we have to prepare ourselves for. Is it halal to buy gold online, though? As many scholars, not a single one said yes. The hadiths about it are straightforward. Yeah, I don't really think that the people you are asking necessarily understand and there are reasons for the there are reasons why something is halal and haram and so you know with You're referring to the hadith about something that happens, which is not necessarily literally hand to hand. It means the exchange is instant. And that is so that we're not masking alone. So that, you know, on the surface, it appears that a trade is happening, but in reality alone is happening. If in reality alone is happening, then don't do it online. But if in reality, you're actually buying gold, then it's fine to do it online. Khalid, for working for that company, I would say the same answer holds. Hi, guys. If you enjoyed this live, then do leave a like. I really appreciate that. Become a member. Join our community. The Discord is lit. There's so much value in there every day. And you also get to watch our portfolios move for move. And find out when we add new names to our portfolios. I think it's a great deal. So check it out. Link in the description. Until next time, make sure to take care of yourself. As-salamu alaykum and peace be upon you all.