In this week's Stansberry Investor Hour, Dan welcomes Harvey Sawikin to the show. Harvey is the co-founder and principal of Firebird Management, a fund that focuses on investing in emerging markets, primarily in Eastern Europe.

Harvey kicks things off by stating that emerging market investors don't pay enough attention to politics compared with macroeconomics. He says that you can glean insight into how a country could develop if you understand its politics, especially in cases where there's new leadership. But it's still important to understand the macroeconomics, as those have been red flags for otherwise promising markets. And he shares why folks would want to invest in emerging markets despite strong growth in American companies...

I understand Americans look at it and they say, "Why should I bother with emerging markets when the U.S. is doing so well?" The thing I would say to that is that things can change... Between 1982 and 2000, the U.S. was the place to be. And then for 10 years, the U.S. gave no performance at all. But emerging markets were skyrocketing, and [for] people who had some diversification into emerging markets – not just emerging markets – the non-dollar currencies went skyrocketing. The euro got as high as 140. [It] can happen again.

Next, Harvey explains how emerging markets view the dollar. If a country exports commodities, it might not care about the strength of the dollar. Additionally, some exporting countries might prefer to have a slightly weaker currency to look more appealing compared with U.S. companies, so traders use the local currency to invest in these markets. Harvey then gives his background with investing in AI companies (with one that went from $8 a share to $240 a share) and his thoughts on the technology...

It could be that in the end of the day, the winners from AI are not the [large-language model] producers... It will be [the] companies – if they can get it at a cheap enough cost – that will be able to use it. Just think about if AI customer service was really good and you didn't need call centers, and it did a great job... There have been some studies that [showed] that a really good AI customer service actually converts people to purchasing better than a lot of the call centers. So it may be that Main Street's the big winner, and it's not OpenAI and it's not Anthropic because... they're too easily substituted for each other.

Finally, Harvey informs listeners that it's OK to be cautious during the AI frenzy. No one knows where the peak of the hype will be, but it might be beneficial to avoid throwing all your money at AI (especially AI companies where you can't even tell what their product is). Harvey believes that patience is the key to successfully navigating the markets, and when everyone is bullish, it's even more crucial. But at the end of the day, it's up to the individual investor – not someone pushing a stock or fund – to determine when they want to get into a position...

It's up to the investor to decide. [The private-equity funds are] not going to tell you this is a bad time. You, the [limited partner], have to make your own independent judgment as to whether it's a good idea to do private equity right now or VC right now, or invest in AI right now. No one is going to help you, and one's going to protect you from your own desire to be part of the big bull market.

Click on the image below to watch the video interview with Harvey right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

This Week's Guest

Harvey Sawikin is the co-founder and principal of Firebird Management, which was formed in 1994. Before founding Firebird, he was a clerk on the U.S. Court of Appeals and a mergers and acquisitions specialist at the law firm of Wachtell, Lipton, Rosen & Katz. He's also a lead manager of Firebird's Eastern Europe and Russia funds, and he serves on the Management Boards of the Amber private-equity funds.

Harvey is a graduate of Columbia University (Magna Cum Laude) and Harvard Law School (Cum Laude), where he was an editor of the Harvard Law Review. He is a member of the visiting committees of both the Photographs and the Modern and Contemporary Art departments of the Metropolitan Museum of Art, and a member of the board of directors of Film at Lincoln Center.

Dan Ferris:              Today we're going to talk to Harvey Sawikin, the co-founder of the Firebird Fund. This guy knows so much about things you and I hardly ever look at. He's a fascinating guy, and we'll talk to him soon.

But first, I am of a mind to believe that we are about to enter a melt-up phase of this AI bull market. It's going to be euphoric. The stock market is going to take off, and this is when the biggest money in the AI bull phase will be made. If you want to learn more about that, just go to meltup2026.com. That's meltup2026.com. Check it out.

All right, now let's talk to our guest, Harvey Sawikin. Let's do it right now.

Harvey, welcome to the show. Thanks for being here.

Harvey Sawikin:       Pleasure. Happy to be here.

Dan Ferris:              Why don't you – why don't we start out – you're a new guest. We have some repeat guests and folks who check in with us often, but you're a new guest. So maybe it would be appropriate just to tell our viewers and listeners a little bit about what you do and who you are and what your background is.

Harvey Sawikin:       Sure. I am the co-founder and co-manager of a group of funds called Firebird, which are Eastern European-focused funds. We're running currently now, I'd say around $900 million roughly. And we've been around since 1994, when we launched our first fund in May 1994. And I will say that we're so old that we were one of the first funds in the Cayman Islands. In fact, I believe our registration number is 7. Because that was – we started right after they passed a hedge-fund law. So we were one of the first funds in there.

And we started – my co-founders and I had been – I had no background in investing other than as a novice for my own account. I had been [a mergers and acquisition] lawyer at this firm, Wachtell Lipton. And I left there and I wasn't cut out for that for the rest of my life, that kind of work. And I took a couple of years off.

I wrote a novel about a lawyer who becomes an inside trader. And while I was waiting for that to be published, meanwhile, I was investing. I'd made pretty decent money at Wachtell Lipton. I was very cheap, so I saved all of it. And I wanted to invest it. And one of the partners there handed me The Intelligent Investor, the Benjamin Graham book. And I looked at it and I read it and I said, "Well, this seems pretty easy. I could do this." There were only like five or six things you had to know. And this was pre-internet.

So, I used to go up to Columbia Business Library, and I got the Value Line books. If you remember Value Line – and I went up to look at these books and find value stocks. While I was there, I ran into a college friend of my wife's named Dan Cloud, who had been working at a brokerage in Hong Kong doing research on frontier markets.

And he said, "What are you doing here?"

I said, "Well, I'm looking for value stocks."

He said, "Well, if you want to hear about value, let's talk about emerging markets."

So we walked a couple of blocks over to Tom's Diner, which is the one in Seinfeld famously, and he laid out the emerging-market idea for me and how cheap it was and the growth rates. And we decided to start a little friends and family partnership called Morningside Capital and to invest in emerging markets.

Soon after we started, only about two months after – we raised a little money from our families and friends, some of our college friends – two months after we started, Russia began mass voucher privatization. And Dan knew something about voucher privatization. He'd seen it in Poland.

And he said, "This could be a very big opportunity. We really need to look at this." So I – we picked up everything and we went over to Moscow in January 1994 when they were – it was the second major voucher auction. And, I just thought that this was possibly a once-in-a-lifetime opportunity. I never thought I'd be still doing it 30 years later. I thought it would be a one to two year trade, and then I'd go back to law or writing another book or something.

And so we started this voucher investing with our little partnership, and it started to do quite well. We figured out how to do it. There were only a few people who actually knew how to invest in vouchers. Famously, Bill Browder at Salomon Brothers was doing it. We were the first fund created to do it, Firebird Fund.

So first, we had some managed accounts, and we had a few managed accounts in the vouchers. And then we decided there were too many. Then we were getting, suddenly – although we had no particular background as fund managers or anything – we were like one of the only people around who knew how to do this. So we started getting a lot of managed accounts. And then we said, this is too much. And we blended it all together into Firebird Fund that was launched in May 1994 from the managed accounts and some new money that came in. So that's how we started.

And then, and Russia turned out to be quite a good investment over the years. Well, I'd say it was a fantastic investment for 28 years and 2 months, but that's another – until the war started, but that's another story.

But, after a couple of years of doing Russia, meanwhile, we noticed that some of the other former Soviet republics were starting stock markets of their own. And some of them looked really good to us. So we started investing in some of the other ones. And in 1997, we decided to launch a regional product, not a Russia fund, but an Eastern European regional fund focusing on the newly – the new markets in these former Soviet republics. And that fund also still exists today. Both Firebird Fund and Firebird Republics Fund still exist today.

And so, and over the years, we kind of – our focus shifted more toward the regional strategy, which I like better than – I've always liked, preferred it to a single-country strategy, which I can explain why. And we, over the years, we thought we could replicate what we did in Russia, finding something really early, getting in before most people knew about it, before there was custody, before there was global custody, before there were [American Depository Receipts ("ADRs")] and [Global Depository Receipts ("GDRs")], just some local shares really cheap when it was the local people buying.

And that we thought – and by the way, we were – we considered ourselves the anti-Templeton, because – and I credit this again to Dan Cloud, who is a very brilliant man. His insight when we started was that although emerging markets – he knew people on the trading desk in Hong Kong who were compounding their capital 30% a year in these markets like Thailand. Yet Templeton and the other emerging-market mutual funds had kind of bad performance. They never had good performance. You could go back and look at Templeton's history. You know, there really never was a high-performing fund, the emerging-markets fund.

And the reason was, Dan realized, was because they were coming in – because they were a mutual fund, they were coming in after things had become more normalized and you had custody and a lot of the early money had been made. The people had made 5 times their money already. And then it was listing. And our strategy was, no, no, no, we want to invest at the same time that the local insiders are investing. And to do that, it couldn't be a mutual fund with all of its restrictions. It had to be a hedge fund.

And I'll say another thing that sounds amazing. We were the first emerging-markets hedge fund, equity hedge fund. When we started, there was only one emerging-markets hedge fund. It was a debt fund called Croesus. And so we had no model for our prospectus. It was – our lawyer had to write it from scratch.

So that, so that concept was always in our DNA, that you wanted to be get in early, find markets when they were just starting out and most people thought they were uninvestable. And then once the GDRs and ADRs and custody and all of that was there, that's when you're starting to take profits and move on to the next one. And that worked for us really well in a series of markets – the Baltic States, Kazakhstan, Romania, Bulgaria, Georgia. A couple of ones that didn't work out, but I would say our hit rate was pretty high once we identified a country. And that's it. That's the origin story. And today –

Dan Ferris:              Not a bad story.

Harvey Sawikin:       My original co-founder retired after three years. As I've discovered is that fund management, the marathon part of – there are people who approach it like a sprint to make money quick. And there are other people who are ready for the marathon. And, of the original four co-founders, two were gone pretty, pretty fast. And the other two, myself and Ian Hague, are still co-managing the fund today, 30, 32 and a half years later.

And we're still – in fact, some of our earliest investments are still positions in the fund. When you're – some of these countries, like for example, there's a company in Georgia, the country of Georgia, called Lion Finance, which we bought in a private transaction in 2004, like from buying out some old management when it was being – the bank was being – it's a bank – was being sort of restructured. And it's still our biggest position today, 22 years later. When we bought it, it was under $20 million market valuation, and we bought 20% of the bank. And I think we bought 20% of the bank for around $10 million, if I remember. And now it's got a $5 billion market cap.

On London, and it's in the FTSE 100. And that's why emerging markets are so fantastic, because if you catch lightning in a bottle, it can go on for years and years and years. Obviously, there are bumps in the road and it can be a roller coaster.

Dan Ferris:              There are.

Harvey Sawikin:       We've experienced, we've experienced some big drawdowns, but in the long run, it's worth it.

Dan Ferris:              So the big complaint that the typical, sort of mostly North American, mostly U.S. investor will, will say to a guy like you is I just can't assess the politics. I can't assess the government and the environment. And I don't know – are they going to seize assets? Or is it, is my own government going to make it impossible for me to invest there all of a sudden and cut me off? We know that's happened.

And does – first of all, I guess there's two questions. One side question is, does being in the Cayman Islands help you get around that? And then the other one is, what do you say to the – our listeners are mostly  U.S.-based investors. So what would you tell them about those standard sort of complaints?

Harvey Sawikin:       Cayman Islands is just purely It's because it's a tax haven that allows us to have both foreigners and U.S. people in the same vehicle. And so it doesn't really – there's no benefits to being in Cayman. I'm based in New York. I think, in fact, we've always thought that emerging-market investors paid too little attention to the politics and too much to the macroeconomic – relative to the macroeconomics. And my partner Ian, his background is political science. He was a Soviet studies person. And so, our whole original idea was based on a thesis about how Russian politics were going to play out in the '90s.

And over the years, every new market we've gotten into, the politics is a critical part of it. I would put it up there equal to the macroeconomic background. When we got into Georgia, for example, they had just had a revolution. They brought in a new leadership, a new president, new prime minister who were libertarians. Literally, the prime minister, well, he was the – he was the CEO of the Bank of Georgia who brought us in, who then became Prime Minister. He had a picture of Margaret Thatcher on his wall.

So we knew this is a country that was going to be super favorable to business and investors. So yeah, it's very important. I think that to write it off entirely and say, well, I don't do emerging markets because the politics is too wonky and scary, Warren Buffett famously has said that, that he doesn't, yet he did a trade, a fantastic trade in PetroChina and BYD.

So there are opportunities. You have to be selective, which is why, for example, in our mandate right now, we have 35 countries we could be investing in. We're only really active in nine at the moment. The other ones we consider to be uninvestable, either because we don't like the political situation, there's not enough of a capital market, the economics, macroeconomic picture is no good. An example of the latter would be, I would say, Turkey. Turkey's – people have been in and out of Turkey. It's a very frustrating market because it seems to do well for a while, and then there's a macroeconomic crisis. Inflation goes to 80%, and then people lose their money. So we, we don't have anything in Turkey. It's something we would trade. We would not – I don't consider it a long-term investment the way it's run now.

Another example of a political place would be a place like Tajikistan, which is basically an autocracy where there's no room for the market and there's no room for foreign investors and minority investors. So there – yet we keep an eye on all these countries to see if any of them change, and they do change. Georgia was uninvestable when we started, and then it became the greatest investment we ever made, just about.

And the other thing is these countries evolve. So when we started in the Baltic States, they had just gotten free of the Soviet Union. They were figuring things out, and they had some crises to get through before – they had a banking crisis in the late '90s. But we always knew that they had one overriding goal, which was to join the EU and NATO and be safe from Russia forever, because they didn't want to be reoccupied by Russia.

And we look for countries that have a long-term goal, political goal, and that keeps them on the path even when there are people who try to – populists arise and try to mess things up and go in a different direction. And the people won't allow it. The people know what they want.

So the Baltic states went from these newly freed Soviet republics to joining the EU, then they joined NATO, then they joined the euro. And now today GDP per capita in these countries is something like – it's only about one-third less than it is in Sweden, in France and Denmark. So it's a huge success story.

And the people – if you went to the capital of Estonia, Tallinn, you might think you were in Helsinki or Copenhagen or something. So we're looking for that transformative, long-term situations, but I understand for 15 years now, emerging markets have been out of favor. They peaked in 2007. I know exactly when they peaked because I got a puppy just about the day they peaked. I had a puppy that arrived in a plane from Ohio, and I had to pick him up. My fund was on top of the world. Everything was on top of the world. I was getting my puppy. The puppy lived to see the emerging-markets index take out its 2007 high, but he had to live to be 18 to see it. He passed away a few months ago, and it only took – it took 18 years for the, for the index to reach its 2007 high.

Meanwhile, the U.S. has been – the whole story in equities. So I understand Americans look at it and they say, "Why should I bother with emerging markets when the U.S. is doing so well? The thing I would say to that is that things can change. If you – between, 1982 and 2000, the U.S. was the place to be. And then for 10 years, the U.S. gave no gave no performance at all, but emerging markets were skyrocketing. And people who had some diversification into emerging markets – not just emerging markets, the nondollar currencies went skyrocketing. The euro got as high as 140.

It can happen again. What would set it off? I'm not sure. Clearly, relative valuations are quite stretched. The U.S. market somewhere, I don't know, 22 times earnings, 24 times earnings. My fund, the overall, the average [price-to-earnings ("PE") ratio] in my fund is about 9.

Dan Ferris:              Nine?

Harvey Sawikin:       Yeah, that's the average. Single-digit PE. And a lot of my companies of our major positions are growing earnings at 15% to 20% year in, year out. And they have a lot of room to grow because the economies are still relatively young. So it's a valuation discrepancy. At some point, people start to take notice. Also, the dollar's been super strong for a long time. And frankly, I'm a little amazed at how strong the dollar continues to be.

Dan Ferris:              I think a lot of people are like – I think that's a – that amazement is a widespread feeling.

Harvey Sawikin:       Well, I read the – do you know Kenneth Rogoff, the brilliant economist who wrote This Time It's Different, a great book? He has a new sort of memoir/book about macroeconomics called Our Dollar, Your Problem. And he – and I read that, and now I understand it a lot better because he really goes through how irreplaceable the dollar is in so many ways and transactions. And it's just, it's very hard to replace it. I remember a currency trader – I always liked the euro. I said, "Why not the euro?"

And I remember I mentioned, I was mentioning this to a currency trader friend of mine. He said, "Harvey, I just want you to know one thing: No currency trader has ever written on his pad, 'Buy euros today.'" You know what I mean? So, nobody really wants it. Yeah, if you have it, you have to have it because you have to sell some dollars. So I don't know.

But nevertheless, in 2000, it didn't seem – it seemed like the U.S. was the only game in town then, too. And then when the Nasdaq crashed and a lot of things changed, and then for 10 years, people who had some diversification were really benefited from it.

Dan Ferris:              Right, so the currency certainly benefits from investment inflows. But emerging-market economies benefit from a strong dollar, from, exports. That's a very traditional view of things. Is it –?

Harvey Sawikin:       Well, it depends on – some countries export, if you're a commodity exporter, you don't really care so much [about] the level of the dollar, I guess, because what you sell is priced. If you're a – I think that, for people who export, I think, for example, the euro wants to be a little weaker because they're exporting their terms of trade, they want to be attractive versus U.S. exports. But in our countries, to us, the strengthening local currency is a very bullish and positive sign because it shows that the people have faith in the government and the currency.

And for example, we had a conference call yesterday with our largest holding, Lion Finance. They – it was quarterly earnings results – and one of the, one of the metrics they showed was what they call de-dollarization. So deposits are now – the majority of deposits in their country are in the local currency, and that is very strong. That's very good for the banking system. It's very good for consumers, if they can use their own currency to buy things.

Dan Ferris:              So what country is it?

Harvey Sawikin:       Georgia. Actually, they also have a subsidiary in Armenia, and the same story is happening there. And one of the things that is supporting both the Georgian and Armenian currencies are large foreign direct investments – not portfolio investors like me, although we're part of it – but much more so investments in ports, railways, and, AI data centers, things like that. And one of the reasons this is happening is because of Russia.

So when the war started in 2022, a lot of international corporations moved their headquarters and their people out of Russia into nearby countries. So Georgia, Armenia, Kazakhstan, Serbia, they've all been huge recipients of people and businesses. That's had a big economic impact on the rest of Eastern Europe, positive, since the war started. And it's kind of amazing to me because when the war started in 2022, The last thing I would have thought is that we were going to be having a big bull market in the rest of Eastern Europe, but that's what has happened. There's been a huge bull market for four and a half years, since the war started that's lifted all these markets.

And the second reason – so part of it was the short-term effect of Russians moving to these countries, starting to spend money, and the other, longer term is that, nobody really trusts Russia anymore in terms of – they don't want to be dependent on Russia in terms of infrastructure transport. So there are new transport corridors are being created.

For example, there's a corridor rail and ports between Asia and Europe that will pass– will not pass through Russia. It will pass through Armenia, Georgia, the Black Sea, and that brings in – and the Chinese are actually paying for a lot of it. Or Kazakhstan, which is another country we invest in, they don't, they don't want to be – right now they export probably 80 to 90% of their oil. This big oil exporter goes through Russian pipeline. That's dangerous. In fact, the pipeline was being bombed by Ukraine, and suddenly Kazakhstan's oil exports had to stop.

So they've gotten together with the Chinese, and they have these plans to significantly increase direct exports to China from Kazakhstan, and they're going to build extra pipelines and connections and rail. So it's a – the things that make a currency strong are usually the things that make it a good place to invest.

And things that – when you have a currency that perennially devalues like the Turkish lira, you can still make money in dollar terms, but you need to have pretty significant nominal growth in equities. You can make money in fixed income. It's harder unless you can hedge the currency, which is usually hard because when you have a country that has a perennially devaluing currency, no one's going to sell you any hedges at a cheap price. They're usually pretty efficient. One of the questions I get is do you hedge? Have you hedged?

And my answer is, it's very hard to hedge because the banks who would – the Russian banks, for example, that would have offered me ruble hedges, they knew better than me, much better, exactly what was likely to happen. There was not going to be any – and the cost of hedging would have been so humongous that it's just not– would have taken away most of the return.

So you just have to keep your eye – keep a careful eye on the macro. Any signs that the currency might be wobbling, you have to think about whether you get out, go to cash. But trying to buy portfolio hedges in emerging markets – that said, I'm an equity investor. We're 100% public equities. I have a good friend who is an emerging-markets debt trader. And everything he does is hedged. He uses credit default swaps and other kinds of options, too. And he locks in quite good returns that he locks in. But he's playing a different game than I am.

Dan Ferris:              I have to ask you this because it's the entire world's favorite subject right now. You spend a lot of time thinking about macroeconomics in countries All over the place. You must have some kind of view on AI. And if so, are you invested because of that view, or do you refrain from investing because of that view?

Harvey Sawikin:       No, I know a lot more about AI than I even really want to. And I'll tell you how this came about, because we had a Russian stock called Yandex, which was the Google and Uber of Russia.

Dan Ferris:              I remember that.

Harvey Sawikin:       It was one of our positions there. And when the war started, the CEO of Yandex said, "I don't want any part of this. I'm leaving the country." And what they did was they split the company in half. So the Google and Uber part went to Russia, and the listed equity was listed in Nasdaq. [It] kept the non-Russian part, which happened to be the largest AI data center in Europe, in Finland, and a lot of engineers, and $2.5 billion of cash.

So the company at this point had been delisted, and it was trading – and it was delisted, and I was not allowed to – I could hold it, but I couldn't buy anymore until they divested the Russian stuff. Once the Russian stuff was fully divested, we said, "This is an unbelievable –" oh, so over the counter, there were some offers, mutual funds who finally could trade it and get out of it. And the implied market cap was $1.5 billion. And I knew somebody who was an AI expert, a young guy who was actually my college roommate's son who was staying in my apartment because he was taking an AI job in New York. And I showed it to him and I said, "Is this crazy?"

He said, "This is crazy," because similar companies with much less than Yandex were in the private market, were being valued at $8 billion, $9 billion with no cash. Here you had the largest data center in Europe and $2.5 billion of cash. You could buy for $1.5 billion. So we just – we, we said we've got to do this. So we kind of doubled down on it. We bought a few million dollars' worth in the over-the-counter market at about $8 and then at $7.50. And we were betting that it would relist on Nasdaq. We knew they had a long-term relationship with both Nvidia and Goldman Sachs.

Yhey were one of Nvidia's first customers back in the early 2010s for GPUs to use in AI because they were very advanced in AI, this company Yandex. So we bet on all these things happening and they all happened. So suddenly we had a massive gain because today – and you got me on a good day because today they came out with blockbuster results and the stock is trading around $240 and we bought it at $7.

Dan Ferris:              You paid it for $8?

Harvey Sawikin:       Yeah, we bought it at $8. We bought millions of dollars at $8. I only wish that we had taken every share offered to us. It was killing me. But, and also we were selling it Because we kept saying, so it went to, we started selling it around 30 because I was sort of like, what do I know about AI? I'm not an expert. Then I sold more at $40. I sold more at $60. I sold more at $90. And then I said, what am I doing? Just hold it for God's sake. So we still have it.

And because of Nebby, oh, and it was renamed Nebius. So now Nebius and CoreWeave are the two big AI data-center infrastructure plays. I really like Nebius, and this is one reason why it's still a very big position for us, because we still – we've been trimming it the whole way, but it's still a big position because they're doing something a little bit different. They're actually trying to create a vertical stack. So it's not just metal and servers and chips. You can go to Nebius, an enterprise, a smaller enterprise. You don't have to be Microsoft. You can go to Nebius.

They do have deals with Microsoft and Meta [Platforms], but a medium-sized enterprise can go and say, "We want to integrate AI into our business." They will either directly with the company or with the company's consulting firm, they will design a software sort of integration and host it. They also have been running data centers for a long time. They're very good at them. They have their own architecture, which is more efficient than most.

All of that said – so I love Nebius. It's a great company. I'm very happy. It's a big position. All of that said, I read all the same skeptical things as anybody else. I have a – in fact, I wrote – I have a Substack I put out once a week. It's called the Falling Knife. And which –

Dan Ferris:              Yes, I have it in front of me.

Harvey Sawikin:       Oh, thank you. I posted a Substack about in February of '25, and I think I was one of the first people to make this comparison. And I compared the AI model developers to the fiber-optic companies in the '90s –

Dan Ferris:              Sure.

Harvey Sawikin:       – wondering whether they were putting up all this capacity, but they wouldn't be the beneficiaries of it. And the comparison – so the question is, are they more like fiber-optic companies or railroads, or more like cereal companies? Because cereal makers have very high competition, and yet they've always managed to keep very high margins. So what distinguishes the cereal companies from the fiber-optic companies? The cereal companies have brands. If you like product 19, you don't want to have Frosted Flakes. So they have some pricing power.

So to me, the real question about the LLMs is whether there really is going to be any sort of pricing power based on preference. At the moment, it looks like Anthropic is building something like that. But it remains to be seen. Then you have the Chinese coming along.

So I share some of the skepticism that people have that – in the end of the day, there's no way they can earn enough money to justify trillion-dollar valuations. And I am concerned, as a big shareholder of an infrastructure company, that the whole complex can be affected by – if OpenAI fails to go public and suddenly people question whether they can pay their debts even, then we have a problem for the whole complex.

So I don't know better than anyone else. All I know is the company that I have, at least for the next couple of years, they have way more demand than they can even satisfy. They have contracts that are locked in with creditworthy people like Microsoft and Meta, and they're going to be making a lot of money for the next three years. And what happens five years down the road, what AI will look like, who will be making the money from it, I have no idea.

Dan Ferris:              That's – yeah, that sounds very reasonable. I continue to think of it very much like the Internet, which of course, the dot-com bubble soared and crashed, but we were all basically right because we all knew it would transform the life of just about every business and every person in the world. It did do exactly that. And I feel like AI is the same thing.

But I guess maybe cutting to the chase a little bit, maybe I should catch this. [Crosstalk] Go ahead.

Harvey Sawikin:       I was just going to say, it could be that in the end of the day, the winners from AI are not the LLM producers. It's mainstream – that basically it'll be companies, if they can get it at a cheap enough cost, that companies will be able to use it. Just think about if customer service was really – if AI customer service was really good and you didn't need call centers, and it did a great job and it converted.

And there have been some studies that really good AI customer service actually converts people to purchasing better than a lot of the call centers. So it may be that Main Street's the big winner and it's not OpenAI and it's not Anthropic because they are too – they're too easily substituted for each other. And a lot of the people I know who are – I know a couple of people who are AI consultants who are helping companies do it, put it in. They're trying to make them model-agnostic just so they don't get locked into Claude or to OpenAI. But then I hear of other ones that say, "No, no, no. You have to use Claude, have to use – that's much better."

Dan Ferris:              Yeah, we'll see where that winds up in five years, won't we? But I was saying a moment ago, I was about to say maybe I should cut to the chase and ask you the question you asked yourself recently. Do you know a bubble when you see one? And is this one, or does it look like it's headed for one? And I love the answer you gave, by the way, in your Substack. Loved it.

Harvey Sawikin:       Well, I think what I said in my Substack is that when you try to – so the background of this was that I was saying that fund managers – in a previous Substack, I had written that I think fund managers have an obligation when things get crazy and everyone's throwing money at you and you know that it's risky, to slow people down a little, say to investors, look, I know this is exciting, but maybe you should – let's think here for a minute.

Don't just grab every dollar you can grab while the ducks are quacking, as they say. Don't feed the ducks when they're quacking. So I was telling a friend of mine about this who's a Wall Street pro, very – and he said, "No, you're wrong. You're wrong because nobody knows where the top is. You can't predict the top of a market. People can make that decision for themselves."

So then I thought to myself, well, how do I know when a market is topping out? And quantitative – and I basically said there are two kinds of ways, quantitative measures of a topping market haven't really been highly predictive. So for example, the S&P 500 has been at its peak for much of its history. In other words, just because it's at its peak doesn't mean it's something you should sell. Also, there's a metric people use called the CAPE, cyclically adjusted P/E.

Dan Ferris:              I know it well.

Harvey Sawikin:       And it's been flashing red for about – I remember the first I heard somebody refer to this was in about 2012 or 2013, where I think it was – I don't want to say who it is, but there's somebody very associated with CAPE who said the market is extremely expensive, look at the CAPE. And so I developed at that time – I said, I want a superhero called the CAPE Crusader who, when anybody is thinking of selling the U.S. market because of the CAPE, he flies down and stops them, right?

Dan Ferris:              Yeah.

Harvey Sawikin:       So, the quantitative measures are questionable. I find that qualitative ones, though, are a little more believable. So, for example, and the ones I use is that – when the advertising is overwhelming, like the way crypto was in the so-called "crypto Super Bowl of 2022."

Dan Ferris:              Oh, yeah.

Harvey Sawikin:       When an AI in a way is today, it's just crazy. You go on the subway, every ad is for an AI company. And I don't even know what most of them – you can't tell what they do.

Dan Ferris:              No, you can't.

Harvey Sawikin:       They may not even know what they do. They may be looking for the so-called product-market fit, which is a great phrase I love because it means, "I don't know, I probably can make money somehow." And also, the Ashenburner case to me was a perfect example where here's a guy, 25 years old, with no fund management experience. Suddenly given billions and billions of dollars to manage because he wrote – why? Because he wrote a good piece. So what? What's his experience? And they took him to the cleaners. Citadel and Jane Street and Goldman Sachs. And everybody looked at this guy, and it was like in a cartoon where they look at somebody and he turns into a turkey, you know?

Dan Ferris:              Yeah.

Harvey Sawikin:       I think they looked at him and then just like, "We're going to take this guy to the cleaners and all his investors, too. And I just feel like that was a very bubbly situation with him. But I can't say that AI is a bubble because it goes to the same things we were just talking about.

Dan Ferris:              Sure.

Harvey Sawikin:       In fact, recent earnings from Microsoft and Amazon where they showed how AI was – there was a real return to them on the AI investments. And if that continues and people can really show that the AI has a real economic return, then I don't – it can go on for quite a while. So I don't really – I can't say that AI is a bubble.

I would say that some of the qualitative indicia are there, like people suddenly being – and all these startups getting $10 billion, $20 billion valuations where they don't have a product, they have an idea. And there's somebody who came out of OpenAI and they have an idea. But that's [venture capital ("VC")].

Dan Ferris:              Sure. I would say, or I would ask you, I should say – your job isn't really, and I don't perceive you as saying that you want to pick a top when you're talking to that enthusiastic when things are looking really frothy – isn't it just, it's just risk assessment. It's a standard part of your job, in other words. So the guy who's saying, "No, no, no, no, no, you don't know where the top is, so you have to take all their money" or something. I'm not sure what his precise message was for you, but it just seems like that's not even a very special moment, is it? It's just like, well, this is normal risk assessment. That I need to do for you as a potential client or an existing one that wants to give me a ton more money or whatever it is, right? It's normal, isn't it?

Harvey Sawikin:       It's easy for me – look, it's easy for me to say that I wouldn't take money because, I'm in the most out of favor. I'm in emerging markets –

Dan Ferris:              Yeah.

Harvey Sawikin:       – and in Eastern Europe. What could be more out of favor? It's not like anyone's not beating my door down in spite of – frankly, I must say, we've had phenomenal performance for the last four years. But nevertheless, nobody is beating my door down. So, putting myself in the place of a technology fund where everybody wants to give me money, would I stop taking it? Honestly, no, I would keep taking it. I might be a little more careful in modeling or in underwriting what I give money to. And I think going – and I've been involved in bubbles before.

So, I was involved in the emerging-markets bubble of 2007. And we tried to do the right thing, but we didn't handle it right. What we did, we thought this – we said we were taking in vast amounts of money at the top, as you always do. And we said, well, the stock market is getting pretty expensive. we found some pre-IPO illiquid things that were offered to us at cheaper valuations.

And we said, OK, well, that at least we're paying a fair price. But that was the wrong way to go about it. Because when the market peaked in '07 and then crashed in '08, we were in all this illiquid stuff we couldn't sell. So hiding in illiquidity is not the answer, either. What would have been the answer at that time would probably have been just being a little more patient.

So we took in, let's say we took in $500 million in 2007. We could have, I don't remember how much it was, but let's just say it was – we were getting tens of millions every month coming in. We could have said, "Look, let's just go to 20% cash, 30% cash, maybe buy some out-of-the-money puts just to be –" So I think that if I was running tech money today and I was being given a lot of money, I'm not sure I would immediately give it to somebody who just came out of Anthropic and has an idea and no product and gets a $10 billion valuation or any billion-dollar valuation. That to me is, just buying lottery tickets or something. I think that there must be ways to navigate this environment. But no, you're right. I t's easy for me to say, "Oh, I don't take –" I would take the money. And fund managers always take the money.

I was – what I was talking about also was in this piece about bubbles, and the previous piece about don't feed the quacking ducks is that I find it offensive in some ways that private-equity funds who have tens of billions under management, they're always marketing something, whether the macro environment is attractive, not attractive, whether the valuations on the deals are really high, their attitude is that's up to the investors to decide. We're going to market to them and we're going to tell them all the great things we're going to do.

And from their point of view, it doesn't matter because if it turns out that 2026 is a bad vintage and those funds get have bad returns because the market goes down, well, then they'll do one in 2027. And if that's a bad vintage, they'll do one in 2028. And the one that hits is the one where they make all the fees.

So essentially what I'm saying is it's up to the investor to decide. They're not going to tell you this is a bad time. You, the [limited partner], have to make your own independent judgment as to whether it's a good idea to do private equity right now or VC right now or invest in AI right now. No one is going to help you. No one's going to protect you from your own desire to be part of the big bull market.

And I speak from experience, because in 2007 I invested in a private-equity fund and it was a disaster and I got completely – lost 70% of my money in a private-equity fund by a top-ranked manager. And I mentioned in my Substack, I went to his presentation. Then the very next year, he raised a new fund and he said at the launch presentation, "Well, 2007 was not such a great time, but this now, this is great, this is perfect."

And I was like really mad. I was like, well, why did you invest all the money In 2007, couldn't you– you could see things were starting to fall apart. Couldn't you have waited? No, because from his point of view, the optimal thing to do was spend all the money from that fund, the '07 vintage, which was never going to be any good, start fresh in '08 with fresh capital and buying everything at the bottom. And I, and I feel that private equity, there's a mentality there to squeeze every dollar at all times. And I'm not saying every fund does this, but I do think it's common in the industry.

Dan Ferris:              One would think your ability to raise money kind of weakens after enough of these episodes.

Harvey Sawikin:       Well, you would think that, but if you have a big name like KKR, Blackstone, Apollo, Carlyle, the big institutions and endowments, generally they're going to go with the safest names. And they'll always have an explanation of why the last fund didn't work. And it will be like that. It'll say, yeah, the vintage turned out not to be a great vintage, but now, now it's good.

But if I were running an endowment, which I'm not, but I do invest my own money, and  I'm definitely looking for smaller – as I said in my Substack, I don't invest in any fund that has a Roman numeral higher than 2. I just don't want to invest in Apollo 13. I chose that deliberately. Or Carlyle MCM XL IV1. I just don't.

So I have given money to smaller managers, sometimes in their first fund, and where I see a new idea somebody really motivated and smart. And they haven't all worked, but I've got a couple of young managers that I've invested with that I'm pretty excited about. So, I'm not against private equity. I'm not against VC. But I do think it's a "buyer beware" kind of situation. The buyer, the investor has to protect themselves in any investment.

And that's as I wrote in my Substack, that's in funds. Fund managers are supposed to be fiduciaries. When you get out of the fund world and you get into the world of financial entrepreneurs like Elon Musk or our president, they don't have any – they have no obligation to protect anyone but themselves. So, even if I think Apollo and Carlyle and Blackstone should be a little bit more protective of the investors, I don't even expect that at all of financial entrepreneurs.

And everybody coming out with these new AI stocks – and it used to be crypto-related things, now it's AI-related things – they're just going to take whatever money they can get. They have no obligation to anybody, that it's going to work, or that it's smart or that it's right. It's up to you, the investor, to protect yourself.

Dan Ferris:              All right. And on this somewhat slightly bubbly note here, let's ask our final question, which is the identical question for every guest, no matter what the topic. Even when we have nonfinancial guests, they get this same identical question. And if you've already said the answer, feel free to repeat it. Or if you need time to think, just take your time. But the question is simply for our listeners and viewers' benefit. If you could leave them with a single thought today, a single idea, what would you like that to be?

Harvey Sawikin:       I think people should make sure to be very well-rounded, keep an open mind, don't chase money and success to the exclusion of having a personal life or your family, because you won't necessarily find it. And then what are you left with? So I would say that – I've had some financial success. I never chased it. I was lucky, seized on a couple of opportunities, but I was always there for my kids the whole time. And I always tried to stay well-rounded, read novels.

It was never about, for me, about – there are people who say that– there's one guy who famously says that he calculates how much his time is worth, and anything that doesn't meet his hourly rate that he set for himself, he delegates to somebody else. And I say that's not the way to live. Do things for yourself. Be like a regular person. And maybe you will, you will reach your financial goals. Maybe you won't, but you'll definitely have a better life along the way.

Dan Ferris:              Well said. Thank you for that. And thanks for being here, Harvey. It was really great to hear from you.

Harvey Sawikin:       OK. Thank you.

Dan Ferris:    You bet.

Harvey Sawikin:       Thank you. I enjoyed it. Thanks a lot.

Dan Ferris:              Wow. That guy knows all kinds of stuff about things I hardly ever think about. I never think about investing in a country like Georgia or Kazakhstan or the Baltic States or any place else like that. I did think about buying a Poland ETF a few years ago, and I didn't do it, and the thing took off. Like we were saying, it's been – the performance in Eastern Europe has been incredible the last four years, and I missed out on that.

But Harvey just knows. You can just hear the experience in the tone of his voice. You can just hear he's – when you've been investing in emerging markets since the '90s and it's 2026, believe me, if you're still in business, you are one cool customer. And I think you can hear that in everything Harvey said. His origin story was great.

And it was great to hear how he thought about owning companies that are highly illiquid, maybe, that the rest of the world doesn't even know about. Did you hear that explanation when he talked about owning companies before a firm like Templeton issues a big ETF and starts buying them? Because they can't issue the big ETF until well into the trend, because investors won't buy the ETF. But they do their own work on macroeconomics and politics and equity research. So they can go in when nobody else wants to go in. And as you heard him say, that's what they like to do. And it's worked out for them.

So that's – we have to have a guy like Harvey every now and then because there are all these pockets in markets. We all talk about the same 500 stocks or so. Folks like me tend to. And every now and then we'll throw something different at you. But guys like Harvey, they're in another plane. They're talking about stuff you've, you've probably never heard of 90% of his holdings.

So that's – that alone makes it really valuable to get someone's perspective who's been dealing in that world that most of us never see, never touch, and has learned so much. So I hope you enjoyed it for that reason.

Another great interview, another great episode of the Stansberry Investor Hour. I hope you enjoyed it as much as we did. And remember to hit like and subscribe and sign up for our free daily e-mail.

Announcer:             Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company, or affiliates.