# AI’s Speed Crash: The Structural Bull Market Isn’t Over

https://www.youtube.com/watch?v=tAUIFAptWvo

[00:00] All right.
[00:03] Uh, a big week for AI stocks falling.
[00:10] So, let's uh let's try to go through this.
[00:12] There's a lot of things I'm going to try to do.
[00:13] I'm not going to spend as much time uh trying to convince you guys that um AI is a structural bull market.
[00:22] Uh which you guys know that it is in my mind and that the compute side uh there's insatiable demand and it will be that way for a long time.
[00:34] But there's some things that I've written about and talked about um not just in terms of the AI midcycle slowdown but also on market structure.
[00:42] I wrote a piece in December on it.
[00:45] Uh, and then I did a video on it that you guys probably remember that wasn't too long ago, which is basically this.
[00:56] And the reason I wanted to bring this up now is because I wrote this in the middle of May.
[01:01] When I really started to talk about the fact that we had finally reached a peak,
[01:05] A peak in terms of it was obvious that whether it was Korea or whether it was the fact that every single person that I talked to who I couldn't convince to buy memory last year was now pushing back on anything I was writing about in terms of the fact that there'd be bottlenecks and there'd be issues and the bar is now so high.
[01:28] And then eventually it led to the midcycle slowdown which was all about the second derivative.
[01:32] But this thing was on the market structure.
[01:36] And the reason I want to talk about it now is because this is only going to get worse.
[01:39] So bubbles, parabolas, and speed crashes.
[01:42] Um, we've seen the bubble in the form of a parabola.
[01:45] And now we've absolutely seen a speed crash in certain names with inside AI.
[01:50] And in my opinion, this is something that everyone's gonna have to get used to, which is these parabolic moves higher where everyone goes in.
[02:02] Because momentum and buying what's working is now being driven more than ever by AI agents, which will only increase and that their job is to be non-emotional and to keep sourcing for the best outcome.
[02:17] And momentum historically is a good way to go.
[02:19] But the problem is when you have leverage on top of it, you end up getting this scenario where V control kicks in.
[02:27] And I'm going to get into that, but I just want you to read this last line.
[02:30] Markets are moving from manias, panics, and crashes, which is the book by Charles Kindleberger, to bubbles, parabasis, and speed crashes, faster up, faster down, and structurally different.
[02:42] So this is not a business cycle thing.
[02:44] So, I'm starting to hear people talk about the fact that, oh, this is going to take down everything.
[02:50] This is related to the AI debt situation.
[02:54] Basically, we went too high and we needed to have a correction.
[02:57] And the way that you know it is to look at this.
[02:59] So, by now you guys have seen me either in the subscriber
[03:03] Webinar this week posting on X.
[03:06] This is the Morgan Stanley tech momentum factor index.
[03:14] And this is the 18-day rate of change at minus 40%.
[03:20] Now they have data on this published in Bloomberg back to 1998.
[03:23] So this is by far by far the worst unwind we have seen in tech momentum.
[03:31] So the tech momentum factor down 40% in 18 days which takes us back to June.
[03:43] I've shown this megaphone chart now for a while and this is an indication of how long this has been building.
[03:51] So even though this may look like it's been going since here, the reality is this point here was still in line with everything and this is opus 4.5.
[03:58] This is the agentic side.
[04:01] This is what I've been writing about.
[04:03] This has been what everyone has come back on.
[04:04] because the earnings have come through.
[04:06] So this is the agentic trade which brought more and more people into it and V started to move higher really from October.
[04:19] Now here is the momentum side.
[04:19] This is not just the tech side which is the uh the white line.
[04:25] The one that's actually given up the most is the industrial momentum which again is the other factor I've highlighted on the momentum side that is basically the AI trade.
[04:35] Now this is overlaid with my thematic portfolio.
[04:38] You can't separate the correlation.
[04:40] You can't separate this as time has gone on.
[04:43] MO is a chameleon.
[04:43] It basically takes what's working and what obviously has been working really since October into November.
[04:51] November is when Opus 4.5 was released.
[04:54] Everything started to jump in and we got this agentic movement and correlations with inside my portfolio were close to one.
[05:00] I wrote this paper on June 4th.
[05:02] The firework show is over.
[05:02] Agentic AI moves
[05:05] From discovery to digestion.
[05:09] That is where I think we are in AI.
[05:11] The firework show is over and the last couple of weeks have been the climax and an incredible display.
[05:17] But the agentic AI buildout has just begun.
[05:19] So I wrote about this.
[05:21] I'm not surprised by anything that's happened.
[05:23] The fact that we've had a correction that has given back now more than 38%, about 40% of the move from Opus 4.5, is not surprising to me.
[05:34] Some names are down much more than that.
[05:36] I'll go through some of those.
[05:38] But it was this thing of more people are now fighting against the bottleneck and short side than against the agentic AI buildout itself.
[05:46] For me, that usually means that the all you can eat AI buffet has left everyone full and in need of a digestion period.
[05:53] So this was June 4th.
[05:56] We've clearly gone through a digestion period where we are eradicating the most levered funds and people.
[06:02] You guys can read the other highlighted part.
[06:04] I just want to do this.
[06:06] As my
[06:06] Father taught me, the odds on the tote board are now fair.
[06:10] So let's sit out this race until we see better odds.
[06:13] We have better odds right now.
[06:16] I have been doing little buys on this week, particularly in the last two days.
[06:24] Uh, I even bought Micron at higher levels than the average price of where I got out.
[06:29] I did buy some slightly lower than where I sold at my highest price.
[06:34] But the reason I'm buying it is because since I sold out and basically got rid of my last share, which was in early June around this paper, there's been new news.
[06:43] So, I just want you guys to go through because it is now equally possible for companies to underwhelm as it is for them to overwhelm.
[06:51] A company can report extraordinary growth, Micron, Samsung, ASML, and still disappoint.
[06:58] Stock trades lower.
[07:00] None of this is a surprise to me that we're seeing a correction.
[07:05] If it extends much further than here, yes, it will be a correction.
[07:02] If it gets to the
[07:07] 50 day 50% retracement and then immediately turns starts to turn back up, it won't surprise me.
[07:14] Uh but as I've said and I said on the webinar uh for the subscribers this week, I don't expect there to be a massive just bounce out of here.
[07:22] And I'll get through the reasons why.
[07:26] Um but remember the reason this is held in bid better than the single names.
[07:29] This has a hundred names in it.
[07:31] They were chosen for a reason.
[07:34] They were chosen because more diversity on this is going to be better.
[07:36] I will be making adjustments to the portfolio on some of the names because there's been new news over the last two months and the price movements have basically argued that they shouldn't be involved in this even though they're going to benefit.
[07:50] They will be disrupted sooner than what people think.
[07:51] On the flip side, I will be releasing this week the paper on the 800 volt DC, the Vera Rubin side, which will be a step up step up function for some companies and that's what the paper was about.
[08:05] Now, here is the theatic portfolio showing it's
[08:07] Having no impact right now on the S&P.
[08:10] And yes, uh, the equal weight S&P.
[08:13] Now, this was uh through the early morning on Friday, but we didn't have that big of a move, but the S&P did finish lower.
[08:24] But regardless, as this unwind has happened so far, nothing has gone on.
[08:27] And the major reason why is we are now 43 names into the S&P 500 earnings period.
[08:35] Look at the earnings surprise.
[08:37] We're repeating what happened last quarter.
[08:39] The sales surprise 4%.
[08:44] Earning surprise 16%.
[08:47] Already we're off to a huge start on the earning side.
[08:49] And in particular when you go through and you look at these and I'm going to move head over.
[08:53] I highlighted just here JP Morgan surprise 34% and the stock traded up 10%.
[09:00] I went back and looked over history.
[09:02] You can't find a time where JP Morgan traded up 10% on an earnings surprise where it was trading near all-time highs.
[09:07] Goldman.
[09:10] Sachs beat by 45%.
[09:13] You can go through all of these numbers.
[09:16] UNH, a dead company.
[09:18] I've talked about the insurers.
[09:18] Morgan Stanley 18%.
[09:21] JB Hunt 10%.
[09:27] We're just getting beats again and GDP is much stronger than even the data suggests, especially from an earnings basis.
[09:33] So, here are some quotes from Jamie Diamond.
[09:36] It's getting as it's getting close to as good as it gets.
[09:38] So, let's go back and use a bare argument.
[09:41] Well, I've seen that before.
[09:42] That happens.
[09:45] Guys, don't let people go through it.
[09:46] If the S&P is going down, it wouldn't be up this much year-over-year.
[09:49] So in every time in history that I have gone through markets, the best recession signal, which is what sometimes does happen when you see a lot of statements like that, the S&P year-over-year turns negative.
[10:01] We're not even in the ballpark of that happening anytime soon.
[10:05] We'd have to fall significantly bounce.
[10:07] It would take a while.
[10:09] I've given you guys this stuff over time.
[10:09] Use the S&P 500 as
[10:13] The best benchmark for the economy.
[10:14] Stan Ducker Miller says it.
[10:17] All the models I built that was the number one factor involved with building it.
[10:21] The firm sees conditions across consumer banking, credit cards, commercial lending, investment banking, trading, payments, asset management, wealth man.
[10:27] The strength is not confined to one narrow corner.
[10:30] Basically, the good as it gets is that it's across the board.
[10:34] Now, if you go into David Solomon's side, everything is a similar comment except their business is obviously more heavily heavy uh heavily weighted towards the investment banking side.
[10:46] But again, you see all of them booming.
[10:48] The buildout of AI infrastructure remains in its early stages, and they're one of the companies involved with selling the debt and everything.
[10:55] This is not going to stop.
[10:57] AI acting as a new structural engine beneath that activity.
[11:00] The AI infrastructure and investment cycle is still early enough to support years of financing, M&A, and capital formation with inevitable bumps along the way.
[11:10] Goldman Sachs jumps to all-time high.
[11:10] JP
[11:13] Morgan jumps to all-time high.
[11:16] Junk spreads sit near all-time tights.
[11:19] And this story goes around and I got asked about it at least 10 times this week.
[11:23] No worries for me whatsoever about this.
[11:27] Zero Hedge does a good job of freaking you people out.
[11:31] That's great.
[11:31] Everyone sends me stuff going through isn't this a worry as I go through it.
[11:35] Debt to equity on these companies is next to nothing.
[11:39] And as I've said repeatedly, the hyperscalers, and this does not include Open AI, and this does not include Anthropic.
[11:44] If you guys want to think that they're going to fall apart, great.
[11:46] Except they're going to be protected by the government.
[11:47] So, I really don't know why you guys are getting all excited about the leading model companies in the US when we're race against China.
[11:54] But if you want to go look at these again, the debt to equity these companies is next to nothing.
[12:00] And the combined RPOS, contractual orders that they already have where the reason they can't fill them is because they don't have enough compute.
[12:08] What is the debt for?
[12:08] To make sure they have enough compute.
[12:10] The compute demand is insatiable.
[12:12] Don't listen to anything you hear from people
[12:14] That argue otherwise.
[12:14] It is insatiable.
[12:17] Insatiable.
[12:20] We will not be there anytime in the next four years where we have enough compute for all the intelligence in the billions of agents that are coming.
[12:29] The deleveraging factor.
[12:29] These are just some of the prime, uh, the prime book.
[12:31] Uh, you can see the numbers.
[12:35] We are taking these numbers down significantly, in some cases back below the levels of 26.
[12:39] Uh, this was through the prior week.
[12:43] So this is through January 10th.
[12:46] We had already taken memory down significantly in the long short side.
[12:52] Yet another quant tremor strikes systematic investors.
[12:53] Hedge funds that rely on sophisticated modeling and systematic trading have been rattled by a series of mini crisis, and insiders have been mildly — I've talked about this on this video.
[13:02] It does feel a lot like '07 to me, except for one problem.
[13:07] Spreads are not widening, and there is no recession on the horizon.
[13:11] So if you guys want to believe that there is, I had a recession signal in Octo — in September of
[13:16] '07.
[13:16] That's because the S&P 500 went negative year-over-year in September of '07.
[13:24] Also, claims were widening.
[13:25] There's a whole bunch of other things that were going on.
[13:29] Cuh profit margins had already come down.
[13:31] There were a lot of issues that were happening back in in '07.
[13:33] So, I don't want you guys to look at this and think this is another sign.
[13:36] Quad funds just suffered their most crippling trading route this year.
[13:39] That was as of June 30th.
[13:42] We've had obviously far worse things since then.
[13:44] AI selloff drives quant funds worst performance since August.
[13:51] Now, this is as of July 9th.
[13:51] This is one of the issues that I want to make sure people realize when I talk about the human structure is over.
[13:58] Every day more and more agents are responsible for trading activity because Robin Hood as of the end of May is open to agents so people could do it.
[14:07] Strategies that work harder so you don't have to.
[14:09] So we I've always said we are heading towards a bubble of optimized portfolios where people are mistakenly believing that their risk control is
[14:18] Tighter than what it is.
[14:20] Sharp ratios will come down for exactly what we've seen.
[14:22] We have seen an unprecedented rise in factor VA that has never been seen before in history.
[14:26] This goes way back in terms of that tech momentum side and what the VA is.
[14:34] I do not think this is coming back anytime soon.
[14:36] And I'll go back.
[14:38] And when I say anytime soon, I think we're going to have much higher volal scenarios that were hundred-year storms.
[14:43] They're going to happen all the time because things are going to get more crowded than they used to and the liquidity is going to be one direction.
[14:50] It's going to be the right risk, but it will unwind and then it will take a while to set back in.
[14:57] Um, and I think that's where we are in the AI trade right now.
[15:01] Uh, the B of the Bank of England warned about this AI agents risk causing market meltdowns.
[15:06] So, again, here it is 39 40% for the something that hasn't happened before, but it has happened before in other assets.
[15:16] So, gold at the beginning of this year, this is a three-day move in
[15:19] Gold, the biggest in 35 years.
[15:24] Silver had a 40% fall in five days.
[15:29] So, it's not like we haven't seen these things.
[15:32] And these were with big momentum trades.
[15:34] So, you know what this is starting to look like.
[15:36] Bitcoin gets 40% drawdowns in 18 days.
[15:41] This is my point about what is happening in the world as everything gets tokenized.
[15:47] And for those of you who have not yet done your homework on crypto, you will be paying a price in my opinion very, very soon.
[15:56] This is getting much, much harder for people to, it seems like, understand, but we're going to be in that position.
[16:03] So, you're going to need to pay attention to crypto, and especially as I get through the end of this and I start to take you through.
[16:08] But consumer agents, the rise of agents leads to more crypto.
[16:13] Bitcoin is the collateral of the future.
[16:15] I'll be writing about it, and as I do my new YouTube, for those of you who are...
[16:19] Already in crypto, you're starting to reach out.
[16:21] For you hedge fund people, mutual fund people, this is going to be where the beta is over the next 12 months.
[16:27] Uh, it's not going to be joining back into the infrastructure trade.
[16:31] Even though it'll outperform, I just don't see this happening.
[16:35] This is going to be consumer agent thing.
[16:37] So, it's going to be more idiosyncratic with names, but that's going to be very dangerous as we're going to see over the course of the next month.
[16:44] There's going to be a lot of names that are disrupted by AI with AI agents.
[16:48] Here's the gold situation, and this is where this gets important.
[16:50] So, this is the 60-day V, which went up to a record, except for here, and I'll show you why this actually was a record, especially when you're dealing with optimized portfolios.
[17:02] Here was silver again, 60-day V back 35 years.
[17:07] Here's techvall the the tech moval which is now at 92 has not stopped.
[17:13] Today was a quiet day because we rallied back, but to look at S&P V down here not moving.
[17:22] A portfolio and this was one asset and this was the other and you were VA waiting them now it's very hard for this thing which is according to this seven times as volatile so what should your appropriate position if you're equal risk weight be it's going to be very hard for leverage funds to go back into this regardless of whether it's a pod regardless of whether it's a systematic strategy or anything else that is vault controlled like Korean retail it's going to be very difficult to get back in because the margins are going to be higher now here is gold and silver this is silver this is gold and what you'll notice is these things did this while the S&P V did not rise during the times that we had high V in these things.
[18:11] The S&P V was also high.
[18:14] This is what's changing in the marketplace.
[18:16] And for me, it's going to stay this way forever.
[18:20] As we get into tokenization, as we get into 24 hours a day, I believe that
[18:25] Everything will trade differently and that you will be in a situation that this that the the structure, the market structure is going to forever change.
[18:34] In my opinion, it is much better for uh allocators that can make decisions over the long term, not have to deal with the minutia of the day-to-day and these little blips.
[18:47] Right now, if a mutual fund was behind on putting money to work in the AI trade, and now they've done their homework, and they believe that they should have more money in chips, well, they're getting a correction back to levels that make more sense.
[18:59] Uh, I actually didn't show this chart.
[19:00] I I just want to highlight that here's the 30-day V is even up here.
[19:05] So, when this stuff starts to h to move down, what you'll see is the 30-day will come down obviously before the 60-day.
[19:12] We we're not seeing that yet.
[19:16] Um this is again the the V for the two one year on on the tech side.
[19:22] So this is techmo one-year vault which is 60 S&P vault one.
[19:27] Of the lowest in history or at least in the last 20, 30 years.
[19:33] Here's the chart of gold.
[19:35] So again that V pickup was in here.
[19:38] It hasn't been able to get anything there and it actually is just tired.
[19:42] It's not that this is going, the V's coming down, it's just tired.
[19:47] Um, and I think we're going to see that in the same way silver.
[19:49] We've seen it in Bitcoin as well.
[19:52] So, here's where you have Adobe.
[19:54] The reason I want to bring this up is all of the AI stuff is going down, but it's going down right now with the 200 day pointing up for 85% of the names in my portfolio.
[20:07] So we are way, we were way above the 200 day.
[20:13] In the case of software which unwound particularly this year, the 200 day was already down.
[20:18] This is Adobe.
[20:19] If you go to Salesforce you get the same story.
[20:22] These are downward moving 200 day moving averages.
[20:25] These stocks are toast.
[20:26] They may bounce back up to the 200 day but they're going to have to pivot their
[20:28] business. And you're going to see this a
[20:30] lot more. You're even going to see it
[20:31] for the me the the semiconductor names
[20:33] at some point over the next 10 years. I
[20:36] just don't think it's happening for the
[20:37] next three. So, if you ask me what to
[20:39] watch for a bottom or why did I buy
[20:43] Micron, well, I wrote this piece on June
[20:45] 29th basically saying
[20:48] AI equals memory. And I'm going to keep
[20:51] saying that AI equals memory. Now, here
[20:54] are DRAM prices for basically
[20:58] the three, four, and five. All of them
[21:01] are going higher. So, even the three,
[21:03] the green one here, the old one,
[21:06] it doesn't stop. We have a shortage in
[21:09] memory. These guys are doing long-term
[21:11] contracts. Their earnings blew away.
[21:14] Micron's earnings estimates were taking
[21:16] up dramatically after I had taken out of
[21:20] something that I had basically had an 8
[21:22] to10 bagger on. And now it's more
[21:27] confirmation based on everything that
[21:29] I've heard, everything I've listened to
[21:31] that consumer agents are coming within
[21:33] the next 6 months. We have made more
[21:36] progress in AI even over the last month.
[21:39] Yet another model come out today in K uh
[21:42] Kimmy K 3.0 which I can't use to replace
[21:45] my Kimmy K 2.5 because I don't have
[21:47] enough hardware. Um we are still in the
[21:50] beginning stages. I'm going to show this
[21:51] chart over and over again partly for
[21:53] when you get worried about compute.
[21:55] There will not ever we will not catch up
[21:57] to this. We have exponential growth of
[21:59] eating tokens which is what these
[22:01] digital agents consume. They don't
[22:03] consume houses. They don't consume
[22:06] potato chips. They don't consume h uh
[22:09] anything. They don't get paid. They get
[22:11] paid in tokens. And the amount of tokens
[22:13] they need will grow as they continue to
[22:15] get smarter. Then consumer agents will
[22:18] come in. So far we only have the
[22:19] enterprise agents. Always remember that
[22:20] chart if you ever start to get worried
[22:23] until memory stops acting bad on good
[22:27] news.
[22:28] Go through it. But as I said last week,
[22:30] I'm not really concerned about it. Um,
[22:33] this chart's horrible. I mean, most
[22:35] technicians are going to call for it to
[22:37] come down here. Head and shoulders top.
[22:40] No way it's going to stop till it gets
[22:41] down here. I did see some technicians
[22:43] that said, you know, their confidence
[22:45] level is very high that we're going to
[22:46] get back down to here. We might. I don't
[22:49] think we will, but if we do, I don't
[22:51] think it'll stay there. Today was the
[22:53] first day we had a change in
[22:56] a pattern that I'm I'm looking at. I'm
[22:58] going to try to bring you guys some of
[22:59] the nuances of how I grew up at Morgan
[23:01] Stanley as a trader. I am an active tape
[23:03] reader. I use a lot of intraday stuff.
[23:07] This is the opening. So, when I traded
[23:10] the S&P book, I would always use the
[23:11] opening and close for a very, very
[23:13] important signal, especially when it
[23:15] comes to VWAPs. Um, and that's really
[23:18] related to anything that's being sold
[23:20] off to me on a risk basis, whether it's
[23:22] a close out of a fund or whether it's a
[23:25] systematic fund that's taking down
[23:27] leverage. I believe it's going to be
[23:28] taken out with much more activity on the
[23:30] VWAP side. So, what I did here just for
[23:33] today, um, this is a 60-minute chart and
[23:36] I'm only looking at the opening to 10:30
[23:38] for Micron. And what you'll see today is
[23:41] two things I like. Number one, we got
[23:43] back above
[23:45] uh the VWOP very early on. And more
[23:49] importantly, it was the biggest volume
[23:51] first hour way above the average
[23:56] since the peak since we were at 1300. So
[24:00] that is a trend change at least
[24:02] something that's going on.
[24:04] I mentioned before I basically got out
[24:06] of Micron in on early June. They
[24:10] reported numbers
[24:12] This is where their earnings for the
[24:14] earnings estimates are for the pro the
[24:16] next year. I knew they were going to
[24:17] beat but the numbers were dramatic and
[24:20] the contracts that they signed were a
[24:21] game changer for them. So I am buying
[24:24] it. One of the other reasons I'm buying
[24:25] it is just because we got the correction
[24:28] and I just want to show you guys
[24:29] something in here. So Nvidia is a name
[24:33] to look at and to let's assume that this
[24:36] was 1300 in micron.
[24:40] Nvidia was a 12bagger
[24:43] over a period that's not too dissimilar
[24:45] from Micron.
[24:47] Then it comes down from that point
[24:50] to where it is today, which is another
[24:53] two years, you've made 48%. Not a bad
[24:56] return. Over two years, you're getting
[24:57] 20 plus% compounded returns. A lot
[25:01] better if you bought it into weakness
[25:03] after this, which if let's assume that
[25:06] I'm trying to buy something now down
[25:07] here in this thing. Um but the main
[25:10] point is number number one the 200week
[25:12] moving average we never got to Nvidia's
[25:15] had tremendously good earnings. So if
[25:16] you just think Micron's going to go up
[25:18] again in violent fashion even after the
[25:20] earnings are great I don't see it
[25:22] happening. The one big difference is the
[25:24] multiple here of Micron was about six
[25:26] times what it is right now on
[25:30] Micron. So Nvidia's uh was much higher.
[25:35] Here are the Nvidia earnings. So again,
[25:38] that quarter in in June was kind of the
[25:42] last
[25:43] beat. That's when they peaked. So before
[25:46] that, we were getting good reactions in
[25:47] the stock. And then since then, the
[25:49] price changes on the earnings, it
[25:50] basically has gone down almost all the
[25:52] time. I think we're probably in the the
[25:55] midst of that right now. If you see a
[25:56] change in that, it's good. All right,
[25:59] back to the fireworks show again and the
[26:01] fact that this is not something that was
[26:03] surprising or shouldn't be and the fact
[26:06] that we want to sit a race out here is
[26:10] the other thing I've learned.
[26:12] So the head and shoulders pattern that
[26:14] we saw in Micron, the reason that I went
[26:17] to Silicon Valley back in 2013, as I've
[26:19] mentioned before, was because of Amazon
[26:21] and because of something that's similar
[26:24] to this. So Nvidia had a head and
[26:25] shoulders pattern
[26:27] in here back in 23 and I told you it
[26:31] peaked in 24. So my gut tells me this is
[26:34] where we are in micron right now. One of
[26:37] my favorite charts to buy is a
[26:39] structural bull market when you break a
[26:42] neckline of a head and shoulders and
[26:44] then you immediately go back up. Now we
[26:46] haven't done that yet in Micron, but
[26:47] that's what I'm looking for and that's
[26:49] what I'd be interested in. Amazon. This
[26:52] is the one that basically sent me to
[26:54] Silicon Valley because once it traded up
[26:56] again and we got through the Mario
[26:58] Draghggy line in the sand and we made
[26:59] new alltime highs in this again when
[27:01] there were no earnings,
[27:04] I had to go to Silicon Valley to
[27:06] understand how this name could trade
[27:07] like that. That every time there was a
[27:08] head and shoulders pattern or some kind
[27:10] of topping formation, when it broke
[27:12] below, it would just go right back up.
[27:14] If what I believe in AI is happening,
[27:16] that's what you're going to end up
[27:17] seeing in this. Here's Nvidia. It did
[27:19] trade below the 200 day eventually, but
[27:21] it took a long time after this peak. So,
[27:23] I do think what's likely to happen is
[27:25] something similar to this, but we could
[27:27] be in here and we could still have
[27:30] another race in Micron and then go
[27:32] through this. It could be completely
[27:34] different. I'm just giving you kind of
[27:35] my perspective on the on what I've
[27:37] learned about. So, let's go through the
[27:38] recap for the week with all the news
[27:40] going on. The S&P was down one and a
[27:42] half%. Q's were down 4%.
[27:47] small caps didn't budge
[27:50] and we had this down this big. What this
[27:52] tells me is 100% this is rotation. This
[27:56] is factor unwinds. This is people
[27:58] covering one thing and covering another
[28:00] thing on the other side. Uh I don't see
[28:03] this as anything systemic. And most
[28:05] importantly, I've shown you the sector
[28:06] momentum chart. This is all the sector
[28:08] Morgan Stanley sector momentums. The
[28:11] white line here is the index for
[28:13] momentum
[28:15] non- sectorbased. So this is just
[28:16] momentum. Here are the two sectors that
[28:18] I had shown before were way out of whack
[28:20] and had to come back eventually. Well,
[28:22] that's industrials and that's tech. And
[28:24] it did that. Here are the other ones.
[28:26] Some of them were up, some of them are
[28:28] down. No movement. That's how I feel
[28:30] confident that this is just a rotation.
[28:33] The thematic portfolio bad week. Uh
[28:37] luckily my risk is down significantly
[28:39] from when it was in here and that's the
[28:41] point of writing the papers in here and
[28:42] going through it. I still have names and
[28:45] one of them Marll is down sharply. Uh
[28:48] that's my biggest uh one behind Eli Liy
[28:50] at this point. But the index itself it's
[28:54] getting a correction that right now is
[28:55] right around 40%.
[28:58] Um a fairly normal correction
[29:00] particularly after a big move. Here's
[29:02] Marll. Marll got down to 62%. It's been
[29:05] painful. Um, but again, I made a lot of
[29:08] money on the way up. I took some off.
[29:10] It's still my biggest position. It's
[29:12] really the only semi I own except for
[29:14] Nvidia at this point, but a lot of the
[29:16] other ones, Integris, um, Fluence, I
[29:19] have small positions. Uh, Kimors, uh,
[29:22] there's a lot of these names where I
[29:23] have positions on, uh, they're all down.
[29:27] So, and trust me, when I sold out of a
[29:29] lot of this stuff, most a good portion
[29:31] of the money that I rotated into was
[29:33] into Bitcoin, Ethereum, and uh silver.
[29:37] And those things haven't really bounced
[29:38] that much. On a relative basis, they've
[29:40] done very well relative to this, but
[29:42] they're not bouncing much. Um, again,
[29:45] thematic portfolio relative to equal
[29:47] weight and relative to the S&P. This
[29:49] includes today's data.
[29:52] again not not having an impact on the
[29:54] market at this point and I don't expect
[29:56] it to because I don't think there's
[29:57] anything behind this and you're going to
[29:58] have to do this in the face of good
[30:00] earnings and at some point good earnings
[30:01] are going to matter for the broader
[30:03] market and for some of these uh
[30:05] infrastructure names. Here's the
[30:08] correlation between the momentum factor
[30:10] and my uh my thematic portfolio. This is
[30:12] the Morgan Stanley one if you guys want
[30:14] to trade it. You can see how well this
[30:15] stuff has hung in there. So AI is
[30:18] dragging lower. The thematic portfolio
[30:20] is hanging in there better. Uh the
[30:23] breath in the market made new all-time
[30:25] highs this week. Equal weight basically
[30:27] made new all it did make new all-time
[30:29] highs this week.
[30:31] Apple
[30:33] one of the largest stocks in the world.
[30:35] A consumer agent story. Talked about it
[30:38] last week. Bad news, bad news. Boom.
[30:42] Consumer agents are coming, guys. You
[30:44] can play it through that way or you can
[30:46] play it through crypto. Um, Philly Fed
[30:49] and the Empire came out this week for
[30:51] those of you wondering if there's any
[30:54] weakness happening in the AI
[30:55] infrastructure trade. So, this is a uh I
[30:58] just combine the two, divide it by two,
[31:01] and then I overlay it with the PMI. So,
[31:04] you can see that we're basically at a 62
[31:08] PMI equa uh uh uh level for those two.
[31:14] So, we'll see what happens with the
[31:15] other ones, but again, the economy is
[31:18] strong and inflation is not. So, we got
[31:22] inflation data this week. Uh, it was
[31:26] much lower than expected. And here is
[31:29] PCE core, the one that got every
[31:31] economist to say there's three rate
[31:33] hikes or two rate hikes or whatever
[31:34] they're talking about before the end of
[31:36] the year. Um, I talked about last week
[31:39] that to me there was a decent chance
[31:41] that July could be one if these numbers
[31:44] came out above just by where the
[31:46] percentage was and the fact that if you
[31:48] really cared about Fed credibility, why
[31:50] not get this out way before the midterms
[31:52] and just do something to show it. But
[31:54] you get these CPI prints which basically
[31:58] take the white line here which is the
[32:00] sticky core 12 month from the Atlanta
[32:03] Fed to new lows. You have true flation
[32:05] at new lows. You have core CPI turned
[32:08] down. You have the trim mean, the one he
[32:12] prefers. It's only one number. And
[32:15] again, I think people read him wrong.
[32:17] I'm not the only one. Here's what the
[32:19] swap market did this week with oil
[32:22] backing up and bombings going
[32:23] everywhere. Didn't budge, guys.
[32:27] Here are the expectations from the
[32:28] Cleveland Fed now casting. They got last
[32:31] month kind of right. They were minus.2.
[32:34] It came in at minus.4.
[32:36] Uh for July, we're now, you know, we're
[32:39] 17 days through. We're through the
[32:41] midpoint. Uh minus again they have with
[32:45] the headline going down to 3.3.
[32:49] Morgan Stanley put this out and I talked
[32:51] about this last week. I completely
[32:53] agree. Worsh is all about reform, not
[32:55] hawkishness. I think people are just
[32:58] reading him wrong on everything he's
[33:00] doing in this. I believe the reform
[33:03] thing is really important and I showed
[33:05] the the quotes from him in both an
[33:07] interview uh in Europe but also in the
[33:11] testimony in front of Congress. Well,
[33:14] here he is testifying again and he goes
[33:17] through this stuff again and he talks
[33:19] about AI will raise prices but don't
[33:21] call it inflation. Um, Worsh is
[33:24] rhetorically hawkish about the inflation
[33:26] outcome, but intellectually reformist,
[33:29] understands the economy. Again, he's a
[33:32] market practitioner, and I really do
[33:34] believe that the most important thing is
[33:37] to ignore the backward-looking data and
[33:39] to focus with a heavier weight on the
[33:41] forward-looking data. We've seen this in
[33:43] every part of AI. If you believe an
[33:46] exponential move, which is happening, if
[33:48] you believe in AGI sitting in front of
[33:49] us, which I'll get into, it would be a
[33:52] huge mistake for a central banker to be
[33:54] making decisions based on one month's
[33:57] data, the past. I want to fight
[33:59] inflation and get it back down. That is
[34:02] old school stuff when you're staring at
[34:04] something this powerful. And this is
[34:06] what you need to go read. Deis Sabis
[34:08] I've talked about on here is by far of
[34:12] the people at the large companies the
[34:14] one that I think is the most honest. I
[34:17] think he has been the one that has been
[34:18] around the longest in terms of talking
[34:20] about AGI. Deep mind his first comments
[34:23] on AGI were back in 2010 and he said it
[34:27] would happen around 2030.
[34:29] This is a pivotable this is him writing
[34:32] this. This is a pivotal moment in human
[34:33] history. The artificial general
[34:35] intelligence, a system that exhibits all
[34:36] the cognitive capabilities the brain
[34:38] has, is probably only a few short years
[34:41] away. When we look back on this time in
[34:44] the decades to come, think Kevin Worsh,
[34:46] I think we will realize we were standing
[34:48] in the foothills of the singularity,
[34:50] nothing less than the dawning of a new
[34:52] age for humanity.
[34:54] Whatever why whatever reason you guys
[34:57] watch my video each week, I spend so
[35:01] much time on this and it began in 2013
[35:04] when I went to Silicon Valley and I went
[35:06] to Singularity University. I believed in
[35:10] this because it was pure math. We're
[35:13] going to be there in a few years by
[35:15] someone who is honest is at one of the
[35:17] forefronts and arguably the best place
[35:21] for figuring out when this is going to
[35:23] happen. And I would say better than
[35:25] Dario Modi and better than Sam Alman.
[35:27] And this guy doesn't run the company.
[35:29] Sundar does. So he wrote this because
[35:32] there are so many things in this that
[35:35] are critical.
[35:38] The writing portrays AGI as a
[35:40] civilizational transformation rather
[35:41] than normal technological innovation
[35:44] that may arrive within only a few years.
[35:47] It could be comparable to the discovery
[35:49] of fire or electricity because it would
[35:51] expand our ability to think, invent, and
[35:53] solve problems across every field.
[35:54] Accelerate drug discovery, clean energy,
[35:56] advanced materials, productivity, and
[35:57] scientific progress. Humanity may be
[36:00] standing at the beginning of a new age.
[36:03] You read all of this and go through it,
[36:05] the world is going to change more than
[36:07] you can possibly imagine. This is an
[36:10] important piece from Demis. We need more
[36:12] kind of this thinking. A good reminder
[36:13] that the goal is a frontier ecosystem
[36:15] that promotes innovation and choice
[36:17] while avoiding anyone model drop that
[36:19] breaks the world. Again, this is
[36:22] worrying about this. Sasha has has has a
[36:26] bias on this, but I just think that this
[36:29] traveled through it got a lot of reads.
[36:32] It's really important. I highly
[36:33] recommend when you start thinking about
[36:36] oh the economy is going to humanoids are
[36:39] coming in three years like we're going
[36:41] to be flying all over the place we are
[36:44] raising our capbacks this is Morgan
[36:47] Stanley I just want to highlight the
[36:48] fact that in weeks where people are
[36:51] saying that there's not going to be
[36:52] capbacks there won't be buildouts we
[36:54] still have it or oh another openweight
[36:57] model that stuns the frontier model this
[36:59] must be the end of anthropic no it's not
[37:01] uh if you guys want to hear my
[37:03] viewpoints on this. Listen to Pomp this
[37:06] week. Um I talked about it. We got into
[37:08] a very long discussion about model
[37:10] router model routers. In the end, open
[37:13] source will be dominating most
[37:15] enterprises, just not in the near term.
[37:17] Um they're still in the stage of
[37:19] figuring this out. Where it will
[37:20] dominate is AI native companies and AI
[37:23] native companies will win. Public
[37:24] companies will lose. I've talked about
[37:26] this before. I've been very brash with
[37:29] people in saying that I think in 2030 I
[37:31] don't know if we're going to know any
[37:33] company that will have a three-year
[37:34] horizon where they're guaranteed to be
[37:36] around physical companies by then if we
[37:39] have AGI and Demis is right they'll be
[37:41] solving so many science there'll be so
[37:42] many breakthroughs
[37:44] I I don't know what to say we can solve
[37:46] problems we had a solution on uh on
[37:50] software this week for semiconductors
[37:52] like everything is going to happen guys
[37:54] it's just a question of when this is the
[37:57] Ruben piece. I spent a lot of time on
[37:59] this. It took me six weeks to put
[38:00] together. There's about 25 names which
[38:03] are not in my thematic portfolio. Some
[38:06] of these will probably go into it just
[38:08] because there's a lot of different
[38:09] companies. Uh there are a lot of Asian
[38:11] companies that are in this as well. Uh
[38:14] you've you've seen some of them. The
[38:15] chart the chart's not going to be much
[38:17] different than the thematic portfolio at
[38:20] least the way it was so far. But I do
[38:22] think as Vera Rubin rolls out, a lot of
[38:24] these companies are going to see a step
[38:25] up function. And that's the way I did
[38:27] the report. I'm looking for step-up
[38:28] functions from their earnings. So now
[38:31] let's finish it off with crypto. So
[38:34] Bitcoin
[38:35] just kind of hanging around here. Still
[38:37] in a bare market, gets above the 20-day,
[38:40] stays above it all week, breaks above
[38:42] the 50-day, sells back down to it. Uh
[38:46] it isn't out of the woods yet. I
[38:48] wouldn't say there's no chance of it
[38:50] breaking to new lows, but it is what it
[38:52] is. Ethereum, well, another little mini
[38:56] break. You like to see these. You got
[38:57] the 20-day above 50-day. You took out a
[39:01] trend line break here. Ethereum's
[39:03] hanging in. And as I've said before, and
[39:05] I'll show you why, Ethereum is the one
[39:07] to watch.
[39:09] And on that front, in the face of
[39:12] momentum, of which crypto is usually
[39:14] very correlated to equity momentum,
[39:16] particularly tech momentum,
[39:19] in a very quiet fashion, which I love,
[39:21] Ethereum is having its best month, up
[39:23] 17% monthto date since August of last
[39:27] year.
[39:29] Think about that.
[39:32] Here's the ratio with Bitcoin also
[39:34] having its best month. So this is the
[39:35] cross, Ethereum over Bitcoin. If we are
[39:37] in what I think we are, which is an
[39:38] agent revolution, then Ethereum should
[39:41] be benefiting more than Bitcoin at this
[39:44] part. Here's the chart of that. Again,
[39:48] this looks a lot better than the chart
[39:50] of each name individually. And I love
[39:52] the like the yuing situation. So, if we
[39:56] can get above the 200 day on this, I
[39:58] think it sends a very good message. Now
[40:01] driving this in terms of looking at
[40:04] things here is the correlation between
[40:06] Bitcoin and momentum that I talked
[40:08] about. So this is back through November.
[40:13] So this is basically tw 12 December of
[40:15] 23 the end of the year. So this is about
[40:18] two years worth of data. That's how
[40:19] correlated it was. So the fact that
[40:21] these are acting good is a good sign.
[40:24] Here's another good sign. Stripe put in
[40:26] a bid for PayPal.
[40:30] I did a video on Stripe acquiring Bridge
[40:33] back in 2024.
[40:36] So, this was October of 24 when I did
[40:39] this. If you guys haven't seen it and
[40:42] you want to catch up,
[40:45] Stripe acquired Stablecoin
[40:46] infrastructure from Bridge for 1.1
[40:48] billion. And now they're looking into
[40:51] PayPal. And this is a stable coin story.
[40:57] So I put this together and basically
[41:00] highlighted that
[41:03] PayPal is in my 40name crypto thematic
[41:07] index which again I will put out for
[41:10] subscribers to see in September or
[41:13] October. It will not be before
[41:14] September, October. It will be late
[41:16] September, early October somewhere in
[41:18] there. I'm spending a lot of time on
[41:20] this guys. Um, I think it's important
[41:23] for you guys to spend the time on on
[41:25] this part, but what I highlighted was
[41:27] this chart. So, this is the 40name index
[41:30] and this is year-to date. So, Bitcoin
[41:34] hanging in there.
[41:36] This as and this is before the close of
[41:39] of yesterday or two days ago. So, on
[41:41] Thursday, the day of the PayPal, but I
[41:43] put this in I posted this in X. This is
[41:47] what I want to see. So just like
[41:49] Ethereum is outperforming, the 40name
[41:51] index is outperforming. I believe the
[41:54] ecosystem of of crypto is already
[41:56] growing in a very big way in front of
[41:59] people.
[42:00] JP Morgan, Black Rockck, and Goldman
[42:02] tokenized stocks and treasuries. That
[42:04] was this week. All of this stuff is
[42:06] starting. Oh, Bitcoin banking adoption
[42:09] hits 32% average as major banks and
[42:12] financial institutions integrate.
[42:16] the value of tokenized real world
[42:18] assets. The chart is
[42:21] it is going up higher and higher.
[42:23] Prediction markets, open interest
[42:25] continues to grow. All of this is
[42:26] blockchain related stuff. Sorry you
[42:29] can't see this. I screwed up putting
[42:31] this presentation together. It happens.
[42:33] But basically the revenues in here are
[42:36] large. These are a variety of companies.
[42:38] You obviously have Hyperlquid which is
[42:40] involved in the private markets. So the
[42:43] tokenized situation, but you know
[42:45] wherethropic and open AAI and different
[42:47] places. You've also got I can't remember
[42:49] all the ones here. Pancake pancakes uh
[42:52] swap. You've got a bunch of others. The
[42:54] main thing is the revenues are coming in
[42:56] because there's activity happening in
[42:58] the ecosystem. Why the clarity act
[43:01] matters for crypto consumers.
[43:05] This is why it matters. Consumer agents,
[43:07] guys, this is a big deal that is going
[43:10] to happen. and if the Clarity Act can
[43:13] get done, of which it's now back up to a
[43:15] 40% chance below 50, but we'll see what
[43:18] happens. I it's important for the United
[43:21] States to get it done. [clears throat] I
[43:24] don't think it's that important for
[43:26] crypto in general, except for maybe a
[43:27] knee-jerk. I do believe that the agents
[43:30] are the most important thing, and that's
[43:32] what's going to happen across the globe.
[43:34] It was a big week. Japan's landmark vote
[43:36] reclassifies Bitcoin and crypto as
[43:38] financial assets. That was in Japan this
[43:40] week. in South Korea writes crypto into
[43:42] state asset rulebook after 76 years.
[43:46] South Korea moves to allow spot Bitcoin
[43:48] ETFs.
[43:50] And here's the most important thing I
[43:51] can show you. The VA is nowhere. So, I'm
[43:55] going to say this again if I'm right
[43:57] that the ecosystem of crypto is in the
[43:59] early stages. It's in the purest AI
[44:01] trade where it cannot be disrupted from
[44:03] AI because it's built on scarcity and
[44:06] there is no competition for it. It's
[44:08] like gold in the fact that it is
[44:09] survived the test of time. So it has a
[44:11] moat. Religion has a moat. Gold has a
[44:14] moat. Bitcoin has a moat.
[44:16] If this is the time, it will start with
[44:19] this here. So if you break the 200 day
[44:21] moving average, I believe most people,
[44:24] if not all, will be heavily involved in
[44:26] crypto over the next 12 months. I don't
[44:28] think we're going to necessarily break
[44:29] through the 200 day moving average
[44:31] before uh let's say October, November. I
[44:34] think this is a second half of the or
[44:36] fourth quarter story, but if it does
[44:38] happen, guys, just be ready. Um, get
[44:42] ready for my uh work that I'm on there
[44:45] and you guys will get to see it. Until
[44:47] then, have a good week, guys. I'll see
[44:49] you next week and we'll look for bottoms
[44:51] and if anything important happens during
[44:53] the week, I will do a subscriber video.
[44:55] So, uh, look there and be on top of it.
[44:58] See you.