Supersonic Tsunami Hits SaaS: My Turbulence Model Is Flashing Risk

All right, let's jump right into it. Um, first of all, uh, it was great to see everyone the last three weeks. This week, uh, at the Bitcoin investor event, um, it's just a good time right now, guys, to uh, spend talking about the markets, going through it, particularly when it comes to AI, crypto together, uh, despite the fact that Bitcoin has fallen. I'll talk more about that towards the end.

Uh, this week, the paywall was launched. So for those of you who have not yet signed up, hopefully uh you will uh this week um the whole theme of of this and really going forward is that we have reached the point that Elon Musk called the supersonic tsunami. Uh I think it's really important particularly for uh global investors, mutual funds, anyone who is making choices between the US uh and the rest of the world. Anyone who's trading who's been fixated on picking the bottom in SAS. Hopefully this week was the week that everyone learned their lesson. If not, I'm going to go through, but the main message I want to get through and I'm going to show it a bunch of times is you really have to think about supersonic tsunami because we are in the midst of it now.

Uh this is the website. Again, I highlighted exactly where you can go see it. You can go to the 22vresearch.com. But again, I'll keep adding stuff there. A lot of the things you see in the weekly videos uh are in there in depth and plus all the research and stuff. I did a lot of things this week for it. But just so you guys hear this, when I started Viscer Labs and I started my consulting work, the the main point was I have a lot of domain experience and regardless of what people over the years have whether they've known me, not known me, uh I do approach markets from a deep macro background and I've been using AI, I don't even know how it's impossible to measure, but uh how many hours a day, but this has been now 18 months of constantly using it for everything in my life. Everything that you see in this video, AI is involved in. Everything I do all day long, AI is involved in. It has consumed me. I am a curious person that loves this. But also, I'm an investor who's making investments not only for me, my family, people that I know. Uh 22V has an asset management unit. I am looking into doing stuff on that. So, if you have uh interest in that in terms of getting the names and getting a deep dive. Uh there's all kinds of different things that I believe artificial intelligence has allowed me. But I also think we're at the most disruptive point in this journey. Uh that's why I did the piece at the beginning of the year and a and crypto is connected to it. So for those of you who have not done anything in crypto, you're getting at your last opportunity as far as I'm concerned. If you've watched me over the years, I fully expected that eventually what would have to happen is the mag 7, the hyperscalers and software would have to start underperformance. That is the form of abundance and because Bitcoin is built on code and all of the ecosystem is it would have to be disrupted as well to some degree. But as people realize that the capital structure of the future is changing and AI agents will be the consumers not humans. You have to think more about that what that is the utility function of crypto is going to grow rapidly. Before you know it before the end of this year SAS will still be down. Bitcoin will be up towards the high and all of you that have been looking for deep dives and you're it's a value trap and I'm going to go through why. Uh and the final message on this is use AI. So the videos that I'm doing, I will have a five-part video series. For those of you who are stubborn and don't want to get involved in it, that's great. But for your kids, at least get them the videos and let them see. I will make it simplistic and I will make it how they can replicate everything that I'm doing.

This is the visual of the supersonic tsunami. There's two components of supersonic. One, speed. Two, structural power. I was on stage at the Bitcoin investor event following Kathy Wood this week and she made a statement that what's happening in SAS is just like Co. I've seen this from Dan Ies. I've seen this from Morgan Stanley. I've seen this from JP Morgan. I've seen it all week with people trying to pick the bottom in SAS. And I will continue to say it is a mistake to do this. AI is now in the acceleration phase. It is going way too fast. The dangerous part of it is coming up. But everything gets consumed by artificial intelligence going forward. And if you think that you're not going to be exposed to it, that is whether you're a $5 trillion company or not, you will be exposed by it at some point over the next three years. So be very aware of your investments on this. This is exactly what Elon talked about. You can go back and read the moonshots. Uh go watch the video. Artificial intelligence and robotics are a supersonic tsunami. So I'm not even including the robotics. That will be the thing that disrupts all the physical side, but we're not going to get into that for another four to five years. Right now, where we are in the abundance disruptive size and you want to rotate your money into the physical side to avoid this. That will continue to be the play. $85 trillion of investment will happen. There's no other way around it. We'll be shoving artificial intelligence into everything. The supersonic part eliminates value. It makes everything a value trap where it just destroys things in its path because it's moving so fast. We've never seen an innovation that changes this fast. And I'm going to highlight today what has happened just in the last 10 days that I'm sure most of you have missed. And we're at the singularity point which is really where recursive self-improvement where the machines are teaching the machines.

So this week it spread. It was not just in SAS. We had broker stocks on Monday's uh insurance broker stocks that were pummeled on Monday. Then we had the wealth management platforms and as I said on CNBC this week, Altruist, which is a $1.5 billion dollar valuation company, I'm sure almost no revenues. At the same time, they took down LPL, Raymond James, Schwab, quarter of a trillion dollars of market cap. Entrepreneur versus the big guys. This is what I've been preaching now. And this is the reason why I'm heavily involved in Bitcoin because eventually the eight billion people on the planet that are at the bottom end of the K have a tool in their hands that allows them to build a business with no people, no cost, and they can get up very rapidly and actually disrupt businesses. Now, are we going to see that in the revenues for those companies anytime soon? No. Will it impact the growth? Absolutely. Unless they can find a way to adopt it quickly and offset some of that. You got into commercial real estate service names this week. Then you got into trucking stocks. So we went everywhere this week. We really disrupted the whole side. And this is where it's starting to become an issue. And as I go through this, um, I have my turbulence model. The market is warning everyone that this rotation is getting very, very bad. The last time we saw a rotation this big and this important was back here. So this is from Michael Bat Batnik on the compound. Um, it's a great chart and I think it highlights it uh in terms of just going through when 115 or more stocks fell at least 7% in a single day across a rolling 8-day window within the S&P 500. So the last time we did this when and these dots are where the S&P was relative to all-time highs. This is back in 2000. I do believe that we are in the midst of a rotation that is equivalent to the dot bubble. I think this is a very similar situation. So instead of calling this a bubble, earnings are growing. I don't see this as being a systemic issue. I don't see this as being anything that's going to impact the economy in any meaningful way. But for those of you who went through the dotcom bubble, 2000 was a very unique period because we did see the Dow make new all-time highs while tech was getting destroyed. And it wasn't until after 9/11 that we actually saw the economic fallout that led to a recession, which wasn't even technically called a recession. Just more highlights on how much dispersion there was. People talked about it, but this is a fragile market and this is why I have a turbulence model and this is the way I'm towards the end I'll start putting it into context as to what to watch out for.

Um, a phrase that I've used always I've done three risk calls this week not only with um clients but also with major uh regulatory bodies because I have the ability of talking to them and at least highlighting what I'm worried about. What I'm worried about is the amount of leverage that has happened inside the hedge fund world since the great financial crisis. In my emerging market days and all the risk committees that I was on at Morgan Stanley, I always had a phrase, the seeds of the next crisis were always planted in planted in the prior crisis. The prior crisis was the great financial crisis. That was when the uh the iPhone came out. That was also when quant strategy started to grow rapidly. Uh multistrats started having quant strategies and they became experts at reducing risk and being able to lever up more and control the coariance matrices in their businesses. This is a warning shot and in my opinion this will lead to problems as the year goes on. So for anyone watching on the risk side you want to have a conversation feel free otherwise uh just deal with these because I think these are going to be more rapid and more normal going forward. Uh great person to follow and just kind of look. Charlie Mcelikott does a great job uh at no more on this and he just highlights some more of the dispersion. I'm not going to read you all the thing but it's happening at a time when the S&P is not moving, which is what my turbulence model was built on. Uh that is usually when the risk is growing the most. S&P is flat over the past month but the average stock moved 10.8%. A dispersion spread at the 99th percentile uh leading to pod shop de-risisking at a 100th percentile gross leverage. I'm going to go through that. A lot of people were sending things. I put something out on Friday and people said there's no gross leverage on the hedge fund side. You guys got some work to do. Um because if you don't think there's gross leverage out there after what's been going on, I'm sorry. You're missing out on this. There is absolutely gross leverage. And if you want to have a class on leverage, give me a call because for whatever reason, if people are going to argue on something I wrote out about gross leverage, you're in the crosshairs. Uh you need to understand how much leverage is in the system. And the gross leverage is a representation of the lower V and the fact that again we've been dominated by one group which has no earnings cyclicality to it which over time has grown and allowed people to find hedges. You've had been able to use the Russell 2000 as both a beta hedge but also as a consistent hedge against software. That trade why I show IWM vs QQQ is critical to the risk structure of the framework of the market. That is my belief and I will keep going with it.

Uh Dan Ies I love listening to him on his enthusiasm with AI but I disagree wholeheartedly in the fact that all of these companies in the selloff are generational opportunity. I disagree completely. There are some that you can go buy. I wrote a piece on Palunteer. I think that'll get a bounce. But for a lot of these companies, no offense to Dan, I I I can't imagine he uses AI all day. He's on the road all day. I don't think he sees what's happening at the at the pace that it's happening, and he doesn't use it. He can't he's on the road too much and selling clothes, too. So, no offense to Dan, but I think we've reached a point where the disruption and the tsunami has gone too fast, and you're going to start cannibalizing its own winners. Um JP Morgan tries to buy the bottom. I'm only doing this from the basis of I'm sure we're going to get a bounce in these names at some point, but there's two ways that waterfall charts like that historically end for me, especially when they are the most owned thing on the planet. It either owns in a value trap where they go sideways and the market deals with it in a rotational basis and then the other way is it continues in a waterfall and you hope there's no contagion. That's what happened in the dotcom bubble. Eventually, it did turn into a contagion. and you started having debt issues eventually because the equity uh names went down. We are getting closer to that every day. Even though there's not a lot of debt in those companies, they are overowned to such a huge degree. And growth vs value is such an overowned asset that if everyone tries to get through the door at the same time, it will have disruptive impacts. The leverage for me is not on the debt. It is at the hedge fund level and in particular the multistrat and quant level where they all are sitting on highly lever dependent on the coariance matrix. And I think if there's a rotation of this basis into small things out of tech into basic materials and energy where tech is 10 times the size and small cap it is more than 10 times the size since the Russell 2000 is smaller than the materials and energy combined are about the same. You just don't have the ability of dealing with this. So I think this is going to be an issue. I can emphas I can't emphasize it more and more.

Um, our job in managing money is to try to find things that have a higher probability of occurring than what the market is discounting. I think the probability of a unwind uh event that turns into something big is even if it's only 25% the market right now in terms of the positioning and the pricing is much closer to 2 to 5% than it is 25%. So uh there are ways to hedge this at this point and I'm going to show some things as we go on. Goldman came out David the software itself has been too broad. Everyone wants to pick a bottom in it. And again, it's either a buying opportunity or value trap. I don't think it's a buying opportunity at all. I think it's a value trap. I think you can find some names to go in there and buy them for sure. But I think the disruption that is going to happen is much greater than this.

Um, I talked about this before and I'm going to keep saying it. I wrote this on January 20th. Seems like a long time ago. It's three weeks ago. AI bubble has stopped as kind of a story which is ironic because I'm getting more and more negative on the hyperscalers by the day because of the money that they're spending and I'll show that later. Uh but buying cheap software became the new bubble trade. Stepping in to buy software because it looks overdone ignores what is actually happening in AI. Will there be relative bounces? Of course, but this isn't a typical sector rotation or buying opportunity and beaten down software names. We are watching the opening act of a demand destruction cycle driven by the steady deflationary pressure of exponential AI progress where coding is increasingly ubiquitous and effectively free. They're confusing the suppressant for the bubble and the bloat for the value. It's going to be a big story. And look how cheap they are now. They're only the fifth most or yeah fifth most expensive uh sector uh from where they were the most expensive sector. The problem is again three years from now I know that semiconductors are going to be needed. I have no idea which software companies are going to be needed. I know capital goods are. Look how cheap energy is. Look how cheap all of these are. I will talk about these later because these are a warning sign also on what's going on in the market, but I'll cover that later. Again, emphasis how fast things are moving and how structural the force is.

So, we are going faster on something that people have faded. They watched it from a distance and now it's right on top of everything and you're starting to see the disruption. So on January 7th, I wrote this one on Opus 4.5. I had written another one on December 8th. This one was just how much had happened over the course of the month and a half or not even the five weeks from the time it was I built the turbulence model sitting on my couch on Christmas. I started using it more and more. So, Opus 4.5 was a major event and I want to remind you when chat GPT finally released 5.1 chat GPT 5 over the summer and it got panned that was a long time between 4.5 and 5. I just want to remind you that as we go through this because Opus 4.5 was a major event and then we got Opus 4.6. So, I would go watch and listen to the recent moonshots. I would also go listen to Nate Jones talk about this. The biggest AI jump I've covered. I see people fading Nate Jones. I I again people are just becoming polarizing on fading AI and not listening to people and thinking they know stuff about it when the people that are always fading these things. Do not use it. Opus 4.6 shipped with a fivetime expansion in the context window versus Opus 4.5. This is uh notes from a combination of those two videos. That is a there a four-time improvement in coder document retrieval over just a couple of months. The model can hold 50,000 lines of code and know what's on every line at the same time. It now mimics a senior engineer in intuition. This is the difference between a model that sees one file at a time and a model that sees the entire system in its head simultaneously. The only reason I want you guys to spend time reading this, this again is only five weeks. At the same time, 30 minutes after 4.6 was released by Opus, OpenAI released 5.3 Codeex, its newest GPT model helped to build itself, also known as recursive self-improvement. Give me the episode and Den titles from a moonshot episode we went through with Eric Schmidt and what happens when we hit recursive self-improvement.

So if you guys are not using chat GPT regular and if you're not downloading stuff and going through this and again I use chat GPT for about 30 some odd percent. The best thing it has is it remembers everything that I do. So I can just go in and say hey I downloaded I've downloaded thousands of transcripts but now I can go in and say hey this one transcript it happened. Give me the details. Oh yeah this is when this is from July 17th. The reason I wanted is he brought up and said RSI is imminent. He emphasized that AI's biggest multiplier is its ability to learn and improve. not just scale computer data sets. Once AI systems begin meaningfully contributing to their own improvement process, a hallmark of RSI, progress starts to grow super exponentially. That's what he said back in July. Open AAI just told you that we are there now. Claude has shown that in terms of what's gone on. So this is now the inflection point. This is no longer AI assisting humans. This is AI generating infrastructure that AI will use. Again, five weeks ago is when software started to get hit because of opus 4.5 because they released you've got clawed code, you've got co-work, you've got clawed bot, you've got claude excel, you've got clawed powerpoint. Every single week there's a new thing going on. You have openclaw in terms of people using it at this point. OpenAI stated GPT35 codeex was instrumental in its own development. This is no longer theory. So if you were waiting for when it was going to happen and for those of you who reached out over the year and said Andre Carpathy he's on this now too we have reached a completely different point what Eric Schmidt broke down acceleration beyond human time scales supersonic new economic structures all of this gets disrupted that's the tsunami part energy and physical constraints matter that's where you go invest right now that's the scarcity because the faster this things goes they cannot back off they have to actually accelerate they're spending, which is what we're seeing. Because if they don't, as I'll get into later, they have existential risk. So, they have to keep spending. They're in a trap. Now, all of the frontier models, they're in a race, but they're also in a trap. Risk and reward duality. This is the problem. You're starting to now go from the benefits that come, but also at the same time, cyber security. There will be security issues this year. Be very careful with not owning V during the course of this year. There will be times that the market is going to dis be disrupted and the most likely places are going to be places that are vulnerable to all this coding. The software names that are cyber, those are other places along with Palunteer that I think people need to be um on this.

Um, Alex from Moonshots just talked about this. This is not productivity gain. This is intelligence cost collapse. 10 engineer uh years equals $2 million. AI cost $20,000. The deflation that is coming or that is here already is just insane. The models are getting better and the cost is staying the same. The models are getting four, five, 10 times better. And as I go through this, this is not just in the US. The scary part about this and what has happened that Dan Ies can't possibly be thinking about is absolutely how fast the Chinese models are getting there as well. And what we saw with them as well, AGI moment, people are getting scared of it because now they're realizing the negative side is going to pop out as well. They're building things humans historically built over years and it's now taking a matter of weeks if not days. It's no longer a tool. It's an independent productive system. This is why the warnings have come out from Demisabas, Sam Alman, uh Dario Modi, as I'll show you later, he had a safety engineer quit. Everybody is starting to get worried because they have the models six months ahead. We only have the models they've released now. Chad GPT's market share has fallen from 70 to 45 while Google, Grock, and Anthropic obviously go. They're leaprogging each other in real time. It used to take a long time for the models to come out. Now they're coming out almost there. We are in a model velocity war, not a product cycle, which means we are in the biggest part of the deflationary spiral.

Now, Miniax, this is on Thursday, new open M2.5 and lightning near state-of-the-art while costing 120th of Claude Opus 4.6. It's being benchmarked right around the new one, not the old one, not 4.5. Little meme on this, they just dropped two. It's on par with Opus 4.6 while being 20 times cheaper. As I mentioned last week, I have a Mac Mini and now I'm using open source. It's a Chinese model because I don't want to have to pay lots of money for the tokens. This is what entrepreneurs around the globe are going to do because they're in the K-shaped economy. They want to build something and they care about the Spain. Enterprises won't. Now, you could see where big businesses are having to pay up for something while there's other models that are free. And the reason they don't they can't pay for them is because they have too much stuff in their business and too much to lose. This is the story of Bitcoin as well. We will get into that as time goes on. Bite Dance new video this week. Deep Seat coming out with a new model this week. This is the uh Alex Finn who this one had I forget how many millions I think 15 million. It went viral. I will be running Opus level super intelligence on my desk for free. This is quite literally changing everything. It's faster than sonnet. It's better than 4.6 for coding. This is all related to that mini 2.5 that I showed. Open claw ran wildly for two weeks waking up hardware and agent manufacturers. It's turning Mac minis into the physical forms of digital labors. Cloud service providers such as Alibaba, Tencent, and BU. You don't see any American companies here have quickly launched one-click deployment of an open of a open-source AI agent platform. There's no US companies mentioned on this. The 16GB version of the Mac Mini has sold out. Good thing I got mine before and good thing I warned people to go get theirs before. AI agents are here to stay. Businesses say they are now widely deployed in large enterprises. Significant shift. So the profit margins are going to grow with these companies because they are already deploying agents. So again, for everyone who told you there's no adoption, the MIT piece last year, all of this BS that people has thrown out there, it's now going so fast that these people that said uh nobody's using it. Well, now you're going to sit there and go through the damage that has to be done. Whatever your long in this, whatever you're trying to buy, this disruption will be going at a faster pace. There is no way to get around this anymore, it's actually getting out of control.

I wanted to bring this up because I wrote this before I started at 22V. This was after the Deep Seek moment. I had so many people calling up and I kind of laughed at it and said, um, it's not a market event in terms of ending things, but it does highlight something. The jaws of disruption, Deepseek and the AI shockwave. The whole thing about this was there are no moes. AI breakthroughs like DeepSeek will continue to emerge, shocking the market and rewriting industry narratives overnight. Just think about what we saw this week. Four separate industries destroyed for the for the week. Names falling 10 15 CH Robinson falling 16 20% in a day. Also, just like Jaws, there will be more sequels than people want to see. This is never ending now. So don't think that this is over. There will be one every week that happens. The only question is will people get used to it and not react to it the same way. Those who recognize the pattern, anticipate the inevitable disruptions and maintain a steady hand in the chaos will be positioned to capitalize on the seismic shifts of AI revolution. And my favorite catchphrase, you're going to need a bigger moat. Guys, coariance matrix screwed. Anytime bombs can happen every day in businesses that have moes that are winning, not companies that are losing. Go through some of these names this week and see where they were trading near their 52- week highs. It is normal for things to gap down when they're at 52- week lows. When they're gapping down at 52- week highs, it is a major problem. And that is the one thing when Michael Batnik did this, how many how many names inside the S&P fell at least 7% over the last eight days? Okay, it was 115. Great. Uh, and we're near all-time highs. Well, if you take that a step further, how many of these names that fell 7% fell close to all-time highs? That's when you start getting into problems because that is the way hedge fund investors and quants invest momentum based what's working starts. If we start getting in the point where momentum where you can shoot something overnight, that is why you end up getting these unwinds so quickly. And if everyone tries to unwind at the same time and they're in the same names because of the liquidity that does not allow them to be in smaller names, this is an idiosyncratic problem. So everyone's been trying to manage a book where they've got idiosyncratic risk as the bigger part of their book. Well, if that idiosyncratic risk is no longer idiosyncratic, if it's a theme which is I'm disrupted by AI and I'm crowded, that's a new factor that doesn't exist.

Uh just highlighting again that we're in the final stages of capitalism where the labor profit pools just continue to grow or lab the profit pools grow while the labor compensation goes down. I heard a lot of economists seek happy with the jobs number and as I go through there is no good jobs number and now the bond market is starting to show the risk associated with um for everyone who has been calling for higher rates higher inflation in the midst of the tsunami. Good luck. This is what is happening now is we have tenure rates that have moved lower. And if I ask everyone why when we just had a payroll number that beat I think people should start getting worried. The reason they should get worried is this falls in also with credit widening and it falls in with all the turbulence we're seeing. I worry again about the coariance matrix which is not just about the stock market. It's cross asset. Again for people on the risk side who want to talk about this in more detail. The only reason I feel I'm the epicenter of this from talking is because I very seldom meet anyone on risk or in macro who fully grasp the supersonic tsunami theme and why this is so important to markets because of mispositioning. There has never been a bigger mispositioning for something coming on as this tsunami that I've ever seen because people believe the MAG 7 are a safety valve. They are all overweighted. When I say they, I mean all of you are overweighted. if you're in the S&P 500, if you're in MSCI world. So, if you're ignoring this, why are 10ear rates going down at this point? Give me the reasons why this should be happening when we have a time where nominal GDP is growing at 7%. What is the rationale when we just had a payroll number? Think about it and then just realize there's something bigger going on here. What is happening? I'm going to go through it.

So on the payroll numbers for everyone who said everything was fine. I'm going to continue to repeat the disruption from AI is happening at the level where humanoids cannot replace. So let's just start with there were 137,000 jobs in education and health services 130 overall which means there was 7,000 jobs. Now again we've got the government jobs which continue to be negative and going through but the reality is this is not a strong payroll number and absolutely AI is still having an impact on these things. the wage pressure. So, I highlighted last week the Atlanta Fed and I said employment costs will continue to move lower. The employment cost uh index came out at even lower annualized than this. We are tracking lower on this. Right now, we're 3.4 on this. I continue to believe that the wage pressure will remain on the weaker end because of everything happening on this true inflation which gets ignored by people. It is absolutely correlated over time to core inflation. So true fl true core inflation came out at 1.17 while we got the 2.6 here. I continue to believe the deflationary pressures from AI will show up in services especially with the wage pressure and all this stuff. The S&P not falling. It's just sitting around here. It is below the 50-day and it is kind of a chart that I'd be a little bit worried about in terms of going through it. We'll see what ends up happening. I don't want to be bearish because I do believe earnings are going to be great. The economy is going to be great. This is really a disruptive thing that I don't think a waterfall impact from software which is the biggest component and is a reason why the S&P has not broken out. You want to be long the stuff you can be long. So it would not be surprising for me to see us go down here and then to have a dead cat bounce again back up to the highs. And I say dead cat because I don't think software and the mag 7 are going to be able to be the things driving it. And if it's energy and materials they're too small relative to tech. So this is an abundance scarcity thing. be long scarcity be short abundance and that means that the black widow IWM versus QQQ no one I remember someone reached out in here when I started really going through this because I wrote my PMI piece right here and in there I said when PMIs go higher on a surprising basis you should see small caps outperform and the reason I don't think Q's are going to go where they normally do okay during this is because they will be disrupted by AI because the only way that PMIs can go higher is if the capex spending continues to increase and the buildout for AI is real. And if you believe that's going to happen, the PMIs will eventually go higher because AI will be put into everything. Well, that's where we are now. So, I expect this to fully go. If you want to hedge your portfolio, just make sure you don't have a lot of shorts on IWM. The amount of people that have tried to pick the bottom of this trade, and this is just a gift that keeps on giving from my perspective, um IGV over SMH. These are the weekly moves. This was a great week for it. It was only down 1%. I remember the first week of the year, everyone kind of calling saying, "I think this thing has peaked. I want to be long IGV, short SMH." Look at these numbers and just what has happened. I mean, we've had three numbers of 8% or more. Semis continue to move away. I want to be long the analog names and this is at a time without Nvidia doing much. Retail has decided to jump into IGV and put money in. Now, I will give Retail credit. They were the ones that really took us out of the liberation day. So may maybe they're going to figure something out that hasn't worked yet because uh that was before last week. But a lot of money going in there. So we'll see if we can get a bounce. Maybe retail can hold things in for a little while. The earnings on software, they're at alltime highs. So this is obviously one year forward. So it resets when we get to through the first quarter earnings. You're back up here. Um, so again, it's getting cheaper and they're still forecasting earnings. This is not about earnings this year. And I think that's what's caused a lot of problems for people and why they want to step in and buy it. SAS isn't dead, it's worse than that. This is a good, good piece. It's the first one I've seen written on it. We're finally starting to get to some stuff that I've been saying and I believe in. SAS isn't dead, it's worse than that. The comment that is made in here. The real threat to SAS was never demand destruction. It's supply explosion. So the demand side is what shows up in that chart I just showed. These companies are getting Salesforce.com is getting people to sign up. Microsoft has 3.3% people pay of users paying for AI co-pilot. Uh I'm not one of them and I find it to be one of the silliest things in the world to use it. But regardless the cost of building software approaches zero. You don't get fewer software companies, you get 10 times more. What people don't understand is I would rather have a turbulence model that's a little bit buggy that I have to go into clawed code and get fixed and change myself than get a set thing that I can't customize. So will that work for an enterprise? Absolutely not. Will it work for startup for startup businesses? Absolutely positively. Will it work for entrepreneurs? 100%. Well, there's 8 billion people on the planet. There's not that many enterprises. So as 10 times more competition chasing the same customers means margins. I have seven revenue streams now. I could probably have 50 but I don't have the time. Each one of those re revenue streams absolutely competes with an enterprise company 100%. Prices drop, margins compress, customer acquisition gets harder and more expensive and that's what's going to happen. So when you are looking at these software companies and saying software is needed, I I tend to agree, but not to the way that you guys are thinking, you're not thinking about how AI every month gets faster and faster and the capabilities get better and better and the more that people use it, the more they realize it. And the more people that are out of work are going to need to use AI. This becomes cannibalism on the enterprises. It eats at their margins. Not for an energy company, not for a copper company, not for Corning. And that's the reason why I want you guys to be in there because we need to build that stuff out. And they've got a defense. The other side, anything built on code is up for disruption. I don't care what it is. It does not matter. This is a paper I'm writing this week about democratization.

Falling marginal cost of capability that makes it rational for entrepreneurs and consumers to bypass incumbents entirely. That is a major theme. That is something I do every day. Uh, it's something I believe in. Why would I pay for C-pilot when I'm spending $12,000 a year for five employees, all the big packages for all the big AI fun to do help me with work? Andre Carpathy, a new kind of coding where you fully give it vibes. Embrace exponentials and forget that the code even existed. That wasn't poetry. It was a death certificate for software scarcity premium. The replacement cough of a 20 to$100 million ARR SAS product has fallen below 10,000 in compute in one founders weekend. It's the speed and the competition. It it prevents you from ever getting to the point of monetization or remote. It means all of the public companies which I have said by 2035 I expect there to be complete disruption for all public companies the entire list of them. And the reason is because we'll have a rise of smaller businesses, entrepreneurial businesses. That's the ecosystem that's growing and that is run by AI agents which is where crypto and the entire framework goes. So again, you don't have to believe in Bitcoin. You don't have to believe in stable coins. You don't have to believe in tokenization. But in the same way that you have faded the bubble of AI, you will then suffer the pressure of the new capital structure of the future. Palunteer, I wrote this week. I also released it on Substack to try and get people to realize the research that I do on 22V. Every week I'm putting something out. I'll highlight what it is. How to hedge bubble AI edition. I'm only bringing this thing up there because remember that it was not more than three months ago that there was an AI bubble and now we've got capex spending which is going to be 70% higher than what was expected a year ago for this year. This is the negative that comes. So I'm not some uber bull. If I'm starting to sound bearish, it's because we're in the most destructive phase of capitalism where continuous innovation incessantly revol revolutionizes economic structure from within destroying old industries while creating new ones. I've talked about Joseph Shumpeder and his whole theory of creative destruction. The entrepreneurs role in this. Entrepreneurs are the agents of this change. Introducing new goods, methods of production, markets, organizational structures. That is effectively the exact theme I'm talking about with AI and with crypto. He called it back in his 1942 book, Go Spend Time on AI. And there it is. This is again creative destruction to the point where eventually it gets so fast and so powerful that even the most powerful suffer at the hands of the small. That is the fourth turning. That is the revolution that everyone has been worried about for the last 15 years as the distribution of wealth get worse. Now everyone who wants to use AI is very very powerful and they're able to build businesses and get revenue streams out of nowhere if they want.

So here's the negative side. So for everyone out there in the mutual fund side, everyone out there on the private wealth management side, everyone who's an FA, all of you have so much money in these names and I know everyone is going on TV saying the Mag 7 is going to win this, they're going to win this. I do not believe that. So at some point over the course of the next two months, if you start to doubt the people that you listen to and you want to hear the story on why this can't happen, why they are not going to win this, this is the beginning of that journey for me to explain it. So this is the MAG seven chart. We're getting close to the 200 day moving average. Very dangerous for us to be breaking below. We're at the lowest close since September. So, something different is happening. It is impossible for the S&P 500 to break out when such a high part, the concentration we've heard about is not going up. If you look at it relative to the S&P, we've already broken the 200 day moving average. This is this is not good. Now, if I bring up a longer term chart, this is when chat GPT was released. They won. The MAG7 was going to be the winners. When this happened, this was bad for the market. When this happened, this was bad for the market. If I did an overlay with this versus the S&P, when this is going down, usually the S&P is going down. I'm not calling for that to happen, but there's a risk that's growing in it that if this goes at a fast pace, it will get disruptive. You can have this kind of go on and not have the market go down because the market was actually going up during this. What you can't have is this turn into a waterfall which is what's happened with software. The MAG7 relative to the S&P though is not the issue and this is what I want you guys to start focusing on. When chatpt was launched very quickly in 23 when you started getting these gaps higher the winner was going to be Microsoft because Microsoft was in everyone's machine and they were going to issue co-pilot and 10% to 20% to 30% of the people that have Microsoft were going to use it. Uh Microsoft to me has a lot of issues in this. Uh that's just me. You guys can do what you want. But this is Microsoft relative to the S&P. Uh we're back to where we were in 2020. This name has lagged. This is a waterfall chart. I don't like waterfall charts and trying to pick the bottom. And I usually think there's something wrong. What is wrong is this is when we started to realize that AI was moving faster and Claude and Anthropic in particular was starting to dominate the enterprise world. That's how fast this has been guys. Anthropic started to dominate and then when you get into here and here, this is when Claude became there. I do believe that people in Silicon Valley that are long mag 7 that are long any of this, they recognize what's happening. You cannot have claude release claud me use it for a week claude powerpoint I didn't use it because I use nano banana the point is why do people need Microsoft and need to pay the money for copilot when they can just use chatpt Gemini and all these and then oh by the way are the Chinese models which are free so this is a problem but we've now taken out the lows of where it was when chatpt was launched it is connected to open AI so here's the scary chart Microsoft, Amazon, Google, yes, and Meta, the hyperscalers, the ones spending the 650 billion, not including the money that Oracle spending, not including OpenAI, not including anthropic, not including XAI. There's a lot of money being spent in a massive race. And then you have the Chinese models, which are free, the hyperscalers relative to the S&P. Now, a lot of this is related to the earnings that came out in the gap down, but this is an equal weight index of the hyperscalers. This is for you guys where I'd be using it as a funding cost. I think you want to be long. Everything's scarce and against it, you want to be underweight. All of the hyperscalers, those four companies that I mentioned, I think those four companies have a big issue. So, this is the hyperscalers relative to the S&P about to hit the lowest level since 23. If they don't change something, it's a problem. And for everyone saying come in and buy them. I when I get to the point where I'm going to show you what has

changed over the last six to eight weeks is new news. Are they being basian? Are they taking in new news and even referencing this or are they just saying gobbledegoop of they will be the winners?

That's what Kathy Wood said before I went on is that I've studied AI companies for 15 years. I know the ones that were building this stuff. They have the edge. I didn't use AI for that entire time. I had data scientists. Everything that I'm able to do that you guys see on this, every reason I'm trying to help people with my payw wall to both invest but also to learn how to use it that comes from knowledge recently. You don't have a l a legacy advantage by being in there.

Elon Musk said software guys are becoming hardware guys. If you didn't listen to this and you want to question your own beliefs in the hyperscalers and not just wake up and say they're going to win because they're big, that is the framework of the last 15 years. That is not the framework of the future. The people who thought that they were just writing code now have to think about transformers, substations, cooling, and energy generation. And you know what? They know nothing about it, but they've hired someone who knows something about it. But that person is like the subcontractor or the contractor on your home where things never get done on time and where they can't possibly know every single supplier and issue.

So when I put transformers, substations, cooling, energy generation, which is what Elon put, there are so many things on here. There's memory, high bandwidth memory. There's optical fiber that Meta is trying to hoard. There's copper. There's silver. There's rare earth. Any one of these can delay this coming out. And then you have a real problem because you can't get the revenue without the capacity. The capacity is not there.

Go listen to this podcast. I've shown how important this is. Some of you have listened to it and agreed with me. If you haven't listened to it, again, there's a lot of this that is not about copper and not about silver. Jeff Curry does a great job of explaining why the hyperscalers are at risk. His asset heavy point, and these charts are going around, asset light versus asset heavy. You didn't want to be long asset heavy over the last 15 years. You wanted to be long asset light. Well, now the asset light companies are becoming asset heavy in the hyperscaler side. He makes this thing. The digital economy is now colliding with the physical world. in the physical world has constraints. Talk about it every week. You can go through it. Here are the IPO the RPO numbers. This is $1.2 trillion now and growing. This is a big problem because this is dependent on getting the data centers done.

So that chart I just showed you to get these numbers we need more capacity. To get more capacity we need the software guys to be able to build hardware. If they can't get it then Dario Modi has said there's a real problem because you're spending tons of money. So you're sp you're you're doing that and now we've raised the numbers on the capex significantly. This were revised higher. This was revised higher. We haven't even gotten the data centers done yet from the numbers on this. You're starting to get a backup. I don't want to say this is a problem because the demand is greater. But the issue is if the delays take too long, it does become a problem and they're obviously borrowing money. So it's not just asset heavy. They're having to come out. So Alphabet goes out and sells 32 billion. We've obviously seen OpenAI.

So, here are the things that we've gotten new news on. The RPOS's continue to grow. Did anyone talk about this as a negative? They're getting more orders, but at some point, if they can't bring the capacity online, when does that become an issue? Number two, the Chinese models are improving rapidly. Free models connected to the expensive models, they are losing market share at without a doubt. Now, maybe not to US companies, but certainly to Asian, certainly to all the future enterprises or the future wannabe enterprises, all startup businesses. If they're trying to make money, they care about costs. Why wouldn't they use open source? So, again, I I you you've got Chinese models going. Claude code has accelerated. We didn't think we'd get to recursive self-improvement, but claude code has accelerated dramatically since November.

The bottlenecks are growing. We're getting cancellations across the board. If you don't, if you're a multistrat and you've got utility teams, ask them how the capex is starting to show up in certain uh uh states, whether it's Michigan, Iowa, Missouri, how many things are being canceled, how many complaints are going out of Louisiana with the metawan. What's happening with Elon in terms of complaints? The bottlenecks in the data center delays are growing. It's one of the themes or theories behind why Elon Elon Musk is going to actually issue and go public merge. He needs more capital. And one of the things he wants to focus on is getting the data centers in space where he doesn't have to deal with all the issues. The capex's guidance remains going up higher. So they're spending more. We've got bottlenecks growing on the buildout that allows them to get the money on the RPOS. Their competition is growing rapidly and a private company is winning the battle in ter these are all news things in the last six weeks.

So if Dan Ies is not saying this, if Morgan Stanley is not saying this, if JP Morgan's not saying this, if Goldman Sachs is not saying this, why are they not saying this? I just don't think they have the domain experience in this to be paying attention to data centers and to the RPOS's connecting them back to the usage. I just don't think people fully grasp and the startup world is going to be using the Chinese models.

So Dario Mod did an interview with Dwaresh Patel came out yesterday. He talked again about how we are near the end of the exponential. Overbuilding is exponential. Underbuilding is the strategic loss. This is the trap to roll in. They have to build. If you overestimate demand, you've got bankruptcy risk. If you underestimate demand, you lose competitive position. This asymmetry forces cautious scaling, but most people are not doing this. And he talks openly about how, again, he's not naming them, but he's saying open AI has just spent too much money. He's basically predicting that they're going to be in trouble unless they can get more of the building done.

Now, for those of you on the payw wall, one of the things I want to highlight, I'm releasing this each week. So, all of the podcasts that I go in here, you will get a list of them, the ones that I've used on the video. It'll have the link so you can just copy it and paste it and go into it. It'll have the details on it if you don't want to go do it. So, I'm giving everyone the same way whatever I've figured is the signal, I'm giving you guys access to the signal on the payw wall.

Now, the reason the hyperscaler is so important, not just from those names of perspective, this is the relationship of growth verse value. So, if the hyperscalers go up, go down, we got an issue. The other new news that came out in the last six weeks that was not news is the size of the IPOs that are coming to the market. So with increase in capex, we have less buybacks. At the same point, you have more supply coming in. This chart's going to get worse because where's the money going to come from to buy SpaceX and XAI and Anthropic and OpenAI. It's going to come from the growth bucket. It's not going to come from the value bucket. So what you're going to have is the demand side. They're going to have to sell something. This is just going to continue to get worse over the course of the year. The only question is where's it going to go? You want to continue to be short growth for it value in my opinion. But the hyperscalers relative to it are critical.

Here is the Mag 7 relative to it. The reason I keep showing this, I still believe Tesla's going to be the best performer out of the Mag 7. Nvidia, I don't know what to do with it. It's still cheap. I do think that there's going to be an issue with the compute side going forward, but Nvidia to me is still the best place to be with inside the Mag 7, uh, outside of Tesla. And so, you're left with that. And then with Apple, the fact that they haven't spent the money, they haven't gone through, they don't have the same issues, but they definitely have a multiple compression issue. Their biggest issue is going to be did they lock in the supply chain for memory where they're going to be able to release things. They are sold out of Mac Mac minis at this point. I'd rather be long Apple than short it.

The turbulence model I released something on Friday. And again, what I want to highlight here is how many green bars I've got. To get a green bar in this, what I need is a shock in the cobar matrix at the same time that the S&P is above the 50-day moving average and at the same time that the VIX is below 25. So what these are meant to do is say that the market's not ready for something and there's something big going on. When there's big going on, the Kovar matrix is really shocking. That's what the turbulence models measures. So again, for people on the payw wall, you get access to this. I wrote a paper on this to describe what it is. I'm not going to go through it, but again, I've I I been involved in risk management since my days at Morgan Stanley. I built a lot of the risk systems at the hedge funds uh I was at or at least constructed them. I always have paid attention to Kovar. That is the risk for the multistrap model. It is dependent that the market acts in a certain way. I believe the act of the market has changed significantly.

And so the main point here is we have had approximately 12 to 15 green bars. And I say approximately because it depends on when you uh what you had as the close, what wasn't the close. The main point is you can see how stable it was. This was the only period in early 24 that we had any kind of multiple bars within a period of time. These are happening now relentlessly. So, so far in the last five weeks, we've had 12 to 15 and then we had about 20 to 25 in the prior 28 months. So, it's telling me there's risk and it comes at a time when hedge fund gross leverage is near all-time highs. So, for anyone who's doubting this, I don't know what you're talking about. If you don't think gross leverage is high and you haven't measured what's gone on since chat GBT and the fact that we've seen this go on consistently, gross leverage, it's not even a question. Net leverage not the same. In fact, net leverage kind of middle of the range except for this one pukage down in in during liberation day. So, it's not the net leverage. So, for everyone who's a long short hedge fund that's like leverage is not high, that's the one you care about, great. It doesn't really matter. Same thing going on o over here in terms of looking at it.

What you have here though is the gross leverage and this is the issue that comes up when gross leverage for long short is at those levels. We know gross leverage is high for the multistrat side because of where V has been and what and the correlations that have gone on. What you normally get in what's happened over the last week especially when we've got stuff going on is people hedge their nets. So the nets go down gross goes up because you add shorts on top of it to protect against the downside move. The worst thing is when you spend a month not falling and you just go sideways.

Now, what I look for once the turbulence model is telling me there's risk growing, if I want to see if there's going to be a big unwind across assets and especially in the multistrap world, what I want to look for is for credit to start to weaken. The only time that that can happen in my opinion is when we get a credit event. Now, credit weakening at the same time as the market going down, not going down is a big issue. And that's where we're starting to see at this point because one of the big hedges for credit, especially widening credit, ends up being VIX options and eventually it will catch up. But in the meantime, if your measured mark month-to-month, this can be an issue.

Now, I'm showing here the levered loan total return index. It peaked here, we've been weakening. This is at the end of the year. So, January, we've seen this weaken at this point. This is a little bit alarming. The only time we've been below the and this is the 100 day moving average, the green line. The only time we've been below the 100 day moving average since we came out of the rate hike cycle was this period in liberation day and we were leaning over before it. We obviously have seen weakness because we've seen the private credit fears. We saw the the auto lender fears everything happening in September. That's what I would worry about.

So HY to IEF is my liquid version of this. I never like it when it's going down. It's a great proxy for anything related to credit fears in terms of getting liquidity. Well, it's trending lower at the same time that I'm getting turbulent shocks, which means we're getting some contagion. Now, here it is overlaid with junk spreads, just to give you an idea of how it leads. This has always been my big proxy HY relative to IEF over the junk spreads. You're getting junk spreads to widen. You've also seen it on uh option adjusted spreads. It doesn't really matter. Everything is kind of leaning higher and weakening.

This is the BDC environment. So, it's not like private credit has gotten better. So this is the BDC index. We're still sitting down here. So we started to break down during liberation day. We bounced all the way back up and then in September is when we started to get the weakness. So remember, we've had a weakening credit market. We have delinquencies happening at the consumer side. As long as it doesn't all flush at once, it's not a big deal. I think we can get through it. But the problem is if we start getting hedge fund deleveraging, you're going to end up impacting credit markets. You'll impact the V markets. and then you'll have a scenario that rates are going to move lower and blah blah blah. Well, that's what we're seeing. So again, I'm just saying that there's a growing probability of an event to occur which I think will happen at some point this year. You want to look the contagion is r is increasing.

One of the issues and Warren Pies brought this up and I completely agree with him. Leadership is transitioning to an unhealthy place with energy and staples leading. So he has this chart here. When staples and utilities are the best performers, it's not great. Energy also not great. More importantly, you need financials and tech normally to be at the top. Well, we know tech's not going to be there if I'm right about what I'm showing. But financials join the party this week. That is the risk that goes with credit. Financials had a very bad week. And it's been insurance brokers. It's been in wealth management. you haven't seen Goldman and the the upper echelon things, but the BKX underperformed the S&P significantly this week. So, I would watch this stuff. The other place where this will spread, services and software. So, obviously the software and services are falling.

The reason I brought up MSCI world for this is because I just want to make sure you realize it is a huge percentage of the market. And more importantly, this is how much of it is the US 90%. So, I will keep saying it. If you guys want to follow my scarcity routine, the other thing I'm worried about if this turns into an event where there's a deleveraging, the Fed will be forced to cut rates, provide liquidity, do what they normally do, if it is happening at the hedge fund level, which I think can be a risk. If that happens, the dollar is going to weaken. If there's repatriation out of the MAG 7 and out of the hyperscalers and out of software, that should be weak dollar. That's what I think is going to happen. And so an embedded put against what I'm saying is to be long foreign stocks X the US.

Look at this chart. This is MCI World X the US. If you are not looking at this, if this is not a benchmark for you, it was unchanged from the end of 2007 all the way to the end of 2024. This is what you want to be long. And it is accelerating. This is a weekly chart. I I just I literally cannot say it loud enough. I'm going to keep pitching foreign foreign stocks.

Now, I'm going to keep showing Brazil. So, Brazil, the sell rate, this orange line. You guys know I lived in Brazil. I love Brazil. I follow Brazil. Uh here's the green line. EWZ, I want to be long this for all the reasons I put. For those of you with the payw wall, go read my research piece from last week. But here's the CRB Ren, the white line. We like this because we like scarcity. We like metals, minerals, all of that stuff should be trending higher. The whole thing. And I believe they're going to be cutting rates. So instead of saying me, just copy this chart right off my screen. Knock my head out of it. Put it into an LLM and say, "Hey, I want you to look at this chart and tell me what I when I should be long EWZ." Uh uh you want to be long EWZ when the ideal the sweet spot is when you have a rising CRB raw industrials index coupled with a falling or destabil or stabilizing at low level select rate. So if they're going to be cutting rates, which is going to start, there's a 90% probability in the market that they're going to be cutting in March. We've got this going higher and I think this is structurally going higher. It says that's when you want to be long EWZ. You don't have to listen to me. I don't need to get on a panel and debate this with people who are bearish on Brazil and talking about politics. I really don't care. This is what is going to happen. You're going to have rates cutting lower. These guys have a thousand basis points of real rates at this point. They have plenty of room to cut and the deflationary pressure. So if you believe in trueflation, if you believe in tenure rates coming down, if you believe the US economy is going to be strong and that the spending is going to happen and it's going to be focused mainly on minerals and commodities, historically this would say be long Brazil. And I'm going to say for many, many reasons outside of that, you want to be long it. You want to be short anything built on code and abundance. That's what this whole thing is. And then scarcity, these ugly things here, utilities, copper, optical fiber, any of it, any of that stuff.

Well, there's there's CVX. Whoa. Chevron. I got told by so many people this was not a good place to be because it doesn't participate. We're about to break out again. It's been basically dead money for over a decade. The rotation will happen. They will benefit if we need to spend money and build out these things. The same thing. Eaton another name. It's been sideways. When you can find these patterns, these kind of bases that John Rog likes to be in where it was unchanged from the middle of 24 to early 26th. almost two years and now it's starting to break out. Their name shows up on almost every single screen that I do on benefiting and it's not just one component. The one thing about Eaton is they're diversified and they've got a lot of revenue streams that are showing up. They will also show up on the optical fiber side, everything. But if you don't like them for the reasons I'm saying, just know that PMIs just had their biggest upswing outside of coming out of COVID since back in I don't even know how long what did I say it was? 95, 92, I don't even know. It's a big PMI jump. So again, you've had low PMIs for a long time. Underweight, it's breaking out.

The thing I'm gonna write about this week, the next place. So you guys like Corning. I get a lot of fanfare from Corning. Well, chemical time, boring chemicals, Vanderlay Industries, Plastics, Latex, all this stuff. I'm going to write a paper on it and give you guys some names on the payw wall. Um the Corning and Meta deal is what triggered the research and I wrote I'm writing finishing this is part of my initial thing but how the meting deal signals the beginning of a multi-deade broadening cycle in AI infrastructure materials. If you guys are looking for names that nobody could possibly own and ones that are boring and not part of the AI cycle chemicals are going to be a big part of it. And look how many chemical names I will this is the John Rog I'm not going to show you his technical score. This is for the people on the payw wall and the institutional people, but I will be putting something out on this in terms of names. If you guys want the names, just go sign up and spend the time. I will go here's one freebie in terms of things to look at. Selony announces acetic acid blah blah blah price increases. We're looking for price increases on things. We're looking for companies to be talking about it. Again, you can go to the payw wall. You can go there.

Bitcoin. Saw a lot of people there. I spoke after Kathy Wood. Um I am disappointed that Bitcoin has gone lower. But if you would have told me that software would end up falling as much as it has, and again this is basically when the software problem started, uh I didn't think we get a waterfall. You can't get away from the fact that software and and Bitcoin historically have been correlated. Uh that's why I don't believe in this liquidity thing. Uh other than the fact that risk on means you're not having a recession. So if you strip out recessions, liquidity to me has always been a lacking argument I don't really care about. Uh I like the correlation, but this correlation makes more sense to me and it's what I believe in. If you guys go back and listen to Michael Sailor, there are two things he talked about. One is the debasement side. Everyone gets fixated on that. That's where the liquidity side comes from. My argument has always been the Joseph Shumpeter side. and living in Brazil. The real theme behind Bitcoin is the fact that there will be very few winners on the enterprise side and the people that have money that are invested in the Kypers scalers in the Mag 7 eventually will see their assets start to become an issue and they will be forced to move into things. Bitcoin is a growth asset. There's no doubt about it. It's built on code. It's innovation. It's the future. The ecosystem is part of it. They are related to VC. They're related to all of it. I think all of the money on the VC world should not be going into AI, it should be going into Bitcoin. It should instead of the NDX, which outperformed private credit, private equity, NVC over the last decade should be going into Bitcoin. We'll see if I'm right on this, but I do believe that the software side has created an opportunity.

So far, we've held in well in Bitcoin this week. If we have another waterfall leg, like I said, and this becomes a deleveraging event, Bitcoin will absolutely head down to 40,000 with everything else with it. But then I would expect rate cuts, dollar weakening, and everything to set up where software reaches a level where it's getting cheaper by the day. If we have another 20% fall, you're going to have the earnings for these things down into the teens. And I think that's where they do become value names that everyone will be moving into.

Here is the relationship between Bitcoin and the software side. When you do a ratio of them, what's critical on this is look at the beta on the upside. So for everyone who's an endowment, a foundation, a pension fund, anyone who's making investments in this, the software side, Bitcoin outperformed on the way up, it has underperformed since September. But again, when you look over the course of this time period, it's gone sideways. I believe once software finds a bottom, this will go higher. What may happen is software has another leg. I think it'll be one for one. Bitcoin is this year down about as much as software. It's about exactly the same. So it is not having a higher beta on the way down.

If you haven't read this, go read it. This again gets into the tsunami side of how fast this is coming, how many jobs are at risk on the enterprise side. Absolutely want to be paying attention. I believe you read this, you go see the impact that is going to have. And I think you need to make sure your kids are learning AI. That's why I do these things. And I'm glad for the students that get heavily involved with me from the college side. Um this is just an unbelievable story. But remember Dario Modi wrote a paper about how risky things are getting. Uh he had written an optimistic piece less than a year ago. Now he wrote a pessimistic piece in January. He had one of his lead researchers on the safety side. An AI safety researcher has quit anthropic that the world is in peril. So this is someone who knows what's going on and he quit to study poetry. That's how scared he is of the impact that is coming. I asked to combine both the Dario Modi piece with the piece what he said coming out. The world is in peril not just from AI or or bioweapons but from a whole series of interconnected crisis unfolding in this very moment. This is the thing for regulators and for everyone out there.

The reason I care about the turbulence model is because of how fast the tsunami is moving. At some point here you have to realize there is 0.0 chance that AI won't be getting stronger. that AI agents won't be out there and that leads to a lot of dangers and nobody is prepared for it. And so there's negatives that come and there's positives. We're going to start to see the negatives in this this year because recursive self-improvement and the escalation of cyber risk is real.

So again, just remember my job here in launching the payw wall is to help you guys from a perspective of domain experience on the investment side, but also now in the AI native side. For those of you who look at me as some researcher, some whatever, I know more than most of the banks do because I've spent more time than a lot of them in the markets in connecting macro. AI is a macro theme that goes across sectors. It is not siloed. It is not a technology. It's impacting everything. And if you didn't think that was happening, you saw it this week. I understand how crypto is connected. This is where you want to be putting your money once software finds a bottom. Either is going to come from software stabilizing and being a value trap or it's going to come from the Fed having to come in and do something because the market has a disruption from hedge funds that are deleveraging. One of the two, in my opinion, is going to happen this year because of the waterfall that's going, it is not a time to step in and buy software. And for those of you who realize that the risk is growing every day, I will I am putting out videos. There's one already up on there. There will be a complete webinar series to help you learn. Have a great uh long weekend. I will see you guys next week. And for those of you who've signed up, thank you very much. I appreciate again for those of you who reached out to me at the events. I'll be doing more events in New York City and then I'll be traveling to some bigger events over the course of May and April. Thanks. Have a great weekend. And I'll see you guys.