Transcription
Quiet week for the markets as we come to the end of the first half of the year. Got through expiration on Friday.
Uh, this week, uh, I'm going to go through and kind of build around a report that was released by CO2. Uh, it's their East Meets West 2025 report, and it's the first, uh, let's say technology-focused or AI-focused report that, in my opinion, really does a good job of connecting it all to macro—what this AI move means. So, especially for people who still have not embraced what I've been going through in terms of the fact that everything in the economy right now is being driven by artificial intelligence and is the reason why the markets will continue to move higher. This report, I think, does a really good job of, of, uh, breaking it out. So, I'm going to go through it. There's some things that I differ with. I think the report is way too optimistic on a couple of things. Uh, but, uh, it's 102 pages. I highly recommend everyone go through and flip through it. Uh, so, that's it. You can get it off their website. Uh, if you want to do the quickie version, uh, BG2, Brad Gersonner, and Bill Gurley, uh, had the Lefant brothers on, and they went through it. It was a great episode. Again, my favorite, uh, technology, uh, podcast at this point.
So, just to go through it, I mean, basically, they're comparing this to each of the different components, uh, and where we are. So, starting here and then getting up, we're kind of in this point, and this is going to accelerate, and this will be again another massive wave of innovation. Uh, they're talking about the fact that, uh, why couldn't this get up to 75% of US market cap. This is one of the places where I don't agree. I do not think technology is the winner in this. Uh, I believe AI will be used by other parts, and you'll start to see other parts of the economy be fine, uh, or broaden out. I think you're already seeing that Amazon is not really a tech company, but it is a tech company. Uh, in terms of today's top 50 companies, they're just showing where it is. I just want to highlight—they have Bitcoin on here as a top 50 company. One of the things that surprised me on here is they did finally embrace, uh, Bitcoin. Uh, Philippe mentioned it. Uh, I still—he talked about the fact—really know how to value it except for the fact that as a percentage of the fiat assets, it's only two trillion and 500 trillion. Uh, he did mention, uh, that the incumbents are starting to see headwinds, which I completely agree with. This is my Bitcoin over the Mag 7. I think the Mag 7 will have insane competition coming at their businesses.
So, they created this thing for 2030. Um, and basically, think of these as the companies that are going to benefit from AI. Uh, there's a few things to notice here. Number one, you still see Microsoft, Nvidia, Amazon, and Meta. What you do not see on here are Google and Apple, uh, implying that they are two of the incumbents that are going to be disrupted. Uh, we've already seen that, uh, as I showed on the last page with Google and search. Uh, but I think it's interesting, and up here they have Bitcoin finishing 2030 as the, uh, third largest. I have said repeatedly, I believe Bitcoin will finish this year as the biggest on this particular list, uh, not in 2030, but at the end of 2025. So, we'll see, uh, where that is.
Uh, these are the takeaways from the presentation: AI-driven productivity boom reshaping the corporate model; explosion in reasoning is the real growth engine. I've talked about this. We're going to go through it. I've written a lot of papers on this. Uh, it's big for, for energy. It's big for spreading out across the AI agents. Uh, Bitcoin and stable coins are becoming systemic, systemic assets. Hyperscale GPO arms race is redefining cloud power. Productivity growth may solve the US debt problem. I'll go through that. Uh, AI cycle is reviving IPOs and M&A activity. Not really seeing that that much at this point.
Um, one of the things Gersonner—they talked about on there, and this I'll get into again and again and again, uh, is the golden age of margin expansion, uh, which basically means the ability of AI to grow top lines while holding the line on headcount. Uh, so this again is going to get into the dynamic that I think people are minimizing in terms of the backlash that's going to come from people losing jobs, which I think has already started, uh, and will continue to be an issue.
Um, OpenAI's got 2700 employees versus Google's 187,000. And this is what makes this a problem. Um, if you view them as a startup, you view this—the more people you have, the more challenging it's going to be. It's just the way it is—the bureaucracy, everything that happens at a time when AI is allowing you to replace things without it. So, uh, for every 2700 employees, the question is, will there be a bunch of small places that'll continue to eat at some of the places that Google is in? I believe so. A replacing not physical labor, but cognitive middle management work, a direct byproduct of AI's reasoning explosion. The reasoning capabilities of AI—not just automation or code generation—are central to the Lefant thesis on why AI will drive explosive growth efficiency in business. I completely agree. Reasoning, reasoning, reasoning has been the big thing. They highlight some of the things I brought up. Sacha Nadella: We process over 100 trillion tokens this quarter, up five times year-over-year, uh, including 50 trillion last month alone. I showed Google last week at 50x in terms of tokens on their most recent thing over a year. Uh, remember what, uh, Satcha Nadella said: Jevons' paradox strikes again. As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can't get enough of. This was after DeepSeek when everyone panicked about DeepSeek and launch of deep research and reasoning model, which also coincides with DeepSeek, which forced them to continue to move things faster and get it out. Uh, this is the growth we saw. So, ChatGPT is growing faster than anything we've ever seen before. AI is running through the economy. Um, the inflection is beyond just consumer use. Share of businesses with paid subscriptions to AI is now going up as well. And again, the inflection point right when reasoning models started to come in—agents, everything along those lines. This is why I wrote *The Inference Inflection: Where Real-Time AI Meets Real-World Opportunity*. I went through all of the companies. I'm not going to read this stuff—all of the companies. We're just getting started with the upcoming rise of AI agents, AI-native phones and PCs, embodied AI like self-driving platforms and humanoid robots, inference manus go parabolic. Um, the implications for semiconductors, memory, networking, power, and edge computer are massive.
Basically, that's where we are right now. That's what the Lefant brothers went through on the podcast, and that's what you can see in the report.
Now, this week, uh, we did get a message from Andy Jassy at, at Amazon. Technologies like Gen AI are rare. They come about once in a lifetime and completely change what's possible for customers. So, we are investing quite expansively, and the progress we are making is evident.
Um, what has happened to AI stocks? This is the Goldman Sachs long-short AI pair. So, this is long companies benefiting from AI, short companies that are going to be hurt by AI. You can see it's driving the market. Um, and again, it started from the bottom there, but it had consolidated before Masa Son pitches $1 trillion dollar US AI hub. I'm just going to go through the, again, continuation of just the massive numbers we're seeing associated with this, which again is confirmation that this is happening, and if you think it's a bubble, again, you're going to continue to make a mistake. You have to spend the time learning about AI and understanding the difference between a training model and a chatbot and reasoning—completely different things. The ability to use it—you get smarter. You go through this if you haven't done it yet, and you're still bearish on the economy and bearish on the stock market—good luck with surviving. You're going to be one of the people that suffers. Uh, Zuckerberg apparently, uh, offering a hundred million bonuses to come there—again, his failing AI efforts. So, there's pressure on Meta that show up on how are they going to catch up—discuss buying Perplexity. What's the other company that's having trouble? Apple executives have internal talks about buying AI startup Perplexity. This was on Friday after the market closed.
So, for the week, um, with Iran, Israel—again, two weeks in a row now—we're just consolidating here after these big rallies we saw. So, not—no real move. Um, consolidation up near the all-time highs. And as I said before, would not be surprised to see us come back to the 200-day moving average at a minimum. We went back and went to the 20. We're kind of recycling. It's about a month now. We haven't done anything. So, there hasn't been much that's gone on. Uh, we're entering, uh, the blackout periods in—we've hit there. They will slow—reducing a major part of demand, as I've shown—this is over a trillion dollars annually. So, with 252 trading days, you can go through this—when the window is open, you're talking 5 to 7 billion of demand. When it closes, it gradually runs off. So, just keep in mind that these periods are kind of where consolidations or corrections would start.
Uh, in terms of what for the month to date, energy has been the best performing sector—obviously, Iran, Israel has had an impact, but I think, uh, as I've said before, tech has held—has done very well, uh, as well. I think there's more to the story now. One of the reasons tech has done well, and you can see the best, uh, level three GICS industry groups—you've got a lot of top-heavy things here related to AI, or at least related to the war, to geopolitics, um, but semi and equipment are in there as well. You've got some of the REITs, uh, in there, which again are being driven by the AI stuff, construction, engineering. Basically, you got a lot of growth stuff in there, or a lot of commodity-related things. Uh, and that brings us to one of the reasons. So, WTI, the second month contract is up 24%, uh, month-to-date. So, over the last decade, you can kind of isolate this. You're dealing with the COVID period. If it wasn't for the COVID period, this is the biggest move. There's plenty of Middle East actions that have gone on here, but as of right now, crude is up 24%. And I think that's important. Again, I've been talking about the second half of the year being a, a, a realization that the reasoning demands that are showing up in the token usage will put pressure on energy. And once we get into the summertime where we have more likelihood of hurricanes, where there's blackout, um, possibilities, I think energy is going to start to take a focus. This is the, um, energy, the commodity energy sector. So, this is the GSCI index, and for the month it's up 21%. So, again, you go back—this is almost—this is over 20 years. This is a big move. Um, and even though this is Iran, Israel, um, I, I wanted to just highlight three podcasts that, for those of you who want to not read about Iran and Israel all the time and read and listen to three podcasts where I think they do a good job of explaining what you should expect. Uh, Marco Papich—I've, I've—you—I've referenced him a lot on here. He does a podcast with Jacob Shapiro. They went through this. Uh, so did, uh, this podcast in terms of honesty with Barry Weiss—had Neil Ferguson and Dexter Filkins, another good one. And then finally, *Good Fellows*, I thought was very good. This also includes Neil Ferguson, but it has H.R. McMaster as well. And they go through it, and they talk about, uh, one common thread they believe is that this will last, uh, a long time. Uh, they don't think this is just going to end. So, with all the speculation that Trump is going to come up with something—whether the US involves itself or not—they don't think it's going to be a very, very short situation, uh, and so if this lasts for more than, say, a few weeks, uh, or a few months, uh, I think there's a floor in energy, and it comes at a time where, again, I like to focus on Venn diagrams that are connecting the geopolitical side—whether it's tariffs, whether it's whatever—with AI, and in this case, as Sam Altman said when he took the stand in front of Congress, uh, the cost of AI will converge to the cost of energy. Uh, the AI revolution isn't possible without an energy revolution. We're going to have problems with the power because of the exponential move. I wrote a piece for 22V this week on Chevron and Exxon. It's so funny to hear people that are energy people immediately talk about, uh, this is not an idea, blah, blah, blah. I, I, I really think people are missing the fact that unless they focus on the AI side of the equation and the demand stuff being insatiable—companies like Chevron and Exxon that historically were not thought of as AI companies—I believe they will be thought of as AI because they are the electron giants for the AI age. So, their business—which I already highlighted in here—the ways they've, they've, they've been adopting—but the world is adopting AI faster than ever before. This is from Google: 9 trillion tokens to 480. This is a direct number of electricity. So, the electrons used for this growth is insanity. Um, Larry Ellison: We'll take all the capacity you have. Wherever—we'll buy every megawatt you can deliver anywhere in the world. I highlighted that last week. The energy demand is real.
So, when you connect the AI energy demand and you realize that here are the Chevron earnings forecast. So, they've basically followed crude. This is the 12th contract of crude. So, looking out to next year. Um, this fell on Liberation Day. So, you had all the analysts move their earnings revisions down. Now you've got crude back up here. And again, this is before anything from the AI demand side. It's not that oil is in there. But obviously, if gas goes up, if other energies are going up, if there's demand, there will be switching. There will be massive switching that has to go because we are going to be short electrons. So, rather than think of these things as oil or whatever, you have to go through—that's why I did the report on it. This is again from the East Meets West report from Codeu, and they're basically—again—so if you look at this—autos, oil, manufacturing factories—global leader of industrial revolution—I just want you to think when you're following things like the PMI data, you're following this at this point—semiconductors, electricity, AI factories—global leader of AI revolution—this is a different world—completely different—AI has changed the entire concept.
Um, one thing that has not changed is the supply chain. So, this pink line here is the Cosby, which has continued to go higher, and this is the equal-weight semis. I still believe—as Cotu wrote and as I say—all semis, analog, anything that's dead, uh, shortages—just buy as much as you can. It's going to take a while because AI is not only growing fast, but the data center growth is going to explode. Uh, Caterpillar—again, finally getting called as, uh, benefiting from AI. This is to kind of emphasize the Chevron, Exxon point. Uh, Caterpillar is a heavy part of this, including generators. So, again, they're involved. So is Generack. All of these places that are involved with the electricity side will be in there.
Um, economic data—Citi surprise index has gone back to the lows of the year. It actually went down to lower than it was here. Now, again, the Citi surprise index means how the data is coming in relative to expectations. This is overlaid with 10-year rates. Um, so this is getting interesting in the fact that, uh, the economy is not bouncing at all, meaning it's fine. We're going to have 3% GDP in, in Q2, but we didn't get any kind of a big bounce in the data. So, things are just kind of mulling along. And I think the main reason that things are just mulling along here is the fact that consumers are concerned with the AI situation.
So, I'm going to just bring up some points here, and again, this is from the report. So, this is actually, uh, from the report in terms of, uh, this is actually from the podcast, but it's related to the report. AI is enabling top-line growth without headcount. Executives are planning for fewer employees. What if our headcount was down 50% in three years? Massive productivity gains—not just cost-cutting. Will AI cause mass unemployment? They ask directly, and this is what the answer is. Is AI going to increase or reduce unemployment? I'm not 100% sure. But if forced to answer, I have faith—faith—it might actually create more jobs. This is the problem. This is where we are in the economy right now—is nobody seems to know the situation on AI. I've given my opinions. I'm going to keep to go through it. Use the data as facts. Use consumer confidence as facts. But also the questions I'm getting—the only way people can ensure that they're going to have a job, in my opinion, is to use artificial intelligence every single day. That's the only way you can ensure it because you will be displaced. You can go get a job in another industry. Uh, but if you want to stay in the same industry, you have to be able to use AI to justify it because it will increase your productivity. Uh, there will be new companies. I feel good about that too. But that takes a lot longer time, especially from people who aren't using AI now, which is probably the reason why they're not going to have a job. AI could lead to net positive employment in the long run. That's my main issue—is I think in the short run, people are underestimating how difficult it is because of the demand speed and the insane usage that are happening and the adoption. I just think this is going way too fast because it will benefit companies that are able to do this.
So, WARN notices started to pick up in a—I want to say—a more meaningful way. So, we went up to the highs since 2023. WARN notices are basically—and this is from the Cleveland Fed—it is a leading indicator of what claims. So, it—that's why it says WARN. So, we've seen the numbers go higher. Uh, in June 2025, more than 170 companies are expected to announce layoffs based on WARN filings. This, uh, passes the roughly 130 companies in May. So, we're seeing more, but they're spanning a broad range of industries: finance, retail, food and beverage. You notice how big these companies are. Individual state reports see significant layoff activity: Pennsylvania, New Jersey, broad. So, we're seeing it on a, on a much broader level than we have in the past. The thing that bothers me is I look for scenarios where there's correlation between, uh, the claims and the WARN notices, and that's what we have right now. So, last year when we saw, uh, claims kind of jump in May and there was a question if they were seasonality, the WARN notices actually collapsed. What you have right now is the WARN notices and the claims—number claims—have been tracking higher. Uh, at the same time, I mentioned the Andy Jassy thing. Um, I see smaller Amazon workforce due to generative AI should change the way our work is done. Um, technologies like Gen AI are rare. Oh, I highlighted this. Um, the progress we're making is evident, but this is the main thing: Many of these agents have yet to be built, but make no mistake, they're coming, and they're coming fast. There will be billions of these agents across every company in every imaginable field. Basically, no matter how you go through this, they're openly talking about it. So, Axios put an article out this week: Why CEOs are using AI to scare workers. And with inside the article: The transformation will likely reduce our total, uh, corporate workforce. This is again the Andy Jassy side. Uh, JP Morgan told AI investors would allow for 10% headcount reduction. Executives are concerned about AI impact. They believe employees aren't taking it seriously enough. Shopify sent out to employees—I highlighted that last week—a warning with anticipated alert that preempts later drama going viral. These are all the reasons why the CEOs are being more aggressive. And this is part of the issue. The tough talk is for Wall Street to signal that company is on trend. Basically, saying that you're going to reduce headcount is a positive for stocks. That's where the issue comes. This is where the inequality argument continues to go through, which again is what they didn't talk about in this report.
They did talk about is again highlighting has Microsoft reached peak employment, and I've talked about this and shown this on many, many of the uh YouTubes lately.
Here's what Gersonner's quote was on jobs and growth: "We've never seen this in the history of technology. Companies growing topline revenue over 20% annually while operating expenses and head count grow at just 2%. It's never happened before." I've talked about that. This is not like other innovations and other displacement. I'll go through part of the reasons why, but every time I hear the technology people try to tell people this will not reduce jobs, we are not just reducing uh through innovation and machinery like the industrial revolution. We have humanoids coming up in the next 5 years to replace physical labor, mass amounts of physical labor. We have transportation jobs being replaced. Those were these are decision-making jobs. So full self-driving, the amount of transport drivers in the country is huge. We have a shortage, but we will replace people as time goes on. White-collar jobs are being replaced.
So what are we seeing? And these are the facts. Temps peaked in '22. This started on the rate hike side, but then Chad GPT came out here. You're seeing temporary hires go down. This is the unemployment uh this is the job situation in the US in terms of the number of people employed. Uh the pressure of just seeing that they're not even hiring temps and for the first time not seeing the overall jobs go down. But it's not just there. This is the part that I think hurts the confidence the most. Uh and this is the temp again in terms of the orange line. So this is that temp. But the white line here is the quits rate. So again, when you start getting into the quits rate or the New York Fed, the ability to get a job after you've quit, these things are rolling over. It's taking longer and longer for people to find jobs, and the fear factor is growing that they won't be able to do. So this is where you see it in consumer confidence in terms of jobs, plentiful uh the so this is the labor one in terms of the differential, the labor differential inverted. So you're seeing this worsen, meaning people are not confident about jobs; it's been a trend that's gone on again since the rate situation went higher, but then also as chat GPT came in, and those are the two forces: your rates are staying at higher levels, the Fed are not cutting, and that's because of AI; no one talks about it; the reason that they are not cutting rates right now is solely because of artificial intelligence, because we wouldn't be growing this way, we wouldn't be able to sustain the higher rates if it wasn't for the the mag the mag 7 and the tech companies to be able to grow without people. Uh they've been able to offset some of the other expenses. So the corporate expense thing is real. The pressure is growing because people are not confident about the jobs that they have. The unemployment rate is still down here. That's what makes this situation so uh strange. And I don't think we're going to have a recession. I think we're having a psychological recession for the bottom 50% in the in the country. They can go get a job, but it's having an impact.
Here are the um recent college graduates versus other groups. So, this blue line here is recent college graduates aged 22 to 27. Look at the unemployment rate. It's higher than any time from 2015 to 2020, and it's trending higher. This is a very dangerous thing when college graduates can't get jobs. So, what you have here is the total employment minus the recent grad unemployment. So, now you're taking the differential between the numbers in terms of the rate. We've never been here before. So this is from 1990. So when CO2 talks about the productivity gains that we saw in the '90s from technology and the fact that it was good for workers, this is not the same thing right now. This is a very dangerous situation because of the nature of AI in my opinion. And I think minimizing is a problem. Um labor share is going to become the thing. This in in my opinion is the reason why Donald Trump won the election is because people are feeling this. They don't know what's happening. When we talk about trying to do tariffs to help uh the workers inside the country and we say well these jobs are not going to actually come back, it's a very, very challenging thing. Labor shares of national income this is from May of 2019 this is a McKenzie report uh paid out in wages and benefits has been declining in the developed world since the 1980s. Inequality and loss of the consumer purchasing power. The rising power of companies versus the workers whether from new technology, globalization, the hollowing out of labor unions or market consolidation has shaped that. So that was 5 years before the election. This trend has been in place, and that is the reason why workers are feeling it. But we're also seeing it for companies. Right now companies are going bankrupt at the fastest rate since 2010. I fully expect this number to be going up, up partly because of AI disruption, partly because of rate disruption. When you link the two together, if you can't adopt and benefit from AI, I don't see how you can possibly make it. And what's coming down the line with humanoids and everything else, if you don't have the capital, if you borrow money, if you're gone through private uh debt, I don't see how you're going to survive.
So, they want to create positive spin. Um, and this is where I've talked about this also. I just think it's way down the line. And my fear is that over the next four years, the demand side of AI uh and the adoption side is going much faster than history, which means it's going to have a bigger impact on the employees. And I think this again is more of a if you can't move up the corporate ladder, if you've taken out debt and you have debt and now you don't have a job, it's just not going to be as easy as it was to go out and get a job because most companies are having trouble kind of making it through this. So they're talking about how AI productivity can help the debt and deficit. That all sounds really good. It goes through, and they use the historical precedent 1990s. They go through all these nice little numbers. You lower the unit labor costs. You get lower inflation. You'll eventually get lower interest rates, higher GDP growth, higher tax receipts, lower debt to GDP. I agree with all of this stuff except for one problem. This is happening fast in terms of getting rid of people. The lower inflation is not happening as fast, but it is keeping on the lower end. The lower rates we're not getting at this point because growth is coming through, and the Fed has not made the adjustment at this point to lower rates. Uh which I think they already should be doing, but that's a different story for a different day. Higher GDP growth. Um I'm not sure that the way we calculate GDP and AI can show up in higher GDP growth. So I think that's an issue because this is an efficiency gain rather than a higher GDP growth. Higher tax receipts I don't think are going to come through. So, I think the debt to GDP ratio, as much as they want to go through these calculations and these numbers, it's all well and good. They've got this now with an AGI case in terms of how strong it'll be ASI. Let's assume that these numbers are right. That's not happening until 2030. This isn't happening until maybe 2035. Whatever the case is, it's going to take a while to get there. If we get there, and in the interim, I think there's going to be a problem in terms of people out of work and how they're feeling and what the government's going to have to do. If AI is the productivity panacea, the market is already priced in, US GDP over the next day would dramatically higher. So there are people that are on this. I happen to agree. Um Elon Musk fixing the government's kind of like the beach is dirty and there's some needles and feces and trash. You want to clean up the beach. How much does cleaning the beach really matter if you've got a thousand-foot AI tsunami about to hit? And his point I agree with: the people just don't realize how much benefits are going to come from AI. But the navigation in the US and I'll go through why specifically the US I think is very challenging.
Um they had this chart in inflation, and again this is the positive surprise that I just don't think the market has embraced yet. I think this is a second half of the year story. Tariffs have not shown up yet, and they are one time. Now this is year-over-year CPI with with live rent. So rent is a lagging the data is lagging. They're including the current one. We're, you can see we're below where we were before this. This is why, in my opinion, the Fed should be going. This is having an impact because of AI. AI is not driving the prices lower necessarily, but what it is doing is it's going to continue to soften the bottom 50%. And this is also going to have an impact. So, when they say with live rents, remember this is not getting a big story yet. We'll see if we get another month of this. uh but house prices are coming down across the country in many, many locations. This is a very unique situation. So yes, it happened in when rates went through the roof. We did see a few months of this. I only bring this up because it seems like with labor worsening terms of jobs or fear and house prices coming down, I think people have to start paying attention that inflation is probably going to surprise on the downside. So once we get through the tariff fears, which I think are overblown, as I've talked about, I think then we'll be back in a situation where maybe the Fed can lower rates. The question is, will Jerome Pow lower rates or will we have to wait until March of next year? Uh because I don't think you're going to be seeing massive job losses. I think the pressure on the jobs market is a psychological one where people feel in trouble at all times because they're hearing people now getting laid off that are good workers and it's hard to get a job. So I think this is starting to have a psychological impact uh at a very high level on the country.
Um US debt holders should brace for impact. This was an interesting article. It's worth reading. Um William Beer uh wrote this for the project syndicate with an SER. Um it's just talking about how and again I bring this up because I think this is where we're eventually going to have to get to. If we don't grow and if the jobs market is weakening at the expense of profit margins, then at some point the Fed is going to have to do something to deal with the deficits. If we're not getting consumption and we're not getting spending, I don't know where this is going to go. So, he's basically writing in here that the message is clear: Without fiscal responsibility, the Fed may find itself effectively printing money to bail out the government. Um, this is the end result of what happens when you've got a creative destruction going on. PBOC gave a speech this week, new world currency order after the dollar era. I think everyone needs to take this seriously. Again, the dollar could have a bounce at any point for a little bit of time. But I think the there's a tsunami of selling in the dollar as well. Uh which is going to continue going forward. I don't think we're going to have a collapse in the dollar, but I do think there's going to be sell pressure on risk of dollar dominance. Warned over-reliance on a single currency creates systemic risk and can compromise the fiscal stability of the issuing country with spillover effects that could trigger a national financial crisis. So I think everyone's noticing the problem in the US; the way the voters are voting it's created an issue. It's added to the issue, and the US has made the decision they cannot have a stronger currency; that a stronger currency helps the wealthy and we need to have a weaker currency to help make our trade more um get rid of our trade deficits which will help the bottom side. This is what we're going to go through. The only other thing they mention is modernizing payments, modernizing cross-border payment systems using digital technologies. The new system is being admitted by the Chinese and the US. It will happen.
What I did after all of this and kind of going through is I took a walk down Park Avenue before my discussion with Pomp yesterday, and I just want to make sure that people see this is the way that I have a conversation with chat GPT. I go through it every single day. But in this case, what I wanted to do is I want to start a conversation how AI is going to disrupt workers and cause more anger in the US very much like the industrial revolution did to workers in the early 1900s. Can we talk about that? Um, what I want to get to is did workers start to unionize because of industrialization? It goes through this, but there's two parts of each AI which are different. Number one, on the intelligence side, AI is replacing white-collar jobs in terms of what's coming; humanoids will replace blue-collar jobs. So, isn't this a unique technology and unionizing will not be a solution to this one? I'm bringing up the unions because the unions were one of the steps that Joseph Schumpeter had talked about. Um I talk and I keep going on this to say, okay, doesn't this create an optimistic scenario for entrepreneurs, which it agreed it did because now AI is making capital cheap, everything is good. uh you have the ability of moving, you have the ability of competing, you have the ability of growing your business. I talk about all of that. Um I'm putting this in there so to emphasize what you need to be using with the chat side with GPT. This is just on my AirPods as I'm walking down the street having a conversation. Um let's get back to the concept of unionization. So I believe what is happening is through both stable coins and the attractiveness of Bitcoin tokenization to come that the ability to raise capital and stay private and disrupt established businesses that the crypto space will continue to be the leading edge and will take investment dollars from the fiat system. This is the revolution that I believe is happening. This is the form of unionization uh of unionizing of people being able to fight back. It's just going to take some time. Uh I wanted to just emphasize again Schumpeter argued that capitalism through creative destruction constantly revolutionizes production. It inherently displaces labor tied to outdated technologies or systems. The result: persistent disruption, employment and income stability for workers. As innovation favors capital. So the companies labor's bargaining power diminishes would weaken organized labor. That's exactly what we've had. Entrepreneurs versus workers. Returns would increasingly flow to capital and innovation, not traditional labor. The long-term downward pressure on labor's income is from technological progress. How shareholder value intensifies. So in this case, remember in the US we focus on shareholders. So these companies are getting rid of people to continue to go through their profit margins and focus on shareholders. The system is cannibalizing itself. If labor continues to lose share of income, aggregate demand weakens long-term growth. Schumpeter foresaw the risk that capitalism might collapse not from failure but from its very success in undermining the social class structure that supports it. That is what we are seeing. The bottom 50% are getting displaced, and I view this situation as worsening at the same time that the S&P profit margins are growing. Uh you're now entering a new world. I think every my my industry the asset management industry is going to go through it. I have people reaching out to me constantly, particularly after last week, after doing talking about how I'm using Perplexity for 60% of my time instead of Bloomberg. People want to learn how to do it. I'm just going to re-emphasize this there. This is not software. You have to use it every single day. You have to build a relationship with it. You have to talk to it. You have to think with it. You have to use it for everything that you do. And if you do not, there's no jobs coming in the future that are going to be created by it where you just press a button. You're gonna have to be creative and you're gonna have to have an entrepreneurial mindset. This is why I wrote this this week for Substack. I'm sick of getting asked by people why Bitcoin is the purest AI trade. Joseph Schumpeter technology creative destruction. We are destroying from the bottom-up basis. Who can participate in this economy? If there's one company that owns everything with only one job that doesn't survive, capitalism doesn't survive. It's cannibalizing itself. Bitcoin is the answer. That's why it's you don't find Bitcoin, Bitcoin finds you. When you become part of it, all of a sudden you become realizing why you should because the system has left you behind. Bitcoin is still consolidating like the S&P up here just below the prior highs. Uh one of the main reasons and just so if you guys ever want to follow it, the open interest in you can see this this is the call the put open interest. So start from 105,000 all the way up. Massive calls that are expiring here next Friday. Uh to me this is why we've been stuck here is that the overwriting is there. That is why we will eventually have a short squeeze in my opinion when it finally does break higher. I don't know what the catalyst will be this summer, but I do know the network effects are taking off. There are bits and pieces of pe this you know realizing that crypto is a place. So, Circle has just continued to move higher, closing the week at around 240. Uh, remember it was supposed to come out at around 30. Senate passed the stable coin bill. Big win for crypto industry. Uh, this should not should, this will trigger a lot of things behind it. The main point of that, it was bipartisan. You had I think 68 uh of the 98 votes were positive for it. That means Democrats were split in terms of this. When you get bipartisan, uh, this is something you want to invest in, uh, in a big way.
Um connecting. So, in here, I wanted to basically connect stable coin volumes back to the Genius Act to AI agents and talk about how this will do, but also how Ethereum should do. So, this is where I kind of get into this whole thing of looking at stable coin volumes. Is it an Ethereum narrative? Um, and I'm going to describe why this is important. Uh but again, stablecoin plus AI agents leads to acceleration of volumes, and Ethereum has not broken out. So I don't want to hear from people on the crypto side about what innovations are better than Ethereum. What I want to have is we're at a point where stable coin volumes are going to be like token usage. They're going to grow violently because we have more reasoning and more AI agents are coming on board. You're going to have explosive growth in stable coins. uh a person who's become a friend sent me the bull case for Ethereum. I highly recommend going to read it. Um not because you like Ethereum, not because you're going to invest in it, but because you need to take the next step past Bitcoin and you need to start reading about the infrastructure that's going to happen because stable coins and the usage is now a given. We're getting massive expansion on this. It is not just the government saying it. It banks are doing it, Walmart, Shopify, all of these different places are going to be using it. So what does it go through? So I basically ask a bunch of questions. Um tokenization is going to be a big part for Ethereum. That's going to happen as well. This was not mentioned in as well in the uh east meets west part of code. They did not spend a lot of time on this. They didn't talk about tokenization. They didn't talk about this. They talked about the public markets coming back which I completely disagree with. Stable coins are the clearest near-term accelerant of Ethereum demand. The Genius Act removes barriers enabling corporate and fintech deployment. As AI agents integrate, we will move from human-led finance to machine-native liquidity, all settling on Ethereum as a collateral fuel and digital reserve. It's poised for a parabolic demand shift with supply mechanisms design. Again, the only reason I'm bringing this up is because we're at a point now where at the same time that we saw reasoning take up, we are now seeing a bunch of Ethereum side in terms of they're building on Ethereum. So these are different people. So um that's this week. Quiet week for the markets, but again I'm trying to make sure I help you guys with understanding the
Impact that artificial intelligences have is disrupting traditional ways of looking at the market. And I do believe that the jobs market has become the most important thing to be watching for the rest of this year.
That's it for this week. See you next week.