Transcription
All right, another volatile week. Um, a lot of stuff to talk about. Uh, obviously the majority of it is going to be related to uh the weakness that we've seen in the market and just kind of going through. But I do want to make one uh point at the beginning that I've just noticed and part of what I try to do in these videos is hopefully um give you a calmer perspective on on on what's happening. Um, everything has gotten way too bullish or bearish. Uh, there's a lot of nuances with markets. They can go sideways for a long time in a wide range. Uh, but everyone gets caught into the oversold, overbought thing. And as I go through this, um, you know, I I I want you to start with something I showed for the subscribers this week. uh just in terms of and just so you guys can see the whole thing the negative trends that are going on that are I would say uh unexpected relative to what people thought coming into the year.
So credit's obviously been significantly weaker. Uh we have a problem in the credit markets. And as I go through this every week, there's always 6, 7, 8, 9, 10 stories to go through about a situation that is worse than what the non-alarmists are talking about. Uh, I don't believe it's systemic because I don't believe anything is systemic anymore when you have a a central bank that can create liquidity facilities to slow down what used to be uh spirals. But due to uh the digital economy and news spreading fast in things like what I do each week where people actually get to know more what's going on, you do get SVB-like speed in terms of uh retail wanting their money back or businesses wanting their money back and you get runs that used to take more time because of it was before the information era.
So credit's weakening. The financials are below the 200-day and the 200-day has been pointed down. I've been talking about this now for 6 weeks and I still see people ignoring it and just pretending like nothing has happened this year. You now have inflation expectations rising rapidly. Fed rate cuts are gone and we actually are now starting to price in, believe it or not, a tightening. Uh, my first rule of thumb in building models over my career for a recession indicator to make sure that I was reducing risk uh while we saw uh recession expectations go higher is the 126-day that's trading days. So that is half a year rate of change of the S&P, which broke through zero on Friday. Uh, that was always the first warning sign and I'll show you because only about 20% of the time is the six-month rate of change negative. And the reason that's important, the S&P 500 is a broad measure of the economy. Uh, it's probably about 20% of employment in the economy. It's got every sector. So when the stock market as an overall level is below zero, there should be recession fears going higher. And right now, uh, they're really not going higher, and I'll go through some of that. And it comes at a time where there's been zero job creation. And again, I hear people debating whether AI has caused this or not caused it, which is insanity to me. We have zero job creation. If you take out the non-cyclical portion of healthcare, we actually have negative job creation. That is fairly significant. That is not uh, you know, a a prognostication. That is not, that is a fact. We have lost jobs over the last year.
S&P down 2% for the week. The third week in a row of down about 2%. So we're not having volatile days at this point. We're not having any signs of capitulation, but the market is now in a uh, a steady uh, state decline. IWM, same thing. Down for the fourth week in a row. Q's, same thing. Accelerating a little bit, but again, 2% not some horrific thing. But here's where we stand. Um, we're below the 200-day moving average in the S&P. So that uh week, the first week of February when I went through, or I guess it was the second week of February when I did a webinar and I showed that the financials were below the 200-day and we were getting close to the 200-day turning down, which is now turned down and how we had not had a time this century going back to 1999 where financials had broken below the 200-day moving average and the S&P did not follow it. Well, the S&P did follow it and we're now below it. So we're below the 200-day on the NDX. We're approaching the 200-day on the Russell. Small caps were a theme that to me was part of the broadening out, but now that energy prices have gone up significantly and we're starting to go from easing to tightening, you've got headwinds now for IWM.
Here's where we stand year-to-date. Uh, and I picked a point which I'll show in the next slide. So, this is down 5% year-to-date through November 20th. And again, financials are the worst performing sector. Now down 11% year-to-date, 15% off the highs. Never a good thing and never something to minimize and never something to ignore. So the fact that this was going on and it was the worst performing sector and below the 200-day before oil and before the Fed rate hikes were now being built in, before inflation expectations had gone higher, before the credit had gotten to this level. I I I think people again need to start to realize this is not the same year as last year. And you're going to hear that a lot in this video because I think last year is having an impact on the way people think about the market.
So, here is last year through March 29th. Very similar, down 5% year-to-date. But here's the difference. Financials were outperforming the market. They were in the middle of the pack. Similar thing with healthcare, energy, utilities, staples, and materials. But remember, this was because of the fears on deepseek that got this side down. Now, you've got tech weak again, but this time for different reasons. AI is at a completely different stage. As I said, coming into this year, this is the year that we have an AI transition. The regime for AI has changed. This is no longer the IQ building stage of of AI. This is the scarcity stage. What are we running out of? What do we need? We have insane amount of demand for AI, but we don't have enough supply for people to use it. We don't have enough compute. So, we're at a different stage. and the competitiveness as we see all long-duration assets are under attack. They're under attack because the progress of AI is going insanely fast and this is going to be a story which I think is going to look and if you were uh on the subscriber webinar this week I talked a lot about comparing this to the 1970s for those of you who didn't see it uh I'd go through it just because I showed a lot of charts I'm not going to show um on my weekly videos because this is really more about what happened. But I do think you should have an idea about why.
So here we are. This is the uh rolling 126-day. These are the recessions. Basically, it led every recession that happened in terms of breaking below. Uh, the S&P year-over-year is the the guarantee signal. We are not negative year-over-year, but we're also uh not that far off. And by the time we get into the summertime, if things haven't improved and the oil prices are still up above 100, there's a chance that you could get into this. But that would mean credit widening. It would mean a lot of things have to go on at the point. Now, what I want to see from a sentiment basis when you break here, remember, everyone thought there'd be a recession. When we broke here, as I'm going to go through this, everyone thought there'd be a recession this year. Nobody thinks there's going to be a recession. Scares the hell out of me and it should scare you in the fact that everyone seems to have taco PTSD.
Um, here we are. Look at that positive number now on the rates. We've got rate hike fears starting to build in. So, that's changed this week. It's changed every week. Uh, two-year rates, here's where they are around the globe. This is the range over the last, let me see if I did 3 months or 6 months. This is 6 months. We are at the high end of the range in every single market except for China in terms of two-year rates. So, we're starting to bring tightenings in around the globe. Rates are moving higher. Just look at these basis point moves for the week. This is 10-year yield. Same story. And yet, I still hear people having the bull bear debate like something is going on that is completely overrated panic. Just like I heard the same thing about software being a ghost trade or something that is related to it shouldn't be happening. This is all fake. will go through the same thing as last year. And that's what I'm saying. I think people are living in this dream world that last year was the same as this year. And I think the reason is because growth expectations are higher. But at the beginning of last year, everyone thought they'd be fine until the tariff thing came in. So now we're going to minimize everything and just keep saying that everything is going to reverse. And a war is the same as pulling back tariffs. Um, I just I I don't understand the logic. Um, I think you have to get it out of your mind and really prepare for more volatility as I've been talking about from the turbulence model, more trading environment, less investment environment. I do think you want to be looking for levels on the AI trade because the AI trade to me is not going to be broken this year in terms of the the capex side. I know it's the number one fear people have. I've gotten asked a lot on that because I'm negative on credit. I still think at the end of the day the buildout will happen. Even if there's a change in capex from 700 billion to 680, it's not going to change the fact that nominal GDP will be strong.
Here are the inflation expectations in the swap market. Different than the tips break evens, but I wanted to just use this because this is usually a better idea of I would say market sentiment from uh from the basis of the way people are thinking about things. We are up to the same level we were. The move has been sharp and that is year-over-year CPI. Year-over-year CPI this time is going to go higher. And that's what's a little alarming is back here we didn't get any change in year-over-year CPI when everyone was worried about it on the tariff side. This one is a certainty. Gas prices are going higher as are many many uh other parts of the complex for energy rates.
First of all, I've talked about this being the factor where I think you're going to get more deleveraging, especially from cross-asset portfolios, risk parity, multistrats, anything that uses leverage. Uh, I think we're going to be in an environment where we should be more up here. I mentioned that for the VIX. This is overlaid with credit spreads. This is the triple B's. I think again there's no fear of a recession where last year at this point we had gone up to levels over here. I think we should be in a bigger uh thought process because the labor market is weaker. The disruption from AI is real and the inflation side uh at this point is completely uncertain as to where it's going to go and we've created no jobs for a year where if you looked at the prior year relative to where we were last year, we had created over a million jobs.
This is rates vis and here we go. This is the tips break evens for two years. We're up basically at the same point again where we were here. We're starting to see rates fall move higher. I think as long as inflation is high, that's going to be the case. We just have not seen any capitulation whatsoever. I'm going to show a bunch of people trying to pick bottoms and things on this. We haven't had a day yet where people have thrown in the recession towel. It just hasn't happened. And I always view it as when downvall versus upvall. um a variety of other things which I showed on the on the the subscriber webinar, but I just want to make sure you guys see this. We this is down volume to upvol ratio. Um again, we haven't had any signs of panic here. There hasn't been any capitulation yet whatsoever. I think we're only starting to see it now. This is the six-month rate of change. And this would be my answer as to the first data point that I think is going to be important. I'm surprised this hasn't happened yet, but as I go through this again, I think this is because sellside analysts have PTSD from being so wrong last year. Sellside strategists have PTSD from being so wrong last year. And the fact that they were this wrong this year crying wolf about something that never came through, I think that's putting them in a place. And they matter a lot for the wealth managers. So for you FAS that are starting to watch this and are starting to subscribe to get better information and get at least some things that are relevant, this is what they should be talking about. Right now revisions have not been lowered, but the six-month rate of change on the S&P is and you can see the relationship. The S&P year-over-year goes down and then eventually the revisions go down. It happens always. That's what we're seeing now. I fully expect revisions to start moving lower. Um, I think Delta Airlines did everyone a disservice because there's absolutely no way that the airlines are not going to be impacted in a major way from what's going on. So, for them to come out and say demand is strong, there's nothing going on. If you go through last year, we saw the exact opposite happen and that's what got people going. If you go back and look in March, all of a sudden, everyone was freaking out. This was just after the election. The tariffs were going through. the Trump uh fears were through the roof this year. For some reason, people are not falling for it this time.
But here's the reality. This is the oil price. And again, I wanted to show this because you have $98 here for WTI, the one that gets quoted in the papers here. Then you've got Brent, more associated with, let's say, the EU. Then you've got here the Dubai oil. And then you have here the Oman oil futures. We've already gone through the 2022 level and you can see the spike here. A lot of these are going to Asia. You've got shortages around the globe. So for people that are trying to predict the end of the war, I want to deal in facts and I want you guys to deal in facts. Maybe oil does come down, but very seldom do you see spikes like this that are going to go all the way back to here. And right now we're up at 167. So if it comes back here and this goes up to 99 or stays up here, you're still going to have an impact on the inflation side that's going to last. Gas at the pump as of uh this morning 393. I did this before it was 391. Here are the futures as of the close of Friday implying a number that is more towards 4 and a quarter. You can see the spike here. Um, I put this together because I wanted to make sure that you guys were thinking outside of oil because there's been tremendous disruptions. There's lots of stories today uh spreading on the fertilizer side. So, I just created this just you guys can look at it on your own, but you've got natural gas, petrochemicals, plastic, polymers, you've got fertilizer, all things for food. Oil's in everything. So, when oil goes higher, everything tends to go and the inflation numbers tend to surprise on the upside because it's really hard to model when all of these kind of moves happen.
Now, that last thing I showed you was built in nano banana to give you guys an idea. This I just want to show you because I'm using more and more OpenClaw, but I also started to use Perplexity Computer and I asked it to build an ecosystem with live pricing for all of the different components in terms of the movements since the war and I created a dashboard with crude, natural gas, petrochemicals, P plastics, fertilizer, industrial gases, construction, transport, freight, specialty chemicals, food and consumption. You can go through the numbers, but what you can see here is the massive movements that have happened already. You haven't seen power and electricity go, but those will be going as well once we start to see some movement there. Natural gas prices in the US. As you can see, I didn't give you the Henry hub. That's negative. So, we've seen natural gas not move in the US. This is another page that goes in. This is if I click into petrochemicals, I can see all of the components that go through. This was built by me in Perplexity computer on Perplexity Max. You'd be shocked at what you can build in a matter of minutes now. It just shows again the agentic world and every every one of you who doesn't believe software is going to be completely disrupted. I've created so many things where perplexity computer not only for this video but just for me to monitor things in a way that Bloomberg can't do. So yes, Bloomberg has messaging function. Yes, Bloomberg has some other functions. But if you guys don't think that $30,000 versus $200 a month, I again $2,400 a year for Perplexity, I pay $600 a year for the data providers, for great data providers. I I you have an ability to do everything in AI and it builds it for you without you having to do it while you can do other things. So yes, the software side continues to roll higher and higher.
Here's jet fuel prices in Los Angeles. This is jet fuel in Singapore. Diesel prices have gone up far more than gas. So diesel has gone from 350 up to 520. This has a huge impact because everything that's trucked uses diesel. Here is URA, the orange line under uh over the top of uh sorry, URA's down here or right here. Brent crude is right here. This is for fertilizers. This happens exactly at springtime for when a lot of the plantings are going to go on. Major event that occurred this week was in Ros Leafon which was shot down with drone strikes. This happened on Thursday and in my opinion this is where things started to spread. You saw semiconductors were weak on Friday. I'm going to go through the reasons why that was on March 20th. Here's what was mentioned on March 7th when Ross Lefon had an outage. Though now it was hit to the point where most people are saying that it's offline for the next 6 weeks to months offline um it is a huge part of helium in fact the majority of the helium received for semiconductors in Korea and Taiwan comes from Raz Leafon they Qatar is uh with the US the two largest in the world and we're now getting a problem there that has semiconductor implications. One attack in the Middle East just put the entire tech industry on life support by bombing the helium plant. Don't think it wasn't intentional.
This is where we're at right now. So these disruptions that everyone looks at and say, "Well, oil's up. It'll come back down." We're at a different stage now. Um, it isn't just about the straight of Hormuz. It's about the damage that's being done and the fact that the energy facilities this week were hit. So again, you're in trouble with helium reserve running down for years in the United States. If you guys have tried to buy balloons for birthdays over the course of the last few years, occasionally you'll run into a point where helium isn't there, but the prices of helium fil balloons have gone up as well before this. So I'm just saying that we're at a stage right now where you're having a bigger uh estimate than or bigger implication than people thought. Uh, in terms of the oil markets on Friday the IEA said it could take six months to restore oil flows from the Gulf. Politician markets are underestimating the scale of the disruption again and it's because of the damage that's now being done. Ifuse stays closed another 3 to four weeks. It all begins to crumble into an already teetering global sovereign debt problem and consumer credit problem. I didn't show this because Luke Roman has any sense on here even though he says based on what it's highly likely it will remain closed for at least another 3 or 4 weeks. Nobody knows. So I think if this had been 2 weeks ago and we did something for one week and we didn't have all the damage in the energy facilities and we didn't have now 3 4 weeks of 20 million barrels per day being impacted and even if 10 million are getting through pipelines or something, you're still dealing with enormous amounts that is not making it. And even if it goes back online, the question is now how much damage has been done? So everyone was focused on the straight. That's where most of the focus is. I think at this point the charts are telling you that it's going to take a while to unwind this. I don't think we will uh make a bottom in stocks that is sustainable until headline CPI year-over-year peaks. That's what happened in the 1970s. I think that allows for everybody to be wrong on the strategy side, the recession fears to go higher and everything. So if we get two months of high monthly data, we'll probably make the peak in CPI when we get the data for April, which will be in May. And I'm just saying that based on the fact that I don't think sentiment regarding uh what has happened for inflation is where it should be relative to this. The market may have gone down, but I am not seeing people be nearly as bearish and as silly as they were last year during the tariff scenario. This one is real. The tariff situation was all speculation based on something that happened a hundred years ago. The fact that people are not as bearish right now on the strategy and analyst side to me is a reflection of PTSD.
Uh on Friday we got this scary situation. Obviously if this happens not a good thing uh in terms of for the markets to have ground troops there. Uh there were stories about an oil export ban because of the fact that you've got WTI uh being lower and natural gas in the US is not moving at this point. The p the pain that started to filter into the market is the dilemma that now the Fed is as they went through and basically said they have no idea what to do. Uncertainty has gone into the rate picture. Whether it's rates going higher, whether it's they should cut, uh I don't know what else to say. Here is the Cleveland Fed uh inflation forecast for March. Uh just remember that when you know the way that the headline CPI, the way that I used to uh forecast it was taking the data from about the prior month on the 15th to the middle of the month on the 15th. That was obviously a long time ago in gas at the pump. But they're forecasting now a headline CPI for the March data of 62, PCE at 47. It's putting all of the quarterly annualized rates well above 3% headline CPI only here, but by the time we get through the March data uh for April, you're going to be much higher. Uh I I just think the uncertainty as I'm highlighting here that people are writing about has never been greater for the Fed. And as I'll remind you, Kevin Warish is due to come uh into office in the middle of May, which will be around the time that I believe that the worst of the inflation stuff would be there, assuming that the strait is flowing again uh sometime over the next couple weeks.
Uh here's the turbulence model. Uh it was a quiet week for the turbulence model, but that's because a couple things have happened. uh the VS already picked up but the other thing is the correlations are picking up so it's less about disruption of of gyrations going the other direction uh but also it was not a volatile week when you go through it relative to what you'd expect I just wanted to highlight this Noah Weissberger who uh I used to follow at Goldman uh he put this point out just to show how much the S&P right now relative to other times I think this is the 1990s I think this is during 2022 how the S&P responded uh to the VIX moving during those scenarios. And this time, again, as I said, the VIX has gotten more volatile. I think that's because people again, and I'll show some data to support it. Uh everyone's been talking about how people have been bearish and putting on hedges. In my opinion, based on the data I've seen, they've just increased growth. So, their shorts have gone up, but that was to neutralize a net long position that they hadn't got out of got gotten out of. And the reason is because the bullish side of the trade, whether it's power names, energy names, uh Caterpillar, all the AI trades, semis, they're all still up for the year. There hasn't been that momentum kind of shock wave because we haven't changed our opinion on the economy and we haven't changed our opinion on earnings. Um, and I just again wanted to put this out because this was put out in November. I completely uh agree. Trump makes it impossible to hold the short. I think the fact that that was the theme last year and people remain bearish the entire move higher, they are less likely to do it.
I posted an X this week, one thing, and it was this. Um, I'm shocked. I showed this because April 24th is 3 weeks after uh Liberation Day. And this is what the strategist did last year across the board. Uh, I should leave UBS alone and Morgan Stanley alone, Wells Fargo. But everyone else just took their numbers down violently as of April 24th. That was 3 weeks after liberation. We are now 3 weeks after the beginning of the war. Um, a year ago in September, UBS gives America recession checks a 93% probability from the hard data. I think people forget this. I mean, I started writing about PMIs going higher in August. I was attacked by most people that that that uh follow cyclicals saying there was nothing showing up. How could you even think this was going to happen? And the recession fears were still alive and well in September. That's how bad the sentiment was last year. In terms of the earnings, you have to go back and see what earnings beat the estimates as we went through. This was from August of last year. Everyone was talking inflation. Everyone was talking recession. This is where we are now. No one's moved a single thing from December price target. like the S&P is now trading lower and no one's moved a single thing. This is opposite of last year and there has to be a reason. UBS put this out confident US stock sees S&P 500 hitting 7700. I again I I don't know what to say to um to people at this point other than I think the difference is and the important thing this is what happened last year with the analyst revisions. If analyst revisions don't change, which I certainly feel will go negative as they have during 2022, during COVID, every time this was during the energy problem what went down, I fully expect will go down, but I don't think the S&P is going to fall in any meaningful way if revisions sit up here. I think people are going to keep trying to bottom because they haven't changed their views. And why should they change their views if the leaders of telling them what's coming are not changing their views? Um, again, this is nothing against Ryan Dietrich. It's just everyone's trying to figure a way to measure sentiment and they're just picking the data. I could find 10 other things as I showed the other day that I'm looking at. These to me are not a good indication of anything. Yes, they can work at times. We haven't seen capitulation. And again, if I'm right about something, the sentiment that is still way off is the analysts and the strategists. They should be more negative than they are or at least be warning about a correction. I'll give m Mike Wilson credit at Morgan Stanley who I used to work with because he did call uh for a correction of 5 to 10%. Well, we're kind of twothirds of the way through there at this point. So, give Mike some credit uh on at least being one of the strategists that said there's going to be a pullback for the things I highlighted at the beginning. We do have a bigger correction that's happening under the hood of the market because you have a lot of names that are down a lot. You obviously have that from what I showed with financials. Uh this got a lot of things. Long only investors. Again, I I I don't know how to do this. You people like to cherrypick things. I mean, this wasn't any kind of day last year in August of 25 or September of 25 other than I don't know, maybe it was another week of expiration. When you get into this bearish sentiment just crossed 50% for the first time in over 6 months, you know what AI is really good at, guys? I can do it all day long. Hey, show me a back test that gives me a positive number for at least 70 80% of the days looking forward. Uh, I don't care what you do. Let's just figure it out. Random periods over six months. I I again, I I don't I don't know what to say. I do like it when sentiment trades at a negative number for a long period of time. I think that matters as you're going higher. But as you're going lower, when you see something like this, okay, here are the returns. Just look at this. Does this look like panic? This is where we were last year. This is where we were in 2022. And we sat down at these levels. This is not panic levels, guys. We haven't we haven't gotten rid of the extreme readings at this. And again, sees potential for an extreme rally. This was March 11th. I showed a bunch of these things. But hedge fund short exposure is at the highest since 2022. Okay. And gross exposure is near a record. Well, that means that if nets go down, guys, and you add more shorts, which I expected that people did because of the turbulence model, they didn't delever. they just hedged up their net exposure. That doesn't mean they're bearish at this point. It just means they're protecting they're trying to protect against further losses.
Um, just an important thing for the flow under the market because we've been having this long gamma environment and now the move index has moved higher. I would expect that if we don't get a resolution this week now that we're through expiration, but also the blackout period for corporate buybacks is now coming into play which will go in through the end of April. That usually leads to more volatility if you're in a downtape because what the buyback desks do is if the market's going to open down, their orders come flying in the door. Um, when I worked at Morgan Stanley, unless something has changed, they just tend to be more active on down days, which adds this long gamma component, uh, which prevents markets from having high realized V. Well, we've had very low realized V.
The credit situation has not ended. So, Blackstone went through its first BCR loss since 2022. They released this late on Friday. Um, I just wanted to show that this is their portfolio. So, this is the BCR portfolio. If you just go to the website and go look at the um, the portfolio shaping, 26% is software and 11% is professional services. If you ask me what the two highest things to be disrupted are by AI, here we go. Well, that's 37% of the portfolio. And then you start getting in into eights and eights and sevens and small amounts. Uh, there's no way that these books reflect the risk that's coming in the next few years from the software side, which is why the bonds and the equities, the public equities are trading down. Uh, you had more uh stories this week from another one. Stone Ridge pays 11% of what they were requested to pay out. JP Morgan halted Qualric debt on software pay. So, and this is supposed to be a very good company. Uh, and they still basically went through as Morgan Stanley saying the default rates to reach 8%. Again, I'm bringing this up because this was not a story a year ago. Um, Cliff Water, lot more stories, guys. Um, I think this is going to remain a big story, especially if you guys get the time to read this. So, this was in X. I highly recommend uh either reading it or going through and uploading it to an LLM. And the reason is because it I mean this is an attempt to be a Michael Bur situation with mortgages and to go through the issue. This I think goes through the issue in a pretty big way. Um, everyone who's saying there's not many losses and this is all fine. I think this thing does a good job or uh a job of at least giving you the side of how bad the situation is very likely but in particular with oil raging I think people should be paying attention more to private credit now Boaz Weinstein did an interview if you prepare prefer to talk to or listen to someone on a podcast you can do that I think these were the interesting points of it major theme is reflexivity he gets into the fact that again what I said before which is especially in this day of SBV and digital economy when more people hear the problem and they're wondering why they got into this in the first thing even though they are legally they took the risk uh I I've just seen this act before they're just going to keep asking for their money and he basically said he ties this stress to what he calls volat volatility laundering uh what better way to have your money in something than doesn't have marktomarket risk and I think that's the issue that's popping up.
So, what I did was I uploaded uh that transcript and the nicknameth uh open letter to Bessant and I just went through and you guys can read this for yourself, but the structure can create a serious reflexive market event and a major opportunity once repriced. The structure itself is fundamentally corrupted and should be reformed and slowly poisons the financial system. Basically, when you go through it, there's a lot of overlap in the two stories. Um, I think this is something important for people to at least be thinking about as opposed to just thinking, well, Trump's going to pull out of the straight of four moves. Everything's going to get flowing again. Oil is going to collapse and there was no issues before, even though financials were the worst performing. These credit issues never end on their own. But in particular, not at a time that the S&P is breaking down and definitely not at a time when you have structural issues like AI, which is a disruptive force that again has to be dealt with. Life insurers will be part of this. They hold more private credit than ever. And again, most of the private equity companies have captive insurers. I won't go through this again. If you listen to Steve Eisman, you know, the reason I'm bringing this up is this has to be in your mind of could this get much worse. Yes, it could. I think it will get to the point that a liquidity facility needs to deal with this to slow down and give liquidity to people. That's what the liquidity facilities were for. That's what SVB was. Give us your loans, you can work your way out of them. In this case, it was actually mainly treasuries. We never got to the CRA, but that was going to be the next facility, and they could create that one again if they wanted to. Um, I won't go through all the annuity side, but you just have to realize that eventually they're going to have to deal with something if these loans continue to get marked down because a lot of annuities are tied to this. and you've had a an insurance company tied to annuities already be in trouble. PHL close down in Connecticut. Go read the stories on your own.
Here is private equity. Uh, the white line relative to the insurance. The insurance names are just breaking down. That is what I would start watching. Uh, we finally went through and like I said, I've shown this before. Don't get sick of it. This is never getting better. So AI's progress will continue to disrupt businesses. They will never be able to get away from this. It is the speed of it and it is the structural nature of it. The entire capital structure of debt. If it's in companies that are going to get hit by this in the next 5 years, that risk has to be built into not only equity multiples, which has happened in the public markets, it needs to be built into the loan and debt markets of these companies that are private. I would say that those markets should be worse than the public companies which obviously have the ability of raising capital through multiple channels.
Um, on the compute side, uh Dylan Patel is a must listen to in my opinion for everyone who's got positions in semis. He had an interview with his roommate Dark Cash Patel. Uh, and it was great two hours. Uh, you know, a lot of good highlights. uh here's what you got in he really I think the most important thing as someone who has talked about power for a long time but you've probably heard me kind of decrease it as a massive problem that has been because I've seen enough things with behind the meter I've seen enough things uh with optimization of the grid that could allow us to at least be able to survive through this in kind of a cut and paste way the real bottleneck I agree with is semiconductors and He makes the point, we just don't have enough compute. And because TSMC is really the gatekeeper of this and they refuse to let this go too fast, you're just you have a a natural throttle on this to keep it from going crazy. He does talk about ASML and the fact that EUV machines are a dramatic uh constraint. The memory crisis is worsening. He does, like I said, minimize power. Um, this is all about compute, the scarcest economic resource, which means you need to be long it. Uh, I think we're going to be in a period because of the helium situation and because of it being overowned and having great years that I do think any move lower in the S&P, we'll probably see the NE memory names uh trade down and underperform the market in a beta perspective. Uh, but I still think that there won't be cancellation of anything. So, I'm going to be remain a memory bull and like I've said for the last I guess it's four weeks now. I'm long VIX. I actually have some short positions now in the semis as well. Just expecting there to be more of a correction. Um, GPU availability, Warren Pies does a great job on this. I mean, it's insane. Basically, there is just insane demand still. There are no signs of uh even getting close. Jensen Yuang has done a lot of presentations uh and and interviews. He spoke at GTC for I believe three hours. Um, and one of the things he brought up which is this whole thing of tokconomics and I think more and more people have to get on the framework that that's where we are. The amount of tokens we need is far greater than we realized 3 months ago. Uh, and the demand is here faster than we expected and that's because of this. Um, he goes through the coding agents auto research and the loopy error of AI. This is Andre Carpathy. Uh, if you want to go read it, great. Remember, for those of you who are subscribers, I do put in uh on the website each Sunday all of the podcasts that I reference on here with the link and a summary. That way, you don't have to listen to it if you want if you want to get more details, but I also uh show you the timestamps and everything. So, if you want to go listen to it on your own, you don't have to waste the time. The main point is here, and you have to remember this, it was October that he did the interview with Duaresh Patel. And as I've mentioned before, I had people calling me up from all over saying he just basically said agents won't be impacting us for another decade that it's all hype. And basically he talks about it um the December flip sudden capability jump. I had asked does he mention his surprise on the speed in there? Uh, it's not incremental process. It's a step function change. You think most people haven't realized how big the shift is. I can tell you in the conversations I've had where people have tried to minimize OpenClaw by asking me what I'm using it for. And judging by what I'm using it for at this point and as I've shown you, I'm using it more and more every day. I'm not only using OpenClaw and I'm going to spend all of tomorrow on this because now that my new machine is here that I can upload another one. I really do need to start building more and more on this for my workflows. But now I have co-work dispatch so I can do that. And I have Perplexity computer which as I've shown you is amazing. It's very easy to build things in it. So if you guys haven't thought of it, pay for Perplexity Max at $200 and just start with that and just build stuff and just literally ask it. You may have to give it an API key. You may have to pay for your own data. It will use Yahoo Finance, but like to give you an idea, I have it do things using FMP data, which I pay $600 a year. That has tremendous amounts of data going back 30 years. But I also have multiple agents. And when I build something, I say, "Okay, what I want you to do is this. I want an agent to do X. I want an agent to do Y. And I want another agent to basically check all of the work on the data to make sure that the data entries are fine. That is the way that you basically, if you've managed people, get to send these things off to do things and they do them while you're working on something else and then you come back and it's just done." So he talks about this whole thing and about how everything has changed his auto research side. He talks about that. Again, this is all about getting the models to be improving without needing new improvements. And that's where we're at a scary time. We don't know what it means to have a billion agents running out to solve problems and certainly to create software. So he gets into that as well. The agentic layer is ahead of where most capital is positioned. And again, I'll say this. This statement is really important and it's not just important for what he's saying. Markets are still focused on models, GPUs, and data centers. He's pointing to orchestration, memory, multi-agent systems, autonomy, loops. This is critical. This whole thing is critical for enterprises and adoption. That's why I spend my time on on talking to people about that. Um, OpenClaw at the GTC. This is how important it is. He not only says it's the most important software since Linux and the fast is growing, they've got their own Nemo Claw for Open Claw. He talked a lot about the different ways they're going to support it. Mark Andre and OpenClaw and Pi together are in the the top 10 of all time software breakthroughs. Again, people are minimizing OpenClaw and thinking it's some kind of fat and it'll be gone. Uh, it's the gateway to the agentic world, which means going from a uh interactive bot of just giving you answers to a task oriented situation where it can go out and build things for you and you can talk to it on your phone. Uh, it went from a weekend WhatsApp pack to 316,000. You need to start have started using OpenClaw yesterday. I completely agree. I don't think you can possibly understand what's going on without using that. Even though claude code will build things um, there's a very big different feel with open claw and perplexity computer and with co-work uh I just wanted to highlight the token usage openclaw 4.5 trillion clawed 586 billion um again when you go through the numbers
On things of all this and you go through the global rankings, uh, you just see that they are bigger than all of the other ones combined, which includes Claude, Code, in terms of the top 20. Uh, remember Peter Steinberger joined OpenAI, uh, well, now it's, uh, more like six weeks ago, and again, they're bringing more stuff out in terms of being able to use. Again, you're going to see more open claw from them.
This is Dispatch, which came out this week, using your phone with it. Alibaba launches an AI platform for enterprises as agent craze sweeps. Perplexity takes its AI computer agent to the enterprise. Again, like I said, Perplexity is a great, easy way to do it, and it is phenomenal to use. Perplexity computer is better than OpenClaw. I'm not really sure about that, but I am telling you that it is easier to use, uh, easier to set up because it's already on your machine if you use Perplexity. So, just go pay the max and computer will be on there.
Again, I built this with it. Uh, and again, I just wanted to show you one thing. When I first ran it, it gave me, uh, the wrong thing for natural gas. It said Henry Hub prices were up significantly. So I went and said, I looked at it. Seems like the Henry Hub LG price move is wrong. Can you rebuild it this time and have a second agent be in charge of checking the percent moves and another data source to make sure that they are correct? When I came back the next time, everything was correct.
Um, this was a good article. Again, I think I'm trying to give you guys ones that are not like the Catrini one, which I didn't agree with. I think the ones we're are being rational about, and this is from the co-founder at Whisper, about what's happening and how fast it's going and how shocking it's been to leaders at at tech companies. And I just want to show this because this is really the way to think about what has happened here. You've got a human organization. So, think of this as Morgan Stanley or Goldman Sachs. You've got all these layers here. The AI agent hierarchy. So I'm above it, telling it to do this stuff. I'm giving the orchestrator, and then I'm having them send out and do all these things. So it's the same as says organizational logic. This is from the paper that he showed. It's just different in terms of who's doing what and what's going on.
The reason I wanted to bring this up is how Palunteer's approach solves this problem. And the problem we're solving is the other side. So the question is, how can a big organization like a Morgan Stanley or Goldman Sachs go to this? It is not easy. And that's the thing I've been saying, especially when the progress is going so fast that any decision you make today could be obsolete in terms of the direction you've gone in three months. That's how fast it's moving. That's why exponential is dramatic. That's why Palunteer, which I'll keep saying for people who want to argue with me, not only are their numbers growing at this point, but you have to understand what they're able to do. And I understand that people have very little knowledge of what I just showed you. But the reality is that's the job that we have is to learn and not start with, I'd never buy a stock with a 100 multiple. Palunteer has an advantage in this. And what I wanted to show was just how their system is somewhat similar to the AI agent hierarchy and the way they've set things up. This alignment ensures that as you move to an economy of trillions of agents, your AI operations are secure, auditable, and fundamentally ground in the reality of your business data.
If there's CEOs of companies going through it, look into Palunteer. It may be more money at the startup side of going through it, but if your if your firm is filled with unstructured data across silos, if you're having trouble getting people move into this to where you're going to be doing deploying this one agent at a time, I don't think you have that kind of time. I just don't. I think this is going to be a bigger problem than people realize, uh, in terms of the adoption, and it's one of my big negatives for this year and one of the things that I'm hyperfocused on to keep monitoring.
Um, Andre Karpathy also put this out. You can go to carpathy.ai/job to go through and basically from his perspective, which jobs are most likely to be impacted. You can go see it and go through the numbers. Declining jobs very quickly. 34 million. There's 140 some odd million people or 150 million people in the country who work. Um, so again, and this is in the short term, jobs that can be replaced or should be replaced is probably more it. Um, the friction will prevent it from happening as fast as it otherwise should. But again, this is getting into more the job disruption side.
Uh, you can tell the diff the difficulties they're having on the adoption side by making these, um, arrangements with the PE firms, again, both OpenAI and Anthropic. Uh, they're going to consultants to fight their battle over the enterprise market. So they're not only trying to win it, but they're trying to make sure that they get more adoption.
So here's where we are for the rest of 2026. Unlike last year, where when tariff, uh, the tariff situation was to me silly in the fact that the AI trade is going to happen. AI is going to keep happening. Um, but the speed is going to continue to grow rapidly. We're going to start getting more and more things happening that are going to be disruptive. So all long duration assets on businesses that are not going to be able to compete in AI are going to be in trouble. So the asset uncertainty for long duration assets are going to remain. The commodity boom, take advantage of the weakness you're going to see in silver, um, in copper during this period, like this. All of these things will be necessary for the massive buildout. The adoption gap, AI progress is faster than enterprise AI adoption. These are themes to make money on this year.
Uh, we're in a period right now where it's difficult to make money because everything is going down. But hopefully you got off to a good start in the year with a lot of the names that we've talked about, um, the key sectors. I still think those things are going to have a great year. But again, in a commodity bull market, as I showed with the webs, uh, the subscriber, uh, webinar this week, you're going to have 50% moves in these names and then you're going to have 30% corrections. This is not software stocks of the past where they just continue to grow regardless what happens in terms of, uh, regime shifts. Regime shifts from investors right now where they start worrying about inflation and recessions. These things are going to get hit, and they'll give up a percentage of their gains, but their earnings will keep growing, and that means they'll get a snapback very quickly.
Um, Jensen Huang gave a call or an interview with Ben Thompson. The reason I want to bring this up, he gets into something that I wrote about this week with just CPUs, and I think it's really critical for those of, I mean, for the subscribers. I sent this out this week. I sent the expanded version out with the name list. So for those of you who didn't get it, um, on the institution side, you can go to your salespeople. For the subscribers, you can go to the website. It's a list of 18 names that in my opinion, uh, benefit from the move to the whole rack. And I think you should be looking at those names as we go through corrections.
Uh, final few slides here. Uh, Chamath put out something again on terminal value. This is something I believe in. What happens if AI makes every moat temporary at a minimum? The uncertainty is growing. And I just wanted to highlight that I've been talking about this for a year and a half. So this was my first thing on the moat erosion engine. And you can see I barely had any substack followers, uh, at that point. You guys should go read my earlier stuff, um, if for no other reason. I did cover a lot of these topics back then. And I think that just shows how slow people have been to understand. This was before DeepSeek. Um, and I did write about how this will question everything due to the rapid and unpredictable changes driven by AI, the disappearance of moats as we know them. I wrote after DeepSeek when everyone called me up, and I reiterated again that although I think this is a panic and there's no way that this is going to kill, um, the demand side and Jevons Paradox will happen. I did go through again that anybody, including Nvidia, could be disrupted during this time of AI with novel solutions that are going to come up. This is going to happen for energy stocks down the road. It's going to happen for everything. Not in the near term, but you just have to get used to the disruption and the supersonic tsunami from AI VC moat situation. And I think this covers really well.
Uh, the SaaS boom produced a few dozen billionaires and a bunch of zero-sum whiners. But the SaaS, the AI SaaS here will produce massive millionaires. This is what I believe. Um, so I'm showing you this just because this is starting to get more credence, especially out of the Y Combinator group. I believe the total value of software goes up, and the number of companies created goes up exponentially. So this is where everyone can be right. So, everyone that says the value of software is going to go higher, great. I'm fine with that. I don't think public companies will go up because I think the number of companies created will go up exponentially, and I don't think they'll ever be public. And that's what they're talking about here. There will be 50,000 companies doing $500,000 to $5 million each, run by one to three people. That's what I believe it misses that they'll have 10,000 people employees. It's just that only three of them will be humans. The rest of them will be AI agents. Which is why you have to understand what OpenClaw does. The number of people who capture the value goes up by 100 times. This is my belief in crypto. This is my belief in Bitcoin. I believe in the disruption of the concentration. This is the decentralization of ownership of assets and the decentralization of this.
So again, I'm bringing this up to remind people the Fed is confused. We've got a credit problem going on at the same time that we have inflation. We've got the White House calling for an emergency Fed cut during this whole thing. This is this week with gas at the pump storing higher inflation expectations calling higher, and Kevin Warsh will be, um, well, it's at 70% now that he gets in before, uh, before May 15th. But the main point is, what is he stepping into, and what does that mean for Bitcoin?
Uh, we've got a buy signal from RenMac in terms of the excessive short positions on Bitcoin. Since I've chastised everyone for what's gone on in, uh, in the bare side and bull side, I'm just going to keep saying Bitcoin may fall another 20, 30% if the S&P falls violently. I don't expect that to happen. I do think the S&P is going to trade down. If I had to guess, I think we can still get to 6,100ish. If the oil price doesn't reverse immediately, and we see the inflation data go up, and we see the job sit, or the recession fear starts to go up, I think we could easily see 6100. Which would mean, you know, being down on the year 13% or so.
Uh, here's the final thing I'll show you. I built this in Perplexity Computer as well. I didn't use my FMP data, but I told it to do the same check. Uh, I just quickly went in and gave it what I wanted, which was at the end of the week, give me the weekly close where we are in the 50, 100 day, and 200 day. Oh, only thing above the 50-day right now is Bitcoin and Ethereum. Get ready. Uh, RSI's two-year. This and my commentary could go down to 6,100.
That's it for this week, guys. Um, again, thank you for everyone who's subscribed. Most importantly, uh, hopefully you're learning. Watch the videos for the, uh, for the advanced subscribers. Uh, I will put them up for people who just want to get the videos. Uh, it's going to take a little bit of time. We're making sure the subscribers have had the ability. I will do more in the future. That's the benefit I'm going to try to do is I will show people, uh, hopefully how to do things in OpenClaw and maybe even Perplexity Computer, and I'll go through and show people there, and I'll give them the actual things to go build it themselves. Uh, meaning the prompts, because the prompts are what happen. And if I tell you what you have to do on the API keys, which you don't even have to go in and add them to the script. You just tell it what the API key is, and it knows it, and then it goes through it. So, you've reached a point where anyone can do this.
Um, be safe during this period with your portfolio. Trade the book. Uh, don't fall asleep on what's happening from the inflation side, and don't get too bearish, and certainly don't sit there and, uh, have PTSD, uh, from the taco days of last year. I'll see you next week.