Transcription
350 billion. That is how much fresh cash Wall Street needs to come up with in the next few weeks just to absorb three massive IPOs and the wave of new shares that big tech just started printing.
SpaceX, Open AI, and Anthropic are all racing to go public at the same time. Google is already selling 85 billion in brand new shares. They just print them. And Meta is reportedly next to print some more shares. And that money has to come from somewhere. And it's coming from, you guessed it, yes, your portfolio. Congratulations.
Because the top 10 stocks in the S&P, the stocks responsible for nearly all of your gains. And I can show you that sort of analyst app here, which is Winston's app here. And you can see that these top 10 stocks accounted for 72% of all the S&P 500 gains this year. And they're the same stocks that are about to get sold and diluted at the same time.
So, by the end of this video, Winston is promising to give you our three-step framework to not just survive what's coming because that's important, but to come out the other side potentially wealthier than you went in. My name is Felix Pin. I'm an ex-investment banker. This is Winston here who's the brains behind it all. And we've seen how banks really work from the inside. And I'm also the founder of the Go Academy where my retired Wall Street mentors teach regular investors institutional strategies and we've done that for over 20,000 students the last six years.
And two months ago, right here on this very channel, Winston warned you that the debt channels were shutting down, that big tech would be forced to print stock to fund AI. And Google just proved us right. $85 billion in new shares. Meta is reportedly next, and today we're going to break down exactly what's happening, why it matters to you personally, and what you need to do about it step by step.
Now, the video here is going to be fairly information dense. So, Winston has done something for you. He's going to throw some numbers at you. And to make sure they really land, we're going to give you a free bonus research report that covers everything we're about to discuss, plus much more, so this video doesn't become endlessly long. You can download that completely for free at felixfrren.org/trap tap. The link, of course, is in the description down below. It is free. Just grab it so you can follow along.
So, let me explain what's happening. And I'm going to keep this fairly simple because what I'm about to show you is something every investor needs to really understand whether you've been investing for, you know, 30 years or 30 days. Winston agrees, don't you?
So these are the two forces about to hit the stock market all at the same time. And both of them are aimed at the same stocks. Force numero uno is the triple IPO collision. Three of the biggest private companies on Earth out in space are all racing to go public, basically sell themselves to you.
First, SpaceX. SpaceX is about to do the largest IPO in history. They're raising about 75 billion in cash. To put that into perspective, this largest IPO we had before was Saudi Arab which was in 2019 and they raised about 29 billion. So SpaceX is asking for three times as much cash as that IPO did, the biggest in the world.
Second, we've got Open AI, the company behind Chad GPT, and they filed their paperwork too. They're looking to raise 60 billion.
Third, we have Anthropic. They make Claude which is your sort of French slightly angry slightly I was going to say something I shouldn't say. Um anyway it's sort of like a chat GPT with uh without quite the evil intent of chat GPT. Um and they've also filed their paperwork and they're looking for about 60 billion.
So you add that up 75 billion, 60 billion, 60 billion. You're like Felix you promised me 350 billion. Yes, you're paying attention. So this is about 200 billion marinos and that's got to come from somewhere in a couple of months. Now the question that nobody on CNBC is asking is where does $200 billion come from? Winston, have you got 200 billion lying around? I don't think so.
Think about it this way. Imagine three brand new mega malls all opening on the same street in the same month. Every single shop in town is going to lose what? Customers because the shoppers, the investors in this case, only have so much money to spend.
And then the second force is this. Big tech is printing shares, which gets which makes it way worse because while the 200 billion is getting sucked out for these three IPOs, the big companies that you already own are also asking for more money and they're not giving you any more ownership for it.
Google or Alphabet as they're called announced they are selling 85 billion in brand new minted shares. Largest tech stock offering ever. So what does that mean in plain English? When a company issues new shares, they are basically printing more pieces of the same pie. The pie does not get bigger, but now there are more slices. So your slice, the one you already paid for, it gets thinner. It gets the ompic treatment and it's called dilution in the words of Wall Street.
And it isn't just going to be Google. Meta, the company that owns Facebook and Instagram, is a reportedly doing the same thing, selling tens of billions of dollars in new stock. Meta stock dropped about 5 to 9% on on that rumor just in one day. Microsoft is spending almost 200 billion on AI this year. You think they're going to do it? Probably. Amazon's probably going to do it, too. So, where do you think all this money is going to come from?
Now, maybe you're going to ask, well, why don't they just borrow the money? Why sell stock? And that is truly a great question, isn't it, Winston? And that's something that I warned you about two months ago if you were watching this channel then in a video that I'll I'll link to somewhere around here. And what I said to you then is that the debt market is choking on tech debt. In the first five months of this year, AI related companies have issued 110 billion in debt. Borrowing costs have gone up and the debt channels, the guys lending the money, just can't handle this one. So, they're turning to the stock market. They're printing shares. Your shares get diluted.
So, if we add this all up, the IPOs, the share offerings, we're going to look at about $350 billion being sucked out the market in the next few months minimum. And every single dollar of that has to come from somewhere. It comes from who? Fund managers selling stocks. And which stocks do they sell first? The ones that are the easiest to sell, the ones that they own the most of, the biggest, the most liquid name in the market. Think about Google, Nvidia, Intel, Amazon, AVGO, Apple, AMD.
And these stocks are the exact same stocks that are carrying your portfolio right now. If you don't own these stocks, you'd have made like no money at all this year. Your S&P 500 fund. 72% of its gains this year are due to these 10 companies. Everything else is just a complete waste of life. 490 stocks are doing I was going to say f all bug. I think we're allowed to say that, right?
And that's where it gets kind of personal because most people watching this video probably think, "Oh, I'm safe. Got a 401k, maybe you got a Roth IRA, you got some money in an S&P 500 index fund because you've been told that just buy the index and hold it forever." And it sounds smart, right? It sounds diversified. It sounds safe. But here's what nobody tells you. The concentration problem is real.
The S&P 500 is supposed to be 500 stocks, right? That's the whole point. Diversification. Don't put all your eggs in one basket, right? Especially not with this guy because he eats eggs faster than you can say egg. But right now, the top 10 stocks on the S&P 500 are not just 40% of the entire index. They also account for, as I keep saying, 72% of all your gains. 72%. So, when someone tells you, I'm diversified. I own the S&P 500. What they're really saying is, 72% of all the money I make come from just 10 stocks. Makes you wonder why you own the other 490, doesn't it?
And I want you to really feel what's happening here, because this is not normal. Your top holdings are being hit from two directions at the same time. Direction one is the big funds selling these stocks to get the cash to buy the IPOs. Do you know this guy? He was Charlie Monger's best friend. Monish Pabry, one of the greatest investors alive. And he says when asked about the S&P 500, what was his answer? He said bearish. >> Just that bearish. He's basically saying at today's prices, stocks are overvalued. They're trading at a price to earnings ratio of 30. The long-term average is 16. So stocks are twice as expensive right now as normal. And that is more extreme than in 2000, right before the dot crash.
And what's Papr doing with his own money? He has zero money in the S&P 500. He has zero money in mega cap tech stocks. Buffett's Burkshire Haway just sold the S&P 500 index fund. And they're always saying everybody should own the index, right? Well, they've sold the index. So, think about that. This is actually your retirement fund, the S&P 500 index fund. That is your safety net. That is what you're counting on to be well, you know, there for you when you're 65, 70, 75 years old. And put in the chat how old you are. See how much time you've got. And one of the smartest investors on the planet, in fact, two of the smartest investors on the planet won't touch it.
And that's exactly why I'm running a special live session this coming weekend for you live from France. And it's called the index fund trap. Why the S&P 500 is lying to you. It is. And think about this. If the greatest value investors on earth won't touch the S&P 500, you need to understand why. And more importantly, you need to understand what to do about it. And I'm going to walk you through everything live with a Q&A. You can ask me questions step by step and it's the first time I'm running this as a seminar. It's going to be likely the last. And so you can either join us live for free or you can learn the hard way and you're going to see what happens in five or 10 years. So seats are limited. Get yours at index.com. Link is down below in the description and in the pinned comment.
And maybe you're thinking, okay, Monish Pubry is a value investor. He's always cautious about overpaying of this nature. You might think, well, that's just how these value guys talk, right? So, let me give you someone from the other side of the spectrum. Tom Lee. You've heard of Tom Lee? Put a T TL in the chat down below. He's the head of research at Funstrap. And he is the most consistently bullish voice on Wall Street. This is literally the guy who called the 23 rally when everyone else is predicting a recession. He called the 24 rally. He called the 25 rally. He's talking about the 26 rally. Is he? Well, this permable, the guy who always thinks stocks are going up right now. He's warning of a 20% correction. So, let that let that sink in. The most bullish man on Wall Street, the guy who's been actually right about the bull market for the last three years is suddenly telling people to brace for impact.
And his three reasons are this. The new Fed leadership is creating uncertainty. Market markets get nervous when the person controlling interest rate changes. Number two, AI valuations are getting repriced. The market is starting to realize that maybe these stocks aren't worth what we're paying. And then this is policy fragmentation, trade wars. They're creating headwinds that could slow down profits. So Tom Lee is predicting a painful drop in the middle of the year.
So let me show you a pattern here. And once you see this, you'll remember this one forever. I promise you that. Back in 2021, we had a massive IPO wave. The market was hot. Money was cheap. Everyone was euphoric. Rivian went public. Coinbase went public. Robin Hood went public. And all at what turned out to be absurd valuations, and then the Fed started tightening, interest rates went up, easy money started disappearing, and guess what happened? Robin Hood went down 85%. Rivian crashed 85%. Coinbase crashed over 75%. And the IPO market just completely disappeared going into 2022.
So the patterns always the same. You get hype, then an IPO flood, then a liquidity drain, as in the easy money disappears, and then you get a crash. We're seeing exactly that pattern right now, but the numbers are about 10 times bigger.
And what no one's really talking about is that big tech is together spending 725 billion this year on AI. The Fed has flagged AI spending as a top financial risk. Now, here's what I think is going to happen, and this is just my opinion, but it's not a fact. I believe they're going to spend less than they're announcing. I also believe it'll take much longer than people expect to see the real benefits of AI. And I also think AI is going to get a hundred times cheaper. All these models, all these tokens you got to pay for are going to get really cheap. And most consumer AI will be completely free like a Google search. Paid for by advertising exactly like Google is search is doing it today. Google is already doing that, right? Go on to google.com, search something as an AI feature. It's free.
And what that means is that the return on that 700 billion in spend could be pretty appalling because if you can do it for free, why pay for it? Like what we're doing, we have software we build, right? So what do we do? We use the greatest model out there. We pay for it at the beginning and then we figure out how we can use a free model to do the same thing for us and then it doesn't cost us anything at all after that. So we spend a little bit, figure it out and then we do it for free with one of the open source models. And that way we can make our software available to you at a at a at a very reasonable price.
Like for example, if you want to monitor what stocks are driving most of the S&P 500 gains and we update this all the time in the Winston app, there's a link down below. There's a whole free month of with the Winston app. You can play around with it. Get some insanely good data. Uh find some value stocks, find some momentum stocks, find stocks that, you know, Trump is buying and all that kind of good stuff. All at a very reasonable cost. In fact, it's entirely free for the first month.
But what most investors don't really understand, even experienced investors, and when I explain this, I think it's going to piss you off and it's going to make you slightly angry because there is a third force and it's working against you and your portfolio. And it's completely automatic. You don't get a notification. You don't get a vote. It just happens. And it's called index rebalancing, right? But how your index fund will sell your winners without asking you is something you want to know.
So here's how it works. NASDAQ has adopted something called a fast entry rule. Under this rule, when a company like SpaceX goes public because it's big enough, it can be added to the SM to the NASDAQ 100 within just 15 trading days. So every NASDAQ 100 index fund in the world will be forced mechanically automatically to buy SpaceX shares. 15 to 30 billion in forced buying depending on how you look at the numbers.
Now these funds don't have cash sitting around to buy SpaceX. They have to sell something. They sell their existing holdings across the board. It means your index fund will sell some of your Microsoft, some of your Nvidia, some of your Apple and everything else to buy SpaceX without asking you. Just happens inside the fund and it doesn't stop there.
When OpenAI goes public in a few months, same thing. We'll force selling off the current holdings to make room. When Enthropic goes public again after that, again, same mechanic, same pressure, three rounds of force selling, all targeting the same 100 NASDAQ stocks, the tech stocks most of you guys own. And it's even the target date retirement funds. You own one of these Vanguard target date retirement funds. Most Americans have them in their 401k. You're again exposed to the same mechanic right now.
So your stocks are being sold by big funds to free up cash for IPOs. That's force one. Force two, your stocks are being diluted by the companies themselves printing more shares. Basically pie is the same size. They're just cutting it into smaller pieces. You now own a smaller piece. And then the third force is your index fund is mechanically selling your winners to make room for the new guys. So you got three forces all pushing in the same direction. And this isn't normal. This is a structural event.
So now you know the problem. Now you're thoroughly depressed and you're wondering, well, what do we do about this? Please tell me. Let's talk about the solution. Because my goal here isn't to scare you. My goal is to prepare you. The people who get wealthy in markets like this potentially are not the people who panic. They're the people who have a plan before the storm hits. Right?
So, let me give you my three-step framework. And I want to be clear. This isn't financial advice. I'm not a registered financial adviser. I'm just a guy who shares with you his opinion on what's going on out there and some of the stuff he's learned from my Wall Street mentors.
So, the first thing I think you need to do today is as soon as literally this video is over, pull up your 401k or your brokerage account and answer one question. How concentrated am I? And a quick way to do that is take the total amount you have in index funds and multiply that by 0.4. Why? Because that'll tell you how much of your money is sitting in just 10 stocks. That's how concentrated you actually are. So if you have $100,000 in an S&P index fund, 40,000 of that is in just 10 companies. And I know many of you then also own those individual 10 companies separately because you think you don't own them yet. So you're sleepwalking in a very very concentrated bet.
And then step two, understand where the money is going. Because the most important thing people don't realize is when big money leaves the tech stocks doesn't disappear. It doesn't go into a black hole. It rotates. It moves into another part of the market. And right now, the smart money is telling you exactly where it's going. We've had coal and energy companies. We've had oil service companies doing really well. Transportation, biotech companies, a lot of stuff out there. Basic materials, a lot of things have done actually very well.
And then step number three, build your watch list before the dip. And I think that's the most important step, and it's one that separates the amateurs from the professionals. You don't panic sell. That's how people get destroyed. You don't try to time the exact bottom of the market. That's impossible. What you do is this. You make a list right now today before anything happens. A list of high quality companies that you would love to at the right price. Pick 10 to 15 names. Again, you can get some help. Go into the Winston app, click on highest rated. You can filter this down to, you know, your country wherever you live in the world if you're investing regionally. and it's going to start giving you some names here sorted by the highest scores that we give them.
Then you wait and if you join me on Saturday, I'm going to show you that on a much much deeper level because there is more to it than just looking up the financials. You want to see the money flowing into it, right? Because many of you are sitting here thinking, okay, Felix, I sort of get the logic, but how do I actually do this? How do I audit my concentration? How do I find the rotation place? How do I know what to put on my watch list and what prices should I set as buy prices? Well, that's exactly what I'm going to cover for you this coming weekend. Saturday, live from France.
So, it works for you if you're in the Medicas or if you're in in in, you know, the socialist states of Europe or formerly Great Britain, just Britain nowadays. I'm going to teach you this index fund trap, how the S&P 500 is lying to you. I'm going to walk you through step by step live with a Q&A how to order your portfolio for that concentration. How about to identify where the smart money is flowing and how to build that list, the exact list that could turn a crash into the best investment opportunity of your life. It is completely free. Claim that free seat that's waiting there for you at index.com. Link is down below in the description. And if you're going to show up for yourself on Saturday, write show up in the comments down below. And I know you'll be there.
And let me leave you with this. Every great bull market, it has a shakeout. Every single one. The '9s had one. The 2010s had one. This one will, too. The AI revolution is real. I'm not saying AI is fake. I'm not saying space won't be, you know, valuable. I'm saying the stocks that are pricing it in are a little ahead of themselves. And the companies behind them are printing shares to pay for bets that might not work out for many years.
So, the people who potentially get rich from this aren't the ones who bought the hype at the top. They're the ones who bought the hangover. This is not 2008. This is not the end of the world. The economy isn't collapsing. This is a $350 billion game of musical chairs. And you just got told the music's about to stop. Mish Pry sees it. Tom Lee sees it. Baffford sees it. The question is, do you? And what are you going to do about it? Have your list, know your prices, buy the hangover, and I'll see you on Saturday at indextrap.com. Link is in there.
And if this video has helped you to see something you didn't see before, share the video with somebody. Share the live seminarstrap.com link with other people who you think might benefit from this, too. Because that's the entire point of this. Help people become more financially literate. Improve your skills so you can make better decisions so you can get to the freedom and the retirement that you deserve.
There is a $2 trillion time bomb buried deep inside America's retirement system and Wall Street is praying you don't find out before it detonates right now. Literally right.