Transcription
Hey everyone, me Kevin here, coming to you from, well, an airport in Amsterdam, which, you know what that means. The market's probably red, and well, it is. This is why we have a coupon code at mekevin.com called "vacation red" that's going to expire pretty soon.
But, but anyway, let's actually focus on what's really going on because I think I'm getting to the bottom of this. And I've been studying a lot, just sort of in travel, what other hedges or suits or even non-suits, retail, whatever, are are thinking about the market. Uh, and I think the explanation for the market, uh, in terms of what's happening is actually a lot simpler than, uh, what people are arguing. And so that's what I'd like to discuss in this video, in addition to what JD Vance said on the Joe Rogan podcast, because I think that gives us a little bit of color into what's going on in Iran, which also aids our commentary on oil and treasuries, which is equally important to, well, the broader market and capex funding, because capex is being funded by debt. And as treasuries go up, the cost of debt goes up, and therefore the cost of buying chips goes up, and you kind of squeeze all that, right? Like the squeeze we saw at IBM that we talked about was really this prioritization of spending because, yes, there is limited access to capital, or at least limited access to cheap capital. It is getting more expensive to raise money, uh, which, which is fine. I mean, treasury is hired, is what it is.
You know, for example, uh, House Hack, and I always like to use us as an example. It's not a pitch. We're not fundraising, or House Hack's not trying to sell you anything right now. Uh, but I try to use it as an example because we sort of look at the market and go, "Okay, wow. Well, there's, you know, studying the market, and then there's what are we doing as a business?" And I remember last year, you know, wow, we're buying, we're switching from buying more GPUs to buying more CPUs. We're, and then we're telling course members, we're like, "Hey, this could be really good for AMD." And AMD skyrockets from like the $170 range to, you know, the $500s now. And, uh, you know, then we also realized just in the last weeks, we're like, "Wow, the value of our GPUs has doubled." You know, those are paper gains, but whatever. Those were back when we were buying a lot of GPUs earlier last year for our proprietary models. You know, one of the things we're seeing now is that when it's time to raise money, which we think, you know, usually we buy real estate in a third. And trust me, this isn't all about House Hack. We're going to talk about the market and what I think is happening in just a moment, but I think it relates, and that's why I'm not trying to bore you. I'm trying to give you this insight from our point of view. In the third and fourth quarter, we usually go buy in real estate. We usually go buy real estate. Let me clarify how I'm saying that. Uh, and we have done that every single year since we started the company. And first said, "We're going to go buy real estate Q3, Q4 of '23." We did it then, did it in '24, did it in '25, we'll do it again this year. Uh, that's when we think we can find the best deals. And so we're thinking like, "Do we fundraise, you know, going into Q3, Q4?" That latter back-to-school portion. Uh, and if we do, we probably fundraise at a higher, well, not only valuation, but but higher yield than what we did before, just because the cost of capital has gone up. Now, fortunately, we can sustain that. We can pay that, right? You know, we're making more money than we ever have before, which is great, partly because of the AI products that we do sell. But the point is, companies, to some extent, are having to make decisions. They're having to say, "Okay, there's less money. The money that we are raising is more expensive." And, uh, you know, let's make some more strategic choices. And I think IBM is an example of that.
Now, what that highlights isn't well seen on its own. The IBM situation, or what I just described, you have to combine it with what Mark Zuckerberg said. And a lot of people, I think, are misconstruing what Mark Zuckerberg said because Mark Zuck, you know, in a private meeting, talked about how, "Hey, you know, we're looking at potentially selling this, this extra capex, or this, this extra compute that we have." Uh, and then he later followed up and clarified that, "Hey, but the reason we're looking at selling that extra compute isn't necessarily because we overbuilt. It's actually because people are willing to throw so much money at our compute just to get access to our compute so that they can operate their proprietary AI models or whatever it is that they're doing." And so Mark is really trying to signal to markets, "Look, we're going to be a little bit more opportunistic in how we can make money." Now, there are two ways to read that. One way to read that is, "Okay, Meta is, uh, an AI play, it's an advertising play, and it's a compute." I personally only care about it from the point of view of how AI makes advertising better, which I think is massive, and I only like it from the advertising point of view, but whatever. Some people say that and they're like, "Oh, this, this is so bullish. Great opportunity to monetize at high valuations, whatever, or, or high prices for compute." Other people look and say, "No, this is, this is a sign that they're regretting some of the overbuilding that they've done." Of course, then a week later, they're like, "We're going to do another facility in Canada." So it, you know, you get a lot of narratives that play to both sides. What I think is, uh, probably true is that there's a mix of a little bit of both going on. Mark Zuckerberg himself has argued that they've fallen behind, sort of, on the LLM race. They acknowledge that. And in addition to sort of falling behind on that LLM race, they realize that they need to be opportunistic about how they make money so that way their stock doesn't keep tanking. Because if the stock keeps tanking and people keep bailing on the stock, then guess what happens? It becomes even harder to raise money for the initiatives that you do think are profitable. Now, I think Meta has been brilliant in how they've arranged a lot of their leases. I think it's a little shady how they arrange a lot of them off-balance sheet, but the cancellation clauses that they have in them, I think are great, and they're going to leave a lot of bag holders in the companies who are providing these sort of leased compute services. But if they can pick up dollars, great.
But now you have to combine this uncertainty with what's going on with Meta with the IBM news, which some are like, "Oh, that's bullish hardware." But then others are like, "But then look at the Meta news." Okay, combine both of those things with the suckening. Remember, we've talked about a suckening for four weeks. We have said on a consistent basis since before the SpaceX IPO, "This sucker is going to meme and then it'll bleed." I called for a 30% rise and then a bleed. And I'd like to also be very clear about the record. You know, people, well, first of all, somebody did like an AI analysis of my alpha reports and said, "Kevin, Claude says you're actually under-selling, uh, your success ratios." I'm like, "Oh, that's really nice. I don't like to be like I'm perfect. I obviously make mistakes as well, but, you know, somebody left a comment the other day. They're like, 'But Kevin, you said sell Micron in the 600s.'" I said, "Sell Micron in the 600s while we were in the Iran war." And then it went well into the low 500s. At the beginning of April, when we were still in the 500s, we said, "Hardware is about to rally, and it's going to boom. People are going to be like, 'What's happening here?'" Because hardware did get cheap, and there were no capex woes yet. And that's what we're about to tie into. And then, of course, we got this massive rally. Now, once again, we think it's overblown. So things change, and you kind of have to watch those pivots. I know it's a little harder in the public videos. Uh, and, and that's why I encourage everybody to join the alpha report. That's not to be intentional. It's just that that's where we're literally writing this stuff down in black and white so you don't have to sort of listen and potentially miss something. But I try to be as transparent as possible about this. So that's why I tell you on, sort of, a daily basis, "Here's where my mindset is."
So, I went very public about SpaceX and how it's going to be a liquidity suck. Problem is, cash and money markets plus money and bank accounts is low. When you combine those two together, it is historically low. If you only look at money markets, it looks historically high. But you have to combine cash and savings account accounts because now people have moved their savings to money markets. So, it skews some of the money markets are at all-time high, there's so much cash available argument. There's not a lot of cash available. You had the great sucking. So, we called for the 30% up and then the bleed, which is exactly what's happened. Okay. So, rather than just looking at the past and saying, "Go to meetkevin.com to join the alpha report," what does that mean going forward? Well, since the SpaceX IPO, we've talked about how money is going to be harder to access, especially on that bleed. People are going to want their lockups to get money to go invest in other opportunities. But now you have to add the IBM warning and the Meta capex warning, which is either opportunistic or it's a capex warning. It's kind of like when the boom is really taking off, everybody's like, "Capex, capex, don't worry, it's going to keep going. It's going to keep going and keep going." When you get to turning points in a cycle, you could start reading things two ways. And then obviously, when we're on the downturn, you can only read things one way. All capex is going negative. We're at this sort of like potential turning point or pause where people are like, "Oh, is this the beginning of a turning point, or is this just a pause, or are people misinterpreting Meta?" So, what is the answer? And this is the forward-looking part. This is what I'm telling folks in the alpha membership, and I'm sharing this with you just to be fully transparent. I, I would rather be transparent with you bluntly and be wrong than not be transparent with you. And then we're going to talk about what Joe Rogan just said on the, uh, and JD Vance just said, because that's also very interesting, and it also applies to what's going on in Iran.
So, what's next? Well, what's next is we've got to see what happens with mega-cap earnings. Now, this is going to be really interesting because between now and next week, we are sitting around twiddling our thumbs waiting for the big boys. Google on the 22nd, Microsoft on the 29th, Meta probably also on the 29th, Amazon on the 30th. You've got Apple coming up. Nvidia's late in the cycle, but seeing that, you know, TSMC beat and raised guidance. They raised their capex by 6.4%. Their revenue growth was expected to come in over 30%, it came in over 40%. They're expanding their capex. All that is great and all, but what does it take to actually get TSM to react positively to that? Because people also leave me comments. They're like, "But Kevin, memory is sold out until 2027, maybe even until 2030." I'm like, "Great, because you know about that. Every other butthole knows about it as well. And it's already priced into the stock market. That's why markets look for turning points so that hedge funds can be early on the turning points and try to beat retail to the turning points." My goal, and my alpha report, is to basically try to provide what hedge funds are thinking with my take and provide it to you, ideally even before they report on it. Right? I'm trying to be ahead of them to finally give us an advantage. The non-suits, who knows, maybe some of the suits are watching, and if you are, all right, fine. But anyway, we're all people, after all.
Okay. So, what happens between now and then? Personally, I think, especially, uh, in the midst of this Iran drama, a lot more uncertainty and potential movement to the downside, especially as the Iran war potentially escalates. That means until we get a clear guide from Meta and Google and Microsoft that they're going to keep spending, including not just their capex guide that they write on paper, but what they say in their earnings call, the market is going to be skittish because SpaceX kind of burned them. And, you know, I'm not, I don't want to keep saying, "Hey, like I told you." So, I'm invested in SpaceX in my venture capital fund, and I don't want it to go down. And I said that since before its IPO, I'm like, "I really don't want it to go down because, you know, we've been in it since, whatever, uh, you know, $300 billion." And, you know, I remember I'm like, "This is now $2.2 trillion. This is great, but it ain't going to last." When can I get out? You know, it's like forecasting before I could even sell. Uh, but that's okay. Uh, so, so now we've got this catalyst calendar, which is basically mega-cap earnings in whole. If this rally is going to keep going and hardware is going to keep going, we need the Zucks, the Satya Nadellas, uh, you know, the folks over at Google to be bullish on more spending. But not just more spending compared to last year. We already expect to go from about $450 billion in spend to over $7 and a quarter, so $725-ish billion in spend. And maybe that'll break a trillion next year. That's already priced in. We need to beat those expectations, and then the semi rally can keep going. Unfortunately, until then, you can't just rely on cybersecurity to hold up the market. You can't just rely on software to hold up the market. We need hardware to stabilize and another sector to rally. And for four weeks now, we have not had that. For four weeks now, we have not had sustained support from hardware or another sector. And hence, we've been bleeding on the NASDAQ 100.
Now, where can we potentially go? But unfortunately, if this Iran drama keeps going, my take is we could potentially head down to 675. I did put a time frame on that. Uh, I'm not saying that's going to be, you know, today. Who knows? We could end up going green today, right? The argument is that between now and those earnings, the nervousness for cash, the dash for cash, may be, or even the desire to take profits, may be so extreme that we could knock on the door of 675. We've talked about that time way, time frame-wise, in the alpha report. And you're always here at there first. Make sure to join over at meetkevin.com.
Now, what did JD Vance and Joe Rogan say? Well, this is also interesting. So, this has to do with Iran because the United States has been on and off bombarding coastal installations to basically try to get the hardliner Iranians back who are launching drones and causing disruptions in the Strait of Hormuz. The great thing about that is hopefully we start diminishing some of their capacity. But JD Vance kind of gave us a big reveal. He said on the Joe Rogan podcast, "You've got two kinds of people in Iran. You've got the crazies and the pragmatists." And the crazies don't have to send a lot of money to some loonies with drones to cause a disruption in the Strait of Hormuz. Because frankly, one ship catches fire and gets attacked, a hundred other ships end up getting stuck and throwing up their hands and saying, "Our insurance isn't going to cover this. We ain't doing it. We ain't going through it." And that's where we end up getting disruptions. And unfortunately, this is not from the podcast, but we know this. Donald Trump has shown his hand. He does not. Oh, yeah. Look, headline now. "Iran warns US of Hormuz red line, says it will retaliate to Trump's strikes, right?" Because they want control of the Strait of Hormuz. They know the leverage point of the United States. And JD Vance alluded to this. You know, they said the Hormuz is the leverage point. But let's be clear what the real leverage point is. The real leverage point is the S&P 500, which is only down 19 pips today. You know, NASDAQ right now down about 65 pips as we're recording this. Dow, Dow is slightly positive, but it's really the economy. And with oil now, Brent now back up over $85, where it was under $75. WTI was under $70 for a moment there when we thought the street was back open under theou. The economy is the only thing that papers over the sort of crazy experimentation that Donald Trump does in office. I, you know, I'm not here to make a debate about whether you should like tariffs or not. Most of you already know I am anti-tariffs. I'm a free market, more libert, economically libertarian, you know, actually pretty leaning, I'd say libertarian on everything. Pretty when it comes to left or right, pretty much in the middle, I'd argue there. But anyway, the whole point of this is, it doesn't matter what you think of tariffs. Tariffs are an economic shock. Only about 50% have flown through the economy yet. The others are still flowing through the economy. It takes time to roll them through our CPI and PPI and PCE reports. And unfortunately, the only thing that's holding those up, or holding the economy up, is the stock market. The stock market tanks because oil goes to the moon, and people are worried about now a new forever war where we start and stop strikes in Iran. Donald Trump's ability to paper over his experiments fails. And unfortunately, if his ability to paper over his experiments fails, and the economy tanks into recession, then Donald Trump will unfortunately go down as a failure solely because of the stock market tanking. And of course, people will then point to the underlying reasons of, "Well, this is why the stock market ended up tanking." But the point is, the reason Donald Trump likes the stock market's performance so much is because if he knows if we go into a recession, the stock market corrects 30% on the index levels, 90% on stock levels, so many people are going to lose their jobs, and everybody's going to blame Donald Trump. This is why he's so sensitive about the economy, and Iran knows it. They know they have a leverage point, and JD Vance fully acknowledges that in the, uh, Joe Rogan podcast.
Now, he also says, "We're not going to send in troops. We've destroyed their nuclear program." Which, the destroy the nuclear program and not send in troops is basically the opposite of what Donald Trump said about, "Yeah, we might have to raid Pyramid Mountain soon, which can't be struck from the air." Okay, so you'll need boots on the ground, and you're telling me the nuclear program isn't over? So, like, the left hand isn't talking to the right hand, or the right hand isn't talking to the right hand here, whatever. Uh, JD Vance talks a little bit about how, you know, if you have these forever wars go on, you can end up causing a failed state like a Libya outcome or a Syria outcome, which then causes a migrant crisis in Europe. Totally agree with that. By the way, I actually have to say, I think JD Vance is relatively rational in the way he presents himself. Uh, he tries to be reasoned. Obviously, we could pick apart some of the things that he says. Uh, for example, you know, and I'm not going to go deep in this, but when it comes to the Epstein files, he really punts on that and says, "Well, you know, we could have done a better job communicating, but it's not our fault. It has everything to do with the 2006 and '07 investigation into Epstein, and they dropped the ball, and they didn't give us the material that we needed to really fully reveal what kind of scumbag this guy truly was."
One thing that I did think was very interesting, though, was that JD Vance points out a Time magazine piece where Time magazine alleges that Trump's former campaign manager is running a campaign for Israel. Uh, and this, uh, Brad Parscale guy, who runs a firm called Clock Tower X, apparently targets Gen Z on social media and, uh, wants to basically, uh, let the entire generation, and even artificial intelligence chatbots, be influenced in a pro-Israel way by trying to spread pro-Israeli, call it disinformation or misinformation, whatever you want. Apparently, Israel is paying $1.5 million a month to Clock Tower X to do this, paying influencers as much as $4,250 per post on X to to essentially try to, uh, manipulate Americans to continue to be pro-Israel. He actually thinks that Israel is kind of losing some of the communication battle, uh, and that every country does this. And he sort of casts this off as saying, "Well, you know, everybody tries to manipulate public discourse." Which is probably true. I mean, Iran puts together Lego AI to try to manipulate that they're the underdog, right? So, it's an interesting interview. There, there are some components of it that are interesting, but it doesn't surprise me, and I don't put, I don't put it past anyone that Israel is trying to spend money for their purposes. They're a country of 9 million people, of, of course they're going to try to. Let me fact-check that population. But of course they're going to try to do everything in their power, uh, to keep funding going for their Iron Dome, whatever else, uh, uh, priorities they have. Uh, and I truly believe, this is my opinion. You know, I'm not sponsored by anyone. The only sponsor I have is House Hack. You know, we don't even take sponsors on the channel. Joe Rogan takes sponsors on his channel. We're not taking sponsors on the channel. Uh, but the point is, uh, yeah, 9.38 million. But the point is, you know, Israel probably has a point to some extent because I personally think Iran is rushing to enrich a bomb at Pickex Mountain. Donald Trump is aware of it. They're not telling us the truth about what's going on over there. This is my own read. It's not something somebody else is feeding me. And, you know, if I were Israel, I'd be pooping myself, too, because I think the day will come where Israel holds up the bomb and goes, "We, Iran holds up the bomb and goes, 'We got it. Strait's ours now, boys. What are you going to do about it?'" Just saying. Uh, and I don't think they'll put the safeguards on that sort of bomb like, uh, the safeguards that we have on nuclear bombs, such as, you know, if you shoot down a nuclear bomb right now, it doesn't detonate, but that's because they have specific fail-safes that are intentionally designed not to blow up when they get shot down potentially in inadvertent areas. I don't know that Iran would do that and include those sort of fail-safes because I do think, and I agree with JD Vance, that there are hardliners, uh, that, uh, that will keep driving this sort of forever war going. And that's obviously where I circle back to saying this is, uh, this is, um, you know, bearish. Uh, I've actually reduced my level on the bull-bear scale because of the Pickax Mountain comments, because I've been worried about Pickax Mountain as a next two or three-year issue. Donald Trump mentioning it moves up my concern.
Longer term, though, still buying stocks. You can see what we're buying by joining over at meetkevin.com. And frankly, I expect to buy stocks and buy the dip on stocks between now and next week, uh, when earnings come out. But we'll clearly be paying very close attention to everything that's being said in these earnings calls because that's the key. As soon as we see capex roll over, I agree that it is game over.