A Bear Market Inside a Bull Market

[0:00] All right, we are gonna get going. Time mismatch presentation. So I'm going to take you through, during the course of this presentation, the theme that I had for my time in DC this week, presenting to Freedom Tech. I enjoyed it, made a lot of friends there, and I'm happy I went down. I'll talk about that. Of course, I've got to talk about scary rates. I can always tell when by people reaching out and by reading X what everyone's most scared of.
[0:38] It's just amazing that it goes from oil to rates to breath to everyone is just every week there's a new thing. It's just impossible to stay up with people's anxiety. I don't know if that's a reflection of not being able to make money. Don't know if it's a reflection of pressure, no idea, but we'll go through that. I will give you the facts. So for every person who tells you every single time rates go higher, there's a disaster, first of all, that's a story that's not true. Second of all, I'm going to take you through the facts of the history of markets in terms
[1:10] of myself building models of where the contagion starts. I had to do this because I grew up in Brazil in emerging markets, where if you didn't get out before the things blew up, you died. And I watched many traders and people during the time of the 90s that were not there. I did all of my theory on Jeffrey Moore and economic leading indicators. But then I'm also going to go into a whole new mind. I've talked about this book before. I think it's really important for people to start thinking about this. It's muse time. Consumer
[1:40] agents, the next AI moment. This is a big one, guys. This is driving the market today and I I believe, will be the driver of the next 12 months. The investments you make the next 12 months, in my opinion, to be successful of creating alpha will be about consumer agents. There's a bear market going on within a bull market. And I'm going to go through that because I think this is going to continue. IWM over QQQ makes new lows since the iPhone. Talk about that and all the other good things
[2:10] related to crypto. Oh, my disclosure. closure. Remember guys, I'm wrong. Sometimes I'm wrong. Sometimes I'm right. All right. So yeah, I went down to DC. I really want to bring this up because this presentation was about how there's two different worlds that are going on and you have a choice. And as you can see in my V up here, you can either be a linear thinker, think every time rates over the past, whatever amount of years have done xyz this is what's happened or you can come over here and be in the exponential
[2:46] and that's the problem we haven't had a rate rise while this has been going on we had a rate rise when this was going on remember that as you talk to people and i'll give you some insights on how to avoid it for the people that were down in dc the community of people around bitcoin it's a great event i made some new friends that i'll have for a long time you guys know who you are and i enjoyed the presentation hopefully i'll be able to show it at some point but this is really what the theme is about on here i wanted to show you guys the notes that i put together just so that
[3:21] when i was sitting down in the minutes before i got up there and go on so there's human time this is the system that we're involved in there's a reason why housing and autos and retail and and restaurants and things are trading where they should be at a bear market level because rates are going higher. The ghost rails. This is the other side of the equation. So you've got the human time where everyone that's doing back tests based on the linear world that no longer exists and most of them are above the age of 50, which I will take you through. The ghost rails is the most
[3:53] important story. It connects back to the agents. I'll talk about that, why it matters, but here's Here's the deal. The speed of intelligence is changing. The speed of money has to catch up. So everyone you're listening to on the bank side, you got to start with their age. I hate to say that, but it's just a fact. There's a big difference between someone who's in their 50s and has already made money telling you how the world's going to end and someone in their 20s or 30s who's working really hard at AI and understands crypto. crypto it's like two different worlds and that's why there's a time mismatch and people have not
[4:26] adapted because they don't use ai um alvin toffler i referenced this book but this is really what this is and if you haven't heard of future shock you should we're at that point where you will frighten and get everyone to feel overwhelmed and i think right now anyone who's bearish honestly with what's happening in ai they don't want to jump on on board at this point. They can't. And I think mentally they're angry at it. They think it's a bubble. They think all these things that fit in with anger. And I think this makes sense because
[5:01] that's what future shock is. If things are changing too rapidly, then people don't want the games to change. They don't like managers making decisions based on quantitative data. It's the old man in the front yard routine. And I think that's why I keep showing this, which is I didn't want to be over here. I made the journey over here in 2013, my trip to Silicon Valley and Singularity University to make sure I didn't focus on this anymore, believing that this was no longer relevant. And that's what's worked. And it's
[5:31] worked, honestly, since 2007. That's why IWM versus QQQ has gone down every single year, and it just continues to make new lows. Even though we had a rally and a broadening out in the early part of the year, we're back to the MAG-7 making new all-time highs. And the MAG-7 are gigantic. And the Russell 2000 names are in trouble because of AI. Not all of them. Some of them make the infrastructure side, as we saw early. But when rates went higher and oil went higher, these companies don't have a way to survive. So this is the world that we're in. And over here,
[6:06] we're going to wean out a lot of people. That's why I'm saying there's a bear market with inside a bull market. So too much of our life right now is polarized into binary situations. It's a bubble. It's not a bubble. There's a time mismatch. So it's very hard for me to imagine, having been involved in markets for a long time, that blockbuster earnings bolster stocks record run. And yet, while this is happening, and stocks are near their all-time highs,
[6:36] I'm doing Julia's show soon. These are just the three ones that picked up on here. here. Depression ahead. Michael Pinto, 55 or higher. Daniel DiMartino, I don't want to disclose her age. I looked up and go through it, but she's in the bracket of me and the rest of Michael Pinto and George Noble, who's older than us. All of us above the age of 55 or above the age of 50. Let's
[7:07] just leave everyone else out of this. Here's the main thing. You see this chart? Does it look like it's going higher absolutely does to me i mean this is a beautiful five waves up consolidation little triangle it's going higher do i think it's going higher i i do would i bet on it's going higher no i don't think it's worth the time and the energy when i've got other things to be involved in do i think that this period here to compare to this period is very different yeah i do but again
[7:38] everyone wants to just take the story and get you scared because this is going to go up to 10 12 14 14, 15. The government's got tons of debt, all this stuff. It's a story. Here's another story. I'm 59 years old, soon to be 60. This is what I did this week. Crypto, why now? All of the different components, AI agents are the inflection point. I'm showing you this because I'm spending my time on where the world is going, not where the world was. Tokenization is happening. It's happening now i'm talking about how tokenization will dramatically change m2 will dramatically
[8:14] change monetary economics today this is the most important thing happening in the world today and it's directly related to crypto and it's directly related to ai agents bond yields believe it or not i did a back test there was no tokenization during the 70s 80s 90s and 2000s there was no ai in in everyone's hands, accelerating at the pace, solving math problems, none of that was there. So is it different? It's absolutely different. I don't even know how people don't see it. So a whole new mind,
[8:44] why right brainers will rule the world is something I included in there. I'm gonna go back to it. This has been going on for some time. I didn't just make this up. Here, remember when we were, everyone was telling us in 2022 when rates were going higher and the Fed raised rates, how we were absolutely gonna have a problem? We did have Silicon Valley bank go under, but it didn't even make a hiccup on the market we had a inverted yield curve 100 probability of getting a recession we had this the lei year over year something i studied for years and yet i didn't
[9:15] fall for the trap of it because i knew that this was created during a time that didn't matter anymore same thing with rates yes rates mattered in the past when companies took debt out that didn't have good balance sheets and they were betting on the future when people bought houses Nobody buys a house now. Housing is trading near all-time lows in terms of sales. Everyone has positive owner's equity in their home. It's a completely different world. The government is the one saddled with the debt. So if you want to bet that the United States government is going to default,
[9:45] as I wrote in that paper, blah, blah, blah. I've heard this too many times over the course of my life in this business about how governments aren't going to be able to get through having debt. The LEI just went positive. We never got a recession. But guess what? every other time that it was down there, every other time we got a recession. So that's why I'm saying there's plenty of instances where this time is different. But I want to give you stuff as facts that if this, I'll change my mind. If year over year S&P goes negative, I'll change my mind. And like I've said, I got a recession signal here. In the end of 2007, it was before the peak of the
[10:20] market. It was right at the peak of the market. When you have an economy that matters, stock Stock prices reflect profits. They reflect hiring. They reflect profit margins. All of that stuff matters to whether rates are having an impact. If rates are having an impact and you're saying, well, there's a bubble because stocks aren't going down, okay, but what about earnings going higher? What about profit margins going higher? I'll go through other things as well. In 2000, before we got into the recession, you got a sell signal. The second derivative matters. The second derivative tells you if there's issues happening in the economy.
[10:53] we are up 17% year over year guys here is credit spreads this is taking the Moody's b-double-a yield relative to 10-year yields I'm sorry when we have problems like in 2000 spreads are widening spreads are widening they're always so if rates are gonna have an impact you're gonna see it in credit spreads it's not their jobless claims for everything with the jobs market if If companies are in trouble, if we're going to have a problem in the market, if rates are
[11:24] mattering, you're going to fire people and they won't be able to get rehired. They will go for unemployment insurance. That's why this thing matters so much. Before every crisis, jobless claims are going higher. They're not budging. So when those things change, I'll worry about it. Profit margins, like I said, they're mean reverting. They tend to go down before. Look, they peaked in 07. They were already declining. They haven't even stopped going higher in a parabolic fashion yet. And oh, by the way, this is another fact. So everything I'm showing
[11:56] you are facts. These are not a story. I'm putting together as a story, but people using rates as the story, there's no facts to it. It's just a story. Here is the story or the facts. Money market funds, again on a three-month base they went higher now I don't care this is cherry-picking three months what I'm saying is that historically this is happening in times not while the stock market is sitting there all-time highs it's it's happening during panics there's flush with cash out there it's
[12:29] moving in because rates are higher and people are collecting five percent four percent whatever they want so I've referenced this book twice already in this in this video this was a very important book of my life I think I read I read it just before the great financial crisis. This really got why right-brainers will rule the world. This was written by Daniel Pink, who predicted that because of technology and exponential technology, this is just after the dot-com bubble, but knowing what was coming,
[13:00] the world was no longer going to be about mathematicians. It wasn't going to be. This is what I always say about Michael Burry. Everyone who made money on the housing market, it. Look how long it took before that had an impact to go through. But regardless, you can't bet on the technology side to go through it. This is a different world. We're in a completely different world. So to say this time isn't different, that is an old man on the front yard story. It is different. The demographics, this is a fact. Claude, who uses it? Those people I
[13:37] I mentioned, meaning myself and anyone above the age of 55, who are the people normally interviewed on podcasts as macro experts. We're interviewed. Our bracket of age is 55 to 64. 2.2% of us use AI. How can you have a view on today's economy and on today's market if you don't use AI? I don't think it's possible because here's where we are. It's about to get worse. So in 2022 is when ChatGPT
[14:07] came out. Here we are now in 2026. So unless people are using it on a regular basis, of which if you're impressed with the images and everything I put together in this video, it's all done via AI. I learn everything through AI. I have Muse doing all of my checks, my bank fraud alerts, everything like that is done with AI. Anything that comes out new, I'm working on Jev now, and I'll show you that in a little bit. Anything that's new, I'm trying to give you guys, but I'm also trying to use it myself for what's going on.
[14:37] This is what's coming. Robots, science and technology, flying cars, Mars. Is this time different? Of course it is. Now here's where we are, the personal agent. It's finally arrived. This is a big deal. This is a major thing. This was the number one thing in the market this week. New York Times, not the most positive paper on technology. I gave my life over to Meta's AI agent and I was blown away. So was I. Here's mine. Yubi. For all you Nick fans, Yubi Brown was my favorite coach.
[15:11] That's in honor of Hubie. So I named my, he looks like a Yubi. This is just my fraud alert. See, someone tested something. AI is all over the place. I asked it to go back and see if it saw any charges the prior week. The downloads are surging. This is what came up the other day for someone who tried to get who showed me. Here's the partnership with PayPal, Expedia, Shopify, Instacart. Meta's stock was up 14% on Monday. It drove Intel, AMD, but also the other mag seven,
[15:47] because guess what they have too? They're going to benefit from this, especially when I take you through why it happened. So remember back in July, July 2nd, Meta Mark Zuckerberg, I covered this, Jess said at an internal town hall meeting that AI development over the last four months hasn't accelerated in the way we expected. Think about that. And now look here. So I went in to AI and I basically said, I want you to go in and find out what changed from that time because it seems to be able to get from there and all of a sudden be able to launch this product. What happened?
[16:17] And I asked it to go into Reddit, into X, into all employees of Meta and get whatever information you can get other than what's been out there as well. and then put it together so basically you can see on the chain of events they release 1.1 then three weeks later is 1.2 then three weeks later is 1.3 and all of a sudden you have the muse consumer launch clearly as you go through this things were changing and the benchmark move was happening the reason this is important is when you go through it and you read what they said
[16:49] changed we're at the point of effectively recursive self-improvement or at least the models are so smart that their ability to contribute to them getting better is increasing dramatically and this is where when you go through it and you have to think about this because this means the competition for consumer agents is coming quickly and the models are just going to get better and better and that's what this was about so again this is from Leopold Aschenbrenner's page 71 of situational awareness and when we hit this point which as I've mentioned his expectation
[17:23] with this would be 2027. And based on what Zuckerberg said in June or in July, two months later, everything changes. Go back to Andrej Karpathy, who on Dwarkesh in October of last year said agents would be a decade away. Constantly, everyone inside the space is underestimating how fast this is moving. Remember, it wasn't too long we were talking about the pause. no pause so this week opus 5.5 released you probably even see lower prices five fable level
[17:56] performance then gpt6 soul and luna came out lower cost fewer mistakes wasn't just those google released one a china released a bunch forget it we are this week the model firehose is wide open recursive self-improvement and so what's coming a new kind of ai model from from ChatGPT Inventors, thrilling developers. So Jev came out. I'm not gonna spend a lot of time on Jev at this point,
[18:27] but I am gonna let you know, you have to go read what this is doing, because this is very different than an LLM. So this is not another one competing with ChatGPT, and this is actually one that you would use with it. And that's what I'm working on, because with the treasure hunt, and again, for those of you who had your children do this on my video and the subscribers, Jev is now the next thing for them to play around with. Jev analyzes everything. So it's not just something that's gonna go back
[18:59] as an LLM and do a back test. This one is making decisions based on everything. It is completely different. So it becomes a decision engine. So I'm working on this to kind of go through it and bring the agentic trading and show you guys what I'm doing in it. But again, all of this just says that we're right here. So now that the agent has arrived, Muse, what happens? Microsoft. So now all of a sudden, the Mag7, and I want to, since people reach out and go,
[19:29] does this mean you're not negative, the hyperscalers? Does this mean you're not negative, SaaS? Completely, I don't know how many times to go through this. this. My viewpoint on everything is that the infrastructure compute names will outperform. So my thematic portfolio on the agentic infrastructure is up 46% through Friday. The Mag7 are up 10%. Salesforce.com, despite this major rally, is down 10% year to date.
[19:59] There will be periods where all of them will outperform, but in the end, I think they'll all run into trouble. And what these guys will run into, they're going to get benefits, but they're going to have competition from each other and competition from OpenAI and competition from Anthropic. They are going to drive prices lower. And so there will be periods where the enthusiasm and the hope will get there. But in the end, I believe all of them will go through multiple compression. And remember, the Micron has already gone through multiple compression to very low levels. I know the Mag7 have, and I know software has as well. They're all going to go through it.
[20:33] That is the bear market with inside a bull market. And that, my friends, is what happens normally when rates go higher is we get multiple compression. Where was the S&P 500 PE back in 1980? Go back and look at your books. It wasn't 20. It was below 10. I believe, and we'll say it publicly, that based on my viewpoint of the competition from tokenization, the competition from AI, and the fact that I don't see rates for the near term coming down dramatically. I think the pressure on all of these companies is actually
[21:07] going to come from the deflationary side. And that deflationary side is going to come from tokenization, expanding the amount of things to invest in at the same time as AI making things cheaper and cheaper and just driving competition to hyper competition. Apple, Siri, getting closer. I'm sure now because of how good the models are, we're finally going to get that. Amazon, Amazon. Why do you think Amazon has a standoff over Muse? I think, again, we're at the point of competition. Amazon. Well, you guys got to hear my iPad jumping into the equation as I said her
[21:52] name. Met a standoff with Amazon. Could be a sign of things to come. It's always good when you're one man show. I'm not editing this out, so I hope you enjoyed that. Had the opposite effect on some financial services online travels we're in another stage where i think people are trying to figure out who loses and who wins from the agents i think this is going to be a big deal and remember open ai is going to release their agent so you're starting to get more responses uh to meta's muse there's going to be a lot of them so let's go back to something i've shown you guys relentlessly
[22:24] this year in terms of the infrastructure and compute needs they're insatiable we had enterprise agents. We didn't have consumer agents. So we already had the enterprise. This was in the first half of 26. So let's assume now we're here. Consumer agents are just starting and I would expect that they're going to explode in terms of usage just based on the downloads. So here's one of the slides and the most important thing for you guys to think about. You can choose what side you're on. This is the way the economy is right now. So think of this as the mag seven in technology.
[22:58] technology. Over 50% of the S&P 500 is over here. Over here are home builders and auto companies like Ford and all this stuff that the young kids don't care about and that the people above the age of 50 think is what drives the economy. This is what drives the economy. It's in the market cap. We know that. The Russell 2000, these companies that still need debt, that care about rates, they're not going to make it through this. This is the bear market within the bull market. So you You can either focus on the bear market signals or you can focus on the bull market signals.
[23:31] This is the two worlds that are going on, and this is the time mismatch. When I was in D.C., I talked about the friction. Anything that has friction, which will eventually get the big mega companies as well in tech, eventually. What is going to happen is that more and more young people are coming over here. The AI-native companies are rising over here. All of this stuff is going to disappear slowly. but it's going to happen. So again, the future belongs to a different kind of person.
[24:04] So here you go. Here's the scary chart. Here's the oil chart. Oil is the same price as it was in 2007, despite the fact that disposable income and everything is through the roof. This is what's scaring you. Those two things. I showed you facts about the economy, and I showed you facts about agents and the acceleration of AI. Those are facts. Those are not guesses. So there's a bear market within a bull market. lowers the barriers to entry, AI reduces the cost to start and compute, faster innovation cycles, moats erode more quickly, margin pressure, shorter duration, multiple compress. So multiples
[24:38] compress is the bear market. We have the most important technology ever. People compare this to the dot-com bubble when Cisco was trading at 100 PE and NVIDIA is trading at 15 next year's earnings. This is not a bubble. This is the opposite. This is a bear market where we are pricing in that AI's competition will destroy the value of anything outside of five years. And that is going to get shorter and shorter. So as they're making money, they're starting to say what actually happens. So before AI, 10 bucks a share. After AI, think salesforce.com. But now
[25:16] the multiple goes from 30 to 10. The stock price goes down. Again, this is what's happening in the market and what you need to be focused on in terms of investing is smaller businesses ai native companies the infrastructure side the intellectual property we're going to have a change because more asset classes are coming and they're coming through tokenization so public equity is dominated it's going to get brought up broken up into a bunch of things and if you don't believe this that's what my job is with the crypto side and so for those of you who have ignored crypto you know tokenization
[25:50] is coming. You're reaching out more and more. I got more people coming to me on this. This is really important because tokenization plus AI is a game changer for the economy. And that's why we have a bear market within a bull market. The groups that are not part of this are going to suffer. And what rates are meant to do is to go high to drive them out of business because AI is driving rates higher because nominal GDP is driven by AI. So the winners are moving rates higher. they are forcing out the people that can't survive the companies that can't survive with rates at
[26:24] higher levels so that businesses that will have to replace them will be the ones that can survive on that the only way you can do that is not have debt today start your business now use humanoids use ai that's what's coming for housing all of it house prices will come down eventually they'll come down when the cost of building them goes down that'll be in five years beginning you have have to start thinking this way, because that's the way this goes. Rates are a way to get rid of the weak, and that's what's going to happen. Breath. I like Jason's work. He's been, I think,
[26:57] reluctant, because I think in the back of his mind, he's like, I don't even know. We've never I've never seen breath this bearish in the last 100 years. Okay. This is the reason why. IWM relative to QQQs is the white line. The orange line is the breath. They're tracking. It makes sense that if you have companies worth $30 trillion
[27:28] and a bunch of stocks that combined are worth $4 trillion, hmm it's a different world guys it's a different world this has been the widow maker trade making new lows see that september 24th new lows iwm verse q this is not a new thing you know when breath was really bad when amazon was beating every retailer that's when breath was bad too do. Breath is always bad during these times when the Mag7 do well. So here's that bridge to cross
[28:04] over to the new side. This is where we start to get in the interesting stuff. If you guys haven't seen the Muse character, here it is. So what Yubi's doing, my Yubi, is he's guiding people that want to go learn new stuff. He's trying to help them cross the bridge. He's the agent. AI AI agents are really the thing that are going to fix because I've learned that humans don't adopt technology anytime in history fast. That is the reason why we have things like the dot-com bubble. They get excited about it.
[28:34] They overbuild it before it's ready. The AI agents are the app store. The AI agents are the iPhone. That's what it is for me. This is the change. This is where tokenization, crypto, and AI connect. That is the bridge here. So that bridge is really the thing that I'm measuring both in my AI infrastructure basket. For those of you who saw my crypto video this week and are subscribers, you're going to get an education for all the mutual funds, the macro people, the hedge funds that are out there. Even if you don't have the ability to invest in crypto, you need to understand the entire ecosystem because it matters for public companies because they will be disrupted.
[29:13] So this is going to be a weird one. Everyone focused on Amazon. They focused on Ozempic. When Ozempic came, you need to get the disruption names because when the disruption comes, the alpha is on the short side. That's what this new world is. The new world destroys old businesses. This is more about the companies to be short. If you go through and look at what percentage of companies have outperformed the S&P 500 over the last one year, three years, five years, ten years, it is a destruction.
[29:43] There's just nobody outperforming. Part of that is because of the market cap, Part of that is because these small companies are so tiny that you need some kind of a cyclical recovery. We had it. The PMIs went higher, and now we're making new lows in queues. That is not supposed to happen. That's because rates are going higher, and they're suffering, the majority of them. Here's salesforce.com. The amount of people that said, yeah, but it's rallying. It's rallying. It's down 10% year to date. Now it's in a downtrend again. The last five years, it's unchanged.
[30:15] changed actually it's down 15 like don't give me this garbage with salesforce.com here's visa here's the name that gets brought up to me the most visa and mastercard unless i'm missing something on the sentiment side guys this is just going to be a knife fight for the p with as the pe comes down because no one wants to give into this they just don't see how crypto is going going to do it. This name was brought up to me about eight times this week. So again, I believe that there will be no consumers. The consumers will be Muse. If you haven't got Muse, you can't
[30:50] even have a say in it because you haven't used it. Muse will change everything. And yes, I've given it all my credit cards. I've given it all my bank accounts, everything about it. It already did information for me. It did DMV work for me. It canceled the Verizon Fios thing because I saw it it on X and I went, oh, this is great. I need to cancel something on there too and renegotiate. All of those things you're going to be able to do. All right. Now, stocks. Really bearish chart. S&P is about to make new all-time highs and it's been consolidating after a poll. Consolidation. Poll. Consolidation. Poll. Consolidation. This is Q's. IWM. Downtrend. Still above the 200-day.
[31:29] Still pointed upwards. All that needs to happen for this to go higher is what? Oil just needs needs to come down. If oil doesn't come down, it'll probably just hang in here and be dragged around. But this is not like some collapse or some bad thing. It's just they suck with rates. It's just a fact. If you want the one place that the bears can kind of look and be like, all right, let's see if there's contagion. Now, again, this is one thing that hasn't meant anything in terms of the last three years. But let's just look. Bonvol went up. So the long end has got to the
[32:02] the point where for some reason people are reaching for volatility and fixed income, which usually means someone's getting hurt. So I overlaid it with the OAS for high yield. It's barely budged, but at least it's moving. So for people who want to be bearish, this is where I'd focus my attention. You have the dollar rallying too. You're getting a little bit of deleveraging stuff. Everyone's freaked out in gold and silver and things like that. But the reality is credit needs to widen out this is the long-term chart of oas um okay just a reminder because i got
[32:37] called or emails on the weekend are you worried about and i can't believe this guy even gets anything as like something to follow but ai stocks will drop 10 on monday morning brace for impacts all because of the pause trade so we all know that that was a bad time to sell stocks because they all gapped lower because everyone was scared and the knee jerk happened and then that was the low so i don't know how many times everyone's gonna fall for ai bear stuff bubble stuff what does this mean it happens the entire time and remember this was the end of situational awareness
[33:11] this is the area where i was doing my mid-cycle slowdown and i'm i this chart is great and more More importantly, the structure of what's going on is really good. And the fact that it's starting to handle bad news really well when people are panicking. Endo, by the way, it was the best week since the week after it. So I think the infrastructure trade has a catalyst. I think that is the recognition that the consumer agent stuff is going to drive not only numbers now, but people are going to start talking in their numbers about how big of an impact the consumer agents are
[33:44] because the token numbers are going to go up significantly. significantly, and that's the reason why you've seen Intel, AMD, you've seen names get hit on the other side related to the disconnect. Now, I haven't shown this in a while. We're getting some good breadth. We got the highest number of names above the 20-day since back here, but most importantly, when we were doing this here, as I said, the ATR was very, very high, and now the ATR is very, very good. I think we're at the beginning, and I think these things are going to get back
[34:15] to the highs, meaning my agentic portfolio. Go pick your names in it, whatever the case. I've told you the ones that I still have decent sized positions on. I've been moving out of some of the tinier ones and moving all of that into crypto because I believe crypto is the major story on the back of the agent trade. A good video to watch is just Blackstone's John Gray. I watched this this week it's real i i like read i like watching people like john gray talk about what
[34:48] he's seeing in his companies he's got a bunch of private companies he gives a lot of numbers in here related to how much they're using ai i'm not going to go through the whole thing but he does a really good job first of all it's interesting he shows the explosive spending that has happened from september of last year to september of this year 21 increase on his companies in terms of their spending. The payoff is already showing up. He goes through the ROIC and more importantly, he cites all of the places that it's happening. Lease processing, code repair,
[35:21] like everyone's worried about the revenues. They're already happening, absolutely, but there's no way to measure where they're happening. You know how you measure it? In profit margins. That's what this is. He breaks it down for you. So it's showing up in productivity, showing up in margins, earnings, jobs, science. The limiting factor is now the physical world. That's what we talk about. That's why you invest in the physical world. The biggest investment risk is underestimating disruption, but overpaying is also dangerous. So as he's going through this,
[35:51] he's just talking about the things people have to worry about, which again, cyber risk, regulation, geopolitical tension. He gives you both sides. So I just think it's important because he does a really good job of basically going through everything thing. I think the underestimating disruption is why these companies are going to have a hard time with their multiples. I think all companies that are big are targets. And that's basically what it comes down to. I think friction is in companies. I think AI native businesses that are small
[36:22] are just not targets for the stuff that's going to go on. So I think you have to be on top. And again, companies that don't have AI don't have the protection. They're going to be an issue, you. But people that do will be fine. So the real returns, he goes through it. Like I said, I think for people that doubt what's happening, he gives specific examples of companies. He goes through this. It is absolutely worth watching. Again, we're here. So you need to stay on top of this stuff. This was a great interview for anyone who's seriously worried about hugging face in the agent swarms. Noam Brown, who's a lead open AI researcher, and Dwarkesh. And Dwarkesh
[36:59] is a super smart guy who understands this stuff inside and out, and most importantly, as an interviewer, he attacks. I mean, he forces people into a corner to go through it. This is where you want open AI. They were the ones that had the hugging face incident. They were the ones that everyone read about. Dwarkesh is a good interviewer, and so this isn't on 60 Minutes, and this is fairly complex, but there's a bunch of important points for people who are worried about the swarms without thinking about the positives that are coming out of this.
[37:30] So, again, he explains multi-agent systems. I think this is important. I think it's important to understand what's been happening with Navier-Stokes, why that's going on, what's been happening with Muse, why that's happening. You have to listen to what agents are able to do. Most importantly, he does go through the Hugging Face incident. He goes through all of it. I don't see how you can't leave that. And if you do leave it being completely worried, then you're not paying attention to this part.
[38:00] One of the major takeaways from the incident, this is a quote from him, is that people underestimated the AI. And we never want to be in a situation again where we underestimate the AI. It's a weird world that because AI progress is so fast, people are consistently underestimating AI. The critical thing here is that the reason this happened is because people, humans, underestimated it. So for everyone who's worried that these things are just going to go out there and go do what they need to do, is it possible?
[38:30] Of course. But they're talking about why we had this situation, just like when Mark Zuckerberg underestimated AI. This is a really critical point because that's why the pause was so important. important. We are going to be spending time on the best models, either not releasing them or making sure that the guardrails are different. He goes into that in there. You should be more happy with this kind of stuff. Claude has discovered a previously unknown enzyme system hidden in DNA of what will effectively be a structure that looks similar to CRISPR.
[39:03] Now, I'm sure you guys know gene editing, CRISPR-like stuff. So if you go read on X or if you go read somewhere, you will find people that say this is nothing. You will find people that say it's something. I want you, again, to just focus on the fact that gene editing and the advancements we're making on this kind of science are unbelievable because this is not an old technology. I actually read this book or I did books on tape for it at high speed because I was interested in what went on with this, with Jennifer, I think her name is Doudna, and I like Walter Isaacson, I love Da Vinci, and I love Steve Jobs.
[39:42] jobs. The reason I bring this up is Feng Zhang, for those of you who read it, was in the book as the major competitor to Jen, Jennifer. He came out, and he's the only one I care about. I don't care about a random biologist saying it's good or bad. What I care about is someone who is known and renowned for his work and basically talking about how science is changing changing in front of our eyes and that is where we are is that when did they set this up they
[40:15] didn't even set their biology research group up until 20 until spring june 30 they launched this again this just highlights that we're where we are in the leopold map we are going to have breakthroughs that are going to solve things and that's why fang zhang's part of this is really important as going through it mckinsey new research out emerging trends in ai enabled drug Drug discovery suggests accelerated discovery cycle time. So again, we're getting this whole thing. And Silico Medicine is on here twice.
[40:45] I've talked about their relationship with Eli Lilly. You guys can go through all this stuff on your own. The only reason I'm going through this is because I believe that healthcare and drug pharmaceuticals will be a major part of the agentic side. So AI consumer agents are going to get people excited for the next three months because because they're gonna extrapolate numbers into all of these. I don't think those companies are ever gonna get them that way. I think there'll be some nice stuff that comes, maybe I'm wrong on it, but I think this is gonna be the next hype cycle
[41:15] in terms of what consumer agents are gonna do. And I think people are gonna miss the fact that this is gonna be a better thing for the biology side than the other side, because I think this is a research and science thing and not a consumers are gonna pay me more money thing. I think in the end, crypto is gonna benefit, but we'll get to that. Research acceleration, again, Again, OpenAI released this blog talking about how fast it's going. Just look at the internal use of coding agents and how much that's changed lately. These are parabolic moves in terms of what's happening, how much they're using them.
[41:48] It's just insane when you read the numbers. And this is driving the price of intelligence down faster than any technology in history. So again, if you're looking for productivity gains and you go back to the Leopold, when you reach the point of agents where now 10,000 agents can work together as opposed to one human using coding agents, now we're going to have multi-agents working. That's why you have to listen to the Noam Brown thing and just start to get the numbers because that's when you start to get into the point
[42:19] that productivity explodes. And this is why at this point you want to be long speed and short friction because everything that's moving at human time and thinking at human time think people worried about rates is going to have a problem you cannot sit there and wait you have to be on top of what's happening so if you're someone managing money and you are not fully in the know of compute of agents and swarms of the crypto guardrails and why they matter from the financial side i don't think you can compete i really don't you're going
[42:52] to be competing first of all with computers but if you're going to try to find ideas which i think is going to be impossible to do because of what I've seen on the agentic side for retail and how much they're using it. I think you have to be short friction and I think you have to start to identify where you make money. So putting a trade on for short friction right now, I think there's a bear market. Like I said, there's a bear market with inside a bull market. Go short. If you think rates are going to blow something up, go short housing, go short the private credit names, go short the private equity names that are still trading down. Blue Owl was down again this week
[43:26] approaching low like find the things that are clearly weak and go short those i just think you're making a big mistake this isn't the great financial crisis this isn't the time before where everything was very sensitive to rates because we hadn't had the iphone yet the iphone changed everything in 2007 that is when the debt markets changed forever and the market cap for the equity market change those are not rate sensitive names so again ai plus tokenization it's going to
[43:57] increase the speed significantly because the agents will now be doing the transactions the velocity of money is going to explode and like i said m2 which right now you're going to have a dramatic change when wealth becomes part of m2 because of speed i just had to put this in there because it was a dead cat bounce on August 21st, and my index is up 42% since he sent that out. So he's really got a good track record lately.
[44:28] If you're looking to catch up on tokenization, I would start with Vlad Tetev from Robinhood. He was on Moonshots this week. It's important to listen to someone and think, can someone at Morgan Stanley, Goldman Sachs, Bank of America, JP Morgan go through the list? Can they compete with a guy who understands AI so well? Could anybody be on here on this show and talk about the things that he talks about on there? You have to listen to it and just understand the advantage of being a younger person in a world of AI with agents.
[45:02] It's really a big deal to understand that. And so to understand the tokenization side, to understand Robinhood chain, these are all things that it talks about. Self-custody is a big deal. He goes through that. I think all of these things are super important on a thematic basis. You don't have to listen to the whole thing. But I definitely think when he says tokenization will take over the entire financial system and you're seeing that happening where it's moving in that direction, it should be there. I highly recommend that you read this. I published it as a sub stack for the exact reason that even though this is going out
[45:35] to subscribers and all of my crypto stuff and all of my stuff is basically going to be behind the paywall now, not the sub stack and not the YouTube. tube. But I want to make sure that people understand that I fully believe that this is the major story and that you have to go through it. And yes, I do take shots at people in rates because we've fallen for this. When you go through the things that we fell for, I highlight them here. One thing I want to remember is it was last year we heard about Smoot-Hawley a billion times
[46:05] and the Great Depression. These fears continue relentlessly while there's something bigger going going on. BlackRock released the Machine Native Economy, How Digital Assets Connect Intelligence, Commerce, and Compute. They're going through a theme that I've written about and talked about on this for a long time. Pomp and I talked about it this week that I've talked about this for months, but they're finally starting to focus the attention on machine native transactions require purpose-built agentic payment protocols. And that's where we are. And that's why I've highlighted to
[46:39] So you guys, Stripe, that's what on the crypto video, I spent a lot of time on Stripe. If you guys don't get that and you're interested in it, it's part of the overall AI package. So you're getting both of them together because that was always the game plan is that they both be on the paywall. BlackRock, following that paper, middle of the week, it's taking model portfolios on chain. So again, they will tokenize through Ondo Finance, part of my 46-name basket, giving non-U.S. investors 24-7 access via crypto wallets for their portfolios.
[47:18] I'm telling you, for your children, this is my focus. It's been an entrepreneur's paradise, and this is for people of any age. The entrepreneurship is blowing up because of AI. AI. So there are business creations happening at an incredibly fast pace. And guess what? Rates don't hurt them. Let me say that again. Rates don't hurt them. These companies don't need capital because they're using AI. Remember that. That's why this whole thing is in there in
[47:49] terms of how the economics are going to change on the back of entrepreneurship. If you didn't get the ghost rails piece, again, we built the crypto rails waiting for the app store or for the people to move in but the mistake was that humans would never use crypto and that's a mistake that i think everyone that believes in crypto didn't recognize that in the end you're never going to change the people that own the 900 trillion dollars view on crypto i've seen it myself personally they don't want to take the time to learn because they don't understand it and they have no need to they've
[48:22] already made their money if they would put some money in they might have some skin in the game agents change that they will be the thing that changes it agents will change it and that's why ai agents building the bridge is there here's the video that i did if you guys didn't see it it's an hour long i promise you you will understand why now is time in crypto this is not happening for no reason so the same reason that i said the mag 7 and all of the consumer agent trade
[48:53] will be the trade and you're going to get the stocks with the hype. Crypto to me is at the beginning of a Peter Lynch style bull market. For those of you who have ever looked at Peter Lynch's famous book back in the early 80s, his whole premise was that you wanted to find something that the street didn't cover, that was in the early stage, and you had done the homework on it before the masses did that is the exact definition of why now in crypto it's necessary because of ai
[49:25] agents this is the app store moment for crypto whatever your views are crypto remember stable coins tokenization bitcoin ethereum this all had to be built and it took 15 years 16 years and guess what the internet to get to the app store took about the exact same amount of time and that's when it took off the dot-com bubble was a representation of the ghost rails except for one thing they use debt the crypto side went through its dot-com bubble from vc money now
[49:56] we're in a different stage ai agents are coming the demand is picking up and just like token usage a year ago the numbers will explode in terms of agents consuming are they going to start small sure but that's what peter lynch was looking for you by the time it's big the trade is up dramatically didn't you learn your lesson with micron so this was the first slide again you guys can go see it and while breath is bad in the stock market and you saw where my names are
[50:28] on my agentic portfolio where there's now 60 some odd above the uh 50-day moving average in my crypto 46 name tokenized index which for you subscribers that didn't see the video i did upload the index. You can go see the names. It was up another 3% today on Friday. For the month, it's up 31%. Bitcoin's up 6.5%. Bitcoin is not what you watch right now. You want to watch the index of which Bitcoin is a member in it. 44 of 46 names are above the 50-day, 96%. The 200-day,
[51:03] 87%. 96% of the 50-day moving averages are pointed upward, and we're now to 72%. This, my friends, is a bull market. That's what the chart looks like. You don't want to be part of this. And remember, what did rates do? Rates went higher. Well, isn't crypto supposed to be very liquidity sensitive, rate sensitive? Hmm. Maybe it's a bull market. For more, for those of you who haven't subscribed, who haven't reached out, go have a conversation with Mark Whaling. Mark's
[51:39] Hi, Terminal. For those of you who are looking to start using something for what you can go through like Bloomberg, this would be my suggestion. Here are my names. Look at this, free six names for you guys that are in there. And look at the returns for the last seven days. These are all part. I uploaded these in there. I'm just saying this is like Bloomberg. You have charting functions. You have news. You have all kinds of fundamentals. These guys have done a great job. I'll be speaking at their event on October 27th. I would go sign up if for
[52:13] no other reason it's institutions it's they have a lot of customers that are hedge funds a lot of customers that are mutual funds it's everything this is not just crypto I think at some point and again there's probably reason why they have it called the bridge and I'm showing you guys a bridge on this I think they're all related again Muse Coinbase want to trade with Coinbase on On Muse, you can trade Coinbase on Muse. Again, Muse just came out. You can do all this stuff. That just shows the rails are already set up. It says crypto and stable coins will be the go-to payment method for agents.
[52:46] New York Stock Exchange teams up with blockchain.com to offer tokenized. This is all this week, guys. Robin Hood said something big is coming in stock tokens soon. And remember, they kind of are involved with the government on this stuff. The tokenization is happening. Okay. So this is the part where I give you a little bit of what I showed to the subscribers. I would go watch this immediately. And again, I will have all of the podcasts for the subscribers that you can go watch.
[53:17] I gave you all the info. That will come out in email at 9 o'clock on Sunday. Ali Yahya is a must listen to. He's not out there that much. He's been a general partner at Andreessen Horowitz. It's this particular episode on Unchanged on their five fund. I just want to give you the highlights of them, why it's important. So he's been at the A16Z since the beginning. He's a former Google brain engineer, former Google X researcher. He left while he was with Google X because they would not listen to him for an investment
[53:49] in crypto. That was a long time ago. But I want you to think about it. Here's someone who is basically got, you know, he specializes in computer security, distributed systems, networking, cryptography. He believed this was going to be so big a long time ago when they set up A16Z that he went there. So when you listen to him speak, he is someone that understands the connection between AI and crypto. That's why I'm directing you towards him. He is very, very good at kind of going through it.
[54:21] And he talks about how AI is fundamentally different from where it's headed. it's primarily a tool that humans use. The next stage is what he calls AI agents becoming autonomous economic actors. So if you want to go through and understand why this is and why it's so important, trust me, you want to know what he's saying. And you want to go back to Mark Andreessen's paper of why Bitcoin matters and just understand that 12 years later, the story that he's saying, Ali Yaya, is what Mark said. Mark didn't know stable coins would be part of it. He didn't know
[54:53] tokenization would be part of it. He didn't know Ethereum would be so important. He was talking about why Bitcoin matters. The ecosystem has changed and it has gone into this. He didn't know that AI agents would be here. Nobody talked about autonomous agents in this side. This is why it's such a big deal. Another video and actually the number one one to listen to because this has Chris Dixon. It has a bunch of partners at A16Z along with Aliyah. If you guys want to get up to to speed on this and you want to start to learn. I'm not going to take you through all of this,
[55:26] but they say AI dramatically lowers the barrier to using programmable money. That is critical. Again, humans were never going to be able to do this. AI agents are the major new catalyst for crypto. They go through this whole thing. This is from May. So I want you to go listen to this and realize that they were right. I want you to go listen and understand what's going to happen. it. Agents could aggressively disintermediate existing payment and subscription models. Unlike humans, agents have no attachment to visa, credit cards, brands, subscriptions, or familiar
[56:01] interfaces. Think about what the consumer side is. Agents don't care about preferences. They have no attachment. You have to change your mind. For those of you arguing with me on this, at least look at it and go through. I don't care about the other side of this. The other side is everyone already uses Visa and MasterCard. If agents are going to disrupt, this is very, very important. And I listen to a lot of people tell me, consumers want to walk into the mall. They're never going to
[56:33] buy Amazon. And don't tell me that that wasn't a story that you didn't hear repeatedly, which is is the reason I went to Silicon Valley in 2013, which was the how can Amazon trade here? I don't get it. More disclosures again. Guys, it's been a pleasure. Again, thanks to all the people down in D.C. I will be at the Bitcoin Treasury Conference on Monday. So those of you that are there, come by, see me. I will be at POMS event in two weeks. And like I said, I'll be at the
[57:05] bridge event and it seems like i'm getting invited to a lot more i'll see you guys next week thanks