AI Bubble Burst? Bitcoin to Zero? Hedge Funds Wrecked? Sounds Like a Bottom is Near

[0:00] this week. I think it's a record for slides. That means I'm going to go fast. I will, for the subscribers, I will put the slide deck, all slides on the site. So, if I go too fast and you guys want to look cuz there's a lot of different things. There's a lot of history. I think we're at an important time just because we've seen, in my opinion, one of the largest deleveraging events of my career. And believe it or not, that is the way I see it, especially when you do it relative to the market. So, let's go
[0:31] through what's happening. You guys have seen the disclosure thing. You read it for yourself. So, here is the >> [sighs] >> Goldman Sachs VIP hedge, the crowded long side relative to the S&P. And this is a 75-day rate of change. And the reason I did this at 75 days, it's not a random number. I did try to pick the point with the largest drawdown, but it also happens to coincide with the record performance for the first
[1:01] half of the year. So, this is really about since June 30th. And the reason this is important, hedge funds had a huge head start to the year. It's very important for where we are because there's a big difference between deleveraging happening when hedge funds are down than when they were playing with house money and wanting to protect it. And I believe that is where we are right now. I also think, based on everything I'm going to fly through here, that from my perspective, the deleveraging is either done or in the seventh or eighth inning, which is a big statement
[1:31] considering we closed on the lows of the week. But, this has been about hedge fund deleveraging. And as I've said repeatedly, AI is inevitable. It does not matter to me what's going on because this will continue to happen. This is not a bubble. For the subscribers, you saw that this week in terms of a lot of videos I did. So, first of all, intense sell-off as bad as 75 days as anything other than the Great Financial Crisis this century. Hedge fund leverage, I showed you my head my big head with my John Deere hat is above it. We went hoodie last week.
[2:02] We're going back to my blue collar days and we're going full-blown John Deere right now. You were at all-time highs going into this. And this was the high and if you go back and look at the performance the leverage since chat GPT and I'll give you all the reasons for that. Hedge funds have gone to record leverage. This was the peak. Now we've gone into a full-blown giving back. Now again, this is not hedgefund performance. This is just the VIP and again, this assumes that Goldman is
[2:32] updating this. This is not a total performance, but this is a a big retracement. You're giving back about half of the overall move since chat GPT. So I went through subscriber video this week for those of you saw it. We covered this. If you didn't go watch it, go watch it. There's a lot of stuff in there that to me is important especially this importance of of Nvidia as part of this. It's been a great signal. I also did this whole AI bubble thing to get this thing completely out of the picture for me
[3:02] that this is not a bubble. In fact, it is totally distracting to even hear the word bubble. I go through why the word bubble doesn't mean anything unless you're talking about going through a recession and being one in for a long period of time which I don't think will happen, can happen, whatever. And I go through all the reasons why. Paper I wrote this week about time. You're going to hear a lot about time. This is going to become even bigger theme. We are at a point now where AI is going to destroy leverage because of time. There is no time anymore that you
[3:35] can be living on arbitraging where things should change. If your earnings beat estimates every single quarter for the next eight quarters, your stock can still go down. That's the world that we're living in. If you're dependent on arbitrage of time meaning things stay together. If If learned anything right now, multiples can expand, multiples can compress. They're just happening at a much faster pace in this uh side. And so, the hidden leverage of the AI cycle, I talk about that in this paper. I also did the crypto video for this week. So, I did a lot of stuff this week for you guys. And
[4:06] it's all because the world is changing. I'm trying to teach you. I'm also trying to give you guys the confidence and the empowerment to both use AI uh if you get the chance. Anthony Pompliano did a talk this week, our usual talk. I talked a lot about the ways that parents should be impacting their own children to adopt AI because of how fast this is changing. I'm going to go through a lot of videos this week from some of the best thinkers in the world on AI that I think you guys should listen to.
[4:36] And if for no other reason, just to stay on top of what their views are. If you guys haven't subscribed and you want to learn more about what you can get from this, and especially how you can help anyone, your family, friends, whatever, understand AI and not have to get sucked into all this as long as we're in these horrible periods. If you guys have gotten to know me at this point, I work a lot. Um I enjoy the markets. I always have. Uh I get to do more than I ever have in my career because managing people is a very time-consuming side.
[5:07] Now, I get to spend all my time looking at markets, looking for signals, looking for things, doing podcasts, talking about my views. Call Mark Whaling, he's the person to go through. So, let's go through everything I'm going to do for the first like 10% of this are things to highlight what last week was about, not this week that just finished, the week before ending October 16th. So, this was Jefferies weekly net flows lower than the deep seek panic. Another way to look at unwinds in terms of the net leverage coming down.
[5:38] Goldman Sachs, second largest net selling of global AI stocks in the past year. Net buying since 2025 fully reversed. This is why I'm getting much more comfortable with where we are. You guys can read the rest of it. Overall hedge fund net position according to Goldman Sachs has dropped to levels we haven't seen outside of liberation day in the past 5 years. And again, I repeat, these are all through October 16th. Put volume exploded on October 16th. During last week, very important to show how deep the deleveraging was, not just
[6:08] for long short equity, which is what most of the data I've shown so far. Goldman Sachs breaks down stock picker's quants giant firms. So, think multi-strats. They talked about the fact that those three strategies lost more than 80 basis points in a single day. That has only occurred three times, and they were all this year. Now, that's since COVID. So, since the COVID crash through the end of 2025, this scenario has only happened three
[6:38] times. Feb. 4, July 28th, which was basically right at the situational awareness lows, and then October 15th, 2 weeks ago. We got another one this week. It was actually bigger. I'll highlight that. Global equity selling hits minus three sigmas driven by long liquidation. That's from Morgan Stanley. UBS notes it mirrors the July situational awareness, and in particular, you get the deep This was mainly outside of the concentrated positions. Goldman Sachs told the client stock pickers lost 2.7 in the week.
[7:08] October and Asia focused funds lost 6.8% the first This is global. Global hedge funds hammered by A all sell-off this week. Asia leads losses. Here is that Goldman Sachs thing, and now I'm not doing or this is the the weekly basis. So, this gets back to what I showed you on a 75-day basis, which was down 12% for the week 2 weeks ago. It was bad. This was another bad week. To give you an idea, as we now move into this week, here was one of the days. This was the horrible day. This was the October 5th the October 22nd day,
[7:41] uh was a just a complete bloodletting. This was Thursday for hedge funds. Almost everything was green. It just shows you how the concentration is what's driving it. Now, this week started with pure panic. We had Monday was going to be Black Monday. Over the weekend, tokenizations finally started to reach the front pages. Western Digital, these were all things that happened. I woke up Sunday morning. I looked, this is what happened over Sunday night.
[8:11] These names all got hammered violently. Now, if you go look at where these things closed, some of them are below, some of them are above, but it was a leading indicator, but more importantly, you don't get to sleep anymore on the weekend. So, it led to this. All this talk, it was flying through. I woke up in the morning, I saw it. I'm going to continue to say the video I did last week, the AI bubble didn't pop, hedge fund leverage did. I fully believe this. You cannot run a leveraged portfolio where you have
[8:41] to make money within a month or within a quarter or within a drawdown level. This is not going to work in this world of AI agents being involved, but also, I've shown this before, the destruction that will happen, the hackings, the amount of bad news, the geopolitical risk, every single thing is going to be popping up all the time. This year is just going to happen. We are never, and I repeat, never, in a world of AI going back to a time where the market would move and not be worried for 6
[9:12] months. Never going to happen again. That's why I've done presentations, the time mismatch. You have to think this way when exponential innovation is moving this fast, and I'm eventually going to go through the severe hackings that are happening across the globe. Also going to talk about Chamath and his Bitcoin's going to zero silliness. But more importantly, the reason it's silly is it comes at a time where all banks are being hacked right now. So, this reminds me on the equity side of August
[9:42] of 2007. So, I just wanted to make sure there was I went through LTCM last week. This in many ways with the AI trade is another version for me of what happened. Now, the quant unwind, there were no concentration risk. This is a concentration risk, but I do want to bring you guys through it because for those who are looking for this is the end of this is the beginning of a bubble, I want to go through this and highlight during this video as to if that's the case, I'll show you what's going to happen based on August of 2007.
[10:12] So, that paper, this paper, which is on AQR's site was written at its 10-year anniversary of the quant crisis or the quant quake. And it basically goes through two things. One, it was a factor unwind, large losses, and then once everything was taken off, it almost made a full recovery. Unlike the situational awareness thing where we never really got a big bounce coming out of that, I do think with the amount of deleveraging that I've seen, with what I've read from the PBs, I didn't include the JP Morgan one, we've
[10:42] had a complete positioning reset. Complete positioning reset. Are there some positions left on? Sure, but at some point, hedge funds are not the entire volume. They get to a point where they've taken off the risk, and then we've got November and December where, again, once you get to a new month, you get a new clock. I hate to say that, but was in the hedge fund world a long time. There's a big difference between having a month where you're up 5% for the year, but you're down 5% for the month, and then all of a sudden, you're up 5% for the year, but
[11:12] you're flat for the month. You start trading a little differently, even though you just had a 5% drawdown, assuming you didn't get fired. So, again, this reminds me of it. You guys should read more about it, but this was from MSCI, same thing. So, this was a very big one, but what they called it is the quant liquidity crunch, and that's I believe is happening right now. Because of time and so many hedge funds that can't handle these types of drawdowns that are levered, the volatility in the
[11:42] fund is explosive, which means the prime brokers are questioning and asking and constantly there, the clients are asking. You end up in a situation where you're reducing risk. And again, liquidity is a problem cuz everyone comes to the market. So, when you come to the market at the same time to get out of positions, and it's long short. Trust me, when you have to get out of part of the market, the AI trade, no problem with liquidity. But when you got to buy home builders back in consumer staples and all this other stuff, that's why you get that that uh screen that I showed you that
[12:13] had so much green on it. So, the 2007 quant quake, liquidity is a time mismatch. Again, it was not simply a shortage of buyers, it was a collision between years of accumulated crowded alpha exposure and the sudden need to liquidate in days. The thing I remember about this, the sharp ratio leading into this, meaning the size of the gains, how long it took to build the positions up, when it tried to unwind it once. So, if you take a year and a half, 18 months, and every hedge fund gradually slowly
[12:45] gets into that and momentum drives it, it's both a self-reinforcing play that everyone pushes up the AI trade, but then if you try to get out of it within 75 days, everyone tries to get out, there's not enough liquidity to handle that. It took 18 months to build it up in 75 months 75 days to take it down. That's what I'm using that as the example, and if you guys want to see this, largest volume contributors, this is the the 50. So, what I wanted to go through is the top 50 versus the bottom 50 performers for October 22nd.
[13:18] So, this is the dollar volume of the top five. So, on this day, on October 22nd, just to give you an idea, So, these daily returns, these are the biggest volume on the top 50. This is their return. Largest volume contributors in the bottom 50. Total sum of both. You can't Basically, to get out of your longs, which drove this performance down, plenty of liquidity, 187 billion traded that day.
[13:48] The 50, not the same liquidity. And so, when you do this over time, you don't have as big of an impact if you're putting this trade on over the course of 18 months. That is the problem. And that is why you get Today is the widest day for S&P S&P 500 breadth versus price since 1990. Okay? Second widest since 1990. Deep seek was the only other day that saw the breadth in terms of There were 324 up on Thursday with the S&P down 1.36%.
[14:21] Okay. On that day, I just want to show you of the performance for that day for these names, okay? These are the 20 best performers of the S&P. This is why when you look Oh, Moderna was down big. It's up 553% through September. Micron, up to like when you go through these numbers and you start realizing what you're deal you're dealing with, you're dealing with
[14:51] names that have made a lot of money for people, and now they're getting out. And again, this makes sense. But, there's a lot of reason that these names are up based on their earnings growth at this point. Hedge funds pile into shorts as Goldman uh flags stocks squeeze risk. Hedge funds have loaded up on stock shorts this month, pushing bearish bets near 5-year high. The reason this is happening on stock shorts is because there is no way to use the S&P 500 as a hedge. So,
[15:22] everyone starts creating baskets or doing something on stocks because that's the only way to hedge the AI risk. They should have used my index which Morgan Stanley can trade. You can trade options on it because it covers pretty much everything, but this is the problem is when index hedges like the Nasdaq, like the S&P don't work and they don't actually hedge what you want. You're left having to use shorts. So, what happens is gross exposure actually goes up because you're trying to stop the pain from those names going down and
[15:52] as opposed to selling them you're trying to find a hedge. Again, these are all for that the the the day on Thursday cuz remember Monday, Tuesday, Wednesday market was up. Today's sell-off deepened into the close more than 2/3 of hedge funds finished down on the day. Hedge funds, by this point their net exposure is the least. So, the S&P was down, but 2/3 were down. Global fundamental long shorts over 1%. And you get to see where we are. Now down tech exposure and squeeze and credit short now down 3.8 months still
[16:22] up 8.8%. This is critical, guys. They are defending the month, but the year they still have a chip stack. This is very important. This is very different than other years, particularly like 2022 and other places where you start getting these. So, as you go through it global systematic long short managers down 1.3% on the day, third worst day since 2023, but still up 19% year-to-date. So, again multi-strats down as well. So, again this day all lost more than 1% in a single day.
[16:53] So, again I showed you that this didn't happen now. It's the first time at all that all three were down at least 1% on a day. Hedge funds exiting trades fueled by root and this is the importance of this spreading into multi-strats and this were when at some point if it's just in long short equity which was really what had happened in July with situational awareness, then you start spreading into credit. Obviously, we saw that with converts and with CoreWeave last week, which I showed. But, it's really been spreading into French bonds. So, that story was from the 2nd. This story is from this week.
[17:25] Significant losses on leveraged fixed income strategies, basically carry trades involving the French bonds. If you didn't get to see it, these kind of charts are never good for relative value strategies cuz very seldom, especially when you're trading at a level here, this is the spread differential between French bond yields at 10 years and German spread. So, the spread is now 173 basis points. So, French bond yields are 173 basis points as of Thursday's close higher than German bond yields. And we were at the top end of the range except for the EU crisis back then.
[17:57] So, that created problem. Now, on a weekly basis through then, it was the worst week in the last, you know, in 16 years of data. The week that was The other one was the the end of September and October 2nd. So, you've got this unwinding. This led to European banks breaking below the 200-day moving average, which has not happened much since COVID or since uh ChatGPT was launched. You've had a few days in between here. So, we'll see if that's
[18:27] enough. If this spreads further into the banks, then you're going to have more waves of unwinds coming from different places. The European banks relative to the Euro stocks had the worst week since SVB. So, this is Silicon Valley Bank. So, you can see how this is the contagious spreading into things in terms of the unwinds. Uh this was the S&P. I should have updated this. This was what it was through Thursday's close in terms of the percentage for the month, which was up 1.38%. Uh actually, that was Yeah, that
[18:58] was through Wednesday. So, we'll get through the rest of that as we go through it and I'll give you the new numbers. Um to start the week, Microsoft pulls out of data center. IPO disaster exposed. Again, this was a uh uh a computing specialist at least came through with their IPO. Broke down firmus, collapsed, IPO collapsed. This is in Australia. Again, this is a neo cloud. And then you had all of these conversations on the FT. So, coming into the week between the
[19:30] massive move that we saw on Sunday in the stocks tokenization side plus all of the bad news overall except for Thursday, it was an okay week, much much better than last week, which again says to me that we're through most of the deleveraging even though Thursday was a brutal day. But, I think a lot of that had to do with what was going on France. One clear signal for me, which is similar to situational awareness in terms of the Thursday, Wednesday night we got meta reports. The stock was up initially, then it was
[20:01] down, but there was really not a lot of movement. But, when I came back and look at the S&P futures at say 7:30, they were down like 30 handles. And that just kind of said to me that a hedge fund globally, and again, this could be in any part of the world. This is the thing with hedge funds, it's a deleveraging scenario, that someone needed to get out of stuff. So, I just want to separate and I want you guys to hear this cuz I know a lot of you are not hedge fund aficionados. Hedge fund deleveraging can happen, and economic deleveraging is what matters
[20:32] for the market. So, for the AI trade, the only thing that matters is the economic deleveraging. Hedge funds, as I've always said and cuz I was part of one, they're just leeches on trends. They jump on the trends, their earnings trends, estimate revisions, and they ride them. And historically, they've had a huge advantage because they've had the data, they've had the ability to trade quicker. That's all gone away. And now they're competing with AI agents. So, whether or not you have adapted to that, hedge funds have a massive massive
[21:02] disadvantage compared to what they had. Now, the bigger places still have a tremendous advantage right now in risk management, but that's why we've seen a consolidation of funds. I was at a multi-strat that was forced to close down and we were trying to compete with them, but we didn't have the budget or a lot of different reasons to keep up for to keep the talent to go through it. So, now at this point the hedge fund deleveraging to me has more to do with what's happening with AI and it's changing everything. So, I'm going to take you through what economic deleveraging fits in, but what I want you to see is
[21:33] typical hedge fund deleveraging, earnings are still good, profit margins are still good, hiring is still good, asset prices going to have a fast decline. That's what we've seen in the AI trade. When you get into economic deleveraging, earnings start going down, it's led by profit margins, hiring come next. Asset prices usually are going down after profit margins. Profit margins tend to lead and I'm going to show that. Here is 2007. So, the quant quake I showed, I got a recession signal in
[22:03] September of '07. My model involved five components. I'm just going to take you through at least four of them and I'll talk about the other one, but one of them is jobless claims. Now, clearly we haven't had any rise in jobless claims. Now, we didn't have any rise in jobless claims back then either. There's also stronger jobless claims right now than where we were a year ago at this right now. Back then, we were on a trend where it was starting to move higher. This is the four-week jobless claims. What I was using before was
[22:34] continuing claims. Continuing claims is different than weekly claims because once you do a weekly claim, you move on to continuing claims if you're still not getting a job. Continuing claims were giving me a recession signal. Right now, we're not getting any recession signal in claims. Junk spreads actually bottomed, made their lows effectively before the quant quake. The quant quake started in here and this is when it really got bad. So, it actually coincided and if you look at spreads now, junk spreads actually look a lot like this right now. Um we made all-time
[23:05] tights, but we're starting to widen. So, I could say right now junk spreads are starting to show the risk of an economic deleveraging. The S&P is not. So, the S&P was one of the signals. Year-over-year is what I cared about. We have a massive positive year-over-year still. Uh a year ago today we were here, we're now up here. So, that is nowhere near, but that can change obviously with the big fall like we had 1987 and then, you know, then you change everything. So, as of right now nothing there. I wanted to show you that on this
[23:36] particular one we closed above the 20-week moving average. Since COVID, you can see we very seldom get below the 20-week, which is about the same as 100-day moving average. I wanted to show just how strong this has been and again, what's been happening since there's no more recessions. Recessions would happen and one of the ways to measure it was how many times or what percentage of the times we'd be in structurally bull market. This is the weeks, the percentage of weeks during these time periods that we closed above the 20-week moving average. And what you
[24:06] can see is since ChatGPT came out, since profit margins basically started to go parabolic, 85% of the weeks, far higher than any period by far and over the course of the entire period, we're dealing with somewhere closer to 72 to 73, 85% of the weeks. So, in these periods here, it's been getting better as exponential innovation has impacted our lives. So, we had the dot-com bubble. Then we had the great financial crisis as part of this and then since then, it's been getting better, but it's really had a step up function
[24:38] in here. This is the best leading indicator I can give you for when a recession is approaching or when an economic deleveraging like an AI bubble is showing up. Year-over-year corporate profits, guys, plain and simple. If you have profit margins growing, it's like what I said about the hedge funds. You have huge window in here, Huge window. So, corporate profits right now up 20% before the recession but the sell signal and this was one of the signals. So, again, this is one of my signals for recession.
[25:09] This happened in March-June of '07. Profit margins and corporate profits started to go down. You get profit margins to go down and then you get the recession. This bar is here is when the recession started. The dot-com bubble March of 2000 went down. Here you go. In 1990 before the recession negative before. Negative before 1980. This was a weird period because you had Volcker fighting inflation but you still went negative. This one didn't break down until later. The main point about this one is it's
[25:39] still going straight up, guys. We have nothing here. All right. And on that earnings front, SpaceX reported. Probably the most important earnings report I've seen in the last I want to say except for Nvidia. And this just confirmed that. If you didn't get a chance to read the quotes and go through it, it is unbelievable what Elon said. So, compute demand is substantially greater than supply. We could rent out our compute several times over if we said yes to everyone. This is critical because he's also talking about
[26:10] being able to build an incremental 10 gigawatts. The revenue on that is somewhere between 30 to 50 billion. He's saying in year one. He's doing that based on what he's already gotten from Anthropic but what they're willing to pay now. Let's assume it's lower than that. It's 20. You're still talking about 200 billion of revenue if he's able to do. I'm fairly confident of being able to bring an incremental 10 gigawatts of compute online 2027. He very seldom lives up to what he says in this. So, let's assume it's five. You're still talking about a hundred
[26:40] billion dollars but more importantly, he is literally CoreWeave on steroids in terms of seeing where the demand side is. I think in three to five years there's probably a demand for a thousand times more. Just make sure you see this bandwidth than there is currently. So again, the agents are what he's talking about in here in terms of how fast they're going. Capital expenditure is expanding, not slowing. JPMorgan doubles SpaceX price target. So
[27:10] the street goes from 240 to 500 and now forecast a quarter of a trillion dollars in 2027 revenue. I mean guys JPMorgan also put out a memory thing basically questioning how is this even happening? And again, I'm going to say this over and over again. Regardless of where Micron is today, if we didn't learn anything from the first quarter, and you guys should remember this, things move fast. There is no doubt in my mind that by the time we get
[27:40] to the end of February Micron could be at 1500. Absolutely no doubt in my mind. So for everyone who's bearish, who's now beating their chest because the semis are having what is a normal correction for them uh and continuing from what happened back in June through here and they're still up 30 plus percent year-to-date. Be very careful with the amount of deleveraging that's happening and how little's actually gone on. Supermicro computer pre-announced. Texas Instruments, I think this is all
[28:10] well and good, but the main point is that you humanoid robots are being brought into the equation. Uh humanoid robots, uh drug discovery next year, health care, all of these things are going to be part of next year's bull market. And again, bull market with many, many corrections. John Gray huge uh part of the AI uh When you think about a bubble, you think about building capacity and then hoping demand comes. With AI, you're building capacity and you're hoping you can keep up with the demand. We can't keep up with customer demand. Demand is almost
[28:41] parabolic. Completely agree and this is seen around the globe. This is not just a US thing. The interesting thing is to show the hedge fund unwinds. Blackstone, which was trading near 52-week lows, even though they're part of the AI trade, they were up 8% on Thursday, which just shows they reported earnings, they opened down significantly on the day. I want to say they were trading down 4% pre-market, finished up 8% on the day to have their second biggest day in the last 3 years. Here, so far, out of my 100 names in the
[29:11] portfolio, and the reason that it's important to pay attention to my portfolio, here is what they've said in the earnings quarter so far over the last 2 months. So, during the deleveraging, you guys can go through all of it. I'm waiting to see a company that says, "You know what? Demand's slowing. We actually think it's going down." Instead, the numbers are just massive in terms of like even with they pre-announced, and they're taking their numbers up significantly. When you just go through every single number, these numbers are staggering, and the
[29:42] guidance is still staggering. The chips are still staggering. And I wanted to show this because, again, you hear about how GPU prices, this is where they're supposed to be. This is where they are based on the years. So, this is each year with the residual value right now. These are supposed to be worthless already. These are supposed to be down at the, you know, down here. They're up here. So, again, you can find anything. These are the
[30:13] same guys that put out the token data, which is still so funny because they tell people it's not what you think, but people still go over it. Andreas put this out, again, as a leading indicator as to what happens. Exports from Taiwan and Korea, which are a major part of everything related to technology, their exports, with the latest data, are still going higher. The earnings for the S&P, for MSCI US forward EPS, um Duet was released, so we're getting
[30:44] another agent. You got Meta Muse, you've got Dots, you've got GrokBot, you've got Instinct. They're all coming. And Jensen highlights that personalized agents will push token usage through the roof. For the week, S&P down 47 basis points. Yes, I say with all of the panic, all of the news I said of deleveraging the last 2 weeks of just insane amounts, the July period looks extremely similar. Up that This looks extremely similar.
[31:16] Here it is for the month. Down 36 basis points, very similar to July. Again, not much has gone on. The S&P is up since hedge funds peaked. That is part of the economic deleveraging. There isn't any happening. Qs for the week, only down 76 bips. Uh for the month, down 4.78%. Again, not outside of the norm, and they had a 16%. You probably don't even remember this cuz when this is going on, the media makes it sound like the world is
[31:46] ending. Uh IWM small caps up 2% this week. Part of the unwind, the deleveraging. Uh my thematic portfolio down 3.8%. Here is the SMH, guys. This is the drawdown from the peak. I want to re-emphasize where we are is down 22% from the peak. That's how much of a bear market it is, and guess what? This happens almost every single year. But especially when you're up as much as they are year-to-date. Okay, this is
[32:18] where my portfolio finished up. 20% of the names, so we are more oversold than we Oh, no, we're at the same point we were in here, which is right around about. So, I think we're in this part in terms of this, unless this turns into earnings starting to miss, which I don't think is going to happen. On the 50-day side, we're much more oversold, which is important because that means we've got more people out. On the 200-day, absolutely, down to 38%. We were still up in the 70s. What has not changed is the 200-day slope,
[32:49] 85% of the names are still pointed upwards. We finally saw a little bit of volatility. We are nowhere near the peak in here, but we're still higher. Uh Bitcoin, up 50 bips for the week. For those of you looking for an asset that just continues to ignore what's going on, which is obviously part of the AI trade from the agentic side, still hanging in. All right. First thing to listen to, the All-In pod. They did a great job this week going through the CoreWeave crash. Uh I'm not going to spend a lot of time on this one, but I
[33:20] think you guys should listen to it. I think they did a good job of taking the difference, and especially Ben Horowitz, who kind of um started the the the Neocloud business back in the late '90s. He talked about that. So, I think he's a very, very important person to listen to, far more important than the permabears in X that you may listen to and get involved with. Um and he just talks about they don't invest in it, but it's not because he doesn't believe in their business. He just realized the mistake they made getting into the
[33:50] business, and that's basically a real estate business. So, again, I showed in the subscriber video this week, go look at the commercial real estate market and look how it's paid off for people that got bearish at this point of 70 cents on the dollar. Um they go through the different ways, I and I think between David Sacks and Ben Horowitz, these are the people to listen to on this. They were not arguing that CoreWeave has no financial risk. They were arguing that credit market stress does not automatically translate into corporate bankruptcy. And I think it was very important of what to look at. I would go listen to it. Again,
[34:21] I'm not going to spend a lot of time. For the subscribers, you guys can get the slides, but also, I will give you the details from each of these, so you can either read the summary, or you can just go to it and download it yourself. Um that's the whole point of giving you guys this stuff. Uh Uh, David Sacks, I think this is the one thing I will read you guys. It It's about whenever you're underwriting to multi-trillion-dollar outcomes in the future based on very rapid rates of growth, exponential rates of growth, the market's going to be super sensitive to any data points we have in the present. This is why
[34:53] the AI bubble is going to be here. I've said this before and I said it in the subscriber video. We are barely into the credit side, barely. I hate to say that to people because they seem to believe we're at the massive stage of it. When you see $10 trillion of capital needed, and then you start associating that with we've taken out $10 trillion, no. We barely have started this because the reason free cash flow is negative is because they used the free cash flow. We had Google raise equity. So, yes, are they coming to the market for debt? Yes, but we are in the very early stages. Is
[35:23] capital becoming challenging? There is no doubt that when you come to the market, just like the liquidity for hedge funds, when you come to the market in a short amount of time for massive amounts of capital, you need to build the risk premiums in, plain and simple. And that's effectively what it is. Eric Schmidt, not the best-looking photo, but I like Eric, so. He was uh interviewed on the Nordea Bank uh with Nikolai. And it was good. I mean, Eric is a good person to go listen to. I think he did a good job. Uh, AI is bigger than every
[35:53] previous technology revolution. He rejects the bubble narrative, uh and he goes through the reasons why. He talks about all the different things, but he gets into biology, and I completely agree. And if you haven't thought about this with Eli Lilly making new all-time highs and me out there writing about it and talking about it, and more in this video on it, I think you need to go through it. He talks about the fact that you don't want to be viewed in history as not participating and not being a major leader in something that will be looked on for thousands of years. It is
[36:24] a brilliant statement. This gets into whether you agree or not on the way these guys are spending their money. The mega hyperscalers have the money to spend. They are not going to finish in second or third place and not be a part of history. It is not going to happen and that is the trend. So everyone looking for, oh, they're going to cancel their CapEx spending. You got to go listen to Eric Schmidt. It's just something that's not going to happen. The rise of intelligence is the biggest revolution in history. Why AI is not a bubble. There's real
[36:54] growth there. It's not fake. It's real money. He's talking specifically about Anthropic. Anthropic plus OpenAI are going from about 28 29 trillion dollars a year ago to 175 no matter how you get there. Maybe it's 165. You were talking about massive dollars as I've shown you. And for people going through the nuance of trying to be like, well, this is 150. This is 170. It's slowing down. You're wasting my time and everyone else's time with your ridiculous views on something that a
[37:24] year ago you said wouldn't even be 50 at this point. So now when it's not 175, we're going to look and say, "Well, look at this. It's slowed down." When every quarter a company reports that doesn't even make nearly the money they do. Of course, there's going to be quarters that go down or don't grow as fast. But that doesn't mean it's stopping. You're talking about the fastest growing companies in history. But more importantly, Meta's taking some of that. Rockbot's taking some of that. Gemini's taking some of that. All of them are taking it and they all count even if those guys aren't getting all of it. Um business will be flatter, smarter, more intense. You have to
[37:55] listen to this. The faster the learning loops, the smarter it gets. I have friends who think in the next 15 years we can cure all disease. Every single thing in here is important to listen to. Oh, I just want to bring up specialized superintelligence is coming. Many people believe in the next few years we're going to build superintelligence in key categories. Why this aligns with Eli Lilly's Tune Lab, which I will get into, but the Tune Lab thing I want to make sure you guys remember. The big technology podcast, Alan Cantorwitz,
[38:26] always does a great job. Had Sundar Pichai on. Again, not going to take you through the whole thing, but uh he basically says the frontier models will be needed. They will always be needed. They will always be the best models. They will not be for everything. And he goes through in a very intelligent way, again, how much open source will be doing a lot of the work. And this is important, but you will always need the frontier models. So, again, as he goes through this, there's going to be lanes
[38:56] for them, and we're starting to get into that world where some of them are open, some of them are closed. You should go listen to Sundar as why. Um technology will adapt to humans rather than the reverse. And he gets to a lot of things that I think are important in terms of that, but he also brings up he sees major gains ahead in healthcare, materials, discovering, and bending cost curves. There's Eli Lilly. It was down on Friday. I did this through Thursday, but it made new all-time highs this week. As
[39:26] a reminder, I did this paper in June where I said it's becoming the most important AI company in the world. Eli Lilly tune lab, the Manhattan project for AI-driven discovery. Read this on your own. I just want to tell you this type of thing where you've got one model that's being trained on all now 135 different biotech companies, their wins, their failures, all of their work in an anonymous basis.
[39:56] This is how you get major breakthroughs. This is how you have collaboration. This is how the specialized world will accelerate things, and that's what's going on. So, it's not just simply an app to help discovery. It's building a specialized bio All of this stuff is what's going to lead to massive changes. And as I went through in the subscriber video, which you guys should now go watch, I went through the size of healthcare and the importance from a barbell perspective. What is happening in pharma, life sciences, and biotech is
[40:27] beginning a massive bull market. We had one very similar to it in 2000 during the great during the dot-com bubble. We had one during the uh the great financial crisis. Healthcare does better in lower volatility points, but remember, spending in this country, that chart I showed, where healthcare is now the biggest spending in the country, it is going to re-rate to more of a growth area, and you've started to see that. You saw the move with Moderna. Forget how much it fell and closed around 200. Look at the move that we've
[40:58] had over the course of this and how far it's gone. You're going to be having these moonshot things coming all the time. And if you need something to compare Tune Lab to, go read about Harvey legal AI. Very similar, just different ways of going through it. This is the whole um importance, and Harvey raises half a trillion dollars at a 15 and a half billion valuation, meaning Tune Lab has an enormous amount of value. Um on the negative side and something to keep in track of, particularly when I get into the Chamath garbage uh regarding Bitcoin going to zero because
[41:30] quantum will destroy Bitcoin, uh AI agents are in your bank accounts, guys. If you haven't read the story and you didn't see this week, they're in there. Uh if you didn't read this, this is a problem, too. Um this happened this week as well. 70% of websites that use PHP uh had a break-in. If you haven't seen reverse engineer anything, this was something that was talked about on an a16z podcast that I listened to today. I've seen it on X a bunch of
[42:01] times. You have to go read about this, too. This is another reason to realize that nothing in the world is safe from competition, and if you believe that hacking is something quantum hacking in 6, 7, maybe 20 years is something to talk about as Chamath did. The hacking of companies is reverse engineering. The hacking of banks, the hacking of websites is all happening in our face with agent swarms. That is today's business because it's all based on software. This is
[42:31] re-engineer re-engineering hardware. Very scary. I did my crypto video this week and I really focused a lot to go from here to here. This is happening, guys. We are in the tokenization world. You have to start to get ready for it. Tokenization is absolutely going to disrupt hedge funds as much as what we're seeing so far. Deleveraging is over, which means the concentration and the risk to AI, in my opinion, has reached a more neutral stance, which means for people who are looking
[43:01] for an entry point, the only way from here, over the course of the next 3 months, I see this as a bad entry point, is if we're going to go through an economic recession. I don't think that's going to happen. We have cleansed the system with the losses that have gone on and the forced liquidations. Doesn't mean we're going to start rallying ahead of the midterms. It doesn't mean we're going to start rallying ahead of whatever you want to think about, but that's why I say, I think at this point, from a swing basis, you have to start thinking differently. Crypto, I covered an important part uh in this week's video of
[43:33] tokenization. Uh here is the 126, 6-month wall of the thematic portfolio for AI, now trading close to 40. Here's Bitcoin. That volatile asset that people are worried about trading at 30 on the same time period. Tokenized index. The index itself is down 10% for the month, still up 50% since August. This is the one I want you to realize.
[44:03] Year-to-date up 35%. It's now up more than the AI traders. That's right. Bitcoin's down seven. The index is there. And like I said, working very hard, have another meeting next week on getting this to be able to be traded. I'm going to put money into it. Uh I'm using or trying to use a group that is going to help me with it. Here's where we stand. Again, bull market stuff down here in terms of this, oversold on a short-term basis. Here's the chart of it. This is the tokenized index of which Bitcoin is one of the 46 names. So, you
[44:34] would think that crypto the 46 names, 42 tokens for uh public companies outperforming the AI trade now. A16Z, very important. For those of you who don't believe in crypto this is what A16Z did. They announced they're now setting up a fund with Chris Dixon, who has always been their crypto guy, the third partner, I believe, behind Ben Horowitz and and Marc Andreessen. Uh so, one of the original ones. They're now
[45:04] calling it AI front A16 uh frontier. When we started investing in crypto, it was a world of its own, but as blockchains have become more widely used, the lines have blurred and the infrastructure has gradually receded into the background. Wall Street and fintech companies now regularly launch products built on blockchains. Does that make them crypto companies? The label matters less now. It makes more sense to define companies by what they do rather than by the technologies they use. If you still don't believe in looking at crypto, I will continue to say it. You will be doing it 9 months from now
[45:35] because this is the beginning of a large, sustainable bull market of tokenization, agentic commerce, stablecoins. Do your homework. Listen to this to start. The frontier I uh frontier IDs. IDs. Uh you got Dixon. You've got Ben Horowitz. You've got Marc Andreessen. All in one podcast talking about AI and crypto. I was the one who brought AI crypto to
[46:05] you guys beginning 2 years ago. Here we are now and it's merging for everyone. The lines have kind of blurred, which you know, we find ourselves asking, I've been writing about this for a while, is Stripe a crypto company? Whereas years ago it was sort of on its own world with its own companies and its own investors, the lines of the lines have blurred and it's become kind of more part of the tech landscape. Crypto is no longer a separate industry, it is becoming infrastructure. I have talked about the crypto guardrails.
[46:37] I've talked about the ghost rails. We are now getting what was made for, which was the agentic side. For people who don't agree or don't believe that AI is connected directly to crypto and that eventually people will realize and they'll come to the same deep philosophical viewpoint I've come to that Bitcoin is the purest AI trade once you get into what Chamath is wrong about in my opinion. Where our difference is is to me what people should be worried about is not quantum hacking Bitcoin,
[47:07] they should be worried about AI hacking capitalism. That is what's happening and that means all companies built, all incumbents are being disrupted. Mark talks about that extensively in this interview. AI is compressing decades of technological development into years, fundamentally changing what small teams can accomplish. This is my tokenized world. This is the world of tokenized small businesses competing with incumbents. At the same time crypto is becoming part of mainstream financial infrastructure and autonomous AI agents
[47:38] could reshape the internet's economic model. This is it, guys. So, here he is. Uh So, all I'm going to say is this is stupid and it's not to say that he is stupid, it's to say the statement, whether it was meant to get a lot of clicks, whether it was meant for whatever, or whether he's got some PTSD from getting out of it too early. Everything that he said, he has no basis to, okay? So, for people who reached out saying Chamath is whatever he is. Does
[48:09] he get lots of listeners and tons of followers? Sure. Adam Back is a PhD in computer science. He invented Hashcash. He is cited and was part of the original Bitcoin white paper, and he has 30 years of experience over cryptography and computer security. No established professional specialization quantum cryptography or Bitcoin protocol development. He's a podcaster who, yes, worked at Facebook as an electrical engineering. No offense to
[48:40] Chamath, but when you make a statement, then if I disagree, I will tell you who I listen to over this. I would never listen to a podcast where he talked about Bitcoin. I've listened to Adam Back before I put money into this. So, I'm talking my book. Obviously, I believe in it cuz I talk about it. But, for those of you that are worried, then follow Adam Back. Quantum threat potentially 20 to 40 years away. This is what he's saying, okay? Existing quantum computers cannot break Bitcoin. Bitcoin can upgrade to a quantum
[49:10] resistant cryptography. He's saying the Bitcoin upgrade process may be too slow. And that is a fair statement. But, then to say it's going to go to zero because it's not going to happen, well, that's not a fact. That's a story. Prepare carefully, avoid rushing. Here's the most important thing. Why Back believes Bitcoin can survive. Hardware versus theory. Quantum algorithms exist, but sufficiently powerful fault tolerant machines do not. This is where you get into software
[49:40] versus hardware, and that's the whole point that he's saying. Quantum threat to Bitcoin is primarily a hardware problem. We've learned, if for no other reason, hardware takes time. It's based on physics. Can we get there? Yes. Software happening today. AI lowers the cost of cyber attacks, identities theft, and exploiting vulnerabilities. A cybersecurity crisis I'm going to say will.
[50:10] So, where he put it's going to zero, I'm going to say that this story here becomes the most important story over the next 3 years for the market. We're going to have severe, massive cyber attacks that are going to do something which is front-page news more than hugging face, more than what I showed you from Axios on two stories this week. This, in my opinion, will drive more people towards cryptography and force the banks to be focused on getting everything onto the blockchain.
[50:40] So, if anything, I believe agent swarms and hackings in the software world are going to speed up things to go to the safety while we're waiting for a hardware issue. Chris Perkins, someone who I've gotten to know over the years, respect him tremendously, he wrote this paper. Very similar different though, quantum won't kill crypto, but it could accelerate Wall Street's adoption of blockchain. So, he's saying that they're going to move to the blockchain because of fears from quantum. I think it's going to happen now.
[51:11] Again, unvetted AI agents are accessing US bank accounts. Go read the story. How How many passwords do you guys have? Okay? If you use crypto and you have one identity, one identity, which is an anonymous identity that's on the blockchain, very difficult all of a sudden, you don't have to deal with all this garbage. I think everything should move to the blockchain, and then the banks, the governments, and everyone else who's now getting involved in Bitcoin and advising their clients to do
[51:42] it. So, if Chamath is saying it's going to zero, while Jamie Dimon and everyone is saying we're advising you to put money into Bitcoin. JP Morgan just said they think Bitcoin will be the best asset over the next decade. Sorry, not going to listen to Chamath. Uh Japan declares cybersecurity emergency. That's already going on. Again, PHP hacked. Why did a spark scramble? Stocks are getting hammered. Tokenization, this is my tokenization moment in terms of the next stage for stocks going on. And as a reminder,
[52:13] we have the quarterly refunding announcement. I mentioned it before. This could be a catalyst to really get crypto going again. Uh token 49, I for those people looking to listen to someone on why it's a bull market in crypto, Tom Lee does a good job of going through a bunch of different things in terms of things I've talked about a couple different. Uh he doesn't really talk about the agentic side, but then he also talks about tokenization. Oh, he does talk about agentic commerce. Um but he talks about the generational wealth transfer. Definitely worth listening to, particularly when you get past the
[52:45] Bitcoin's going to zero and think, "Well, if it is going to zero, it's not going to happen for another 6 years." And by then, can we solve something? Well, he's saying they won't get it the community won't get around. What if the community owns JP Morgan in the United States and Japan and South Korea and everyone else? I think they might have a chance to do it. Uh tokenized AI stocks slide over the weekend ahead of the reopen. Again, I'm just showing this because this is what's going on. Switzerland approves its first Bitcoin ETF. JP Morgan predicts Bitcoin will outperform US stocks, gold, and real estate over the next 10 years.
[53:16] BlackRock Bitcoin ETF IBIT pulled in 664 million. If you want to get a sense, we are at the all-time highs in the outstanding shares of Bitcoin. This happened during a bear market. What do you think will happen to this line in a bull market? As I talked about, the silent IPO. I wrote that in here. Um to me, I believe we are at a This was a buy the rumor, sell the news event.
[53:49] It should have been a sell the news event here here when Donald Trump became president. Instead, we've consolidated now for 2 years. Once we get back above this level here, okay, which in Bitcoin terms is basically going to be 100,000. Uh I think this line is going to go up a significant amount, particularly now with the volatility that people have been exhausted in an AI and the fact that you're going to have hackings and everything else going on consistently. J.P. Morgan is now three tokenized products live on Ethereum.
[54:19] Tokenized stocks are expanding across DeFi. I mean, this is just happening, guys. Banks and institutions are on chain. The old guard isn't fighting tokenization. It's slowly but surely moving in. These are all of the companies that are on chain now. Yuval, I spoke to him. Canton, very very interesting guy, and just has done an amazing thing of getting Canton up to this. You should go read about it again. Very The more I I start meeting these
[54:50] guys and talking to them, and I keep telling you, they're all incredibly smart, and they could easily be doing big things in other markets, but they believe in this. And DTC, uh they're Canton is connected to DTCC. So, this is a very important thing with tokenization. Um and so, speaking to him, I can just tell you things are moving ahead. Tokenization is accelerating. There are now over 360 on chain tokenized equity products up 200% year-to-date. This is the kind of stuff you want to invest in, guys. Stripe and Agoric Commerce revs up.
[55:22] John Collison said in an interview with Mark Zuckerberg and Alexander Wang, Agoric Commerce went vertical last week. Uh Uh, Brian Huang, who I spoke to and met with last week, who's with Glider introducing au- automated token portfolios. This is what I'm hoping we can do with mine. Very interesting way to approach this. Very cool.
[55:52] Amazing as someone who's been in Wall Street a long time. Uh, that's it for this week, guys. I tried to keep it close to an hour. I think I did that. I went fast. As a reminder, call Mark Wailing if you want more information, especially to navigate this stuff. Uh, I did three This is the fourth video I've done this week. So, when times get tough, I stand in front of the computer and I try to bring you guys things to at least calm you down and give you some of the facts and organize things, but at the same time, I think this is going to be the life that we're in for a long time. So, I'm
[56:22] trying to give you the places. A gentle compute, for sure. Healthcare needs to be part of your portfolio as well, and it needs to be the pharma side, the biotech side, and life sciences. I showed an I showed a combination of a portfolio that I think people should be involved in. That that presentation, the entire slides, you can watch the video, but the slides are also up there as well. Um, and if nothing else, uh, I'll see you guys next week. We'll see if there's another tokenized wipeout over the weekend.