El fin del trauma de TACO: los mercados por fin afrontan la realidad de la inflación — Jordi Visser (29 marzo 2026)

[0:00] All right, um
[0:03] the the war continues
[0:07] and we're starting to finally see the
[0:09] market shift. I think this was a big
[0:12] week for um
[0:14] ending what I talked about last week,
[0:16] which is I think investors finally got
[0:18] rid of the uh the taco PTSD and realized
[0:23] that this is not the same situation as
[0:25] last year. And
[0:27] we started to discount
[0:29] more of a reality onto what's happening.
[0:31] So, I'm going to go through that. Um
[0:34] I'm going to highlight the fact that I
[0:37] think one thing is certain in my mind
[0:40] going through this is that we're at a
[0:41] regime shift. And what a regime shift
[0:43] means for all of you listening
[0:46] is confirmation that the environment
[0:49] that we were in
[0:50] definitely over the past couple years
[0:52] since since the launch of chat GPT, but
[0:54] honestly uh since 2007,
[0:58] we're just in a different regime now.
[1:00] And I think AI is part of it. The major
[1:03] driver of it. You can separate
[1:05] commodities and kind of geopolitics if
[1:07] you want. But I think at a minimum
[1:10] people have to accept now a reality that
[1:12] is very different than last year where
[1:13] the majority of banks and investment
[1:16] banks all throughout the second half of
[1:17] last year were calling for oil to
[1:20] get down to the 40s and 50s. Uh
[1:24] And again, I I think this is just a
[1:26] mistake that people have have done with
[1:29] AI and the fact that there's a massive
[1:31] amount of power that's needed and also
[1:33] that energy is something that's
[1:35] necessary for China.
[1:38] Uh and since there's a rare earth
[1:40] stranglehold, there now appears to be a
[1:42] reality regardless of what people want
[1:45] to say that the vulnerability for Asia,
[1:48] which I'll go through, is energy and
[1:50] especially for China.
[1:52] So, we're in this world that I think
[1:53] people have to stay here. Hoarding is
[1:55] going to be going on because we don't
[1:57] know when this is going to end and even
[1:58] when it does end, I think people don't
[2:00] want to have the risk that this
[2:02] continues again. So, just remember as
[2:04] you go through this week's video that
[2:07] I do think a regime shift is something
[2:09] that you have to prepare your portfolio
[2:11] for. I've been saying multiple
[2:12] compression in general.
[2:15] I mean, it looks
[2:17] gloomier on the right-hand side, but the
[2:19] reality is in a world of low inflation
[2:21] with strong earnings and good economic
[2:23] growth and more importantly
[2:26] just not a difficult environment for
[2:28] credit. Now, we're getting into a more
[2:30] volatile situation and I think this is
[2:33] the reality of what I was writing about.
[2:35] We have scarcity and we have abundance
[2:38] and right now you want to be short
[2:40] abundance and you want to be long
[2:41] scarcity and I think the market is
[2:43] emphasizing that more and more every
[2:45] day, but I think you have to accept the
[2:47] regime shift at this point. So, let's go
[2:50] through this. AI and these are all
[2:51] structural issues in my important in my
[2:53] opinion. The AI software disruption is
[2:56] real.
[2:57] Everyone who is trying to pick the
[2:58] bottom of it the the one thing the war
[3:00] has done is I don't hear this anymore
[3:02] from people. I think they've just
[3:04] accepted the beatdown.
[3:06] Software is being re-rated. Hyperscalers
[3:08] are being re-rated. This is because we
[3:11] don't know 3 years from now based on the
[3:13] progress which is accelerating what the
[3:14] world is going to look like and then
[3:16] when you extend this out 5 years and
[3:18] you're in humanoids, you start to get
[3:20] into even murkier conditions. So, I
[3:21] think anything that has a high multiple,
[3:23] the first question is are you guaranteed
[3:26] to still be in business 3 years from
[3:27] now? Are you guaranteed to have revenue
[3:29] similar or more to where you are today?
[3:31] And I think that's getting harder and
[3:32] harder for software in particular, but I
[3:34] think it's also spreading
[3:36] from the disruption that's happened
[3:38] through credit and other places. The
[3:40] labor disruption, this is a reality.
[3:42] It's going to worsen. So, we're not
[3:44] going to see labor pick up. You have to
[3:46] embed that into it because it's now been
[3:48] a year that we haven't had any job
[3:50] creation and now with oil prices moving
[3:52] higher, rates having moved up, Fed rate
[3:55] hikes, we have a different situation
[3:56] than we did before. Commodity is in a
[3:58] bull market. You have commodities moving
[4:00] higher while rates are moving higher
[4:02] and even though we've seen a pullback in
[4:04] gold and silver, they are still up
[4:06] sharply from 6 months ago while equities
[4:09] are down. The credit cycle
[4:12] is going to continue and I hear way too
[4:14] many people, way too many on this side.
[4:16] I was out to dinner a few times this
[4:19] week. I heard it repeatedly with people
[4:21] saying this is overblown. I heard this
[4:23] with software. The credit cycle is in a
[4:25] downturn. There is no doubt about it.
[4:28] I'm sorry for people who don't want to
[4:29] accept this, but when credit cycles
[4:31] start to unwind and you have people
[4:33] being forced to
[4:34] to take off positions,
[4:36] again, the tide of liquidity is going
[4:38] out and you get to see who's naked,
[4:40] who's been fraudulent, who's been
[4:42] carrying things over and we've seen that
[4:44] starting in September and now it's
[4:46] continuing.
[4:48] Software is just one part. There's going
[4:50] to be more, so I think people have to
[4:51] accept this and then long duration
[4:54] assets are being repriced. So don't
[4:56] minimize this stuff. Really stay on top
[4:58] of it. I think people need to be
[5:01] aware that this is going on and you can
[5:04] basically see how it's impacting and the
[5:06] reason I wanted to show this chart is
[5:08] because the problem is for the regime
[5:10] shift is the positioning.
[5:12] So if labor is not going to be created
[5:15] then consumer discretionary is not going
[5:17] to be in the same side particularly when
[5:18] you throw higher commodity prices or
[5:21] input costs, you have the affordability
[5:23] issue. So discretionary is 10% of this.
[5:28] Financials are 13%. They're getting hit
[5:30] by software. Information technology is
[5:32] 33% and then commercial services is 12.
[5:37] So when you combine this, this, and
[5:39] this, you get over 53 50%. Remember
[5:42] consumer discretionary includes Tesla
[5:44] and Amazon
[5:47] and the financials are lumped in with
[5:48] it. And then over here you have energy,
[5:50] materials. These are the current
[5:51] weightings of the things that are
[5:53] benefiting from this world. They're just
[5:55] not big enough. So,
[5:58] the reason I wanted to show that,
[5:59] believe it or not, in this quote-unquote
[6:01] bear market that we're in,
[6:03] this is all about these names down for
[6:06] the year, the big weights, the ones that
[6:08] have worked since 2007.
[6:11] All of the small ones
[6:13] are up for the year. We have 11 sectors,
[6:16] six of them are up through Friday. That
[6:18] doesn't sound like a bear market, that
[6:20] sounds like a rotation. This will
[6:21] continue to be the story. There will not
[6:24] be a recession this year, even if oil
[6:26] goes to $150 as I go through this. I'm
[6:28] not concerned at all about a recession,
[6:31] but I do think that it will be a year
[6:32] where there will consistently be
[6:34] multiple re-ratings for these sectors.
[6:36] So, this is more about an overweight,
[6:38] and I show this
[6:39] because for those people who were hoping
[6:41] for a pullback, this is the pullback. I
[6:43] talked at the beginning of the year
[6:44] about a 15 to 20% correction at some
[6:46] point. We're getting it earlier. It is
[6:48] on the back of oil, but then you're
[6:50] going to have the midterms at some point
[6:52] if this can at all at any point over the
[6:54] next four or six weeks start to slow. We
[6:56] are going to go through repricing the
[6:58] stock market, which we should. Now, for
[7:02] subscribers, there's been a lot of
[7:03] requests, and I'm going to do this. I
[7:07] will have a model portfolio, which will
[7:08] be up there.
[7:10] This is going to be all of the thematic
[7:13] pieces that I've written. As of right
[7:15] now, the total number is 95, but I
[7:17] included five other names
[7:19] that to me I've talked about and written
[7:21] about. But this model portfolio is
[7:23] hopefully going to help people
[7:25] in this world where we have the the the
[7:28] the rotation going on. Again, chemicals,
[7:31] semiconductors, optical fiber, the whole
[7:33] rack in energy infrastructure, plus the
[7:36] other names. These are all
[7:36] hardware-related names. This is where
[7:39] you want. These charts are not in a bear
[7:41] market. They are for the majority of
[7:43] them been in a very good uptrend. Some
[7:45] of them are getting are coming down now,
[7:48] but for the most point you're in
[7:49] uptrends in these things and I think
[7:51] you're going to be there. Over the
[7:52] course of the last year these names are
[7:54] up 75% but more importantly year-to-date
[7:57] and this is an equal weight portfolio of
[7:59] these names. These go this starts with
[8:01] the piece of optical fibers in November
[8:03] then it goes into December with the
[8:06] advanced packaging side and then the
[8:08] pieces that I wrote earlier on in the
[8:10] year. And the reason I want this to be
[8:12] there is because as I add names in terms
[8:15] of themes that are happening
[8:17] all of this right now benefits from the
[8:19] agendic side. So this is something
[8:21] that's going to be there for the year
[8:23] for sure. Now what I wanted to show you
[8:25] is what the market cap is of this
[8:27] because the mag seven market cap is
[8:29] still might be just below 20 trillion at
[8:31] this point. This name of 98 stocks comes
[8:36] to 16 trillion but Nvidia which is one
[8:40] of the names is 4 trillion.
[8:42] If you cap weighted it's obviously going
[8:44] to be very equal weighted it's going to
[8:46] be very different but the main point is
[8:48] these three names alone are almost half
[8:52] of it. So the bottom 95
[8:55] start to get into smaller things and you
[8:57] still have Eli Lilly ExxonMobil ASML.
[9:00] You get the point here and then we start
[9:02] to get into smaller. You can see down
[9:04] here that 19 of the stocks are mid-cap.
[9:06] A lot of the names are sub 50 billion.
[9:09] In fact the majority. So you're going to
[9:12] be in there. I also I'm going to start
[9:13] putting up a technical analysis report
[9:16] for each of these especially as we go
[9:18] through this. It'll just be a recap of
[9:20] every single name so that way the
[9:22] subscribers who are investors can start
[9:23] picking their points. During times like
[9:25] this
[9:26] I think everyone should be looking for
[9:27] opportunities. I fully expect this year
[9:29] that earnings are going to grow in the
[9:31] S&P 500. Right now what you've seen is
[9:33] actually estimates have gone higher.
[9:35] That's because energy it's very easy to
[9:37] re-rate energy higher because of how
[9:39] much crude has gone up. We're obviously
[9:41] going to see some names come down,
[9:43] particularly as I go through this, but
[9:44] the reality is at this point, remember,
[9:48] you're going to see revenues on the high
[9:49] side because inflation and or revenues
[9:52] are going to be on the uh on the nominal
[9:54] side. The difference between the 1970s
[9:56] and now are a lot, but one of the
[9:58] differences is the job situation in
[10:01] terms of our ability to cut things uh
[10:04] at this pace uh because of AI. So,
[10:07] import price, this was the big change
[10:09] that happened, and this is where I think
[10:10] the market started to realize, "Oh my
[10:11] gosh, uh we're going to be in trouble in
[10:13] 2 months." In 2 months, as I said last
[10:16] week, as I've said in every interview,
[10:18] inflation is almost assuredly going to
[10:20] be above 4%. Uh if you haven't seen that
[10:23] or haven't factored it in, it is not
[10:25] good for stocks, and I have not seen
[10:27] economists adjusting to this cuz I think
[10:29] Taco had everyone kind of not wanting to
[10:31] go through what they went through last
[10:32] year. But this week we got the import uh
[10:35] price index. This is the jump that we
[10:38] saw. This is ex-petroleum.
[10:40] And this is through the end of uh
[10:42] February when oil was closed the month
[10:44] below $70.
[10:46] So, below $70, and we already had import
[10:49] prices going higher, and the majority of
[10:51] this, again,
[10:53] was coming from computers, peripherals,
[10:56] and semiconductors. This is the
[10:57] inflation that was already happening,
[11:00] which is going to continue. This is
[11:01] again is what you want to invest in on
[11:03] the long side. The pricing power of
[11:05] these of these companies, which are
[11:07] technology related, and so you had
[11:10] capital goods import prices the most on
[11:12] record back to 1988.
[11:15] DRAM prices are finally flowing through.
[11:19] Here is oil now. So, the orange line
[11:22] here is the second-month contract of
[11:24] crude, the 6-month rate of change. This
[11:27] is overlaid with the 6-month rate of
[11:29] change of CPI.
[11:32] So, 6 months this has gone higher, this
[11:34] is saying that you're going to take the
[11:36] CPI to an annual to a monthly number of
[11:39] about 0.03 to 0.35.
[11:42] Well, that means we'll be dealing with
[11:43] 6% year-over-year inflation annualized
[11:47] if
[11:48] oil prices sit up around here based on
[11:50] history. At a minimum, you're going to
[11:52] see this stuff head up to four, but
[11:54] again, the risk for inflation now that
[11:57] oil has gone up here and sat here. And
[11:58] as I go through the problems around the
[12:00] globe, this is going to spread because
[12:03] we're spending too much time on just oil
[12:05] prices and there's far far more
[12:06] disruptions that are happening.
[12:08] Uh two bearish things for the market
[12:10] that I think you have to expect are
[12:11] going to lead to more weakness on top of
[12:14] the fact that inflation is going to go
[12:15] higher.
[12:16] I don't think this is uh consensus in
[12:19] terms of investors' minds, but forces
[12:21] entering Iran
[12:23] by April 30th, more than 50%.
[12:27] The Strait of Hormuz traffic returns to
[12:28] normal by the end of April.
[12:31] 27%.
[12:33] So, you've now starting to get the OECD
[12:36] warns that it will surge to 4.2%.
[12:40] You've got Rob Kapito warning that again
[12:43] this week, they were mispricing the Iran
[12:45] risk. I think we're getting closer.
[12:47] Uh this chart is going to start to uh
[12:50] show up more and more. This is the wave
[12:53] the first wave of inflation in the '70s
[12:56] down, and this is overlaid with what
[12:59] we've done so far. This dotted line here
[13:02] is using one year break even implied
[13:04] which have already gone above 5% to
[13:06] highlight what the market is effectively
[13:09] thinking. And like I said, I think four
[13:11] 4% to 6% should be a foregone conclusion
[13:15] in people's minds based on the
[13:17] disruption that's happening and the fact
[13:19] that the input prices for computers and
[13:21] peripherals are already driving things.
[13:24] So, when you get up there, you would
[13:25] expect that the multiple
[13:27] uh compression would continue.
[13:30] This is polyethylene.
[13:32] Going back to 2011, this is
[13:34] month-to-date. This is important for
[13:37] plastics.
[13:38] Uh and here you have plastic prices. I'm
[13:41] only bringing all this stuff up just to
[13:43] show you the extent of where oil is
[13:45] going to go. It's going to go into
[13:46] plastic. So, anything that your food's
[13:47] wrapped in, your toys are wrapped in,
[13:49] anything. Fertilizer prices.
[13:52] So, food. We've got the helium shortages
[13:55] and you're starting to see more panic
[13:56] setting in for the tech supply chains,
[13:59] uh specifically semiconductors.
[14:04] China, back only 6 days into the war,
[14:07] uh halted gasoline and diesel exports
[14:12] to basically uh deal with their own
[14:14] country. Uh and this is why the hoarding
[14:17] situation to me is going to happen. So,
[14:19] you can see Australia's got a problem. I
[14:21] mean, they've got hundreds of uh petrol
[14:25] stations that don't have diesel or gas.
[14:28] Same thing going on in South Korea and
[14:31] in Vietnam, but it's really throughout
[14:33] Asia. You've got problems everywhere.
[14:35] Cathay Pacific announced that they're
[14:36] going to increase a fuel charge on
[14:38] airlines 34%.
[14:40] You can go through this, but every
[14:42] single part of Asia is at risk uh for
[14:46] not only disruptions, but they have
[14:47] severe shortages and we are around the
[14:49] globe going through reserves at a very
[14:51] fast clip. Uh we've already gone through
[14:54] the oil on the water and now we're
[14:55] starting to go into the reserves at
[14:57] country levels. Uh this is from the
[15:00] Shell CEO. Next month, disruptions in
[15:02] the supply of energy resources from Asia
[15:04] will spread to Europe. If you remember
[15:06] COVID and the way it spread, it started
[15:08] in Asia, went to Europe, and eventually
[15:09] came here. This is to me why
[15:12] uh the market will have a sell-on-rally
[15:14] mentality until inflation gets up to 4
[15:17] to 5%. So, any bounces, which is why I I
[15:20] last week and we'll I've been saying it
[15:21] out for for a couple weeks. This is no
[15:24] longer a bull bear for the index side of
[15:26] the market. If you're watching people
[15:28] say it's oversold, it's this, it's that,
[15:31] don't listen to it. At some point like
[15:33] 2022, if you listened every time the
[15:35] market was oversold, you ended up
[15:37] getting knocked down again and again and
[15:39] again. If you're a trader, you can do
[15:41] that. You can look for opportunities to
[15:42] buy into things, but the market is going
[15:44] through a very, very problematic
[15:45] situation of building in inflation and
[15:48] one thing is certain, we don't know how
[15:50] high it's going to go. So, when I say 4
[15:52] to 6%, if it goes to 6%, I would expect
[15:55] the S&P to fall at least 25% off the
[15:58] highs.
[15:59] If it only goes up to four and it peaks
[16:01] in May, I think we'll make the bottom
[16:03] right around that time period, but I
[16:05] think the bottom will be kind of a
[16:06] rolling bottom. It won't be some spike,
[16:08] but I do think the second half of the
[16:10] year the earnings will dictate things
[16:11] and we will get back up cuz I'm not
[16:13] expecting any sort of recession, but I
[16:15] do think for the panic to reach a level
[16:17] two things need to happen. There need to
[16:19] be recession fears, so we need to get up
[16:20] to people saying 50% chance of
[16:22] recession, just like we saw last year,
[16:24] just like we saw in 2022, just like we
[16:26] saw in 2021 and 2020, even what we saw
[16:29] after SVB. Only year I can remember
[16:33] since the since COVID that we haven't
[16:35] talked about a recession in big ways was
[16:37] 2024. I think we need to get there and
[16:40] that's about the point that the bottom
[16:42] will be made.
[16:43] I thought this is a good way to
[16:45] that Mike Canterwitz did this week from
[16:48] a visual perspective of the PE the PE.
[16:51] We've got credit widening out and we've
[16:53] got PE heading down. When you're in
[16:54] inflation, you should have a lower
[16:56] multiple. We were coming from a place of
[16:58] Goldilocks at the beginning of the year
[16:59] or towards the end of last year.
[17:02] So, if we get to stagflation fears where
[17:04] recession fears are going, you could
[17:05] take this all the way down. This is
[17:07] where we got in 2022.
[17:09] This is where we got in 2023. There's no
[17:11] reason why we can't get back down here
[17:13] in terms of the multiples,
[17:15] none whatsoever. If we start seeing the
[17:18] rest of the world go into a recession,
[17:20] then 40% of the S&P
[17:22] uh, revenues come from overseas, you're
[17:24] going to have issues in terms of the
[17:25] S&P.
[17:27] Here's just a history of the world using
[17:29] Perplexity computer. I put in all the
[17:31] data and just said, "Give me the time
[17:33] period of the S&P from the day it prints
[17:36] above 4% and stays above it to all you
[17:41] end up with 11 and a quarter percent
[17:42] annualized uh, 64 of the of the whatever
[17:47] it is, 93 years.
[17:49] Uh,
[17:51] it's a it's below 4%. That's when you
[17:53] make money. When you're above 4%
[17:54] regardless of what people want to say,
[17:56] it makes it more confusing. Rates are a
[17:58] better alternative. It has people kind
[18:01] of in a mess. Here are the technical
[18:02] levels that I'd be watching. Um,
[18:05] I did close out some of my VIX about a
[18:08] third of it uh, on Friday. Now, about a
[18:10] quarter of it on Friday.
[18:12] Uh, and as we go higher, I do think it's
[18:14] very likely that we'll bottom somewhere
[18:16] in this area beginning at this point
[18:18] here at least for a bounce and then
[18:20] we'll see what happens with the
[18:21] inflation data. That's the way I'm
[18:23] viewing it as the inflation risk is
[18:25] rising, we're going to keep taking this
[18:27] down lower and I think people need to
[18:29] adjust to it and just deal with that
[18:31] that's where we are. Uh, reminder too
[18:34] that midterms typically are bad leading
[18:36] into it and then good post it. Uh, in
[18:40] fact, it's not just typically, you get a
[18:42] drawdown
[18:43] and then you This is what happens 1 year
[18:46] later after the midterm. So, I think you
[18:49] should have that in the back of your
[18:50] mind because I do think that they will
[18:52] try or the administration will try
[18:54] everything to help for there. I think
[18:56] there'll be
[18:57] assistance needed in the credit side at
[18:59] some point. So, I just bring that up to
[19:01] just keep in the back of your mind. John
[19:02] Roque this week put out his biggest
[19:05] fear, which is the fact that 2-year
[19:06] rates have started to move higher and
[19:08] the chart looks like it could move. Um,
[19:12] he highlights the relationship that's
[19:14] been there for the last two and a half
[19:16] or three years with crude oil. It's kind
[19:19] of a scary thing to think that we could
[19:20] get up to 5%. But if inflation goes to
[19:24] six, I don't think it's out of the
[19:25] equation that two-year yields won't go
[19:27] up till towards five. I don't think the
[19:30] market has discounted enough as to
[19:32] what's happened. We finally have seen a
[19:34] move in high yield CDX. We had a big
[19:36] blowout on Friday. I think the credit
[19:39] situation again, I think people
[19:41] Investors are very complacent. Not
[19:44] retail, obviously, that's trying to get
[19:45] out.
[19:47] But the banks seem to be trying to keep
[19:49] everything at bay including the the
[19:53] the ones that have people trapped in it.
[19:55] They're trying to say this is just an
[19:57] overreaction. As we learned with
[19:59] software, um
[20:00] I I don't sit there and pretend that the
[20:02] market doesn't know something. There is
[20:04] a credit cycle that is happening and I
[20:06] think people have to adjust to it.
[20:08] I think it I think credit spreads were
[20:10] too tight and I think now we're moving
[20:11] into a different world. Here's the move
[20:13] index for rates ball.
[20:15] Move higher and we're approaching the
[20:18] levels we were at liberation day which
[20:20] kind of highlights the fact that
[20:22] with inflation moving higher and rates
[20:24] moving higher,
[20:26] you're starting to get into a bad
[20:27] situation for investors sitting at home
[20:30] and what can happen to the economy.
[20:33] We're set for the worst month in 60/40
[20:37] since 2022 and we're losing money on the
[20:40] alt space.
[20:42] This just is setting up to be a very
[20:44] very difficult time where bonds are
[20:46] falling off at the same time that stocks
[20:48] are falling off. Crypto has already
[20:50] fallen. Now you've got privates and alts
[20:52] and everything's going down. Don't be
[20:54] surprised if the economy is weaker and
[20:56] if we start to get into those recession
[20:58] fears place. Here is the global 60/40
[21:01] month to date. This is through Thursday.
[21:03] It does not include Friday. I'm sure
[21:05] it'll be a little bit further down, but
[21:06] you can see where it's the worst on on
[21:09] pace for the worst month uh since 2022.
[21:12] The good side is this comes after
[21:14] massive moves higher over the last 2
[21:16] years, and again, that's one of the
[21:18] reasons why I don't think a recession is
[21:20] in the cards. Um
[21:21] I wanted to highlight another thing on
[21:23] the regime shift.
[21:25] I've talked about this
[21:27] as well. Uh I think growth assets are in
[21:30] major major trouble in this regime. Of
[21:32] all of the problems that I showed at the
[21:34] beginning, I don't think anyone
[21:37] can identify what a growth business
[21:39] looks like anymore. I think it is
[21:41] uncertain going forward. I think the
[21:43] growth that matters is coming from
[21:45] commodity companies and hardware, and
[21:48] those typically are in the value side.
[21:49] This is the overlay of the S&P white
[21:53] line divided by commodities.
[21:56] So, this is divided by the BCOM. So,
[21:58] when the S&P is going down relative to
[22:00] commodities. So, when commodities are
[22:02] outperforming the S&P, that is also when
[22:04] growth underperforms value. Well, that's
[22:07] what we're seeing right now, and I think
[22:08] this has a long way to go. And since
[22:10] most of the money in the world is in the
[22:12] US, and then most of the money from an
[22:15] asset versus from a growth versus value
[22:17] perspective has moved into growth, and
[22:19] value's effectively been dead, and we
[22:20] just made the highs since the lows made
[22:23] in here. And when was this? This was the
[22:26] launch of the iPhone.
[22:28] So, the last time we had a commodity
[22:30] bull market that was driven by China,
[22:32] this one is going to be driven by AI.
[22:34] You can see what happened. Growth
[22:36] continued to get hit versus value. I
[22:38] think the same thing is in the cards.
[22:40] So, for all you growth managers out
[22:43] there, uh I would
[22:45] accept the fact that unless you believe
[22:46] we're going back to a world where
[22:47] credit's going to be great, credit
[22:49] spreads will be tight, inflation's going
[22:50] to be low, and oil's going to be sitting
[22:52] back at $50, and AI's not going to
[22:54] disrupt anything, then great. I think
[22:56] all of that is pipe dream. Uh I think
[22:58] all of those things are structural, and
[23:00] there needs to be uh an adoption to
[23:02] this, and the problem is it happens so
[23:04] quickly that as I showed at the
[23:06] beginning, the waiting is just so
[23:08] mispriced relative to the reality of
[23:10] what we're going into. It is going to
[23:12] take a long time, and so there is going
[23:14] to be a wave of selling into any
[23:17] strength in my opinion, and God forbid,
[23:20] when we start to see the earnings tick
[23:22] down, at that point, I think it'll be a
[23:23] major, major problem for some of these
[23:25] names, and I think you're already seeing
[23:27] some of the hyper scalers with the risks
[23:29] that are rising I'll get into that.
[23:31] So, you're starting to get into these
[23:33] charts now, and this is true, and this
[23:34] is one of the reasons why oil is not
[23:36] going to create a recession in the
[23:39] United States.
[23:41] It's just not as important or as
[23:43] intensive it was. Manufacturing was
[23:46] twice as important back then.
[23:48] Not only is the oil side just not as
[23:51] important, but the US is now a net
[23:53] exporter of BTUs. So, it actually
[23:55] benefits. So, I wouldn't get caught up
[23:57] in this. I do think if oil were stay at
[24:01] 100 plus dollars for the entire year,
[24:03] we'd have a global recession for sure,
[24:05] mainly because the rest of the world
[24:06] would go into it, and the US consumer
[24:08] would fall off enough. I just don't
[24:11] think that's going to happen. The other
[24:12] part about this is just how much
[24:14] consumer household net worth has gone
[24:16] up. Household net worth has gone from 60
[24:18] trillion when oil was the same price as
[24:20] it is today in 2000 early 2008.
[24:25] So, oil today, right now with the spike
[24:27] we had, is the exact same price as
[24:29] before as early 2008, but here's how
[24:32] much consumer household net worth has
[24:34] gone up. We've gone from 60 trillion to
[24:36] 180 trillion.
[24:39] An increase of 120 trillion while oil
[24:41] hasn't changed. That is a lot of
[24:43] trillions of dollars to be spent on the
[24:44] economy. It may not be distributed
[24:47] fairly, but oil is not by itself is not
[24:49] going to take the economy down. The
[24:51] housing market during the 19
[24:54] I'm sorry, during the 1970s was an
[24:55] inflationary pressure
[24:57] or sorry, during 2022. I I wanted to
[25:00] highlight in this where we are different
[25:02] today and why I'm also not worried as
[25:05] much as I was back then. In
[25:07] we had inflation that was high not only
[25:10] on the bottleneck side, but you also had
[25:12] a bull market in housing. This is just
[25:14] showing house prices, which peaked in
[25:16] 2022 have come down. So, even though I
[25:19] think inflation is going to go higher on
[25:21] the on the headline,
[25:23] I don't think this is going to feed
[25:25] through to the core, which means the Fed
[25:26] can look through this and more
[25:28] importantly, if oil prices do come down,
[25:30] you're going to see a sharp reduction
[25:32] once we start going through
[25:35] the reality. This is different than
[25:36] 2022, guys, for sure.
[25:39] Uh
[25:39] again, you can see that buyers were
[25:42] happening in 2022 and now it's no
[25:44] buyers, all sellers. Housing and wages
[25:48] are both on the decline. For the wage
[25:50] side, here's where we were in '21, '22
[25:53] when inflation was going higher and oil
[25:55] was going higher. Okay, great. So,
[25:57] Russia is in here, we're above 100 for
[25:59] the entire time, but we also had massive
[26:01] monetary stimulus that was still in the
[26:03] system and we had the fact that jobs
[26:05] were being created relentlessly.
[26:08] Now, nothing. So, remember how much
[26:10] wages were growing during this time? You
[26:11] had to beg people to get back to work.
[26:13] Well, now we haven't created a single
[26:14] job over the last year, which is why
[26:16] wages have come down and here's where
[26:18] wages were during 2021. It's a very
[26:20] different time. So, as you freak out on
[26:22] inflation, don't freak out that much. Um
[26:25] here's the other thing.
[26:27] AI is still driving the economy.
[26:29] Um these numbers are just staggering.
[26:32] So, this is the imports of capital goods
[26:34] ex-autos
[26:36] divided by the imports of consumer
[26:38] goods.
[26:39] Uh just look at how consistent this was
[26:43] and now all of a sudden, I mean, this is
[26:45] just unbelievable. I still don't think
[26:48] people realize
[26:50] how big a trillion plus dollars in
[26:53] spending is for AI and how that will
[26:56] override anything that's happening. It
[26:58] will continue to happen. AI is a
[26:59] structural boom and even though people
[27:01] want to find and talk to me about when
[27:03] CapEx CapEx will be canceled and all
[27:05] this stuff. If we cancel from 1 trillion
[27:07] to 900 billion, it is not going to make
[27:09] a difference on anything except to get
[27:11] you more bearish at the lows. Uh here's
[27:14] Taco
[27:17] Monday, he comes out at 7:00 and says
[27:19] we're going to delay the whatever he
[27:21] said over the weekend, the obliteration,
[27:24] the water plants, and here's what
[27:26] futures did the rest of the week. So,
[27:28] the high was made the second he said it
[27:29] and went down. This is a clear sign that
[27:32] the Taco stand has no people anymore. No
[27:35] one's paying attention. S&P was down 2%
[27:38] for the week. Again, a fairly quiet
[27:40] week, but it's four weeks in a row of
[27:43] very quiet down week.
[27:45] Uh and then you also have a small down
[27:48] move. If you ask me,
[27:49] I think we'll make a low Monday or
[27:51] Tuesday this week and we'll start some
[27:53] sort of a bounce just because people at
[27:56] this point as of Friday and if we get a
[27:58] couple bit of follow-through, we'll have
[28:00] enough hedges on for a bounce. I still
[28:03] don't think, like I said, it matters. I
[28:05] think
[28:06] rallies are to be sold into during this
[28:08] time period. I think we're in a
[28:09] different market. Qs down 3.4%
[28:14] the worst week since liberation week.
[28:17] IWM
[28:18] was up for the week. I'm sure that hurt
[28:20] people.
[28:21] One thing I want to say, I've talked
[28:23] about this before, but I think one of
[28:25] the pain trades this year and what's
[28:26] going on is there is massive
[28:29] deleveraging that needs to happen.
[28:30] That's the reason why I showed you guys
[28:31] the turbulence model back on February
[28:33] 3rd. The turbulence model was meant to
[28:35] represent the P&L of multi-strategy
[28:38] funds or any kind of cross asset
[28:40] firms. It's showing the daily ball.
[28:44] I've had multiple readings as I've
[28:46] highlighted. Basically, the ball of the
[28:48] market has gone up. The message back
[28:50] then was to significantly take up cash
[28:53] because it was happening at a time when
[28:54] the market was quiet and liquidity was
[28:56] ample. Well, now liquidity and spreads
[28:57] are wider and things like this where the
[29:01] Russell's up on a week that the S&P is
[29:03] down and we all know that when you want
[29:05] a hedge over the past 17 years,
[29:08] you wanted to use the Russell. The Black
[29:10] Widow trade was trying to be short
[29:12] queues and long IWM.
[29:15] Well, last week was one of the, you
[29:17] know, it was a 4% outperformance for IWM
[29:20] over queues. Whenever this happens, it
[29:22] is not good
[29:24] for hedge fund portfolios because with
[29:26] oil going up, you would think that this
[29:28] will hurt small companies more than big
[29:30] companies. It'll hurt
[29:32] manufacturing, bank, whatever you want.
[29:34] Um all right. And this is another
[29:36] indication that this is more about
[29:37] deleveraging and rotation rather than
[29:39] people getting bearish.
[29:41] Uh put-call ratio, again, has not
[29:44] spiked. So, I've shown I showed this
[29:47] last week. I just want to highlight it
[29:48] again. Every good low we've made in the
[29:50] market has seen the 5-day moving average
[29:53] of the put-call ratio jump up. Yes, we
[29:55] got up to like the highest level since
[29:57] December, but I'm showing you guys
[29:59] I think things that matter more uh in
[30:02] terms of looking for a sustainable
[30:04] bounce. I think we're going to need
[30:05] people seriously hedged up. And I also
[30:07] think we need to see everyone in a
[30:08] recession. Recessions happen when down
[30:10] volume to up volume makes major spikes.
[30:13] Usually last for a few days. Um here's
[30:15] where we are in the 5-day average of
[30:17] down volume versus up volume. It's
[30:19] because people are rotating. You get I
[30:21] showed you at the beginning. Not every
[30:23] sector is down. Six of the 11 are up for
[30:25] the year, guys. This is not what you
[30:27] think. The S&P is weighted towards
[30:30] software and these other items. It's not
[30:32] weighted the proper way for the world
[30:34] we're going into. The VIX closed outside
[30:36] of the Bollinger band.
[30:38] Pretty much this is one of the good uh,
[30:40] buy signals out there. It's one of the
[30:41] reasons why I think we'll make some type
[30:43] of a short low,
[30:45] uh,
[30:47] early in the week, uh, and a bounce and
[30:49] maybe we'll finish up for the first week
[30:51] in five. That's what my gut would be
[30:53] even if the news is horrible and we walk
[30:54] in Monday and everything's down. I I
[30:56] still think, uh, that you're going to
[30:59] you're going to get a bounce this week.
[31:00] Uh, gold down 15%
[31:04] for the month.
[31:05] Okay, this is the worst month since the
[31:08] great financial crisis and before then
[31:10] since the early 1980s. The reason I want
[31:12] to show this again, this is obviously
[31:14] was a crowded position
[31:16] unwinds. Uh, your eye bore.
[31:19] This is, uh, something I'm sure a lot of
[31:22] the equity people don't follow this
[31:23] much. This is a six contract of your eye
[31:25] bore. Basically, they're, you know, what
[31:27] used to be euro dollar futures within
[31:29] inside Europe or sofa futures.
[31:31] Um,
[31:32] huge move down, uh, for the month. More
[31:35] importantly, the last time we saw
[31:37] anything like this was during 2022, but
[31:40] I want you to see when this happened in
[31:42] 2022, this is where valve was. So, let's
[31:45] take it from before. Valve was actually
[31:47] already up here.
[31:49] Five times the level. This was a 10 plus
[31:52] standard deviation move. Uh, this caught
[31:54] a lot of people. This is why when you
[31:56] see some macro funds that have taken
[31:57] losses that are significant, your eye
[31:59] bore was a big place. To get a reversal
[32:01] that quickly is a big deal.
[32:04] One thing that's been very quiet, um,
[32:06] and I do think if this becomes an issue,
[32:08] this is one type of talk show thing
[32:10] where they're going to have to do
[32:11] something to provide liquidity and this
[32:13] is where liquidity facilities get more
[32:15] interesting to me. Uh, this is 10 year
[32:18] rates and remember when we started
[32:20] getting into the worst of last year
[32:22] during liberation day, you had this
[32:23] violent move where the basis trade was
[32:25] unwind. Things have been very calm so
[32:27] far, but I would watch, uh, 10 year
[32:29] rates just to see if something big goes
[32:31] on. Turbulence model getting less
[32:33] signals now, uh, Uh, but that's because
[32:36] now we're starting to get a little bit
[32:37] more into uh, higher correlation moves
[32:39] and everything is kind of moving like it
[32:41] should, but
[32:43] uh, I do want to emphasize again the
[32:44] clusters that have been seen and what
[32:46] historically has happened at good
[32:48] bottoms in the market and I think this
[32:50] is becoming more of a good bottom
[32:51] situation, especially with the rollover.
[32:54] You kind of want to see a lot of these
[32:56] happening down there. So, I'll keep
[32:57] watching it, but for now
[32:59] nothing. Oh, and by the way, uh, China
[33:02] and the US tit-for-tat uh, ahead of them
[33:04] meeting. Uh,
[33:06] again, not good for the market, but
[33:08] clearly this got lost in the shuffle.
[33:10] Hyperscaler chart, horrible. Um, I've
[33:14] used this as the funding side of many
[33:15] trades. I believe this is the way you
[33:17] want to be. I think this is going to
[33:19] continue to move lower. This re-rating
[33:21] is not appreciated. I still have people
[33:23] asking me, "When do I buy Microsoft?
[33:25] When do I buy Meta? When do I buy it?" I
[33:27] don't think you do. I just think this is
[33:29] a multiple re-rating. I think they're
[33:30] going to keep making earnings. Uh, I
[33:32] think people are going to question the
[33:34] quality of the earnings. I think the
[33:35] debt situation is going to be an issue.
[33:37] People say, "What's going to happen? Are
[33:39] they going to cancel CapEx?" No. And I
[33:41] think they're going to have to issue
[33:42] debt. Remember, Meta has an off-balance
[33:44] sheet S P SPV that they set up with Blue
[33:48] Owl for the Hyperion deal.
[33:51] Uh, this is an issue. So, you got a
[33:53] sharp falloff here in the hyperscalers.
[33:56] Here's all of them.
[33:59] The best performing one is now down 13%
[34:01] year-to-date, which is Google, 14 for
[34:04] Amazon, 20% for Meta, and Microsoft at
[34:08] 27. The drawdown for Microsoft is
[34:10] getting close to 40. Here's the
[34:12] Microsoft chart, brutal. Best case
[34:15] scenario is I could see a big head and
[34:16] shoulders forming, but I think we're
[34:17] going to undercut that. I'll show you
[34:20] the reasons why. We've obviously taken
[34:21] out a trend line here, which came in
[34:23] here.
[34:24] Chart is just horrible and as I've said
[34:26] repeatedly, I can't think of a worse
[34:28] situation for Microsoft than myself
[34:32] using AI, I have multiple open claws, I
[34:35] use all LLMs all day long. I would not
[34:38] touch Microsoft Copilot with a 10-ft
[34:41] pole. So, I don't know how they're able
[34:44] to in a world where software companies
[34:45] are getting hit, and they are one of
[34:47] they are the largest one in the world,
[34:49] how are they going to be able to do this
[34:51] without finding a way to embrace it? And
[34:52] they're connected to OpenAI. I just find
[34:55] it
[34:56] to be troublesome.
[34:58] Here's the 200-week moving average. I I
[35:00] posted this on X this week. First time
[35:02] we've closed below it on a weekly basis
[35:04] since 2013. 13 years ago was the last
[35:07] time.
[35:09] Here's the software index, the S&P 15
[35:11] software index.
[35:13] We closed briefly below in 2022. We're
[35:16] way below now. This is the first time
[35:18] since 2010.
[35:21] Over 15 years.
[35:23] Here is the hyperscaler relative to the
[35:25] S&P, which is the orange line here,
[35:27] which is looking to break this support
[35:29] level. So, the hyperscalers relative to
[35:31] the S&P, and this is overlaid with
[35:34] software relative to the S&P. I will say
[35:37] it again and again, the hyperscalers are
[35:38] software companies. They get disrupted
[35:40] as well. You can call them cloud
[35:42] companies, but then you have to assume
[35:44] they get adoption, they get the build
[35:45] out of the data centers. That is all
[35:47] going slower than expected. I continue
[35:49] to believe that the hyperscalers, for a
[35:51] variety of reasons, should not be looked
[35:53] at as longs, and at its best, you can
[35:56] look at them as market performers.
[35:58] Meta chart.
[36:00] Horrible. They had more bad news come
[36:02] out this week.
[36:04] Drops almost 8% as two court defeats
[36:06] related to the dangers of social media
[36:09] for kids. They just have a lot of bad
[36:12] stories happening. Amazon.
[36:14] Chart is bad, but the main thing to me
[36:17] is I don't know if people realize this,
[36:19] but Amazon
[36:21] for almost 5 years now
[36:23] is effectively
[36:25] unchanged.
[36:27] It was here at about 180. Right now it's
[36:29] about 200. You're talking about a 10%
[36:32] performance in 5 years.
[36:37] So, it's not a new story.
[36:39] Um,
[36:40] here's Oracle CDX.
[36:43] Their CDS blew out last week. Um, I've
[36:45] mentioned Oracle before.
[36:47] They had earnings, stock traded up.
[36:49] They've not only given all that back,
[36:50] the stock has just zoomed to new lows.
[36:54] Uh, the growth factor, again, I want to
[36:57] highlight
[36:58] the regime shift. ChatGPT comes out, we
[37:02] get a growth move. Now all of the
[37:04] sudden, and this is growth factor, this
[37:05] is not the Russell versus value. This is
[37:07] the growth factor. Uh, we get Opus 4.5
[37:11] and you get a shift the other direction.
[37:15] Can't do a video on the weekend without
[37:17] more
[37:18] pain for the private credit market.
[37:21] Ares had its big posted a monthly loss.
[37:23] A lot of the other ones did, too. They
[37:25] limited withdrawals.
[37:28] Apollo capped withdrawals.
[37:31] Uh, you had a downgrade for KKR and
[37:34] Future Standard from investment grade.
[37:39] Going to be a problem.
[37:42] UBS halted withdrawals from a real
[37:44] estate fund.
[37:49] SoFi,
[37:51] you guys can go uh, listen to Steve
[37:53] Eisman talk about this on his podcast. I
[37:55] would listen to Steve Eisman every week
[37:56] at this point. This is not going away,
[37:58] guys. I've said it before, I'll say it
[37:59] again.
[38:00] I I've been associated with credit
[38:02] events since the outset of my career and
[38:05] I started trading Mexico in 20 in 1994.
[38:08] They don't end on their own. They just
[38:10] don't. They can linger and they can be
[38:13] there and it doesn't have to end up as a
[38:14] horrible thing. You can just kind of
[38:16] earn your way out over time, kind of
[38:18] like the 2000 to 2005 period uh, coming
[38:21] out of the dot-com bubble, but uh I
[38:23] think this one has got a bigger issue
[38:25] because of media, uh because of how much
[38:28] people want their money back, and I
[38:30] don't think this is going to stop, and I
[38:32] think this is eventually going to spread
[38:34] to when you have to raise cash, you
[38:36] can't just keep putting money in and
[38:38] giving people money back. I think all of
[38:40] this is a sign that they don't want to
[38:42] sell some of these these bonds or the
[38:44] loans down for the marks that are
[38:46] associated with them, and I think this
[38:48] is becoming an issue for them, but also
[38:50] for the insurance companies. Uh private
[38:52] credit default's accelerating, not a
[38:55] surprise. Uh surging redemptions, slow
[38:58] fundraising, all of this stuff, again,
[39:00] not a surprise. Cliffwater, new news.
[39:03] Blue Owl, new news. If you go read this
[39:06] story, you get to see that we were all
[39:08] wary of the $1.4 billion deal, why we
[39:10] were wary of it, how the relationship
[39:12] with the pension funds are with Blue
[39:14] Owl, how them selling at certain levels
[39:17] mean they're going to have to be marks
[39:18] put down, all of these kinds of things
[39:21] which are normal within side a credit
[39:23] cycle that is an issue. Uh
[39:26] liquidity's becoming it. I'll say it
[39:28] again and again, I think liquidity is
[39:29] the major story, and I think it's going
[39:31] to continue cuz there's no way to solve
[39:32] this problem other with time
[39:35] and people suffering slow losses as
[39:37] opposed to fast. This is not a
[39:39] deleveraging event like the Great
[39:40] Financial Crisis, which I hear people
[39:42] talking about. This is not a contagion
[39:45] of that magnitude, and the government
[39:47] has the GFC built liquidity facility
[39:49] opportunity if they want to. Uh now you
[39:52] have the banks offering hedge funds ways
[39:54] to short private credit. This just adds
[39:57] to the situation. And remember the
[39:58] mortgage situation, if you watch The Big
[40:00] Short,
[40:01] that pressure was coming from the
[40:03] outside world as well. And once it
[40:04] starts to go, and you get more people
[40:06] looking for the hedge, it becomes a
[40:07] bigger risk. So this is not something to
[40:09] just ignore. New way to hedge the AI
[40:12] debt risk. So think Oracle and think all
[40:14] of the cap ex side. Um financials, this
[40:17] is going to be one of the important
[40:18] parts of the earnings period and how the
[40:20] stocks react. Right now, this is a great
[40:22] thing to look at just in terms of how
[40:24] negative people are on
[40:26] future earnings. Financials already
[40:28] factoring deeply negative earnings
[40:30] growth and severe estimate cuts in
[40:32] contrast to solid growth and estimate
[40:33] revisions. So, this is just highlighting
[40:35] that as of right now, the revisions and
[40:37] the earnings are high relative to the
[40:39] stock price. Historically, the stock
[40:42] price leads and then the revisions and
[40:44] the EPS goes. So, we're going to start
[40:45] getting into the earnings period and the
[40:46] question is
[40:48] are these guys going to take down
[40:49] numbers? Is it are we going to start
[40:51] seeing things go? Are they going to
[40:53] start taking some reserves? Are they
[40:55] going to do anything? And if not, we'll
[40:57] see. That's where you could get a big
[41:00] short covering rally in some of these
[41:01] things in the financials. And I think as
[41:03] we're in this down move, people are
[41:04] going to look to the earnings more and
[41:06] more because this is a multiple
[41:07] compression story. This is not a
[41:09] recession story.
[41:11] There is no sign in AI guys. For anyone
[41:13] who's wondering, is this right? We still
[41:16] are in massive demand. We do not have
[41:18] enough compute. I've shown Warren Pie's
[41:21] work. Here's another thing that came out
[41:23] this week.
[41:25] The rental rates are spiking. There was
[41:27] one news item that got a lot of
[41:28] attention this week and it was Turbo
[41:30] Quant. And you should understand Turbo
[41:33] Quant. It's worth spending some time on.
[41:37] Easiest way is to go back to Silicon
[41:38] Valley and just realize it's a
[41:40] compression algorithm. Now, this one's
[41:42] for memory.
[41:46] It's important and this is one of the
[41:48] reasons why the memory stocks were hit
[41:50] this week. But another way to think
[41:51] about it is that this is and this is
[41:53] Matthew Prince who's the I believe CEO
[41:56] of Cloudflare.
[41:58] This is Google's Deep Seek.
[42:00] The optimization of AI inference for
[42:03] speed and memory usage is a big deal and
[42:06] they released this paper. There's the
[42:08] visual on it in terms of what's
[42:09] happening. It enables you to get more
[42:11] performance out of it. So, it should
[42:13] lower prices, but you can see here one
[42:15] of the things it's really good for is it
[42:18] means you can get better models on edge
[42:20] devices. So, edge devices meaning
[42:22] computer, phone, car, anything. But, it
[42:26] makes it more possible
[42:28] because of this efficiency game.
[42:31] Speeds up AI memory eight times cutting
[42:33] cost by 50% or more.
[42:37] Just remember this. Gavin Baker, by far
[42:39] the most plausible and scariest bear
[42:41] case to AI data center CapEx is edge AI
[42:44] running AI in devices. This was in
[42:46] December.
[42:47] So, this
[42:48] literally, Gavin Baker talked about
[42:50] this. You can go listen to it. But, if
[42:51] you don't want to, that's my job here.
[42:54] Uh Gavin said the clearest bear case for
[42:56] AI of structured demand is the edge AI.
[42:58] He said that within a few years people
[42:59] can run a pruned down, but still very
[43:01] capable model directly on a phone.
[43:04] It could shift away from the cloud. This
[43:05] is now going to happen. So, the question
[43:08] is how bearish is this? Well, as of
[43:11] right now, we'll see. Uh but, it does
[43:15] move a decent amount away from the
[43:17] cloud, which I think was going to happen
[43:19] anyway because we've run into the major
[43:21] issue where the memory shortage has
[43:23] gotten far worse than even uh I think
[43:25] Gavin expected back when in December.
[43:28] Edge AI is the bear case because capable
[43:30] local models could absorb a meaningful
[43:31] share of inference weakening long
[43:33] duration demand story for cloud compute.
[43:35] I also believe that open source models
[43:37] are taking this on local devices.
[43:40] You're moving away from the total cloud
[43:42] story is really the case. If the cloud
[43:45] story is not there, then you have to go
[43:46] question or if the cloud story starts to
[43:48] shrink, even though the CapEx will come
[43:50] down, you still need to come up with the
[43:51] revenues for these guys cuz they're
[43:53] still building these for the training
[43:54] models as well.
[43:56] Makes it very challenging, and I think
[43:57] that's one of the issues is the ROIC to
[43:59] me remains a big issue. Um I'm not going
[44:02] to go through this uh all these points,
[44:04] but again,
[44:06] I compared
[44:08] the Gavin Baker article in uh ChatGPT
[44:12] and I imported uh an article, the actual
[44:15] paper from the blog of Google and just
[44:17] said go through it and it lists out what
[44:20] the bear case is and why the Google
[44:22] story is true. So, what ended up
[44:24] happening,
[44:25] like with Deep Seek, everyone assumed we
[44:27] won't need as much memory and just like
[44:29] they did with Nvidia during Deep Seek,
[44:31] they puked all this stuff out. Uh
[44:34] Micron, which did blew away numbers, saw
[44:36] their shares fall from mid-400s
[44:40] to the mid-300s. So, you had a decline
[44:43] of about 20 to 25% in the stock.
[44:47] And the funny thing is
[44:49] uh a company which just beat earnings by
[44:52] from ex- expectations of $9 to $12,
[44:56] uh their PE now for 2027
[44:59] is 3.8. I think we've built in kind of
[45:02] the weakness and here's the long-term
[45:04] chart of it. And yes, you could say this
[45:06] is like software, except for one thing.
[45:08] This is hardware, guys. This is a
[45:09] commodity. If you ask me what I'd rather
[45:11] own, Salesforce at 10 12 PE
[45:15] or Micron at 3 4, give me Micron all day
[45:18] long, especially for the next year.
[45:21] Uh it could increase demand. So, you've
[45:23] got the other side by the end of the
[45:25] week saying, "Well, this is Jevons
[45:26] paradox again." Which was the right
[45:27] answer for that. Anything that reduces
[45:30] it just brings in more memory. I happen
[45:32] to think that this probably is something
[45:34] not to fade in terms of the long-term.
[45:36] If you take this out 3 years
[45:39] and you just realize that we're going to
[45:40] have more efficiency gains happening
[45:42] across the board, I do think at that
[45:44] point memory will probably be in a
[45:46] position where it won't be as necessary.
[45:48] But, we are nowhere near that at this
[45:49] point.
[45:50] Uh so, for the next year, year and a
[45:52] half, I think it's safe and then you
[45:54] just respond each day. Here are the
[45:57] price changes. This just came out this
[45:58] morning. Uh this is from TrendForce. Uh
[46:03] just look at these numbers. Like this is
[46:05] not something to be fading when this is
[46:06] still going on. Uh, one final chart for
[46:09] the week, Bitcoin trading
[46:12] in a range here. Still looks a lot like
[46:15] software. It's hanging in here.
[46:17] Uh, I don't want to get interested in
[46:19] this until we get to a place on the S&P
[46:22] where I think we've built in recession
[46:23] fears. And once we've built in recession
[46:26] fears, I think the midterm and the
[46:28] printing and all the things that should
[46:30] happen for the private credit side will
[46:31] start to become more relevant. Until
[46:34] then guys, on your risk assets, go
[46:36] through my thematic names on the
[46:38] paywall. Uh,
[46:41] go look at levels on all of them. I
[46:44] think those are still in a bull market.
[46:45] I think you should still to be looking
[46:47] at all the things that I highlighted at
[46:48] the beginning.
[46:50] Uh, and yes, I now can start to focus
[46:52] more on the offensive side because I
[46:54] think the market is starting to discount
[46:55] things. The S&P is now down 10% off the
[46:57] all-time highs. We've got
[47:00] 20 plus percent on many of the tech
[47:02] names at this point. And I think a lot
[47:04] of the bull market names on energy and
[47:06] power and materials and all of that
[47:08] stuff for there. Uh, there is one space
[47:10] I'm
[47:11] constantly right now looking and buying
[47:14] more things on silver. So silver is the
[47:18] one that I want to be owning now. It's
[47:20] the place where I think people should be
[47:21] focusing for both miners and also the
[47:23] commodity. Uh, but I think silver is
[47:25] going to come strongly out of this the
[47:26] same way Bitcoin will. That's it for
[47:27] this week. I'll see you guys next week.