[0:00] So, we're living in a time that might be
[0:02] remembered as one of the biggest bubbles
[0:04] in history. And that's because in the
[0:06] next few weeks, your retirement account
[0:08] and your 401k is going to be buying
[0:11] shares in some of the biggest IPOs in
[0:15] human history, even though you might not
[0:17] want to. Okay, how's that going to
[0:19] happen? It's going to happen because the
[0:21] rules of the financial system were just
[0:22] rewritten to make sure that your money
[0:25] is going to be buying it automatically.
[0:27] Now, this is actually more than just a
[0:28] theory. Larry Frink from BlackRock,
[0:31] which is the biggest asset management
[0:32] company in the world, said that your
[0:34] retirement funds and pension funds will
[0:37] be used to build out this AI
[0:39] infrastructure.
[0:40] >> And so much of this money, not just the
[0:43] project, is going to be coming from the
[0:44] private sector, from savings accounts,
[0:47] from pension accounts, from insurance
[0:49] companies, and on and on and on.
[0:51] >> So, let me explain how this is going to
[0:53] happen. In the finance world, there's a
[0:55] concept called the IPO or the initial
[0:58] public offering. That's when a private
[1:00] company goes public, right? It's when
[1:02] investors all around the world are
[1:03] finally able to buy shares and invest in
[1:05] a company. And one of those companies
[1:07] that's going public soon is SpaceX. And
[1:11] the value of that company is going to be
[1:13] $1.75 trillion. Now, to put that number
[1:17] in perspective, it would make SpaceX on
[1:19] day one more valuable than every
[1:23] American defense contractor combined. It
[1:26] would also be the biggest IPO in human
[1:28] history, even bigger than Saudi Aramco,
[1:30] which held that record since 2019. The
[1:33] difference though is that Saudi Aramco
[1:35] was the most profitable company on the
[1:37] planet when it listed. But SpaceX lost
[1:40] $5 billion last year. Now, the craziest
[1:43] part about all of this though is that
[1:45] the financial rules that are supposed to
[1:48] protect us from buying these overpriced
[1:50] investments at the wrong time were also
[1:53] just changed right before these IPOs.
[1:56] That's because on May 1st, the NASDAQ
[1:59] introduced something called the fast
[2:00] entry rule, which cuts the waiting
[2:02] period for a company to be included in
[2:04] an index from 3 months to just 15
[2:08] trading days. And what it also does is
[2:11] it gets rid of something called the
[2:13] float requirement that would have
[2:14] disqualified SpaceX, for example, from
[2:16] being included. The rule change will
[2:18] also force index funds to artificially
[2:22] inflate how much of the company they'll
[2:25] have to buy. So, what we now have is a
[2:28] handful of insiders that got in really
[2:30] early at low prices and now they need to
[2:33] exit. And to exit, they need buyers.
[2:36] They need a lot of buyers. buyers that
[2:38] are going to absorb trillions of dollars
[2:40] worth of stock at peak values so that
[2:42] the insiders can walk away. But finding
[2:45] enough of these buyers for the biggest
[2:47] IPOs in history is going to be really
[2:49] hard unless you change the rules. Which
[2:52] means now your 401k might be the exit
[2:56] liquidity they need. Now the story gets
[2:58] even crazier because SpaceX is just the
[3:01] first company in line, but right behind
[3:03] it is OpenAI and Anthropic. They're
[3:06] doing their own IPOs and going public.
[3:08] So, we'll have three companies with a
[3:11] combined valuation of about $4 trillion.
[3:15] So, SpaceX, OpenAI, and Anthropic would
[3:19] leapfrog every other company in America,
[3:22] basically on day one. And that's why
[3:24] some people are saying that this is
[3:26] going to be a bubble the likes of which
[3:29] we have never seen before, and we're all
[3:31] going to fund it with our own retirement
[3:34] money. So, in today's video, I want to
[3:36] show you how this is all going to work
[3:38] and the accounting trick they're going
[3:39] to use to make this AI boom look a lot
[3:41] more profitable than it really is and
[3:43] what you might be able to do about it.
[3:45] So, with that said, let's get into it.
[3:47] Hi, my name is Andre Jick. Hope you're
[3:49] doing well. Come for the finance and
[3:50] stay for the AI bubble. So, first I want
[3:52] to explain exactly how your money is
[3:54] going to end up buying all of these
[3:56] IPOs. This is why the financial
[3:58] industrial complex is as powerful as it
[4:01] is. Because they control the flow of
[4:04] capital, aka the flow of where money
[4:06] goes. Here's how. There's something
[4:08] called the NASDAQ 100. It's basically
[4:11] the gold standard index for tech
[4:13] companies. It tracks the top 100 tech
[4:16] stocks. There's over $600 billion worth
[4:19] of investment products that track this
[4:21] stuff. Meaning when a company gets added
[4:23] to the NASDAQ 100, every single one of
[4:27] these funds that tracks the index is
[4:30] forced to automatically buy that stock.
[4:33] And they don't get a choice or a vote in
[4:35] this. And that automatic buying is worth
[4:38] billions and billions of dollars in
[4:40] demand for whichever company gets added.
[4:42] So getting into the NASDAQ 100 is like
[4:45] being given a money printer cuz the
[4:47] moment that company is included, they
[4:49] get access to hundreds of billions of
[4:51] dollars in passive investment flows that
[4:54] has to buy their stock whether they want
[4:56] to or not. Now what's most interesting
[4:58] though is that the rules around getting
[5:02] into the index just changed on May 1st.
[5:05] The NASDAQ introduced something called
[5:07] the fast entry rule and it changed three
[5:10] things. First, it changed something
[5:12] called the waiting period because before
[5:14] a new company had to wait until the
[5:16] NASDAQ's next yearly review before it
[5:19] could be added, and that could take up
[5:20] to a year. The fasttrack entry rule cuts
[5:24] that down to just 15 trading days. Now,
[5:27] the second thing it changed was
[5:28] something called the float requirement.
[5:30] A float is the percentage of company
[5:32] shares that are available for the public
[5:35] to buy and sell. So for example, if I
[5:37] was a company and I had 100 shares in
[5:40] total, but only 10 were available for
[5:43] people to invest in, my float would be
[5:46] 10%. Okay, but in the old rule, the
[5:49] NASDAQ wanted a minimum 10% public float
[5:52] to even qualify for an inclusion into
[5:54] the index. But SpaceX is planning to
[5:57] list with a float of around 4 to 5%. So
[6:00] under the old rules, that would be an
[6:03] automatic disqualification. Now the
[6:05] third change is a hidden multiplier
[6:09] right and what that means is for any
[6:11] company listing with a float less than
[6:14] 20%. The NASDAQ now artificially
[6:18] inflates how the stock is weighed in the
[6:21] index. So a 4% float gets treated as if
[6:24] it were 12%. A 5% float is treated like
[6:27] 15%. So this multiplier is now 3x, which
[6:31] means index funds are now legally
[6:34] required to buy more stock than the
[6:37] actual available supply would normally
[6:39] justify. Now, what's important to
[6:40] understand here is that the NASDAQ
[6:42] didn't just write these rules for SpaceX
[6:44] specifically. They wrote them for a
[6:46] whole class of companies and SpaceX just
[6:49] happens to be the first in line for
[6:51] these IPOs, but right behind them is
[6:54] OpenAI and Anthropic, and they're
[6:57] planning to do their own public
[6:58] listings. So, just three companies that
[7:00] are going public are going to be
[7:01] potentially funneling as much as $4
[7:03] trillion worth of newly issued stock
[7:06] into passive retirement accounts within
[7:08] a couple months of each other. And the
[7:10] NASDAQ, by the way, is not alone. The
[7:13] FTSE, Russell, another index is doing
[7:15] the same thing. They are allowing the
[7:18] index inclusion after just 5 days,
[7:20] right? S&P is doing the same thing. So,
[7:24] what we have is every major index
[7:26] provider is racing to update their rules
[7:29] at the same time. Now, you could look at
[7:31] this and say, okay, well, maybe the
[7:33] rules needed updating. Maybe the system
[7:36] just needed a firmware upgrade. Maybe.
[7:39] Some people say though that the timing
[7:40] of all of this is just very suspicious
[7:43] because every single one of these rule
[7:45] changes was announced just weeks and
[7:47] months before the biggest IPOs in human
[7:50] history. Right? All of these companies
[7:52] are being listed within just months of
[7:54] each other. So that is the mechanism of
[7:57] how your retirement account will end up
[8:00] owning SpaceX, OpenAI and Anthropic
[8:03] whether you want to or not because the
[8:05] rules are changing to accommodate them.
[8:09] So now the question is well why are they
[8:11] trying to force everyone to buy these
[8:13] companies and why right now? Now
[8:15] speaking of things that take money out
[8:17] of your pocket without asking your phone
[8:19] bill. Most people are paying60, $80,
[8:22] $100 a month for their wireless plan,
[8:24] and they've never even once questioned
[8:25] it. The system counts on you not paying
[8:27] attention. But the sponsor of this
[8:29] segment, T is the exception. T's plans
[8:31] start at just $5. Unlimited is $25 a
[8:34] month, all in America's largest 5G
[8:37] network. There's no contracts, no drama,
[8:39] and you can change your plan anytime.
[8:41] You get free hotspot, unlimited texts,
[8:43] international calls to over 60
[8:45] countries. It's the same coverage at a
[8:47] fraction of what most people are paying.
[8:49] They also have over 14,000 excellent
[8:51] reviews on Trustpilot with a 4.5 score.
[8:54] You can build your own plan at to.com.
[8:56] The link is down below. Thank you to T
[8:58] for sponsoring this segment. And now,
[8:59] let's get back to it. Okay, so why are
[9:01] they trying to get everyone to buy these
[9:03] IPOs? And the basic answer is that these
[9:06] companies need to sell trillions of
[9:08] dollars worth of stock. And the only
[9:10] buyer that's big enough to absorb that
[9:12] much supply is the passive investment
[9:14] complex. the trillions of dollars that's
[9:17] sitting in our 401ks and index funds
[9:20] across the whole country because
[9:22] remember passive investors don't choose
[9:24] what they buy. They just buy whatever
[9:26] makes up the index. So if you want a
[9:30] guaranteed demand for your IPO, you
[9:33] don't go to the investors and try to
[9:35] pitch to them. You just try to get into
[9:37] the index. But if the rules say, well,
[9:40] you don't qualify for the index, you
[9:42] change the rules, right? That is the
[9:44] name of the game. But for this game to
[9:47] work though, they need something else.
[9:50] They need an epic story, right? They
[9:52] need a dream because investors love to
[9:55] buy the dream. And SpaceX has one of the
[9:58] best dreams ever told. Because if you
[10:00] ask anyone on the street what SpaceX
[10:02] does, most people will probably tell you
[10:04] something about rockets, right? maybe
[10:06] going to Mars, maybe Elon doing
[10:08] something crazy. Most people's
[10:10] perception is that they're trying to
[10:12] make humanity become a space exploring
[10:15] civilization, and that is worth a lot of
[10:18] money. But behind this dream, SpaceX is
[10:22] actually made up of three completely
[10:24] different businesses. There's the rocket
[10:26] business that's made up of things like
[10:28] government contracts, NASA missions,
[10:30] reusable rockets, and last year they did
[10:33] around $4 billion in revenue. That's a
[10:35] lot of money until you realize that's
[10:38] only about a quarter of the company's
[10:39] total business. The second business is
[10:42] Starlink, which is that satellite
[10:44] internet provider. They have 10 million
[10:46] subscribers across 150 countries and
[10:49] they made 11.4 billion in revenue with
[10:51] 63% profit margins. It's all really
[10:53] impressive. So Starlink is actually
[10:55] genuinely doing really good. And if all
[10:58] SpaceX was Starlink and these reusable
[11:01] rockets, then maybe this is a completely
[11:03] different story. But there's a third
[11:05] business and that business is losing a
[11:08] lot of money. It's called XAI, Elon's
[11:11] artificial intelligence company. But
[11:13] that company burns over a billion a
[11:16] month. So when you look at SpaceX and
[11:18] the three separate companies that it is,
[11:21] the overall picture is that SpaceX
[11:23] actually lost $5 billion last year. So
[11:27] Starlink makes money, right? Rockets
[11:29] make money and then XAI kind of like
[11:32] lights it on fire. So what you're
[11:34] actually being asked to buy right now at
[11:36] 1.75 trillion is all of that bundled
[11:40] together at the biggest IPO values in
[11:42] human history. And the only reason that
[11:46] might not sound crazy to some people is
[11:47] because they believe in the dream,
[11:49] right? Which is this AI boom and the
[11:51] artificial intelligence is going to
[11:52] change everything and make everything
[11:54] grow forever and ever, right? Maybe,
[11:56] right? But some people say the problem
[11:58] with that dream is that if you look at
[12:00] the math, it just doesn't make any sense
[12:02] right now. Now, so far I've explained
[12:05] the mechanism of how your money will get
[12:07] funneled into these IPOs automatically
[12:09] and maybe how they might not be worth
[12:12] that much, but what I haven't explained
[12:14] is why are these companies trying to go
[12:17] public specifically right now? So, one
[12:19] of the best theories I've been able to
[12:21] find about why they're all trying to go
[12:22] public right now is because this whole
[12:26] debt based AI boom, right? The trillions
[12:29] of dollars in valuations and the record
[12:31] profits that are in the headlines about
[12:32] tech companies printing money, a big
[12:35] part of this is sort of an illusion.
[12:38] It's a paper illusion that is built on
[12:40] an accounting trick where money is
[12:43] passed from one company to the next to
[12:46] the next and back to that same company.
[12:48] Right? which artificially increases how
[12:50] much money it looks like they're making.
[12:53] Now, that strategy works for only as
[12:56] long as the markets stay strong. But
[12:58] remember, there's also a geopolitical
[12:59] context to consider and what's happening
[13:02] in the Middle East because the longer
[13:04] they wait, the more likely that the
[13:07] financial markets could break by the
[13:10] reality of the supply chains. So, they
[13:12] need to move fast. They need to pump up
[13:14] the value as high as possible and get as
[13:16] many people to buy it. So, let me just
[13:18] give you an easy example of how they're
[13:20] pumping this. And then we'll get into
[13:21] the specifics. But imagine I lend you
[13:24] $100, right? And then you use that $100
[13:26] to buy a Pokémon card. That card goes up
[13:29] in value $1,000. I then get to write
[13:32] down on my tax return that I made $900
[13:35] in profit, even though I never sold
[13:37] anything. Even though that $900 exists
[13:40] only on paper. And then I use that paper
[13:43] profit to justify lending you another
[13:46] $5,000 to buy even more cards, right?
[13:48] That is roughly a simple way of
[13:50] explaining what's happening between all
[13:51] these tech companies. So, let me show
[13:53] you. A group of analysts at the
[13:55] Financial Times looked at something
[13:56] called the capex, which is capital
[13:58] expenditure. a fancy way of saying how
[14:01] much money Microsoft, Google, Amazon,
[14:04] Meta, and Oracle are planning to spend
[14:07] on building out AI infrastructure
[14:10] between now and 2030. And then they
[14:12] looked at how much revenue those same
[14:15] companies are expected to make from
[14:18] those investments over the same time
[14:20] period. And so they asked, okay, are
[14:22] these companies going to make more money
[14:25] than they spent? And the answer for
[14:28] almost every single one of them was no.
[14:31] Under the most generous assumptions
[14:33] possible, assuming zero costs, no
[14:36] salaries, no electricity, no overhead,
[14:38] nothing, Microsoft's implied return on
[14:41] its AI investment was 9.2%. Google was
[14:45] negative 15.7%. Meta's negative 28.8%.
[14:48] Oracle's negative 35.6%.
[14:51] The only company that clears it into
[14:53] positive is Amazon at just 7.2%.
[14:58] These aren't worst case scenario
[15:00] numbers. Remember, these are the best
[15:01] case numbers, assuming it costs these
[15:03] companies literally nothing to build and
[15:06] run their AI infrastructure. They all
[15:08] still lose money. Now, let's look at how
[15:11] they're funding all of this. Where do
[15:13] they get the money to do this? This year
[15:16] alone, those very same companies have
[15:18] issued over $150 billion in what are
[15:22] called corporate bonds to fund this AI
[15:25] spending. Now, to put that in
[15:27] perspective, that is more than double
[15:29] what they were doing just 2 years ago.
[15:31] And look what's happening to what's
[15:33] called their free cash flow. As a
[15:36] result, Microsoft, Meta, Google have all
[15:39] seen their free cash flow margins, which
[15:41] is the actual money left over after
[15:43] spending, collapse towards zero when you
[15:46] account for their AI capital
[15:49] expenditure. JP Morgan's analysts are
[15:51] projecting that by 2027,
[15:54] several of these companies will have
[15:56] negative free cash flow, meaning they
[15:58] will be spending more than what they'll
[16:01] be bringing in. from companies that were
[16:02] just a few years ago the most profitable
[16:05] businesses in human history. But it gets
[16:07] crazier. On the other side of that
[16:10] spending, look at who they're spending
[16:12] it with. It is all with each other. Open
[16:16] AAI has committed 280 billion to
[16:18] Microsoft and 138 billion to Amazon.
[16:21] Anthropic committed 30 billion to
[16:23] Microsoft and 100 billion to Amazon. In
[16:26] total, OpenAI and anthropic spending
[16:29] commitments represent roughly half of
[16:32] Microsoft's entire revenue backlog. 54%
[16:35] of Oracles, 51% of Amazon's. So, what
[16:38] you actually have is a system where big
[16:42] tech invests into AI startups. The AI
[16:46] startups then use that money to rent
[16:49] computing power back from big tech. Big
[16:52] tech books the investment gains as
[16:54] profit and then uses that profit to
[16:57] justify spending even more. The money is
[17:00] mostly going in a circle. Michael Bur's
[17:03] company recently did a deep dive on this
[17:05] exact thing. And the circle only keeps
[17:08] spinning as long as everyone sort of
[17:10] agrees about the valuations which sort
[17:14] of brings us back to the IPO. The second
[17:16] these companies go public, the
[17:19] valuations stop being whatever just a
[17:21] couple investors decided they were in a
[17:23] private funding round, right? They
[17:24] become whatever the open market decides
[17:27] they're worth. And if those numbers come
[17:30] in lower than what Google and Amazon
[17:33] have been booking as profit, then those
[17:35] profits have to get revised, right? The
[17:37] earnings that justified the stock prices
[17:40] get revised downward and then the whole
[17:43] loop goes in reverse, right? So this
[17:45] theory says that is why the timing of
[17:49] all of this is so important to them.
[17:51] That's why they changed the rules. That
[17:53] is why there's such an urgency to get
[17:55] these IPOs to go public as fast as
[17:58] possible. They need these IPOs to
[18:00] validate the paper before the paper runs
[18:03] out or gets exposed by some conflict in
[18:05] the Middle East. So now the question is,
[18:08] well, has this happened before in
[18:10] history? And what happened to the stock
[18:12] market? Turns out it has happened
[18:14] before. Now there's a famous saying in
[18:16] the investment world that says history
[18:18] doesn't repeat itself, but it rhymes. So
[18:20] it might not happen the same way again,
[18:23] but this has happened before and it did
[18:25] not lead to good things. There's a chart
[18:28] from the Financial Times that I think is
[18:29] really interesting. It shows the
[18:31] biggest, most hyped, most culturally
[18:34] significant IPOs in American history
[18:36] against the S&P 500, aka the stock
[18:39] market. It shows companies like Xerox
[18:42] went public when investors were
[18:44] desperate to own it and then the market
[18:46] peaked right after. Ford went public
[18:49] when investors were desperate to own it.
[18:51] Right? The market peaked right after.
[18:53] McDonald's, Apple, Goldman Sachs,
[18:56] Blackstone, every single one of these
[18:58] companies went public at the same moment
[19:00] when public excitement about owning them
[19:02] was at the highest point. And in almost
[19:04] every single case, the market peaked
[19:08] right after. That's because the IPO is
[19:11] rarely about the company needing money,
[19:13] right? It's almost always about the
[19:15] seller needing a buyer. And the best
[19:18] time to find a buyer is when everyone
[19:20] wants what you're selling. And that
[19:22] brings us to right now. By the time
[19:25] SpaceX, OpenAI, and Anthropic complete
[19:28] their IPOs, they will have raised as
[19:32] much money as all the 300.com IPOs from
[19:36] the year 2000 combined. and that's
[19:39] adjusted for inflation. That is
[19:41] unbelievable. Now, a lot of people have
[19:43] said that the AI boom is nothing like
[19:46] the.com bubble. And they do have a point
[19:48] cuz one of the classic signs of a bubble
[19:50] is when values get completely
[19:52] disconnected from reality. That's when
[19:54] something called the PE ratios, the
[19:57] price to earnings ratio goes up really
[19:59] fast, right? And companies start trading
[20:02] at hundreds of times what they make
[20:04] without any profit. And by that measure,
[20:08] the AI boom looks different. The PE
[20:10] ratios of most of these companies are
[20:13] not that insane. The valuations look
[20:15] kind of reasonable. But that's what
[20:18] makes maybe this bubble more dangerous
[20:20] than any other one. Because according to
[20:23] BCA research, for example, the AI bubble
[20:27] is not a valuation bubble. It might be
[20:29] what's called an earnings bubble.
[20:32] Earnings bubbles are much harder to see
[20:34] coming. What's the difference? In a
[20:36] normal bubble, the stock price goes up
[20:39] while the earnings of the company stays
[20:41] flat. So, the price to earnings ratio
[20:43] goes up really fast with no correlation
[20:46] to its earnings. But an earnings bubble
[20:49] like this one might be. It's that the
[20:52] earnings themselves that are inflated,
[20:55] right? The price to earnings ratio can
[20:57] still stay low and look reasonable. And
[20:59] that's because it's that E, right? the
[21:02] earnings number. That's what's being
[21:04] artificially propped up, which is
[21:07] exactly what could be happening with
[21:09] that accounting trick we talked about,
[21:11] right? The paper gains from anthropic
[21:12] investments are inflating the earnings
[21:15] of Google and Amazon, and it's making
[21:18] their PE ratios look healthier than they
[21:21] might actually be. And history has a
[21:23] very clear track record with earnings
[21:24] bubbles. It happened with homebuilders
[21:27] before 2008. Their PE ratios looked
[21:30] reasonable right up until the moment
[21:31] they didn't. It happened with banks
[21:33] before the financial crisis. Perfectly
[21:35] healthy earnings numbers right until the
[21:38] earnings themselves were shown to be
[21:40] built on assets that were worth a
[21:41] fraction of what they were being carried
[21:44] at on the books. And the theory is that
[21:47] it's happening right now with
[21:48] semiconductors. Look at this chart.
[21:50] Global semiconductor sales have gone
[21:52] completely parabolic. A straight
[21:54] vertical line up, right? And every time
[21:56] in history that semiconductor sales have
[21:58] looked like this, what followed was a
[22:02] very brutal earnings collapse. In almost
[22:04] every historical case, the stock price
[22:06] peaked before the earnings did. Which
[22:10] means by the time the earnings started
[22:13] going down, the stock had already been
[22:16] dropping for months and nobody had
[22:18] connected the dots yet. Look at Nvidia
[22:21] for example. In December 2001, Nvidia
[22:24] peaked and then went down 83% before
[22:26] earnings caught up. In November 2021, it
[22:29] peaked and went down 53% before earnings
[22:32] caught up. There's Micron, Intel, the
[22:34] S&P 500 tech sector. The same pattern
[22:37] repeats across every single
[22:39] semiconductor cycle in modern history.
[22:42] The stock sort of always knows before
[22:44] the earnings do. And right now,
[22:47] something very weird is happening in the
[22:50] broader market. That suggests that the
[22:52] stock market might already be starting
[22:54] to know. The S&P 500 has just hit four
[22:57] consecutive record highs on what's
[22:59] called negative market breadth. Meaning
[23:02] the index keeps going up, but more
[23:06] stocks are actually going down than
[23:09] going up, right? The gains are being
[23:11] driven by just a handful of the very
[23:14] biggest companies while everything else
[23:16] is just deteriorating. And according to
[23:19] the data, this has literally never
[23:21] happened before in market history. Four
[23:23] consecutive record highs with negative
[23:26] breadth. This just basically means the
[23:28] S&P 500 as an all-time high and it's
[23:32] kind of hiding what's actually
[23:33] happening. And what's happening is a
[23:36] market that is concentrating. It's
[23:38] becoming more and more dependent on a
[23:40] smaller and smaller group of companies
[23:42] to hold the whole thing up. And here's
[23:45] exactly what that looks like. By the
[23:47] way, right now AI related stocks make up
[23:50] almost 49% of the whole S&P 500's market
[23:54] cap. 41 stocks out of 500, about half
[23:58] the entire index. Which means if
[24:00] anything goes wrong with AI, it won't
[24:03] just hurt tech stocks. It will hurt
[24:06] retirement accounts. And that's because
[24:08] almost 50% of our retirement accounts is
[24:10] essentially a bet on AI right now if
[24:13] you're in these indexes. Right? These
[24:15] are the same companies, by the way, that
[24:17] are about to be joined by the three
[24:19] biggest IPOs in history. So, let me tie
[24:21] all of this together and give you the
[24:23] big picture of what's happening. So far,
[24:25] the US personal savings rate just hit
[24:27] 2.6%. And that's the lowest that it's
[24:30] been in 4 years, which means the average
[24:32] American almost has nothing left in
[24:35] reserve. And also, the real wages are
[24:38] going down. The bottom half of the
[24:41] consumer economy is already in distress.
[24:43] In fact, what's mind-blowing is that the
[24:46] top 10% of earners right now are the
[24:49] only reason the economy is not in a
[24:52] recession. The top 10% of spenders are
[24:55] holding up half of the economy. Now,
[24:58] here's another chart that shows exactly
[25:00] why it's happening and why it's probably
[25:02] going to get worse. Corporate earnings
[25:04] are going up, which is good, but workers
[25:07] incomes are not. They're flat and that's
[25:09] not good, right? The gap between those
[25:11] two lines is AI. Remember when companies
[25:15] were laying people off and telling us
[25:16] it's because of AI? That's why that gap
[25:19] is there. Companies are automating their
[25:21] way to higher profits while the people
[25:25] who work for them are starting to make
[25:27] less and less. One researcher said, "At
[25:30] the limit, firms automate their way to
[25:33] boundless productivity and zero demand."
[25:35] Right? Think about this passive
[25:38] investment money that SpaceX and OpenAI
[25:41] and Anthropic are counting on to buy
[25:42] their stock. That only exists as long as
[25:47] American workers have paychecks to
[25:49] invest that money every 2 weeks. Right?
[25:52] The moment that AI displaces those
[25:55] paychecks, the very thing that these
[25:58] companies are exploiting, well, that
[26:00] starts to get smaller. there's less
[26:02] money for them because they got rid of
[26:04] their own workers, which is another
[26:06] reason why this window might be closing
[26:09] and why these companies want to go
[26:10] public right now. But remember, there's
[26:13] also the straight of her rem. It's been
[26:15] closed for 3 months due to the Iran war.
[26:17] Exon Mobile's senior vice president went
[26:20] on stage at a conference in New York and
[26:22] said that oil inventories are going to
[26:24] hit critically low levels within the
[26:26] next 2 to 3 weeks. And when that
[26:29] happens, the price of oil goes up. His
[26:31] estimate was $150 to $160 a barrel. If
[26:35] that happens, that would mean every
[26:38] country that imports oil, which is most
[26:40] of them, they'll suddenly need a lot
[26:43] more dollars to pay for this oil. And
[26:45] when countries need their dollars fast,
[26:48] where do they go to get them? They sell
[26:51] whatever dollar denominated assets they
[26:54] own. And the biggest dollar denominated
[26:57] assets most countries hold are US
[27:00] Treasury bonds. So they sell US
[27:03] treasuries. And when you sell
[27:04] treasuries, interest rates go up because
[27:07] the US needs more buyers. And the way to
[27:10] get more buyers is to tempt them with
[27:13] higher interest rates, right? But when
[27:15] rates go up, borrowing gets more
[27:17] expensive for everyone, for governments,
[27:19] for companies, for consumers. Here's a
[27:21] chart from FFTT. Since the beginning of
[27:24] the Iran war, wherever oil goes,
[27:27] Treasury yields follow almost perfectly,
[27:30] which means if Exxon Mobile's right
[27:32] about $150 oil coming in the next few
[27:35] weeks, Treasury yields are likely going
[27:37] to levels that start breaking things.
[27:39] And we're kind of starting to see the
[27:40] early signs of that. Emerging market
[27:43] countries sold US treasuries in March at
[27:46] the fastest rate since at least 2023.
[27:50] 27 countries have approached the World
[27:52] Bank looking for emergency crisis
[27:55] funding. Global bond yields are breaking
[27:58] out of multi-year consolidations across
[28:00] the US, UK, Germany, Japan, and Canada.
[28:05] And sitting right in the middle of all
[28:06] of this is the new Federal Reserve
[28:08] chairman Kevin Worsh, who remember was
[28:10] hired by President Trump to lower
[28:12] interest rates. except the market right
[28:14] now is predicting that interest rates
[28:16] will go up. For the first time in four
[28:19] years, the two-year Treasury yield is
[28:22] above the federal fund rate, which is
[28:24] basically the market's way of telling
[28:26] the Fed it should be increasing interest
[28:28] rates, not lowering them. But if Kevin
[28:32] Walsh lowers interest rates into an
[28:34] inflation spike when oil is going up,
[28:36] right, then the dollar falls, inflation
[28:39] gets worse, and bond yields go up even
[28:42] higher as more countries and investors
[28:45] lose confidence and sell more of their
[28:47] US bonds. But if he increases interest
[28:50] rates, the stock market drops because
[28:53] corporate borrowing costs go up. And
[28:56] this whole AI spending boom that's been
[28:58] holding up 93% of US GDP growth now has
[29:03] a much higher cost of capital. Right?
[29:05] Either way, it looks like yields are
[29:08] going to go up and higher yields are the
[29:11] one thing that could pop everything
[29:14] we've talked about like all the paper
[29:16] profits and the circular spending and
[29:18] the $150 billion in corporate bonds that
[29:21] all these companies issue to fund their
[29:23] AI spending, right? All of it gets more
[29:26] expensive and it comes under pressure
[29:30] right at the three biggest IPOs in
[29:32] history. So that is the macro big
[29:35] picture reason for why they might be
[29:37] changing these rules right now because
[29:40] the window might be closing and maybe
[29:43] the people on the inside kind of know
[29:44] that. Okay. So how do you make money or
[29:46] at the very least not lose money in that
[29:48] case? because I don't want you to walk
[29:49] away from this video thinking that
[29:51] investing is bad or that SpaceX or AI is
[29:54] a fraud or a scam or that technology
[29:56] doesn't work. Right? It does work and I
[29:59] think Starlink is genuinely one of the
[30:01] most amazing things that's been built in
[30:03] the last decade and AI is real and it is
[30:06] going to change the world in the next
[30:08] century. But I also think there's a big
[30:10] difference between a technology winning
[30:12] and investors winning. Right? Those are
[30:14] two completely separate things and we
[30:16] have a lot of historical examples of
[30:18] this. Like in the late 1800s, for
[30:20] example, the railroad boom changed
[30:23] America forever. Railroads connected the
[30:26] whole country and they expanded commerce
[30:28] at a scale that was impossible before.
[30:31] They transformed things like agriculture
[30:32] and manufacturing, supply chains,
[30:34] everything. The technology was real and
[30:37] the railroads are still here today. But
[30:40] almost every single investor who funded
[30:42] the railroad boom got wiped out. Those
[30:45] companies went bankrupt and their stocks
[30:47] collapsed. Right? The people who built
[30:50] the railroads lost everything. But then
[30:52] a new group of investors came in. They
[30:54] bought the same railroads out of
[30:56] bankruptcy at pennies on the dollar and
[30:59] they made fortunes. The same thing
[31:02] happened with the fiber optic cable boom
[31:03] of the 1990s. Hundreds of billions of
[31:06] dollars were spent laying cable across
[31:09] the whole country and under the ocean.
[31:11] Right? The companies that laid it though
[31:13] went bankrupt in the dotcom crash. And
[31:16] then a decade later, that same fiber
[31:18] optic infrastructure became the backbone
[31:21] of the internet. That's how you're able
[31:23] to watch this video right now.
[31:25] Technology won, but the initial
[31:27] investors lost. And it was the people
[31:30] who bought those assets afterward that
[31:32] built the world we live in today. That
[31:35] has always been the pattern. And that
[31:37] pattern is what I think will most likely
[31:39] happen with AI. I think it's the initial
[31:42] investors, the people buying at $1.75
[31:46] trillion valuations, the passive funds
[31:49] that are forced in by these rule
[31:50] changes. They're going to absorb any
[31:53] potential losses. the technology itself
[31:56] will keep on evolving and a new group of
[31:58] investors will pick it up at much lower
[32:01] prices and they'll build the next era on
[32:04] top of it. Okay, then so what do you
[32:07] actually do with this information? And I
[32:09] think the first thing is just understand
[32:11] what your index funds actually own
[32:14] because then the next few weeks they're
[32:16] going to own SpaceX and after that open
[32:19] AI and anthropic at values that history
[32:22] suggests is extremely unfavorable entry
[32:25] points for passive investors. Now I'm
[32:27] not saying you should sell everything,
[32:29] but you should know what you own and
[32:31] why. The second thing you might be able
[32:33] to do is actually know where your money
[32:36] should be invested right now to protect
[32:37] yourself against all the possible
[32:39] outcomes because maybe none of this
[32:41] matters. Maybe it's not a bubble, right?
[32:43] Maybe the IPOs will go great and Kevin
[32:46] Worsh might thread the needle at the
[32:48] next Fed meeting. Hermuse might reopen
[32:51] next week. The AI boom might generate
[32:53] returns that justify all the money
[32:55] that's been spent. History might not
[32:57] rhyme this time. Maybe. For me
[33:00] personally, I just like to think that
[33:02] the job of investing is not for me to be
[33:05] right about a specific thing. The job of
[33:08] investing is to put my money into
[33:10] multiple outcomes cuz no one knows
[33:12] what's going to happen based on their
[33:14] probabilities of happening. Now, if
[33:16] you're interested in seeing how I'm
[33:18] preparing and how I'd like to invest,
[33:20] those videos live in the premium member
[33:21] section where you'll also get access to
[33:23] my main videos earlier. And if that's
[33:25] valuable to you, the link is down below.
[33:27] It allows me to make more videos like
[33:28] this one and take on fewer sponsors.
[33:30] Thank you so much for watching this
[33:31] extremely long video and being a member.
[33:33] I hope you have a wonderful rest of your
[33:35] day. Smash the like button. Subscribe if
[33:36] you haven't already. I'll see you next
[33:37] week. Bye-bye.