Your 401K Is Their Exit Strategy (SpaceX, Anthropic, OpenAI)

[00:00] So, we're living in a time that might be

[00:02] remembered as one of the biggest bubbles

[00:04] in history. And that's because in the

[00:06] next few weeks, your retirement account

[00:08] and your 401k is going to be buying

[00:11] shares in some of the biggest IPOs in

[00:15] human history, even though you might not

[00:17] want to. Okay, how's that going to

[00:19] happen? It's going to happen because the

[00:21] rules of the financial system were just

[00:22] rewritten to make sure that your money

[00:25] is going to be buying it automatically.

[00:27] Now, this is actually more than just a

[00:28] theory. Larry Frink from BlackRock,

[00:31] which is the biggest asset management

[00:32] company in the world, said that your

[00:34] retirement funds and pension funds will

[00:37] be used to build out this AI

[00:39] infrastructure.

[00:40] >> And so much of this money, not just the

[00:43] project, is going to be coming from the

[00:44] private sector, from savings accounts,

[00:47] from pension accounts, from insurance

[00:49] companies, and on and on and on.

[00:51] >> So, let me explain how this is going to

[00:53] happen. In the finance world, there's a

[00:55] concept called the IPO or the initial

[00:58] public offering. That's when a private

[01:00] company goes public, right? It's when

[01:02] investors all around the world are

[01:03] finally able to buy shares and invest in

[01:05] a company. And one of those companies

[01:07] that's going public soon is SpaceX. And

[01:11] the value of that company is going to be

[01:13] $1.75 trillion. Now, to put that number

[01:17] in perspective, it would make SpaceX on

[01:19] day one more valuable than every

[01:23] American defense contractor combined. It

[01:26] would also be the biggest IPO in human

[01:28] history, even bigger than Saudi Aramco,

[01:30] which held that record since 2019. The

[01:33] difference though is that Saudi Aramco

[01:35] was the most profitable company on the

[01:37] planet when it listed. But SpaceX lost

[01:40] $5 billion last year. Now, the craziest

[01:43] part about all of this though is that

[01:45] the financial rules that are supposed to

[01:48] protect us from buying these overpriced

[01:50] investments at the wrong time were also

[01:53] just changed right before these IPOs.

[01:56] That's because on May 1st, the NASDAQ

[01:59] introduced something called the fast

[02:00] entry rule, which cuts the waiting

[02:02] period for a company to be included in

[02:04] an index from 3 months to just 15

[02:08] trading days. And what it also does is

[02:11] it gets rid of something called the

[02:13] float requirement that would have

[02:14] disqualified SpaceX, for example, from

[02:16] being included. The rule change will

[02:18] also force index funds to artificially

[02:22] inflate how much of the company they'll

[02:25] have to buy. So, what we now have is a

[02:28] handful of insiders that got in really

[02:30] early at low prices and now they need to

[02:33] exit. And to exit, they need buyers.

[02:36] They need a lot of buyers. buyers that

[02:38] are going to absorb trillions of dollars

[02:40] worth of stock at peak values so that

[02:42] the insiders can walk away. But finding

[02:45] enough of these buyers for the biggest

[02:47] IPOs in history is going to be really

[02:49] hard unless you change the rules. Which

[02:52] means now your 401k might be the exit

[02:56] liquidity they need. Now the story gets

[02:58] even crazier because SpaceX is just the

[03:01] first company in line, but right behind

[03:03] it is OpenAI and Anthropic. They're

[03:06] doing their own IPOs and going public.

[03:08] So, we'll have three companies with a

[03:11] combined valuation of about $4 trillion.

[03:15] So, SpaceX, OpenAI, and Anthropic would

[03:19] leapfrog every other company in America,

[03:22] basically on day one. And that's why

[03:24] some people are saying that this is

[03:26] going to be a bubble the likes of which

[03:29] we have never seen before, and we're all

[03:31] going to fund it with our own retirement

[03:34] money. So, in today's video, I want to

[03:36] show you how this is all going to work

[03:38] and the accounting trick they're going

[03:39] to use to make this AI boom look a lot

[03:41] more profitable than it really is and

[03:43] what you might be able to do about it.

[03:45] So, with that said, let's get into it.

[03:47] Hi, my name is Andre Jick. Hope you're

[03:49] doing well. Come for the finance and

[03:50] stay for the AI bubble. So, first I want

[03:52] to explain exactly how your money is

[03:54] going to end up buying all of these

[03:56] IPOs. This is why the financial

[03:58] industrial complex is as powerful as it

[04:01] is. Because they control the flow of

[04:04] capital, aka the flow of where money

[04:06] goes. Here's how. There's something

[04:08] called the NASDAQ 100. It's basically

[04:11] the gold standard index for tech

[04:13] companies. It tracks the top 100 tech

[04:16] stocks. There's over $600 billion worth

[04:19] of investment products that track this

[04:21] stuff. Meaning when a company gets added

[04:23] to the NASDAQ 100, every single one of

[04:27] these funds that tracks the index is

[04:30] forced to automatically buy that stock.

[04:33] And they don't get a choice or a vote in

[04:35] this. And that automatic buying is worth

[04:38] billions and billions of dollars in

[04:40] demand for whichever company gets added.

[04:42] So getting into the NASDAQ 100 is like

[04:45] being given a money printer cuz the

[04:47] moment that company is included, they

[04:49] get access to hundreds of billions of

[04:51] dollars in passive investment flows that

[04:54] has to buy their stock whether they want

[04:56] to or not. Now what's most interesting

[04:58] though is that the rules around getting

[05:02] into the index just changed on May 1st.

[05:05] The NASDAQ introduced something called

[05:07] the fast entry rule and it changed three

[05:10] things. First, it changed something

[05:12] called the waiting period because before

[05:14] a new company had to wait until the

[05:16] NASDAQ's next yearly review before it

[05:19] could be added, and that could take up

[05:20] to a year. The fasttrack entry rule cuts

[05:24] that down to just 15 trading days. Now,

[05:27] the second thing it changed was

[05:28] something called the float requirement.

[05:30] A float is the percentage of company

[05:32] shares that are available for the public

[05:35] to buy and sell. So for example, if I

[05:37] was a company and I had 100 shares in

[05:40] total, but only 10 were available for

[05:43] people to invest in, my float would be

[05:46] 10%. Okay, but in the old rule, the

[05:49] NASDAQ wanted a minimum 10% public float

[05:52] to even qualify for an inclusion into

[05:54] the index. But SpaceX is planning to

[05:57] list with a float of around 4 to 5%. So

[06:00] under the old rules, that would be an

[06:03] automatic disqualification. Now the

[06:05] third change is a hidden multiplier

[06:09] right and what that means is for any

[06:11] company listing with a float less than

[06:14] 20%. The NASDAQ now artificially

[06:18] inflates how the stock is weighed in the

[06:21] index. So a 4% float gets treated as if

[06:24] it were 12%. A 5% float is treated like

[06:27] 15%. So this multiplier is now 3x, which

[06:31] means index funds are now legally

[06:34] required to buy more stock than the

[06:37] actual available supply would normally

[06:39] justify. Now, what's important to

[06:40] understand here is that the NASDAQ

[06:42] didn't just write these rules for SpaceX

[06:44] specifically. They wrote them for a

[06:46] whole class of companies and SpaceX just

[06:49] happens to be the first in line for

[06:51] these IPOs, but right behind them is

[06:54] OpenAI and Anthropic, and they're

[06:57] planning to do their own public

[06:58] listings. So, just three companies that

[07:00] are going public are going to be

[07:01] potentially funneling as much as $4

[07:03] trillion worth of newly issued stock

[07:06] into passive retirement accounts within

[07:08] a couple months of each other. And the

[07:10] NASDAQ, by the way, is not alone. The

[07:13] FTSE, Russell, another index is doing

[07:15] the same thing. They are allowing the

[07:18] index inclusion after just 5 days,

[07:20] right? S&P is doing the same thing. So,

[07:24] what we have is every major index

[07:26] provider is racing to update their rules

[07:29] at the same time. Now, you could look at

[07:31] this and say, okay, well, maybe the

[07:33] rules needed updating. Maybe the system

[07:36] just needed a firmware upgrade. Maybe.

[07:39] Some people say though that the timing

[07:40] of all of this is just very suspicious

[07:43] because every single one of these rule

[07:45] changes was announced just weeks and

[07:47] months before the biggest IPOs in human

[07:50] history. Right? All of these companies

[07:52] are being listed within just months of

[07:54] each other. So that is the mechanism of

[07:57] how your retirement account will end up

[08:00] owning SpaceX, OpenAI and Anthropic

[08:03] whether you want to or not because the

[08:05] rules are changing to accommodate them.

[08:09] So now the question is well why are they

[08:11] trying to force everyone to buy these

[08:13] companies and why right now? Now

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[08:59] let's get back to it. Okay, so why are

[09:01] they trying to get everyone to buy these

[09:03] IPOs? And the basic answer is that these

[09:06] companies need to sell trillions of

[09:08] dollars worth of stock. And the only

[09:10] buyer that's big enough to absorb that

[09:12] much supply is the passive investment

[09:14] complex. the trillions of dollars that's

[09:17] sitting in our 401ks and index funds

[09:20] across the whole country because

[09:22] remember passive investors don't choose

[09:24] what they buy. They just buy whatever

[09:26] makes up the index. So if you want a

[09:30] guaranteed demand for your IPO, you

[09:33] don't go to the investors and try to

[09:35] pitch to them. You just try to get into

[09:37] the index. But if the rules say, well,

[09:40] you don't qualify for the index, you

[09:42] change the rules, right? That is the

[09:44] name of the game. But for this game to

[09:47] work though, they need something else.

[09:50] They need an epic story, right? They

[09:52] need a dream because investors love to

[09:55] buy the dream. And SpaceX has one of the

[09:58] 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.