Paul Tudor Jones Just Gave Stock Market Warning (What You Need To Know)
Summary
Market Outlook: Paul Tudor Jones compares the current AI market to the 1999 tech bubble, suggesting a potential short-term rally followed by a significant downturn.
Investment Strategy: Jones emphasizes the importance of risk management and timing in trading, highlighting that average investors often fail to exit markets before downturns.
Asset Diversification: The podcast criticizes the binary investment mindset of all-in or all-out, advocating for diversification into assets like gold, commodities, and international equities.
AI Market Skepticism: Despite the anticipated exponential demand for AI, the podcast questions the current economic viability and sustainability of AI investments, drawing parallels to the dot-com bubble.
Historical Perspective: The discussion reflects on past market cycles, illustrating that buy-and-hold strategies can be risky if not aligned with market fundamentals and valuations.
Investment Caution: The podcast advises caution against following popular investment narratives without critical analysis, warning of potential overvaluation in the AI sector.
Strategic Insights: The podcast encourages investors to consider both bullish and bearish arguments to avoid confirmation bias and make informed investment decisions.
Community Engagement: The host promotes Rebel Capitalist Pro, a community focused on investment strategies that prioritize risk-reward balance and wealth protection.
Transcript
Hello fellow Rubble Capitals. Hope you're well. So I wanted to go over or take a deep dive into this AI story. It's all about the bubble. And in fact, Paul Tudtor Jones came out today and said that this reminded him of 1999. A lot of people are taking that to mean that he's very bullish. And I guess maybe in the short term you could interpret it that way. But in the longer term, as we all know, 1999, we're going into 2000, that did not end well. So, let's go right over to this headline. They did an interview with him on CNBC. I'd strongly suggest watching it, but I can go ahead and summarize it for you. Paul Tudtor Jones, ingredients are in place for massive rally before a blowoff top to a bull market. So most everyone on Twitter that I see that's extremely bullish and bullish on AI, they are looking at this and a lot of the Bitcoiners as well, they're like, "Oh my gosh, look at this. Paul Tudtor Jones is going to be a blowoff top. So you got to get in the market. You got to get in the market. You got to get in the market." That's what most people hear where when I hear of a blowoff top, maybe I'm just overly conservative, but I don't really want to participate in a bubble. um there's far more other things that have better value or the riskreward is better. And a lot of people make the big mistake of thinking in binary terms. So either you have to take 100% of your net worth and put it into the S&P 500. That means you're bullish and you think it's going up. Or you have to take 100% of your net worth out of the S&P 500 or Nvidia or Google or whatever you got it in and put it into cash. Those are your only two options. So if you're not in the market, then you're going to be missing out on all these gains. As if things like gold don't exist. As if things like gold miners or silver miners or commodities or commodity producers or equities in other markets. It's like these things don't exist. There's a lot of other assets that we could invest in where again the riskreward makes a little bit better sense. But let's go into this idea. And then what Tutor Jones says is he likes gold. He likes uh crypto. I don't know that he mentioned Bitcoin specifically. The Bitcoin of course are taking it that way. But um he's he's basically okay. The government's spending a lot of money. the Fed is lowering interest rates and we've got just this mania and we've got a great story and that's the recipe for a bubble. That's a recipe for a mania. That's a recipe for hysteria. Now keep in mind Paul Tudtor Jones is one of the most famous traders of all time there. There's no getting around that. But his time frame for placing bets is maybe I mean I I don't know his style. I would guess it's maybe 1 day to 3 months, something like that. So, you you've got to take a step back and look at his time frame or look at what he's saying through that lens. It's not like he's putting capital to work for the next three years or the next 5 years. And one of the things that he makes very very clear is he thinks it's a blowoff top. He doesn't know how it ends. Maybe it ends in a massive crash like the.com bust. Maybe it's just a slow grind down. He doesn't really know. But he's like, "For me as a trader, I've got to play this rally, but I've got to do it with," he says it in different terms, but he's basically if you have to do it, you've got to be on point with your risk management, and you've got to know when to bail. And unfortunately, the average investor, the average Joe J, they don't know when to bail. In fact, instead of bailing, what they usually do is just dollar cost average their way into bankruptcy. But Paul Tutor Jones isn't going to do that because he's an expert. Okay, so now let's think about the the.com bus and then we're going to go into the AI bubble that's really driving this. Now I know a lot of people also make the mistake of conflating demand for AI with the economics. So whenever I do a post on Twitter and that that's regarding the economics, the rebuttal that I get from the bulls is okay AI doomer you you know AI is taking over the world basically that that's what they're saying and I don't disagree. I don't disagree with that at all. I think AI will be just as big. Who knows, maybe bigger than the internet, but that doesn't mean that the economics work right now and it doesn't mean that the economics will ever work. Um, not that we won't have it, but you might have to have some sort of a subsidy. In fact, we're going to go into an a blog post from CPY where he makes the argument that it's very similar to the railroads and it might become an interest uh or a national security issue. And especially with the Trump organization, I'm sure that he would have no issues whatsoever getting in the mix here as far as getting the government in the mix to prop up the AI industry if there's that aha moment that emperor is wearing no clothes moment where they realize that, oh, hey, unfortunately, the math doesn't work. And I get the arguments, and we're going to be going over that. And the arguments of course are that right now it's just B TOC and that's why OpenAI is losing all this money because they've got to integrate it into the the the general psyche for the average Joe and Jane and the whole entire world. They've got to get these 1 billion users and that's what's going to drive the adoption from a B2B standpoint. And once they do B2B then they're going to raise the prices and that's when they're going to make all of these trillions of dollars that are going to justify the capex spend. I get it. I get it. I get it. I get it. But even when you do the math, using that as your base case, you still run into problems. So now that we know what Paul Tutor Jones is saying, what he's warning about, then now let's go over to an actual chart of the S&P 500, and I want to use this for a whiteboard video I'm doing tomorrow. So, the problem here, and this is why I always in my in my videos when I'm trying to go over strategies that work and that are proven and then strategies that don't, I always tell people to be very very careful of buy and hold. Extremely careful of that narrative and the dollar cost average thing. It's time in the market. It's not timing the market. This is nonsense that you can you can cherrypick time frames when that has worked. Absolutely. But you can also look at decades where that doesn't work. In fact, if you go back to the 1930s, take it 1930 to 2020. There were just as many decades where it did not work versus where it did work. It was about split 50/50. And then there was one decade where you were about flat. So what was the common denominator with all the decades that it did work is during at the beginning of that decade stocks started out S&P 500 very cheap. But we know in 2020 the stock market was not cheap. It was very expensive and it's just even more expensive today. So keep that in mind. But going back to 1999 or 1998, we see the S&P 500 was right around call it a thousand and then we go straight up to call it 1500. So just in that last 12 months, maybe 16 months, you had a 5050% increase in the stock market. This is what Paul, excuse me, Paul Tudtor Jones is talking about. This is the blowoff top. And then what happens usually when you get a a blowoff top, that's kind of the definition of a blowoff top, is you have a crash. And I don't know that there are any real good examples of a blowoff top without a crash. Um, but this is what happened during the com bust as we go from 1500 and we go down to call it 800. So way below where we started in 1999. And think about the attitude back then. It was the exact same narrative which was correct by the way. The narrative was the internet was going to change the world. They were all correct. They were absolutely 100% correct. It's just the prices of the stocks didn't reflect the economic reality of the next three years. although it might have reflected the economic reality of the next 20 years. So then we have this big draw down. But here here's the key guys. Even in nominal terms, and obviously this would be far worse if you adjust for inflation, the market didn't get back up to the same level that it was in August of 2000 until basically 2013. So 13 years. 13 years. And by the way, if you're dollar cost averaging all the way down, you know, you're probably going to get to a point where you have to tap out and you've got to sell and just lick your wounds prior to it going back up to where it was to begin with. So this is again, this is why I say the buy and hold, the dollar cost average, this is you got to be very very careful with that. And usually you have to do the opposite of what those financial planners tell you. You have to do the opposite of what the gurus tell you. You have to do the opposite of what Dave Ramsey tells you. And it's not just George Gammon saying that. Just simply look at a chart. In fact, right here, I mean, you can look at a inflation adjusted chart going all the way back. Let's do all real quick. And I mean, just look at this. You you've got right here in 1928. You fast forward to 1980, that's a pretty long period of time, call it 50 years, and the stock market was flat in real terms. Not exactly something you could retire on, but there's times there's decades in there like the 1950s when it skyrockets. But you've got to remember the 1950s started off with the S&P 500 very cheap where the call it the 1930s started off with a big crash but prior you know 1929 or so started off with stocks much more expensive and you get to 2000 to 2010 obviously they were lower but the stocks started off very very expensive. So you you have to consider the fundamentals in in order to determine whether or not you should quote unquote buy and hold. But now let's go over so now that we understand kind of the lay of the land through the lens of Paul Tudtor Jones who has been doing this since the late 80s and obviously doing it at an extremely high level. we have now that we look at the risks and if this is the.com now let's look at both arguments because I you guys know me well on on Twitter people don't really watch my videos so they don't really understand the fact that I try to look at both sides of the equation I try to look at the bull argument and the bear argument and then come to a conclusion as to which I think is the most probable able outcome. So, and I want to present that my videos. If there's a bull argument, I want to present that and I I want you guys to think it through. We should never just live in this, you know, it's not a prudent investment strategy to just live in an echo chamber. You know, seeking out confirmation bias. That that's a really bad investment strategy. It might be good for it might be good for uh YouTube videos or channels or something like that, but it's ter it's a terrible investment strategy. So, let's not fall victim to that. And what I want to do first and foremost is I and I think you guys will get a kick out of this. So, the most famous um kind of representative of the.com bust as we all know is pets.com. it was pets.com. So I thought it would be fun to go to chatgpt and say what was the bull argument back in 1998 for pets.com because we look, you know, with the with hindsight being 2020, we look at pets.com and like what a bunch of idiots that were buying that company. I mean, who would have been that stupid? They didn't even have revenue, man. What a bunch of morons. Yet, we don't realize that if we were in the exact same situation with the exact same information at our disposal and we couldn't see the dot bus coming, we likely would have done the exact same thing. It's not like they were stupid back then. They were just whipped up into a frenzy very similar to what you see right now. So, let let's try for a moment. Let's just do a thought experiment. Let's try to take a time machine back to 1998 and imagine what it would have been like to actually be there without knowing what was going to happen in the future and being there at the beginning of the internet age when it when it was just seeing mass adoption and everybody talking was talking about how it's going to change the world and they were right. They were absolutely right. But let's look at the bull argument for Pets.com. And by the way, don't dismiss this as, "Oh, those people were just idiots investing in Pets.com." Do you know who their one of their biggest investors were? Pets.com. That would be Jeff Bezos in Amazon. So, it wasn't all idiots buying Pets.com. But here's according to Mr. GPT. And again, you can see that I think demand for AI is absolutely going to go exponential. Absolutely, it is. No doubt about it. No doubt in my mind. But the economics don't make sense right now. Although they probably will in 10 years, but since the economics don't make sense right now, we're still going to get it. There's still going to be the capex spend. But the prices of the stocks in this circular AI economy or ecosystem, they don't make sense. Well, they're way overvalued. Let's just say that based on my calculation. Now, you may come to a different conclusion, but these things usually don't end well. And and human beings have a tendency of taking a story and then just taking it to an extreme and getting out over their skis the whole thing busts and then people come in and buy it at a reasonable price and that's where the money is made. I'm going to get to this. You guys are going to love this bull argument for pets.com. But before I do, let's go over to Cisco because this was another poster child for the com bust. And look at this. From 1999, it started at call it 20 bucks, 23 bucks, and then it went straight up to looks like 80 and then it came crashing down to 12. Now, if you were one of the people buying it here at 50, 60, 70, 80, and then it had this dip down and you're like, "Oh, buy the dip. Buy the dip. Buy the dip." All those stupid dot doomers, they don't know what they're talking about. You would have gotten annihilated. And by the way, the reason it can go just completely parabolic is because retail is getting involved and they're the ones that inevitably get crushed, right? The Paul Tutor Jones, they're buying in here and then they're selling right here and then they're buying right here again. You see? So, think about this. If you would have bought Cisco in 2002 when it was 11 bucks, that would have been a good investment, great investment. Or even 2015 or so when it, like he always says, when it gets past that little bit of a high right there on a good trend, that's usually a good time to buy on a long-term chart. So that there's times in here when Cisco would have been a great investment, but it's when the economics made sense versus the share price at here. This was just silly talk. This was FOMO. This was mania. This was hysteria. And it's not that Cisco was going to go bust or that Cisco wouldn't be there into the future. No, absolutely. And it's not that Cisco wouldn't benefit from the new world that we're going into with this new technology called the internet and all the things that it's brought into our lives. That was absolutely true, but it didn't make sense at 80. It only made sense at 10 or 11. And that's really the point. Okay, let's let's go back to the bull argument for pets.com. Here's what the bulls argued according to chat GPT. first mover advantage. And you know when I was reading this earlier, I tried to just like open my mind, free my mind, try to be completely objective and without bias. And I wanted the bull argument to see if it kind of made sense. Like I was like, "Oh, yeah, yeah, yeah, yeah. Okay, yeah, I I I get that. I get that." And I think that if you guys are able to do that, just keep an open mind here that I'll go through these and you'll be like, "Okay, they've got a good point." Here we go. First mover category creation advantage. Pets.com was among the first to focus exclusively on pet supplies in e-commerce, a vertical niche. Bulls believed that the established branding, logistics, customer habits, early pets.com could monopolize the online pet supply market. Another thing you'll notice is these arguments are almost exactly exactly exactly what you hear today. Almost exactly. And you may say, "Yeah, George, but Pets.com didn't have revenue. Open AAI has revenue." Yeah, great. Open AAI has revenue. They've got expenses of 400 billion and revenue of 12. Woohoo. Like, would you rather be Pets.com with no revenue and expenses of let's just say 2 million or would you rather be open AI with 12 billion and expenses of 4? You know, it's not 400. I'm I'm exaggerating obviously, but you get my point. It's not like just because you have revenue that means that you've got this awesome business where you're just going to print money. If your expenses are 10 times your revenue, you still got a problem, at least in the short term. Okay. They thought once customers used it, switching cost or convenience would lock them in. Massive market opportunity and online penetration upside. The pet product market was large and growing. E-commerce was assumed to be the future of all retail. It was. It was. But it didn't make sense in 1999. Bulls assumed that over time more consumers would shift purchasing of mundane goods, pet food, litter, toys online. Again, they were right. But it didn't happen until 2015. Even if the margins were low initially, volume would make up for it. Have you heard that before? Network scale economies in fulfillment, logistics, and marketing. The more orders, the more you could spread warehousing, shipping, and infrastructure costs over a larger base. Scale would drive down unit costs and shipping inventory handling. Also, large marketing spend, brand awareness would pay off. Early investment in brand equity. I mean, it sounds like Amazon. I mean, it's basically Amazon. It's just one turned into Amazon and one went tits up, which is usually what happens in these things. So, what you want to do as a prudent investor is wait till the dust settles and then go ahead and pick the winners. You know, it's like my buddy Rich Cooper. He talks about women doing this all the time. And it it's it it's true. I don't want to knock on the gals here, but what they do is they don't care about your journey as a guy. All they do is stand at the finish line and they just pick the winners, right? So, you as an investor should do the exact same thing gals do when they're out there dating. You don't you don't care about their journey. You don't care about their hardship. You don't care about the 18-hour days. The only thing you care about is at the end of the finish line, they've got a private jet. Learn from the women here. That's a good investing uh a good investing lesson. All right, let's keep going. Strategic partnerships and domain distribution leverage. Here you go. Amazon invested early in pets.com. A majority stake in early rounds wasn't all dummies, was it? That gave access to Amazon's user base, brand, credibility, marketing channels. But what's happening right now? Open AAI. Oh, well, they're investing in Oracle. Oh, this is a great strategic move. And Nvidia, well, they're investing in OpenAI. Well, this is a great strategic move. The exact same stuff. The domain name pets.com itself was premium asset. They also sought tie-ups with portals so they could drive all this traffic. So they had all these great partnerships for traffic coming into pets.com. They're going to monopolize the vertical. They're going to and once people start shopping at pets.com, they're going to get used to it. They're going to have a network effect and then they're going to buy everything from pets.com and you just keep growing and growing, growing, growing. distribution of retail middle. They could cut out the middleman tax. This is genius. Bulls thought in traditional pet supply chains, margin stacking, distribution physical stores left room for a direct consumer model to undercut them and still make money. For the 50th time, they were absolutely right. What they're describing is Amazon. They're describing modern-day Amazon. Get scale first, monetize later. The echoes of familiarity, the idea that growth and market share mattered more than short-term profits. Focus on building a large customer base, brand awareness, logistical footprint, then later figure out the profitability, pricing, upsells. There's so much demand. It's just there's so much demand that we don't have to worry about being profitable. Well, we don't have to worry about making money. As long as there's the demand, we'll be okay. Maybe, maybe not. Brand and viral marketing as a moat, the sock puppet mascot, and aggressive advertising campaign, Super Bowl ads, Macy's parade, TV, radio were intended to make Pets.com a household name. The And Open AI, what are they doing? They're giving away their stuff for free. Why? to make it a household name to then encourage B2B adoption. Assume future improvements in infrastructure logistics. Bulls assume that shipping costs, fulfillment technology, inventory management systems, and supply chains efficiency would improve over time, increasing margins. What are they talking about now? Oh, George. Well, you can't focus on the fact that they're spending this much on capex or they're spending this much on energy because in the future these costs are going to go down dramatically. These costs are going to go down dramatically. What they forget and that's absolutely true. It is 100% true. But unfortunately, when your costs go down, guess what happens to the amount you can charge for that product or service? especially when it's a commodity like AI that goes down as well. So you get to the point with AI especially with the with um the providers like OpenAI or um Anthropic something like that where there it's just a race to the bottom. So let's just say that it costs them $5 to provide a an AI or to to give a a business access to an AI bot. Okay. Or to chat GPT, let's say, let's just say that it costs chat G or open open AAI, excuse me, $5 to do this because of the electricity, because the water, the cooling, the the infrastructure and whatnot. Okay. Well, and let's just say that right now or at the beginning they can charge the business $100 or $300 a seat for this. Okay, fantastic. But then Anthropic is going to come down and say, "Okay, well, we'll do it for 250." And then OpenAI is going to say, "We'll do it for 200." And then they're, "Oh, we'll do it for 150." and then we'll do it for 50. And then you just until the point where they basically turn into a utility. They turn into Verizon or AT&T. And it's not that they don't exist. And it's not that they don't make money, but it's just that they have these razor thin margins and they can't really grow because everyone already uses a cell phone. And what's your growth strategy? And it becomes this commoditized utility where it still exists. It still makes money, but it ain't worth a hundred times revenue. Now, it's only worth a PE of five. And that's the big discrepancy, one of the big discrepancies. Assume future improvements in in okay, we talked about that. Lock in via data, customer, lifetime value, repeat purchases. And this is the argument for the B2B, right? because they're saying that well Microsoft is going to spend all this money and even if they have to use the AI as a loss leader to incorporate it into Azour I think is their that's their business product or something like that their CPM. Um the argument there is well they're going to get so many more customers that even with AI as a loss leader well then it still makes sense and now Microsoft has them in that ecosystem. That's fine. But even that math doesn't work. Even that math doesn't work. Because at a certain point, Open AI can't charge less than it costs them. And then you have to ask, okay, well, if what it costs Open AI, is that worth it to Google? And let's just say that uh it costs them $30 billion a year, they Google to incorporate this into Azure, which has more network effects, incorporate this AI. The question is, can they make more than $30 billion a year with additional customers for Azour? And that's sketchy when you consider the fact that even right now after this has been available to the general public for quite some time and they have a lot of competition in the space, it would be very hard to get that additional bump to where it would make sense. So, it's very similar for the the Googles of the world and the Microsofts of the world. It's very similar to a McDonald's type model, just to make it super simple for everybody. And what most of you guys know is McDonald's actually loses money on the hamburgers. So, if they sell you a burger, they're probably losing 5 cents. So, you say, "Well, George, why do they sell the burgers?" Because they sell the burgers to get you to buy the soft drink. Because the soft drink is where they have the margins. You see? So the argument there is that Microsoft well okay fine by using OpenAI or incorporating this into Azour or whatever it's called then they're going to be willing to pay OpenAI this high amount and use that as a loss leader like selling a hamburger for 5 cents less than they have to pay because they're going to be able to make it up with the Coca-Cas in the back by people using cloud and getting this network effect. This is the exact same argument, exact same argument they were using for pets.com. And now it goes into where the why the bullish argument was overly optimistic. So I'm assuming a lot of you on um this live stream right now or that watch it after the fact will have access to chat GPT or Gemini just go ahead and do the exact same thing. I would strongly encourage you whenever you're trying to make an investment decision just and let's just say you're bearish. Okay, we'll tell chat GPT to give you the bullish argument or vice versa. It's a very very very useful tool. Again, my argument has nothing to do with the fact that it has nothing to do with my belief that AI won't change the world or it's over. No, I I think the opposite. I think it's probably underhyped if anything and I think it's very very useful and I think it'll be even more useful and demand will absolutely go exponential just like the internet. Okay. Now, what I want to do is just after going through a lot of these thought experiments with chat GPT today because I've I've personally tried to get my head around this and a because I'm looking for opportunities and then b I'm I'm my initial gut instinct here especially when I started looking at the round tripping and a lot of the things that we've been talking about on this channel. My gut instinct was well this doesn't end well. But I I wanted to be like, well, maybe I'm wrong. So, let me hear the best counterargument to that and let me think that one through. So then what I did is I started using some analogies and started trying to think of some analogies once once I went back and forth with chat GPT, ironically enough, OpenAI, uh I I came to an analogy that I think will really help you understand the bull argument and then maybe the bear argument. And it was basically looking at OpenAI as selling Ferraris. So if you if if someone was selling Ferraris for $20, what do you think the demand would be for Ferraris? Probably pretty high, wouldn't it? It would be extremely high. And then you say, "Well, George, they're not going to always sell Ferraris for $20 because that's just to the the average Joe and Jane public. what their objective is is to sell Ferraris for $250,000 to businesses because these businesses have to have those Ferraris. And let's just assume for a moment that the Ferrari costs them $200,000 to make. Okay, fine. So then you have a business that uh says, "Okay, I have to have a Ferrari. I I have to have one or else people won't buy my product. People won't buy Azour. or my CPM or my cloud computing or whatever it is. So, you say, "Fine, I'll go ahead and just spend the $250,000 to buy that Ferrari that I absolutely have to have." But then Anthropic comes in and says, "Okay, well, we're making Ferraris as well, and you really can't tell the difference between the two. We'll give it to you for 225,000." And then like I said earlier, you just go all the way down till you get to a point where they're selling the Ferraris to the businesses for 2 thou or $200,1. And so that's when they turn into Verizon. So then the question becomes can the purchaser of the Ferrari, the business, the cloud computing company let's say, can they make more than $200,000 that they have to pay for the product to begin with. And maybe, maybe they can't, maybe they can, maybe they can't. So then the winner becomes the guy that has the most upsells on the back end. So you upsell them cloud, you upsell them this, you upsell them that, you upsell them this, and they're the guy that's going to be able to afford to pay the price. The guy, the gal, it's going to be able to pay the price, whereas no one else is going to be able to afford to pay the 200,000 because on the back end, they're only making 150,000. So it doesn't make any sense for them. the what they have to do is they basically have to kind of keep up with the Joneses for as long as they can until they go out of business. So, let's just say that you've got Google that can afford to pay the $200,000 for a Ferrari, but you have all these other startups that are kind of nipping at their heels that don't have the ad revenue, that don't have all these other revenue streams, YouTube as an example, and then they're like, "We can't pay 200,000. There's no way. But we're going to pay the 200,000 as long as we can because if we don't, we're out of business tomorrow because then all of our customers will go over to the guy that has the Ferraris. But then what happens is all these other businesses go bust and then what happens to the supplier of the Ferraris? Well, they sell a lot less product, don't they? they sell a lot fewer product Ferraris because now they're only selling the Ferrari to the last man standing. Let's just say it's Google. So, this is how you have to look at the economics. You have to because when you start getting in the weeds and you hear like the Wall Street analysts and it's like they're all salesmen at the end of the day. And whether they're selling you a bearish argument or a bullish argument, they're still just trying to sell you. and they're going to sell you with fancy words and terms and all these things. At the end of the day, when the rubber meets the road, no pun intended, it's just all about simply how much does it cost to deliver for the the the people making the Ferraris, right? And will that cost go down? Yes. But then what's going to happen if their costs go from 200,000 down to 100,000? Guess what's going to happen to their price that they're going to be able to charge due to competition? that goes down as well. So you get to a point where instead of charging $200,1 now they're just charging $100,0001. And then that is absolutely going to benefit the people buying the Ferraris because now maybe the economics make more sense if they're able to monetize on the back end. But that to get from A to Z takes 10 years just like we proved with that Cisco chart. It doesn't happen in 3 months. And you've got to have this wash out, right? And that's what the free market's all about. That's what the free market's all about. So, you know, my base case here is that this plays out exactly like the.com bust and that the in that AI plays out exactly like the internet. That if we fast forward 15 years, we can't even fathom a world without AI. And but it's a bumpy road. It's a bumpy bumpy road from get getting from A to B. And the story, the narrative is going to create massive hysteria, massive FOMO, a huge mania that we may be just at the beginning of. And we could see, who knows, we could see the MAG 7 triple in the next year. But watch out below. Watch out below because that for for most of the investors in this that doesn't end well because they don't have the skill set of a Paul Tudtor Jones. Now I want to give a huge shout out guys. If you want to understand the math a lot better I cannot recommend this blog post from Cuppy enough. It is fantastic. And he actually he's done a couple of these blog posts, but uh the first one was so popular that he had actually a lot of people within the AI space, a lot of insiders calling him and telling him that basically they're scared out of their minds, that he's spot on. And then you had a couple people call him that had a bull argument that he actually thought about and he included in his second kind of follow-up post. So you guys have to check this out. It's right here. I'll go ahead and put the and I was I maybe I'll go over I've highlighted the whole thing because I wanted to go over this with you guys, but I don't want to turn this into an hourong video. So, I'll just go ahead and copy this and I'll put it in the chat right here. And then Josh, can you do me a favor and can you just put that in the description of the video so if people want they can go and it's this is maybe a 10-minute read and it is absolutely worth your time. I mean I would I would if you whatever you're doing tonight I would just take five minutes 10 minutes aside and read this and it's it's just pure gold. No pun intended. And if you guys want more insights like this, it's exactly what we do in Rebel Capitalist Pro. This is the private online investing community. I with Lynn Alden and Chris Macintosh. And it's it's not just all bearish and just buy gold and whatnot. We talk about stocks, maybe not in the S&P 500, maybe not in the AI space, but stocks where the riskreward makes a lot more sense. maybe in the commodity space or maybe outside of the United States or maybe other strategies where they actually where we're not getting caught up in the hysteria and the FOMO and it's all about not only growing your wealth but protecting your wealth. If you want to check that out, you can just go to uh it's it's Rebel Capitalist. I don't know what the URL is. Josh, just go ahead and put that one in the description as well. Okay, guys. Enjoy the rest of your evening. As always, make sure you are standing up for freedom, liberty, free market, capitalism, and we'll see you in the next video.
Paul Tudor Jones Just Gave Stock Market Warning (What You Need To Know)
Summary
Transcript
Hello fellow Rubble Capitals. Hope you're well. So I wanted to go over or take a deep dive into this AI story. It's all about the bubble. And in fact, Paul Tudtor Jones came out today and said that this reminded him of 1999. A lot of people are taking that to mean that he's very bullish. And I guess maybe in the short term you could interpret it that way. But in the longer term, as we all know, 1999, we're going into 2000, that did not end well. So, let's go right over to this headline. They did an interview with him on CNBC. I'd strongly suggest watching it, but I can go ahead and summarize it for you. Paul Tudtor Jones, ingredients are in place for massive rally before a blowoff top to a bull market. So most everyone on Twitter that I see that's extremely bullish and bullish on AI, they are looking at this and a lot of the Bitcoiners as well, they're like, "Oh my gosh, look at this. Paul Tudtor Jones is going to be a blowoff top. So you got to get in the market. You got to get in the market. You got to get in the market." That's what most people hear where when I hear of a blowoff top, maybe I'm just overly conservative, but I don't really want to participate in a bubble. um there's far more other things that have better value or the riskreward is better. And a lot of people make the big mistake of thinking in binary terms. So either you have to take 100% of your net worth and put it into the S&P 500. That means you're bullish and you think it's going up. Or you have to take 100% of your net worth out of the S&P 500 or Nvidia or Google or whatever you got it in and put it into cash. Those are your only two options. So if you're not in the market, then you're going to be missing out on all these gains. As if things like gold don't exist. As if things like gold miners or silver miners or commodities or commodity producers or equities in other markets. It's like these things don't exist. There's a lot of other assets that we could invest in where again the riskreward makes a little bit better sense. But let's go into this idea. And then what Tutor Jones says is he likes gold. He likes uh crypto. I don't know that he mentioned Bitcoin specifically. The Bitcoin of course are taking it that way. But um he's he's basically okay. The government's spending a lot of money. the Fed is lowering interest rates and we've got just this mania and we've got a great story and that's the recipe for a bubble. That's a recipe for a mania. That's a recipe for hysteria. Now keep in mind Paul Tudtor Jones is one of the most famous traders of all time there. There's no getting around that. But his time frame for placing bets is maybe I mean I I don't know his style. I would guess it's maybe 1 day to 3 months, something like that. So, you you've got to take a step back and look at his time frame or look at what he's saying through that lens. It's not like he's putting capital to work for the next three years or the next 5 years. And one of the things that he makes very very clear is he thinks it's a blowoff top. He doesn't know how it ends. Maybe it ends in a massive crash like the.com bust. Maybe it's just a slow grind down. He doesn't really know. But he's like, "For me as a trader, I've got to play this rally, but I've got to do it with," he says it in different terms, but he's basically if you have to do it, you've got to be on point with your risk management, and you've got to know when to bail. And unfortunately, the average investor, the average Joe J, they don't know when to bail. In fact, instead of bailing, what they usually do is just dollar cost average their way into bankruptcy. But Paul Tutor Jones isn't going to do that because he's an expert. Okay, so now let's think about the the.com bus and then we're going to go into the AI bubble that's really driving this. Now I know a lot of people also make the mistake of conflating demand for AI with the economics. So whenever I do a post on Twitter and that that's regarding the economics, the rebuttal that I get from the bulls is okay AI doomer you you know AI is taking over the world basically that that's what they're saying and I don't disagree. I don't disagree with that at all. I think AI will be just as big. Who knows, maybe bigger than the internet, but that doesn't mean that the economics work right now and it doesn't mean that the economics will ever work. Um, not that we won't have it, but you might have to have some sort of a subsidy. In fact, we're going to go into an a blog post from CPY where he makes the argument that it's very similar to the railroads and it might become an interest uh or a national security issue. And especially with the Trump organization, I'm sure that he would have no issues whatsoever getting in the mix here as far as getting the government in the mix to prop up the AI industry if there's that aha moment that emperor is wearing no clothes moment where they realize that, oh, hey, unfortunately, the math doesn't work. And I get the arguments, and we're going to be going over that. And the arguments of course are that right now it's just B TOC and that's why OpenAI is losing all this money because they've got to integrate it into the the the general psyche for the average Joe and Jane and the whole entire world. They've got to get these 1 billion users and that's what's going to drive the adoption from a B2B standpoint. And once they do B2B then they're going to raise the prices and that's when they're going to make all of these trillions of dollars that are going to justify the capex spend. I get it. I get it. I get it. I get it. But even when you do the math, using that as your base case, you still run into problems. So now that we know what Paul Tutor Jones is saying, what he's warning about, then now let's go over to an actual chart of the S&P 500, and I want to use this for a whiteboard video I'm doing tomorrow. So, the problem here, and this is why I always in my in my videos when I'm trying to go over strategies that work and that are proven and then strategies that don't, I always tell people to be very very careful of buy and hold. Extremely careful of that narrative and the dollar cost average thing. It's time in the market. It's not timing the market. This is nonsense that you can you can cherrypick time frames when that has worked. Absolutely. But you can also look at decades where that doesn't work. In fact, if you go back to the 1930s, take it 1930 to 2020. There were just as many decades where it did not work versus where it did work. It was about split 50/50. And then there was one decade where you were about flat. So what was the common denominator with all the decades that it did work is during at the beginning of that decade stocks started out S&P 500 very cheap. But we know in 2020 the stock market was not cheap. It was very expensive and it's just even more expensive today. So keep that in mind. But going back to 1999 or 1998, we see the S&P 500 was right around call it a thousand and then we go straight up to call it 1500. So just in that last 12 months, maybe 16 months, you had a 5050% increase in the stock market. This is what Paul, excuse me, Paul Tudtor Jones is talking about. This is the blowoff top. And then what happens usually when you get a a blowoff top, that's kind of the definition of a blowoff top, is you have a crash. And I don't know that there are any real good examples of a blowoff top without a crash. Um, but this is what happened during the com bust as we go from 1500 and we go down to call it 800. So way below where we started in 1999. And think about the attitude back then. It was the exact same narrative which was correct by the way. The narrative was the internet was going to change the world. They were all correct. They were absolutely 100% correct. It's just the prices of the stocks didn't reflect the economic reality of the next three years. although it might have reflected the economic reality of the next 20 years. So then we have this big draw down. But here here's the key guys. Even in nominal terms, and obviously this would be far worse if you adjust for inflation, the market didn't get back up to the same level that it was in August of 2000 until basically 2013. So 13 years. 13 years. And by the way, if you're dollar cost averaging all the way down, you know, you're probably going to get to a point where you have to tap out and you've got to sell and just lick your wounds prior to it going back up to where it was to begin with. So this is again, this is why I say the buy and hold, the dollar cost average, this is you got to be very very careful with that. And usually you have to do the opposite of what those financial planners tell you. You have to do the opposite of what the gurus tell you. You have to do the opposite of what Dave Ramsey tells you. And it's not just George Gammon saying that. Just simply look at a chart. In fact, right here, I mean, you can look at a inflation adjusted chart going all the way back. Let's do all real quick. And I mean, just look at this. You you've got right here in 1928. You fast forward to 1980, that's a pretty long period of time, call it 50 years, and the stock market was flat in real terms. Not exactly something you could retire on, but there's times there's decades in there like the 1950s when it skyrockets. But you've got to remember the 1950s started off with the S&P 500 very cheap where the call it the 1930s started off with a big crash but prior you know 1929 or so started off with stocks much more expensive and you get to 2000 to 2010 obviously they were lower but the stocks started off very very expensive. So you you have to consider the fundamentals in in order to determine whether or not you should quote unquote buy and hold. But now let's go over so now that we understand kind of the lay of the land through the lens of Paul Tudtor Jones who has been doing this since the late 80s and obviously doing it at an extremely high level. we have now that we look at the risks and if this is the.com now let's look at both arguments because I you guys know me well on on Twitter people don't really watch my videos so they don't really understand the fact that I try to look at both sides of the equation I try to look at the bull argument and the bear argument and then come to a conclusion as to which I think is the most probable able outcome. So, and I want to present that my videos. If there's a bull argument, I want to present that and I I want you guys to think it through. We should never just live in this, you know, it's not a prudent investment strategy to just live in an echo chamber. You know, seeking out confirmation bias. That that's a really bad investment strategy. It might be good for it might be good for uh YouTube videos or channels or something like that, but it's ter it's a terrible investment strategy. So, let's not fall victim to that. And what I want to do first and foremost is I and I think you guys will get a kick out of this. So, the most famous um kind of representative of the.com bust as we all know is pets.com. it was pets.com. So I thought it would be fun to go to chatgpt and say what was the bull argument back in 1998 for pets.com because we look, you know, with the with hindsight being 2020, we look at pets.com and like what a bunch of idiots that were buying that company. I mean, who would have been that stupid? They didn't even have revenue, man. What a bunch of morons. Yet, we don't realize that if we were in the exact same situation with the exact same information at our disposal and we couldn't see the dot bus coming, we likely would have done the exact same thing. It's not like they were stupid back then. They were just whipped up into a frenzy very similar to what you see right now. So, let let's try for a moment. Let's just do a thought experiment. Let's try to take a time machine back to 1998 and imagine what it would have been like to actually be there without knowing what was going to happen in the future and being there at the beginning of the internet age when it when it was just seeing mass adoption and everybody talking was talking about how it's going to change the world and they were right. They were absolutely right. But let's look at the bull argument for Pets.com. And by the way, don't dismiss this as, "Oh, those people were just idiots investing in Pets.com." Do you know who their one of their biggest investors were? Pets.com. That would be Jeff Bezos in Amazon. So, it wasn't all idiots buying Pets.com. But here's according to Mr. GPT. And again, you can see that I think demand for AI is absolutely going to go exponential. Absolutely, it is. No doubt about it. No doubt in my mind. But the economics don't make sense right now. Although they probably will in 10 years, but since the economics don't make sense right now, we're still going to get it. There's still going to be the capex spend. But the prices of the stocks in this circular AI economy or ecosystem, they don't make sense. Well, they're way overvalued. Let's just say that based on my calculation. Now, you may come to a different conclusion, but these things usually don't end well. And and human beings have a tendency of taking a story and then just taking it to an extreme and getting out over their skis the whole thing busts and then people come in and buy it at a reasonable price and that's where the money is made. I'm going to get to this. You guys are going to love this bull argument for pets.com. But before I do, let's go over to Cisco because this was another poster child for the com bust. And look at this. From 1999, it started at call it 20 bucks, 23 bucks, and then it went straight up to looks like 80 and then it came crashing down to 12. Now, if you were one of the people buying it here at 50, 60, 70, 80, and then it had this dip down and you're like, "Oh, buy the dip. Buy the dip. Buy the dip." All those stupid dot doomers, they don't know what they're talking about. You would have gotten annihilated. And by the way, the reason it can go just completely parabolic is because retail is getting involved and they're the ones that inevitably get crushed, right? The Paul Tutor Jones, they're buying in here and then they're selling right here and then they're buying right here again. You see? So, think about this. If you would have bought Cisco in 2002 when it was 11 bucks, that would have been a good investment, great investment. Or even 2015 or so when it, like he always says, when it gets past that little bit of a high right there on a good trend, that's usually a good time to buy on a long-term chart. So that there's times in here when Cisco would have been a great investment, but it's when the economics made sense versus the share price at here. This was just silly talk. This was FOMO. This was mania. This was hysteria. And it's not that Cisco was going to go bust or that Cisco wouldn't be there into the future. No, absolutely. And it's not that Cisco wouldn't benefit from the new world that we're going into with this new technology called the internet and all the things that it's brought into our lives. That was absolutely true, but it didn't make sense at 80. It only made sense at 10 or 11. And that's really the point. Okay, let's let's go back to the bull argument for pets.com. Here's what the bulls argued according to chat GPT. first mover advantage. And you know when I was reading this earlier, I tried to just like open my mind, free my mind, try to be completely objective and without bias. And I wanted the bull argument to see if it kind of made sense. Like I was like, "Oh, yeah, yeah, yeah, yeah. Okay, yeah, I I I get that. I get that." And I think that if you guys are able to do that, just keep an open mind here that I'll go through these and you'll be like, "Okay, they've got a good point." Here we go. First mover category creation advantage. Pets.com was among the first to focus exclusively on pet supplies in e-commerce, a vertical niche. Bulls believed that the established branding, logistics, customer habits, early pets.com could monopolize the online pet supply market. Another thing you'll notice is these arguments are almost exactly exactly exactly what you hear today. Almost exactly. And you may say, "Yeah, George, but Pets.com didn't have revenue. Open AAI has revenue." Yeah, great. Open AAI has revenue. They've got expenses of 400 billion and revenue of 12. Woohoo. Like, would you rather be Pets.com with no revenue and expenses of let's just say 2 million or would you rather be open AI with 12 billion and expenses of 4? You know, it's not 400. I'm I'm exaggerating obviously, but you get my point. It's not like just because you have revenue that means that you've got this awesome business where you're just going to print money. If your expenses are 10 times your revenue, you still got a problem, at least in the short term. Okay. They thought once customers used it, switching cost or convenience would lock them in. Massive market opportunity and online penetration upside. The pet product market was large and growing. E-commerce was assumed to be the future of all retail. It was. It was. But it didn't make sense in 1999. Bulls assumed that over time more consumers would shift purchasing of mundane goods, pet food, litter, toys online. Again, they were right. But it didn't happen until 2015. Even if the margins were low initially, volume would make up for it. Have you heard that before? Network scale economies in fulfillment, logistics, and marketing. The more orders, the more you could spread warehousing, shipping, and infrastructure costs over a larger base. Scale would drive down unit costs and shipping inventory handling. Also, large marketing spend, brand awareness would pay off. Early investment in brand equity. I mean, it sounds like Amazon. I mean, it's basically Amazon. It's just one turned into Amazon and one went tits up, which is usually what happens in these things. So, what you want to do as a prudent investor is wait till the dust settles and then go ahead and pick the winners. You know, it's like my buddy Rich Cooper. He talks about women doing this all the time. And it it's it it's true. I don't want to knock on the gals here, but what they do is they don't care about your journey as a guy. All they do is stand at the finish line and they just pick the winners, right? So, you as an investor should do the exact same thing gals do when they're out there dating. You don't you don't care about their journey. You don't care about their hardship. You don't care about the 18-hour days. The only thing you care about is at the end of the finish line, they've got a private jet. Learn from the women here. That's a good investing uh a good investing lesson. All right, let's keep going. Strategic partnerships and domain distribution leverage. Here you go. Amazon invested early in pets.com. A majority stake in early rounds wasn't all dummies, was it? That gave access to Amazon's user base, brand, credibility, marketing channels. But what's happening right now? Open AAI. Oh, well, they're investing in Oracle. Oh, this is a great strategic move. And Nvidia, well, they're investing in OpenAI. Well, this is a great strategic move. The exact same stuff. The domain name pets.com itself was premium asset. They also sought tie-ups with portals so they could drive all this traffic. So they had all these great partnerships for traffic coming into pets.com. They're going to monopolize the vertical. They're going to and once people start shopping at pets.com, they're going to get used to it. They're going to have a network effect and then they're going to buy everything from pets.com and you just keep growing and growing, growing, growing. distribution of retail middle. They could cut out the middleman tax. This is genius. Bulls thought in traditional pet supply chains, margin stacking, distribution physical stores left room for a direct consumer model to undercut them and still make money. For the 50th time, they were absolutely right. What they're describing is Amazon. They're describing modern-day Amazon. Get scale first, monetize later. The echoes of familiarity, the idea that growth and market share mattered more than short-term profits. Focus on building a large customer base, brand awareness, logistical footprint, then later figure out the profitability, pricing, upsells. There's so much demand. It's just there's so much demand that we don't have to worry about being profitable. Well, we don't have to worry about making money. As long as there's the demand, we'll be okay. Maybe, maybe not. Brand and viral marketing as a moat, the sock puppet mascot, and aggressive advertising campaign, Super Bowl ads, Macy's parade, TV, radio were intended to make Pets.com a household name. The And Open AI, what are they doing? They're giving away their stuff for free. Why? to make it a household name to then encourage B2B adoption. Assume future improvements in infrastructure logistics. Bulls assume that shipping costs, fulfillment technology, inventory management systems, and supply chains efficiency would improve over time, increasing margins. What are they talking about now? Oh, George. Well, you can't focus on the fact that they're spending this much on capex or they're spending this much on energy because in the future these costs are going to go down dramatically. These costs are going to go down dramatically. What they forget and that's absolutely true. It is 100% true. But unfortunately, when your costs go down, guess what happens to the amount you can charge for that product or service? especially when it's a commodity like AI that goes down as well. So you get to the point with AI especially with the with um the providers like OpenAI or um Anthropic something like that where there it's just a race to the bottom. So let's just say that it costs them $5 to provide a an AI or to to give a a business access to an AI bot. Okay. Or to chat GPT, let's say, let's just say that it costs chat G or open open AAI, excuse me, $5 to do this because of the electricity, because the water, the cooling, the the infrastructure and whatnot. Okay. Well, and let's just say that right now or at the beginning they can charge the business $100 or $300 a seat for this. Okay, fantastic. But then Anthropic is going to come down and say, "Okay, well, we'll do it for 250." And then OpenAI is going to say, "We'll do it for 200." And then they're, "Oh, we'll do it for 150." and then we'll do it for 50. And then you just until the point where they basically turn into a utility. They turn into Verizon or AT&T. And it's not that they don't exist. And it's not that they don't make money, but it's just that they have these razor thin margins and they can't really grow because everyone already uses a cell phone. And what's your growth strategy? And it becomes this commoditized utility where it still exists. It still makes money, but it ain't worth a hundred times revenue. Now, it's only worth a PE of five. And that's the big discrepancy, one of the big discrepancies. Assume future improvements in in okay, we talked about that. Lock in via data, customer, lifetime value, repeat purchases. And this is the argument for the B2B, right? because they're saying that well Microsoft is going to spend all this money and even if they have to use the AI as a loss leader to incorporate it into Azour I think is their that's their business product or something like that their CPM. Um the argument there is well they're going to get so many more customers that even with AI as a loss leader well then it still makes sense and now Microsoft has them in that ecosystem. That's fine. But even that math doesn't work. Even that math doesn't work. Because at a certain point, Open AI can't charge less than it costs them. And then you have to ask, okay, well, if what it costs Open AI, is that worth it to Google? And let's just say that uh it costs them $30 billion a year, they Google to incorporate this into Azure, which has more network effects, incorporate this AI. The question is, can they make more than $30 billion a year with additional customers for Azour? And that's sketchy when you consider the fact that even right now after this has been available to the general public for quite some time and they have a lot of competition in the space, it would be very hard to get that additional bump to where it would make sense. So, it's very similar for the the Googles of the world and the Microsofts of the world. It's very similar to a McDonald's type model, just to make it super simple for everybody. And what most of you guys know is McDonald's actually loses money on the hamburgers. So, if they sell you a burger, they're probably losing 5 cents. So, you say, "Well, George, why do they sell the burgers?" Because they sell the burgers to get you to buy the soft drink. Because the soft drink is where they have the margins. You see? So the argument there is that Microsoft well okay fine by using OpenAI or incorporating this into Azour or whatever it's called then they're going to be willing to pay OpenAI this high amount and use that as a loss leader like selling a hamburger for 5 cents less than they have to pay because they're going to be able to make it up with the Coca-Cas in the back by people using cloud and getting this network effect. This is the exact same argument, exact same argument they were using for pets.com. And now it goes into where the why the bullish argument was overly optimistic. So I'm assuming a lot of you on um this live stream right now or that watch it after the fact will have access to chat GPT or Gemini just go ahead and do the exact same thing. I would strongly encourage you whenever you're trying to make an investment decision just and let's just say you're bearish. Okay, we'll tell chat GPT to give you the bullish argument or vice versa. It's a very very very useful tool. Again, my argument has nothing to do with the fact that it has nothing to do with my belief that AI won't change the world or it's over. No, I I think the opposite. I think it's probably underhyped if anything and I think it's very very useful and I think it'll be even more useful and demand will absolutely go exponential just like the internet. Okay. Now, what I want to do is just after going through a lot of these thought experiments with chat GPT today because I've I've personally tried to get my head around this and a because I'm looking for opportunities and then b I'm I'm my initial gut instinct here especially when I started looking at the round tripping and a lot of the things that we've been talking about on this channel. My gut instinct was well this doesn't end well. But I I wanted to be like, well, maybe I'm wrong. So, let me hear the best counterargument to that and let me think that one through. So then what I did is I started using some analogies and started trying to think of some analogies once once I went back and forth with chat GPT, ironically enough, OpenAI, uh I I came to an analogy that I think will really help you understand the bull argument and then maybe the bear argument. And it was basically looking at OpenAI as selling Ferraris. So if you if if someone was selling Ferraris for $20, what do you think the demand would be for Ferraris? Probably pretty high, wouldn't it? It would be extremely high. And then you say, "Well, George, they're not going to always sell Ferraris for $20 because that's just to the the average Joe and Jane public. what their objective is is to sell Ferraris for $250,000 to businesses because these businesses have to have those Ferraris. And let's just assume for a moment that the Ferrari costs them $200,000 to make. Okay, fine. So then you have a business that uh says, "Okay, I have to have a Ferrari. I I have to have one or else people won't buy my product. People won't buy Azour. or my CPM or my cloud computing or whatever it is. So, you say, "Fine, I'll go ahead and just spend the $250,000 to buy that Ferrari that I absolutely have to have." But then Anthropic comes in and says, "Okay, well, we're making Ferraris as well, and you really can't tell the difference between the two. We'll give it to you for 225,000." And then like I said earlier, you just go all the way down till you get to a point where they're selling the Ferraris to the businesses for 2 thou or $200,1. And so that's when they turn into Verizon. So then the question becomes can the purchaser of the Ferrari, the business, the cloud computing company let's say, can they make more than $200,000 that they have to pay for the product to begin with. And maybe, maybe they can't, maybe they can, maybe they can't. So then the winner becomes the guy that has the most upsells on the back end. So you upsell them cloud, you upsell them this, you upsell them that, you upsell them this, and they're the guy that's going to be able to afford to pay the price. The guy, the gal, it's going to be able to pay the price, whereas no one else is going to be able to afford to pay the 200,000 because on the back end, they're only making 150,000. So it doesn't make any sense for them. the what they have to do is they basically have to kind of keep up with the Joneses for as long as they can until they go out of business. So, let's just say that you've got Google that can afford to pay the $200,000 for a Ferrari, but you have all these other startups that are kind of nipping at their heels that don't have the ad revenue, that don't have all these other revenue streams, YouTube as an example, and then they're like, "We can't pay 200,000. There's no way. But we're going to pay the 200,000 as long as we can because if we don't, we're out of business tomorrow because then all of our customers will go over to the guy that has the Ferraris. But then what happens is all these other businesses go bust and then what happens to the supplier of the Ferraris? Well, they sell a lot less product, don't they? they sell a lot fewer product Ferraris because now they're only selling the Ferrari to the last man standing. Let's just say it's Google. So, this is how you have to look at the economics. You have to because when you start getting in the weeds and you hear like the Wall Street analysts and it's like they're all salesmen at the end of the day. And whether they're selling you a bearish argument or a bullish argument, they're still just trying to sell you. and they're going to sell you with fancy words and terms and all these things. At the end of the day, when the rubber meets the road, no pun intended, it's just all about simply how much does it cost to deliver for the the the people making the Ferraris, right? And will that cost go down? Yes. But then what's going to happen if their costs go from 200,000 down to 100,000? Guess what's going to happen to their price that they're going to be able to charge due to competition? that goes down as well. So you get to a point where instead of charging $200,1 now they're just charging $100,0001. And then that is absolutely going to benefit the people buying the Ferraris because now maybe the economics make more sense if they're able to monetize on the back end. But that to get from A to Z takes 10 years just like we proved with that Cisco chart. It doesn't happen in 3 months. And you've got to have this wash out, right? And that's what the free market's all about. That's what the free market's all about. So, you know, my base case here is that this plays out exactly like the.com bust and that the in that AI plays out exactly like the internet. That if we fast forward 15 years, we can't even fathom a world without AI. And but it's a bumpy road. It's a bumpy bumpy road from get getting from A to B. And the story, the narrative is going to create massive hysteria, massive FOMO, a huge mania that we may be just at the beginning of. And we could see, who knows, we could see the MAG 7 triple in the next year. But watch out below. Watch out below because that for for most of the investors in this that doesn't end well because they don't have the skill set of a Paul Tudtor Jones. Now I want to give a huge shout out guys. If you want to understand the math a lot better I cannot recommend this blog post from Cuppy enough. It is fantastic. And he actually he's done a couple of these blog posts, but uh the first one was so popular that he had actually a lot of people within the AI space, a lot of insiders calling him and telling him that basically they're scared out of their minds, that he's spot on. And then you had a couple people call him that had a bull argument that he actually thought about and he included in his second kind of follow-up post. So you guys have to check this out. It's right here. I'll go ahead and put the and I was I maybe I'll go over I've highlighted the whole thing because I wanted to go over this with you guys, but I don't want to turn this into an hourong video. So, I'll just go ahead and copy this and I'll put it in the chat right here. And then Josh, can you do me a favor and can you just put that in the description of the video so if people want they can go and it's this is maybe a 10-minute read and it is absolutely worth your time. I mean I would I would if you whatever you're doing tonight I would just take five minutes 10 minutes aside and read this and it's it's just pure gold. No pun intended. And if you guys want more insights like this, it's exactly what we do in Rebel Capitalist Pro. This is the private online investing community. I with Lynn Alden and Chris Macintosh. And it's it's not just all bearish and just buy gold and whatnot. We talk about stocks, maybe not in the S&P 500, maybe not in the AI space, but stocks where the riskreward makes a lot more sense. maybe in the commodity space or maybe outside of the United States or maybe other strategies where they actually where we're not getting caught up in the hysteria and the FOMO and it's all about not only growing your wealth but protecting your wealth. If you want to check that out, you can just go to uh it's it's Rebel Capitalist. I don't know what the URL is. Josh, just go ahead and put that one in the description as well. Okay, guys. Enjoy the rest of your evening. As always, make sure you are standing up for freedom, liberty, free market, capitalism, and we'll see you in the next video.