All right. Hello everybody. Welcome back to another episode of the market close. It is a Monday, November 17th, 3:45 p.m. Ugly day once again, and it seems like every time I start off these shows, uh, that is the first word I have to say, which is that the day was ugly, but nonetheless, the day was ugly.

Uh, Ethereum completely falling apart today. ETH right here as of the beginning of this show, 2979. We got to 2955. It is officially below $3,000 and as a result of it being below $3,000. I mean, you're seeing a lot of pain, not just in the crypto trade, but obviously as well also in an asset like BMR, $303, down 11% on the day. BMR now down well over 50% from its highs. Robin Hood got a little bit of relief above 112 but basically still uh down below 114 down 7% of the day. Palenter down 2% on the day. Google holding up obviously because of the Birkshire investment. So that's been helping Google and that's 285 that's up 3% on the day. Nvidia that's up or down 2.4%. Nvidia did get at 1 point to 184. So you got a little bit of a bounce right there. So down 3%. Meta down 2% below 600. Nebia somehow holding green up 2%.

And then the S&P I mean we were holding 670 when I left on the open and now we are at 664. I mean we were just at 662 if I'm not wrong which is uh yeah it's lower than where we were on Friday. 662 is lower than where we were on Friday. Friday we bottomed at 663.

Obviously, there is some tension going on in the market in regards to a variety of narratives that I'm going to talk about and I'll share some perspectives from some other people that have different ideas in terms of what's going on right now. But that is causing the level of fear and panic that you're seeing across the equity markets. Tesla was pushing 420. Tesla potentially going red on the day. It's at 407. You got about 14 minutes until until the market closes. Tesla, you're holding on. It was at 404. It's holding on to the single 400s, but um it was or it is down from that 420 level that we were at in the uh in the morning.

So, what's going on? What's happening? And why are the markets freaking out as much as they're freaking out? First of all, I just want to say I don't see the structural change in the AI trade. And I talked about this on Friday, and I think a lot of people would tend to agree. don't see the change from last week, last month or three months ago to now in regards to what's going on with AI and like the capex spending cycle, AI productivity, margin enhancements. If anything, we've gotten even more data over the past couple of weeks that shows that that is making a lot of sense or that broader thesis is making sense.

The the big difference has been obviously the debt that has been incurred from some of these hyperscalers. Amazon got 80 billion of demand for the debt that they offered this morning. They did a six-part bond sale. uh that ended up resulting in uh 15 they only needed 15 billion but they had 80 billion in demand so they obviously had way more demand than they needed for their debt. Meta had 125 billion in demand. They raised 30 billion. Google also had 100 billion in demand. So you have some of the hyperscalers taking out a couple billion in in in uh debt which I guess is spooking out the markets a little bit and making them question are we in an AI bubble if all of this is being financed via debt which is I guess a fair concern to have. I don't know if it fundamentally destroys the entire thesis that we've been talking about over the past couple years at this point with AI.

So, having said that, I don't think that's the fundamental reason for all the pain that we've been seeing over the past couple of weeks. I think it's about private credit, which has started to become more of a concern, and we'll talk more about that today. and then the labor market. You have those two things going in tandem with each other that's causing these like what I would say is quite random sell-offs intraday every other day and then recoveries.

because the market's like well you know like yeah we're afraid of this stuff but look at Nvidia's earnings and then we gap back up and then some another headline comes out the market's like ah well we don't care anymore but now we do care and it's like it's obviously very been very up and down and emotional for a lot of people to navigate but I think those are the narratives that are going back and forth which is causing some of these issues and a little bit of stability would help out.

We got a lot of narratives and a lot of things to talk about. First of all, Tom Lee, he was on CNBC for a little bit. Let me just play what he was saying about Ethereum and then we will keep going from there and get into the rest of some of these headlines.

>> Stay bullish. >> Well, there's um the story of building on Ethereum and we know that there is a lot taking place. There are stable coin creations. Larry Frink and Black Rockck and Wall Street want to tokenize assets, you know, bring stocks, bonds, real estate onto the blockchain, and they have to find a neutral 100% uptime blockchain. That's Ethereum. Um, and that's the fundamental story. The price of course for Ethereum will fluctuate because crypto is hypervolatile. In fact, it's kind of the it's it's sort of a feature of the blockchain itself. And and I think we've been in a downtrend. Unfortunately, a lot of folks are kind of questioning if we're in a 4-year cycle um for Bitcoin. So, we talk about that in the chairman's message we published this morning that, you know, the the most correlated factor to Bitcoin prices when you see it at a at Bitcoin at a peak actually is the ISM. >> So, I I think we're still in the a correction phase of crypto. you know, crypto suffering from that liquidation event on October 10th, but because the fundamental story is intact and and we we you know, crypto discounts the future, that's why it's volatile, but uh it still looks pretty attractive here. >> And personally, I think this time for Ethereum because you've got this general market uh riskoff mentality. So what are some of the idiosyncratic uh elements that we should be thinking about as it pertains to Ethereum in the meantime? >> Well, Ethereum kind of has several ways that establishes a floor. >> One is that the value of all the assets locked onto the blockchain. Um and that number is growing, but historically Ethereum uh bottoms when that ratio is about 50%. So we're I'd say we're pretty close to that level. That's why I think Ethereum probably is bottoming this week. But the other way to look at Ethereum is really its price ratio or even its network value ratio to Bitcoin. It currently sits at this number is 0.032. The long-term average like the 8-year average if if we were just to trade to that 8-year average would put Ethereum at around 12,000. So, I think Ethereum is undervalued because number one, uh, the story is gaining relative to Bitcoin this year, but two, we're getting this sort of intrinsic floor because of the value that the assets locked onto the Ethereum blockchain.

>> All right. Uh, Tom Lee saying that Ethereum is bottoming this week. >> Again, kind of the same argument Tom Lee's been making for a while. Uh and the question is just you know well the equity markets kind of believe what he's saying right there. You're getting a little bit of a bounce as we get into the close and then that bounce is getting rejected. I mean again this price action is just incredible.

You know what it also feels like and this is some other stuff I was reading today. It feels like someone in the world of crypto is getting margin called heavily. And we're not talking about a retail investor that's getting margin called for like 50,000 bucks. We're talking about some institutional investors that were heavily overlevered and you know are getting margin called for billions and as a result it's creating a lot of this systemic decline. That could be another thing that's happening. But overall we're going to have to see when it does stabilize if it does stabilize in the coming days for what that price action looks like.

Uh, we got some headlines from Trump right when I was about to go live. Uh, I don't have the clip of him saying this yet, but apparently he did indeed say this. $2,000 tariff stimulus checks will be distributed by the middle of 2026. That is the quote from Mr. Trump about 10 minutes ago.

Um, first of all, I don't know how he's going to be able to send out checks without congressional approval. I don't know if Congress is going to approve printing what would amount to be at least $200 billion. Uh, and number three, I mean, is this really what we want to be doing versus pay down the debt? You know, I can understand a tax rebate. I can understand a tax credit and like that's the way to give back to the American consumers via tariffs, but straight up printing $2,000. I mean, the last time we did that, we had a global pandemic where everyone lost their job and people needed money. So, like, I don't know if things are that bad. I'm not saying things are perfect, but obviously, you know, you got these stimulus ideas combating the affordability narrative and the question is just going to be is that going to work? And conveniently, you have the midterms coming up as well.

a lot of it is starting to pop up in this private credit issue, which is, I think, creating a little bit more pain. So, let me pull up some analysis right here on private credit. Let's take a listen to this and I think it'll kind of get us into the broader discussion of what's going on and why certain investors are feeling certain pain or at least are thinking that there's more pain to come. This is with Blue Owl Capital. Let's take a listen to this and then we'll get deeper into some of the other headlines we have.

>> Reads, Wall Street blows past bubble worries to supercharge AI spending frenzy. This is a firm that has high hopes around data center. Um, its growth story is leverage to that story in in some ways. Blue Owl, by the way, was one of the underwriters for Meta's uh data center financing. So, that's why Blue Owl is at the center of kind of this data center finance buildup. >> And the market is uneasy about this because of what? Well, the market is uneasy that the the marks uh the marktomarket that these private credit firms are sharing uh may not be fully reflective at each point in time of what's actually happening under the surface. Uh, and one thing I would add too, Scott, in addition to the Wall Street Journal article, which is kind of feeding into this theme that people are already kind of nervous about with regard to just the overall debt loads and data centers, another headline for Blue Owl today is one that's in the FT, which involves the merging of two funds. This is a little bit technical, but bear with me. So, Blue Owl is essentially merging one of its earliest private credit funds, uh, Blue Owl Capital Corporation 2, which has about a billion dollars in assets. targeting wealthy individuals with a larger fund called OBDC which has 17 billion. Now as a result of this they're saying that uh essentially the the smaller fund is going to be uh essentially the facing losses of about 20% because that is what is uh happening for OBDC which is trading at a discount of 20% to NAV. So essentially if the deal is approved by shareholders, the merging of the two would see some of those wealthy investors face uh about 20% losses there. >> But those at its core to kind of deduce what she's saying in layman's term, you got a lot of people in the private credit market that are not believing the debt that is being issued for these data centers and a variety of other things. Blue Owl's like one of the largest lenders in the country. So there's a lot of different things, but the data center part is what they're focusing on. And we're seeing that through the credit default swaps on Oracle. We're seeing that on uh Corewave continuing to get hit even with their, you know, 52 or 55% increase in backlog or 55 billion backlog increasing 100% year-over-year. Like you've just got a variety of things that should be bullish for the overall space around capex, but then you've got people saying, well, what if this doesn't play out the way it's going to play out? You've got the concerns about the AI bubble obviously that we've talked about and that's leading to more pain potentially or at least the the um the uh the perception of more pain potentially in the data center market AI bubble concerns around lending. Uh are those real concerns? I don't know. I mean I think I' I myself have to do a lot more research on this stuff as well, but they are enough concerns to get people to start wondering what the heck is going on.

Here was uh another pretty large investor and um his take on what's going on. This is a minute. He did a 55minute podcast, but here is a minute of him saying private credit is the next thing to kind of take a dip.

>> Ridiculous argument of all for private credit has been private credit belongs in every portfolio because it lets you sleep at night because it helps you ride out the volatility of your public credit. Again, that's just a repackaging of the volatility. If you don't market to market, there's no volatility. But if the price goes from 100 to zero in a matter of a few weeks, uh there's there's something something uh unoured is going on. And so I'm very very negative on those types of uh you know, non-transparent markets. It reminds me, I've been saying this for probably two years now, that the next big crisis in the financial markets is going to be private credit. Uh it's it's it it has the same trappings as subprime mortgage pack repackaging had back in 20 uh 2006. Now it took a couple of years for it to totally unravel. So this stuff doesn't happen in a week or a year even. But I'm very negative on that.

>> It's quite incredible, right? I mean, he's saying what's going on in private credit has the same packages of the the sort of bonds that were packaged with other bonds and then sold on top of other different bonds with the CDOS's back in 2008. Uh, and says that all these are faulty. He went on to say that the US financial markets are the most overvalued financial markets I've seen in my entire lifetime. So, you got someone who's relatively respected in the financial media space basically making the claim that this is 2008 again. And but you know, even if it's not, someone's saying something like that for everyone wondering like, why are markets down? Well, because that's going to make headlines and people are going to take action immediately when they hear someone say stuff like that.

You had uh Fed President Waller say a couple things. So, number one, he said we should be paying more attention to the labor market than the current inflation overshoot. He says, "I'm hearing that firms are paying for AI investment by not hiring." And then number three, he says, "A 25 basis point rate cut won't get a job growth back to where it was."

Okay, so finally, you have someone actually saying that, "Yeah, we should probably focus on the labor market over inflation. And I wish his opinion was the opinion of the uh entire Federal Reserve. But he says the three things that I think are the most obvious. Number one, we should be focusing on labor versus inflation. Number two, 25 bips might not even be enough to increase the job market back to levels to where it was. And then number three, he said something that a lot of people have been saying, which is that I'm hearing that firms are paying for AI investment by not hiring. I mean, I think we've heard this from a variety of different people, that one of the ways that companies are paying for all this AI expenditures, even if they're not like the biggest companies in the world, and even if they are, like an Amazon, which just fired 30,000 people, is by reducing costs.

Yes. So, Wall Yes. So, Waller is doubbish. He's always been doubbish. The problem is you have a decent chunk of people that are not doubbish um on the Fed and I think that's also creating a lot of more pain in uh in the idea for if we're going to get a rate cut in December.

So, for a lot of people asking kind of how do you navigate the situation or what are you thinking about? I think there's three obvious things you can do, right? Very simple things. Number one is you sell some aggressive covered calls. So, example, let's say you own a thousand shares of Nebius and your average is $95. You can be selling aggressive covered calls every week to generate some premium to soften the blow from Nebius getting hit.

Number two is you can buy puts. Number two is you can buy puts. It's not crazy to buy some puts. You can do the same strategy. Buy far out the money puts. If you think you want to protect your Robin Hood position and you have 2,000 shares of Robin Hood at 70 bucks, Robin's at 115 today. you can buy a proportional amount of puts in relationship to the overall position for, I don't know, $85, $95, whatever strike that you think is relatively reasonable if you were to think Robin Hood were to get hit pretty bad if things were to get bad.

And the third option, which is the one that is the most obvious, right? You can sell stock. A lot of these names are up a lot year to date. Nebas, you know, still up almost 2x year today. Robin Hood's up 2x, poundry is up 1.5x, Nvidia's up 50%. I mean, at the end of the day, the other simple option is you can take some profits, which you know, I I think a lot of retail has been pretty smart about taking profits this year, and we've seen that through the data that retail has actually been actively managing portfolios, but some profits are better than no profits.

This affordability thing, dude, this thing hit the administration like a brick. I don't think they expected this affordability [ __ ] to come through. And boy did it come through, man. Like absolutely nuked a lot of the progress they were making because now once something becomes a narrative. I mean, it becomes a narrative and it's I mean

Uh Trump is planning campaign rally speeches at the White House to talk about the economy towards the end of the year. So we we last week was the headline that he's going to travel the country for these speeches. Apparently he's doing it now at the White House or at least that's what they're planning and um that is their attempt to kind of make the argument that the economy is doing okay. Yeah. Trump to host large indoor rallies domestically before year end to discuss the economy.

Trump to talk up econ Oh wow. Trump to talk up economy and meeting with McDonald's owners. Under mounting pressure from Americans worried about inflation, US President Donald Trump will meet on Monday with owners, operatives, and suppliers of fast food chain McDonald's to tout his administration's efforts to drive down living costs. See, tell me that this affordability thing is not something the administration cares about.

Like, dude, are you kid? You're you're you're freaking using movie trailers to promote a speech to McDonald's franchisee owners around affordability, and we think affordability is still some random like tactic. It's like, no, obviously the administration is leaning into if if Trump didn't give a [ __ ] about affordability and he was he would think it's like some Democratic hoax or stupid narrative. He would not be saying make America affordable again. He would not be doing a speech at McDonald's. He's trying to change the narrative because I'm sure his political consultants are saying, "Mr. President, we're going to lose the midterms if we don't win this argument." Like, I feel like that's the reason for the pivot.

Again, at its core, I hate saying this over and over again, but I think end of year can still be very strong if you get the rate cut and you have the AI earnings picture stay intact. It's just obviously more and more things are compounding to create some hiccups in this overall overall market narrative, I would say.

And look, that happens that I mean that like that's that's that's why markets are so dynamic, right? I mean, a couple weeks ago, we thought there was a regional banking crisis, then we forgot about it. Three months ago, we thought there was a bond rating crisis with Moody's, then we forgot about it. Like, the market thinks about stuff. They care about stuff. Who knows? Maybe in another couple of days, no one cares about Oracle's credit default swaps, even though they're caring today. That's what gives opportunities to either buy or sell in the market. You need these conflicting narratives happening back and forth. And for every narrative, there's a buyer and a seller. Our job is to try to identify the trend that's taking place.