Good morning everybody. Welcome back to another episode of the market open. It is Monday, November 17th. We are live and we just went red. We were green in the futures. We were green last night and we kind of just went red literally 30 minutes ago. Uh I think there's a couple of reasons for why we're red that we'll talk about.

Uh and you know just across the board. I mean the only thing that's really green is Google and that is because Bergkshire bought Google over the weekend for those that don't know. But we are indeed red and I think there's a couple of headlines that we'll talk about for why that's happening. Google right there up 3.2%. Google was pushing 300 last night. It was at 296. Unfortunately, it's going to be hard for Google to make those new all-time highs. Uh unless the broader markets are cooperating, and that's why you got Google going red or Google at least going down from where it was yesterday.

Nvidia officially going red. 186.99. You're getting some pre- Nvidia earnings uh jitters, I would imagine. And so that's why you're seeing Nvidia kind of take a little bit of a nose dive right there. Down about 2%. It was up 2% yesterday after hours. So again, a complete 180 from what we saw last night. Apple right here down about 1.2%. Oracle down 1%. Rocket Lab down half a percent.

Bitcoin back to 93. Look at that candle right there. It was at 95 like 25 minutes ago. Now it's at 938. This is after Michael Bur, not Michael Bur, Michael Sailor just disclosed that uh he bought another 8,000 Bitcoin for about a billion bucks, $823 million um over the past week. still not enough to hold up Bitcoin. Bitcoin getting a bit of pain right there at 9380. Then obviously Ethereum is probably going to be a hit as well. Ethereum, yeah, 3100 with that green candle. Ethereum got to 3,000 over the weekend. Bitcoin got to 92,000.

So definitely going to be key levels to watch as we look towards the week to what happens with these stocks. And then Tesla right here falling below 400 down about 1.4%. The choppiness once again of the equity markets continue. I know it's only uh an hour into pre-markets and you know we've got about 30 to 40 minutes left until the market opens and this is the first day of the week but nonetheless you are still seeing some of that choppiness even from the futures last night. Futures were bright green. I mean we were up half a percent on the NASDAQ. I mean it was a pretty nice kind of momentum swing.

It it and qu and honestly it didn't make sense why we had that momentum swing last night. I didn't think there was any major major headlines. But then again, none of these moves have made sense in the context of headlines. They've all just kind of happened throughout the past 3 weeks, and it's something that we all are going to have to navigate.

So, we got a lot to talk about, a lot to get into. Uh, Japan, I think, is also a big story that is important to discuss today for those that haven't heard about it. Uh, Japan is basically unleashing about 17 trillion yen or 110 billion dollars of stimulus into the economy. There's good things about this. There's bad things about this. They have implications on the Japanese yen carry trade. they also have implications on um Bitcoin and crypto. So, we'll talk about kind of this Japanese stimulus and why the country is doing it in the first place.

Uh you've got macro updates in the context of data. So, we got a bunch of Canadian data this morning, which is important, but now that the US government is open, we should be getting more data this week. I do not believe we're going to be getting the jobs report this week. That should be coming next week. And so the anticipation of that jobs report is also going to be really important for the markets to kind of figure out exactly where they think the probabilities of rate cuts are going to go.

Rate cut probabilities once again are below even where they were last night. Last night they were at 45%. Right now they're at 42.9. So until we get data that shows the labor market is struggling, which unfortunately is the data that the Fed's going to need because for some reason the Fed doesn't understand that the labor market is struggling. Uh, but you know, they're going to need to see that data for us to get like a meaningful chance in terms of getting that rake up. So, we got a lot to talk about there.

And then we got Nvidia this week. We'll do a preview on Nvidia because that's also going to be really important. I mean, at the end of the day, Nvidia's got to crush it. I think Nvidia will crush it. You got a bunch of street upgrades across the board on Nvidia. There's there's really not a fear I think that a lot of people have of Nvidia crushing it. It's just a question if that's enough to get the market to stabilize and take that next leg higher. And maybe it is, maybe it's not. But this Wednesday, we're going to have those results and have a much better understanding of what's going to happen to Nvidia.

Yes, Michael Sailor did buy Bitcoin this morning. Uh 8,178 Bitcoin for 835 million, 102,000 a coin, which look at 102,000. He probably thought that was relatively low and now unfortunately we're at 92,000, but uh you know, he continues to buy. So they now have 649,870 Bitcoin at $74,000 on average per coin. and they've acquired them for about $48.37 billion on uh their average for Bitcoin.

That is what we've got today. Yen carry trade gives me PTSD. Yeah, we got to talk about it. I mean there are some there are some correlations between what Japan is doing to potentially uh increase what we've had before at least or what we did have before back in August. Japan key government panel member government must compile stimulus package sized around 23 trillion yen for spending tax cuts. See I reported 17 trillion apparently it's going to be much lar the headline yesterday did say 17 trillion was the bare minimum.

So I mean if it is going to be more than 17 trillion the Japan is obviously deciding that it's time to stimulate their economy and and quite frankly a lot of this has to do with the um population crisis and the fact there's a lot of older people in their economy and ultimately they're going to have to pump money into the system to get the economy working again. So we'll talk about Japan and we'll see what it looks like going into what happens in the United States markets this week.

All right, having said that, I think let's um let's get started. So, let's start off with some of the headlines this morning for why I think we're going red. These are just all my assumptions. I could be wrong about this, but let's go get off with it. I mean, here's the first one. I saw this like 30 minutes ago, and I think this is why we're I mean, this might not be the only reason, but I think this is part of the reason. Amazon Amazon kicks off a six-part US dollar high-grade bond sale.

you know, seeing this type of stuff, it's annoying, but you also can't blame these companies for doing it. But nonetheless, it is what it is. I mean, when you see companies start selling bonds and tapping the credit markets, we saw Oracle do this, Oracle got handsomely cut from 350 to 220 for this. Uh Google did this, Meta did this, and now Amazon's doing this.

Uh the reason I think this is triggering a lot of people is because one of the ways that the dotcom bubble collapsed was that there was so much not only vendor and circular financing which we're already seeing examples of happening right now. But a lot of it was done through the credit markets not through the free cash flows of the business and as a result that you know ended up being painful.

Now the the the sort of nuance here is that it's freaking Amazon. Amazon can afford to raise debt and Amazon can meaningfully uh execute on that debt in a way that you know a lot of other companies can't. Amazon, right? They're up 0.25% in the pre-market. It's still green, but potentially will go red here. It was down 1% on Friday. And so, like, Amazon, Google, Meta should not have any problem selling debt.

I mean, a lot of their debt is going to be due in 50 years, and their debt is yielding higher than 10-year Treasury. So, they have plenty of demand for their debt. It's just the broader perception and narrative that this debt is not going to meaningfully lead to an ROI. But if you believe the debt based data center buildout is not going to lead to an ROI, well then you would have thought that using their free cash flows to build data centers was not going to lead to an ROI.

So I think if you were skeptical about the data center capex buildout in the first place, then you know whether it's debt or not, you're still skeptical. It's just the debt adds another level of concern when there shouldn't be because Amazon, Google, like these are companies that are not going to default on their debt, but it does add that concern to the market and I think as a result of that concern, you know, that's why you have some pain right there.

So Amazon that is down and you know interesting stat on Meta. Meta did more capex this year than net income on a trailing 12-month basis. It's kind of crazy, right? So you do have a lot of investors also a bit scared that uh there's way too much being spent on capex versus the actual, you know, business profitability and that's why Meta has obviously been getting hit as well over the past couple weeks.

Another piece of news on Amazon right here and this news is I think is kind of bullish. Uh Jeff Bezos launched an AI startup. He raised 6.2 billion uh and it is called project prometheus. The company is focusing on artificial intelligence for the engineering and manufacturing of computers, automobiles and spacecraft.

I mean I thought this was kind of bullish because you know at the end of the day Bezos is coming back. He's going to be the co-chief executive. So he's getting back to an operating role. So he will be the CEO of this company. And at its core it looks like they're going to be trying to find talent. They've already got a hundred different researchers from um OpenAI and Meta to come join the company.

And it looks like they're going to be building AI that is uniquely geared towards very high level tasks around spacecraft, automobiles. Obviously, Bezos has Blue Origin, so he's probably looking for how AI can make that company even better and more efficient. But, uh, it is cool to see Bezos come back. And, you know, a lot of this is his own money that he's raised to be able to start this new company.

question simply becomes how much does the market like, you know, the idea of new startups into the ether when it comes to the AI race. And I think that's going to be a broader question that the market's going to have to answer.

All right, 13F. So what happened over the weekend? Well, we saw this on Friday. This actually happened in Q3, but it was disclosed on Friday. It was I think the biggest news of the weekend quite frankly. Birkshshire bought 17.8 million shares of Google. This was a very very very big deal.

Um it's hard to explain how big of a deal this is. Birkshshire when they take a position in a name they take a position and they let everybody know they take a position. You have millions of people honestly probably tens of millions of people across the world that follow what Birkshshire does. Buffett probably didn't make the decision because he's retiring. It was probably other leadership at the firm like Greg Gable.

But the fact that you have Birkshar leadership coming together and saying, you know, we believe that we need a technology play in the portfolio after really not having any technology over the past decade outside of Apple, which they didn't even consider was technology is quite incredible. And to me, it's kind of validating some of the AI trade.

And the reason it's validating the AI trade is because Google's going to spend a ton of money on capex next year. Google's obviously growing because of Gemini and Whimo and all their bets around AI, Google search being uh enhanced through AI, AI mode, etc. Like there's cloud that's really growing because of the AI workloads that Google's contracting for. So I mean a betting on Google is a bet on AI.

Now if AI went away, would Google go away tomorrow? No. But is there a world in which Sundar would even let the opportunity present itself that another company could take its lunch if they focused on AI more and Google kind of took their foot off the pedal? I don't think so. I mean, and you had that existential crisis for Google back in 2023 when Chachi BT was growing as fast as it was and a lot of people started thinking, hey, maybe I'm never going to use Google again. Obviously, that narrative has flipped and Google is now in a prime position to win.

But I think a $5 billion stake, although it's only 2% of the portfolio, is admitting that we need exposure to something in the world of AI. It's admitting that this capex spend is not going anywhere. And it's also admitting that quite frankly, Google is probably one of the best and most diversified AI companies because eventually Google will stop spending on capex and all that money will go back to share buybacks and free cash flows.

And Google's business is likely going to be resilient in the face of AI, if not enhanced, in the face of AI as being the world's largest toll booth for searchbased advertising. So, I think it's really nice to see Bergkshire uh invest in an AI company. I think we'll probably going to get more of these investments from other different funds. You're going to have a lot of people in my opinion that follow uh Bergkshire religiously that are just going to buy Google.

I mean, the reason Apple became one of the most amazing stocks over the past 10 years is once Buffett touched Apple and everyone was like, "Oh, Buffett's given, you know, the Buffett co-sign," a lot of people started buying Apple and you know, they didn't sell Apple. So, in order to do this, by the way, Bergkshire did sell about 16% of their Apple stake. Um, which makes sense. You know, they've held on to it since500 billion dollar market cap.

But it does make sense. They're transitioning into a company that can grow a lot faster. And I think this might be the start of a new potentially technological driven Bergkshire Hathway over the next decade potentially. It's going to be something that's exciting to see if they do do that. But you have them taking a stake in Google.

Some of the other stuff in the 13Fs that were disclosed. Stanley Ducken Miller also bought Google. David Ter sold all of his UNH. Uh Peter Teal, I know this has been making the headlines as well, has sold all of his Nvidia. and basically 76% of his Tesla. He did take new stakes in um Apple and Microsoft, which was weird because, you know, if you're getting rid of the entire AI thesis from your portfolio and getting rid of Nvidia, why would you kind of buy two names that are also in AI? But I guess he wanted a bit more safety and they're probably not as volatile as Nvidia.

But yes, Peter Thiel did take his entire Nvidia stake off the table. I don't think that's that crazy. I mean, I know a lot of people are trying to put the narrative together that if Peter Teal is selling and that Soft Bank is selling, then, you know, everyone's getting out of Nvidia. I think that that is one narrative and that's one argument. I also think a lot of these guys have been in these names for a long time and, you know, Soft Bank's been in it for like 10 years. So, eventually they're going to take some profits and it's not crazy that they're going to take some profits.

Crypto still getting hit. Yes, crypto is down 9374. We talked about it last night in terms of what's going on. And you're probably going to keep hearing this argument about force deleveraging and structural deleveraging. I think it is a legitimate reason for why crypto is getting hit for all these perpetual futures contracts that uh you know have been introduced and we'll talk about Japan in a second because that also has an implication right here.

Um a lot of these perpetual futures contracts unfortunately have allowed people to go uh you know from as little as 10x to as high as 250x on leverage. And when you're on 250x of leverage or even 100x of leverage, as you can see, there's also been weekly crypto asset outflows in the Bitcoin ETF funds. Uh even a 2% move will liquidate your entire position.

So from that perspective, and we saw this on October 10th, you know, there was a 19.2 billion liquidation in crypto because Bitcoin had a $20,000 candlestick. And I mean, obviously that took away a lot of money from the system. As a result, Tom Lee's argument is there's plenty of macro or uh market makers that also suffered during that liquidation and they're now having to sell to recoup a lot of the losses that they have.

Does that put crypto in a structural bare market? I don't know. I would say no. I I would say just like any stock that has a liquidation from a margin call or something like that, if someone's heavily levered into that stock, like it's going to create some short-term pain, but eventually the fundamentals come back in place. Uh with crypto, you've got to believe in a different sort of paradigm of fundamentals versus like a stock market fundamental thesis.

But if this is a structural deleveraging and not the beginning of a bare market, then crypto should be okay. The problem is no one knows. And you got a lot of people that are starting to think that crypto winter is here, right? And that is pretty ugly. I mean, if you look at Bitcoin from November 17th last year to November 17th this year, Bitcoin's down, which is kind of crazy. if you just held it for a year. I mean, a 10 year would have got you a better return than Bitcoin right now.

So, it's quite incredible to see this. And and the other reason why crypto's taking a hit is because unfortunately the Fed has not really given any level of meaningful clarity on a rate cut. Again, the probabilities for a rate cut are now below 50%. Bitcoin thrives on liquidity and and funnily enough, we've added more to the M2 money supply over the past six months than we have over the past couple of years. and um like M2 money supply going higher. If you put that on a chart with Bitcoin's price action, you know, Bitcoin's going lower.

So, it's almost like more liquidity into the system is not really helping risk on assets right now. And in in order for it to thrive, it's going to need even more liquidity, but if we're not getting a rate cut in December, I mean, the lack of liquidity is going to continue putting some pressure on Bitcoin. So unfortunately, it's going to be one of those assets that's going to need a real narrative rebooting over the coming days.

when we hear this whole conversation around bubble, which I've been hearing a lot more of over the weekend, that's fine. You know, that is a perspective that people can have and it's healthy to have that perspective. But then you see two of the CEOs of leading AI companies saying that we can't build these things fast enough and we're trying to figure out the capacity on this planet and we might have to go outside of this planet just to be able to build all these data centers because they think it is going to be that big of a deal.

And maybe it will, maybe it won't. But that is the argument from, you know, some of the most important tech CEOs on the planet in terms of what they're thinking about when it comes to data centers.

of being a tech investor during the um the year 2000 bubble which was really a telecom bubble and I think it's really helpful to compare and contrast today to the year 2000 um you know first I think uh Cisco peaked at 150 or 180 times trailing earnings Nvidia is at more like 40 times so valuations are very differently very different

most important however is that the year 2000 internet bubble or telecom bubble was defined by something called dark fiber um and if you're a veteran of of the year 2000 you'll know what that was but dark fiber was literally fiber that was laid down in the ground and not lit up. Fiber is useless unless you have the optics and switches and routers uh that you need on either side.

At the peak of the bubble, 97% of the fiber that had been laid in America was dark. Contrast that with today. There are no dark GPUs. All you have to do is read any technical paper. And that one of the biggest problems in a trading run is that GPUs are melting. And there's a very simple way to kind of cut to the heart of all of this. It is the return on invested capital of the biggest spenders on GPUs who are all public and those companies since they ramped up capex have seen call it a 10point increase in their ROIC's. So thus far the ROI on all the spending has been really positive.

the current US economy to a Jenga tower that's propped up by spending from wealthy consumers and AI companies. Joining us here this morning at Post9, former Bridgewater chief investment strategist Rebecca Patterson is back. It's great to see you, RP. >> Good to see you. >> So, Jenga doesn't sound too good. Can you talk about it? >> Sure. I I mean, the Jenga tower could keep getting taller before it topples. We know economic cycles eventually it topples. What what spurred me to write this is when you think about the supports for the economy right now as you just said AI and the high-end consumer it's kind of it right where small businesses have gotten hurt

by the way she's right about that I mean AI and the high-end consumer is what's propping up the economy there's I don't even think there's a debate around that there's not that much going for this economy besides you got this massive AI spend and then you have the wealth effect that's leading to people buying stuff because their stock prices have gone up over the past couple years.

So asset prices staying high, affluent customers, and the AI spend. Can any of those things go away and we'll still be all right? >> No. No. That's the problem, right? So if the AI capex hits constraints, whether that's uh power constraints, labor constraints, what whatever it is, um that would be a big shock to the stock market given that they're driving so much of the stock market.

Stocks come down that affects the high-end consumer's ability to spend. Even if AI is fine, let's say there's something else that causes high-end consumers to get more cautious. Maybe the Fed doesn't cut as much. Maybe it's geopolitical. It could be anything. if they get more cautious and aren't buying equities or decide to take some profit that pulls down the stock which hits AI companies big in a bigger way. Right? So all of these things are linked together and you need all three of them to stay firm for this party to keep up.

All right, folks. I think that is it for the day. Uh it's about 11:40 right here. Didn't even realize it was 1140. SoFi down 1%. S&P again is flat. We'll see on the market close how flat it continues to be, but 4 cents away from going green. 67158.

And then Hood down three. Pounder barely down. Tesla pounder down half a percent. Tesla up. Tesla's the story of the day up 4%. Bitcoin trying to make a move back to 94. Nvidia also down 1%, not that crazy. And then Google got the Birkshshire stimulus and that's why that's up 5%.

Maybe there's some news on Tesla coming out that the market might know about. Maybe there's something we got to keep an eye on. But obviously, if you're holding Tesla today, you are definitely definitely liking the price action. 28875 on the googs Tesla 420 hood 117 and then pounder 173 on the day.

Thank everybody. Appreciate it. I will see you guys on the close. We'll see where the market reaction goes. Again, relatively flat on the indices. Tesla's going green. Hood's down 3%. Palenteer down about half a percent. Crypto trying to bounce a little bit. So, at the close, we're going to see how these prices play out.

But that's kind of what we got for market open. All right, that's it. Thank everybody. Appreciate it. I'll see you guys on the market close. Bye everybody. Have a good one.