In this week’s video, I break down why the midcycle slowdown within AI continues to dominate the narrative and why the bearish takes miss what’s actually happening beneath the surface. Equal weight S&P is breaking out, IWM made new all-time highs, NYSE cumulative breadth hit an all-time high, and the S&P is consolidating in a triangle after spending June flat. That’s air coming out of the bubble, not a bubble bursting. Meanwhile, momentum volatility, now running hotter than the dot-com era, is flushing out hedge funds with VAR limits and retail traders chasing breakouts. Headwinds don’t stop things. Planes don’t hit a headwind and go straight down. You get turbulence, and that’s what we’re going through.
The deeper story is threefold. First, the podcasts: Greg Brockman says there will never be enough compute in the world to satisfy demand, Scott Wu describes agents moving from tasks to missions, and Gavin Baker says GLM 5.2 forced him to rethink his framework, the future is composable models, with frontier tokens capturing 90% of economic value while open source handles the workflow layer. Second, Kevin Warsh: he called AI improvement “hyper Moore’s law stuff” so why would a pro-AI Fed chair hike into deflationary pressures and job disruption? The market pricing hikes makes no sense against negative CPI prints, a 3.5% median wage, and a quits rate signaling no labor market strength outside healthcare. Third, Bitcoin: sitting at its lowest 60-day vol, with the first divergences since July of last year, lower lows, higher highs, on bad news.
Timestamps
- (00:00–01:42) Intro from Maine: midcycle slowdown continues, the volatility shakeout, and why the application layer and Warsh matter for Bitcoin.
- (01:42–04:39) Markets: Equal weight S&P breaking out, IWM at all-time highs, S&P in a consolidation triangle, NYSE breadth at all-time highs. Hyperscalers (Meta, Amazon, Microsoft, Google) stuck in multiple compression despite growing earnings; financials setting up to break higher.
- (05:00–08:25) The megaphones: Semi/software rotation ranges, Morgan Stanley momentum index trading outside 5% bands, TMT volatility above dot-com levels. This is how crowded trades get uncrowded. Plus, why the margin debt “bubble” chart is lame analysis relative to US market cap, we’re below the post-GFC midpoint.
- (08:25–09:53) Consolidation types and the headwinds: data centers, power and cooling, memory bottlenecks, regulation. Turbulence, not stoppage the headwinds matter more now because the earnings surprise is gone and the trade is crowded.
- (09:53–14:34) Podcasts and open source: All-In with Gavin Baker on GLM 5.2 and composable models; frontier tokens capture 90% of economic value while open source processes 80%+ of tokens. Dean Ball’s paper on the regulatory limbo risk.
- (14:34–16:26) The memory architecture rumor: a claimed breakthrough in memory efficiency went viral, but with no details on timing or applicability, don’t sell your memory stocks and don’t expect another 7-to-10 bagger after you’ve had one.
- (16:26–23:35) Scott Wu and Greg Brockman: agents moving from seconds to hours of work, less like a tool, more like a junior coworker. Companies aren’t adopting AI tools, they’re adopting AI workers. Enterprise adoption at the inflection point, “show me the ROI” phase. There will never be enough compute and the final seven minutes on AI in healthcare are must-listen.
- (23:35–26:52) The playbook and the data: AI consolidation playbook re-posted, estimate revisions still strong in the US with Europe posting its biggest upturn in two years. Aggregate weekly payrolls sitting at boring post-GFC levels.
- (26:52–38:26) Kevin Warsh deep dive: rejected forward guidance, “hyper Moore’s law,” and why a Fed chair who believes AI brings deflation and job disruption wouldn’t hike. Real two-year rates driving the debasement trade selloff; crowded long-dollar positioning; negative headline CPI prints coming; Cleveland median PCE and Atlanta median wage both back at 2010–2020 levels; the CBO debt path everyone forgot $7 trillion in net interest by 2036.
- (39:01–41:56) Application layer: insurance and healthcare benefiting most as infrastructure consolidates. KBW insurance breaking out (Travelers, Allstate on the 52-week high list), regional bank M&A coming as AI-capable banks buy up smaller ones. 8% of the S&P at 52-week highs, 13 of them financials.
- (41:56–47:19) Meta reality check: the compute-resale story is a valuation play, not excess capacity, they said themselves they’re still compute constrained with demand outrunning expectations. Physical capacity, not demand, is what limits hyperscaler capex surprises. Plus GLM 5.2 as a realistic risk to the Anthropic ARR multiple narrative.
- (47:49–50:40) Bitcoin: lowest 60-day vol in the cycle, rate-cut expectations chart driving price, rate of change getting less bad, and the first divergences since July of last year arriving on bad news. If the Fed-hike positioning unwinds, it’s good for gold, silver, and Bitcoin.
