Why Stocks Fell As The Fed Holds

[0:00] Dano: Happy Friday, October 30th, 2026. Sitting here on Halloween Eve, All Hallows Eve Eve, and it is a little bit scary in the market right now, depending on what sector you're looking at. My name is Dano Weir.

[0:14] Dano: I'm the Marketing Director for Fermata Advisors and our private wealth arm, Sonoma Wealth Advisors, joined shortly by our Managing Principals, Daren Blonski, CFP, Chris Sipes, CFP. Definitely want to get their take on you You've probably even seen a headline or two, depending on how deep you are in the market for your own edification.

[0:33] Dano: A rough day. Let's just put it that way. Or really was it?

[0:38] Dano: Tech stocks getting absolutely pummeled in some senses. We're going to look at how the cost of AI ambitions are peaking and why that might be so similar to the moments 100 years ago for the railroads. And yet, big tech stocks, why does Daren have a view of the S&P that shows a green week? If you look at things equally weighted, we'll take a look at that.

[1:00] Dano: Plus bonds having a good day this month. That's hard to say. And to say we've said that very often, we take a look at the top six biggest single day drops in history and the greatest Bank theft of all time took place last night. We'll look at the downstream effects of the $6.3 billion Binance hack. Let's roll.

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[1:52] Dano: Managing Principals of the firm Daren Blonski CFP welcome back to the show Chris Sipes CFP guys let's start with the news from late last night slash early this morning Daren you have known crypto for a long long time tell me what Binance is and why it's a big deal that it was hacked allegedly by North Korea well so the interesting they're still trying to figure out exactly what happened right but the so.

[2:16] Daren: Far it appears that a laptop from a developer got into the hands of a hacking group in North Korea, who then went on and cleaned out a bunch of accounts on Binance, right? So this is a really important distinguishing point to make that throughout time, when we've seen issues, because everyone says, oh, that crypto, it's going to get hacked, I'm going to lose it, whatever.

[2:42] Daren: This is another perfect instance where crypto itself wasn't hacked, it was the accounts that hold it. That we're having.

[2:50] Daren: And what's becoming even more apparent to everything going on out there in the economy is that the ability to protect and defend proprietary anything is going to become very, very, very difficult. And that I think we'll, and I can get into this later, but we'll tie into some of why we're seeing the repricing happen in the Markets with some of the big tech stocks.

[3:15] Daren: These moats. That were once there for any organization are now coming into question. And I think the cybersecurity stuff is just the beginning of it. So crypto didn't get hacked. A brokerage where you buy and sell crypto on got hacked and accounts got cleaned out at that brokerage.

[3:33] Dano: So this would be similar to Mt. Gox then, which happened a while back?

[3:35] Daren: Yeah, it would be like Mt. Gox on steroids. Like the first big hack. What often happens though when these hacks happen is everyone goes, oh, well, crypto is not safe. Well, no, that's not.

[3:45] Daren: That's not the point at all the point is just those who are given the custody of that crypto their accounts got hacked because apparently someone in North Korea got a hold of the developer's computer and went into a back door effectively and got everybody's information and then took the crypto off of the Binance platform but what's been interesting is it was taken off the platform and then transferred to all these different accounts and they can track a lot of that.

[4:12] Daren: So 3 billion of the six point.

[4:15] Daren: 3 billion that were stolen was actually frozen which is also another interesting thing they they have a way to freeze it now which in some ways tells us that this stuff's really starting to come to maturity because then people who want to control it can control it the the the issue with crypto all along is it's not been controllable by the government in yeah isn't that the whole point of crypto yeah well that's if they can't control it like is that really but But that's the Bitcoin story.

[4:45] Daren: But then that's why there's so many Bitcoiners that don't like the other cryptos because there's different ways to control those. But that's also why they've gotten adoption at the government level because there's because there's ways to control it is more palpable for. People who seek to control.

[5:04] Dano: And an interesting side note, just a side story to this, there's a guy named CZ who's in charge of Binance and Elon was on Twitter laughing at this whole instance. CZ clapped back and said, hey, by the way, I do have respect for you. We've got a billion dollars in SpaceX shares. We'd really appreciate some support. So...

[5:28] Dano: Somewhat saying like i'll sell you know i'm i'm in need i'm in need of filling a hole right now i've got a billion in SpaceX so if you don't want that to happen maybe help me out here buddy i thought that was humorous high school never ends well it's.

[5:43] Daren: Actually also bigger right because but anyway i diverge no good no good well it just it's it's interesting that like you're seeing Elon come out and say a lot of these things like, hey, this is going to get bad for better. This is going to blah, It is an interesting, because here's this guy, the guy who created Binance. He was actually got a pardon, a presidential pardon, right?

[6:09] Daren: He was in jail. And I don't know the exact what he went to jail for. I think some level of fraud, but he's out now. And he's kind of right to Elon where he says, hey, man, we appreciate some support. And I think you're going to see more of that where everything in the tech world is going to come under attack, right? It was Binance today, but what is it next?

[6:34] Dano: Yeah, which would be the...

[6:36] Daren: Oh, go ahead. Well, case in point, Department Of Homeland Security got hacked this week. Department Of Homeland Security and 20,000 of their employees' information got leaked out and their identity stolen. That's Department Of Homeland Security, folks. So the idea that anything is not susceptible anymore is just...

[6:53] Daren: Non-reality like everything is going to come under attack and we're quite literally going to you know the conversation used to be what about these agents should we have agents in our life the conversation in my opinion is how are you going to protect yourself with agents that's the future because you can't put the genie back in the box and so so you.

[7:18] Dano: Clearly, and you'll never be able to definitively know, but with the hack like that, and Daren will show in the technicals for crypto at least, saw significant pullbacks this week. So potential that that is part of what's happening on the stock market side. But Chris, also earnings reported for many companies. So how does that play into our meme here?

[7:44] Chris: Well, every time we have one of these big sell-offs in the...

[7:47] Chris: In the tech side of things and and i think you're tempted if you're like me you're tempted to think oh my gosh this is it it's finally turning the corner right and it's so appropriate that this happens on on halloween where for those of you that have seen the halloween special the peanuts the famous charlie brown a scene where he's trying to kick the football and lucy just keeps pulling it away from him like that that in this meme is you know stock market leadership every time you think it's gone and that all these you know small caps and value stocks and fundamentals valuations any other asset classes are going to take over i feel like the football is just you know getting jerked away so i think it's too early to celebrate you know is today the real pullback ah just kidding next week all green yeah now year to date value is leading by a long a long shot But relative to the S&P, it's actually growth is the biggest laggard year to date and value is leading.

[8:55] Chris: Again, knock on wood, because I don't actually even believe it. Small cap value is leading the way out of value, while large cap growth is second from the bottom in terms of the factors in the Markets this year. Who knows, we might be seeing a change in that relationship.

[9:19] Chris: There's been several days over the last couple weeks where you look at, say, the NASDAQ is down significantly and small and medium and even large cap value is either flat or up. So there's starting to be some divergences in the market, but probably too early to tell. Okay, so we got the sentiment indicator this week.

[9:44] Chris: Now, this was on Thursday, so this was prior to the big sell-off today, which I'm sure if the sell-off continues next week, these numbers are going to change completely. But not really a whole lot of change in the sentiment indicators from AAII. Now, on the CNN indicators, we're at 25, which is just... At the top of extreme fear before it goes into fear. That's up from 16 extreme fear last week.

[10:17] Chris: So in terms of positioning, the market is definitely more on the fear side of things or extreme fear side of things in terms of positioning. And then you've got Bitcoin at 30, which is fear. That was a drop from 50 neutral last week. I'm sure that indicator is going to be changing rapidly with the Binance hack and quite the sell-off in Bitcoin after that.

[10:44] Chris: So if you're a contrarian type of investor, you might have your antenna up a little bit in terms of you look for extremes in either happiness or sadness to give you some indications about where the Markets might be going. People are, people are getting very scared. And, fear is dominating in the market. So as a contrarian investor, that might be a good sign.

[11:11] Dano: And I want to give a heads up to everybody watching the show live on Friday, October 30th. If you are watching, whether it's on YouTube, Facebook, Twitter, X, or LinkedIn, this is a live show.

[11:25] Dano: So as you're seeing the show, if you have questions or reactions, you can comment on that platform. We see them come through to our show here. And we will do our best to answer or respond to those. So if you have a comment, drop it in the comments.

[11:40] Chris: Now, we and many others have compared the boom in AI to the railroad boom back in the 1870s.

[11:50] Chris: There's a great book that happened to come out recently about that time period called 1873. We definitely recommend it. I think it was the same author that wrote The Lords Of Finance. It was very good. But one of the things that you take away in this great chart from B of A showing that, you know, knowing when the changes are happening is very hard.

[12:15] Chris: Okay, because you've had multiple times during that boom where the market was up significantly, down significantly, back up significantly, down significantly. And we're definitely seeing that again with the AI boom. I'm sure you guys remember when Zuckerberg announced the metaverse and Facebook dropped, I think it was 25% or 30% in value the next day.

[12:43] Chris: I feel like almost all the big mag seven stocks have had one of those or more where they release earnings and then there's a huge sell-off the next day. In terms of market cap, they keep topping each other in terms of... This is the most market cap lost in a day.

[13:01] Chris: This week, it was Google with their earnings announcements. They saw a large drop in their stock. If you think, hey, when it's time to run for the hills, it's going to be obvious, I would caution you with that kind of outlook because some of the biggest bounces can happen during a sell-off, and you just never really know.

[13:29] Dano: When it's that one you never know if lucy's pulling the football again right so so so it makes it difficult to try to to predict these things ahead of time they don't ring a bell at the top as they say so Chris that was in 2022 February 2022 Meta announced the metaverse shares dropped 26 percent in a single day or losing 230 billion in market cap Since that day to today, they're up 150%. Yeah.

[14:03] Chris: I mean, think about it. I think this week, I want to say Google was down 12% yesterday, somewhere in that range. But if you think about these massive companies, when that happened to Meta, it was still one of the largest companies in the market, losing a quarter of its value in a day. Like a quarter of the value of a company in one day is just an insane drop.

[14:29] Chris: And that's happened several times and that's why you have to be careful with single stocks. You know, and, and you have to be careful even with stocks that are great companies and maybe good, great companies in the future. Anytime you're, you're holding those single stocks, you're subject to these massive drops, that, that can happen to any, any company.

[14:54] Chris: Now, one of the things that's kind of changing with the narrative is, like Daren mentioned earlier, that a lot of these hyperscalers are starting to spend more money on the AI build-out. And that AI build-out is getting increasingly more expensive to finance.

[15:10] Chris: I think you guys saw this week that Microsoft was tapping the corporate debt Markets. So a lot of the hyperscalers have gone from paying for these build-outs via free cash flow to borrowing funds, whether that's from the corporate debt Markets or issuing equity in order to finance these build-outs.

[15:34] Chris: And that overall cost of capital, I think it was two weeks ago, we talked about the weighted average cost of capital. So for a company, you can take the cost of their loans, their fixed income, their bonds, essentially, and then you can take the cost of their equity, how much it costs them on their equity, and you weight that to get a weighted average cost of capital.

[15:57] Chris: Now that is the hurdle that the project, that whatever project they're going to do has to clear. In order to make money. And that hurdle has been going up. And you can see that it's risen to nearly 10% on new debt that's being issued.

[16:19] Chris: And that's completely different than just a few years ago, say in 2020, 2021, when interest rates were so much lower, that cost of capital was much lower. Therefore projects that are maybe a little more marginal can be financed a little easier. The opportunity cost is much less of that capital. Now that is changing.

[16:45] Chris: And so these projects are getting increasingly more scrutiny in terms of are they going to be able to clear that cost of capital. And for investors, they're looking at, hey, you know, Treasury rates over 5% now. How much more do I need to be compensated to go ahead and take the risk on these projects that are more speculative in nature? 10% isn't going to cut it in order for me to jump out into that level of risk.

[17:21] Chris: This was very interesting. I saw this on the Idea Farm, but it was actually put together by Bridgewater Associates.

[17:32] Chris: What this is showing, well, I'll just read what Meb Faber says. Change and concentration are accelerating, increasing the risks of destabilization. In the past two years, NVIDIA has overtaken Apple to become the most valuable company relative to GDP in history.

[17:53] Chris: By year end, we will have built more compute in the last two years than in the prior six combined, most of it in the United States. So taking various valuation measures, et cetera, one way that they can do that is to look at the value of the company relative to GDP and look at NVIDIA and Apple relative to either even some of the giants like Standard Oil.

[18:22] Chris: I mean, Standard Oil was broken up at the time because it was considered to be just too big back then. So that's where you get all this separated oil companies, Chevron and Exxon and Marathon. And a lot of the biggest oil companies in the world were split off of Standard Oil.

[18:40] Dano: Isn't that such a cute idea to think of now, splitting up a company because it was too big?

[18:45] Chris: Yeah. Microsoft, look at Microsoft back when they were going through the antitrust conversations. And they're literally quaint. In valuation relative to Apple and NVIDIA. So just monster, monster companies.

[19:04] Daren: So let me ask you guys this question, Chris.

[19:08] Daren: How many millions of jobs?

[19:12] Daren: So there's only two options with AI, right? If you spend all this money on AI and build out, there's only two options. The overall economy has, well, I guess there's more than two options, but the most plausible two options are one. The economy expands exponentially because of the increased productivity of AI. Okay, so that's one option. And that generates more cash flow than pays all this back.

[19:35] Daren: So that's one. The second option is that what's actually happening is AI is front-loading the debt to then absorb how many millions of jobs. Because those are the two scenarios, right? So let me say it again. AI is front-loading the debt. Debt that will take over our jobs and absorb how many millions of jobs, or it's going to make the economy exponentially larger.

[20:04] Daren: Thus will justify these costs of build out so if i ask you guys that question if on one end of the spectrum is economy is going to grow and be massively bigger that's kind of what the story Elon says or you some of these doomers that are creating the anthropic day in day out because we're going to ruin civilization which we should mention because this is a stock show anthropic produced its s1 this week and that's like hey we're getting ready to ipo and then and that's when they have to list all their risks.

[20:33] Daren: The first time in history, I'm pretty sure that someone put in their S1, there was an existential risk to humanity. That was one of the one risks, was it was creating an existential risk to humanity. The risk of us company going to IPO and becoming bigger is that we're going to kill humanity. I mean, that's insane. Absolutely insane.

[20:57] Daren: So if I ask you that question, are you on the left, and you're like, hey, the economy's going to get huge, and AI's going to make all of our life busier. And then I go on the left or the right, or excuse me, that's on the right and it's on the left. And the left, I say, well, actually, it's going to take all of our jobs. Where do you guys fall?

[21:15] Chris: I'm going to say.

[21:16] Dano: You asked two centrists, so you're going to probably get the same answer from both of us.

[21:23] Chris: Well, two things I would say. One is I saw something that Bill Gates mentioned, basically something. This isn't a direct quote, but it was basically like. AI is going to produce an unbelievable amount of abundance for our society in the years to come. But the years between now and when that happens is going to be probably the most tumultuous in history.

[21:49] Chris: And I would say that sounds about right to me. And that's because of that chart on the right, the wealth inequality. When you look at the amount of wealth, and not only wealth, but power, that is concentrated in these, in, in this small segment, of society that tends to historically lead to very volatile, very volatile times.

[22:14] Chris: When you get that kind of concentration, so that, that, I would say, and the other thing I would say is that either one of those outcomes is massive outcomes are priced in. So because betting is so popular now, I think if you related it to betting, it might be easier for people to understand.

[22:34] Chris: Because a lot of people go, yeah, NVIDIA is, you know, it's a great company and they're changing the world with AI. Yes. And it's already, that is in the price, right? It's as if you're betting on two sports teams, one is far better than the other.

[22:51] Chris: There's going to be a huge spread and the odds are going to be that team that is so much better, it's priced into the bet. So So, yeah, I think it is going to happen eventually. I do think it's going to be very tumultuous between now and then. And I think it's all priced into the stocks at this point. If it doesn't come through as rosy as possible, you know, buyer beware.

[23:18] Dano: Daren, I have said this before on the show, so this isn't a new position, but if perhaps this is your first time checking out the show, I think. I choose to think a lot about the 1950s and 60s, where this massive optimism around rockets, space, and nuclear energy, atomic energy, and the future is just going to be nothing but rockets, space, and atomic energy, and all of the potential that was locked into that.

[23:56] Dano: Now sitting here 60, what? Sorry, eight, 60 years later. Yeah, sorry. I can't do my math today. Do we have rockets, space, and atomic energy? Absolutely. Is my car powered by plutonium? It's not. Could it be? It could.

[24:14] Dano: So to your question of whether it's going to be massive economic growth or whether we're all going to have no jobs, it's going to be something in the middle or a third stranger option that we can't even conceive of. And that's what I choose to think. I think either of those options that you present, though, is possible.

[24:32] Daren: You know, it's interesting, right? Because where you fall in that, I think, depends on like how you really look at this, what's happening. Case in point today, Google is now running their first AI agent in space.

[24:50] Daren: So think about that, right? One of the big issues right now is the compute and the energy that AI takes.

[25:00] Daren: If we need more energy to create more compute, to create more economics, which FYI, for all those people that used to complain about Bitcoin taking energy.

[25:11] Daren: Okay.

[25:15] Dano: We're letting the data centers help people understand how to properly apply their mascara and what taco they should choose. That's all running through AI, too, if we're talking about energy usage.

[25:26] Daren: Well, that's right. And then if you look at like, so they launch, so Google launches this satellite into space that effectively a model is run in space off of solar panels.

[25:37] Daren: So now compute is all nothing, right? So I think the bigger risk is that the cost of compute actually forces, this is like when we finally will get regenerative energy, when we'll finally get more and more energy because the cost of this is forcing this. But then the question is like, Does it all relegate our jobs? We end up on UBI, universal basic income.

[26:01] Daren: I think the truth is there'll probably be a transition time, a period of time where things really do change pretty drastically and significantly. And this goes along the lines with what Chris, you and I have been talking about for literally years on this channel. And that is the fourth turning, right?

[26:17] Daren: This idea that we're going to go through a time of... Political instability, institutional instability, societal instability. And learning to be more independent and more supportive within smaller communities, I think, is going to become an important survival skill as this change foments and things change in the environment we're in.

[26:41] Daren: And perhaps AI and these build-outs are what, this is the beginning of it, right? I do think, though, before it happens, there'll be like this collapse and then everyone who likes AI will be called crazy and that was a stupid idea.

[26:54] Daren: But under the table, there's just this groundswell that is just incredible and changing everything and being right on the front lines AI and utilizing it, working with agents, molding agents, finding use for agents, how fast it's moving is uncomprehensible. And the truth is, the closer you get to it, the more you see that and you feel that.

[27:26] Daren: And what this is about to do to all of our lives, which is literally 100 years worth of technological change in no longer than 10 years, it's going to drastically change everything. But there probably will come this time where society will push back and there'll be things and we have to figure stuff out.

[27:42] Daren: So there's like this transition period. I think the riskiest period of time for all of us is going to be that period of time from we're not sure how it's going to unseat society to be figuring that out.

[27:57] Chris: Absolutely. Well, here we see why those companies are so important to the stock market. This from Lance Roberts, he says Micron and NVIDIA are expected to contribute 36%. Of the S&P 500'S aggregate year-over-year earnings growth in the third quarter, while the 10 largest contributors represent roughly 66% of the total. This remains a selective market.

[28:28] Chris: And the point there is we've seen the concentration in the S&P growth, which has been following earnings. The market has been following the earnings, and those have been accruing to... Micron and NVIDIA. I learned this week that if you guys look at the Russell value index, guess which stock is the biggest part of the Russell value index? It's something like 20 plus percent of that index. Any guesses? It's Micron.

[29:04] Chris: Micron.

[29:08] Daren: So that's super interesting, right? Because...

[29:10] Chris: Yeah.

[29:11] Daren: We talk a lot in this channel about the big dogs, right? Like the S&P 500 being dominated. But what you're saying to us, Chris, is even the bigger, smaller mid-cap indexes are dominated by AI too.

[29:25] Chris: Yeah. Well, because if you look at Micron on a price-to-earnings ratio, simple price-to-earnings ratio, it's very low. And that's because semiconductors historically have always been super cyclical. In their earnings, they go through boom and bust. And it's sort of like oil, where there'll be times where it's like, gosh, this company looks dirt cheap.

[29:48] Chris: Well, it's because you're pricing it on peak earnings. So it's just funny that, you know, I mentioned earlier that value was the leading factor in the Markets this year. And I wonder how much of that is tied to the fact that some of these semiconductor companies are weaseling in there at peak earnings. So anyway, time for, you know, that's a conversation for another day.

[30:13] Chris: But the hyperscalers have disclosed quite a bit of off balance sheet commitments, you know, and this was a good illustration of that showing these don't necessarily show up on the financials on the balance sheet because you've got things like leases, purchases, and also backstops of other companies. I think that's been pretty well covered in the media, so we won't spend a ton of time on it.

[30:41] Chris: But, you know, NVIDIA backstopping some of these, what do they call them, neoclouds and stuff. And so it's like they're selling the chips to them. They're also backstopping them and part owners of them, et cetera. So there's a lot of stuff that's maybe not being accounted for on the accounting side due to that. Now. Chris, one second.

[31:07] Dano: Can you clarify what backstopping means for someone who doesn't know what that is? I've heard of it in the banking sense from the federal government, but how can a company, how can NVIDIA backstop a quote, neocloud?

[31:19] Chris: Well, think about it like if you have anybody in your family, Dan, that's maybe not so good with money and they came to you and they said, Dan, I know you've got great credit. I need to borrow money for a car. Bank's saying no to me. Can you co-sign for me? Right now, you might feel like, oh, sure, I'm just kind of kind of backstopping. And what from the Bank's perspective, you're signing for the loan.

[31:46] Chris: I get what percentage of those actually that people co-sign for that they end up paying the loan. It's a very high amount. So personal finance tip. If you co-sign for something, expect that you're going to pay for it. But that's that's essentially backstopping. So a lot of these companies are able to go borrow because they've got NVIDIA behind them as their backstop.

[32:15] Dano: Daren, I believe you call those FFF loans? Friends, families, and fools.

[32:23] Chris: Yeah. So talking a little bit about cycles, and we just talked about the major... That these companies have in the current stock market. And this is from Ned Davis research showing, you know, the effects of that Bridgewater, the potential effects of that Bridgewater concentration that we showed here with Apple and NVIDIA being the largest companies.

[32:55] Chris: Now, Ned Davis put together, Ned Davis research put together, well, what if you just bought the largest company in the index at the end of the year. And, and then held that. So that's on the bottom, chart at versus the S and P 500. And this goes back to, it looks like maybe 1960 or so. And it says, is investing in the biggest stock, a good idea.

[33:26] Chris: Historically, it's been a terrible idea. And that's because they tend to not do as well. As the rest of the index. You tend to underperform the index by owning that largest stock. So you can see all those companies that are up there in the left-hand side that were once the largest stock.

[33:45] Chris: And some of them are still around overall, but ExxonMobil is a great example of, they used to be the biggest square on that quilt that we look at a lot. And now they're a tiny piece. They've grown a lot since COVID, but remember how small that square was during COVID. And so these companies all cycle through. And it's not only companies, but it's asset classes. So last decade's winner tends to be next decade's laggard.

[34:13] Chris: So the cycles of asset classes here, you can see gold in the 70s had just an incredible decade and then spent the 80s really struggling. The Nikkei, the Japanese Nikkei in the 80s, just... Just got back to even a couple of years ago from that peak in the 80s. Then you've got the NASDAQ and the dot-com bubble and emerging Markets in the early 2000s.

[34:41] Chris: Emerging Markets had their lost decades too. So you have to kind of ask yourself, where has all the growth been recently? Is that likely to continue over the next 10 years or the next decade and a half? Plus like we just went through with the S&P? Or is it more likely that you're going to see something else take over?

[35:06] Chris: And like we said with the railroads, the hard part is you never know when that actual turn is taking place. And that's why the diversification tends to work over time because you can't know those things ahead of time. If you think the S and P, is, is escaping from that, that cycle. And now things are different.

[35:30] Chris: This, from theory, Theory from IRV showing the NYU Stern School Of Business portfolio visualizer. It's a mouthful. Showing how the S&P tends to cycle as well. So there was a 20-year period during depression where the S&P basically went nowhere, followed by some very high returns from the 50s into the 60s. And then again, the cycle continues.

[35:58] Chris: So we're in a cycle right now. One of the best cycles in... One of the best bull Markets in the S&P 500 history. So not saying you should sell everything, not saying you should sell all of your S&P, but if you're in the camp of, you know, VOO and chill, you might want to consider, you know, if you can sit through a lost decade or not.

[36:23] Chris: Okay, big drop.

[36:26] Dano: Did you just use a Gen Z slang term there, Chris? Did I hear that? Voo and chill?

[36:31] Chris: I don't know if that's actually Gen Z or more of a retiree conversation. But last Thursday, we saw a huge drop in rates, massive drop. I was camping, but obviously paying attention and just being slightly annoying on teams, I'm sure, because tech stocks were down, value stocks were up, and bonds were ripping.

[37:01] Chris: It was a crazy day, but did some research on that kind of drop relative to the overall interest rates. Because it was about a 17 basis point drop in one day, which is significant. But 17 points off of 5 plus percent is not as big as 17 points off of, call it a half a percent like we saw. In the 10-year yields during COVID. So the relative drop was not as big as the absolute drop, which is on the left-hand side.

[37:42] Chris: But when you see a drop like that in the Markets, it should be a sign that, hey, something big is happening. Previously, there were times like COVID, the Silicon Valley Bank sell-off, Black Monday, et cetera. A lot of big... Big things happen around huge drops in rates.

[38:02] Chris: And I think if you're kind of wondering, are we going to head into a recession and things like that, you want to keep an eye on the two-year Treasury yield because that one tends to be the front of where everybody piles money in when they're selling and they're scared. Not seeing that kind of drop yet, but something to keep an eye on. Now for bond investors, a rate drop is a very good thing. This from JP Morgan.

[38:29] Chris: And saying that if rates fall, and this is from probably a week and a half ago or so, so the math's going to be a little bit different now, but if rates fall 1%, you'll earn 13% on the 10-year Treasury. If rates rise 1%, you'll lose 2%. So we've been talking about the convexity, the different convexity of those different asset classes if you're thinking about ways that you can diversify.

[38:56] Chris: And diversification in bonds has not been as good lately. Now that we've come out of globalization, this is a great chart from Goldman Sachs showing, you know, basically the start of the Ukraine-Russia War is kind of where they put the start of the or the end of globalization.

[39:17] Chris: And then we've got the Iran war start. So since globalization has been being ripped away, that's... Contributed more to inflation for all kinds of reasons, less trade, more issues around energy, et cetera. So inflation has become more of an issue.

[39:37] Chris: And in the bond market, that's going to be a headwind. And so you don't get as good of diversification from the bonds as you previously might have expected in a different regime. So talking about things changing again, big, big long sweeping changes. Interest rates tend to take a lot longer.

[40:00] Chris: To go through these huge cycles, 30, 40 year cycles. Globalization, a long cycle. The regimes can change. So diversification is about having the assets that are going to perform in different regimes. This was from Nicholas Rabner at Phenomenally on X if you want to follow him.

[40:29] Chris: Used his data to recreate this chart because the chart that was posted was too hard to read. But if you look at the risk and return of 100% stock portfolio measured by S&P 500 versus the famous 60-40, and they're looking at 100% stocks versus 60% stocks and 40% bonds, 60% stocks and 40% gold, or 60% stocks and 40% you in managed futures, better known as trend following.

[41:02] Chris: And you can see here that when you combine that diversification, the compound annual growth rate tends to stay elevated in some cases, like with the stocks and gold actually was better compound annual growth rate, along with lower volatility.

[41:21] Chris: And so your Sharpe ratio, which is basically how much return are you getting for the amount of risk that you're taking. So a higher Sharpe ratio is better and you get a lower drawdown. So the way that you mix your diversification can be very helpful and it matters in these different regimes, potential regimes. So last note is on the housing market.

[41:55] Chris: This was a great chart I thought from Logan. Modashami this was in response to people saying this is the most expensive housing market in history the answer to that is it's expensive yes relative to history measured by the income ratio so how much is the payment going to be as relative to your income but actually folks in the 80s and the late 70s had it much worse so it's been It's been worse before.

[42:25] Chris: It's definitely elevated now relative to history, but it's not as bad as it has been in the past. So I don't know if that's good news or bad news. Maybe we got more to go, but I thought that was a great chart nonetheless.

[42:42] Dano: All right. We'll get to this one at the very end. Daren, you want to take us into the world of analytics?

[42:50] Daren: Yeah, I can do that. Lots to stare at today.

[42:57] Daren: I guess we'll start here. So this is the Bitcoin chart. The reason I bring this up is because Binance was hacked last night, supposedly by some North Korean hacker group, and they stole $6.1 billion-ish worth of cryptocurrency. They didn't hack.

[43:22] Daren: The actual currency they just stole the money out of the accounts inside it's Binance which is an exchange finance is saying they'll cover it all and they have insurance and yada yada yada and Elon's laughing and the owner of Binance is saying come on man be cooler we just got ripped off with the largest Bank theft in history and i don't know it's kind of interesting but we've been talking about this double bottom for a couple weeks you can see this formation here It was a double bottom.

[43:53] Daren: And then you have this kind of cup and handle forming. And we broke above this neckline of this double bottom and then got rejected right here along this long-term resistance slash support line. You can see the sucker goes all the way back. Look at how long this guy goes back. I mean, it's been an important line for a very long time. So it doesn't look like we're quite ready to break above that.

[44:22] Daren: So if we go back above, say, call it 90, this range right in here, then we'll see something different. I'm not quite ready to say that this is now invalidated with the hack. I would argue that it's probably closer to the reality that the current hack is just a momentary thing and the market will absorb it. We sort of closed on our 20-period moving average.

[44:50] Daren: That's not super great. That's that long-term trading. That's the first line of defense when it comes to the Markets. Our 50-period moving average, you can see we closed right below it today.

[45:01] Daren: Overall, not particularly concerned yet. I'd want to see some follow through one way or the other. I'm not buying this yet that this is over and it's all going to come down and fall.

[45:14] Daren: I think that's less likely. So let's dive into the S&P right now. So this is the S&P. I've been showing this range from $7.49 to call it $7.50 to $7.80-ish. And the market's actually been in there. But let me show you a little piece of good news. And then I'll show you an area where I don't like on this chart. You can see this was a low back in September. And we traded up, got rejected, and we came back.

[45:42] Daren: And we hit that low again right in that area. But notice that that low, this is an interweek low. So let's look at the four-hour chart and you can kind of see it even cleaner. But you can see so in the last four hours of the market today, it traded down, hit that low. But notice how, see that long wick there? That means that as soon as price hit that area, it just got bought up.

[46:07] Daren: The buyers just stepped in, gobble, getting ready for Thanksgiving and bought some of it. Whereas like this last, this four hours here on Wednesday 16th, September 16th, 2026, it closed and it wasn't quite the same quick move. And so there was a trade down and then bought right back up, which... Tells you that there's a lot of buyers buying that weakness.

[46:33] Daren: So while I'm sure the media is going to be running their mouth tonight and everybody's saying, oh, the market's falling apart to the end of the AI trade, not so far, so fast. Like these aren't technically, we're not in trouble. Where are we in an invalidation zone? If we trade below where this traded down here on the 16th of September, but here we traded right into that spot.

[46:58] Daren: On the invalidation line and got quickly bought. So that tells you there's still demand. There's still buyers in the market. So don't get faked out by the media. We are in risk zone. We are in support right now. We didn't close the week in support, which I don't love, but I could also see it's not over. How do we close down here below invalidation line?

[47:19] Daren: It'd be very different. Doesn't mean we won't close there next week, but we haven't done it yet. So then let's look at the cues And you can see we have this just nasty close, this drop out of the basement today. We were looking pretty good technically. And then we dropped down. But notice, notice this, because this is important. We actually just made a higher low.

[47:43] Daren: So technically, the trend is still up. So I think it's too early to say, oh, this trade's over. Bye-bye all these AI companies. I do think the market's feeling jittery. I do think people are starting to say, wait a SEC, if Amazon is going to spend billions of dollars building out these data centers, are they ever really going to pay that back? And I think that's what the market's asking.

[48:11] Daren: Now, we've talked about this spy in the past, every week actually, and we talk about the heat map, and we show you how NVIDIA, Apple, Google, Amazon are the big dogs. Interestingly enough, Amazon... Two-thirds of its revenue comes from its cloud infrastructure and its compute support and its servers.

[48:31] Daren: The things we know Amazon to be and order Amazon, your phone, that kind of thing, is less than a third of their overall revenue. Far more of their revenue comes from compute and selling access to GPUs, which is interesting because in the S&P 500, there's 11 different sectors. I still think it's kind of funny that they have consumer cyclical Amazon when it makes more of its revenue from technology than anything.

[49:00] Daren: But I guess you could argue that it's consumer cyclical because people want more demand on servers or for compute when the market's better. But I don't really buy it. But the rest of the market actually looks pretty green, right? So we have these big dogs throwing off red signals at us, people freaking out. Intel has worst day in 50 years. 50 years. 24% down, but all these other small stocks are actually doing well.

[49:28] Daren: So this is what we call stock rotation. So what it's telling us is so far, whatever this is that's happening, people aren't selling all their stocks and running for the hills. They're moving out of the tech stocks and shifting over to the other ones for perhaps a turnaround. Interesting semiconductors, though, had a really nice week.

[49:49] Daren: CLAC went up pretty good. This week. So semiconductors, which is the front end of that risk curve saying, eh, not so fast. We like this. We're okay.

[50:00] Dano: And Daren, I think lurking in the background too, just to bring up something from the start of the show, but I mean, with Binance having the hack, I mean, that is a major disruptive event for a large amount of money. You can't necessarily tie it to this.

[50:16] Dano: But I mean, we saw back in the summer when situational awareness blew up, market had an issue that day and turned around. So it's possible that you're showing that at a certain point it did hit support. Not great, but it's possible that this could be Binance.

[50:36] Daren: What do you mean it could be Binance?

[50:39] Dano: Well, I'm saying with so much disruption happening with Binance getting locked up, you know, I'm just saying you've got a disruptive element going on in the background, right? There could be downstream effects from that.

[50:50] Daren: Yeah, I mean, I think the bigger narrative is Binance is like just one of the many hacks that we're going to hear about. I ran an analysis last night to say, hey, how many hacks are actually happening out there? And things are getting hacked all over the place.

[51:06] Daren: And they're going to continue to get hacked over as the compute gets better, the AI gets better, and we get these cheap models built for us that you don't have to pay for much to do it. Some of the models that were released from China are super, super cheap, right? So if it's super, super cheap, it takes one person to literally sit and spin up a swarm of AI bots to go attack.

[51:27] Daren: Anything they can attack on the internet. So you're going to constantly start hearing about all these zero-day hacks and patching systems constantly. Like literally these AI agents are finding weaknesses in software that's been there for 20 years. Just nobody ever saw it or found it.

[51:44] Daren: But when you throw out 200,000 whatever bots at a super cheap compute cost, then you start finding stuff real quick. And that's what's happening. And it's going to get worse because... Compute's going to get cheaper. The cost of the token, which is to drive the analysis, is going down exponentially.

[52:03] Daren: And as it goes down with IE Google launching their first AI bot into space, that tells you where this is headed. Everything gets attacked. Everything. And there's nothing that's going to be left unturned that doesn't have, if it has economic value, somebody's going to start finding it.

[52:21] Daren: I think, you know, small business America is going to suffer more than anyone because The big dogs have the ability to fight back on some level, but the mom-pop shop plumbing company that has a tech software that they put in 20 years ago for 50 bucks or 50,000 or whatever, and they're still running on their whatever, those systems get attacked constantly.

[52:44] Daren: It's almost like any business out there has to invest significantly in their technological infrastructure now. You can't just operate and think that you're not going to get attacked. You should assume that. The other thing that's really interesting that I think is underlying this whole AI change this week is if we look at what happened to Google.

[53:03] Daren: And Google made a really interesting admission in its earnings call where it said that search is now pretty much like dying off. And you can see this fall down. Market did not like that repricing Google in a big way. Why? Because what's happening is most consumers now They're not going to Google, and I can say this is certainly true for me.

[53:27] Daren: Google's now down 31% from its high. That's wild. But consumers now and people who use it, they're not going into the Google infrastructure. They're going into their search engines, right? I'm going to Muse, and I'm saying, hey, Muse, go find me blah, I need to buy.

[53:46] Daren: Like, for example, my daughter really wants these basketball shoes for her that are coming out, these Caitlin Clark. Basketball shoes and they're green and black, which are school colors. And, but they're going to fall off the shelves tomorrow. So I've got a bot that's scanning Dick's website constantly to try and buy them for me.

[54:04] Dano: Like that's how you're not using news.

[54:08] Daren: News is great.

[54:09] Dano: Like, come on.

[54:10] Daren: Yeah, for real. Like I know we dogged on it like a month ago and then boom pops out this model. I mean, but it's incredible, especially for the Facebook marketplace function on it. It works incredibly well because you can like set up all these things maybe you want to buy and you can have it doing a constant search for you and looking for those things.

[54:30] Daren: And then on top of that, communicate with the seller and figure out and negotiate it for you. It's pretty wild. What I find is the different models have different strengths in different places. You know, Gemini, for example, tends to be really great on graphic design and like overall kind of internet indexing work.

[54:49] Daren: But they're all leapfrogging each other. Supposedly, Google launched a model this week called Carbon that beats out all the other models. Interestingly, though, the market said, ha, we don't care and just smacked them. And that's because in their earnings call, they said in their earnings call, our search engine revenue is way off.

[55:11] Daren: And the search engine revenue that's way off, well, that's problematic. Why? Because people are going on their LLMs, talking to their LLMs, and then from their, you know, their plot interface or their open AI interface or their Muse interface or their Gemini interface.

[55:28] Daren: They're interacting with the internet and asking questions and searching things. And what that's forcing is a re-indexing of the entire internet. So not only are we seeing agents completely attack the internet in every which way possibly they can, which is going to increase, it's going to force this entire revamping of the internet.

[55:45] Daren: It's not going to be like www go whatever website anymore. Those will exist. But the agents over time, the bots, people that use it for malicious purposes are going to just destroy all that stuff. And then that will force the internet to be redesigned into something that agents consume. So there'll be like this consumer interface that you look at and say, hey, I'm searching the internet.

[56:06] Daren: I'm looking for this or that. And it might have pictures and whatever. But the agent searches, they don't want that. They want a text file because they can search through that really quick and then verify it. It's much more readable. Web MCP is what it's called right now.

[56:20] Dano: Chris, do you want a perfect example? Daren, you just said this. Chris, do you want a perfect example of how?

[56:25] Dano: Perfectly priced the mag 7r Daren you said that the search revenue was quote off right for Google search revenue was up 12 but that is slightly down from the 19 that it was up in q1 therefore people are worried did Chris i mean so it's not like it was negative 30 or something right the search revenue was still up but it's priced so to perfection that if it's not a ungodly number up that it's going down.

[56:58] Chris: You bet on the right team to win, but you didn't make the spread.

[57:02] Dano: Exactly. It better be a blowout.

[57:05] Daren: Well, and I think that's the whole what's happening, right? Like everything is priced to perfection. And that was why I asked you guys the question earlier. Do you think the economy is going to exponentially expand or is it going to take all our jobs? Because it's got to do one or the other with this kind of spending.

[57:24] Daren: Because the cost of the AI build-out either has to create so much more prosperity and wealth, or it has to absorb prosperity and wealth. Otherwise, it doesn't mean anything. And I think at the end of the day, that's what's being questioned right now.

[57:41] Daren: And perhaps the market is saying, well, is it really going to absorb what? And how are they really going to pay all this stuff back? Because this seems a little out of control. So Google, to your point. Search engine, people still using their search engine, just not as much as they were. And it gets smoked.

[58:01] Chris: Yeah, if you look at companies like Microsoft announced big layoffs, but also companies like Kroger, which is a big grocer, right? So you're seeing that kind of across the board in different types of industries where some of these layoffs are starting to be announced, massive amounts of layoffs, right?

[58:25] Daren: Well, so that was like what, that's what Microsoft said this week, right? Where they're like, hey, we're going to buy out, I don't know, was a third of their staff or something like that. I don't know the exact numbers, maybe look that up, Dan, but it was a significant chunk of they're going to buy people out and retire them out.

[58:40] Daren: And they're just flat out saying like, we're automating everything, like our programmers, our engineers. I was talking to an investment guy earlier. And so in our world, there's CFPs and CFAs. And I literally, I got a call from a wholesaler today. And he said to me, hey, I have a buddy who's a CFA who just got let go. Are you guys looking for a CFA?

[59:04] Daren: And you want to know what my response back to him was?

[59:07] Dano: No.

[59:08] Daren: My response was no. And if I were him, I'd be looking for a different job. Because our bots do that way better than any humans ever going to be able to do that now. And it's just going to get more that way. But as a business owner.

[59:23] Daren: As someone who has to make economic decisions every day, that is, it's problematic, right? Because you have, you're in these positions of, do I add a body or not add a body? Or can I utilize technology in a more cost-efficient way?

[59:43] Daren: And then the question goes, does the economics increase the situation? Do I create more wealth by that or by laying off people? Do we simply... Or not hiring people, because I think that's going to be the bigger thing. I don't think it's going to be like, yeah, sure, there's gonna be some companies that do laying off, but it's pretty unpopular to lay off, right?

[1:00:00] Daren: If you're a company, I think the bigger issue is people just aren't going to be rehiring. And I don't think that stuff's going to show up in the job data. Right away. It just, people will be out on unemployment longer and then it will slowly build. But the way, if you look at the unemployment data, is it's not really designed to measure that and look at that, but that's going to become more important even more and more.

[1:00:23] Dano: To your question earlier, Daren, it was 24%, 60,000 jobs offered voluntary buyouts at Microsoft. They're citing adoption of automation and AI. However, I think it was this time last year when cuts were happening, the same thing was happening. And we asked the question, is that really happening? Or is that what they're saying? Because they're trying to, you know, sell a positive narrative on it?

[1:00:51] Daren: Well, good, good on them for actually being honest about it. Right. I feel like so many companies are doing the same thing. But there's like, yeah, it's because we're automating everything. And like I said, again, I don't think it's going to be people getting laid off is going to be the issue. I think it's going to be retired out and people not getting hired.

[1:01:06] Daren: And then does that expand the economy exponentially? And we all have opportunity to be on UBI because we're so productive with managing our 100 agents a day. And that's the future of work. Or is the future of work, we're just like, hey, we don't really need to go to work because the economy does what the economy does and makes money for everybody.

[1:01:27] Daren: So anyway, VIX is up. Was that past 20 in this session? It dropped back below 20, which I then go back. To my original conclusion about SPY, about the QQQs, not so fast. I don't know the sell-offs over. We look at our ratios, RSP to SPY. You can see this jump up. And that's what I was talking about. This goes up.

[1:01:46] Daren: That means those smaller stocks are doing on a cap weighted basis. The bigger ones are doing less of a lift. Smaller ones did lift today. But we're getting to this 29, which has been ceiling right here. From a technical perspective, that's been kind of the ceiling for this move. So the... So diversification is kind of either over or about to change big.

[1:02:07] Daren: So one scenario is these tech stocks continue to bleed, but then all the other stocks continue to absorb money out of the market. And then we'll see this go up higher and higher. That's the Goldilocks scenario that we take some air out of these AI companies and we funnel that money into other stocks. And then the market can keep on going.

[1:02:30] Daren: But my thesis too is that, well, now that... It's coming out of the big stocks and into little stocks. If these big stocks pop next week, then you're going to see all-time new highs in the SPY pretty quick. It'll move quick because you now have what we didn't have before, which was support from the smaller cap companies in the S&P 500.

[1:02:52] Daren: Our move index did move back up. And hey, Chris, I know you hate this, but hey, your bonds look pretty good, buddy.

[1:03:00] Daren: Nice bounce up.

[1:03:03] Daren: But we can see this downtrend line here, and you can see breakout fail, breakout fail, breakout fail, fourth time's a charm, right? And if an investment revisits a price area more often, eventually it breaks through. I guess you could argue that these were touches too.

[1:03:25] Daren: So either this is it for bonds and we're going back down, which if that's the case, then I expect the 10-year to go back up. Interesting close on the tenure, though. You can see this support area. We broke through it and closed below it. That's interest rates down.

[1:03:41] Daren: Unfortunately, it's, you know, for the current administration in power, for good or bad, however you like to look at that, I think lower interest rates is a little too late to help the election. Because if you look at. I have to be so careful. I don't even know why I bring this up, but I'm bringing it up anyway.

[1:04:04] Daren: Because people seem to be so sensitive here, and we just try to call it equal sides on either fence. But there's a chance that now 70% chance that the Democrats are going to sweep the midterms, which tells you that a couple of things. One, I think you see something significant happen between Election Day and...

[1:04:28] Daren: January 1st when the new Congress comes in, because that's all the Republicans are basically going to have to move really quick now, because now they're not going to have any, they're basically the next two years is going to be a massive food fight. It's just going to be painful, but the market actually might like that, right?

[1:04:48] Daren: So because if politicians can't do stupid things, then, and they're busy, too busy fighting with each other and trying to evict each other, then Us people are better well taken care of. I got to keep the power in check. We got to talk about gold. We talked about this last week.

[1:05:06] Dano: One second, Daren, before you move on to gold, we've been remiss to mention there was a Fed meeting this week. So if you want to go back to the 10-year real quick, we did get some comments from... Kevin Warsh and holding rates in the 3.75 to 4% range.

[1:05:23] Dano: And interestingly, guys, they said they were looking at cutting the number of meetings. And this next year, they're holding eight meetings, but one of them will not be about rates at all. So some of the other underpinnings of this week's market action, I feel like has to be the Fed decision as well.

[1:05:45] Daren: Yeah, I mean, yes and no. I think what I think's bigger out of the Fed decision is that the Fed, and Warsh has been doing this, he's really pulled back from what Janet Yellen and Chair Powell used to do, which was try to communicate to the Markets.

[1:06:06] Daren: And he much believes more in this open market idea and that we should be a little more aloof from the market. Which I don't think is helping the debt market at all, right?

[1:06:15] Daren: And I don't think helping people feel confident that these huge expenditures on AI are a great idea because it's, if the market, at the end of the day, likes certainty, right? It's just like if the Democrats are going to sweep, well, guess what?

[1:06:31] Daren: I can certainly say they're going to spend the next two years fighting with the Republicans about everything. And it's just going to be a big fat spat. Well. That in of itself is an element of certainty, right?

[1:06:46] Daren: Where it's actually more uncertain if the Republicans were to win the House and Senate in these midterms, who knows what the heck would happen, right? So the market might respond negative to that.

[1:06:56] Daren: But certainty is the status quo, and it's more likely that we see the status quo now. For good or bad, for this country, however you want to look at it, everyone feels very emotional about their own opinion about that.

[1:07:08] Daren: But that's the point is just under the. If they fight, that is certainty. And the same thing is what Kevin Warsh is doing is he's pulling out certainty.

[1:07:18] Daren: And the theory on that, I suspect, is that price action, the market will allow to exist in a more true-to-form capitalistic market. And there'll be true price discovery, which means there has to be volatility. Which means then all of a sudden, this move up, if you look at the S&P, since...

[1:07:41] Daren: 08-01 like this folks is what market certainty looks like but then we have these quick dips but that's it and just keep ripping the problem is i just don't think it's politically palpable for this not to continue so thus we get we're gonna we see these massive u. s debt clocks just keep ripping because at the end of the day this is This is what matters.

[1:08:12] Daren: This is what matters.

[1:08:14] Daren: Medicare spending, Social Security spending, defense and interest. Those are the puppies that matter. So they have to keep printing money and they keep printing money and that keeps coming into the market because where else is it going to go?

[1:08:25] Daren: Because when they print money, it mostly goes to the people who already have the money. Doesn't mean we might not see a quick dip here, but history has shown. So how long can Kevin Warsh?

[1:08:39] Daren: Continue to be aloof from the market well he's untested so we shall see all right let's go to gold gold you've got it fell out under this key support area so we're down at 3800 right now so this looks like it's headed down and i think that's the bet on the ground right now that was a pretty gnarly close for gold if you're betting for gold up but that also built bodes kind of well for stocks, perhaps.

[1:09:11] Daren: Interest rates go down, gold going down.

[1:09:16] Daren: As long as interest rates go down slowly, it's actually a really good thing for Markets. It's if they start moving too fast, then, Chris, your point earlier, then things start breaking.

[1:09:32] Daren: All right, we talked about Bitcoin. We talked about the 10-year. We talked about the S&P 500.

[1:09:41] Daren: Look at the semiconductors this week, though. Wow. They got crushed, which is interesting. On This Philadelphia Semiconductor Index, we're down on that 50-day just sitting there. Looks like a double top to breakout double top.

[1:09:58] Daren: So if this pattern holds, you can see this double top here. Maybe even a triple top, but we'll call it a double top. It's a little bit more exaggerated, maybe in the four-hour. It'll look a little different.

[1:10:09] Daren: So this chart's looking at the four-hour chart. And the four-hour chart and the semiconductors, it looks more like distribution, actually. Or you can say a triple top. There's your top right here, right here, head and shoulders. There's your neckline.

[1:10:28] Daren: We're in zone. This thing's got to defend itself. Otherwise, look out below. There's definitely some support right here in the 10,000 zone, but this is where the bulk of support sits right now down in the 8,000 area. So if we get a big sell-off, it turns into something worse. It's kind of where... I see support. And then in this zone right here where you'd see a turnaround, it's almost there.

[1:10:54] Daren: You could get a quick dip and move. I think we're kind of at the spot on the market where it kind of has to decide over the next few weeks and the midterms are coming. But I think it looks all pretty confidently like Democrat Party is going to take and sweep. The surprise now would be that. The Republicans actually win this Senate. I think the House is definitely going Democratic at this point.

[1:11:25] Daren: So we shall see. We shall see. I think we're going to leave it there. I hope you want to have a great week.

[1:11:31] Dano: One more out the door?

[1:11:32] Daren: Sure, let's do one more.

[1:11:34] Dano: Look at Reddit.

[1:11:36] Daren: Yeah, Reddit had some interesting things they came out with today.

[1:11:39] Dano: RDDT. So Reddit announcing earnings and what's... The earnings were, they made money, by the way, they made a billion dollars, but the CEO confirming that their Google referral traffic has dropped meaningfully by over 1 million weekly visits in October to that exact issue that you were talking about, Daren, with people just using AI mode.

[1:12:07] Dano: So no one's actually going to Reddit to see the ads. They're getting the information pulled through to AI mode. And so... I can't see your screen if you've got it on a second screen yet.

[1:12:19] Dano: There we go. A historic 29.2% crash today for Reddit.

[1:12:26] Daren: Well, it makes all the sense in the world, right? Because let's say you're interested in growing apples in your backyard and you want to learn about growing apples in the past. You might go to YouTube. You might join a Reddit board of Apple growers of America. And then learn from that. But I'm not even joking. I have an Apple tree that I was thinking about how I was going to prune it this winter.

[1:12:52] Daren: So I took a picture of it, put it in Gemini and said, show me where the right places to prune this tree are to make it most fruitful next year. And it took that picture and made cuts. It showed me like a red line where it said, make the prune on it. Almost exactly where I would think I would make them. It was pretty dang accurate. So you don't need to go to Reddit board to figure out how to prune the tree anymore.

[1:13:19] Daren: What are you going to go to Reddit for? Just to like talk smack to a bunch of internet memes people that you don't know who they are? Like really, there's no other point. And on top of that, you can set your bot, put your Grok bot onto a Reddit feed. You don't even need to go there to look at their stupid ads because you can scrape all their data.

[1:13:40] Dano: And similarly to that, back in August, there was a report that OpenAI had also stopped meaningfully utilizing Reddit's data as well. So that was another blow to them. So a rough day for Reddit. I always find those interesting to follow. I always find the ones that are tanking. Last week, we did one that was up. So maybe I'll find some positive stories next week.

[1:14:08] Chris: Intel is down almost 30% today too, 20, 28 plus. So yeah, a lot of people are saying that Reddit, you know, earnings call was like marking the end of the internet as we know it.

[1:14:24] Dano: Right. Yeah.

[1:14:25] Chris: The human driven internet.

[1:14:27] Daren: I think it's close.

[1:14:28] Chris: All bots now looking for Caitlin Clark shoes.

[1:14:32] Daren: I mean, seriously, like it's, I mean, you can, you don't need the internet anymore. We're like... I almost never go on Google and ask Google. I'll use Gemini and ask Gemini or Muse or Anthropix, Claude, or, but like, why? Like it's so much less efficient.

[1:14:52] Chris: Just wait though until the bots are incorporating the marketing like into the bot interaction. That's what they're going to do. They're going to make it so that they know every single thing about you, all your hot buttons. Then they're just going to ease it in there in the way that you're like, you know what? I do think I want Caitlin Clark shoes. Yes, that's exactly what I want.

[1:15:16] Chris: Trust me, it's coming.

[1:15:18] Dano: You know, your fears for your family sound like a perfect fit for a state farm whole life insurance. Did you know? Blah, Exactly.

[1:15:30] Daren: But it's seriously, I mean, think about it. You could literally tell a bot to change Dan's opinion over time. So if you know that Dan's in Gemini or Claude or OpenAI, you could literally tell the agent on the back end. I want you to build a strategy to change Dan's opinion about Disneyland over a period of six months.

[1:15:57] Dano: Oh, no.

[1:15:58] Daren: Construct a strategy to slow him down. You picked a bad example. Knowing to change his opinion about Disneyland. If someone had the access to your search or your conversations, you could absolutely do that now.

[1:16:14] Dano: That particular stance, I don't feel like you'd move me on. But yeah, I mean, you know, you could. Probably get me on something else.

[1:16:21] Daren: Maybe Nintendo?

[1:16:23] Dano: No, not Nintendo either. Maybe are the 49Ers really going to do it or not this year? I could probably be swayed one way or another on that one. But you're right. And it also, since we're just expounding on this episode here at the end, math too.

[1:16:39] Dano: The big joke in the book 1984 was that the big brother came up with 2 plus 2 is 5. And when I read that in high school, I'm like, how could anyone ever believe that? Well, if we're trusting ChatGPT for math now, if Sam Altman decides two plus two is five, how are we to know? It is going to be an incredible shifting of power.

[1:17:03] Daren: Yeah. Yeah. I mean, it's fascinating. And that's to my point that I said earlier, are you on the side that AI changes our world, takes our jobs? Or you decide it creates exponential future economic benefit, expands the economy exponentially. Like that's what Elon's saying. And if I was Elon, I'd be saying the same thing.

[1:17:27] Daren: If I was Sam Altman, I'd be saying the same thing. If I was Anthropic, I'd be saying the same thing. Because the only answer that anyone wants to hear is we're going to expand and make future great. Not, hey, we're going to take all your jobs and all of you have to now question your sense of self-worth.

[1:17:45] Daren: And figure out an entire different way of doing things. Either way, the AI companies win that game. They might not win it tomorrow. They might not win it six months from now. They might not win it a year from now. But once we get that S-curve adoption moving, it ain't stopping. FICO is a great example of that, right?

[1:18:08] Daren: FICO used to be where we all went to see if we were good borrowers of debt and they're getting crushed. And I expect them to continue to get crushed because there's a lot of other ways I can learn about Dan and figure out if he's a good person to lend money to now that I have all his anthropic data at my fingertips.

[1:18:26] Daren: And the power that these companies have is going to be exponentially insignificant. And that's what the market's saying, but maybe not as much as we once thought. But I think that's the correction. That's the S-curve. That's the coming down before it really takes over our lives.

[1:18:45] Dano: All right p doom on that people yeah well in the spirit of all of this maybe perfectly timed almost like i saw it coming myself and Chris sat down on our other podcast our sister podcast it's all money this week and did a deep dive on this very topic are we in an AI bubble what what are the realities of the situation what are we seeing in the market so you can find that on our YouTube channel it's also linked up at SonomaWealth. Com to find it on all the various platforms.

[1:19:14] Dano: One last thing, guys, before we go. There was a major passing this week. Patrick Stewart, the actor, died this week. I found a stupid way to incorporate him into this show, which is the only thing I could find him talking about money. He said, you mustn't tell my employers this, but I would do this job anyway for nothing.

[1:19:34] Dano: I thought that was such a poignant phrase to find, especially as we might all be considering someday what our life's work is supposed to be since we're not going to be web developers. I thought it was such a poignant way to consider, you know, what is the job that you would do for nothing because he did his.

[1:19:55] Dano: All right. We'll leave it there. Thank you so much for checking out On The Markets. My name is Dano Weir.

[1:20:00] Dano: Daren Blonski, Chris Sipes. You can learn about our firm at SonomaWealth. Com. If you are one of our clients, thank you so much for sticking with us to the very end of the show. We appreciate your time.

[1:20:11] Dano: And if you're a prospective client, if you're looking to learn more about us, SonomaWealth. Com is where you learn about how we help clients and families across Northern California and across the country. We'll see you next week On The Markets.

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