Felix Nikolas Prehn · Transcript · · Updated
The UNTHINKABLE is About to Happen to Your Portfolio – Transcript
Video by Felix Nikolas Prehn · Watch the original on YouTube
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- The Nasdaq 100 dropped 2.9% in one day as $1.2 trillion vanished during what the bank of phrase describes as the AI trade derating.
- Hedge funds are shorting US stocks at a 5-year high while experiencing the largest two-week selling of global tech stock in more than 10 years.
- Goldman Sachs notes that lower-rated borrowers in project finance have driven riskier debt in the eye of the storm.
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$1.2 trillion disappeared from the Nasdaq in a single afternoon this week. And if you own any stocks at all, any big tech names, some of that money was yours. And everyone's now screaming crash. AI is over, get out, right? Now, my name is Felix Nicholas Prem, and I'm going to tell you what actually happened because it wasn't a crash. It was something much more specific, and once you understand it, you'll know exactly
which part of your portfolio sitting on the firing line and which isn't. Because the skilled money, they were already positioned. They were betting against these exact stocks that just crashed the level we haven't seen in 5 years. They were ready. You probably weren't. So, did they know something you don't? Well, by the end of this video, you will. And stick around till the end because I've also got one trade with a 77% chance of profit I'm going to put on today. And
I'll explain that for you as a little bonus. Now, if you've watched your stomach drop to this this week because it looks pretty hideous. Now, if you felt your stomach drop, you're in good company. And I think the worst bit is the not knowing, isn't it? It's the uncertainty. Do you sit tight? Do you sell? What do you do? And no one on the news gives you a straight answer to this. So, I put everything from this video into a free companion report, the Goldman Sachs numbers and every chart
I'm about to walk you through it in plain English to read on your own with your, you know, golden retriever or whatever. And it's completely free, and you can download it down below at What's the link? felixflem.com/rotation. Right. So, let's start out with a loud bit. The Nasdaq 100 is the 100 biggest companies on the Nasdaq exchange. It's mostly tech. This week, it fell 2.9% in one day, biggest drop in quite a few
months. $1.2 trillion seem to have vanished. So, what broke? Well, the bank of phrase is that the AI trade is derating. And what that really means is that investors won't pay such a high price for these companies anymore.
Now, picture a street where every Now, picture a street where everybody suddenly wanted to live. Prices went really silly. And then a few buyers starting ask And then a few buyers started asking whether the new train station was ever going to actually open, and the whole street got repriced to sand.
Same houses, just lower prices. Now, a Trade Algo Management Sachs wrote to his clients yesterday that it's been, and I'm quoting him, "a trying couple of weeks for the AI complex." And he listed the reasons. We'll put it on the screen for you here. First, Tesla is cutting CapEx. CapEx is short for capital expenditure, the money a company spends on big, long-lasting things like factories and computer chips and so on.
So, think of the difference between your weekly food shop and building an extension on your house, right? The extension is CapEx. The whole AI boom rests on companies building enormous extensions. So, when a big name like Tesla says it's going to spend less, everyone selling the bricks, as in the chips, feels it. Then second, Meta's AI spending sent the cost of insuring its debt to a record. That insurance is
called a credit default swap, or CDS. It's like insurance on money you've lent to a friend. If your friend can't pay you back, the insurance pays you instead. The more worried people are about the friend, the more the insurance costs.
Meta is one of the hyperscalers. That's the name for the giant tech companies building huge data centers for AI. The others are Microsoft, Amazon, Google, and so on.
Now, third, Lam Research, which makes the machines that make computer chips, gave guidance that underwhelmed. Guidance is a company telling you what it expects to earn next, and investors had hoped for more.
So, Goldman says the disappointment in big tech earnings reignited concerns as to the durability of the trend. In plain English, people are wondering whether the AI spending spree can actually last. Because if AI spending slows, the first companies to get hurt are the ones living on borrowed money, right? We're going to come back to borrowed money in a second. Now, most people here freeze.
They see a red day, a red week, a second red week, and then either they sell everything at the bottom, or they do nothing and they just hope. Now, reading what the skilled money is doing while the news and the headlines are screaming at you is actually a skill set. And it's a skill you were never taught, and it's not your fault.
Nobody sat you down at school and explained how money actually worked, right? If they did, put it in the comments down below. I doubt anybody had that lovely experience. But once we realize it is a skill and that the people who are actually making money out of this and that actually did quite well yesterday. I think it's something we might want to learn. And you can learn it, by the way. You've picked out way harder things than this.
Because driving is more complicated. I I think. I think getting a mortgage is probably more complicated than this. So I'm going to do something for you tomorrow. I'm going to teach you this completely for free. And by tomorrow, I mean Saturday. I'll show you how the skilled money is positioning right now, mid-now, before this is going to really hit you. Because so far, we're down a few percentage points. It's it's manageable. But once the damage is already done, prices
have moved, well the good options are gone. And honestly, I'd rather worry you a little now than see you get hurt later. Uh and I cuz I think I think this will will get a lot worse. Possibly not next week, but at some point.
Because when it comes, it's going to be it's going to be a pretty hard punch in the stomach. And it's going to hit people's pensions, their life savings, their portfolios, stuff they're were on for the next 20 years. So, learn how to be ready before it lands. That's our whole mission here. It's completely free. It's completely live. You can ask me questions. Uh so, you need to just show up. Uh just go to the link down below in the description, grab your seat
at survivethebubble.com, and once you got your seat, put act in the comments because you have acted, and that makes you special. You know, not that kind of special, but especially in a good way. So, let's go back to the skilled money.
And what were they doing? Well, the hedge funds, according to Goldman Sachs, who run a lot of their money, says hedge funds are now shorting US stocks at a 5-year high. What's shorting? Shorting is betting the price is going to fall.
So, you sell a share you don't own, and then you buy it back later. And you hope you can buy it back at a cheaper price. It's sort of the opposite of what most retail investors are doing. Imagine Imagine your neighbor lends you his lawn mower. Lawn mowers are selling for $300, so you sell his lawn mower for $300. You're not a very good friend or neighbor. Now, a month later, they're now on offer at $200, so you go and buy one back, and you give it back to him,
and you keep the $100. That's a short. And it's lovely when prices fall, and it's very painful when they rise, and your neighbor wants his lawn mower back. Now, market data um and this is Goldman's data says that across global stocks, for every one trade buying, there are about five selling short, betting on that fall. It's five to one. That's at the very, very, very extreme of what
we've seen in 5 years. And it gets more extreme. Goldman Sachs called something that they call a prime brokerage. That's the part of the bank that lends money and shares to hedge funds and holds their trades for them. So, it can actually see what the hedge funds are really doing with their money. And its data showed the largest two-week selling of global tech stock in more than 10 years. 10 years. On top of that, we have
the the short leverage I was just mentioning. And it isn't just America. Japan stock market has entered what is called a technical correction. Basically, it dropped 10% in two weeks. Now, the twist is Goldman Sachs says all the shorting raises the chance of a short squeeze. Remember the lawn mower?
Imagine lawn mower prices suddenly jump to $500 and you still owe your neighbor a mower, so you have to buy one back whatever it costs. So, does everybody else who borrowed one? They all rushed to the shop at the same time and the rush itself pushes up the prices. It's like a packed theater when the fire alarm goes off and there's only one door. Everyone heads for the same narrow door at once. That's a short squeeze. And it's why prices can suddenly shoot up even in a horrible week. So, what does that mean for you?
Well, two things. First, you're tempted to sell everything at the bottom because a headline told you to. Remember the lawn mower? When this many people are betting on the fall, the snapback can be fairly violent and the people who sold in a panic usually get fairly frustrated.
Now, the second thing that worries me a little bit more is that the skilled money doesn't bet this heavily against something without a reason. They've got the Goldman research notes and the prime brokerage data and they've got analysts on speed dial. You've got a notification on your phone that says tech sell-off.
And gap's fairly big. And that's the whole reason I made these videos. So, did they know something? Well, yes, sort of. And the part they know is something the headlines completely miss. If you only watch the news, you think the whole market fell off a cliff. Well, it didn't. This was an AI trade sell-off, not a market sell-off.
And to see that, you need to know about a slightly different version of the S&P 500. The S&P 500, the one that's probably in your pension fund and all the index funds you're in, is weighted by size. The bigger the company, the bigger its slice. It's like a It's like a slice of pizza where the Nvidias and Microsofts get massive slices and hundreds of other companies are tiny tiny little crumbs each. Well, on the day
that the Nasdaq dropped almost 3%, the S&P equal weight closed in the green, which means most companies actually did quite well. The Dow, which is 30 of the biggest American companies, finished flat. So, what actually rallied? Well, consumer staples, which is the stuff you buy whatever the economy's doing, like, you know, toothpaste, washing up liquid.
It's utilities. It's electricity and water companies, right? Healthcare, financials, the banks, the insurers. And some of them went up quite a lot. So, the money that left the hyperscalers, these giant AI spenders, didn't leave the market. It went to into boring stuff.