Chapter 1: What is the main topic discussed in this episode?
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You don't normally tune into a late night TV show expecting a rigorous debate about free speech, but somehow this is the world we live in. This week on The Verge Cast, we're talking about how FCC Commissioner Brendan Carr has turned his agency into the speech police and why it's falling to people like Stephen Colbert and Jimmy Kimmel to fight back.
That plus the gadgets we are and maybe aren't getting from Apple and others this year and the latest in the chatbot wars. On The Verge Cast, wherever you get podcasts.
Today's number? 13 million. That's how many views a video of RFK Jr. jumping into a pool with jeans on received last week. The bizarre clip was designed to encourage Americans to, quote, get active, but it ultimately drove viewers to get therapy instead. Welcome to Profiteer Markets. I'm Ed Elson. It is February 25th. Let's check in on yesterday's market vitals.
The major indices all climbed as tech rallied out of Monday's sell-off. AMD led the way, climbing 9% after Meta signed a multi-year deal to buy their chips. Meta will also have the option to take a 10% stake in the chipmaker over a period of time. Meta's stock was actually flat on the news. Meanwhile, gold declined. And finally, Bitcoin fell below $63,000. Okay, what else is happening?
A new Substack piece has sent software stocks into yet another freefall. An article entitled The 2028 Global Intelligence Crisis, published by Citrini Research on Sunday, outlines a nightmare scenario, and that is what if AI leads us into a financial crisis? The premise is simple.
By 2028, AI displacement has caused unemployment to hit 10%, spending plummets, the S&P slumps, and the economy becomes unrecognizable. After this piece was released, the Dow fell as much as 2%, and software stocks fell 5%. So here to break down this Citrini research article and the chaos that ensued, we're speaking with Josh Brown, CEO at Ritholtz and host of the Compound and Friends podcast.
Josh, good to see you. I want to get your reaction to this Citrini research blog post. This is like the second blog that's gone mega viral in three weeks related to AI. And now we're seeing just crazy selling in the markets. Do you agree with the market's reaction? Are you as worried as other investors seem to be?
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Chapter 2: What triggered the recent market downturn?
And that leads to more job creation in other areas of the economy. It happens every time it'll happen this time. It'll be uncomfortable in certain pockets. Nobody is, is, uh, nobody's delusional about that. Um,
And the timeframe is the question. It's like, how many jobs will be replaced, displaced within a certain timeframe?
Chapter 3: How did Citrini Research's blog impact software stocks?
How many of them in that timeframe? That's going to be the disruption. But the idea that this has structurally changed the entire fabric of the universe, that's where I start to get lost. I do need to wrap us up here. I think a big piece of this
or at least something that is very interesting to me, is, again, the market's reaction to a blog that was posted on Substack by, as you call it, it was a think piece, by a very smart person who wrote a very interesting and creative article. And it inspired incredible selling pressure, incredible value destruction, which to me says something about how investors are feeling right now.
And something that you have described, you came up with this term HALO, which stands for heavy assets, low obsolescence, which is the new type of company that investors seem to like right now, which is companies that have nothing to do with AI. AI won't even touch it. So before we go, could you just describe this HALO term that's gotten pretty popular?
Wall Street Journal wrote an article about it. It's your term. Just describe what that means and how investors feel right now.
So in early February, I was talking about the types of stocks that were on the 52-week high list. And what they all had in common was they have heavy assets on their balance sheets and they have low obsolescence risk. And it occurred to me that this was a reversal of the entire post-financial crisis period where we fetishized
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Chapter 4: What are the main concerns surrounding AI and the economy?
um the opposite asset light businesses we wanted companies with subscription revenue arr um very little cost of doing business and almost no assets on their balance sheet and now it's flipped it's the reverse you look at stocks like anheuser-busch coca-cola pepsi you cannot type i want to diet coke into a prompt and uh have somebody else create that product. It is not disruptible.
Natural gas transmission lines, utilities, caterpillar, deer, most stocks that are related to heavy industry, in fact, completely halo. And there were some really fascinating examples inside of one industry You could say Expedia is highly disruptible by AI.
You can plan trips, you can book flights, you can have an agent that scours these airline websites and find the optimal trip for you, putting Expedia out of business. But within the same sector, there's Delta. Can you prompt yourself a fucking airplane? Obviously not. So this is a really interesting market.
What this does, Ed, just to sum up, it throws out all these old paradigms that people think about in the stock market. It crushes the growth versus value thing that's now irrelevant. It gets rid of cyclical versus defensive. That's irrelevant, too. It even breaks the tech versus non-tech idea because certain tech stocks like Apple are extremely halo.
You cannot get around the physical iPhone device. And ChatGPT is probably just going to become a plug-in to the iOS ecosystem. So Apple is halo while Adobe is not. So I think that that's a really important prism through which to view the stock market. And I think that dynamic will remain important throughout the rest of the year.
Absolutely. Lots more that we could discuss. I mean, again, my takeaway, people are very confused and very anxious right now. All of the paradigms that they've been following are just being thrown out the window. And it's very confusing to see which ones actually work. It's not supposed to be easy. If it were easy, everybody could do it. Get used to it. That's exactly right.
Josh Brown, thanks very much for your time. Cheers, Ed. After the break, warning signs from Blue Owl. And for even more markets insights, you can subscribe to my weekly newsletter, Simply Put at edwardelson.substack.com.
This week on Net Worth and Chill, we're joined by Zarna Garg and her daughter Zoya for a mother-daughter conversation about money, ambition, and reinvention. Zarna proved it's never too late to chase your dreams from practicing law to building a matchmaking business to becoming one of comedy's most exciting voices.
Her unconventional path has led her to Hulu comedy specials, sold-out tours with Amy Poehler and Tina Fey, and her memoir, This American Woman. Meanwhile, Zoya's been watching, learning, and carving out her own path as a young professional.
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Chapter 5: How does Josh Brown assess the market's reaction to the blog?
Aries, Apollo, and Blackstone fell more than 5%. So... What exactly is Blue Owl and why is it preventing its investors from withdrawing cash? Here to help us answer these questions, we're speaking with Robert Armstrong, U.S. financial commentator for the Financial Times. Rob, welcome back to Profiteer Markets. I want to get into Blue Owl with you. I keep on seeing this name in the news.
I kind of know what they do, but not really. Can you just start off for us? What is Blue Owl? Why should we even care about them?
Blue Owl is a large... What would I call them? Fixed income investor. So they run assorted funds that manage... credit investments on behalf of investors in various different ways. And they're a big player in the space. They've been around for a long time and they've made a lot of money.
So they're a meaningful player, especially in private credit, which is, of course, kind of the asset du jour of the last couple of years.
So talk a little bit about how it is the asset du jour, because I think that's a big piece of the story here. The reason why it probably matters to people is because private credit is suddenly a big deal. And it used to not be.
It used to not be. And it's not so often that a new asset class kind of appears, right? The last, you know, private credit is now something that an institution say is you know, a respectable institution will have a private credit allocation in their portfolio. And that might not have been true three or four or five years ago.
And, you know, you have to go back 30 years before that when kind of junk bonds became like this new asset class that people were getting into. And I think the magic of the asset class has two parts. One is that
It is reputed to have fixed income, like returns, like the returns you might get from, uh, high yield bonds, but with a little bump, because you are lending to a special class of borrowers. The, these funds are lending to borrowers who for one reason or another would like to avoid public markets.
either they want a bilateral relationship with their lender or their business is such that it's hard for larger markets to understand, or their cash flows are uneven, or for whatever reason, they don't want to be buffeted by the daily grind of the high yield bond market. So they do a bilateral deal with a lender who charges them a little bit more. So let's say you are getting 8% on your
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