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Hello everyone, this is Meet Kevin. I just finished another cup of coffee and I'm incredibly excited to tell you how we just removed even more disclosure requirements for AI development so we can take this " bubble" to new all- time highs, baby. Many people ask, "Kevin, why are you optimistic about the third and fourth quarters?" You say you are more optimistic about the rest of 2026 than 2027.
What's bothering you so much? In fact , we have a price target on QQQ even for next Tuesday, in addition to general optimism for the rest of the year. It looks like we will hit the Tuesday target price again ahead of schedule, due to optimism in the economy. I'll put everything on the shelves. There are a few different things going on, and we'll go over them one by one.
We will talk about CPI and PPI. I'll talk about this disclosure rule , what's happening with artificial intelligence, Elon, and all that. So, let's begin. First of all, if you haven't heard yet, you should know about this. If you go to the Meet Kevin app, you can use it for free. I'm not trying to sell you anything, I'm just providing more benefit, okay?
Do you have a version for desktop, Android or Apple, okay? You will find an overview of the lifting of this disclosure requirement on the data tab, in the artificial intelligence section . This disclosure requirement is a big deal. During the financial crisis, we decided that asset- backed securities , like mortgages or auto loans, pooled together, should have certain rules.
Let's quickly explain some of these rules and use the best eraser for a whiteboard. You know what's great about this? She is always with me. So, after the 2008 financial crisis, we passed regulations known as the Dodd -Frank Act and other acts. We decided, in part, that asset-backed securities —again, like pools of mortgage loans—should require those who create those pools to maintain a 5% unhedged portion.
So I will write: share without hedging, " own funds risk." In other words, you can't create a product without having any responsibility for it. Because then you may not care about the quality of this product. And if you're risking your own money, maybe you'll be a little more careful. Isn't that right?
And the second is that we will introduce rules for disclosing information about what's inside. So, in terms of composition, what components are inside these asset-backed securities? Well, we just did something in the last, maybe, 5 days that essentially meant, “Hey, if you’re going to issue data center asset-backed securities, well, guess what?
You don't have to do this , and you don't have to do that. We don't need this garbage. Who needs disclosures or rules? » And that's literally what happened here. You see, a group of lawyers wrote a letter and said, "We respectfully request that the staff agree with our view that fixed income securities in data centers, described as DCS, data center securities, or securitizations, are not considered asset-backed securities as defined in the Exchange Act, blah blah blah ." It's just a fancy way of saying, "Please exempt us from the rules." "The reason we think we're different — and this is kind of the complicated math they're trying to play — is because they're saying, ' Hey, when you own a pool of houses or a pool of car loans, that's different than owning a pool of GPUs.'" You don't need to know what the utilization levels of these GPUs are or which GPUs are in the pool, because this time it's different.
Houses and cars, and this is their main argument, can be sold separately, because the owner of the house or the car can decide to sell this, you know, house, vehicle or whatever. But GPUs don't sell themselves . And since GPUs don't self-destruct, we are different and shouldn't be limited by these rules.
OK. And so, guess what happened? Literally the day after they got rid of these requirements that the underlying assets be disclosed, that the current reporting requirements be met, that the buyback obligations be disclosed, that the GPU lease rates , utilization levels, concentration, lease terms and all that nonsense be disclosed.
What happened the day after we said, or the SEC came out and said, “You know what? » Actually, we have a screenshot of this somewhere . I will find him. You know what? We agree with you. Here he is. Here is this letter. Based on the statements in your letter, we agree that fixed income securities or other securities issued as part of a data center securitization of the type described in your letter are not asset-backed securities.
In other words, don't worry. Disclosure rules don't apply to you because you're right. You are different. Your pool is different from what it was in 2008. And guess what happened right after that? Yes! On August 10, Nvidia partners with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR— in fact, everyone—to raise and deploy $500 billion in other people's money.
And they can stay with these GPUs because these companies don't want to carry that burden. All of these companies make money from what is called AUM— assets under management. They don't really care what those assets are. They just want to get their commission. And if that requires less disclosure, well, let's blow that bubble even more.
Is it surprising that Nvidia has entered into a partnership? Of course not. They should benefit: probably 40% of that $500 billion will go straight into Nvidia's coffers. So, reason for optimism, number one , before the big bubble bursts and everything collapses in the fire of the worst Great Recession 2.0.
Perhaps even worse, comparable to the times of the Great Depression. I hope this doesn't demotivate you. Until then, we have ample reason for optimism, because spending will continue. God, I need more coffee. The costs will continue to rise, not just because of these disclosure rules , the Nvidia partnership, and the financialization of data centers.
One. But number two, we already know that, so I won't just add to the pile. Elon Musk is going to spend money like a drunken sailor. Elon Musk helped SpaceX rise 9% yesterday, because the day before, an interview came out where Elon said: "Yes, computing in data centers will be 99% of our company. Yes, we will spend $30 billion to $50 billion per gigawatt to build these facilities, and we will make that much money.
In the future, we will earn 300-500 billion dollars a year." This is great. He didn't mention net income, GPU rental rates, their stability, or how much debt SpaceX will accumulate, but I'm not here to play down SpaceX. I'm telling you, this is the second reason for optimism—the crazy spending that is now essentially reminiscent of 2018 in terms of disclosure rules.
Elon's crazy spending benefits the entire market. In fact, I call it: "a rising tide lifts all boats, baby." Some of my favorites, uh, number one favorite at the index level—RSP, new daily highs again and again and again. This is the S&P 500 index with equal shares. This is the third reason for optimism.
When the equilibrium index rises, it means we are going beyond what technology stocks alone are doing. And what happens when we see stocks rise outside of the technology sector? We are seeing a wave of people getting richer, the wealth effect is expanding, and people will continue to spend every damn dollar they have.
Today, the market is completely "green", which is very impressive, but it has already become a trend. Look at this equilibrium index. Honestly, for the last 6 years, all he has done is grow rapidly. I mean, these dips are very, very short-lived. And look how clear that 200-day moving average looks. Of course, this is probably a symptom of it being a moving average.
But boy, does it make you want to buy on bounces off the 200- day moving average. Now the second part, which I'm also very bullish on, is IGV, the software ETF . This is thanks to my thesis about the software sector reaching a bottom in 3-4 quarters, which has really started to come true with companies like Microsoft, Palantir, and even Axon.
These are great stocks that we have been sending buy/sell alerts for. And I'm not saying that every stock I invest in immediately goes up. In fact, just recently I bought a stock, the next day the earnings report came out, it fell, and I'm like, "Wow." It happens. You can't always win. But if you need fundamental analysis, you always know you can join meetkevin.com.
But let's focus. Let's focus on the data. The next factor that makes us optimistic. So, number one: Nvidia's disclosure rule. Number two: Elon spends like crazy. Number three: expanding the wealth effect. Number four: inflation. This is an interesting point. The inflation we see here: you can see that basic goods had a real effect from the tariffs, and now we're seeing a decline in annual rates.
The core CPI is trending downward. Basic services excluding housing are largely stable, and housing costs are also showing a decline. This is the same significant lag in housing indicators. This is exactly what Jerome Powell talked about a lot in 2021-22: they expected housing disinflation, but because of the way the owner's equivalent rent was calculated, it was delayed.
That's exactly what happened. You can clearly see this delay here, how services responded much faster than housing. And now you're seeing some leveling off in this housing disinflation. You no longer get the same discount as before. Well, who could have predicted this? Oh, wait. We predicted. We literally predicted that if Monder wins, rents in Manhattan will reach new all-time highs.
And of course, that's what happened, because every time the government promises to make something more affordable, you can bet they'll make it even less affordable. The government is a horror. Look, I'm not an anarchist, okay? Let's be frank. The government has certain responsibilities. There must be a balance.
Everything has its nuances. Unbridled capitalism only leads to pure socialism, and eventually to communism. So certain restrictions are needed. I don't think the situation with these SEC disclosure rules is healthy. This only inflates the bubble even more. Therefore, in the short term, I am optimistic.
In the long term, be careful. Because that's the right wording, right? But let's figure it out. So, yesterday the Consumer Price Index (CPI) came in slightly lower than expected. The Producer Price Index (PPI) was almost unchanged this morning. As you can see, the magazine says: wholesale prices did not change last month , as energy prices became slightly cheaper.
Although in reality this is no longer entirely true, given oil at $87. But some of this data is a little late. Overall, the CPI and PPI figures turned out to be less dire than feared. The labor market report was also somewhat weaker. I must say that even TS Lombard, which has consistently pushed for an interest rate hike, now admits: " This probably reduces the likelihood of a rate hike in September." So we're not going to die for the idea of raising the rate.
They begged for it, and for TS Lombard it was the base case scenario that this is it—this very moment. This, you know, will be something really serious. But now the disinflationary data we are getting and the deteriorating labor market indicators suggest that the Fed probably has no reason to raise rates.
Instead, Kevin Warsh's bias towards fixing expectations will likely prevail. Interestingly, the only ones still calling for a rate hike, such as TS Lombard, literally say the following: “We are much more concerned about the rapid overheating of the labor market in the transition from full employment to overemployment.” In other words, these people literally believe that the labor market is improving, and this will force them to raise rates further.
I find this absurd. This is my opinion. I think they only look at the unemployment rate, which is decreasing. But if you look at the 27 weeks of unemployment, the labor force participation rate, the weekly ADP trend— all of this data is bad. This is a very shaky foundation, in my opinion. This won't be the last straw that will plunge the economy into recession tomorrow, but the foundation is very shaky.
We have unreliable foundations in the labor market. This is probably because more people will lose their jobs to AI than we will gain new jobs thanks to it. So I want to make that clear. In the long run—yes, AI will create more jobs, like any technology before it, but there's usually a delay, right?
First you lose more jobs, and only then you get growth in the future. I hope this time does not coincide, although it probably will, with the bursting of the bubble. But right now we're still just pumping air into this tire, you know? This tire is rated for 70 PSI and we are currently at 50 or maybe 69, I don't know.
But this thing can stretch. We can probably pump it up to 100, 120 before it pops. Maybe I'm too optimistic. But I'm an optimist, and that's one of the reasons why I'm buying and why we're cautiously increasing our stake. If you want to see what exactly we buy, and most importantly, why, why we are building this thesis on inference computing for corporations, which covers both hardware and software.
If you want to see the details and fundamental analysis of all this, join me on mekevin.com right now, as Elon helps us break it down. The promo code is called "oh Elon pump it." God, Kevin, can you be a little less excited and more serious? Oh, dude, that's embarrassing. It doesn't matter . So when we put all of this together, we see a lot of reasons to say, "Dude, we're not going anywhere anytime soon on capital expenditure reductions." In fact, this new $500 billion Nvidia fund, I think, is completely undervalued by the market.
I don't think we've even seen a real breakthrough in hardware yet. We saw some momentum from CoreWeave, which of course sent Nebius shares higher. Nebius, Nebius. Nebius is a ticker, right? Nebius is a company. Um, CoreWeave, which was really interesting, had, you know, a fantastic earnings report, but it was based on their backlog, not their balance sheet.
If you look at CoreWeave's balance sheet, I'll open it up now. It makes me want to vomit. He is so terrible. And I don't want that to happen to SpaceX—to have a worthless balance sheet. I want you to take a look at this, just to get a quick overview. CoreWeave has $6 billion in cash. And if you look at their current debt, which is due within the next 12 months, and add up everything in red —not including deferrals—that's $18 billion in bills due within the next year.
And to pay these 18 billion, they only have 6 billion. Here's $10. No wonder they pay 10% or more in interest on their debts. Now, what's really remarkable about CoreWeave is what they claim in their statement. Let me open this up, as we have it in our Alpha membership. It's in the promotions tab. If I go to CoreWeave, I want you to see their percentage costs because I think they're a bit misleading to people .
Here is a breakdown of their debt. Below you can see that as of June 30, the company has a weighted average cost of capital. So, you know, WACC, WACC , WACC at 9%. Well, that's great. They have a WACC of 9%. But what is really happening? According to the Wall Street Journal, they have to raise the effective yield they pay on this debt by discounting their bonds.
So they are essentially deceiving people. They say, " Yes, our WACC is only 9%." " Okay, but wait a minute." Here is a Wall Street Journal article that says this. CoreWeave is the latest company to have to pay more to attract investors to sell data center-related debt. The AI computing company just renegotiated the terms of its $2.6 billion loan sale.
Mind you, this is a drop in the ocean compared to the 18 billion they need to pay their bills. Offering a yield of around 5.5 percentage points above the SOFR, this debt would yield over 10% under current terms, which include offering loans at significant discounts to par. In English, here's another lie about WACC.
This is how you blow a bubble. I'm not saying the bubble will burst anytime soon. She's going to crack. I don't know when, but it will break. But until then, in the short term, I am optimistic. OK. Ready for this? Let's say you have $100 of debt and you tell everyone, "Hey, my WACC is 9%." "It's less than 10%." What are you even talking about, Willis?
But what happens when you have to sell it at a discount? They say, "Hey, uh...this is a $100 bond. We're going to pay you $100 in the future, right? A bond is just a promissory note. So, we're going to pay you $100 in the future. We're also going to pay you a 9% yield, so $9 for every $100 invested.
But we're actually selling you this bond for $85. You're getting a 15% discount, and with that discount, you're getting $9 on 85. Your yield is 10.59%. So, at $85, the discount makes it 10.59%. Oh. You can still report that your WACC is 9%, even though you're actually paying 10.6%. That's nuance, and if you just want a quick summary, you're missing the point and you're missing the point.
Those of you who watch my videos know what I'm talking about. You're like, "Damn, I never thought of it that way, didn't know about this disclosure , or the debt of the companies, or how they manipulate the numbers ." That's how we can better understand these scoundrels, because they're trying to rip us off from all sides.
So if you want to see Kevin take down the scoundrels, join us at meetkevin.com. Boom! Time for some more coffee. . But .
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