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Everyone screaming that AI will crash this market is dead wrong. And Jim Kramer is about to prove why the panic traders are the ones about to get wrecked, not the machines. World, you buy them whether you want to buy the product whether you like them or not. Frankly, I don't believe that AI will wipe out the white collar workforce.
Let me give it to you straight though because I don't think the narrative you're going to hear about today is going away. I think it will hurt the price earnings multiples what we pay for a host of stocks causing them to drop without seeming well let's say anything being wrong. See yesterday an alpha called Catrini Research and Alop Sha two sources I never heard of until today frankly put out a stunning well-ritten incredibly pessimistic paper called the tw the 2028 global intelligence crisis.
The piece starts with a provocative question. What if our AI bullishness continues to be right? And what if that's actually bearish? Very interesting. I got it. Just drew me right in. What follows was a dystopian tale set in 2028 of incredibly high unemployment and incredibly low consumer spending because the robots will replace us.
Apparently, humans are nothing but friction. As AI gets better and better, more and more white collar jobs will disappear. Basically, they're predicting that most of the middle class will cease to exist. Today's stock market declined. It reflected the thesis embodied in this work of science fiction.
The worst hit were software stocks, which according to the 2028 global intelligence crisis, will be all but destroyed by AI that can write code better than they can. This paper argues that software companies will eventually be forced to lay off tons of workers and the companies instead will invest their savings in AI tools that can be used to maintain their output with dramatically lower costs.
And according to these guys, software is only the opening act. The housing complex, banking, retail will all be laid to waste by this white collar crunch as the good jobs disappear. The private equity firms that bought most of the companies that that that have been taken private in technology, well, they're going to go under, perhaps causing a credit crunch.
Unemployment skyrockets. The world as we know it collapses. It does everything but quote Billy's famous line from near the end of Predator, we're all going to die. And the stock market today took it seriously. Today we saw one of the more one more pummeling of the enterprise software stocks that we used to know and love.
Salesforce, weren't they, Adobe and their accolades along with Service Now. For some reason, the paper really zooms in on Service Now. And it is not optimistic. It talks about how all these companies will no longer be able to charge what they used to because too many of their clients will be able to develop software in-house using AI instead of settling for, let's say, four-year contracts with 5% price increases.
Now they're going to bulk maybe ask for two years at no price increase to be sure that they are ready to move to anthropic if it claud has a competitive cheaper product. Oddly the paper didn't spend time outlining the destruction of cyber security stocks. The market took care of that itself as Crowd Strike and PaloAlto Networks fell for a second day.
Truly hideous declines caused by a press release from Anthropic. They said they're moving into cyber security and that was what that was enough to just to crush the whole group. I'm gonna have more on that later. But for now, I need to say that this vision of global intelligence crisis uh that destroys the the economy.
I don't know. I think it's a reach. The screen reminds me of a piece of research during the initial GOP-1 craze where an analyst was recommending buying the airline stocks because people would all weigh less and save the airlines a lot of money on fuel. Listen, I've been a big believer in AI. You know that, which is why I believe in the pioneers of AI.
I believe in Jensen Wong, the CEO of Nvidia. They report this week. He talks about how traditional software won't be destroyed. Uh it just gets smarter. The new technology will create new jobs that we haven't even thought of yet. It's the fourth industrial revolution for saying. And like the previous ones, it'll create a lot more jobs than it destroys.
I remember when computers erased a lot of white collar jobs in the '90s, but the computer ended up being a great spur for the economy. These uh two individuals in the paper, well, the company in the paper, they think that that's not going to happen. They just think jobs are going to be destroyed, nothing else.
But you know what? Not that long ago, everybody was ringing their hands about falling birth rates in this country, but well, also worldwide. The fertility rate has fallen to a historic late of 1.6 in the country. You need an average of 2.1 children per woman just to maintain a steady population. Heck, remember the labor shortage as we came out of the pandemic.
With a huge decline in immigration, we may need all the help we can get from AI automation. We're running out of workers. I thought that was the thesis. Besides, I think the 2028 timeline for this is way, way too quick. Artificial intelligence can't wreck the entire software industry in the next two years.
But there's one real problem here. The whole thesis calls into question what price to earnings multiples we should pay for tech and for other stocks. Ultimately, the rest of the service economy, which is twothirds of the total economy, may be under attack. Yep. As I explain how to make money in any market, the multiple is the secret sauce.
It shows what we'll pay for future earnings. The problem that most stocks in the service economy and the tech economy trade at relatively high multiples and people simply aren't willing to pay as much for them with these AI apopul spheres floating around. The multiples are too high. We see it in Salesforce reports this week.
This company formerly the king of the enterprise software stocks which has kept pace with AI by creating its own AI agents. That's good. Has lost 33% of its value since the beginning of the year. That's bad. It sells for less than 15 times this year's earnings estimates. That's good. A ridiculously low amount for growth stock.
But when Salesforce reports on Wednesday, we will see numbers that reflect the damage in its core software as a service business where clients pay per user. I'm worried about that with AI making each user more efficient. The thinking is there could be a real problem here even if it hasn't shown up yet.
How do we uh we need to ask how much of the labor expenses were in stockbased compensation which makes the stock look cheaper than it is? Then there are the private equity companies like Blue Owl, which you'll hear about more later. Blue Owl, like many of its ilk, has been restricting withdrawals from some of its funds.
They'll give you some money right now, but you can't pull the entirety of your investment out. Who knows what multiple should be put on them? I'm not a buyer of anything they have to offer. What multiple do you put on banks knowing that if this Saturday document comes true, the earnings are going to go down big, especially the credit related companies.
Today the money is piled into the staples and the health care companies. Can that go on forever? I think we need to be more cautious about all stocks because the market was just too easy to take down today. There are too many worries about the power of anthropic and open AI. There are too many worries about the weakness and blue owl.
Too many worries about a fictitious version of 2028. But I got to tell you, I'm a worrier. Here's the bottom line. There's just too many things that can go wrong if you buy the wrong stocks. Don't I know it. We own some of the wrong stocks for my charitable trust. We've made some sales, but I can't help but grow more pessimistic, as you'll hear on the f at the Friday meeting that we have when I see how easily a piece of science fiction can crush the market as if it's science fact.
It's a way more difficult market than many of you think. Let's be more cautious. We have to be after what we saw
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