If Trump Loses the Midterms, Will the AI Bubble Pop? — Transcript

Full transcript

1. 0:00If Trump loses the midterms, will the AI
2. 0:02bubble pop? I'm going to give you a
3. 0:04spoiler. It's It's not looking good.
4. 0:06See, Trump has been in this exact
5. 0:08situation before. The last time he was
6. 0:10president, he lost the midterms. And
7. 0:12what happened to tech stocks next was It
8. 0:15was absolutely brutal. Now, next week,
9. 0:18there's a 90% chance that he could lose
10. 0:20again. And because stocks are so much
11. 0:22more expensive now than they were back
12. 0:23then, a lot of insiders are worried that
13. 0:26the damage could be a lot worse this
14. 0:27time. Wall Street is already warning its
15. 0:30big clients and insiders that a
16. 0:32Democratic win is the biggest risk to
17. 0:34the AI trade. Now, of course, the media
18. 0:36is not telling us any of this. They're
19. 0:38just blabbing about complete nonsense,
20. 0:40while insiders are preparing for the
21. 0:41worst. So, if you've got any AI stocks
22. 0:44at all, or you've just got index fund
23. 0:46exposure, or a 401k, you need to know
24. 0:49what happens next because it's about
25. 0:50your money. So, that's what we're
26. 0:52talking about today. Today, we need to
27. 0:54talk about what tech stocks did the last
28. 0:57time Trump lost. But then we're going to
29. 0:59go one step further and analyze what
30. 1:01they did every single time a president
31. 1:02has lost the midterms in the last 30
32. 1:04years. And finally, we're going to talk
33. 1:06about some of the exact dates that you
34. 1:08need to watch out for. In case you don't
35. 1:09know me, my name's Nick. I've been a
36. 1:10professional investor and unprofessional
37. 1:12trader for 25 years. I'm not a financial
38. 1:14advisor, and this is not an inducement
39. 1:15to buy or sell any assets. And as
40. 1:16always, do not take financial advice
41. 1:18from some random dude on YouTube. Now,
42. 1:20let's crack into it. We're going to
43. 1:21start with midterm night, the 6th of
44. 1:23November, 2018. That's the last time
45. 1:26Trump was president and lost the
46. 1:28midterms. Now, this was a crazy night
47. 1:30for the Democrats. They win 41 seats,
48. 1:32and they take over the House of
49. 1:34Representatives. So, anything that needs
50. 1:36a vote now needs to get past them.
51. 1:38Previously, Trump could just push
52. 1:39whatever he wanted through because he
53. 1:41controlled both the House and the
54. 1:42Senate, but now he needs the Democrats.
55. 1:45And over the next 7 weeks, tech stocks
56. 1:48absolutely crash. By Christmas Eve, the
57. 1:51Nasdaq, the index that's full of tech
58. 1:53stocks, is down 16%, which is a lot for
59. 1:55the Nasdaq. Nvidia, the company that's
60. 1:57at the heart of today's AI boom, is down
61. 2:0040%. So, if you put $10,000 into Nvidia
62. 2:03back then on midterm night, by
63. 2:05Christmas, you would have had about
64. 2:07$6,000. But, why did this happen?
65. 2:10Well, there were three main reasons.
66. 2:11Number one was the Federal Reserve, the
67. 2:13people who set America's interest rates,
68. 2:15you know, the central bank. It kept
69. 2:17raising interest rates, kind of like
70. 2:19they are now. And when rates go up, tech
71. 2:22stocks, they get hit the hardest. They
72. 2:23get hit pretty hard. Number two was that
73. 2:26there was a trade war with China that
74. 2:28was just hanging over everything. It was
75. 2:29brutal. To be fair though, this time
76. 2:32that's not really happening. There's a
77. 2:33few tariff disputes, but it's not as big
78. 2:35as the trade war with China was in 2018.
79. 2:37That was crazy. Number three, Trump was
80. 2:40fighting with everyone. He was fighting
81. 2:42with the Democrats, obviously, but he
82. 2:44was also fighting with the Federal
83. 2:45Reserve, even some Republicans he was
84. 2:47fighting with, especially when on the
85. 2:4822nd of December, the government ran out
86. 2:51of money and shut down.
87. 2:53Because the Democrats wouldn't give him
88. 2:55money for his wall, I think it was.
89. 2:57Yeah, that was it. And this was
90. 2:59essentially a fight over the budget,
91. 3:01which is coming again, by the way,
92. 3:02before the end of 2026. Keep that in
93. 3:04mind because we're going to come back to
94. 3:05that. Now, while the 2018 crash was
95. 3:07absolutely brutal, by January of 2019,
96. 3:10the Fed, the Federal Reserve, backed
97. 3:12down. It stopped raising interest rate,
98. 3:14and later that year, it cut them three
99. 3:16times. So, by April of 2019, tech stocks
100. 3:19were back at new highs. Now, was this a
101. 3:21one-off event, or does this happen every
102. 3:23time a president loses the midterms?
103. 3:26Well, to figure this out, I went back
104. 3:27and looked at every single time a
105. 3:29president lost the house since the
106. 3:311990s, and what happened to chip stocks
107. 3:34back then. If you don't know, chip
108. 3:35stocks are the companies that are making
109. 3:37the brains of every AI computer out
110. 3:39there. I mean, right now, they basically
111. 3:41are the AI trade. Obviously, Nvidia is
112. 3:43the biggest one of them. That's the one
113. 3:45that uh makes a lot of the chips, but
114. 3:47it's not just AI, by the way. These
115. 3:49chips go into pretty much every piece of
116. 3:51advanced technology there is, but let's
117. 3:53go back to 1994 and look at the midterm
118. 3:55back then where Bill Clinton loses both
119. 3:58halves of Congress. He loses the house
120. 4:00and the Senate. Absolute disaster for
121. 4:02Clinton. And within the next year, chip
122. 4:04stocks fall 22%.
123. 4:06Next was 2006 under George W. Bush. Now,
124. 4:09he lost both halves too, the house and
125. 4:10the Senate. Chip stocks fell 19% and
126. 4:12Nvidia fell 27%. And that Nvidia drop
127. 4:16that happened really fast. It was within
128. 4:17four months of the vote. Pretty crazy
129. 4:20drop in such a short period. Although
130. 4:21these days those drops are kind of
131. 4:23normal, but back then it was crazy. Then
132. 4:25there was 2010. Now, this one was a big
133. 4:27one. Barack Obama loses the house and
134. 4:30then Congress becomes an absolute
135. 4:32battleground for him over the debt
136. 4:34ceiling. The new Republican House of
137. 4:35Representatives refused to raise the
138. 4:37debt ceiling without massive spending
139. 4:40cuts. And if you don't know what the
140. 4:41debt ceiling is, the it's basically the
141. 4:43legal limit on how much the government
142. 4:45can borrow. Think of it like America's
143. 4:46credit card limit. And if that limit
144. 4:48doesn't get raised, America can't pay
145. 4:51its bills because America lives off of
146. 4:52debt. So, if the sitting president
147. 4:54controls both the house and the Senate,
148. 4:57debt ceilings just go straight through.
149. 4:59He just pushes them straight through.
150. 5:01But as soon as the opposing party
151. 5:02controls the house, well,
152. 5:05they have the power to stop the debt
153. 5:07ceiling raises going through and they
154. 5:09use that as a negotiation tactic. It
155. 5:12went right down to the wire back then,
156. 5:13but finally they did push it through
157. 5:15through after a bunch of negotiation,
158. 5:17but regardless, one huge credit rating
159. 5:20agency downgrades America's credit
160. 5:22rating for the first time ever because
161. 5:24of all the chaos with the debt ceiling.
162. 5:26And for tech stocks, this was absolutely
163. 5:28brutal. Chip stocks fell 31% and video,
164. 5:31which again is a chip maker, falls 54%.
165. 5:34Not good, but does this keep happening?
166. 5:37Because what we're talking about right
167. 5:38now is AI stocks before AI became this
168. 5:42big thing that it is today. So, let's
169. 5:44look at 2022. That is the most recent
170. 5:46occurrence we have. That was Joe Biden.
171. 5:48He loses the house. Now, Nvidia drops
172. 5:5022% in 2 weeks and at one point chip
173. 5:53stocks are down 17% inside of the next
174. 5:55year. And here's the crazy thing about
175. 5:572022. Chat GPT came out on the 30th of
176. 6:00November. That's 3 weeks after the vote.
177. 6:02So, that was the start of the AI boom. I
178. 6:04mean, Chat GPT is what kicked off this
179. 6:06entire AI boom. And then obviously,
180. 6:08we've already talked about this one, but
181. 6:09there's 2018 under Trump. That's the one
182. 6:11where Nvidia lost 40% in 7 weeks. So,
183. 6:14that's five out of five times. Every
184. 6:16time a president lost the house, chip
185. 6:18stocks dropped at least 17% at some
186. 6:21point in the next year. But for balance,
187. 6:23I do want to point one thing out. Most
188. 6:25times, the crash was temporary and
189. 6:27within a year or so of the midterms,
190. 6:30chip stocks were doing quite well again.
191. 6:32Does that guarantee that if we crash
192. 6:33again, we will see a recovery very, very
193. 6:35fast? Well, we'll talk about that later.
194. 6:38It's important. Now, you might be
195. 6:39looking at these scenarios and thinking,
196. 6:40yeah,
197. 6:41the stock market crashed, but there was
198. 6:43always something, right? It was a fight
199. 6:45over the debt ceiling or a fight over
200. 6:47the budget and the wall, etc. And this
201. 6:49time there's nothing. Well, I mean,
202. 6:51there actually is something. The debt
203. 6:53ceiling issue is coming back and it's
204. 6:55coming after the new house and Senate
205. 6:57are seated. Because the way this works
206. 6:59is you get the vote in November, but
207. 7:00then the new house and Senate aren't
208. 7:02seated until January. So, whoever they
209. 7:04may be, Democrat or Republican, this is
210. 7:06probably going to happen after they're
211. 7:08seated. And if they're a Democratic,
212. 7:10then it might be a problem for Trump to
213. 7:12get the debt ceiling raised. Because
214. 7:13right now, America's got $860 billion of
215. 7:16room left before it hits the debt
216. 7:18ceiling, which is, you know, it's it's
217. 7:20not really that much for a government.
218. 7:22On its current trajectory, the debt
219. 7:24ceiling should be hit by May of 2027.
220. 7:27But we'll come back to that too in a
221. 7:28second because
222. 7:30we've talked enough about history. Let's
223. 7:31just talk about what's happening right
224. 7:33now. So, right now it's Trump's turn
225. 7:35again and it does look like he's going
226. 7:37to lose at least the house, maybe even
227. 7:39the Senate. And he's saying the same
228. 7:41things he said last time.
229. 7:43Last week he posted, and I quote, "If
230. 7:45the Democrats win, you will have a
231. 7:461929-style economic depression."
232. 7:48Obviously, he's campaigning for himself.
233. 7:50He's exaggerating what this is. It's not
234. 7:52going to be that bad. But this time,
235. 7:53there's a lot of problems.
236. 7:55Stocks are a lot more expensive than
237. 7:57they were back then. So, there's there's
238. 7:59a measure of stocks called the Shiller
239. 8:00PE. It's the price of the whole stock
240. 8:03market compared to what companies have
241. 8:04earned over the last 10 years. So, the
242. 8:07higher it is, the more you're paying for
243. 8:09every dollar of profit. So, think of it
244. 8:11like buying a corner shop that made
245. 8:13$10,000 a year on average for the last
246. 8:1510 years. Now, if you pay $300,000 for
247. 8:18that corner shop, you're paying 30x, 30
248. 8:21times what it earns. If you pay
249. 8:23$400,000, you're paying 40 times what it
250. 8:26earns for the exact same shop. Would you
251. 8:28pay that much for a corner shop? I mean,
252. 8:30probably not, right? But stocks on the
253. 8:32S&P 500 are treated differently,
254. 8:34especially AI stocks. So, right now, on
255. 8:36average, stocks are valued at around 40
256. 8:38times a yearly earnings. In 2018, it was
257. 8:4030 times. So, compared to the last time
258. 8:43Trump lost, you're paying even more for
259. 8:45every dollar of profit one of these AI
260. 8:47stocks makes. And honestly, as far as
261. 8:49the stock market goes, stocks have never
262. 8:51been this expensive going into a
263. 8:53midterm. The closest was 1998, and that
264. 8:57was 16 months before the dot-com crash.
265. 8:59So, the only other time the whole market
266. 9:01has been this expensive was right at the
267. 9:04top of the dot-com bubble. And the two
268. 9:06times stocks got anywhere near this
269. 9:08expensive just in general, chip stocks
270. 9:10fell 84% after the 2000 top and 47% in
271. 9:142022.
272. 9:15And you might be thinking, "Well, no
273. 9:17problem. I don't own any AI stocks." But
274. 9:19you might have exposure anyway, because
275. 9:21if you hold the S&P 500, the 10 biggest
276. 9:24stock companies now make up 40% of the
277. 9:26S&P, and Nvidia on its own makes up 7%,
278. 9:30which is crazy when you think about it,
279. 9:32because the S&P 500 is an index fund of
280. 9:34America's 500 biggest companies, yet 10
281. 9:36of them take up 40% of it. And a lot of
282. 9:39index funds follow that. So, if you've
283. 9:41got $10,000 in the S&P 500 in that index
284. 9:44fund, about 4,000 of that is just in the
285. 9:47top 10 companies. And about 700 of that
286. 9:50is just in Nvidia. And And look, the AI
287. 9:53bubble is already starting to crack.
288. 9:55This is the thing a lot of people don't
289. 9:56notice. Chip stocks are down 26% from
290. 9:59their high in June. That's a bear market
291. 10:01by any definition. And Oracle, one of
292. 10:03the big AI data center builders, is down
293. 10:06more than 60% from its high. Just for
294. 10:09clarity's sake, a bear market just means
295. 10:11a fall of 20% or more. So, officially, a
296. 10:14lot of the AI stocks are in a bear
297. 10:16market. And CoreWeave, by the way,
298. 10:17CoreWeave is a big one. That's a company
299. 10:19that rents out AI computing power.
300. 10:21That's down 70% from its high. And just
301. 10:24last week, Meta, the company that owns
302. 10:26Facebook, fell 7% in a day after saying
303. 10:28that it will need to raise hundreds of
304. 10:30billions of dollars for AI data centers,
305. 10:32etc. Now, you might be thinking, "Okay,
306. 10:33Nat, but
307. 10:35what I What does a Democratic win
308. 10:36actually do to AI stocks?" The AI boom
309. 10:39is is global. It's bigger than American
310. 10:41politics. And I And I get that. That's
311. 10:43fair. But this is starting to sound like
312. 10:45I'm saying
313. 10:47telling people how to vote, "Don't vote
314. 10:48Democratic, otherwise we'll get an AI
315. 10:50bubble pop." I I'm not getting into
316. 10:51politics, guys. I stay completely
317. 10:53neutral on this stuff. I just want to
318. 10:54make that clear before I go any further.
319. 10:56But anyway,
320. 10:58this US election can impact the AI boom,
321. 11:01even though it's a global thing. So,
322. 11:02let's talk about that. Well, first,
323. 11:04let's talk about what they can't do. So,
324. 11:06Trump still has his veto power. So, the
325. 11:08Democrats can't undo the tax breaks that
326. 11:12make building data centers so cheap.
327. 11:14Those are permanent because Trump put
328. 11:15those in. And they can't undo them.
329. 11:18Basically, his veto is his power to
330. 11:20block any law that Congress sends him.
331. 11:22But what what what they can do is ask a
332. 11:24lot of very annoying questions to Trump.
333. 11:26Very
334. 11:28I'll give you an example. See, if
335. 11:29Democrats win the House, they run every
336. 11:31committee, and they can force people to
337. 11:33hand over documents and testify and
338. 11:35they've already said where they want to
339. 11:37start. 500,000 AI chips just got
340. 11:40approved for the UAE and months before
341. 11:43that the shake whose company got 100,000
342. 11:45of those chips bought a 49% stake in the
343. 11:48Trump family's crypto company.
344. 11:50Interesting timing, right? Now if you
345. 11:52don't know what the UAE is, it's the
346. 11:54United Arab Emirates by the way. So
347. 11:56then there's the big one, power bills.
348. 11:58They just sent us so much of bloody that
349. 12:01people's bills are going up because of
350. 12:03the demand for electricity and in this
351. 12:05election that's become a vote winner.
352. 12:08One Washington analyst put it like this,
353. 12:10he said, "If you oppose data centers,
354. 12:12you win. If you support them, you lose."
355. 12:14A big poll this month found that 69% of
356. 12:16Democratic voters want limits on
357. 12:19building data centers and even the
358. 12:20Republican governor of Texas froze data
359. 12:23center permits. And this isn't just one
360. 12:25party by the way, both parties now want
361. 12:26data center
362. 12:28data centers to pay for their own power.
363. 12:30The house actually passed a bill on this
364. 12:32recently, 417 to three votes. So that's
365. 12:35why like I said at the start, Wall
366. 12:36Street is worried. One of the biggest
367. 12:39banks in America told its big clients
368. 12:41that a Democratic sweep could knock
369. 12:43stocks down more than 10% and put the
370. 12:45whole AI spending boom at risk and if
371. 12:47that goes if that's at risk then the AI
372. 12:50bubble could pop. And if you're
373. 12:51wondering what a sweep means, a sweep
374. 12:52means that the Democrats win both the
375. 12:54house and the Senate and right now
376. 12:55betting markets give that at about a 65%
377. 12:57chance. Now look, nobody really thinks
378. 13:00that Congress can stop the data centers
379. 13:02getting built. The AI the AI boom is
380. 13:04just far too big for that but it can
381. 13:06slow them down and it can make them more
382. 13:08expensive. And the thing is these AI
383. 13:10stocks right now are priced like
384. 13:12everything is going to go perfectly.
385. 13:14That's what it's called, it's called
386. 13:15priced for perfection. That's how the AI
387. 13:17stocks are priced. So even slower and
388. 13:19more expensive, it's a big problem for
389. 13:21them because that means things aren't
390. 13:22going perfectly. And look, if you want
391. 13:25to know what an AI bubble popping
392. 13:27actually looks like, you don't have to
393. 13:29guess. It's already happening in China.
394. 13:31Their AI bubble is already popping.
395. 13:33China's main index of AI
396. 13:35and chip stocks has fallen 40% in under
397. 13:374 months. That's $480 billion absolutely
398. 13:40wiped out. And there was no big trigger
399. 13:42for this. Prices were just too high and
400. 13:44people started worrying that America
401. 13:46would ban Chinese equipment for its data
402. 13:48centers. And guess who got burned with
403. 13:50this? It was retail investors,
404. 13:51obviously. I'll give you a crazy
405. 13:53example. There was a robot maker called
406. 13:54Unitree. When it listed, ordinary
407. 13:56investors asked for 8,000 times more
408. 13:59shares than than there were. It halved
409. 14:02since August. So, there was crazy
410. 14:04demand, but it lost 50% since August.
411. 14:06Two Chinese chip companies, Meta-X and
412. 14:08More Freds, shot up 700% and 400% on
413. 14:12their first day of trading last year.
414. 14:14Both have been down 50% since July. And
415. 14:16a lot of people bought in because it
416. 14:18looked like the government was backing
417. 14:19it. One small business owner said that
418. 14:21that's exactly why he bought. Now, he
419. 14:23and his friends are sitting on massive
420. 14:25massive losses. And even after all of
421. 14:26that, those Chinese AI stocks still cost
422. 14:28about 100 times what the companies earn
423. 14:30in a year. Now,
424. 14:32in America, the Nasdaq is only 6% from
425. 14:35its record high. So, it does have a lot
426. 14:37room to move down. Now, let's talk about
427. 14:39the dates you guys need to watch out
428. 14:41for. The first one is today, a few hours
429. 14:43from when this video drops, the Fed is
430. 14:45deciding on its interest rates. It might
431. 14:46raise interest rates. It probably won't,
432. 14:48but if it does, that's
433. 14:50very bad for the AI bubble. But on the
434. 14:51same day, today, Microsoft and Google
435. 14:53report their earnings. Those are the two
436. 14:56of the biggest AI spenders. So, if
437. 14:58earnings for Microsoft and Google are
438. 14:59good, it should be good for AI. If not,
439. 15:02it's going to be pretty bad, especially
440. 15:03if interest rates go up on the same day.
441. 15:05But that's probably that's probably not
442. 15:07going to happen. Oh, and tomorrow,
443. 15:08Amazon is reporting its earnings, too.
444. 15:10So, that's going to be another one. Then
445. 15:11on the 3rd of November, you have to
446. 15:12watch out for the midterms themselves.
447. 15:14That's when the midterms happen. Then in
448. 15:16the middle of November, a couple of
449. 15:17weeks after that, Nvidia reports its
450. 15:19earnings, which is going to be super
451. 15:21important. Nvidia, whenever Nvidia's
452. 15:23earnings are good, it tends to be good
453. 15:25for the AI bubble. Uh when they're bad,
454. 15:28uh or if they're bad, it's it's going to
455. 15:29be really, really bad
456. 15:31uh because it's, you know, the biggest
457. 15:32AI stock in the world. Next is the 9th
458. 15:34of December. That's the Fed's last
459. 15:36meeting of the year, so that's another
460. 15:38opportunity for interest rates to go up.
461. 15:40If the Fed chair, Kevin Warsh, raises
462. 15:42rates again, that's bad news for tech
463. 15:44stocks because like I said, when rates
464. 15:46go up, tech stocks get hit the hardest.
465. 15:48Oh, and then there's the 11th of
466. 15:50December. That's when the government
467. 15:51runs out of money. Well, it doesn't
468. 15:52literally run out of money. What runs
469. 15:54out is Congress's permission to spend
470. 15:57government money. This isn't the same as
471. 15:59the debt ceiling, by the way. That's
472. 16:00when they run out of how much they can
473. 16:02borrow. So, by the 11th of December,
474. 16:04Congress has to pass a new spending bill
475. 16:06or at least a short-term extension. If
476. 16:08Congress doesn't fund it, it uh shuts
477. 16:11down again, just like in 2018, and that
478. 16:13was absolutely brutal for AI stocks. And
479. 16:16then around May in 2027 is the final
480. 16:18date you should watch out when the debt
481. 16:20ceiling happens, and that's uh when
482. 16:22America's borrowing limit gets reached
483. 16:24that we've already talked about. If the
484. 16:25Democrats take the House, they are not
485. 16:27going to want to give Trump anything
486. 16:30uh if they don't have to. It's going to
487. 16:32be a very uh tough negotiation. So, we
488. 16:34could get another 2010-style fight. And
489. 16:362010 is the one where, by the way, chip
490. 16:39stocks fell 31%. So, if Trump loses the
491. 16:41midterms, will the AI bubble pop? I
492. 16:43mean, it could. It's looking pretty
493. 16:45bloody bad. Tech stocks got smashed last
494. 16:48time he lost, and every single time a
495. 16:49president has lost the House, chip
496. 16:51stocks have dropped hard inside of the
497. 16:53year. And this time, stocks are more
498. 16:55expensive than they were going into any
499. 16:57other midterm in history. And chip
500. 16:59stocks are already in a bear market, by
501. 17:01the way. But look, history also says
502. 17:03that each time the stock market does
503. 17:05mount a comeback, so we do need to
504. 17:06consider that. That's why I hold hard
505. 17:08assets, by the way. That's why I I don't
506. 17:10I'm not messing with AI stocks right
507. 17:11now. And also, I have a bunch of cash
508. 17:13ready to buy any dip. If we see a
509. 17:15massive dip in the stocks, I might I
510. 17:17might buy a little bit, just a little
511. 17:18bit. So, if you've got AI stocks or just
512. 17:20an index fund or a 401k, keep an eye on
513. 17:22those days, they're super important. If
514. 17:24you got something out of this video, hit
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