00:00If you look at earnings, they're still pretty amazing. I mean, double digit, like 12% returns thus far and this after double digit returns last year as well. Does that continue? I think part of it's very genuine. If you look at the profit share of GDP, it's been going up and up and up. And what's happening is because the average worker feels miserable, you ask them about the economy is terrible. They also feel like they don't have any bargaining power. And so what we're not seeing, even though the labor market is tight, we're not seeing wage growth going up. In fact, it's
00:29going down. So all the productivity gains are going to companies. That's true. But the other thing is, there's something a little artificial about the artificial intelligence profits. I mean, if company A decides, I'm going to spend $50 billion with company B, then company A says capital spending. They only have to depreciate a sixth of that, say. But company B, it's all revenue. It goes straight to the bottom line. So that one transaction pushes up total profits by $40 or $50 billion. So if you see this massive expansion in capital spending by technology companies, it will automatically push up profitability.
00:59Mathematically, it has to. And I don't think that's quite the same thing as ongoing profitability.
01:06I'm going to think out loud for a second. So just hang with me here. I wonder if the past week, then, we should be more worried about it than just one week's of selling.
01:15Because if it continues, not only do you get the hyperscalers punished for spending more, you get the private capital stocks punished for funding them.
01:24Does that create an environment where maybe the willingness to spend or to lend to the capital, to the big capital spenders, starts to creep back?
01:31And because it's becoming so important for the earnings picture, for the economy, it has a really dangerous kind of snowballing effect.
01:39Well, there's risk there. And I think the other part of the story that's been going on all year, and you can see this also in international stocks and the dollar,
01:46is people came out of last year three super years on inequity markets where people are overconcentrated and they're rebalancing.
01:53And, you know, the questions about, well, maybe I don't need any software companies because my faithful assistant, Claude, can do it all for me.
02:01You know, that may be part of the story here. But I think there's a bigger narrative as people are just prudently rebalancing.
02:07And it's, you know, it's not that this is bound to happen.
02:11You know, the thing about a bear market is, you know, not the hour nor the day, but you do know the location.
02:15The epicenter of a bear market is always a place where there's been the most hype and euphoria and, you know, easy money going forward.
02:24So it's not surprising to see Bitcoin taken on the chin or the hyperscalers take a hit this week because it's that's where all the enthusiasm has been.
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