Are you exposed to the AI sector? That may wind up being a trick question.

Much of the debt that is being issued for the A.I buildout is in the private credit space. Many may say so what? If we look at private credit most of it is issued because banks look at the borrowers as being a bit too risky.

Recently, many private credit companies have been restricting withdrawals and there are many examples of some funds that have reported a full valuation and, in a few days or weeks, the “VALUE” went to ZERO. That does not happen in that type of time frame. The reason it appears to happen quickly is that these companies do not trade daily and so many believe that because they do not see any price volatility they must be “safe.”

The first clue that there are underlying problems would be the restriction of getting your investment back. Next, there are a few lawsuits out there that imply that some BIG money has bought insurance companies and have been using customer premiums as a piggy bank. A lot of that money has gone to buy A.I. debt and now sits on the balance sheets of many insurers. This does not mean that this is a norm, but Apollo Group is in the news as well as their insurance company- Athene.

There is an attorney from California who has a YouTube channel called Ox Talks. He goes in-depth as to the magnitude and riskiness. He does not speculate but uses facts as a good attorney usually does.

To me, this is similar to what has happened to healthcare, dental, retail, and most of our economy where big money buys a business that it generally has no experience in. They do, however, know how to add debt to their buyout targets, line their pockets, and be in charge.

Another is Delaware Life- owned by the owner of the LA Dodgers who has been sued by policyholders because of the appearance of using policyholder premiums as collateral for A.I or other more risky investments.

Many may ask what the problem is. The problem is that if A.I., which I perceive to be one of the biggest bubbles of all time, fails it could lead to massive losses not just for the A.I space but for those funds that are doing all of the lending.

The problem here is that it appears that a lot of the lending is being done with OTHER PEOPLE’S MONEY. Some may be yours. It pays to ask questions!

Things got a lot more serious after the democrats took control in many states. The federal election will have a lot less impact on the A.I sector because most of the rules and regulations take place at local and state levels.

I have written about China’s advantage because of cheaper, more abundant energy and their open platform vs. our pay platform. In addition, it was just reported that Taylor Frazier McCollum derailed a planned five-billion-dollar datacenter in Landover, Maryland. While the report is on her, she got 25,000 signatures and was helped by an NGO (non-government organization) Mystical Medicinals. She was also joined by PSL (Party for Socialism and Liberation) (Reported by Polymarket)

While I am no fan of the datacenters the alarming part of the story is that PSL has connections with China-based Neville Roy Singham that have made efforts to block US industrial development.

Keep in mind that much of the spending being done is based upon HOPE that these centers get built and that earnings will continue to move higher.

I am also extremely concerned about the Anthropic IPO. There is a MAJOR push by the banks to stir up interest and spike the IPO price up. There are reports that it is multiple times oversubscribed. Are they true? The reason I ask is that Space X was reportedly four times oversubscribed, but at the last minute almost half of the subscribers backed out. Sorry but that sounds more like a mirage to pique interest possibly by the banks or even Space X itself, rather than genuine demand. The price action after the IPO supports my theory.

It is no surprise that they need to do a full-court press to get the public in after the dismal spending numbers for Anthropic were released a couple of weeks ago. BUYER BEWARE.

Zero hedge had a report that “Anthropic Bankers Push for Higher IPO Valuation Amid Warnings That Weak Debut Could Prick AI Bubble.” Funny that the banks issuing the shares even refer to the A.I Bubble.

While it is impossible to guess what the IPO will look like my guess is that massive intervention will take place to give the appearance of massive demand whether it is genuine or not. This is similar to how the Fed allows the illusion of solvency by conjuring up cash out of nowhere to allow the Treasury to issue more debt even though we cannot even service the existing debt without “printing up” more cash.

While there is massive manipulation of all prices to keep most people as confused as possible and out of assets that those “in charge” want for themselves like hard assets, reality will ultimately prevail and it will be exposed that the necessities of life and REAL money are far more valuable than promises to repay- particularly when the numbers scream- It cannot happen.

Sometimes it is difficult to see past the most recent price action. This, in many cases, is the plan. Keep in mind that price is what you pay- value is what you get.

The Chinese realize this and as others manipulate the price they BUY. It is reported that China bought 25.8 TONS of gold in the past 2 weeks. Remember the old saying- Those who have the gold make the rules. It is a matter of time before the confidence that underpins this system is demolished by rising interest rates or the “printing” required to keep them from blasting higher. Charles Nenner, former Goldman Sachs trader, has a 200- year interest rate chart that is calling for a 30-year bear market for bonds. This may sound a bit crazy, but it is not any crazier than interest rates falling over a 40-year period.

If rates rise look for stocks, bonds, and real estate to struggle (being kind). If the manipulation of rates lower continues look out for a collapsing currency. In either case I believe hard assets are far superior to manipulated and overpriced products or debt-laden properties. I believe patience will be greatly rewarded.

Be Prepared!

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