Capital Misallocation

The Jim Morrison of Finance: Traffic in Macro / Markets / AI / Memes / Music / Philosophy / Co-Host of Benny & The Squirrel / Building

[Capital Misallocation @BenBrey]

GOLD - the only true money that has no liability side or need for miners. It is time tested & is what humans go back to in times of stress.

"Gold is money, everything else is credit"
- JP Morgan

A Gold Tweet Compilation In Anticipation of the Return of the King🧵

[Capital Misallocation @BenBrey]

“Digital Gold” is -8% since I posted this..12 hours ago.

Never, and I mean never, fight against the “Classic Clean” chart.

[Capital Misallocation @BenBrey]

BREAKING:
A multi-year textbook “Classic Clean” chart has emerged on “Digital Gold” bitcoin:native
“Have fun being Poor” in Reverse?

[Capital Misallocation @BenBrey]

The Squirrel over there in Hong Kong finding time to let the folks know how to find acorns.

[BlindSquirrelMacro @SquirrelMacro]

https://t.co/Ktpd7ri5Sl

[Capital Misallocation @BenBrey]

BREAKING:
A multi-year textbook “Classic Clean” chart has emerged on “Digital Gold” bitcoin:native
“Have fun being Poor” in Reverse?

[Capital Misallocation @BenBrey]

Is it me or has Twitter gone back in time to 2021 and mutated where literally the entire timeline was crypto stuff then and is AI stuff now. Check out this! Check out that! “Have fun being poor”.

I guess all would say is that this whole thing seems like Magnetar 2.0 & the darling of 2020/2021 - crypto - literally has gone no bid. I mean the Crypto Captain Saylor is sad and getting ready to float away on his yacht.

Might be time to ring the register folks right here. Crypto has led markets for a long time… might be again.

[Capital Misallocation @BenBrey]

Live look at BTC/ETH liquidity fleeing to AI / SpaceX IPO “INNIT” Squirrel!?
@SquirrelMacro

[Brandon Carl @brandonjcarl]

Documenting the headwinds I now see for AI.

It won't seem like it, but I love AI and am long-term positive. But when "math doesn't math" I take note.

1. The core thesis for foundation model lab investment has been high upfront investment made worthwhile by significant long-term profits.

2. These are capital intensive businesses and the compute commitments are very high relative to revenue and require strong growth over long time periods. The "leverage" (commitments versus revenue) is extremely high.

3. The fundamentals are not as positive as they previously were:
• Input costs are higher (commodities, chips, power)
• Interest rates are higher
• Competition is more intense
• Scaling Laws are now problematic: exponential costs/power cannot continue

4. Forecasting compute spend is challenging and high risk due to (a) revenue uncertainty and (b) algorithm uncertainty

5. Revenue growth appears to be slowing. The technology is valuable, but ROI is proving to be more expensive and take longer than anticipated.

6. The future is likely "different models for different use cases" with the lower end of the market being highly competitive.

7. Core use cases such as agentic software engineering are likely to need approaches beyond next-token prediction. They are Σ₂ᴾ complexity problems requiring multi-objective optimization and likely a combination of Transformers and other methods.

8. Current forecasts in memory makers are built largely on quadratic attention. That will not persist: we are already seeing work from DeepSeek, Minimax and Nvidia that can cut RAM needs by 80% or more.

9. This means semiconductor valuations are substantially overinflated and will go through the traditional glut versus shortage cycle.

10. For foundation model providers: lower costs with competitive differentiation is good. However, lower costs with a lack of differentiation would mean lower revenues. This makes it harder to (a) service commitments and (b) pay back investors.

11. Leverage is substantially higher than in previous cycles, evidenced by leveraged ETFs, call option activity and margin loans. Korea is particularly susceptible.

12. 0DTE options create a profile that has stronger parallels to portfolio insurance and 1987 than any other point I can remember.

13. The combination of exponential increases in call activity coupled with the ties of semiconductors to structured products means there is a non-trivial systemic risk to the financial system.

14. Implied earnings growth rates are inconsistent with other periods in history.

15. Macroeconomically we cannot and should not fund exponential cost increases. History has shown us repeatedly that there are better ways (see Quick Sort and Simplex).

16. Significant supply is hitting the market via IPOs.

––

Taken together: costs and competition are increasing while revenue growth is likely slowing. Valuations are fragile and prone to technology disruptions that are already here. Systemic financial market risk is extremely high.

[Capital Misallocation @BenBrey]

SUPPLY IS COMING

[BlindSquirrelMacro @SquirrelMacro]

@BenBrey

[Capital Misallocation @BenBrey]

$CEG & $GOOGL secondary deals today the day after I was warning that we may start seeing secondary equity offerings is something we may start to see.... oh how this market has changed.

[BlindSquirrelMacro @SquirrelMacro]

@BenBrey and the 🐿️ were chatting about the risk of MAG7 equity supply coming on top of these AI IPOs on the Sunday show. THE NEXT DAY!! I told you to never miss a Sunday show!

[BlindSquirrelMacro @SquirrelMacro]

I think there are a few ECM syndicate banker in NYC gulping audibly. Do you think they were listening to the Sunday show @BenBrey ? No bueno for SpaceX physics

[Capital Misallocation @BenBrey]

Hope it’s start of a trend @SquirrelMacro

https://t.co/ndzihBYaU5

[Ian McMillan, CMT @the_chart_life]

Listen, I’m a big “the index is the index” guy, but they are openly looting the coffers.

This is 100% fraud.

[Lawrence McDonald @Convertbond]

This is the moment. As a former Lehman trader I feel it’s the time speak up. We all have that responsibility, enough hubris. We must STOP this. Your 401k is on the line. I know deep down @elonmusk @chamath and @DavidSacks agree — at a $2T valuation, passive investors (the S&P 500, the Nasdaq) deserve better.

[BlindSquirrelMacro @SquirrelMacro]

Time to take the DRAM chips to the cage. Never miss a Sunday show!! @BenBrey

https://t.co/wvowEqJ7EM

[Capital Misallocation @BenBrey]

Ep.56: Sanity Check of Benny & The Squirrel “Unmissable Sunday Show” is live - enjoy!
@SquirrelMacro

https://t.co/Nw6Ivyx4ke

[Capital Misallocation @BenBrey]

@geoffreykarren @TradexWhisperer The rational players are clearly not in control of the market anymore buddy…we haven’t been for awhile

[Capital Misallocation @BenBrey]

China: The Real Story

He told us why Taiwan invasion is NOT happening, why Chinese stocks underperform despite insane growth, and who’s winning the RMB bet — Benny or the Squirrel? @SquirrelMacro

Episode 55 with Michael De Clercq is live ↓

https://t.co/ICqi66YBVb

[Brandon Carl @brandonjcarl]

Very interesting data across 2,444 companies.

82% of tokens are spent on AI-generated bugs, rework and review friction.

[BlindSquirrelMacro @SquirrelMacro]

Check it out 👇 Craig is joining @BenBrey and me on the pod during the last few days of the $SPCX roadshow. Going to be fun.

[Capital Misallocation @BenBrey]

@binaryprinciple @SquirrelMacro DM me and we can chat on it

[Capital Misallocation @BenBrey]

I have partcipated in over 1000 IPOs in my career on the buyside roughly for a "context window"..

SpaceX is in a league of its own in terms of "Idiocracy". The Squirrel (@SquirrelMacro) and I are back out with more thoughts post S-1 filing - TLDR: Still Bearish.

Just remember all the public bulls you are going to hear in deafening volume in the next two weeks most likely are long at 5% cost basis vs deal price. AKA

"Show me the incentive and I'll show you the outcome."

[BlindSquirrelMacro @SquirrelMacro]

A special free edition will be dropping at 7am EST. @BenBrey consider the physics of the SpaceX IPO. Will Musk pull it off or worse 'double tap' the SPX trying?

[BlindSquirrelMacro @SquirrelMacro]

@BenBrey and I just sat down to chat about the SpaceX IPO. Tune in! 👇
https://t.co/JDMnkTQNkU