Marty's Bent

Sup, freaks? The man running the most valuable company in history just told you exactly what's coming. Jensen Huang, CEO of Nvidia, has been making the rounds over the last week highlighting how AI is going to change everything. One of the things he said is about your money. Nvidia is a company with a market cap of $4 trillion. Last week at their GTC conference, Jensen told the All-In podcast: if you have a $500,000 a year engineer and they're not spending $250,000 a year on AI tools, something is deeply wrong. He compared not using AI to designing chips with paper and pen.

A lot of people pushed back on this saying these tools were supposed to drop the cost of labor. If your engineer makes half a million and spends a quarter million on tokens, how is that saving money? What people are missing is just how insanely productive these tools make you. We've been pretty much an open book about how we've been implementing AI here at TFTC. The value we get from using tools like Claude far exceeds the cost. We've automated a ton of back end processes with a team of six. It feels like we have a team of 50 and a few months into agentic implementation to our workflows we've successfully generated an increase in revenue and revenue streams that make our AI investments profitable.

Jensen was also on Lex Fridman's podcast this week and made another point worth highlighting. If he has a choice between a new college graduate with no clue what AI is and one that is an expert at using AI, he would hire the expert every single time. These tools can be applied across a business' operations; accounting, marketing, supply chain management, legal, and sales. Having someone who knows how to us AI to productively and efficiently accomplish the necessary aspects of these business operations will be additive to the company in ways that a single individual would not have been in the past.

Intelligence is being commoditized. What we really need are people who can think creatively about systems designs and things that don't exist yet and use AI tools to bring them into the world. If you're out there and you've been dismissive of what's going on in AI, I urge you to seriously rethink your position. You can literally use the models to teach you how to use the models. Start with one small problem in your personal life or at your job and try to us these tools to solve it. Once you solve one low-hanging fruit problem, the snowball effect begins.

Now here's where it gets serious. What this AI boom is beginning to do is disrupt private credit markets. You have a ton of private credit funds that underwrote deals with software companies post 2020 and 2021 when interest rates were near zero. They were looking at annual recurring revenue and treating it as good as gold. But here we are five or six years later and AI is eroding the moats of these software companies at an alarming pace. People can simply use AI tools to build their own solutions. Expensive B2B SaaS products are unappealing to many now. Especially smaller teams who are more nimble and can scale with the internal tools and workflows they build with AI. I'll admit, it may be harder for larger, bloated incumbents to make the transition immediately.

Nick Nemeth used AI and public SEC filings to expose what a $31.5 billion private credit fund doesn't want you to see. Cliffwater's fund reported a 41-month win streak, zero losing months, with a Sharpe ratio of 3.75. For context, Bernie Madoff, who could pick any number he wanted because he was fabricating returns, chose a Sharpe ratio of 3.5, which is what initially incited sleuths to look into his Ponzi. Nick found 50 non-accruals using public filings. The fund reports zero. He found loans marked at par on businesses that have been functionally eliminated by AI.

And this isn't unique to Cliffwater. There's $13 trillion in private equity and private credit that marks its own homework. Every fund that pays its own valuation agent has the same conflict. Insurance companies backing this are levered 20 to 50x. As we discussed a couple of weeks ago in the Bitcoin Brief, many private equity funds have acquired insurers and reinsurers and have funneled some of the cash generated by policy premiums into their credit deals. This is your pension money, your annuity, your retirement at risk and ultimately being valued by people who get paid when marks are higher because it allows them to juice AUM to collect fees on.

Yesterday, Apollo capped withdrawals on their $25 billion debt fund after redemption requests hit 11%. They're giving back 45% of the capital (5% of AUM) that redeeming investors have requested and shutting the gate on the rest.

Today, Ares Management followed that up with a similar announcement, they are capping their Strategic Income Fund withdrawals at 5% after clients sought to redeem 11.6% of shares. These aren't small funds run by nobodies. Apollo and Ares are two of the largest alternative asset managers in the world. Along with Blackstone, BlackRock, Morgan Stanley, and Cliffwater these funds have collectively received more than $10.1 billion in redemption requests this quarter alone. So far, the industry has agreed to honor only about 70% of those demands. Goldman Sachs predicts the retail private credit sector could shed between $45 billion and $70 billion in assets over the next two years.

Private Credit Is Gating Redemptions and the Dominoes Keep Falling

Apollo and Ares lock the exits. $10B in redemption requests. Goldman predicts $70B in outflows. The private credit unwind is here.

TFTC – Truth for the CommonerMarty Bent

On top of all this, the 20-year US note yield is back at 5% less than 24 hours after Trump said peace talks with Iran were underway. The threat of 7% mortgages and $4 gas prices has become reality. Bond markets are saying this war is unsustainable.

So you have AI eating into the revenue of the companies these funds underwrote, a massive refinancing wave coming at a time when interest rates are are significantly higher than they were when the original loans were underwritten, and a war driving yields in the wrong direction. It's a double whammy turning into a triple whammy.

With all of this in mind, don't panic. Chaos is a ladder. Disruption is the norm throughout human history. You can either watch it happen and be affected by it, or you can ride the wave, use the tools, and position yourself to succeed. Things are going to be volatile. Take this opportunity to use the tools and position yourself as we transition into the digital age. Learn how to use AI. Don't live beyond your means. And make sure you have bitcoin in cold storage because the case for bitcoin gets stronger by the day. We have AI driving a rapid deflation in tech as intelligence gets commoditized. We have a massive credit crisis beginning to gain significant momentum, which will likely dictate a bailout via the money printer at some point down the line. And we have an ugly, yet hopefully short, war going on that will certainly push our geopolitical counterparts to consider neutral assets that cannot be controlled by any one government.

All signs point to bitcoin's fundamental value prop becoming glaringly obvious to more people as we head toward 2030.

Iran Was a Network Node in London's Control System

The geopolitical chess game in the Middle East runs deeper than most realize. Tom Luongo presented a compelling case that Iran's leadership, particularly the Islamic Revolutionary Guard Corps (IRGC), has been operating as a crucial component within the City of London's global control apparatus. According to Luongo, this relationship centered around Iran's strategic position controlling the Strait of Hormuz, one of the world's most critical shipping chokepoints.

"London funded both Iranian proxies and their opponents to maintain the chaos premium that benefits their insurance system" - Tom Luongo

The arrangement allegedly worked by having Iran maintain constant threats of closing the straits and developing nuclear capabilities, creating perpetual instability that drove up insurance costs and energy prices. This chaos premium directly benefited London's financial system, which profits from volatility and uncertainty. Luongo argued that London's financial elite deliberately funded opposing sides to ensure ongoing regional tensions, maximizing their leverage over global trade flows through manufactured crisis.

Check out the full podcast here for more on financial warfare, energy geopolitics and banking control systems.

Headlines of the Day

Hackers Compromise Security Scanner to Steal Half Million Credentials

OpenAI Shuts Down Sora App After Losing $15 Million Per Day

SpaceX Aims to File for IPO as Soon as This Week

OpenAI to Raise Additional $10 Billion at $730B Valuation

BlackRock's Mitchnick Says AI Agents Will Use Bitcoin

Iran Charges Ships Up to $2M for Safe Passage Through Strait

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Final thought...

The Red Hot Chili Peppers documentary on Netflix is good. Will be watching it again.

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