Markets Are READY TO RIP After Rate Cut And China Deal

0:00Hello, everyone. The Fed and President Trump have cleared the stock market for takeoff.

0:15We're live today from the desk of Anthony Pompliano.

0:29Before we get into today's show, I need your help. Right now, we have 35 ,429 subscribers on our YouTube channel, but my goal is to get to 1 million subscribers. We can get there together. So hit that subscribe button and let's get into today's show. All right, ladies and gentlemen, uncertainty is a cancer. It can spread fear through an entire market. Uncertainty can kill optimism quickly because as the uncertainty mounts, the flow of capital slows and asset prices lose momentum. It's this loss of momentum that becomes so dangerous to bull markets. Thankfully, we got extreme clarity yesterday on two major topics that investors seem to care about.

1:07The first is interest rates, and the second is our China trade relationship. First up, Jerome Powell and the Federal Reserve cut interest rates by 25 basis points during the conclusion of this week's meeting. Now, this decision was not a surprise at all. I told you about it yesterday. But some of Powell's commentary around the decision was really noteworthy. The Fed chairman still believes that there is potential risk to rising inflation, which frankly has failed to show up as he previously predicted, so he's been wrong on that. But he also believes that there is continued pressure on the labor market, and that actually seems to be a pretty good analysis on his part.

1:39His exact words were risks to inflation are tilted to the upside and risks to employment to the downside. Now, in my opinion, that central bankers speak for we're watching the market, but there's not an explicit problem that I can point to and scare the heck out of you with it at the moment. So at another point in the conversation, though, Jerome Powell was asked about the potential of a bubble in artificial intelligence, and he was asked to compare the current situation to the 1999 and 2000 tech boom. His answer was pretty interesting. Take a listen. Yeah, this is different in the sense that these companies, the companies that are so highly valued actually have earnings and stuff like that.

2:15So if you go back to the 90s and the dot-com, these were ideas rather than companies. And so there's a clear bubble there, whereas the, I won't go into particular names, but they actually have earnings. And it looks like they have business models and profits and that kind of thing. So it's really a different thing. You know, the investment we're getting in equipment and all those things that go into creating data centers and feeding the AI, it's clearly one of the big sources of growth in the economy. Consumer spending also, though, has been, you know, is much bigger than that and has been growing and has defied a lot of, you know, negative forecasts, continuing to do so this year.

3:04Consumers are still spending. Now, it may be mostly higher-end consumers or maybe skewed that way. But the consumer is spending, and that's a big, big chunk of what's going on in the economy, bigger than, substantially bigger than AI. Think about this for a second. Business models, revenue, profits, you know, things that real companies have. This rational take from the leading central banker will hopefully quell some of the doomsday predictions of a massive bubble in AI. So the good news coming out of the Fed press conference yesterday is that rates were cut once again. The 25 basis points decrease brings cheaper capital into the market.

3:39It incentivizes more research and development in the corporate sector, and it should result in asset prices continuing to go higher over the coming weeks. At least that's what investors hope for. But the interest rate cut yesterday was not the only clarity that we received. Last night, deep into the night, we got word from President Trump's visit to Asia that the United States of America has struck an agreement with China. Woo! This agreement is widely being reported as a tariff truce, and it is aimed at easing trade barriers between the two countries because they've been slapping each other with all kinds of tariffs and other trade obstacles in recent months.

4:14But given the fact that tariffs were not fully removed, they were simply decreased, I don't know if I'd call it a truce. I would likely call this something more akin to a de-escalation when it comes to tariffs. But regardless of the specific wording that I want to use or you want to use. The important thing is that an agreement has been reached. Both the United States and China can claim victory in the outcome. That's a very important component to getting an agreement done. As I said yesterday on Fox Business, the president of the United States of America, Donald Trump, he's a dealmaker. Whether you like him or not, he gets deals done.

4:45And so we should expect deals to get done in all of these trade negotiations. Take a listen to what I had to say. I think we're watching this dealmakers make deals and you're seeing that there was immense pressure. There was a lot of posturing. There was a whole soap opera of the trade tariffs and the trade pressures. But now you have the dealmakers coming to the table and they're going to get the deal done. And I think one of the interesting things about China and the U.S. is we would love to decouple. Everyone would love to not be dependent on each other. But these two countries are the largest economies in the world.

5:12They need to work together. And you now have everything set out for them to get the deal done. I think they'll get it done. What do you think is going to be more pressing, TikTok or soybean purchases? Well, look, I think China making the soybean purchase is kind of like an olive branch is a good sign. But really, at the end of the day, what type of economy do we want? Do we want a technology economy or do we want one where the physical analog world is important? And, you know, the truth is both are really important. And so I think what you're going to start to see is a little bit of horse trading.

5:37You're going to see them say, hey, you know what? Maybe we'll be a little bit looser when it comes to soybean stuff, but we're going to take a little bit more when it comes to TikTok. And my guess is that TikTok is actually a bigger threat than the soybeans. But, you know, again, the farmers in America, they're very loud. Scott Besson, soybean farmer himself, and he obviously is saying, hey, look, let's get this done as well. So what exactly was agreed to here in this agreement? Well, Bloomberg explains the main components. They include the U.S. cutting tariffs on Chinese goods related to fentanyl down to 10 percent.

6:06China is going to buy a tremendous amount of U.S. soybeans and other farm goods. China is going to pause sweeping controls on rare earth exports. The U.S. is going to roll back expansion of restrictions on Chinese companies. The United States is going to extend a pause on some reciprocal tariffs for a year. And China is going to work with the United States to resolve issues related to TikTok. Now, when you look at all of that stuff that got put into this agreement, it seems that both sides gave something in the negotiation. And frankly, that's how a good deal gets done. Everyone has to walk away feeling like they could have gotten a slightly better deal.

6:39They got to feel like they left something on the table. But the leaders of both countries seem to be very pleased with the meeting. Even President Trump, who is known to lash out at people, he described it as a 12 out of 10 and had many nice things to say about President Xi. So this brings us back to how investors should perceive these events. It is nearly impossible to see interest rate cuts and a China agreement as any sort of bearish catalyst, and it definitely isn't going to lead to lower asset prices. The exact opposite is likely to happen, actually. The United States is open for business and we have been running around the world striking trade deal after trade deal after trade deal.

7:14And that should increase the amount of capital that's being invested in our country. It's a good thing for our economy and for our society. Add in the fact that our central bank realizes that they have to get the cost of capital down and that's why they continue to cut rates. They realize that leaving rates at four and a half or 5 % is unsustainable. And so now you've got a clear picture of the ingredients needed for a bull run to continue. Clarity brings capital. Capital brings higher prices, and higher prices bring momentum. And momentum is really hard to stop once it gets going. So the bull run is underway.

7:47We are in a bull market. The pessimists are completely wrong. This train is not going to stop anytime soon. And so make sure that you don't poison your brain with any sort of fear porn that's out there. We are cleared for liftoff. The next few weeks and months, they're going to be a lot of fun in my opinion. So rumors are that OpenAI is considering an IPO in 2026 at a$1 trillion valuation. That's trillion with a T. This would be an insane achievement for Sam Altman and his team. But I think that people are getting ahead of themselves with these rumors, and there's a lot to unpack in this story.

8:19First of all, OpenAI is reported to be doing$13 billion in revenue right now. That's a big number, but that ain't worth a trillion dollars. And the goal is to end this year on a$20 billion revenue run rate. That's good, but it would require the company to go public at a 50 times revenue multiple. And that feels pretty rich, even for one of the fastest growing companies in the world. 20 billion in revenue, that's good, but a trillion dollars? Hard to see a dotted line to that. Now, this obstacle doesn't acknowledge the fact that OpenAI is also hemorrhaging money at an unprecedented rate. Usually, I personally think that people are idiots when they claim that companies are invaluable because they're investing all their cash into growth.

8:55Growth usually equals future profits. But if you go ahead and you take a look at what OpenAI is doing here, most companies, they're not losing all this money and also trying to pull off the second largest IPO in human history. So what do I think is gonna happen? Do I think OpenAI can actually go public at a trillion dollars? Well, in my opinion, OpenAI is definitely gonna go public. They have no choice. The company needs insane amounts of money to fund their various projects and frankly, to fund the ambition that they have for this business. You can really only get hundreds of billions of dollars or potentially trillions of dollars in capital through the public market.

9:30You can't get that in the private market. So OpenAI is gonna get into the public market because they need the cash. On the other hand, I think two other things are true at the same time. The company's growing faster than most people can appreciate. Just think about from launch of ChatGPT to today, the company now has over 800 million people using ChatGPT on a weekly basis. That is a ridiculous growth trajectory from when they just launched. So that growth rate is likely to drive more users and more revenue. And most investors can't comprehend a growth rate of something like that. But at the exact same time that they're growing incredibly fast, this company consumes so much capital that it is usually hard for public market investors to understand what that means for a business in the future.

10:13They're going to expect OpenAI to show a light at the end of the tunnel and show some path to profitability. Investors want growth, but they also want profits. Just ask Jeff Bezos at Amazon, the knock against the e-commerce giant for years was that they weren't profitable and no one thought that they could actually turn a profit at some point. But of course, the haters, they were proving completely wrong. Amazon's become one of the best businesses in the world. Similar story with Uber and many other companies. They simply were investing in growth and eventually they got to profitability. So when it comes to OpenAI, I think that there will be more scrutiny than we would normally see with a hot company.

10:48Think of a level of scrutiny similar to WeWork. The public market investors are gonna be all over this. But I also think OpenAI is a once-in-a-generation company, and that will ultimately, they will prove the haters wrong. The question is how much money will OpenAI need between now and the 2026 IPO? How many corporate deals are they gonna have to strike? I personally wouldn't bet against Sam Altman. He seems like a monster, and he has been absolutely on a tear. But I also think that there's a ton of work ahead. OpenAI's ability to stomach that uncertainty is gonna increase the size of the economic reward at the end of the journey.

11:18The more that they take on, the more ambition they have, the more that they're able to eat glass, the bigger the IPO is going to be. And maybe, just maybe, we're watching the world's first$10 trillion company get built. Wouldn't that be pretty insane for us to all watch happen right in front of our eyes? Most of you guys know that I think Palantir CEO Alex Karp, he's a gangster. This guy, he just says what he means. He sits and takes all this criticism and then he just lashes back and says, you know what? I think you're wrong. In an interview recently, he described AI as American intelligence.

11:51Take a listen to this.

12:21The classic, the real question is, will the GDP growth accrue to all Americans or just wealthy Americans? And the answer to that is, it depends what you do. But I deeply believe, I think we deeply believe. Well, no, manufacturing jobs. If you build manufacturing jobs, which is what this president wants to do, can you build them? Yes. How do you build them? You need AI. Can you train the people? Can you upscale them? Yes. If you use AI. Mechanicals, electricals, and plumbers in construction. And I know the red tape, you've discussed it, but nuclear reactors building that. The number one thing of this administration is pro-power growth.

12:55Now, I got to tell you, when I heard Alice Karp say AI makes America the dominant country in the world, and that he spent half his life in Europe and they're whining and crying, I got pumped up about that. Because you know what? He's right. We need America to be a winner on the global stage. America is amazing at manufacturing and innovative industries. We have reusable rockets. We have drones. We have tons of things in pharma. Defense technology, we are the dominant player. and an artificial intelligence, I would not bet against America. Having guys like Alex Karp and many, many other entrepreneurs working at this, I like America's position.

13:29There's plenty of people talking about China or other countries all around the world, but in my eyes, American innovation, American exceptionalism, people may not like it, but it's there for a reason. America is incredible at innovating and America is still the best capital markets in the world. If you wanna bet against America, I think you're gonna be on the losing side of the trade and having people like Alex Karp not only go and build this stuff, but be able to continue to reiterate what it means to be an American technology company. That's important because it also inspires the next generation.

14:02How can you not get excited about seeing somebody like Alex Karp, who's so successful, who doesn't have to be out there still in the mud arguing with people, but he's doing it because he believes in it. And he's actually going to inspire that next generation to be just like him and to believe that they can create these companies, they can create this technology and they can change the world. Never bet against America. And I think that artificial intelligence, it's our game to lose. And so far, America's leading and I don't think that's gonna change anytime soon. That's it for today's show. Thank you guys so much for watching.

14:34Please remember, we've got 35 ,429 subscribers on YouTube. With your help, we're gonna get to our goal of 1 million. The people are saying it's not possible, but hit the subscribe button and I'll see you guys live tomorrow from the desk of Anthony Pompliano.