Market Top Alert: Is 40% Crash Next? Trader Reveals Why He’s Short | Gareth Soloway

1. The market is compared to a Ponzi scheme, teetering on a retrace or pullback potentially larger than expected.
2. At least 60-70% of the country is already experiencing a recession.
3. Gareth Soloway is introduced as the President of Verified Investing.
4. An article is discussed suggesting AI could be causing a quiet labor market.
5. Former economic adviser Kevin Hassett noted mixed job market signals but strong GDP growth in Q2 2025, attributing potential labor market quietness to AI-driven worker productivity.
6. AI has contributed to the stock market's rise, with 75% of the S&P's upside in the last two years linked to AI stocks.
7. The current semi-weak labor market is primarily due to business uncertainty and consumer spending slowdown caused by persistent inflation, not solely the AI boom.
8. The AI bubble is at an inflection point, and the stock market has likely topped for at least a 10-15% correction.
9. AI companies' stock valuations are pricing in revenue they won't receive for the next five years.
10. Money shuffling between AI companies (e.g., AMD receiving funds from OpenAI and giving warrants) is described as a "classic kind of Ponzi" to maintain positive sentiment.
11. Many companies are reporting difficulty monetizing AI despite its potential.
12. Data centers for AI are being halted by companies like Microsoft and Micron due to insufficient power supply.
13. Supplying power to these data centers from the existing grid would significantly increase electricity bills for average consumers.
14. Hyperscalers are overestimating profits by depreciating chips over seven years, despite chips losing 90% of their value in two years.
15. A weekly chart of the SMH (semiconductor ETF) shows a historical pattern of 102% rallies above the 200-weekly moving average followed by significant corrections.
16. The SMH recently reached 102% above its 200-weekly moving average, suggesting a sizable correction is due.
17. If major semiconductor stocks fall, they could bring down the entire market, as AI stocks account for 75% of S&P gains.
18. Approximately 90% of GDP is estimated to be capex spending from large tech players, making the economy vulnerable to spending cuts.
19. Goldman Sachs and Morgan Stanley CEOs have also predicted a 10-20% drawdown in equity markets within the next 12-24 months.
20. The S&P 500 has likely already topped, with historical chart patterns indicating a bigger correction is expected after reaching an upper parallel trend line.
21. Market choppiness is attributed to investors conditioned to "buy the dip," which slows initial market declines.
22. Shorting broad-based semiconductors is preferred over individual stocks due to earnings risk, with SanDisk mentioned as an example of an overextended stock.
23. The biggest market falls occur at the end of cycles when panic sets in, after an initial period of slower declines.
24. Bitcoin's high was identifiable by connecting 2017 and 2021 bull market highs, which acted as resistance.
25. A small Bitcoin position was opened below $94,000 at a technical support level.
26. A significant support area for Bitcoin is identified between $73,000 and $75,000.
27. Bitcoin's underperformance compared to tech stocks this year is attributed to it becoming a "boring asset" and institutional buyers pulling back.
28. Institutional buyers are less aggressive due to stalled altcoin markets and reduced lending conditions for crypto companies like MicroStrategy.
29. De-risking, where institutional money sells off high-risk assets like crypto before the stock market, is also contributing to Bitcoin's performance.
30. Bitcoin is still considered a digital gold reserve and is expected to eventually outperform the stock market after the current de-risking phase.
31. Long-term holds in altcoins are advised against due to constantly changing technology and specialization.
32. Gold is likely to experience more downside in the short term, despite its current consolidation above $4,000.
33. A comparison between 1979 and 2025 gold charts shows similar patterns of bull moves, consolidation, and nine consecutive weekly gains before corrections.
34. Gold is expected to pull back to $3600-$3500 to flush out "weak hands" before its next bull run.
35. While different from 1979 due to current rate cuts and high debt, gold is forecast to reach new all-time highs of $5,000 next year.
36. Bitcoin has the most short-term downside risk percentage-wise (around 23% to $73K-$75K) due to its volatility.
37. Gold has about 12% downside risk to $3600, and the stock market faces a 10-15% drawdown to 6,100, with potential for 30-40% downside over years.
38. Gold is considered the least risky asset for allocation, followed by Bitcoin, due to gold's diversification and central bank ownership versus Bitcoin's leverage and large holders.
39. Ray Dalio's observation that the Fed is "stimulating into a bubble" by cutting rates is agreed upon.
40. The US has continuously added debt during expansionary periods, creating a bigger bubble that is expected to lead to a severe collapse.
41. Current generations have forgotten lessons from past financial crises like the Great Depression due to repeated government bailouts.
42. New investors must be cautious, as V-bottom recoveries and quick new all-time highs are not guaranteed, with historical examples like the NASDAQ and Nikkei showing long recovery times.
43. Gareth estimates 60-70% of the country is already in a recession, with the market's rise temporarily preventing a broader economic downturn.
44. Trading discipline, learned through past losses, is crucial for long-term profitability and protecting capital.
45. The "money printer will never stop" idea is challenged, with a warning that excessive printing will dilute the currency, leading to a collapse of the US dollar's buying power.
46. The dollar has depreciated significantly, and central banks are rapidly diversifying away from it, indicating a trend towards de-dollarization.