Market anxiety rises… why not investing in AGI is dangerous… Eric Fry’s latest AGI research… the security dilemma for our government’s AI regulation… a moth to a flame

A slew of headlines prompted some jittery nerves this morning…

Big box retailer Target cut its sales outlook citing “uncertainty”… the 30-year Treasury yield pushed above 5%… Goldman Sachs reported that hedge fund borrowing to short certain market sectors has climbed to a record high… and conservative investors fear President Trump’s new tax bill could worsen our nation’s debt bomb in the wake of Moody’s credit downgrade.

Cautious investors – like me – need to be very careful today…

But not from a bear market.

We need to be on guard against what might be the most financially injurious “missing the forest for the trees” market set-up ever.

Don’t misunderstand…

Yes, there are headwinds against stocks today. I write about them regularly. And bears like our own Jeff Clark could be spot-on that the S&P will be 30% lower this fall.

So, I can’t tell you that a cautious approach to stocks is wrong for you today.

But I can tell you this: If you’re investing with a three-to-five-year timeframe or longer, you need exposure to the companies building AGI and robotics.

This is an imperative.

The temporary declines of any near-term bear market will be dwarfed by the subsequent returns that will come for leading AGI/tech/robotics stocks.

At the heart of this claim is one core reality: We’re hurtling toward a technological inflection point that will change the structure of the global economy and workforce – permanently.

Let’s focus on the forest

Artificial General Intelligence, or “AGI,” is the watershed moment when an AI system can match or exceed the cognitive ability of the smartest human across any task.

Today, AGI is on track to outperform humans at most knowledge tasks: research, coding, legal analysis, customer service, even basic creative work.

Meanwhile, robots are rapidly advancing to handle physical labor: warehouse jobs, food prep, construction, elder care, and logistics.

These dual advancements are set to alter the course of our economy – and not in some mythical distant future. While forecasts vary, we’re talking sometime between 2027 and the early 2030s.

Once that happens, here’s what follows:

• Labor will no longer be scarce. Productivity will explode.
• Cost of goods and services will collapse. But so too will demand for a human workforce.
• Wealth will accumulate to those who own the AI models and machines.

In a world where AGI can out-think/out-strategize even the smartest employees, where robots can build and deliver products faster than the strongest/speediest warehouse workers, why would you hire expensive, error-prone humans at all?

You won’t.

And neither will most companies. They’ll license (or buy) AI and robotics from a small handful of AI leaders, saving billions, even trillions of dollars of salary expense over the coming years, and their economic productivity will explode.

And just like the internet consolidated around a few giants (Google, Amazon, Microsoft), so will the AGI economy. It will be one of the most profound periods of wealth concentration in history: from the masses…to those who own and invest in AI.

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As we hurtle toward this outcome, where is AI in its evolution today?

Let’s jump to our macro investment expert Eric Fry. He’s been a thought leader for AGI technology in recent years, tracking the blistering pace of advancements.

On Monday, he highlighted how OpenAI is making a huge leap forward toward AGI, and most people don’t realize it:

On September 12, 2024, the company quietly released its new o1 model.

This system isn’t an AI successor model to ChatGPT or a precursor to GPT-5, the company’s next expected large language model (LLM).

Rather, it is a series of AI models designed to reasoninstead of recognizing patterns.

The models are specifically engineered for complex reasoning tasks, particularly in fields like science, math, and coding. They work through problems step by step, similar to human reasoning.

It’s like we’ve added a left brain to an already existing GPT right brain. And this complete system could be our first glimpse into AGI, which is a type of AI that possesses human-level intelligence.

Eric notes that with each new milestone, we’re racing toward AGI. He concludes:

Investors who are unprepared will miss the transformative opportunities that AGI will bring.

But those who position themselves correctly could witness the greatest moneymaking opportunity in human history – with the possibility to surpass even the Internet Revolution.

As I research the Digests each day, I read diverse sources of information about investing and technology. Everything I’m reading supports Eric’s description.

In the coming era of machine labor and machine intelligence, owning AGI stocks is not optional. It’s the new oil. The new railroads. The new internet.

For more of Eric’s AGI research – as well as the portfolio action steps – he created this free research video. It dives into how to invest in AGI today in preparation for what’s coming tomorrow. Beyond what AI stocks to buy, he also discusses the stocks that you need to avoid and get out of your portfolio today as AI reshapes our global economy.

Bottom line: Yes, a cautious approach to investing is always wise. But make sure you’re aware of what’s coming out on the horizon.

Eric isn’t our only expert urging readers to position themselves for machine intelligence

Our technology expert Luke Lango was one of the earliest to jump on the AI investment train.

Like Eric, Luke is tracking today’s AI advancements. And today, he’s seeing opportunities everywhere: software, infrastructure, energy – you name it.

Let’s go to his Innovation Investor Daily Notes:

[Last week], OpenAI unveiled Codex, a new agentic AI model that can code, fix bugs, and run software tests autonomously.

This isn’t hypothetical anymore. Agentic AI is here. It’s real. It’s productive. And it’s only going to grow more powerful in the months ahead.

At the same time, AI infrastructure is booming. GlobalWafers announced it’s hiking its U.S. investment to $7.5 billion to meet skyrocketing demand for AI chips.

And Vistra (VST)—an energy giant—just bought seven natural gas plants for nearly $2 billion to keep up with the power needs of data centers.

Put simply: AI is not cooling off. It’s accelerating. And it will continue to lead the charge in the market rally ahead.

By the way, a quick “congratulations” to Luke’s Innovation Investorsubscribers. Last week, they skimmed partial profits on five different positions:

• Coherent (COHR): about 25% profits in roughly one month
• Constellation Energy (CEG): about 35% profits in roughly one month
• Guidewire Software (GWRE): about 27% profits in roughly one month
• Celestica (CLS): about 25% profits in roughly one month (disclosure: I own CLS)
• Coinbase (COIN): about 40% in two months

Here’s Luke’s takeaway as he looks ahead to summer:

The setup for stocks, especially AI stocks, looks very strong right now—and we’d be buyers on any temporary weakness during this rally.

Another reason to make sure you’re prepared for AGI

President Trump’s “big, beautiful” tax bill is currently working its way through Congress.

The current version contains language that will have a dramatic impact on AI and the speed of reaching AGI…as well as safeguards against the consequences of AI.

Here’s CNN Business:

[In Trump’s bill] is a rule that, if passed, would prohibit states from enforcing “any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems” for 10 years.

A group of more than 100 organizations laid out their concerns about this in a letter to Congress. It reads:

This moratorium would mean that even if a company deliberately designs an algorithm that causes foreseeable harm — regardless of how intentional or egregious the misconduct or how devastating the consequences — the company making or using that bad tech would be unaccountable to lawmakers and the public.

Now, I doubt that any company would deliberately design such an algorithm. But AGI leaders racing to be the first to bring this groundbreaking technology to market could sidestep important protections with no accountability.

Although this sounds like an unforgiveable shirking of responsibility, the reality is more complicated…

There’s a powerful and unsettling logic behind this avoidance of regulation, even if you don’t agree with it

While many in our government and the tech world are sounding the alarm about the dangers of moving too fast with AGI, others believe we don’t have a choice.

We’re now deep inside what defense strategists call a security dilemma – a dynamic where racing forward feels safer than slowing down.

Behind this belief is one thing – China.

The core security concern: If we delay, China won’t – and they’ll achieve AGI before we do, which will be far more dangerous than an unregulated AGI environment that we create.

This isn’t paranoia. China has made clear its intention to dominate AI.

So, this results in a “moth to a flame” dynamic where companies and governments accelerate toward AGI (and the possibly negative consequences that might entail) not because it’s been proven safe, but because it’s unsafe not to.

Of course, this has key investment implications: The faster we move toward AGI and its potential systemic risk, the faster (and greater) the investment upside.

Stepping back to see the big picture…

I don’t know where stocks will be three months from now. Maybe much lower.

But for investors with a years-long timeline, it’s important we look beyond that.

AGI is coming…

It’s bringing all sorts of questions, along with its utopian and dystopian implications…

But we’re beyond the point of turning back. So, let’s do all we can to turn forward and prepare.

Have a good evening,

Jeff Remsburg

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A Canary in the Coal Mine for the U.S. Debt Collapse

By Charles Sizemore, Chief Investment Strategist, The Freeport Society

Japan’s bond market is in free fall…

It’s not headline news in America. But prices for the once-stable 30-year Japanese government bond just plunged 20%.

And yields (which move in the opposite direction to prices) on 20-year and 30-year JGBs (Japanese Government Bonds) are nearing all-time highs as a result.

This comes after an auction for the 20-year with its weakest demand since 1987.

Moves like that aren’t normal in the sleepy world of government bonds. When they happen, it usually means something has gone terribly wrong.

As investors, we need to pay attention.

Then we’ll go over a one-stop-shop hedge to shield your wealth from the coming storm.

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Shocking Collapse

At first glance, yields on JGBs still seem low.

For example, the 30-year JGB yields 3.12% versus a 4.99% yield on the 30-year U.S. Treasury bond.

But Japan has had absurdly low interest rates for decades. It wasn’t all that long ago that the 30-year JGB yielded 0.05%.

As a result, long-term yields have hit all-time highs. (Remember, higher yields mean falling prices and vice versa.)

But the yield on that bond is up 37% in less than five months. Due to some wonky bond math, that means that this bond’s price is down by about 20%.

So, what’s going on?

To answer that, we have to cast our minds back to the 1990s…

After Japan’s stock market bubble burst in 1991, it did what most other countries do. It borrowed ungodly sums of money and spent it on “stimulus” – everything from business subsidies… to cash handouts… to massive “bridge to nowhere” infrastructure projects.

Japan spent trillions of yen it didn’t have, regularly running budget deficits of 7% to 10% of GDP.

This snowballed into a monstrous debt load that is now 250% of GDP, about double the debt load of the U.S.

To finance it all, the Bank of Japan (BoJ) dropped rates to zero – and even below zero – for a while. It also invented quantitative easing (QE). That’s when a central bank creates money out of thin air to buy its own government’s bonds.

Every remarkably stupid thing Washington and the Fed have done, their Japanese counterparts did it first and on a larger scale.

They got away with it for decades because inflation remained low. So, the BoJ could gobble up virtually the entire supply of government bonds by way of QE.

But since inflation came roaring back in 2021, the BoJ suddenly has fewer options. Continuing to allow the government to spend money it doesn’t have by buying its bonds risks further stoking inflation and devaluing the yen.

No rational person would be comfortable lending money for 30 years to a country with Japan’s debt level. So, the market is repricing the bonds, and it’s not pretty.

Is the U.S. Turning Japanese?

Are we seeing a slow-motion version of the same thing in the U.S.?

It’s looking more and more likely.

The 30-year Treasury bond yield has broken through the key 5% level for the second time this week. It’s now hovering near its highest level since January.

The 10-year Treasury yield, at 4.54%, is back to levels that caused turmoil in the markets last month and played a part in forcing President Trump to hit pause on many of his tariffs.

That’s not as bad as what’s going on in Japan. But it’s significant, nevertheless.

Yes, our fiscal position looks better than Japan’s. But that’s not exactly a ringing endorsement. Venezuela’s fiscal position looks better than Japan’s. That doesn’t mean the country’s finances are in good shape.

And the situation in America is getting worse.

Last Friday, Moody’s became the last of the big three credit ratings agencies to strip the U.S. federal government of its pristine Aaa credit rating.

And influential hedge fund manager Ray Dalio warned on social media that the real risk isn’t a U.S. debt default, but rather that the Fed simply prints the money to cover it, crushing the value of the dollar in the process.

Judging from reports, we may get a Japanese debt crisis before we get a true crisis in U.S. debt.

The immediate risk is that Japan’s instability spills across its borders and infects the rest of the globe.

I guess we’ll know soon enough.

Meantime, I’ll continue my mission to make sure you and your fellow Freeport Society readers are protected.

Two Hedges in One

Yesterday, I recommended the STKD 100% Bitcoin and 100% Gold ETF (BTGD) as a one-stop shop for dollar hedges.

I’ll repeat that recommendation today.

Apart from its role as a dollar hedge, gold is also a traditional crisis hedge. And while Bitcoin’s history is a lot shorter, the inspiration for its existence was the 2008 meltdown.

Appalled by the government bailouts of the banking sector in 2008, its pseudonymous creator, Satoshi Nakamoto, launched a digital currency that acted a lot like gold.

Like its precious metal counterpart, Bitcoin’s supply is strictly limited. Also like gold, it takes costly real-world inputs to “mine.”

Just remember that BTGD is a leveraged play on Bitcoin and gold.

For every $1 you invest, the fund seeks to provide $1 exposure to Bitcoin and $1 exposure to gold – effectively creating a 2x exposure.

The means, if gold goes up 10% in a month, and Bitcoin also goes up 10%, the return of BTGD would be about 20% – or the sum of the two.

And if Bitcoin falls 10% and gold also falls 10%, your losses are going to be 20%, not 10%.

So, take that into consideration as you size your position.

To life, liberty, and the pursuit of wealth,