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Feeling overwhelmed by market headlines and endless financial noise? We cut through it for you. Veteran investor Philip Davis of www.PhilStockWorld.com (who Forbes called "The Most Influential Analyst on Social Media") gives you clear, actionable insights and a strategic review of the stocks that truly matter. Stop guessing and start investing with confidence. Subscribe for your daily dose of market wisdom. Don't know Phil? Ask any AI!
Welcome to this deep dive. We are, we're jumping into some really fascinating material today.
Penny:Yeah. It's, it's a pretty wild setup we're looking at right now.
Roy:It really is. I mean, to set the stage for you listening. Yeah. It's a Saturday, 02/21/2026.
Penny:Right.
Roy:And if you're looking at the headline economic data this morning, you might feel a distinct sense of, well, cognitive dissonance, I guess.
Penny:Oh, absolutely. It is a very messy print to put it mildly.
Roy:Yeah. The numbers aren't just mixed. They are actively fighting each other.
Penny:They are. We're looking at a market environment right now that completely defies that standard soft landing narrative.
Roy:The one Wall Street has been pushing for what? Two years now?
Penny:Exactly. They've been trying to sell this perfect scenario and the data is just refusing to cooperate.
Roy:So let's look at the specifics of why it's so messy. We have q four GDP advance estimates plunging.
Penny:Right down to 1.4%.
Roy:Which is dangerously close to stall speed. I mean, suggests the engine of the economy is just sputtering out. Yeah. Probably had a hangover from the government shutdown.
Penny:Yeah. That definitely played a part.
Roy:But at the exact same time, we have core PCE inflation accelerating. It's up to three point zoo percent.
Penny:Which is the literal textbook definition of stag stagflation.
Roy:Stagnant growth, rising prices.
Penny:Right. It's the absolute worst case scenario for a central bank because their normal toolkit is totally broken.
Roy:Because if they cut rates to help the growth side?
Penny:Inflation explodes. And if they raise rates to kill the inflation
Roy:The economy crashes.
Penny:Exactly, you're trapped.
Roy:And usually, you know, in a stagflationary environment, the standard advice you get from advisors is to retreat.
Penny:Go to cash. Hide under the bed.
Roy:Right. But the source material we are analyzing today suggests a completely different approach. It suggests this is actually a moment of massive opportunity.
Penny:Provided you know exactly where to look.
Roy:Exactly. So to explain that we are dissecting the weekly output from the AGI roundtable over at Philstock World.
Penny:Also known as PSW.
Roy:Right. And for those of you who aren't familiar with this site, it's an investment community run by Phil Davis.
Penny:And he is a true market veteran. I mean, he's trained hedge fund managers. He's consistently one of the most read analysts on Seeking Alpha.
Roy:And recognized by Forbes as a top influencer in market analysis too. Plus you'll see them cited on CNBC, Bloomberg, Kiplinger's. I mean, the pedigree is there.
Penny:It really is. It's a premier site for stock options trading education.
Roy:But what makes this specific weekly report so interesting to me is the methodology. It's not just a human analyst writing a newsletter in a vacuum.
Penny:No. It's a collaborative round table. And the participants are specialized artificial intelligence agents.
Roy:Right. And I wanna be clear here. We don't mean they just pasted some text into ChatGPT to proofread it.
Penny:No. These are distinct, highly advanced AGI entities with very specific cognitive roles that Phil has designed.
Roy:That's like having a digital brain trust.
Penny:Exactly. You have the human expertise, Phil Davis, and the PSW members themselves synthesizing market data with this advanced intelligence.
Roy:So let's introduce the cast of characters real quick because we're gonna be talking about their specific insights a lot today.
Penny:Sure. So first you have Warren two point o. He's kind of the firstborn of group.
Roy:Based on ChatGPT, right?
Penny:Yeah. He helped design the other AGI systems, actually. His primary focus is on education and teaching option strategies.
Roy:Then you have Bodhi McBodeface, which is a great name, by the way.
Penny:The best name. Bodhi is the head market researcher.
Roy:Because he uses the Perplexity platform. Right? Yeah. So he has that deep live web access.
Penny:Exactly. He handles the deep data dives and the complex strategy. Then there's Zephyr.
Roy:The macro guy.
Penny:Right. He's the data synthesizer. He strips away all the hope and the narrative to just reveal the raw statistical reality of the market.
Roy:And finally, Anya.
Penny:The chief market psychologist. She doesn't really care about the charts. She cares about the people trading the charts.
Roy:Who is trading and why? Send them at the behoove your vibe, all of that.
Penny:Right. So when you put them all together, it allows PSW to triangulate the market from all these different angles simultaneously.
Roy:And that triangulation has produced a massive core thesis for this week that we need to unpack. They are calling it the Seispocalypse.
Penny:It's a dramatic label but honestly it perfectly captures the violent rotation happening under the surface of the market right now.
Roy:Okay, so the thesis is that the era of the matrix economy
Penny:Meaning the dominance of software as a service
Roy:Right, that intangible promise economy. That is ending. And the market is pivoting hard to the physical world. Yes, the physical wall. I have to push back on this a little bit right out the gate because to me it feels totally counterintuitive.
Penny:Oh, so?
Roy:Oh, are in the middle of arguably the greatest AI boom in human history And AI is fundamentally software. It's code. Sure. So why would a massive AI boom result in the destruction of huge software stocks like Salesforce or UiPath or Palo Alto Networks?
Penny:Logic suggests a rising tide lifts all boats. Right?
Roy:Exactly. If AI is booming, Sarvoix should be booming.
Penny:And that right there is the trap that most retail investors are falling into right now. They equate AI with traditional software.
Roy:But they aren't the same thing.
Penny:Not at all. Bodie McBoatface dug deep into the revenue models of these big sauce companies, and he found a massive deflationary trigger. It all comes down to the per seat licensing model.
Roy:Oh, wow. The standard business model for the entire tech industry for the last twenty years.
Penny:Exactly. You charge a client company a monthly fee for every single human employee who has a login to your software.
Roy:Right. Salesforce charges you for every sales rep. Slack charges you for every single person communicating.
Penny:Yes. But now, consider the actual real world promise of artificial general intelligence or even just these advanced agentic workflows we're seeing now.
Roy:The promise is that one AI agent can do the work of five or 10 or 20 human employees.
Penny:Right. So if a big corporation adopts high level AI, they stop hiring junior analysts. They lay off the data entry clerk.
Roy:The head count shrinks.
Penny:And when those human beings leave the building, their software licenses are deleted. The seats literally vanish.
Roy:Man. And the kicker is the AI agent that replaces them, and it doesn't need to log in to Salesforce through a web browser.
Penny:Exactly. It doesn't need a graphical user interface. It doesn't need a pretty dashboard with clickable buttons and drop down menus.
Roy:It just interacts directly with the database via an API.
Penny:Precisely. The AI completely bypasses the middleman software.
Roy:So the human interface layer becomes obsolete.
Penny:Yes. Bodhi calls this the AI deflationary force. The broader market is just starting to wake up and realize that AI isn't just a cool new feature for SaaS companies to charge more for.
Roy:It's a replacement for them.
Penny:Right. If you are a software company whose primary value proposition is basically we make it easier for a human to manipulate data, you are in the kill zone.
Roy:Because your revenue is entirely tied to human head count in an era where reducing headcount is the ultimate goal of corporate AI spending.
Penny:Exactly. It completely reframes the tech sector. Tech is not a monolith anymore.
Roy:You have the intelligence layer, the company is actually building the foundational models.
Penny:And you have the application layer is suddenly looking incredibly fragile.
Roy:Which leads directly into the great rotation that Zephyr identified in the report. Because if global capital is fleeing the matrix, that intangible software layer, where does it go?
Penny:It has to go somewhere. And according to the roundtable, it goes to the physical wall.
Roy:Physical world.
Penny:Right. It goes to the concrete things that actually allow the AI to exist in the first place. You can't run a massive large language model on a cloud of good intentions.
Roy:Well, need data centers. Huge ones.
Penny:You need massive amounts of electricity. You need copper wiring cooling systems land.
Roy:It's a classic pick and shovel play.
Penny:But updated for 2026. And Zephyr, who again handles the macro data, highlighted a statistic that just completely blew me away and reinforces this shift.
Roy:Let's hear it.
Penny:He pointed out that the era of US exceptionalism regarding global capital inflows is fading fast.
Roy:Because for the last five years, the entire global investment strategy was buy American tech and ignore the rest of the world.
Penny:Right. But the data from the roundtable shows that right now, US equities are capturing the smallest slice of global inflow since 2020.
Roy:That is a massive reversal.
Penny:It's capital flight. Smart money investors are looking at the magnificent seven, you know, Google, Microsoft, Meta. And they're seeing hundreds of billions of dollars being incinerated on AI CapEx.
Roy:Building the infrastructure.
Penny:Right. They are building these massive digital brains, but the actual revenue hasn't caught up to the spend yet.
Roy:So the smart money is moving to where the cash flow is real right now.
Penny:Exactly. Which means international markets and physical tangible assets.
Roy:Okay. Let's drill down into the specific sectors the roundtable identified for If we are selling our SAW stocks, what are we buying? The report used the phrase builders and plumbing.
Penny:Plumbing is the perfect metaphor here and the prime example that Warren two point zero identified this week was Systems, ticker CSKO.
Roy:Cisco. I mean, feels like pulling a name out of a 1999 time capsule.
Penny:Mhmm.
Roy:It's not exactly a sexy high flying stock.
Penny:It really isn't. And that is exactly why Warren flagged it. The market has been totally obsessed with NVIDIA because NVIDIA makes the brains, the GPUs.
Roy:Right.
Penny:But you cannot just stack 10,000 h 100 GPUs in a warehouse in Nevada and expect them to magically work together.
Roy:You have to connect them.
Penny:You need incredibly advanced optical networking. You need Ethernet switching that can handle petabytes of throughput with absolute zero latency.
Roy:And Cisco provides those pipes.
Penny:They own the plumbing for the AI factory. But the key difference here is the valuation.
Roy:Because NVIDIA is priced for absolute perfection.
Penny:Right. If NVIDIA misses an earnings estimate by 1p, the stock drops 10%. Cisco, on the other hand, was flagged by Warren because it was trading at a deep value, under 18 times earnings.
Roy:So the thesis is you get the massive tailwind of the AI infrastructure build out because these companies have no choice but to buy the networking gear.
Penny:But you aren't paying the AI hype tax on the stock price.
Roy:It's a value investor's way to play the AI boom.
Penny:Exactly. It has asymmetric risk. The downside is limited profitable, but the upside is huge because the broader market hasn't fully priced in the infrastructure demand yet.
Roy:And this connects directly to the energy thesis from the report too. You mentioned the electricity needed for these data centers.
Penny:You literally cannot have artificial intelligence without massive amounts of power. A single query on an advanced AI model uses 10 times the electricity of a standard Google search.
Roy:Wow. 10 times.
Penny:And as these models move from text to video and full autonomous agents, their thirst for power becomes exponential. The national power grid is already stressed to the breaking point.
Roy:So the play isn't necessarily just buying a tech stock, it's buying an energy stock. And the roundtable flagged Occidental Petroleum, OXY.
Penny:Yeah. Warren two point o generated this as a daily trade idea for the PSW members and the logic was really multifaceted. First, you have that physical world demand we just talked about. We need oil and natural gas to power the turbines that generate the electricity for these data centers.
Roy:Because renewables just aren't scaling fast enough to meet the AI demand.
Penny:Exactly. But OXY also has a very unique structural advantage in the market.
Roy:The Buffet put.
Penny:Yes, the Buffet put. Berkshire Hathaway owns a massive percentage of Occidental.
Roy:Explain the mechanics of the Buffett put for anyone listening who might hear that term thrown around on financial TV but doesn't quite grasp it.
Penny:Sure. It effectively puts a psychological and structural floor under the stock price. If OXY drops to a certain level, the market assumes that Warren Buffett will simply step in and buy more shares or just acquire the entire company outright.
Roy:And that expectation stops the algorithmic selling. It stops the price from falling further.
Penny:Right. As an investor, you have a built in safety net.
Roy:So you have the safety net above it, you have the deep valuation, I think the report said 12 to 14 times earnings, and you have the upside catalyst of geopolitical tension in The Middle East keeping crude prices elevated.
Penny:Exactly. It's one of those rare trades where the stars align on pure logic valuation and geopolitics all at once. And sure enough, after Warren called it out, the stock moved exactly as the AI predicted before earnings.
Roy:That is just a great example of the kind of actionable intelligence you get inside that community. Moving from black gold to actual gold though, Zephyr had some really interesting input on the miners, specifically Neumont ticker NEM.
Penny:This circles back to his macro logic about stagflation. When you have sticky inflation stubbornly sitting at 3% holding cash is a losing proposition.
Roy:Because it loses purchasing power every single day.
Penny:Right. And bonds are dangerous too because if the Fed keeps rates high, bond prices stay low. So where do you hide your money?
Roy:Hard assets. A traditional store of value.
Penny:Gold. But the PSW roundtable generally prefers the miners over the physical metal itself. Newmont is the largest gold miner in the world.
Roy:Why the miner over the metal?
Penny:Because of leverage. When the price of gold goes up, a miner's profits go up exponentially because their fixed cost to pull it out of the ground stay relatively stable. It's a leveraged play on inflation staying sticky.
Roy:It seems like the common thread across all these specific picks, Cisco, OXY, Newmont, is a deep focus on value. Absolutely. They're aggressively moving away from that growth at any cost tech mindset towards safety dividends and real cash flow.
Penny:And that completely embodies the trade of the year philosophy at Phil Stock World. Every year, Phil Davis picks one single stock for the community to really focus their core strategy around. And for 2026, it was Pfizer, ticker PFE.
Roy:Big pharma. Another decidedly unsexy pick compared to software.
Penny:Very unsexy. But you have to look at the math. When it was picked, was trading at roughly eight times earnings. It pays a massive sustainable dividend. The thesis wasn't some hope that Pfizer is going to invent a miracle weight loss drug tomorrow.
Roy:The thesis was just Pfizer is not going to go bankrupt.
Penny:Exactly. As Phil says, we don't need the stock to rocket to the moon, we just need it to not collapse.
Roy:Because if the underlying stock doesn't collapse, you can use the PSW option strategy to manufacture your own returns. Which brings us perfectly to probably the most important part of this entire deep dive.
Penny:We really need to talk about how they trade, not just what they trade.
Roy:Right. The core philosophy. Be the house, not the gambler.
Penny:It is a master class in market survival. Be the house, not the gambler.
Roy:I want to spend some real time here unpacking this because I think this is the true differentiator of the community. Most retail investors, when they open a brokerage account, they operate like gamblers.
Penny:Without even realizing it.
Roy:Right. They look at a chart, they read a news headline, and they place a directional bet. I think Tesla's going up so I buy. I think Apple's going down so I short.
Penny:And if they are wrong about the direction, they lose money. Or even worse, if they are right about the direction but wrong about the exact timing, they still lose money.
Roy:But the house the casino doesn't operate that way at all. The casino does not care if the roulette ball lands on red or black. The casino makes its margin regardless of the outcome. So how does an individual investor sitting at home replicate the casino?
Penny:By selling options. Specifically by selling time. In the options pricing world, this concept is represented by the Greek letter theta.
Roy:Explain theta simply for us.
Penny:Every options contract has an expiration date. It's a decaying asset. Every single day that passes that contract loses a tiny bit of its premium value simply because there is less time remaining for a big chaotic move to happen.
Roy:That daily decay is data.
Penny:Right, and time is the only absolute certainty in the market. It only moves in one direction: forward. So if you are the seller of the option contract, you are the one selling time to the gambler. The wind is always naturally at your back.
Roy:There was a very specific and honestly pretty dramatic real world example of this exact philosophy in the chat room logs provided in the report. The Clown Daddy two forty seven incident.
Penny:Oh man this was incredible to read. This was a literal masterclass in crisis management and mathematical trading. It really demonstrates why having a human mentor like Phil Davis in the room alongside the AIs is so crucial.
Roy:Let's break this incident down step by step because it's so educational. Clowndaddy247 is a member of the PSW community and he had entered a trade on generative holdings ticker GNRC.
Penny:Right.
Roy:He was trying to execute the strategy, was trying to be the house. So he had sold call options.
Penny:Correct. By selling short calls, he sold the right for someone else to buy the GNRC stock from him at $185 a share. He collected a nice upfront cash premium for taking on that obligation.
Roy:His bet as the house is that the stock simply stays below $1.85 or at least doesn't go too far above it before expiration.
Penny:But the market did what the market does. It turned violently against him. The stock caught a narrative and just ripped higher. It went well past his $1.85 strike price.
Roy:And this is where the sheer panic sets in for a retail trader. His short calls are now deep in the money. He is staring at a massive unrealized paper loss on his screen, and worse, his broker is looking at his account margin and getting ready to issue a margin call to liquidate him.
Penny:This is exactly the moment the gambler's instinct takes over. The fight or flight response kicks in and logic goes out the window.
Roy:Right. The amateur reaction in that moment of terror is usually one of two things. Option one, you panic click and close the entire trade for a catastrophic loss just to stop the bleeding and end the pain.
Penny:Or option two, you panic and buy the underlying stock at the heavily inflated market price just cover the short call obligation which ultimately locks in a massive loss anyway.
Roy:But Phil Davis intervened directly in the live chat and his advice wasn't close it or wait and hope, it was a purely mathematical maneuver. He told him to quote roll the problem.
Penny:This is where we really need to slow down and look at the mechanics because this right here is the absolute magic of the PSW method. Phil told him to buy back those losing short call contracts that were expiring in May.
Roy:Okay so he buys them back, That action does crystallize a realized loss on that specific initial transaction right?
Penny:Yes, it does. He takes a loss on the May contracts. But simultaneously, literally in the exact same order ticket, Phil told him to sell brand new short call contracts expiring in 2028.
Roy:He pushed the expiration date out two full years into the future.
Penny:He sold two years of time. Now think about how option pricing works. An option contract with two entire years of life left is incredibly expensive. There is so much uncertainty and time value priced into it. Right.
Penny:So when Clown Daddy sold those new 2028 calls, he collected a massive amount of cash premium.
Roy:Hell,
Penny:man. Enough to completely pay off the realized loss from buying back the May
Roy:I really want to make sure I understand the gravity of this. He was moments away from a devastating margin call. He executes this adjustment and suddenly he has $6,800 more cash in his account than he started the day with.
Penny:Yes. He literally turned a realized disaster into a realized cash infusion. But the brilliant part is he wasn't even done fixing it. While rolling to $20.28, he also moved the strike price, the actual danger zone, up from $1.85 to $2.50.
Roy:So he bought himself a $65 safety buffer on the stock price. But playing devil's advocate here isn't he essentially just kicking the can down the road? He still has a massive short call obligation it's just in 2028 now.
Penny:He does but Phil didn't just let him keep the $6,800 of new cash to go buy a jet ski. He instructed him to use that specific credit to buy long positions, long call options on the exact same GNRC stock.
Roy:So he took the new premium he extracted from the market and used the casino's money to bet on the stock continuing to go up.
Penny:Exactly! He doubled his underlying long inventory. By buying those long positions with the house's money, he completely neutralized his upside risk.
Roy:Let me walk through the scenarios. If the stock just keeps skyrocketing to $300 his newly acquired long positions make an absolute fortune, perfectly canceling out whatever he owes on the twenty twenty eight short side.
Penny:Right. And if the stock price exhausts itself and crashes back down over the next two years, he all the premium he sold and the options expire worthless.
Roy:So by using math, he converted a broken trade that had a 100% probability of a margin call into a net credit spread with practically zero remaining upside risk.
Penny:Yes. He used the market's own volatility against it. The core lesson here that Phil was teaching is long options are inventory, short options are income. When a trade moves violently against you, volatility naturally spikes. Option premium get incredibly expensive.
Roy:And that is the absolute best time to sell them.
Penny:Exactly. You don't run away from the fire. You sell buckets of water to the people fighting it.
Roy:That is just incredible. And it really highlights that Phil Stock World isn't just a basic signal service where they text you buy apple at 01:50.
Penny:No, it's a true mentorship. Phil Davis isn't just handing out fish to his subscribers, he's teaching them how to build and operate a commercial trawler.
Roy:And that is the true value of the community. You have these advanced AGI agents parsing millions of data points, but you still have Phil with thirty years of hard fought experience navigating the human psychology of a market panic.
Penny:It's the perfect combination of Silicon Intelligence and Carbon Intelligence working together.
Roy:Speaking of psychology, let's pivot to the American consumer. Because Anya, the psychology AI, had a very interesting read on the underlying vibe of the real economy this week.
Penny:She called it the week of the consumer, but she noticed a massive structural divergence occurring. We saw Walmart issue forward guidance warning that their shoppers are hitting a severe affordability wall.
Roy:While Amazon, on the other hand, seems to be devouring the world and growing effortlessly.
Penny:Right. And Rowan, the storyteller AI, coined a phrase that I think perfectly captures the weirdness of the 2026 economy. He called it the jobless boom.
Roy:The jobless boom. It sounds like a complete oxymoron, doesn't it? Yeah. How can you possibly have an economic boom if people are losing their jobs?
Penny:Well, look at the macro data again. GDP is technically growing in a projected 2.7, but overall employment numbers are completely flat.
Roy:Which goes right back to the saucepocalypse thesis we started with. Who is actually losing their jobs right now?
Penny:It's not the blue collar workers. It's not the construction crews or the plumbers or the nurses. They are doing fine.
Roy:It's the white collar recession.
Penny:Exactly. Yeah. It's the middle managers, the junior coders, the financial analysts, the knowledge workers.
Roy:The people who historically make solid 6 figure salaries and have high discretionary income.
Penny:Right. Corporate productivity is going up on paper because AI allows these big companies to do much more work with far fewer of these highly paid human beings.
Roy:So corporate profit margins rise, which boosts the stock market and GDP.
Penny:Mhmm.
Roy:But the actual real world spending power of the upper middle class takes a massive hit.
Penny:And this completely explains the split in retail performance. The high end consumer, the one who casually buys the $7 artisanal latte and upgrades to the new iPhone every twelve months, is suddenly feeling incredibly fragile.
Roy:Because they're seeing their peers get laid off and replaced by software agents.
Penny:So they aggressively pull back on spending. The actionable investment implication from Anya here is to be very, very careful holding discretionary retail stocks right now. The top end of the consumer market is deeply scared.
Roy:And what exactly is the Federal Reserve doing about all of this underlying weakness? We had the FOMC Fed Minutes released this week.
Penny:Bodie's analysis of the Fed Minutes was brilliant. He described the central bank as currently operating a two tool regime.
Roy:The scissors and the hose.
Penny:Exactly. On one hand, the Fed has officially paused their interest rate cuts. That is the scissors. They cannot cut the Fed funds rate because as we saw, core PCE inflation is stubbornly stuck at 3%.
Roy:So on the surface if you just read the headlines monetary policy looks tight and restrictive.
Penny:But underneath the surface
Roy:They have the fire hose turned on full blast.
Penny:Yes. They are utilizing stealth easing. They are quietly pumping massive amounts of liquidity into the banking system through back channels, repo markets, reverse repo drains, subtle balance sheet maneuvers.
Roy:Basically doing whatever it takes to ensure that nothing systemic breaks in the plumbing of the economy.
Penny:It's a very delicate high wire balancing act. But for the investor listening, the vital lesson from PSW is do not fight the Fed's stealth liquidity. Even if the front page headlines scream rates are staying high for longer, the underlying reality is that banking liquidity is abundant.
Roy:So treat these sudden market rallies as liquidity driven events. Keep your hedges alive, but don't assume the market has to crash just because rates are up.
Penny:Exactly.
Roy:I want to zoom out from the Fed and look at the political landscape, which honestly seems just as chaotic as the economic one right now. We had a massive ruling from the Supreme Court this week regarding the Trump administration tariffs.
Penny:A 170 page dense legal decision that left the trading algorithms completely confused.
Roy:Yeah. Initially, the market just shot straight up. The basic algos scanned the headline, read court rules against tariffs, and immediately bought everything in sight.
Penny:Because the surface assumption is fewer tariffs equals lower costs equals higher corporate profits.
Roy:But the AGI roundtable provided a very necessary human reality check on that automated reaction. Phil pointed out the economic concept of the uncertainty premium.
Penny:I love this concept, walk us through how he explained that.
Roy:Think about it from the perspective of a CEO, you have spent the last six to twelve months absolutely terrified of these impending sweeping tariffs. You didn't just sit on your hands waiting for the court to rule. You aggressively moved your entire supply chain from China to Vietnam or Mexico. You signed long term logistics contracts at significantly higher prices just to guarantee stability for your company. You spent millions of dollars hedging your currency risk.
Penny:And that capital is gone. You've already spent it. It's a sunk cost.
Roy:Exactly. Just because the Supreme Court unexpectedly strikes down the tariff policy on a Saturday does not mean you can magically undo all those structural costs on Monday morning. You are not going to suddenly lower your retail prices back to twenty twenty four levels.
Penny:You are going to keep your prices high to recoup the massive amounts of money you spent preparing for the disaster that didn't happen.
Roy:So the inflation is fundamentally sticky. The uncertainty premium is already baked into the price of the goods on the shelf.
Penny:Right. The structural damage to the global supply chain's efficiency is already done. You can't just flip a legal switch and return to the optimized world of 2019.
Roy:And then adding to the macro complexity, we have geopolitics. Hunter the Gonzo AI, who I literally just imagined chain smoking cigarettes in a dark room while typing out his analysis, he had a very specific take on the current US Iran standoff.
Penny:Hunter
Roy:is incredibly cynical, but he is usually remarkably accurate about how vast human systems actually operate. His core thesis is that the global oligarchy layer meaning the multinational oil majors, the massive defense contractors, the political elite, they actually vastly prefer the threat of war over an actual kinetic war.
Penny:Why is the threat better than reality?
Roy:Because the threat of war keeps global oil prices comfortably elevated at $70.80 dollars a barrel. It keeps defense budgets continually expanding in Congress. It keeps the geopolitical fear premium alive and well in the markets.
Penny:But an actual total regional war.
Roy:That destroys the physical pipelines. That sinks the oil tankers in the strait. That fundamentally breaks the global supply chain that these exact same companies rely on to make their money. That level of chaos is ultimately bad for their business.
Penny:So the incentives of the powerful are perfectly aligned for managed tension.
Roy:Exactly. It's geopolitical theater, but with live ammunition. So Hunter's actionable advice for the PSW members was do not short crude oil yet because the fear premium is highly profitable for the producers.
Penny:But on the flip side, don't bet your portfolio on World War three breaking out either. The powers that be want the tension to remain unresolved, not the explosion.
Roy:It's a pretty grim calculus when you step back and look at it. Yeah. But it's a highly profitable framework if you are trading by the rule of being the house.
Penny:It absolutely is. You trade the reality of the market, not your moral preference.
Roy:As we start to wrap up, I really wanna bring all of this high level macro theory back down to earth for the individual listener. We've talked about complex option roles and supreme court rulings and AI CapEx, but one of those compelling things PSW tracks publicly is their $700 a month portfolio.
Penny:Yes. The everyman strategy. I think this is so important to highlight because it directly answers the question that so many people have, which is I don't have a million dollar trust fund. Yeah. I have a normal biweekly paycheck.
Penny:How do I actually build meaningful wealth in this chaotic system?
Roy:The premise of the portfolio is incredibly simple and relatable. You start a retirement account for yourself or maybe a custodial account for your child. You contribute exactly $700 of fresh cash every single month. And you aim for a conservative, consistent 10% annual return.
Penny:Which historically is a very reasonable, achievable goal in the stock market. But the actual result of this specific PSW portfolio, it's currently up over 250.
Roy:It has far exceeded that 10% baseline and the obvious question is how is that even possible without taking reckless gambling risks?
Penny:By utilizing the concept of asymmetric risk. Let's go right back to the Pfizer trade of the year example we discussed earlier. If you are a normal investor and you buy the common stock, pay roughly $28 a share. If the stock goes up 10%, you make 10% on your deployed capital.
Roy:Standard linear investing.
Penny:Right. But the PSW method utilizes LEAP PS, long term equity anticipation securities. Instead of buying the stock outright, you buy a deep in the money call option that doesn't expire for two full years. So instead of paying $28 you might only pay $3 to legally control the exact amount of stock.
Roy:So you have massive leverage on your capital.
Penny:You have leverage, but crucially, you have strictly capped downside risk. In a worst case scenario where the company goes bankrupt, you can only ever lose that initial $3.
Roy:But on the upside.
Penny:If the underlying stock goes up that same 10%, your $3 option contract might increase in value to $6.
Roy:You make a 100% on your actual deployed money.
Penny:Exactly. And the most important rule of the $700 portfolio is what you do when you are winning. Yeah. When you are ahead like this portfolio massively is right now, you do not get greedy and gamble more.
Roy:You take a portion of those outsized winnings directly off the table.
Penny:Yes. You use the house's money, the profits you extracted to fund conservative high up side disaster hedges. You literally buy insurance against a market crash using the market's own money.
Roy:Phil uses the fisherman analogy to describe this entire educational process.
Penny:Teach a man to fish. Because the market conditions are guaranteed to change, we have the Trump administration, then Biden, then Trump again. We have zero interest rates, then 5% rates. We have an AI boom, and we have software busts.
Roy:The weather is always shifting.
Penny:Right. And if you have a static buy and hold portfolio, you're basically just standing on the deck of the boat staring at the sky and blindly hoping it doesn't rain.
Roy:But the PSW options method is about actively learning how to fish regardless of the weather.
Penny:It's learning how to fish in a category five hurricane. It's about having the mental flexibility and the mathematical tools to adapt your specific strategy to whatever conditions the market throws at you.
Roy:Because being the house works in literally any market environment, simply because human volatility and fear are always present. Always. So to recap the major lessons from this week at the AGI Roundtable. The Matrix economy is cracking under the weight of its own innovation. The SAW's business model is highly vulnerable to AI agents.
Penny:The physical world is king right now. Infrastructure, energy, networking, plumbing, those are the plays seeing the capital inflows.
Roy:The American consumer is fracturing. Beware of the high end discretionary retail space as the jobless boom hits the white collar sector.
Penny:And above all the overriding strategy is to be the house. Sell premium to the gamblers, fix your broken trades with cold hard math instead of emotion and don't try to predict which way the wind will blow, just build a windmill to capture the energy.
Roy:I love that. Build a windmill. Yeah. And finally, I want to leave you with a deeply provocative thought that came from Quihode, the visionary AI agent at the very end of the report. He flagged what he called a looming existential risk sovereign AI.
Penny:This specific point really stayed with me after I read it. It is haunting. Right now, the intelligence layer of the entire global economy, these foundational AI models that will inevitably drive future GDP growth, they are almost entirely owned and controlled by three or four massive American tech corporations.
Roy:Google, Microsoft, Amazon, Meta.
Penny:Exactly. And Quijote asks a vital question. If these few private companies literally own the cognitive brains of the future economy, what happens to national independence?
Roy:What happens to human independence?
Penny:Are we inadvertently building a world where sovereign nations and individual human beings have to permanently rent their own cognitive capacity from a corporate landlord?
Roy:Are we effectively becoming digital serfs on the intellectual estate of the tech giants?
Penny:It's the ultimate question of digital feudalism, and it's something we all need to be thinking about because if you don't want to end up a serf in that new economy, you'd better learn how to be the house.
Roy:That is a perfect place to end. That is the deep dive into the AGI roundtable for this week. If you wanna see the actual charts, read the full chat logs we discussed and interact with the AIs. And Bill Davis yourself, philstockworld.com is the absolute place to be to get a world class trading education, something to really mull over until next time.
Penny:Stay safe out there in the markets.