AI Bubble: Reset Coming - Bill Gurley

0:00Bill Gurley warns we have an AI bubble. Yes, according to Bill Gurley, we will have a reset coming. Basically, according to Bill, AI bubble is real because the value is there and according to him, people got rich quick. Then a whole bunch of other people wanted to get rich and a bubble is formed. So again, according to Bill Gurley, the AI bubble will be having a reset shortly. This is very similar to kind of the .com era where people moved in and then more people moved in and so on and so forth. Again, it will be interesting to see where that reset comes. We did get pending home sales this morning and again, I think this number is not that important, frankly. Again, what do I mean by that? Well, we got pending home sales that was expected to fall and they did not. They rose. They were expected to fall .6% and they were actually

1:03up 1.8%. But Michael, why do you say that doesn't matter? Well, frankly, it doesn't. These pending home sales came into the report when rates were right around the low sixes, potentially even with a five handle. And I don't know if you've looked at interest rates lately, but they are a lot closer to six and a half than they are to six. So again, I think something we have learned over and over and over again is interest rates near and below six percent brings demand and anything at six and a half or higher crushes demand, aka demand destruction. Well, it looks like more and more people are seeing meta layoffs coming. Again, I don't know if you heard, but over the weekend it broke that meta might be laying off 20% or 16,000 people. Did you know that the average salary, the all-in salary at meta is $379,000?

2:06I find that wild. An average employee, an average employee, $379,000. Crazy. JP Morgan says that if meta is to do that, they could save $5 billion a year by removing 20%. Jensen Wong from NVIDIA was out saying they got a trillion. Yes, folks, that's not with a B. That's with a trillion dollars in demand coming for their AI chips, Blackwell and so on coming through 20, 27. That is wild to think about. Earlier in the month, we talked about this important meeting between China and the US, between President Xi and President Trump. It looks like that is going to be delayed because of the Iran War. President Trump does not want to leave the US while that is going on. That important meeting looks to be delayed. Unfortunately, we were hoping for a grand

3:08bargain or a grand deal or whatever you want to call it, but that does not look like it's coming. Let's congratulate Nicholas. Nicholas joined our school community in the last 24 hours. And if you are a real estate agent, never forget that on Tuesdays, we have real estate agent, mastermind, our accountability group from 1 to 2 p.m. Pacific. So if you're a real estate agent, want to check it out, make sure you get in school. Also, don't forget, we have a bunch of real estate investors inside school. So if you want to get to meet some investors, get in there. Got some numbers about a San Francisco and a Chicago building. I'm collecting some commercial data recently. San Francisco office, one, two, three mission street, one, two, three mission street. In 2019, sold for 400 million dollars. It just the debt just sold for less than 100. So again, that's a 75% discount. How about Chicago? Chicago multi-families. This is not even office. This is

4:11Chicago multi-family address to 20 West Illinois street to 20 West Illinois street in 22, 2022, sold for 105 million. Folks, it just retrained it at 77 million. What does that mean? Well, it likely means that the syndicator who bought it for 105 lost it. And more importantly, the LPs, the limited partners lost all their equity. If you look at that deal, 105 to 77 million, it looks like the banks, the lender actually probably escaped relatively unharmed. But all the equity was gone and LPs took that on the chin. The other thing that's unfortunate for those LPs is something called depreciation recapture. So not only did you lose all your money, but now you've got to pay the tax man because you likely accelerated depreciation and you owe a gobb of money. That is not good. Let's talk about apartments. Again, multifamily, when you build rents go down,

5:17apartment concessions have hit their highest level in over a decade. Don't forget folks that all these inflation reports are still showing over 3% shelter inflation. And that is wrong. That is bogus. That is inaccurate rental inflation across the country is actually negative, not positive. And if the Fed would get off their butt and recognize that, they could actually declare victory and have rates sub 2%. Got some data on housing. Shout out Mike Simonson for putting this out. The spring selling season is here. There's now 904,000 active listings. That's up 5.7% year on year, which is down from a peak at over 30%. So there is talk about active listings going negative year on year soon. So we will stay tuned for that. Mike actually has a rule. It's kind of tongue in cheek at least for me. I don't know if he meant it that way, but he says when rates move, demand moves faster. This is something you and I have been talking about for years is rates go to 6.

6:21Demand flies off the shelf and it goes to 6 and a half. It kind of turns off. Pending contracts up 4% year on year, new listings down 2% year on year. So again, think about that. Pending up in listings down. So again, that will chew into active listings and prices flat. Don't know if you saw this, but looks like the SEC might might be scrapping quarterly filings. Yes, as you know, public companies have to report every 90 days. SEC is pushing an idea that, you know what, let's report twice a year once every six months. I think that's wild. Do you guys really think we need less information? Not more. This is kind of wild to go backwards, but hey, it is what it is. Ryan Lunkquist, shout out Ryan Lunkquist from Sacramento. Put out a great report. I follow Ryan on X talking about Sacramento. If you are a real estate agent or an appraiser, this might be a

7:21report you want to create for your area or your buy box. He said that the average days on market 36, median days on market 12. So what does that mean? That means there are some super outliers pulling that average higher. In fact, inside Sacramento, less than seven days, 38% go pending in less than seven days. 54% go less go pending in less than 14 days. In fact, greater than 90 days, only 11%. Again, you're going to have some huge outliers that are taking that average to 34 when the median is only 12. Don't know if you've noticed this, but the government workforce is the smallest. It's been since the 60s. I find that kind of amazing. Again, the government workforce today stands at 2.68 million. The last time we were that low or lower was 1966. Yes, before I was

8:28born, 1966, the government employment was 2.66 million. So hey, government employment down big time. Ken McRoy is talking about multi-family liquidation. Thankfully, Jonathan Twanley and I have been talking about this for years. So you know, this is coming. Multi-family liquidity has dried up. Deals are not are now 60% LTV. So again, liquidation is very liquidity in the market is tight, significant repicing occurring. And what does that mean? Folks, that means there's a lot of pain if you did a deal in 22. But there's a lot of opportunity if you were conservative and waiting for 2026. The Fed dot plot is the final topic of the daily financial news. Again, the questions I will be asking myself when we will get tomorrow at 11 Pacific to Eastern. What is the new peak unemployment? More specifically, will one of the Fed presidents raise their peak unemployment

9:32above 4.5? Will any of them forecast a rate hike? How many Fed presidents say zero cuts in 2026? And how many show two cuts? I'm basically trying to identify who is a hawk and who is a dove. Perhaps the most important question I have for tomorrow is will anybody forecast a rate hike? I'm not sure any of them have the balls to do that, but I guess we will find out. Lastly, let's congratulate somebody for getting a couple of deals done. Ian, congratulations for getting your two deals done. I will go ahead and put your card in the mail. Ian, congratulations. If you don't know what these are, folks, I give away black cards for when you get your second deal or more. You can get as many of these as you like. And I give a gold card out when you get your first deal. I've actually given out so many gold cards. I have to get a new batch, so I've currently ordered some. All right, folks, take care of yourself. That's the daily

10:36financial news. Please join school. Get around other wealth builders. If you want to get wealthy, it's good to be around the community. And of course, don't forget to check out steadily, who is the sponsor of the daily financial news as they saved Olivia and I over 20 grand in 2025, which I am really thankful for. That's almost two random month, which I will always remember. All right, folks, take care of yourself. We'll talk tomorrow. Peace.