Last week, Arthur Hayes posted on social media that he had liquidated all his HYPE and NEAR positions and said he would explain the underlying logic in detail in an article this week—this article is a response to that. Its core viewpoints are as follows: The escalating situation in Iran, coupled with companies' inventory replenishment cycle, may drive energy prices further up. Between now and the beginning of the third quarter, the market will see the IPOs of three major AI projects. Trump may shift to an anti-AI stance before the midterm elections in an effort to win over more Republican voters. The peak of this market cycle will most likely occur between now and September. For investors in risky assets, it's now time to gradually take profits. The following is the original text: Is all of this just my imagination, or is it really true that investing in artificial intelligence these days simply requires subscribing to Citrini Research's service and blindly buying all the stocks they recommend? Am I dreaming? Or have oil prices already lost their influence on the economy and politics? This is why Trump and the Iranian Islamic Revolutionary Guard Corps were able to exchange barbs on social media, while a large number of ships were stranded in the Strait of Hormuz. With the two-year U.S. Treasury yield 0.5 percentage points higher than the effective federal funds rate, the market is sending such a clear signal: will the Federal Reserve really hold off on raising interest rates at its next policy meeting? Will all the benefits that artificial intelligence has created for the United States really end up in the hands of a few tech professionals? The chaotic world before me forces me to conduct a reality check to determine whether I am truly awake or trapped in a dream. If the check proves it's all an illusion, I will immediately adjust my portfolio. This article is my test. After typing these words and organizing my thoughts, my portfolio will undergo significant changes, or it may remain unchanged. My core judgment begins here: the current market situation is more like a dream. Within the entire investment system, the price of oil and other hydrocarbon energy sources is a core variable with a reverse transmission effect. The essence of human perception of the world is the conversion of energy into biological intelligence, and the logic of artificial intelligence follows the same pattern. This law will never be broken. The market may deviate from this common sense in the short term, but reality will ultimately prevail. This article will begin with oil prices and ultimately focus on the US presidential election. The current situation could very well trigger a bursting of the artificial intelligence stock market bubble, dragging down the entire crypto market as well. Once the dust settles, Bitcoin will have a chance to bottom out and rebound. I previously asserted that Bitcoin would never reach the $60,000 mark again, but that prediction has clearly been wrong, which is typical for market forecasts. I always adhere to one principle: opinions can be clear, but there's no need to be stubborn. Next, we will proceed with the analysis. Whether or not to negotiate has become the core issue at present. Politicians always act in their own self-interest. The reasons behind Trump's unprovoked military action against Iran are likely known only to him. Faced with the constant stream of explanations from him and his advisors, the outside world is unable to discern the truth. At this point, dwelling on the causes is pointless; the real question is whether Trump and the Iranian Islamic Revolutionary Guard Corps will choose a ceasefire and, if so, how to end the standoff. This conflict is now entirely dominated by Trump, and for him and the Republican camp, starting a war in an election year is undoubtedly a passive move. In the United States, the prices of necessities like gasoline and food often directly influence election results. Currently, navigation through the Strait of Hormuz is disrupted, and energy and food inflation continues to rise. The root cause of all this is the Trump administration's hasty action against Iran, launched without public consultation. Some may point the finger at Israel, but this argument is completely unfounded. Understanding American history reveals that domestic forces will never obey external orders. As long as the war doesn't affect their own lives or cause casualties among family and friends, the American public is not opposed to war. Trump has repeatedly emphasized that only thirteen American soldiers died in this special military operation. This is also why the United States is keen on using advanced long-range weapons and waging 'game-like wars.' Even though Trump's initiation of this Middle East war lacked a clear winning strategy and went against the expectations of many supporters, his base still chose to side with the Republican Party. The fact that some Republican lawmakers, due to wavering in their stance, faced pressure from within Trump's own party and lost their elections further confirms this. Trump's core concern isn't that his base voters are unwilling to vote in the November election, but rather that soaring prices will cause a large number of swing voters to gravitate towards the Democrats. The cost of living has become the biggest obstacle in Trump's re-election campaign. To win over swing voters, Trump needs to at least stabilize current oil prices. With supply chains only now beginning to absorb the pressure from rising energy and raw material costs, completely curbing inflation is unrealistic. All Trump can do now is manage market expectations of inflation, not change inflation itself. Whether Trump is willing to reach a reconciliation with Iran depends entirely on the trend of oil prices. As oil prices continue to rise, his stance tends to soften; however, once the market anticipates impending negotiations and oil prices subsequently fall, he changes his tune. After all, from a geopolitical perspective, the agreement reached in this round of negotiations is likely to be more passive than the agreement signed between the Obama administration and Iran. In the eyes of many voters, this is tantamount to 'defeat,' and the Republican Party will pay a price for it in the election. Negotiations always require concessions from both sides, and the Iranian Islamic Revolutionary Guard Corps has similar considerations. When oil prices are too high, its major trading partners will pressure Iran to compromise with the United States; however, once Iran signals a willingness to negotiate and oil prices fall, the pressure from its trading partners will also decrease. Given current oil price levels, neither the US nor Iran has any incentive to back down. While oil prices are significantly higher than before the war, they have not yet reached a level that could trigger a full-blown crisis. The commodity market is generally stable, there is no large-scale famine globally, and most countries can replenish their supplies of key industrial materials through other channels. However, this delicate balance is destined to be unsustainable. The significant reduction in global supply of core energy sources, coupled with consistently stable prices, defies market principles. Once global spare capacity is exhausted, spot prices will inevitably rise sharply, a consensus shared by many commodity analysts. The crisis has not yet fully erupted simply because global energy reserves were ample before the war. If the stalemate between the US and Iran continues until the end of the second quarter, spot prices for hydrocarbon energy and various basic commodities will inevitably surge in the third quarter of this year. To paraphrase Churchill: Politicians always find the right choice only after exhausting all other options. Only when the situation completely spirals out of control will Trump and Iran truly sit down at the negotiating table. In my view, the current disruption to shipping in the Strait of Hormuz will most likely continue until the beginning of the third quarter. Let's assume that oil prices will gradually rise amid fluctuations. In this context, how will the rising oil prices interact with Trump's campaign rhetoric? November Election Showdown: Republicans vs. Democrats According to odds from the prediction market Polymarket, the Republicans can only retain control of the Senate by a narrow margin, while suffering a significant loss of seats in the House of Representatives. While many believe the Republicans will lose the House, I disagree. Trump still has a chance to turn the tide, and the key lies in shifting public opinion and issuing statements regarding regulations and taxes related to data center construction and the artificial intelligence industry. The current vote distribution among political parties is as follows (218 votes are needed to pass a bill): Based on Polymarket's current odds, the following is the projected party composition after the election: The Republican Party's position in both the House and Senate is not optimistic after the election. However, the Republicans can change the situation through redistricting; when the existing rules are destined to fail, changing the rules becomes inevitable. Assuming Polymarket's prediction is correct, the Republicans need to gain 19 seats. Redistricting can reduce this number. The following are the potential impacts of redrawing the selection area: The Republicans now only need to win 11 more seats. Next, let's look at which elections are close and, based on current polls, which districts might slightly lean towards the Republican Party within the margin of error. The allocation of 35 seats remains highly uncertain. As mentioned earlier, high inflation and rising living costs are negative issues that Trump is unlikely to reverse. Another major topic currently affecting voters from both sides is the expansion of data centers and the impact of artificial intelligence on the job market. Aside from the ultra-wealthy, almost everyone is worried that data center construction will drive up costs and that artificial intelligence will take away jobs. Many regions have already introduced policies to postpone new data center projects, and there are growing calls for increased taxes on AI companies and subsidies for ordinary citizens. After all, the vast majority of people are not executives or high-paid employees in AI companies. For voters in contested districts, these issues are extremely influential. Trump could easily win the remaining crucial seats by making statements about the artificial intelligence industry. At this stage, he only needs to make related remarks, without enacting any specific legislation. He only needs to promise the general public that if the Republicans win, they will begin to regulate the artificial intelligence industry after the election. As a seasoned politician, Trump has always been adept at making campaign promises, but rarely delivers on them. The handling of Epstein's files is a prime example. During his campaign, he loudly proclaimed a thorough investigation of those involved, but after taking office, he only released a small amount of information. Now, he could do the same thing: during his campaign, he promised to pass legislation to slow down data center expansion, impose a windfall profits tax on artificial intelligence companies, and use the revenue to distribute a new round of relief funds; after the election, once the Republican Party has secured power, he could gradually retract these statements. Some may find it hard to understand why Trump would emulate the actions of left-wing Democratic politicians. But let's not forget that he launched the largest universal relief program in the United States since Roosevelt's New Deal, and he did not restrict the use of relief funds for everyday consumption by the lower classes. For Trump, temporarily distancing himself from AI giants like Elon Musk and cultivating an image of supporting ordinary people is not difficult in order to maintain his political standing. If Trump does indeed make tough statements regarding the artificial intelligence industry, the market will not see it as a mere campaign tactic, but rather as a sign that the US will substantially restrict capital expansion in the AI ​​sector and increase industry taxes. Panic will spread immediately, and the AI ​​stock market bubble will burst. Previously, Elon Musk and Trump had a public spat on social media, with Musk's affiliated departments publicly questioning Trump. Trump subsequently announced he would cancel government contracts related to Musk's companies, causing Tesla's stock price to plummet 18% in a single day. This demonstrates the market's sensitivity to such controversies. Politics can support an industry, but it can also deliver a devastating blow in an instant. The dispute was later proven to be just a publicity stunt, and the two quickly reconciled. Musk was even invited to attend the recent summit between Trump and Chinese leaders in Beijing. However, the market believed it at the time, triggering a massive sell-off. This is just the ripple effect caused by the personal conflict between the two. Once Trump, representing the Republican Party, clearly states his plan to impose heavy taxes on artificial intelligence models and related intelligent agents, the impact will be far greater than before. Similar remarks had previously circulated in South Korean political circles, causing the local stock index to nearly hit its daily limit down the following day, only returning to an upward trajectory after an emergency official denial. The current market's optimistic expectations for the artificial intelligence sector are based on the premise that the industry's revenue will continue to grow exponentially and that the concentration of new technologies and wealth will not provoke public resistance. This idea is detached from reality and is more like being immersed in a dream. Trump's statement will be the real test to shatter this illusion. Whether he will actually take action still depends on oil prices. As the situation in Iran continues to push up oil prices and inflation worsens, Trump will have fewer campaign rhetoric options left, ultimately leaving him with no choice but to target the data center and artificial intelligence industries. Trump's reasons for desperately avoiding Democratic control of the House of Representatives are quite clear. If the Democrats win the House, they can exercise subpoena power, repeatedly summoning Trump, his family, and key aides to testify and posing a variety of pointed questions. If the Democrats were to return to the White House in 2028, the Department of Justice, with its vast resources, would then launch a purge, investigating Trump's business entities.

Source: PANews

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