Speak of the devil, I was hoping you would cover the potential AI Bubble and it's relationship to the current stock market at some point. But I didn't think you would do it, and didn't want to press it. Please bear with me as I constructively ramble. I'll say my own experience with stocks and then my feelings and some experience with AI.
My reasons for interest are a personal stake. When I had disposable income, I bought some stocks in 2021-2022. *None* of them were AI. I bought GE at a low point, Canadian Pacific, and some solar (plus a few really bad investments I threw 20 dollars at here and there). None are AI, but GE at least has gone up a lot in an environment where the entire growth is being driven by AI, including unrelated markets.
My personal stake isn't a greedy one (I hope). I was planning on keeping everything in there until I retired or at least until decades down the line to put into a house or towards retirement. With the economy, I've been struggling with whether to keep them through a downturn (and one I agree will be a bad one) or if I should pull out and take the cash. For my family, we've depleted our emergency accounts to low, low levels. We're very much at "stay and pray" finances.
It's not an astronomical amount of money but it would help to have that money in hand. This would be the last lifeline if I call it in. And that gives me pause. But, I could wait too long, realize we absolutely *do* need the money, and then not have it because it's tanked. "Stock gurus" are no help either. For their market, they're ok. But every one is a used car salesman, and "nothing can possibly go wrong". The long story short is that I have no idea. I've been thinking about it a lot.
If I can give an aside related to those investment: About 3 years ago, I invested $20 in a medical marijuana grower because *that* was going to be the next big thing. This wasn't many years ago. That stock tanked so hard and so fast that it went to 0.20 cents and got delisted in a matter of months. I couldn't sell it for a pack of gum. It is named "Bright Green LLC", if anyone is interested. It lacked business fundamentals, but spoke a big game and promised all these investors and new avenues. I may be talking out of my backside, but if that business said "AI" with all the same problems, I'd probably have an extra grand to burn right now.
***
I really don't know what's going to happen with the AI game. It's absolutely overvalued. I don't see how that's debatable. The question is how long can it run before it starts to tumble (*when* does this collapse), will it gradually fall or will it drastically collapse, and how bad is that downside? And is that going to be part of other declines elsewhere? I have a feeling it's going to be one economic pillar that goes and stresses others to go, or it will pop after another one does. "We need money. Let's sell the crypto...oh, everyone else had that idea this month and we're not getting enough back?" and so on. Again, I may be talking totally in bottom-speak, but I feel like it's going to be the floor from "The Money Pit": when leaned on in need, it's gonna give out.
I would argue investors are relying on a logical fallacy. They start with a correct idea: AI will be helpful and transformative for business, consumers and personal use. The fallacy addendum is "...and that means everything is money". In that regard, it's the same issue the Internet Bubble had. This thing will make money over time and will be another tool over time. But not everything is gold, and those investments will only pay off over time.
The current market seems to be a momentum of speculative investment and FOMO more than actual fundamentals and merit. It's accruing itself for itself, more so than any current output. It's not just investors. Businesses are all pushing to be a first adopter in order to not lose ground to competitors. It's ground where they don't even know what the heck the ground *is* yet. I can say that from experience working in a tech job. We're chasing our own tail thinking it's the other guy, and not thinking about why we have to run so hard.
I would underscore this as another problem with AI and another mirror of the Internet Boom:
*What the does AI actually do?*
I don't say that from a position of ignorance on AI. I say that because it's literally a buzz word more than a fundamental tangible thing. Everyone sees potential there, but there seems to be less knowledge of what to do with it to actually make money. They can make money all day long from investors. That's not the point, and that runs out eventually.
What fundemental production and consumption can and does this drive in real world terms? What money does this put on the table that wasn't going to be there otherwise? What is going to save money somewhere and make money elsewhere? How is this going to make enough money to justify and pay back investment? How is me using an AI image generator for funsies going to make a company 1.5 billion dollars?
It can and probably will, someday. But it's all chasing after imagined dragons. "It's gotta be out there somewhere". And these investments are so high, someday needs to be pretty soon. Like the internet, I don't see how this isn't a speculative market that's looking at a thousand things to make money, saying they all do or will, and then crashes because there were more promises than returns. And like the internet, it will stay that way until people come along that have solid ideas about what to actually do with the infrastructure years after the fact. I don't see elephants right now. It's all heffalumps.
I'll give another serious issue: we do not have the energy infrastructure in place to support this industry. That is a ticking bomb at the base of this industry. They cut alternative energy funding. Nuclear may come, but that's going to take a while. These things need energy infrastructure support right now. All these new whizzbang AI data centers will (and are already starting to) take up an unsustainable amount of electricity, while driving up electricity prices for the average person as a result. And that's in tandem with the inflationary effects on electricity prices as it is.
“Iran and Israel could go back to war in just a few weeks and not end it so quickly this time, causing a big switch in oil prices…”
That switch may be on the horizon.
Patrick from Northstar Bad Charts posted a series of tweets today including a 160 year chart showing how silver and oil track each other over time. It’s crazy looking at the chart. Going back to 1860 when one of the two break out, the other is soon to follow. Same thing on the downside.
With silver having been on an amazing run, and oil in the dumps, history says oil will soon be heading higher.
Speak of the devil, I was hoping you would cover the potential AI Bubble and it's relationship to the current stock market at some point. But I didn't think you would do it, and didn't want to press it. Please bear with me as I constructively ramble. I'll say my own experience with stocks and then my feelings and some experience with AI.
My reasons for interest are a personal stake. When I had disposable income, I bought some stocks in 2021-2022. *None* of them were AI. I bought GE at a low point, Canadian Pacific, and some solar (plus a few really bad investments I threw 20 dollars at here and there). None are AI, but GE at least has gone up a lot in an environment where the entire growth is being driven by AI, including unrelated markets.
My personal stake isn't a greedy one (I hope). I was planning on keeping everything in there until I retired or at least until decades down the line to put into a house or towards retirement. With the economy, I've been struggling with whether to keep them through a downturn (and one I agree will be a bad one) or if I should pull out and take the cash. For my family, we've depleted our emergency accounts to low, low levels. We're very much at "stay and pray" finances.
It's not an astronomical amount of money but it would help to have that money in hand. This would be the last lifeline if I call it in. And that gives me pause. But, I could wait too long, realize we absolutely *do* need the money, and then not have it because it's tanked. "Stock gurus" are no help either. For their market, they're ok. But every one is a used car salesman, and "nothing can possibly go wrong". The long story short is that I have no idea. I've been thinking about it a lot.
If I can give an aside related to those investment: About 3 years ago, I invested $20 in a medical marijuana grower because *that* was going to be the next big thing. This wasn't many years ago. That stock tanked so hard and so fast that it went to 0.20 cents and got delisted in a matter of months. I couldn't sell it for a pack of gum. It is named "Bright Green LLC", if anyone is interested. It lacked business fundamentals, but spoke a big game and promised all these investors and new avenues. I may be talking out of my backside, but if that business said "AI" with all the same problems, I'd probably have an extra grand to burn right now.
***
I really don't know what's going to happen with the AI game. It's absolutely overvalued. I don't see how that's debatable. The question is how long can it run before it starts to tumble (*when* does this collapse), will it gradually fall or will it drastically collapse, and how bad is that downside? And is that going to be part of other declines elsewhere? I have a feeling it's going to be one economic pillar that goes and stresses others to go, or it will pop after another one does. "We need money. Let's sell the crypto...oh, everyone else had that idea this month and we're not getting enough back?" and so on. Again, I may be talking totally in bottom-speak, but I feel like it's going to be the floor from "The Money Pit": when leaned on in need, it's gonna give out.
I would argue investors are relying on a logical fallacy. They start with a correct idea: AI will be helpful and transformative for business, consumers and personal use. The fallacy addendum is "...and that means everything is money". In that regard, it's the same issue the Internet Bubble had. This thing will make money over time and will be another tool over time. But not everything is gold, and those investments will only pay off over time.
The current market seems to be a momentum of speculative investment and FOMO more than actual fundamentals and merit. It's accruing itself for itself, more so than any current output. It's not just investors. Businesses are all pushing to be a first adopter in order to not lose ground to competitors. It's ground where they don't even know what the heck the ground *is* yet. I can say that from experience working in a tech job. We're chasing our own tail thinking it's the other guy, and not thinking about why we have to run so hard.
I would underscore this as another problem with AI and another mirror of the Internet Boom:
*What the does AI actually do?*
I don't say that from a position of ignorance on AI. I say that because it's literally a buzz word more than a fundamental tangible thing. Everyone sees potential there, but there seems to be less knowledge of what to do with it to actually make money. They can make money all day long from investors. That's not the point, and that runs out eventually.
What fundemental production and consumption can and does this drive in real world terms? What money does this put on the table that wasn't going to be there otherwise? What is going to save money somewhere and make money elsewhere? How is this going to make enough money to justify and pay back investment? How is me using an AI image generator for funsies going to make a company 1.5 billion dollars?
It can and probably will, someday. But it's all chasing after imagined dragons. "It's gotta be out there somewhere". And these investments are so high, someday needs to be pretty soon. Like the internet, I don't see how this isn't a speculative market that's looking at a thousand things to make money, saying they all do or will, and then crashes because there were more promises than returns. And like the internet, it will stay that way until people come along that have solid ideas about what to actually do with the infrastructure years after the fact. I don't see elephants right now. It's all heffalumps.
I'll give another serious issue: we do not have the energy infrastructure in place to support this industry. That is a ticking bomb at the base of this industry. They cut alternative energy funding. Nuclear may come, but that's going to take a while. These things need energy infrastructure support right now. All these new whizzbang AI data centers will (and are already starting to) take up an unsustainable amount of electricity, while driving up electricity prices for the average person as a result. And that's in tandem with the inflationary effects on electricity prices as it is.
“Iran and Israel could go back to war in just a few weeks and not end it so quickly this time, causing a big switch in oil prices…”
That switch may be on the horizon.
Patrick from Northstar Bad Charts posted a series of tweets today including a 160 year chart showing how silver and oil track each other over time. It’s crazy looking at the chart. Going back to 1860 when one of the two break out, the other is soon to follow. Same thing on the downside.
With silver having been on an amazing run, and oil in the dumps, history says oil will soon be heading higher.
Worth a look.
@badcharts1