If it’s pro labour policies = more growth = higher rates shouldn’t be bearish gold and bonds vs stocks? (I mean, think there are many other reasons, from China and US debt situations to geopolitics and valuations etc for it to not be the case - but just to stay in your framework)
It should be - but has not so far... although if I use the 1970s as framework, oil was the bottleneck, so I suspect oil stocks did well. Today, semiconductors seem the bottleneck, so perhaps semi related stock do well while everything else fails?
to me it’s that 1) it should be if the Fed was reacting to this stronger growth (but so far has not, and the fact that AI is pro-growth but not necessarily positive for labour could be a reason for them to refrain from hiking for a while) 2) in the US they actually need strong growth and lower rates to tackle the debt situation, which is bullish stock and,
to some extent gold, vs bonds 3) in China, they will eventually have to print to come out from the real estate crisis, which is bullish gold 4) Russian reserves, Greenland etc.. all speak for more rebalancing away from US assets to gold, which is bullish gold vs stocks and bonds - at least that’s how I try to make sense of it. Thanks for the point on semi, it is indeed a great analogy
To what extent do you think AI will cause deflation? I have been hearing from business owners recently who have talked about AI having a pretty significant impact on the productivity of their businesses (software developers being 10x more productive, etc). I have been fully on board with your view, but now I'm starting to wonder if we're going to see a pretty significant deflation effect coming from AI. If that happens, it could partially derail your thesis as I could see bonds being favored from the inflation side of the equation. However, if we do see notable deflation caused by AI, I would expect a big reduction in political stability. Perhaps the risk premium caused by that could overpower the deflationary effects of AI in that scenario?
I think what you are seeing is inflation in hardware and deflation in software caused by AI... which is driving the outperformance of capital intensive businesses vs capital light businesses. Net net - i think we still see inflation
Well, I think we have two timelines. We have the shorter term where we’re seeing significant investment needed in goods investment, but once we get over that hump and AI proliferates into the labor market further, I see a lot of what were previously high paying jobs being eroded by AI. I’m just now starting to observe AI having a notable impact on people’s businesses who I’m talking with.
Definitely will impact employment. In finance Ai has been used for a decade or so. Basically destroyed the intern and graduate job market at banks ans hedge funds. But with power demand surging and defence recruitment rising - Will we see mass unemployment or dedlation? Not.so sure
Defense spending is for sure not going down anytime soon. If anything, I think AI will further promote that. I guess a lot of it depends on the accuracy of the forecasts by these tech CEOs. If what Jensen Huang says about how the efficiency of the compute increasing significantly is accurate, then power demand won't be as big of an issue as it is right now.
If it’s pro labour policies = more growth = higher rates shouldn’t be bearish gold and bonds vs stocks? (I mean, think there are many other reasons, from China and US debt situations to geopolitics and valuations etc for it to not be the case - but just to stay in your framework)
It should be - but has not so far... although if I use the 1970s as framework, oil was the bottleneck, so I suspect oil stocks did well. Today, semiconductors seem the bottleneck, so perhaps semi related stock do well while everything else fails?
to me it’s that 1) it should be if the Fed was reacting to this stronger growth (but so far has not, and the fact that AI is pro-growth but not necessarily positive for labour could be a reason for them to refrain from hiking for a while) 2) in the US they actually need strong growth and lower rates to tackle the debt situation, which is bullish stock and,
to some extent gold, vs bonds 3) in China, they will eventually have to print to come out from the real estate crisis, which is bullish gold 4) Russian reserves, Greenland etc.. all speak for more rebalancing away from US assets to gold, which is bullish gold vs stocks and bonds - at least that’s how I try to make sense of it. Thanks for the point on semi, it is indeed a great analogy
To what extent do you think AI will cause deflation? I have been hearing from business owners recently who have talked about AI having a pretty significant impact on the productivity of their businesses (software developers being 10x more productive, etc). I have been fully on board with your view, but now I'm starting to wonder if we're going to see a pretty significant deflation effect coming from AI. If that happens, it could partially derail your thesis as I could see bonds being favored from the inflation side of the equation. However, if we do see notable deflation caused by AI, I would expect a big reduction in political stability. Perhaps the risk premium caused by that could overpower the deflationary effects of AI in that scenario?
I think what you are seeing is inflation in hardware and deflation in software caused by AI... which is driving the outperformance of capital intensive businesses vs capital light businesses. Net net - i think we still see inflation
Well, I think we have two timelines. We have the shorter term where we’re seeing significant investment needed in goods investment, but once we get over that hump and AI proliferates into the labor market further, I see a lot of what were previously high paying jobs being eroded by AI. I’m just now starting to observe AI having a notable impact on people’s businesses who I’m talking with.
Definitely will impact employment. In finance Ai has been used for a decade or so. Basically destroyed the intern and graduate job market at banks ans hedge funds. But with power demand surging and defence recruitment rising - Will we see mass unemployment or dedlation? Not.so sure
Defense spending is for sure not going down anytime soon. If anything, I think AI will further promote that. I guess a lot of it depends on the accuracy of the forecasts by these tech CEOs. If what Jensen Huang says about how the efficiency of the compute increasing significantly is accurate, then power demand won't be as big of an issue as it is right now.
As you say defence is important now... so even if efficiency improves the spend will be there... they will just buy more