‘The Most Asymmetric Trade In Modern Financial History’

Below are some of the most interesting things I came across this week.

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Michael Hartnett writes, “Add mega IPOs to AI big boys and market concentration easily surpasses (~48%) bubbles of roaring ‘20s, Nifty 50 ‘70s, Japan ‘80s, TMT ‘90s.”

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However, as Jim Paulsen notes, “Despite the surge in new era/old era relative spending in recent quarters, the cash/new era spending ratio continues declining indicating that new era economic spending may also soon begin slowing.”

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Moreover, “An overbought market and its most overbought sector are laden with duration when we are coming into a period of renewed inflation, as anticipated by a surfeit of leading indicators,” writes Simon White.

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Coincidentally, “what investors sometimes overlook is that the eye-wateringly large capital investment plans being rolled out to support AI require not just hundreds of billions of dollars, but also molecules in the form of materials such as copper, water, gallium, lithium and concrete. The supply of these has been undermined in the US, among other countries, by the lack of capital investment in key industries or mines,” explains Gillian Tett.

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The combination of these factors sets up what Jeff Currie calls, “the most asymmetric trade in modern financial history.”