How Do You Value the AI Bubble?

Tom Bodrovics welcomes Kevin Muir, the publisher of The Macro Tourist Newsletter and co-host of The Market Huddle to the Competent Investor. Kevin expressed significant concerns about the current state of the markets. Muir highlighted the stark contrast between the extreme bearish sentiment of 2023 and the current widespread optimism, suggesting that the market may be overvalued and due for a correction. He compared the current environment to the dot-com bubble, emphasizing that while AI and other technologies may be revolutionary, the market’s exuberance has priced in expectations that may not be realistic.

Some Competent Links:
Website: https://competentinvestor.com
Substack: https://competentmanpod.substack.com/
X: https://x.com/CompetentManPod
Rumble: https://rumble.com/c/c-7699939

Muir argued that the rapid rise in gold prices, driven by central bank buying and investor nervousness, could negatively impact the stock market. He noted that gold’s recent gains have been unprecedented, and its rise could signal broader economic instability, potentially leading to a market correction. Muir also discussed the role of fiscal policy in driving economic growth, arguing that the U.S. and other countries have been spending more aggressively, which has supported markets. However, he cautioned that this spending could eventually lead to inflation and crowd out private sector investment.

Muir expressed skepticism about the AI bubble, comparing it to the dot-com bubble and suggesting that many investors are overlooking the risks. He also discussed the potential for a significant market correction, predicting that it could be larger than many investors expect. Despite his concerns, Muir identified energy as an underappreciated sector, noting that the demand for energy, particularly from developing countries, could drive significant growth in the coming years.

Throughout the discussion, Muir emphasized the importance of understanding what is already priced into the market and being cautious about investing in overvalued assets. He also highlighted the potential for geopolitical and economic shifts to impact markets, particularly in light of Trump’s potential influence on monetary policy and the U.S. dollar. Muir’s insights provided a contrarian view of the current market environment, urging investors to be mindful of the risks and potential for a correction.

Timestamps:
00:00:00 – Introduction
00:00:40 – Market Correction Risks
00:05:43 – Grumpy Old Man Analogy
00:10:01 – Analyzing Gold Trends
00:13:00 – Gold Spooking Stocks
00:18:03 – Portfolio Positioning Strategies
00:23:15 – AI Bubble Valuation
00:29:43 – Fomo Bubble Dynamics
00:31:27 – Fiscal Stimulus Driving Markets
00:43:14 – Japan & Fiscal Optimism
00:54:24 – Trump Inflation Accelerant
01:00:58 – Energy Sector Opportunities
01:06:48 – Concluding Thoughts

Guest Links:
x.com: https://x.com/kevinmuir
Website: https://themacrotourist.com
Substack: https://posts.themacrotourist.com
Podcast: https://markethuddle.com
E-Mail: mailto:kevin@themacrotourist.com

Kevin Muir started as an institutional equity derivative trader for a big Canadian bank in the 1990s. In 2000, Kevin decided that bank-life wasn’t for him, so he traded his own account for the next two decades. Along the way, he started writing the MacroTourist newsletter, which he describes as an “almost daily” letter about the markets that still manages to have fun. The MacroTourist newsletter attempts to bring a unique take on a variety of different financial topics. Kevin’s tagline is, “All I Bring to the Party is 25 Years of Mistakes.”

Kevin Muir is a CFA and a graduate of the University of Toronto economics program.