In a revealing conversation, Kevin Muir, a market commentator and publisher of The Macro Tourist, shares his alarm over the current market's overvaluation. He draws parallels to the dot-com bubble and cautions against the exuberance fueled by fiscal policies and AI hype. Muir discusses how rising gold prices could signal economic instability and impact stocks. He also critiques the overconfidence in AI valuations and suggests looking towards non-US markets for better opportunities amidst the prevailing risks.
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insights INSIGHT
Crowds Have Flipped From Fear To Greed
Kevin Muir warns the market has flipped from extreme bearishness in 2023 to extreme optimism in 2024.
He argues that when everyone is least afraid is when you should be most fearful about valuations.
question_answer ANECDOTE
Toronto Meetup Where Pessimism Dominated
Kevin shares a 2023 Toronto meetup where nearly every presenter was bearish and praised a dire credit-collapse thesis.
He and Harris Kupperman were the lone optimistic voices, predicting fiscal support and stronger economy.
volunteer_activism ADVICE
Size Positions To Match Your Risk Tolerance
Kevin says you cannot time the exact top or bottom of moves like gold, so decide position size by your personal risk tolerance.
He recommends sizing positions so you can sit through expected volatility rather than chasing magic sell signals.
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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.
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.
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.
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