Much of our time is dedicated towards the craft of proper money management, with the attempt to find a salient or a mega theme that can ride us towards new unbound riches.
In my investment career I’ve had several notable epiphanies, the first of which was the dot coms. I’ve mentioned this here before, but it’s worth noting again, I was quite literally one of the first people to take note of internet stocks back in the early 90s. I made fledgling investments in AOL at a time when everyone said MSFT would dominate them. There was a period of time from 94 to 97 where these stocks did nothing but trade lower. The market thought it was pie in the sky, until Dell and Gateway scaled PC sales and AOL became a mainstream story. The rest is history.
Fast forward to today, $NVDA is the most valuable company in the world. Everyone knows about GPUs and the cloud and have bid up the hyperscalers to levels never thought possible. But ask yourselves: “is this over?”
The idea that this is ‘just getting started’ isn’t hyperbole, when taking into consideration the 500 hyperscale centers today and the 150 to be built every year for at least the next 5, and that’s just America.
My point: there is no second best narrative or theme. We often hear about “AI” but barely 5% of database traffic is AI related. In other words, this is the second inning of an extra innings game.
The only issue to concern ourselves with is valuation and overall market sentiment. There will be down 4% days in the future and ripping days to the upside. Markets will fluctuate. But there isn’t anything even remotely as interesting as the relationship between transmitting data and procuring the power necessary to keep the centers going.
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The Fed added $3T to the money stock in three months in 2020. With 1.5 years of QT the balance sheet STILL remains above the point it was AFTER the $3T was added. Reserves remain $1.8T above where they were before the covid ’emergency’, where at that time they were $1.5T above where they were for 100 years before the GFR. Until that top-percentile-wealth-increasing madness is un-done, inflation will remain and equities will rise. No worries.