Starting off with the beauty and wonder of college hoops. For the first time since 2008, seventeen years, all four number one seeds in the men’s tournament are headed to the final four.
For a markets and math geek like me, this is a moment of serendipity. Because exactly the most probable thing happened. It was Gaussian bell curve perfection. It wasn’t center left, or center right. It was exactly in the middle. In theory there was a 68.2% chance of this happening. But it turned out to be a pure 100% moon shot of an outcome, yet not a surprise if you went by the numbers.
As I’ve made clear many times, take the other side of my sports pics…always. With that, I’m all in on the Blue Devils of Durham. There you have it Duke, I’ve cursed you. I cursed the Cowboys of Dallas last NFL football season, and I’ve now done it to you. To the rest of the world of sports fans, I accept your ‘thank you’.
Still living in a world of chaos where up is down, and down is up? At least that’s how it’s feeling these days. Who is the devil we know, and what is the devil we don’t? And are we all just Bugs here waiting for the water to start to boil before it’s time to jump out? The good news, you aren’t alone. Time to get to work and figure it all out.
I’m still feeling like one of these mornings I’m going to get a Bloomberg alert on my phone that lets the world know the that we are now talking real business…‘The United States today announced its buying Cuba. The levered deal, slated to close by tomorrow night, was banked by Goldman Sachs and includes participation from Havana Club Rum and Cohiba.’ I swear to God, I don’t think this is out of the question at this point.
Biggest fear for the markets right now is the machine gun approach to policy that Trump is using backfires and not only Joe Sixpack calls it quits and sits on his diminished wallet, but Bobby Bouge does too. The latter, with the help of massively inflated asset prices, is running the economic show now.
But even they have their breaking point. And that cuts across all socio-economic levels. But it’s concentrated in the top 10% as they make up 50% of consumer spending. Somewhere Ronald Reagan is smiling as it looks like ‘trickle down economics’ is how our robust set of economic circumstances has been running for the past 35 years.
If consumer confidence continues to fall, stagflation is going to be more and more on the table. And that is simply the truth, not a ‘Never Trump’ statement. But full disclosure, I’ve been fooled by many a chart. This specific one looks like a legit red flag given all that is going on. Elections are one thing, and then the consumer votes with their wallet.
The growing masses are finally, finally I said, starting to get hip to the fact that inflation is rearing it’s painful head again. And probably will for a while. This has been my contention for a long time. But alas, I am but a guppy in a sea full of whales. This is the University of Michigan reading on consumer confidence and inflation expectations.
There will be a big jobs number release this Friday when the Labor Department, which for all I know won’t make it through May, releases the March employment report. We haven’t seen an inflection point to the downside since early 2020 when Covid put the brakes on everything. But let me be as clear as the crystal on the Thanksgiving Day table, this is your signal for where the Federal Reserve is in terms of how quickly they start another round of rate cuts. I’m setting the market at sub 100,000 adds. Any takers on the over?
I took my first trip down the path of figuring out if I was a ‘dead man walking’ in terms of Artificial Intelligence putting my writing work out of business. The good news is that I’m safe. What I found, and I think a lot of people do the same, is that the output when asking ChatGPT to replicate my work is that it’s provides a directionally accurate output. Where it fails is it can’t articulate a back story, or personal events that aren’t out there on the world wide web. I’m now sure the Gonzo Capitalist lives, and with it a great narrative about the past, present and potential future about markets, the economy, and stocks. In Hunter S. we trust.
One of things that doesn’t always make the front page of the paper as it relates to AI is the massive massive massive amount of energy that will be needed to power both AI data processing and the endless need for data centers. If this chart is right, and I have no reason to not believe it is, by 2028 then 60% of data center power will be consumed by artificial intelligence processing. That is up from 15% today.
And that amount of processing requires billions of dollars of little engines to run the massive factories. That’s billions with a ‘b’ and an ‘s’. This is the iSTOXX Artificial Intelligence 500 ETF performance over the last decade. That’s a four and a half bagger. A performance grand slam with a little left for the trot back to the dugout. High fives all around.
These are top 10 holdings in the ETF. I must give them credit, with the inclusion of Intuitive Surgical, SIEMENS, American Tower, and Keyence there is some originality in this portfolio.
Meta
Alphabet
NVIDIA
Intuitive Surgical
SIEMENS
Advanced Micro Devices
Micron
Intel
American Tower
Keyence
Back to the need for power. It’s so great that they are re-firing Three Mile Island in 2028, and the single buyer of all energy produced will be Microsoft. Let that sink in a little. An entire nuke plant is being turned back on for the sole purpose of powering up enough energy for the worlds largest software maker to process data. Three years ago, that would have been unthinkable. Now it’s just a Monday. I don’t know who Steve in the straw hat is, but I think he is on the wrong side of this trade.
Bill Gates, the founder, and former CEO of Microsoft is so bullish on the new age of nuclear energy that he put down $1 billion of his own well earned jack to be a part of the new plant in Kemmerer, Wyoming. It’s being built and run by Terra Power. That’s him front and center in the blue sweater at the groundbreaking last year.
This is an absolutely nothing tract of land near a town that boasts Dr. Jerry Buss as its most famous resident as well as being the site of the first JC Penny. It is also home to not one, but two legitimate eco-tourism fossil hunting business. Both American Fossil and Fossil Lake Safari will take you out to crack rock for as little as $100 per two-hour session to find 52 million year old fish bones. I assume no creel limit.
The last thing I will leave you with is this. ChatGPT is indeed really cool. We were using it on a road trip recently, basically killing time. We kept throwing the app we were using ideas and questions, and it was coming back with not a small amount of content.
Best way to describe it to the everyman is Google can give you ten sites to search for a fancy Italian dish. Whereas ChatGPT creates the best one for you based on 1,000 or so data points that get collaged into a result. Imagine what that means as you spread that concept across every industry, and around the globe. This is a technology that is not to be trifled with.“I’m sorry Dave, I can’t do that”.
Stock story of the month is Carvana. This is a true long versus shorts battleground. And like many of these, the ursine bodies have been piling up as the bovines have been taking advantage of what was once a company on the verge of default and bankruptcy.
The stock has traded from $20 in 2018, to $320 in 2022. Then things got ‘spicy’ when the company was looking into the liquidity abyss and CVNA traded to $5. That’s correct, $320 to $5 over two years. Having survived its near-death moment, the stock of Carvana has now traded north of $200 for the past six months. Even volatility would say that’s a lot of volatility.
For bulls on the stock, the tailwind has been a huge jump in used car prices since the opening of the liquidity flood gates as a reaction to Covid. Decisions have consequences, and the Fed’s to back the economy with virtually free money has put the bid in asset prices, including cars. If you round up just a little, used cars cost almost twice what they did on average in 2022 as they did in 2020. And notice the correlation that had with the Carvana stock price.
The Achilles heel to the bull story is that Carvana is front and center in the world of sub-prime auto loans. They have in the past financed 80% of the buyers that go through their system to buy a car. Which to the bears make this no different than Countrywide or Washington Mutual. Defaults on loans to less than good credit are at an all-time high going back 30 years.
At the end of the day, this is one hell of a story. And we in the business actually call them ‘story stocks’. If I was still running money, I would hold it neither long, nor short. For as they like to say in the business, ‘it might go to zero, but it’s going to have to go there without me’.
Right now, it’s all about getting my credit score back into striking distance of ‘great’. Because sitting on three Jeeps with an average age of 27.33 years on each is no way to get to heaven. Plus, that crappy 3.6-liter V6 engine design on the Rubicon was not at all my fault. Good job, Jeep. How hard can oil coolers be?
This is my favorite old car junkyard. It’s the banks of the Bighorn River in central Montana, a piece of flyfishing water I compared to playing a round of golf at Pebble Beach. An absolute must for any true student of the sport.
Many moons ago, I was pulling a rainbow trout of size through this spot with an audience of tens in other boats watching. When he snapped me off, it was the worst silence I had ever heard. Ear chattering silence. One minute away from Norman Maclean’esque glory, the next just another chump who let the ‘big one’ get away.
