September 12, 2023

Had enough yet?

Enough of the POTUS crowing about how well “Bidenomics” is working, despite what you see with your own eyes?

Enough of the Fed explaining how they have no idea where the economy is headed and somehow that’s a good thing? 

Enough about inflation-skewed, seasonally-adjusted economic reports that paper over reality?

Me too. 

So I thought I’d write a bit about something different. About something that I believe is going to be the driver of the next big supercycle in the markets. Something that’s going to literally disrupt the entire economy (and for the better!) 

Interested? Then let’s go…

How’s That Bull Market Treating Ya?

Since about mid-June, stocks have “technically” been in a bull market.

We wrote about it back then with a caveat… That the rally was largely being driven by a handful of mega-cap tech companies that were defying the tighter financial environment. Seven companies who comprised 30% of the S&P 500! 

Have a look…

In the chart above, the Nasdaq-100 is the index most heavily weighted toward big tech companies — which means it’s gotten the biggest bang for the tech buck. The Nasdaq Composite and S&P 500 are both capitalization weighted and contain many big tech performers. (Nasdaq just contains more than the S&P.) 

But look at the bottom index. That’s the S&P 500 Equal Weight Index. It’s not cap-weighted which means it takes out the excess influence of the huge tech companies. 

It’s barely scraping by this year. 

So tech’s the thing!  But what is driving tech?

Two letters…

AI

When it comes to artificial intelligence, the stock market has become captivated — obsessed even. The promise of AI is for real. It has the potential to be the next big disruption, the next tech revolution.

And despite all the press it’s received, not to mention the tens of billions that have been invested in it so far, it’s still in its very early stages. 

And so you understand it a little bit better going forward — about where it is and where it’s going — I thought I’d offer a little primer here. So you can have a little better idea of what its potential really is.

But maybe we should start with where it’s been…

As futuristic as it sounds, AI is not a new concept. 

Believe it or not, the idea has been the topic of discussion and development since the 1940s by British mathematician Alan Turing. In the early part of the decade he worked for the British government as a cryptanalyst creating unbreakable codes for the allies during the war. He also had his name attached to a number of other advances like Turing’s Proof, the Turing Machine, the Turing Test… and other things you need a PhD in math to understand.

But in around 1948, he proposed the idea that machines could be programmed to solve problems just like humans. 

The problem is, when you’re thinking that far out of the box, it usually takes a few decades for the world to catch up with you. And so AI sat on a shelf and waited for the world to catch up. 

Now the world’s caught up. 

What makes it a real potentially disruptive force today, however, is that we’ve reached a point where a number of conditions necessary to launch it are converging to form a perfect storm.

We’ll cover the first one in your next letter.

Humbly yours,

Tim Collins
Editor, Streetlight Daily