The Sunday Drive - 06/30/2024 Edition [#117]
The Sunday Drive - 06/30/2024 Edition [#117]
Musings and Meanderings of a Financial Provocateur
šš¼ Hello friends,
Greetings from Saratoga Springs, NY. Letās enjoy a leisurely Sunday Drive around the Internet.
š¶ Vibin'
Itās the mid-point of the year and the equity markets have been quite strong thus far. The S&P 500 is up 15.3% year to date, having delivered an outstanding half-year return with abnormally low volatility as compared to historical levels. (Source: YCharts)
My spidey senses tell me the second half of the year could turn out to be the mirror image with sub-par returns and meaningfully higher volatility. Iād love to be wrong.
So this week, Iām vibinā to Bon Joviās 1986 hit, Livinā on a Prayer. Enjoy.
Oooh, weāre half way there.
Oooh Oooh, livinā on a prayer.
š Ā Quote of the Weekā
āLife should not be a journey to the grave with the intention of arriving in a pretty and well preserved body, but rather to skid in broadside in a cloud of smoke, thoroughly used up, totally worn out, and loudly proclaiming, āWow! What a ride!ā ā
ā Hunter S. Thompson
š Ā Chart of the Week
This weekās Chart is actually more of an illustration. It depicts the typical hype cycle for emerging technologies. In this case, it refers to the AI hype cycle discussed in the Bloomberg article where I found it.
These cycles are driven by investor psychology and tend to recur in a familiar pattern as shown above. When a new thing appears, folks get very excited about itās potential, throwing massive amounts of capital at it, which ends up creating mal-investment and poor returns in the end. Historically, this excess capital has come directly from the capital markets, via IPOs, bond offerings, and the like, or from venture capital.
However, the current AI hype cycle has been fed more indirectly from capital flows into the largest tech companies - AAPL, GOOG, META, AMZN - who also happen to be the largest customers of the largest AI semiconductor provider - NVDA.
Many would debate where we are along the path to Peak Inflated Expectations. Maybe weāre still quite a long way from it. Maybe weāve already passed it and are on the downward slope to the Trough of Disillusionment. š¤·š¼āāļø
One quibble I have with the way the downturn is depicted in the Chart is that I believe, and have witnessed in my career, that the recovery from the Trough of Disillusionment typically takes much longer than shown.
Before the technology reaches the Slope of Enlightenment, we first have to travel through what I call the Desert of Profound Disinterestā¢ļø. That could take a few years. When people stop talking about AI is when I think it gets interesting again from an investment perspective.
No one truly knows where we are in the hype cycle, but one thing I do know. Itās going to be quite a wild ride.
š Interesting Drive-By's
š Bond Traders Worry That Liquidity Will Worsen - from Rethinking65 [Link]
š Artificial Intelligence at the Dividend Cafe - from The Bahnsen Group [Link]
š¤ Quiet Compounding - from Morgan Housel [Link]
š” Reverse-Engineer Your Creativity With AI - from Michael Taylor [Link]
š¤ How People are Making Friendship Work - from Anne Helen Petersen [Link]
šš¼ Parting Thought
If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X āem?) at me.
Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed. The views expressed in The Sunday Drive are mine alone, and are not necessarily the views of Investment Research Partners or Cache Financials.
āI hope you have a relaxing weekend and a great week ahead. See you next Sunday...
Your faithful financial provocateur,
-Mikeā
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