I have been at this for a long time, so I have seen booms and busts and have lived to fight another day. I have also spent a lot of time researching events that took place long before I was even alive. Because of this research and longevity, I tend to see things a lot differently than most.

I have written in the past that if any one of us had the power to “print” money- particularly if we were the only people with that privilege, we would likely NEVER give it up. It is no surprise that since the central banks have that privilege that they too, are unwilling to give it up.

This is important to understand when it comes to stock manias also. If you have an advantage that you are able to exploit you certainly want to exercise that advantage and involve as few people as possible to maximize your profits. In addition, if too many people catch on you lose your advantage and the game could end. This is a MAJOR reason to doubt those that tout “trading secrets that made me rich.”

Another piece to this puzzle is in private equity. There is a lot of buzz in our industry about private equity deals and ETFs that can let the little guy get in. Where were these deals a few years ago? My guess is that, as some great opportunities presented themselves, the insiders kept it quiet and made large sums of money in many cases.

It appears to me now, that since big money sees little opportunity at this time, it is time to unload the positions on the public. Why do I say this?

One glaring example is the AI space, which I have long said looks just like the dot com bubble of the late 1990s. This is not to imply that there may not be a lot more upside BUT I believe there is a cliff out there that the insiders are aware of, and they are looking to finance future growth with OPM (Other people’s money).

What appears to be massive demand for chips and other AI related products just may be an elaborate mirage. This has been called out by major banks like JP Morgan and Goldman Sachs.

Michael Cembalest of JP Morgan described the “circular economy” of AI which appears to me to be a vendor financing scheme where one company produces a product, leases the product to a user and the user provides a service to a third party. All ok so far.

If you notice the photo attached what this appears to do is create an illusion of massive demand where it may or may not exist. Another MAJOR point is that the “money” that these companies have promised to invest has not been earned yet- so it will likely have to be financed with debt.

As a matter of fact in a Zero Hedge article it states:

“Which brings us to a stunning punchline: Other recent AI news: Oracle’s stock jumped 25% after being promised $60 Billion a year from Open AI, an amount of money open AI doesn’t earn yet, to provide cloud computing facilities that Oracle hasn’t built yet, and which will require 4.5GW of power (the equivalent of 2.25 Hoover Dams or four nuclear plants) as well as increased borrowing by Oracle whose debt to equity ratio is already 500%. See any chance of a glitch here?

It appears to me that this could easily be a way to stir up a frenzy of buying and also attract the capital that they are trying to raise where seasoned investors may see far too much risk because of sky-high valuations that could only make sense if there are no obstacles or downturns.

It is estimated that there is an 800 BILLION shortfall between now and 2030 to fund the computing power needed. According to Bain & Company AI companies will need $2 TRILLION during this time.

There are a lot of moving parts- that I am sure most people with FOMO (Fear of missing out) are not even aware of as they “invest” their capital with their fingers crossed.

I would be more concerned with FOGOIT (Fear of getting out in time)

This is certainly not my area of expertise but when you get major banks and research firms questioning the ability to build this to scale- and “investors” willing to take chances at large gains without considering the fact that not only does the infrastructure need to be built out at massive costs but the end product needs to be monetized.

The last part- the monetization would have to be monumental to service the debt needed to get up to scale. The problem? China, with their Deep seek AI, has proven that this can be done for FAR less expense and for most applications is more than sufficient. I still have to be leery about the future projections and the ability to MONETIZE the actual end product for the major profits that will be needed to sustain the companies.

I still believe that AI will play a large part in our future, but the mania is off the charts and most stock valuations make no sense at these prices. If we have a re-do of the dot com bubble, we will see actual companies that are good survive and the pretenders will cease to exist. In the downdraft those “good” companies will still have their share prices smashed- as many dot com survivors did and there could be a VERY attractive entry point AT THAT TIME.

Of course, all of these “promises to pay” are reported on the financial game shows as facts that have already taken place which leads to even more mania- deserved or not.

Be Prepared!

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