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Wednesday, May 31, 2023

AI Gold Rush Boom/ Bust Cycles

 Picking up where we left off in yesterday's blog:  

This Isn't Normal! The So Called AI Gold Rush In Technology Stocks And The Rigged Options Market

Booms & Busts 

This feels a bit like Deja Vu, writing about some of the same topics I was writing about during the financial crash of 07 - 08, and one of those topics is boom/ bust cycles. A boom can be best described as an economic surge which is propelled by investment, and animal instincts (greed). Think of the Gold rush during the Western Expansion (1848-1855), or the Tulip mania of the Dutch Golden Age (1634 - 1637). The Bust cycle marks the end of the boom, and is propelled by another - even more powerful - animal instinct, fear.  

The Tech Bubble 

In 2000 it was the Tech boom (bubble) - fueled by speculation, and low interest rates. Once the Fed began raising rates, that boom went bust, and that's why investors are so terrified of the current Fed rate hike cycle. 

I remember the unwind of the tech bubble well. This was back when I still trusted the lame steem media to tell us the truth. Yes I too was once naive! I was convinced that the market was never coming back. I even convinced others to panic out of the market, right at the bottom. "Fool me once, shame on you; fool be twice, shame on me", but we "won't get fooled again".   

Come to think of it, this was about the time I really started to see through every lie that's constantly reported by the lame stream media. From fake news, to fake "conspiracy theories"; it just looks like propaganda to me. For instance: If you happened to see the most recent Elon Musk interview on CNBC; You couldn't help but notice how he was forced to say that he didn't believe (what they continue to report as Donald Trump's "Big Lie") that the election was stolen? Of course Musk is a corporatist, and so he fell right in line with their questioning, but I digress!   

The 2001 Crash 

I found a really good article on the 2000 boom/bust linked below:   

Dot-com Bubble Explained | The True Story of 1995-2000 Stock Market 

The So Called Great Recession 

In 2007 it was the housing bubble, which was accomplished through deregulation of the banking system. Sandy Weill had a big hand in that, as did the Republicans, and the Clinton administration, and you'll never guess who else...? 

Jamie Dimon, from Sandy Weill's assistant to savior of First Republic

New boss, same as the old boss.

 And now you know the rest of the story. Now you understand Jamie Dimon's popularity on Wall Street... or at least with Bloomberg staff writers.   

Fake News 

Real News 

Oil and Energy 

No boom/bust would be complete without the energy sector, so in 2007 Oil was pumped to new all time highs, on something called "peak oil theory", only to come crashing down, months later. Yes, another false narrative, another boom/bust. 

I remember hearing rumors - at the time - that Goldman Sach was storing oil in offshore oil tankers,but I don't know if there's any truth to that. 

Nothing to see here!

The Health Care Boom  

You may not have heard about this one, but In 2008, we saw a massive rally in healthcare stocks, and that boom accelerated into the 2012 Presidential Election as socialized medicine was pushed by both candidates - Romney/ Obama. Whether is was going to be called Romneycare, or Obamacare, didn't matter; Wall Street was going to win.     

Your choice in that election was between the black democrat, and a white RINO, but as it turned out the white RINO took a fall, in order to propel the equity narrative. Of course that election was thrown, and anyone who watched the debate live on CNN should know it.  

As you can see the healthcare sector remains in a bubble, after Covid helped propel big pharma to new all time highs.  

Tech Leads 

In 2008, we also saw the return of tech as a leader, as the FAANG narrative was spun. The trick was to pick a new marker leader, and that was a simple as going to the 2000 playbook! 

During the Covid liquidity bubble, we saw a continuation of that trend, and even today, after a full year of rate hikes, the Nasdaq remains in a bubble.    

We also saw Oil and energy crash, on the heels of the Covid story, and that was fueled by the corporate owned lame stream media. They actually blamed the Russians, and the Saudis, as hedge funds in London drove Oil contracts to 0 (zero). They even blamed the Fracking bust. 

Once that (zero contract price) goal was accomplished it was time to drive energy stocks to the moon again.  

I thought I had seen it all at this point, but I was wrong. Turns out there really is always a bull market somewhere. 

Enter AI 

Today it's the AI story - which is just another name for the highly speculative Tech sector. 

 This is not to take away from the technological innovation that's been going on for nearly half a century, which started with names like IBM, and Texas Instruments leading the space program in the 70', and in more recent history Microsoft, and Apple.   

There's nothing new under the sun; so AI just looks like another tech bubble to me. It's FAANG by a different name, and it's the same ol' dash for trash, we see every spring.   

In the next update we're going to look at some charts and maybe even try to get a handle on how to trade it.

Take care, 


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