Stats, Bulls, Evolution

Stats

While the end of Q4 2023 was primarily focused on the victory in the fight against inflation, the expectations for rate cuts were too optimistic. The story for Q1 2024, at least for now, will be the market digesting the reality that there may be just two rate cuts in 2024. That’s down from the six rate cuts predicted in the futures market. The Fed hiked rates from 0% to 5.5% at a monumental cost and risk to the global financial system, and it would now be premature to cut rates before the official inflation stats have stabilized. Even though inflation is trending positively, it will be a while until we see 2%. The UK’s inflation rate is finally down to just 4%, and the US inflation rate is currently at 3.4%. While international shipping rates are up quite a bit recently due to issues in the Red Sea, it was only two years ago when shipping was a staggering 10x higher due to COVID. While inflation and rates are important, the last sentence of this article in bold has more significance.

There is always a bull market somewhere

A key concept for investors is the ‘hot ball of money,’ or the rapid flow of capital rotating in and out of sectors seeking short-term gains. This highlights why broad market comments miss the mark. There’s always a sector experiencing a bull market. Past examples include a variety of technology waves, biotech, crypto, electric vehicles, marijuana stocks, country-specific stock markets, SPACs and now AI and uranium assets. This trend can lead to significant price surges, especially in smaller markets like uranium, where there aren’t that many options and market caps are fairly low. Traders aim to anticipate these shifts, often moving on before they become mainstream news. It’s a bad idea to chase these markets once they hit CNBC. Remember, even in market downturns, there is always a sector thriving.

AI Evolution

Consider that we may be in the early stages of a long and detailed cycle of rapid AI and machine learning evolution. I’ve been thinking more about what that might look like, and I’ve come to a few updated realizations.

• • The cost of education is now effectively zero. Self-motivated learners now have access to a 24/7 on-demand teacher knowledgeable in every subject. Hallucinations or not, people are also imperfect with their logic and accuracy and can be subject to bias or manipulation. The future of the education sector is now less about learning new concepts and more about applying them in live classrooms, conversations, decisions, debates and labs. (This is the basis for the image this week)
  • AGI, or Artificial General Intelligence, lacks a clear definition. With ChatGPT’s ability to discuss everything from biology to the Bible to local legislation, ChatGPT demonstrates a breadth of knowledge surpassing all humans. This, to me, indicates AGI has already been achieved – a level of intelligence equal to or greater than many people.
  • Companies have already rolled out AI engines with authority to decide how to spend company resources to solve a particular problem based on customer input and interactions. We’re in the early innings of this stage.
  • As this evolution continues, it puts tremendous pressure on the need for more energy, compute, data storage, better security, connectivity and so on. There is a lot of economic power behind this wave. This comment is less about VCs finding the next OpenAI, investors picking the next Apple or beating the S&P and more about the expanding economics coming from the rapidly rising tide in this sector.