The media, the financial world, and civilization came to a stop this week.
Wars were paused, children’s births delayed, and the heavens shone a light again on the sleepy little blessed village of San Jose, CA.
TheStreet.com headline said it all:
‘The most important stock on planet earth’
I’m not so sure Pfizer appreciates their status being removed since they invented the “shot that saved humanity” just three years ago. But I digress.
The cacophony of calls for universal praise on the future artificial intelligence possibilities has long been touted by those pumping this stock. The usual suspects did their bull cases on the Bubblevisions proclaiming that although the risks of Terminator robots eradicating mankind were there, a stock with the potential to raise the S&P 500 to 5,200 by April was far more important than Mother Teresa, the Pope, and humanity itself.
In reality, this is just another repeat of the United States economic, stock market, and speculative bubbles throughout history.
If one looks at the current chart of Nvidia stock, one will see a quite familiar pattern.
Of course the comparisons to the 1990’s .com bubble returned with a vengeance and the defenders of Nvidia and this rally replied with their usual version of “it’s different this time” drivel:
Wall Street keeps likening Nvidia to dot-com-era Cisco. Is the comparison justified?
Of course they use the usual catch phrases of “valuation calculations” and newer more sophisticated accounting standards plus my favorite of “modern investors are more sophisticated.”
Bunk.
Here are some reminders for those that survived the internet wars of 1999-2002 to refresh one’s memory:
Cisco Systems (CSCO):
Intel (INTC):
Corning (GLW):
And of course MicroStrategy (MSTR):
If one reflects on chart patterns alone, this is a stark reminder that the mistakes of the past can be repeated. In 1997 through 2000 the American public was constantly reminded that fiber optics and the internet were the future. There is no way that the economy could contract again and a new future was upon us.
In reality, human nature, aka, greed and avarice won out, and the NASDAQ cratered in a 1929 fashion which obliterated the speculative bubble, just like 1987, just like 1981, and of course, the old worn out reference of 1929. One could go back further but the comparisons to the auto and radio bubble of the 1920’s was apt, considering the speculative fervor the 1990’s initiated in an almost identical manner.
Here is society again, on the so-called precipice of artificially capable intelligent machines capable of logical and rational behavior. The flaw however is that humans are the ones initiating that usage of said machines and also programming them. Much like the automobile boom of the 1920’s, the idea that all of the companies would succeed was thrust upon the public and the theories of unmitigated, unlimited capitalism could catapult mankind to new heights.
Of course the interference of government action was never taken into account.
In the case of the modern era, that government includes a politically active and economically meddling central bank known as the Federal Reserve. As Jim Bianco reminded one of his readers this week via “X” the cycles of the primary US bond yield, the 10 year US Treasury, has been yanked, teased, and taunted in different directions.
The chart Bianco published points out one glaring, if not alarming feature:
Ignore the cycles, look at the sub-cycles. From 1998 to 2002 the 10 year US Treasury yield surged on an a move back above 5%. Combined with the puncturing of the speculative Wall Street fervor, this sent the US economy into a short recession which punished the middle class, eradicated the NASDAQ bubble, then allowed the genius Alan Greenspan to justify creating the housing bubble which lead to the Great Financial Crisis (The Depression that Never Was).
“Cisvidia” is just a symptom of what is happening.
There has been no mass adoption of artificial intelligence as a practical profit guaranteed tool for corporations outside of remote switchboard operators, poorly constructed customer service representations, and the ability to block the American public from getting services that they have been paying for in various service industries.
In the mean time, the American people are simply looking for a get rich quick scheme to justify their existence and the ability to offset inflationary pressures created by government largess via speculative investing. It is akin to the now massive legalization of sports wagering and online casinos yet justified by presenting the cover of a retirement future, even if the largest institutions eventually crush their plans with their own confidence game.
For one’s own sanity it is advisable to look at the older charts from above and decide if the risk of a repeat of one’s own portfolio is worth it.
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