I’m in that category of I think the productivity boom will be real… just not enough and diffuse across too much time for current valuations to be reasonable.
This reminds me of the situation in power markets in North America a few years ago when consensus was completely on the side of “free gas forever”. Abundance supply from renewables, coupled with lack of mid demand anywhere. Call option options on power prices - both physical such as power plants and financial – were basically free.
Maybe the lesson is instead of guessing the future, look at what is priced in and take the thing for free that becomes available when everyone else expects the opposite outcome.
I was referring to your comment that the call option on sustained AI productivity miracle seems to be quite cheap if not free if sentiment is pricing for stagflation. You’re right, market pricing is not entirely one way
I’m in that category of I think the productivity boom will be real… just not enough and diffuse across too much time for current valuations to be reasonable.
It's a risk to be sure.
This reminds me of the situation in power markets in North America a few years ago when consensus was completely on the side of “free gas forever”. Abundance supply from renewables, coupled with lack of mid demand anywhere. Call option options on power prices - both physical such as power plants and financial – were basically free.
Maybe the lesson is instead of guessing the future, look at what is priced in and take the thing for free that becomes available when everyone else expects the opposite outcome.
Makes sense...only I'm not sure what's free in this case. Cash, going short and going long all have their challenges.
I was referring to your comment that the call option on sustained AI productivity miracle seems to be quite cheap if not free if sentiment is pricing for stagflation. You’re right, market pricing is not entirely one way
This!!!!
AI might both make money and reduce inflation, bullish for stocks and bonds.
This “optimistic” read is considered silly right now, which is why it might turn out to be true.
Thanks Jeff.