September 27, 2024 | Read Online

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"Nobody wins afraid of losing."

— Chris Stapleton

Friday ambitious charts

This may have been the week that markets entered founder mode.

The headlines were good: We learned the US has been growing faster than we thought, Micron reassured us that the world is still clamoring for semiconductors and China was reported to be "assembling an economic bazooka."

As a result, US equities hit new highs (again) and Chinese equities rocketed 16% higher.

This is not, however, the true measure of our times.

Instead, the 2020s may come to be remembered as the decade when entrepreneurs, corporations and entire economies started betting big and entering "founder mode," in the new parlance.

How else can we explain Mark Zuckerberg feeling confident enough this week to declare himself the Imperial Emperor of our AI economy?

Unveiling a prototype of Meta's new Orion glasses, Zuckerberg referenced Julius Caesar by wearing a t-shirt with the inscription Aut Zuck Aut Nihil — "Either Zuck or Nothing."

The Latin phrase suggests an ambition for absolute power, uncompromising ambition or unwavering determination, depending on how you'd like to interpret it.

Meta's Orion glasses are a "wrist-based neural interface" that allows you to "send a signal from your brain to" a machine, potentially making them the first consumer device in the coming age of ubiquitous cyborgs.

So you can see why he might be feeling like an all-conquering emperor of technology.

In this game of thrones among tech founders, however, he has some competition.

Reuters reported this week that OpenAI will convert to for-profit status, possibly leading to a $10 billion payday for its equally ambitious CEO, Sam Altman.

It's easy to be cynical about this (start a non-profit, raise billions, convert to for-profit, become billionaire), but I admire the ambition.

I think we need more of it: History demonstrates that profit-driven ambition fuels the creation of groundbreaking achievements and societal advancements.

Nine of the top 10 richest people in the world — all founders, of course — were made in the USA and that's a feature, not a flaw, of the US economy.

Unscientifically, it may also be why the US is outgrowing the rest of the developed world.

The revised data released this week showed that US GDP growth was 1.2 percentage points higher than initially reported and this revision exceeds the entire economic growth of countries like the UK and Germany, as Joseph Politano notes.

That is a remarkable stat and there is probably much more of them to come because while the US is responding to AI demand by building datacenters (to accommodate an expected 15x surge in US power demand), Europe is responding to AI by de facto banning it.

There are risks to letting AI rip, of course, and my faith in billionaire founders may turn out to be naively misplaced.

But business is a positive-sum game and in business (as in life), no one wins being afraid of losing — so I'll be rooting for the people trying to win, whatever level they're trying to win at.

Let's check some charts.

Even better:

I highlighted this chart of per capita US GDP last week at $68,000, and after this week's revisions, it's already up to $69,000. The revisions "reinforce just how exceptional the current economy's performance is," according to Mark Zandi.

We found some more money, too:

The personal savings rate was also revised higher, to 5.2% in Q2 from the originally reported 3.3% — higher savings means lower recession risk.

Also revising higher:

The Atlanta Fed's forecast for Q3 US GDP is up to 3.1%.

Priced in?

"Credit and stock markets are pricing in 250bps of rate cuts and 18% SPX EPS growth between now and end-2025," according to a Bank of America note. "It doesn't get much better than that for risk, so investors [may be] forced to chase."

If so, there's a lot of money to do so:

There is now $6.5 trillion hiding in US money market funds.

China is the new Japan:

This chart from Barclays suggests that China may now be caught in a Japan-like spiral of low inflation, low growth and low birth rates. If so, this week's China stimulus may be the start of decades of money printing to come.

It's not just that in the US:

The bar to the right here shows that only one-fifth of the US stock market returns since 2020 are attributable to multiple expansion — ie, it's not just that stocks are getting more expensive. Companies are making more money, too.

But, yes, stocks have gotten more expensive:

This chart from Koyfin is a reminder that shares of Microsoft and Apple traded at double-digit free-cash-flow yields as recently as 10 years ago. That's a tailwind that markets won't have over the next 10 years.

US investors are betting on earnings:

The above from @bespokeinvest shows that US equities have positively decoupled from the expected path of fed funds. In other words, we're not counting on the Fed to make stocks more expensive, we're counting on founders and CEOs to make stocks cheaper (by making more money).

Call me naive, but I think they can.

Have a great weekend, ambitious readers.

— Byron Gilliam

Your all-time favorite newsletter author will be IRL at Permissionless chatting with the top liquid token fund managers on how they seek and find alpha in the digital asset space. Don't miss it!

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Eric Balchunas @EricBalchunas

The Chinese government (aka the National Team) is on an ETF buying spree BOJ-style to jump start stock market, they've already plowed $91b into ETFs, headed towards $110b EOY, which is 80% of the flows over there. Here's where they spending the money, via @RebeccaSin_SK

6:31 PM • Sep 27, 2024

102 Likes 14 Retweets

8 Replies

Yano 🟪 @JasonYanowitz

Everyone is underestimating the possibility that the next few months could get insane

tw profile: THE COIN THE COIN @thecoinlive

.@JasonYanowitz to @KevinWSHPod: "My biggest conviction is that we're going into a pretty colossal bull market, and people seem to be really underestimating that right now."

8:31 PM • Sep 26, 2024

155 Likes 13 Retweets

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