AI is not like DOT COM
June 6, 2024
**************
–It’s all about NVDA which joined MSFT and AAPL with a market cap over $3T. GDP is $28.5T so the value of these three is about 35% of GDP. I got one of those ‘your memories from this day’ emails yesterday, and the attached Nasdaq chart was included.
From March 1999 to March 2000, Nasdaq doubled (NDX-100). Currently NDX is a bit over 19k; at the start of 2023 it was around 11k, not quite doubling in a year and a half. Of course, rates were high at that time (a friend kept reminding me, “It doesn’t matter, these tech companies don’t borrow money”). Dot.com mania was in full swing. And of course, going into the turn of the century Y2K fears were being plastered across headlines: Bank computers would stop working, air traffic control would fail, etc. There was a lot of investment in new systems By March of 2021 it was pretty much a full round trip, 72% off the high.
–Bank of Canada cut 25 yesterday. ECB on tap to do the same today. ADP was weaker than expected at 152k but ISM Services vaulted higher to 53.8. Rates still ended lower, with tens down another 5 bps to 4.287%. On Friday, to end last week and month, tens were 4.512%. As of yesterday, a drop of 22.5 bps, essentially a rate cut, just like the Bank of Canada and ECB, except the Fed’s not in on it (but we can expect Powell to blather about the weakening job market next week).
–Because the very front end of the US curve is pinned, the reds (1-year forward) were the leaders on the SOFR strip, with March, June and Sept 2025 contracts +5.5 to 9544, 9567.5, 9587). Near one-year calendars made new lows with M4/M4 at -100.25 and U4/U5 -97.5… 4 ease territory.
–Got my name in the paper yesterday (Sun Times)…of course it didn’t have anything to do with market stuff, but rather was from a picture I had taken and shared with a friend – a cicada emerging from its shell. The constant undulating buzz from this mass of insects is now a constant…and it’s loud!
