Our AI basket and what does it mean to call something a bubble?

Listen to the full episode now or follow the Saxo Market Call on your favorite podcast app.

Today’s Links

The latest Felder Report, which includes a number of useful further links on the systemic risks that are building due to the increasing dominance of passive. Some pretty stiff warnings from GQG, for example, a manager of USD 172 billion that calls this market “Dotcom on steroids.”

Here is very well written substack that defends the Trump administration’s gambit at correcting the imbalances that have led the US economy to this point. It is a policy arc that started with Trump 1, continued in piecemeal fashion under Biden and has now been supercharged by Trump 2. I fully endorse that there has been plenty of method in the “madness” of the US’ new geostrategic “Grand Macro Strategy”. The open question is whether the US’ enemies and traditional allies of the US that don’t appreciate the method or the madness will stand by passively and bend to the US attempts at changing the landscape. Domestically, Trump is suffering record low approval ratings - he’ll need a strong turnaround in the reality for citizens at the bottom two-thirds of the income spectrum very soon if he is to see his agenda through beyond the mid-term elections - assuming these are allowed to proceed in anything resembling a democratic fashion.

A Bitcoin booster with a number of followers promises multiple times over the last 24 hours that TODAY IS THE DAY!… where we “set the foundation for a conversation” on a strategic Bitcoin reserve. I have read tried reading the papers without really comprehending the logic for as long as I was able to remain awake. There is only one thing I think I really get about crypto, which is the harnessing of crypto stablecoins to help back the US dollar. That makes perfect sense from the POV of the sovereign. It also makes perfect sense to mobilize sovereign assets and resources to invest in priorities important for national economic security, from infrastructure to key products and competencies, as well as defense and cybersecurity. But just to hold in Bitcoin? I don’t get it, even if I promise to make an effort to try to get it if Bitcoin continues higher, say, above USD 150k.

Chart and Table of the Day - Our big AI basket

As promised, below it our basket of AI stocks. My colleague Ruben has offered me some further names that deserve to be in there, and we’ll figure out additional ways to cover the AI space, but for now, we can consider this a kind of equal-weighted tracker for what is going on. As this is an equal weigh index that I will rebalance every quarter, I didn’t want to show “performance” further back than a quarter as this would presume that we could have made this selection of stocks this far back. As the weeks and months proceed, we'll eventually move the start date to September 11, the date the Saxo Market Call first labelled the current situation an “AI Bubble”. To put some reputational risk in the game, for this to have been a reasonably good call in terms of timing, we should expect a top in the coming three months or less, and certainly within six months, timing aside. As mentioned on today’s pod, a bubble call also requires a certain size in the retreat from the top. In this case, we argue that two-thirds is the minimum eventual correction needed to qualify as a “full cycle bubble” within 12-18 months.