9/26/24 Roundup: Global Liquidity in Focus

As Central Bankers cut rates and print, key September headlines suggest that the enduring theme of productivity in the private sector and profligacy in the public sector will drive the trajectory of investment opportunity in 2025.

• • Microsoft contracts power from the Three Mile Island Nuclear power plant
  • Gold pushes to another all-time high, +29.5% YTD to $2,684

Microsoft partnered with Constellation Energy to reopen Three Mile Island. That was not on most people’s bingo card last year…maybe ever. But there were signs.

Nuclear power to better drive a new souped up search engine called ChatGPT? Maybe something more as the stakes for tech dominance advance rapidly.

From the market cap and performance concentration of the U.S. magnificent seven Mega Cap tech stocks to NVIDIA’s more recent ascent to best performing S&P 500 stock since Covid, software is clearly the Killer App.

So it isn’t about Tech, its about software that needs a robust tech platform and now energy as table stakes. NVIDIA only took off after integrating software into its hardware offering. If Cisco had done the same 25 years ago, maybe it would not still be below its March 2000 peak, underperforming the S&P 500 along the way.

The changing of the guard in industry is upon us as both consumers and taxpayers.

Last month NASA was forced to commission Elon Musk’s SpaceX to retrieve astronauts stranded by the failure of a craft manufactured by old-economy Boeing. The reliance on commercial providers by NASA has been a long time in the making, but the rapid emergence of SpaceX over the embattled incumbent Boeing indicates the concentration of value and power is pan-market, both public and private.

Some may see Microsoft’s alliance with Constellation as a key move in the battle for AI dominance. We think it raises a new concern. A warning of the potential for mega cap tech’s dominance to migrate from private markets to the public realm if rockets and nuclear power are now the domain of shareholders instead of voters and legislators. Later this quarter we will share a deeper dive into how bitcoin miners fit into this fast changing, data-driven energy renaissance.

But back to markets…

Global liquidity is being conspicuously noticed by one corner of the market, gold.

The largest liquid asset in the world at ~ $18 trillion in market value hit another all-time high, +29.5% YTD to $2.684, but still not piercing $2,700. Not surprising given the growing probability of Chinese stimulus in the form of more money supply, on top of the lower ‘price’ via this week’s rate cuts and reserve ratio reductions noted above.

We’d also note that the above link listing assets by market capitalization lists bitcoin as number 10, at $1.3 trillion, behind Meta and ahead of Warren Buffet’s Berkshire Hathaway. The irony is rich.

The convergence of technology, energy, and financial markets is reshaping investment opportunities, with the private sector’s innovation and dominance (particularly in tech and energy) driving significant shifts in both market dynamics and geopolitical influence as we head into 2025. This evolution signals a blurring line between private enterprise and public policy, impacting everything from AI to commodities like bitcoin and gold.