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Davos 2024: Artificial Intelligence

Updated: Jan 16

The Davos World Economic Forum (WEF) takes place this week. Below I will highlight some key aspects of this year's meeting and how they connect to markets and the economy.

We will begin with the fact that yesterday I posted an article saying that Nvidia is now the outlier stock not only within the overall market, not only within Tech, but now even among the mega caps. So it can come as no surprise that this year's forum is all about artificial intelligence:

"DAVOS, Switzerland — For the last few years at the World Economic Forum cryptocurrency firms dominated the main strip in Davos, promoting their wares. But in 2024, artificial intelligence has taken over"

FR comment: How much I agree

"This shift underscores the rapid rise in AI investments and interest last year, sparked by the explosion of popularity of ChatGPT, the AI chatbot developed by OpenAI, and launched at the end of 2022"

FR comment: It's been a full year of this AI madness already. The AI stock melt-up began at the start of 2023, which makes this the glue sniffing stage of artificial intelligence.

No Davos confab would be complete without the usual reminder from Oxfam as to the human cost of this Roman orgy of excess:

“Extreme poverty in the poorest countries is still higher than it was pre-pandemic, yet a small number of super-rich men are racing to become the world’s first trillionaire within the next ten years"

“If current trends continue, the world will have its first trillionaire within a decade but poverty won’t be eradicated for another 229 years,” Oxfam said.

FR comment: The pandemic made global poverty worse and doubled the wealth of the ultra-wealthy. Yet if you criticize how the pandemic was handled you are treated as a societal pariah. Just today we learned that 73% of Americans have STILL not recovered from the pandemic. So it's not only the poorest countries that have not yet recovered from the pandemic, it's the wealthiest countries as well:

"The COVID-19 pandemic continues to have lasting effects, and not just on the health of Americans. Almost three-quarters of Americans (73%) are struggling financially, mainly due to the aftermath of COVID-19, according to a Real Estate Witch study conducted by Clever"

The key assumption in the Oxfam article projecting trillionaires in 10 years is "If trends continue". How likely are we to see a trillionaire within ten years when the current odds of another financial bailout for the ultra-wealthy are now the limit approaching zero?

A couple other questions are raised by the "theme" of this confab: If the economy is doing "so well" as we are told constantly by bullish pundits, then why are so few people enjoying the benefits?

And then the obvious follow-on question: if the economy is doing so well, then why is the deflationary Tech sector leading while economic cyclicals such as Materials, Financials, and Energy have the largest earnings declines in the fourth quarter as I just showed earlier today?

Just as multi-billionaires ignore global poverty at their peril, investors have been ignoring stock market inequality for the entire past year.

All warnings ignored.

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