Macro Trends vs Micro Risk: AI's Role in Shaping Markets, Industry & Art

Join David Nelson, CFA host of "The Money Runner" podcast. The episode dives deep into the fascinating interplay between macroeconomic trends and micro-level risks. Discover how artificial intelligence (AI) is not only revolutionizing financial markets but also reshaping industry and the arts. 

From a remarkable market recovery to AI's transformative impact on music and technological innovation, explore how AI navigates the complexities of modern economies. We'll dissect recent movements in retail giants like Wal-Mart, dive into tech's fluctuating fortunes, and evaluate the intricate dance between economic policies and market reactions. Whether you're an investor, a technologist, or an art enthusiast, this episode offers valuable insights into how AI is influencing both the macro and micro facets of our world. 

As an added bonus David introduces Chris Patti's new digital artist "Siphia".  Trust me, you don't want to miss this.

Disclosure: "At the time of this article I currently hold shares in some of the companies mentioned as part of investment portfolios in funds I manage for Belpointe. Additionally, I may discuss other securities that are under consideration for future investment; however, discussing these securities is not a recommendation to buy, sell, or hold. My mention of these securities reflects my personal opinion and analysis at this moment and may change without notice. Please remember that all investments involve risks, including the possible loss of principal."

Transcript

0:03

Nothing changes sentiment like price. Ten days ago we were looking at a growth scare and a full blown global meltdown. A little more than a week later, markets have more than retraced the losses, sitting just shy of another all time high, Thursday's 1.6% markets surge was rock solid, the price momentum never let up. In the last several weeks. Even on strong up days, you would see lots of attempts to sell into the strength, take profits and or put on short positions. Not Thursday. All the attempts to do just that failed, at least for a day. Investors were buying into the thesis that the Fed would stick the landing. I don't want to be a Debbie Downer, but the macro data isn't confirming the micro. Welcome to the Money Runner. I'm David Nelson. Thursday's market surge was driven by a retail sales number coming in at the high end of expectations, coupled with better than expected earnings from the world's largest retailer, Walmart. The above begs the question is good news at Wal-Mart coming at the expense of other retailers? Or are the reports from Home Depot, McDonald's, Brinker, Walgreens and Amazon? One off scenarios and the economy is doing just fine. The truth rarely lives on the extremes, so I suspect it's somewhere in the middle, to be sure. A deep dive into the company reports mentioned above shows a challenged consumer careful with discretionary dollars. And for some retailers and restaurants, margins were struggle. Not so Wal-Mart, which shined in almost every category, managed to beat on margins. By the way, one of the data points in the retail report that should be at least mentioned was the big jump in auto sales, in part getting a bump in demand following a cyberattack that disrupted dealer operations in June. Markets and the economy are no different than the animal kingdom. The strong and the powerful thrive and the weak struggle to survive while Wal Mart jumped to all time highs. Dillard's cratered 10%, missing earnings by a country mile as margins collapsed enough of retail. Let's turn to tech secular investment themes, including artificial intelligence. Like others in the past, we'll go through periods of peaks and valleys that will challenge both bulls and bears to defend their trades. Bulls will push their stocks beyond what current economic support and bears will overstay their welcome. All new technology platforms go through these cycles, especially one is disruptive as they are not unlike the build out of the internet in the nineties, the A.I. trade will continue to have these major corrections, but to date I still see nothing to challenge the idea that this is one of the most important investment themes in a generation. I don't mean just stocks. I was a recording artist years ago and I'm already listening to music created with A.I. prompts that will blow your mind. Check out my good friend Chris Patti’s Siphia, a new digital artist. Let me know what you think. Shadows fade in the glowing light dancing through till the morning’s sight, feel the night ignite in electric hue. Found my rythum I’m chasing you A I is a tool that even artists will embrace. But it will be the artist in partnership with technology. And again, you'll have to be an artist to make it work. A I will weave itself through the fabric of the industrial complex. It will be disruptive. It will stumble and fall, but in the end will be indispensable. As a technology platform everyone will embrace. is Nvidia ahead of its fundamentals. Maybe, but ask yourself where it will be in a couple of years. How about Broadcom, Dell or Supermicro? Do you think the buildout of these data centers won't have the customers to justify the expense? Maybe in the short run, but I suspect long term investors will be rewarded. The market is moving beyond the MAG 7. My original thesis was if the economy rolls over, the market will embrace the pristine balance sheets of Apple, Microsoft, alphabet, meta and others. I think that's still true, but not all mag seven players are the same. Increasingly, I'm concerned with Alphabet and have since sold off about 25% of the position the DOJ may be in the process of trying to break up the company, but that's not the big concern. First, the DOJ efforts that could take a long time to play out, and there is always the appeals process. My real concern centers on search the cash cow of alphabet. Google will clearly be a leader in AI, but I'm already using other A.I. platforms for search, like open A.I. perplexity and others, and they're all good. By definition, Alphabet will lose some market share. Additionally, I'm not sure how the current business model will be able to monetize search in an AI world. What about the Fed? Maybe we give the Fed too much credit. Investors obsess over the Fed's next move. Will they or won't they cut? And if they do, by how much? And Oh, my God, what if they don't? I still believe the Fed is behind the curve. Real rates are still in restrictive territory. Inflation data continues to fall. Manufacturing data is still weak. And for my money, we're seeing cracks in the facade of the shop until you drop consumer. I believe the Fed needs to cut right now takes a long time for monetary policy to wash through the system. It was that way with rates on the way up and it will be that way on the way down. When it comes to sticking the landing, the history of the FOMC, it's not good. But even if they're late, eventually they'll get it right. The bigger concern for me is what we saw last week. Markets don't crater without reason. The leverage unwind we saw last week could happen next time. There's a liquidity crunch. Systematic traders running investment books levered up three, four, five times, only need a trigger before it's déja vu all over again. Like I said, it's always the smartest guys in the room that cause the most market damage. Well, that's it for this week. I hope you enjoyed today's pod. And if you did, you know the drill. Please hit subscribe and you'll find a lot more on my substack site. DCNELSON123@SUBSTACK.COM I'm David Nelson and this is the Money Runner.