One of my faith-based beliefs is that productive assets, such as a company that makes widgets, are more valuable than rocks or metal bars. This, of course, hasn’t been true lately. Here’s the price of gold over the period of Bidenflation (we’re still in the “Bidenflation” period even without Biden, since inflation is tough to tame once it gets going, e.g., because government is nearly half the economy and many government payments are automatically indexed to inflation):
On the other hand, the S&P 500 is also way up, especially the Big Tech/AI companies.
What does ChatGPT have to say? The S&P is worth 1.7X all of the above-ground gold:
How about 10 years ago when AI wasn’t functional and productivity gains from AI weren’t baked into investor expectations? The ratio was higher: 2.35X.
So the value of productive assets, which should be enhanced by AI, have actually fallen relative to an unproductive asset, whose value shouldn’t be directly affected by AI.
Does this mean that markets don’t think that AI is useful? Or perhaps they think that AI will make some companies more productive, but it will render so many humans useless that taxes on the productive to fund idle lifestyles for the useless will wipe out any economic gains? Or maybe there is a simpler explanation, e.g., people love gold.
The media is doing a good job drumming up fear. The sub $200 AI plans are dog turds, but the gootubers spending $1000+ on claude opus plans & codex CLI plans are saying AI is undervalued if anything. The demos are convincing enough, but developing effective prompts, creating a harness for the agents to run in, & mastering the AI tools is like learning another programming language.
So much drumming by all involved — fear, shock, and awe — it’s like everybody has four sticks [1].
I see gold heavily advertised to us senior citizens on OTA television. “I like an investment I can visit in person at the bank.” Not sure what that indicates. Conjugal visits by chrysophiles?
[1]