Ian Harnett

Just in case you thought it was only US Equities that are expensive. This is the dispersion of Sector Price / Book ratios for World ex US sectors…

While the US market may be supported by forward EPS valuations, the dispersion of 'fundamental' valuation metrics like Price/ Cash is extreme. As we noted in our research report for @asr_london clients recently, the Price/Cash dispersion has tended to peak around market reversals

If you would like to see more of our award winning research drop me a line, or visit www.absolute-strategy.com/blog

Many thanks to @robarmstrong.bsky.social at the @financialtimes.com for highlighting our ASR research note, "No Smoke Without Fire" where we explored the recent stress for BDCs/Asset Managers - and noted the latter moving into a 'bear market'. This was in the context of the Blackstone results

James. Yes it is… the lifespan of the data centres probably isn’t. That could be the kind of capacity that finds a new use if it gets written down - but I will probably be writing on this soon for our clients.

Yes. The lessons tend to show the larger players may well survive - but they are not able to escape a pretty harrowing time if this cycle follows those of the past. Thank you for the question. Ian H

@tonytassell.bsky.social and @raydouglas.bsky.social many thanks again for your help with this article. These pieces are always improved by your efforts - I am always very grateful. Ian H

Thank you for the kind words. I suspect that price action wi come quite quickly once the process brings to peak - but I think we will see the pre-cursor in falling cashflows of potential buyers of the AI services.

The AI capex endgame is approaching The rapid building of excess capacity both extends bubbles and ultimately bursts them

Please read the full Financial Times article. It would be great to have your comments in the FT article itself, or feedback here, my views, especially on what I might have got wrong! It’s important for all to investors to fully appreciate both sides of the argument

www.ft.com/content/c7b9...

The AI capex endgame is approaching The rapid building of excess capacity both extends bubbles and ultimately bursts them

The key point is that the long run adoption of new General Purpose Technologies nearly always see these kinds of capex bubbles - but that over expansion leads to a bust which triggers a process of creative destruction to occur (Schumpeterian Waste), where cheap assets can be broadly accessed.

The AI capex endgame is approaching The rapid building of excess capacity both extends bubbles and ultimately bursts them

Many thanks to @tonytassell.bsky.social at the @financialtimes.com Times for asking me to share my thoughts on why I believe the AI capex boom signals the start of the end-game for this phase of the AI bubble.

www.ft.com/content/c7b9...

Many thanks to @robarmstrong.bsky.social for including this ASR chart and comment in his recent Unhedged column for the @financialtimes.com. We showed how the US market is not just over-valued but also over-owned

While society gains from these bubbles in the long run - it is equity holders that pay - often with declines of 70%-80% in the value of their equity holdings.

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However, we highligh that this capex excess is essential to the eventual success of these new technologies.

The reduced cost of capital that these new GPTS see in their ‘bubble’ phases and rapid build out of excess capex. This ‘schumpterian waste’ that is essential to their eventual ubiquity.

The AI capex boom is the final signal that we are in the end-game phase lf the AI ‘bubble’

We recently wrote a paper for Absolute Strategy Research Ltd clients highlighting how the capex boom in AI is the last of five classic signals that are typically seen as we reach the final stages of bubbles.

The Nixon tariffs were much smaller in size and only in place for four months - making them a poor starting point for thinking about what ‘might’ happen when the full impact of tariffs hit home…

Lessons from the 1920s and 30s on tariffs and markets Investors today might be too complacent about the risks to earnings from slower growth and higher inflation

Many thanks to Tony Tassell at the Financial Times for publishing my article on lessons from the 1920s and ‘30s on tariffs and markets. It may be coincidence, but profits only fell much as they did in in the GFC were around the tariffs of the early 1920s and early 1930s.

www.ft.com/content/ea29...

Tony has flagged the provisions in the new Budget Bill that move us closer to a world where capital is explicitly weaponised… not a surprise… but definitely unwelcome for markets. Kind of Tony to repost the FT insight article that we wrote warning of the risk of just such a development.

Thank you for sharing. I had not see this paper. Ian H

How ‘weaponised trade’ could lead to ‘weaponised capital’ As international structures that promoted free trade are unwound, there is a rising risk of a return to capital controls

Many thanks to the FT for inviting me to share my views on the risks to global capital flows from the #liberationday tariffs

www.ft.com/content/c564...

Many thanks to Jonathan Shapiro at the Australian Financial Review for his coverage of the ASR views on the potential impact and importance of the U.S. Department of the Treasury Sovereign Wealth Fund. This will have an impact, not only in the US, but also for Global investors.

Michael - I think that the answer has to be 'not a lot'.... 😉

Tony - could not agree more - David Bowers and I were in the US last week suggesting to ASR clients exactly the same things - this is a coherent philosophical shift in regime and that tariffs are a prelude to capital controls and the end of globally portable capital. This as the chart shows why!

@adamtooze.bsky.social - even more impressive is that you can replace that pre-GFC trend line with actual US productivity! This chart shows the impact of persistent UK policy failures. We use this chart with the ASR clients to highlight the degree to which the UK deserves its low equity valuation.

This was a recent #ASRchartoftheday a week or two back - available to Absolute Strategy Research Ltd clients via their client relationship manager. If you would like to know more contact us here www.absolute-strategy.com/blog. Or you can follow both ASR and me on LinkedIn for additional insights.

Indeed, while everyone focuses on the strategic risks for the US from foreign holdings of US Treasuries, it's worth noting how a buyers’ strike, or the coordinated sale of some of the the 17.4% of Equities held by foreign investors could also, potentially, have an impact.

Who owns US Equities? As the US market comes under pressure, it is worth looking at how the ownership of the US market has changed in the last 75 years. This has shifted from a market owned mainly by US households, to one where institutions and foreign investors have key holdings.

Very kind of @nixonsimon.bsky.social to flag my recent article on the #USsovereignwealthfund in his latest #wealthofnations article. We have suggested to @asr_london clients that investors need to take the US SWF more seriously. If you wand to read the article visit www.absolute-strategy.com/blog

Great to be in Washington DC with my Absolute Strategy Research Ltd co-founder at the start of a week seeing key clients and prospects to talk about the actions that we might expect from the #treasury and the #Fed and what these might mean for #globaleconomics and #assetallocation

@mccrum.bsky.social nice article. Thank you. It confirms the old saying that ‘if you want to make a small fortune in aviation…make sure that you start with a very large one’!