Some deep reading
Getting a temperature check here on reader sentiment towards AI. I’d appreciate it if you answer this poll:
Things are heating up again in the Middle East. The US and Iran are exchanging fire in the Strait of Hormuz again, while Iran is back to firing missiles at the UAE and Qatar. The US maintains that Project Freedom is a defensive operation and is trying its best to prevent these hostilities from escalating into a full out war again. If they succeed in helping ships move through the SoH unharmed, the US will have the upper hand in this war and oil prices may come under pressure. If the operation fails or breaks out into full hostilities, then we may see oil prices continue their climb.
Brent crude is only up $5 despite the resumption of hostilities. The muted price response has frustrated oil bulls, who probably expected oil to be in the $150-200 range by now. The inflection point when inventories will get drawn down and the supply crunch finally becomes real is always around the corner.
I believe the answer to this conundrum is that global demand destruction has been greater than expected. Unfortunately there is no way to properly measure the reduction of demand for petroleum products, so demand destruction falls under the radar. Examples of demand destruction include Thailand and Indonesia mandating or encouraging work from home, South Korea implementing driving bans, airlines cutting tens of thousands of flights, while airlines such as Spirit Airlines go out of business, and Malaysia launching a biodiesel fuel plan to reduce reliance on traditional diesel.
The war in Iran is also accelerating the shift to EVs and clean energy. Despite everything Trump has done to kill clean energy and abandon the fight against climate change, it is ironic that his decisions are doing more to accelerate the shift away from fossil fuels than any other US government policy has ever done. This is why I believe my portfolio holding LIT, the Global Lithium and Battery Tech ETF, will outperform.
I had nothing on the calendar until 6 pm today so I dedicated the day to some deep reading on AI. Thank you to those who shared these articles with me (you know who you are). The following pieces were insightful and helped me shape some of my thinking on AI:
Tracking Trillions: The Assumptions Shaping the Scale of the AI Build-Out - GS
-Explains the key variables that will affect AI capex spending
Turning humanoid supply chain constraints into billion-dollar wins
-A primer on the various supply chains and bottlenecks that will benefit from humanoid robots. A starting point for researching a few longs in this area.
AI isn’t coming for your job. It’s coming for your mind
-By offloading cognitive effort onto AI, we are weakening our minds and reducing our ability to think critically. This is why I shy away from summarization tools and still read every article and link without using AI to summarize. I also write every post in this newsletter with my own hands because I believe writing is a skill that needs to be developed and maintained (although I sometimes ask AI to proofread and polish my draft if I’m running short on time).
Say Hello to the Internet of AI
-How digital networking is exploding and changing in architecture
Deep Dive: Where Value Accrues in the AI Stack
-This post by Social Capital is paywalled but is a nice 144 pager on how to identity where one should be investing. Don’t be intimidated by the length as each page is in slide format. It’s also written for relative novices to AI.
Warren Pies explains why the demand for compute dwarfs whatever is happening in the Strait of Hormuz, and the dynamics affecting the oil price.
Disclaimer: The content of this newsletter is provided for informational and educational purposes only and should not be construed as professional financial advice, investment recommendations, or a solicitation to buy or sell any securities or instruments. The newsletter is not a trade signaling service and the author strongly discourages readers from following his trades without experience and doing research on those markets. The author of this newsletter is not a registered investment advisor or financial planner. The information presented on this newsletter is based on his own research and experience, and should not be considered as personalized investment advice. Any investment or trading decisions you make based on the content of this newsletter are at your own risk. Past performance is not indicative of future results. All investments carry the risk of loss, and there is no guarantee that any trade or strategy discussed in this newsletter will be profitable or suitable for your specific situation. The author of this newsletter disclaims any and all liability relating to any actions taken or not taken based on the content of this newsletter. The author of this newsletter is not responsible for any losses, damages, or liabilities that may arise from the use or misuse of the information provided.