Markets & Politics Propelled By “Joy”

McAlvany Weekly Commentary

NVIDIA: $3 Trillion In 21 Months "This Time Is Different" Is Always The Same Jackson Hole Gift Signals September Rate Cut "Politicians will lay claim to the stock market's success if they have success on their watch, and they're blamed by others for its failure. And perhaps it's more coincidence. Perhaps the trends in play are beyond the ability of either party or candidate to control. Only versions of the outcome exist. So an individual politician in a policy suite may make something a little better or a little worse by the policies chosen. But if markets run in cycles, politicians are closer to being coincidental to that history." - David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary, I'm Kevin Orrick, along with David McAlvany. Well, Dave, last week we talked about a 400 ounce bar of gold being over a million dollars for the first time, but as we speak today, it still is over a million dollars. What are you thinking about gold right now? David: Well, sometimes you see these price moves and it is a flash in the pan. And when we had the Russians invade Ukraine, the price went higher. The COT reports got very clustered and crowded. Kevin: That's the Commitment of Traders when you say COT. David: That's right. That's right. And it was a flash in the pan. Kevin: Right. David: I have a feeling that this is a little bit different, and there are a wide array of things that the global audience of investors are looking at and they're not being appeased. There is nothing. Even Nvidia's reports this quarter, it's not enough to keep them from adding to their ounces. Kevin: Well, yeah, it's interesting. Nvidia has been sort of an anomaly. I can't help, when we're talking about Nvidia, I'm thinking about artificial intelligence and I think a little bit about the history of the computer. Von Neumann during the Manhattan Project and other guys working on the IBM computers that ultimately became IBM computers when they were figuring out how to actually make the A-bomb work. But Alan Turing was brought in as well, and they said, "How someday will we know whether it's actually artificial intelligence or whether it's human intelligence?" And so Alan Turing came up with something called the Turing Test to determine whether a computer can actually imitate a human. Now my question would be this, though. Artificial intelligence, AI, has caused Nvidia and other stocks to go through the roof. Is there a test like the Turing Test where we can see, are we in artificial valuation territory, Dave, not artificial intelligence, but artificial valuation? David: Well, of course. And that's one of the reasons why our conversations with Andrew Smithers have been so important. Go back to the archives and listen to those. Or if you want to make your way to Amazon and order a few books, The Q Ratio, I think he wrote that in about the year 2000, and then a few years after, Valuing Wall Street with Stephen Wright, and they were co-authors. And just a brilliant look at how you can look at 10 or 20 different measures of value and which of those 10 or 20 are the very best in terms of consistency through time, through any cycle. And they land on the cyclically adjusted price earnings multiple and Tobin's Q, which is just the measure of the value of stocks compared to their replacement cost. Kevin: Right. Well, and the cyclically adjusted price earnings ratio, a person can google that and just look at the last few decades and just look and see how it tracks. Stock market rises and crashes valuations when they get too high, it always points— That is a good test when I ask about artificial valuation or true valuation. David: Yeah. Now that is one that's looking at earnings. If you're looking for an egregious mark to absurdity, it is Nvidia at price to sales of over 40 times. This week Nvidia reports for the quarter. Why does everyone seem to care? Bank of America study shows 78% correlation between Nvidia shar...