I only recently ran across Jay Martin’s incredible work when a PP subscriber posted a link to one of his recent videos where he compared the underlying dynamics that fueled the housing bubble to the current dynamics fueling the AI bubble.
I thought it was brilliant, and very well explained and produced. So, I started watching more of his videos and realized, “I’ve got to get Jay on my program.”
So, I reached out, we scheduled a podcast, and here it is.
The core thesis of his housing vs. AI bubble comparison is that asset bubbles don’t end when the assets fall in price; they end when the assets simply fail to go up in price fast enough to justify continued financial flows to the sector.
If the first derivative is the asset prices, the second derivative is the rate of change of those asset prices. Wonky, but essential to know and to track because it’s the second derivative that provides the early warning.
For the AI bubble, the metric to track will be the valuations that the big AI companies like OpenAI and Anthropic secure during the next round of fundraising.
Both OpenAI and Anthropic have committed to enormous future computing contracts, while generating comparatively puny revenues and large losses. As these bills come due, new capital must continually be raised to fund previous commitments, creating a circular financing structure.
Round and round it goes until it can’t anymore. At that point, look out below, because the US stock markets are seriously overweight AI and related companies.
Jay happens to be a resource investor and the organizer of the incredibly well-regarded and attended Vancouver Resource Investment Conference, so we also discussed gold, copper, and oil.
We then moved on to discuss how 2027 could be really disruptive due to food inflation from fertilizer shortages, as well as the large El Niño that has materialized this year. But also because of the growing signs of distress in the G7 bond markets, especially the U.S. Treasury market.
And we discussed a whole lot more, and we could have easily gone on 3x longer, which I have every intention of doing in future podcasts.
You’re in for a treat with this one.
Enjoy!
Timestamps
00:00 – The Money-Printing Endgame
01:21 – Why Jay Martin Started His Show
04:05 – The 2008 Housing Bubble Meets AI
06:25 – AI’s $2 Trillion Leverage Game
13:45 – China Is Coming for AI
19:40 – Why America Can’t Easily Reindustrialize
23:07 – Can the AI Bubble Be Stopped?
29:37 – The U.S. Treasury’s Creative Financing Tricks
34:38 – How Empires Debase Their Currencies
42:00 – Gold, China and the Next Reserve Currency
46:48 – The Coming Copper Supply Crisis
57:00 – Why “Drill, Baby, Drill” Isn’t Working
01:04:49 – The Debasement and Scarcity Trades
01:09:44 – Jay’s Two Investment Themes
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by cmartenson