Yes, the Superbowl was two weeks ago and yes it was a great game that went into overtime. Yes, we overindulged in result.
But sheesh. One would think that by now, the chips and dip supply/demand curve would have normalized.
But one would be wrong on that score.
Because, by all observation, each commodity is materially divergent from an equilibrium state.
Let’s begin with chips, a product the demand for which is difficult to observe. We can only instead engage in that forlorn exercise, practiced so dismally by dismal scientists everywhere, of estimation.
And our best predictive proxy, which you probably have already guessed, is the astounding performance of bull goose AI chip manufacturer Nvidia, which: a) reported on Wednesday; b) blew the doors off of expectations; c) obliterated the recent, META-set record for single day valuation gains ($277B – an amount greater than the capitalization of all but thirty companies in the global equity complex), and d) shot past the $2T valuation threshold, rendering it the fourth most valuable company in the world. It also, as pined for in last week’s note, revitalized an equity rally that was beginning to look a little saggy in the socks. Meantime, I am now interconnected with 5 of the Mag 7 – a multi-functional user of Microsoft, running my scripts on Apple products – including my aggressive posting of cat pics on Facebook, on the many devices I purchased on Amazon. I Happily search my way through Google, watching the NFL on its YouTube sub. No, I don’t own a Tesla but you gotta draw the line somewheres.
All of which leaves me one short of 7. So, I’m thinkin’ I probably gotta get me some chips, preferably of the NVDA variety. The good news is that you can buy these little buggers on Amazon Prime. The bad? The cheapest of these bad boys will set you back about seven hundred big ones and will take more’n a week to land on your doorstep.
I think I can rustle up the 7 Benjis. But I’m not sure I can wait that long for delivery.
Until then, I’ll just gaze longingly at the product image:
I reckon we can always crank up the foundries/chip factories to meet attendant demand, which appears to be insatiable.
So, I am not going allocate any of my worry to issues that may arise in this pursuit.
Dips. Now that’s another kettle ‘o fish entirely, coming as they do in so many varieties. You’ve got yer tomato-based, avocado-sourced, dairy derivative, and legume originated. There’s something called humus, which I truly do not understand. Dips can also be, or so I am informed, made from caramelized onions. Heck, I have even heard unconfirmed rumors that some demented enterprises sell concoctions based on such back benching foodstuffs as celery and kale.
On the finance side, DIP is an acronym for Debtor in Possession, a trade upon which – trust me – you do not wanna be on the other side. But in the liquid markets, all roads dip in one direction – a noticeable drop in the price of a financial instrument. Unlike chips, dips are a mixed blessing. Nobody particularly wishes to see the dip descend upon what they own, but, more philosophically, market dips are, it can be argued, a healthy element of the construct, offering, as they do, opportunities for strategic and tactical buying, a rationalization of pricing dynamics and other bennies.
Problem is, there ain’t no dips in sight, the last one of any materiality having transpired in October, in result of that nasty attack on a bunch of civilians in Israel. That there conflict is still raging, with much of the world turning its sympathies towards the victims of Israel’s indisputably forceful response.
Tempting though it is, I won’t go down the rabbit hole of offering my opinions on this mess. Suffice to say: 1) the speedy pivot, with barely concealed glee, to blaming the victim nation for the conflict has distressed me; and 2) investors have not cared sufficiently about this to manifest even a skinny 2% pullback in the intervening period.
Nope, investors don’t care. No dips for you. 4 months. And running.
All of which has caused the historic alliance of chips and dip to fray at the edges. The world will take all the chips it can get, dipless though they may be.
We’ll just choke them chips down dry, thank you very much.
And I am starting to believe that the fissure will continue, nay, expand. That the more the world demands of chips, the fewer are the dips that will materialize.
Because the hard fact is that the rate of acceleration of technology development is, well, accelerating – in terms of processing power, the range and scopes of tasks it can and will handle, and other factors.
Yes, there’s AI, but there’s also Quantum Computing. Put these two together and you arrive at a chip- rich dip-bereft market environment.
So, I recommend against shorting NVDA – at these or even significantly higher valuations.
My hunch is that we’re gonna be compelled to pay a heavy price for all the monkey muffins we’ve dropped on this economy since the turn of the century. These the wages of some truly self-serving and economically unholy actions of which we all are guilty.
If I’m right on this, then the associated drop will be more than a dip, might even devolve into a full-scale crash. There is no shortage of catalysts for such a contingency.
Our pig circus that passes for domestic politics could devolve into something deeply unpleasant and perhaps unfixable. Hostile forces around the globe – from the Persian Gulf to the steppes of the Urals to the Yangtze River and beyond could mess with our flow in unthinkable ways. Our bloated credit complex could collapse, taking us back to the good old days of ‘08/’09.
These will be significant tests for our resolve and other human qualities, but, if we survive them, the upside deriving from the next wave of technological innovation is mind-boggling to contemplate. We’re not simply talking about creating term papers with single clicks on our laptops or Power Point presentations generated through this same conveyance. Health Care, Manufacturing, Agriculture, Transportation, all stand to be re-engineered, with unimaginable productivity gains sprinkled like angel dust on the investing masses.
Gloomy Gusses will point out the potential of untold jobs being rendered obsolete. Please. The blacksmith workforce was completely subsumed (and then some) into manufacturing assembly lines. Yes, some clerks lost their lousy gigs at Blockbuster, but how many jobs have replaced them in the realms of streaming content?
Thus, if we can survive (and that, admittedly, is a big “if”), the gains to the capital, commercial and consumer economies stand to be transformative.
But all that is perhaps peering down the road to far — certainly beyond our range of visibility. I don’t see either the big reckoning or the innovation renaissance taking hold on the immediate horizon.
But, meantime, there ain’t much to complain about respecting prevailing market conditions. There are innumerable reasons to expect the worst from the tape, all of them valid, but this has been the case since markets organized themselves a few thousand years ago.
I think that in the meanwhile, the backdrop against which those inclined to add to their holdings is favorable for the cycle.
So, maybe it’s time again to throw a party. Even a stag(flation) party (see last week’s note), which, even if it emerges, I don’t think will do much to stem the demand for chips or the disappearance of dips from the realms of investment.
So, if chips are on back order and dips are nowhere to be found, well, I’m highly confident that with some imagination, most of you will find adequate, alternative forms of refreshment.
TIMSHEL