COPIERS AND FOLLOWERS UPDATE
Hi everyone, another update from me as May has bounced back from the shocks caused by the Iran conflict, with investors seemingly discounting risks from high oil prices and increasingly lower inventories.
A solid tech earnings season has seen earlier investor jitters replaced with bullishness over the AI infrastructure build out. According to Dan Ives at Wedbush Securities, “These earnings have validated the AI bullish thesis”, adding that “Demand and supply is 10-1 for chips” and mentioning that we are still in the “early days of the AI revolution”.
However, the earlier calls from last year concerning the stock market's fixation on AI resembling a bubble are starting to get louder, with Michael Burry amongst others finding comparisons with the final stages of the dot-com bubble at the turn of the 2000s. The worry is that stocks are going up due to increasing amounts of mania for these tech stocks and not because of jobs or consumer sentiment, the later of which has been down for a while.
The country that has been at the centre of this AI stock frenzy has been South Korea, where the Kospi index, after climbing over 80% last year, is up more than 90% this year. Along the way, the Korean stock market's total capitalisation has overtaken both the UK and France, making it the eighth largest in the world.
Samsung, together with fellow chipmaker SK Hynix, account for over half the whole index and is up over 400% in the past 12 months. SK Hynix has tripled its value this year and is just shy of 1000% increase since May last year. In South Korea investment accounts have soared in popularity with an average of over 2 accounts for every man, woman and child in the country. Margin lending has reached a new high along with a big increase in older citizens cashing in their life insurance policies to buy more stocks.
Mania in one country is one thing and even the rise in US tech stocks inches the bigger markets closer to a bubble. But analysts like Ives still reckon there could be another 1 to 2 years of the AI hype to come this time round. What I am more concerned about is what I mentioned in my last post regarding oil inventories, and it is very possible that there could be a big supply shock coming soon.
The war in Iran, despite ceasefires and headlines of deals within touching distance, still goes on, along with the stalemate over the Strait of Hormuz. Whilst countries I don't think would really admit having a shortage of oil, if and when shortages materialise I think we could see a huge price hike in oil and probably quite significant negative ramifications for stock markets. Whilst the AI trade may have further to go, any sudden supply panic in markets could well take the AI stocks along with it.
That is why we continue to have cash on the side and, although our AI exposure is relatively small, the portfolio has continued to grow this month as well.
At the end of last month I closed a few more positions, with Alaska Airlines, along with most other aviation stocks, too exposed to jet fuel shortages for me to feel comfortable holding it any longer. As well as this we cashed in good profits in our mid and large cap ETFs, as oil and price stocks hit smaller companies harder, due amongst other thing to lack of pricing and purchasing power.
Please keep watching out for more updates coming from me and rest assured I will be continuing to watch what is happening in markets most earnestly.
Best wishes, Richard.... Show More
Not investment advice. The author may have financial interests in the mentioned instruments.
5
0
0
.
We use our own and third-party cookies on our websites to enhance your experience, analyze traffic, and for security and marketing. For more info, see our Cookie Policy or go to Manage Settings.
Privacy Preference Center
When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.
More information
Manage Consent Preferences
Strictly Necessary Cookies
Always Active
These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.
Performance Cookies
These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.
Functional Cookies
These cookies enable the website to provide enhanced functionality and personalisation. They may be set by us or by third party providers whose services we have added to our pages. If you do not allow these cookies then some or all of these services may not function properly.
Targeting Cookies
These cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.
