Wall Street is struggling with the conviction that American actions are becoming too expensive, and the continuous increase in indexes indicates signs of “unrestrained optimism.” Some recommend hedging, others see excessive optimism in sectors related to the investment topics of artificial intelligence. Still others see cracks on private equity markets.
Cooperman: The bubble breaks when the market is based on the strength of inertia
Leon Cooperman, an investing veteran and head of Omega Family Office, describes the current situation on the stock markets, using the quote by Warren Buffetta from a quarter of a century ago.
– When the bull market is gaining momentum and reaches a point where everyone earns, regardless of the strategy, a crowd is pulled into the game, which reacts no longer to interest rates and profits, but simply to the fact that it seems mistaken for non -invasion of shares – said Buffett in 1999 to the magazine “Fortune”.
“This is exactly happening now,” comments Leon Cooperman.
He emphasizes that the bubbles break not when the valuations of the shares are simply overstated, but when the irrational enthusiasm of investors and market participants is powered by the force of inertia. According to Cooperman, investors' moods are currently just such, and the valuations of AI shares are “absurdly high”.
Interestingly, the analyst currently avoids government bonds even more than stock markets. In his opinion, increased inflation destroys profits from constant income instruments. “Actions are less risky than bonds at this level,” Cooperman argued on CNBC.
Goldman Sachs boss: Time for capital outflow?
David Solomon, president of Goldman Sachs, expects further economic growth in the USA, despite the weaker labor market and geopolitical turmoil.
Government expenditure and “all this construction of artificial intelligence infrastructure” mean that in general the economy is still “in good condition” – said the head of the investment bank in an interview with Bloomberg. Such a scenario should also mean a revival of mergers and acquisitions in the banking sector on the market.
Solomon expects to “withdraw” capital from the stock market over the next 12-24 months. This should not be surprising, however, taking into account the current increased valuations of the campaign, especially in some segments related to AI. “I'm not worried about what will happen next to sleep every night,” says the president of Goldman Sachs.
Chanos: Magic Machine of Private Debt
The fall of the supplier of Car parts First Brands, crushed by $ 11.6 billion of liabilities, sheds new light at risk. Funds operating on the Private Debt market such as Sagard and Strategic Value Partners granted First Brands the last loan injection before bankruptcy. Now their losses can reach hundreds of millions.
Jim Chanos, known for his successful plants against the bankrupt Enron, and currently the investment advisor, warns:
“I suspect we'll see more cases like First Brands when the cycle finally turns,” Khanos said in an interview with the Financial Times. – Especially because the Private Debt segment created another layer between lenders and borrowers.
He explains that in the face of the Renaissance of the Private Debt market, institutions invest money in this “magical machine that provides profits at the level of investment in secured debt papers.” In his opinion, high rates of return on relatively safe investments should be “the first warning signal”.
Bank of America: AI feeds on raw materials
Bank of America analysts are convinced that investors focusing on the subject of artificial intelligence should complement the portfolio with raw materials that will be necessary for further development of this technology. Indicate low valuations shares of companies related to copper production or energy production.
The British FTSE 100 index can be helpful, which includes such mining giants as Rio Tinto, Anglo American and Glencore. “Artificial intelligence eats raw materials,” say BFA analysts. The index also provides exposure to sectors that could serve as a protection against overheating of technological actions, e.g. thanks to the presence of medical sector giants such as Astrazeneca and GSK.
JPMorgan: Too much interest in the atom?
Energy demand for AI data centers also fueled interest in the related investment thesis – nuclear energy segment. According to some estimates, energy demand will lead to an investment worth $ 350 billion in nuclear energy in the USA.
Investors seem to believe it. The MVIS Global Uranium & Nuclear Energy index has increased by 71.7% from the beginning of the year, compared to an increase of 14% S & P 500 index.
Frame of VarianaValas, head of global advisory in investment banking JPMorgan Chase, wonders if this interest is not excessive. “Nuclear energy was given so much attention that it worries me,” he said in an interview with Bloomberg.
– The demand for larger amounts of energy exists here and now, but its delivery from new nuclear reactors may take some time – he says. – Nuclear energy will almost certainly survive its renaissance and in the future will have a greater share in the supply of electricity – he adds. However, the reality of nuclear energy, he claims, is that this technology is not yet ready to take the role of a leader.
