Biden's Techno-Imperial Cycle
...and the Techno-AI Cycle as part of it
Reading Time: 12 minutes
Since the attempted shooting of DJT, talks of the Trump Trade have been re-invigorated. Markets now predict a Trump Presidency as all but certain.
I agree that the Donald will be elected too, but I don’t blindly believe in linear ways of predicting markets in the manner of:
“What happened last time DJT was president?”
And then deducing from that the things that are bound to happen again…If you want an edge from markets, you need a big picture way of looking at things.
I mapped out the main processes I think are shaping the market setup — and I uncovered two main boom/bust processes.
—» The Techno-AI cycle
—» Biden’s Techno-Imperial Cycle (or Techno-Expansion Cycle)
Let’s start with the Techno-AI Cycle…
The Techno-AI Cycle
It’s no secret that the US and its Big Tech companies dominate the global technology markets, the US was always on the cusp of this trade. The Chinese know this and have been trying to close the gap, either by trying to catch up or by closing up their own markets to US competition.
For example, Google isn’t allowed in China and so Baidu is the leader in search.
US dominance in internet and technology has been a great boon for the economy for more than two decades now — allowing US equity markets to not only over-perform but also consistently attract foreign capital.
Rising equity prices propelled US household wealth, boosting purchase power and resulting in wealth effects.
This accelerated post-Covid…
While the rest of the world was reeling from Covid lockdowns and fears of a steeper economic recession, the US economy was benefiting from massive stimulus.
On March 27th 2020, Trump signed the biggest stimulus package in US history — $2 trillion. The super fast response from the US was the reason US equities bounced back fast and strong.
Confidence in the US economy was reinforced and the S&P 500 is now 150% higher than the Covid bottom of March 2020.
Biden is inaugurated…
By January of 2021, Biden was inaugurated as POTUS. The economy was already recovering and unemployment was dropping fast.
But Biden knew not to miss a great massive fiscal stimulus opportunity — to shore up his chances of being re-elected. INCENTIVES!
We will get back to Bidenomics later in the piece, but for now I should note that the massive fiscal expansion with the war in Ukraine on top resulted in spiking inflation.
The Fed was then forced to act by hiking rates fast — scaring investors and spooking stocks. The broad-market sell off started in January 2022 and went on until October 2022, right about the time Chat GPT was launched.
Chat GPT is Launched!
And this is where, strictly speaking, the process of the Techno-AI Boom/Bust process starts.
Start with the white box on the upper left and move clockwise following the arrows.
Fallibility & Reflexivity
Our understanding of reality is always flawed, that’s the fallibility part —the reflexivity part is when our understanding of reality alters reality itself.
We are in far-from-equilibrium conditions when there is a clear reflexive connection happening between the fundamentals and our perceptions of the fundamentals.
Boom/Bust
The reflexive connections range from the big and obvious to the small and insignificant — but all together they unite to create extreme fluctuations not only in security prices but in the underlying fundamentals as well.
Let’s uncover the connections and incentives shaping the whole setup…