The last four years were a succession of black swans that could have easily derailed the bull market on Wall Street but did not though the short term corrections on Nasdaq were both savage in their intensity. These black swans include the Russian invasion of Ukraine, Powell’s U-turn from “inflation is transitory” to the swiftest, most brutal Fed interest rate tightening policy since Paul Volcker, the sudden collapse of Silicon Valley Bank on the asset liability maturity mismatch that has killed banks ever since Renaissance Florence of the Medici clan, the Japanese yen carry trade unwind in August 2024, the bond market temper tantrum on the Powell FOMC’s September 2024 rate cuts, the reemergence of Donald Trump on the world stage in the November election, Orange Man’s wild disruption on tariffs, Greenland, NATO, the annexation of Canada, Midnight Hammer and finally the US-Israeli airstrikes on Iran and the biggest energy supply shock in history after Ayatollah Khamenei ordered closure of the Strait of Hormuz.
I am surprised that the rise in the dollar was so muted in these multiple crises, US economic growth was so resilient, AI capex so spectacular even though non-tech capex no longer exists, bank stocks were such a beauty (rode the Citi roller coaster from 65 to 130 but still at only 1.3 price to book now. Thank you Jane!) and credit spreads are so easily narrow even as direct lending/private credit is subprime 2.0.
To butcher Tolstoy’s famous observation in Anna Karenina, all bull markets are not alike, happy or unhappy. The best bull markets are those not founded on off-plan speculation with looney tune leverage, guess who?, but a structural rise in demand that makes all my Champagne wishes and caviar dreams come true even while the world has gone mad. This is why I fell in love with Dr. Copper last summer and outlined my arguments ad infinitum several times in multiple posts.
Copper repaid my love and the red metal is up 35-37% in both COMEX and London. Yet I am still convinced that we are in the very early stages of a structural bull market that I believe will define my investment focus for the next five years.
The numbers are staggering. Almost a trillion dollars in AI capex spending by the US hyperscalers, Anthropic alone has raised its revenue to $45 billion, up 80X according to Dario. Now wonder the insatiable demand for compute will only rise and make copper the hottest strategic commodity on earth since crude oil in October 1973.
The twilight in the desert has taken a toll on OPEC but the sunrise has barely begun in Congo’s heart of darkness. The copper mountain glows red in the African bush as its math in the Age of AI is pure poetry for me.
A typical large AI campus is designed around a power blocks of 50 – 150 megawatts. Each megawatt equates to 33 tonnes of copper consumption in installed capacity. This is a game changer second derivative on AI where the risk/reward calculus is nowhere near as dangerous as skating on Planet Chipster on the eve of the biggest bubble blow up since GFC. So copper is my fave hard asset once $40 trillion dollars in national debt, $5 a gallon gasoline and the highest credit card/student loan delinquency since Lehman went to money haven in 2028. A glimpse of the future? Zohran and his Lenin lite Dems take control of the house and senate to banish MAGA into the garbage heap of American history and demand payback from the White House, Fortune 500 and Wall Street. State owned grocery stores and free bus rides with 80% income taxes is one black swan that will finally make this the unhappiest of all bull market families. That much, at least, is certain!
Also published on Medium.
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