So, let's just take a step back and examine actual value rather than just prices. What, exactly, does Space-X do that makes it worth so much? The send rockets into space but lose money doing it. They operate a space-based satellite network which provides internet connections (Starlink) which earns a modest profit and has about 10 million users. Not bad but, meh. Both of those units provide actual services however, their share of the truly astronomical valuation of Space-X is small. What, according to the S-1 filing makes Space-X worth so much? AI. Yes, AI which doesn't provide any revenues (yet) much less earnings.
For all you business owners out there here's a question: What if I told you you could value your own company at a price thousands of times higher than it actually is worth based on your actual operations simply by adding a new feature which, according to you, will change the world for the better in the future? Would you be on board with that?
Here's the thing; the world still runs on molecules. Stuff like Diesel fuel, Aluminum, Fertilizer, Rare Earth Metals, Sulphur, etc. In order for AI to do ANYTHING it still needs stuff like Copper, Silver, Lead. Oh, and Oil. Lot's of Oil!!
The data centers AI depends on to work don't build themselves, cool themselves or run themselves or pay for themselves. It takes stuff, workers and dollars. Lot's and lot's of dollars!!
Our economy and the businesses that make up a huge part of it's mass are facing severe shortages of the stuff they need to operate. Oil and the myriad of derivative products which come from processing Oil are in crisis-level deficit right now. Price means nothing if you can't produce products and services. Analysts who follow Oil and have deep knowledge about the Oil market are apoplectic right now about global reserves. Many claim we are dangerously close to Tank Bottoms which means the tanks that hold our Oil reserves will have nothing but unusable sludge in them by September.
In the coming weeks, readers will increasingly see two rarely used phrases in stories covering our dwindling worldwide oil inventories: "operational minimum" and "tank bottoms." The phrases more or less signify the same thing, though the former is more abstract and precise, while the latter is more visual. They signify rapid depletion of existing oil inventories and presage price spikes to come due to the loss of oil supplies from the Persian Gulf because of Iran's closure of the Strait of Hormuz, the maritime artery through which 20 percent of the world's oil previously flowed.
Think of it this way: Let's say you are currently spending your entire weekly salary on living expenses. Then, you suddenly have your salary cut by 20 percent. Believing that the cut is temporary, you dip into your savings account to make up for the loss of income. At the current rate of withdrawal, your savings will last four months. As the weeks go by, your savings account balance dwindles as you continue to live in the style to which you were accustomed before the salary cut. Your boss tells you (frequently!) that your full salary will soon be restored. So rather than cut back on your expenses, you keep spending down your savings, believing that all will return to normal before you exhaust your bank account.
That's what is happening in the global economy, which had about four months of buffer stocks - essentially, an "oil savings account" - to draw from at the beginning of March. We are getting closer and closer to using up those savings, which are in the form of commercial inventories. We are rapidly drawing down those inventories to make up for the loss of oil and oil products from the Persian Gulf.
I get called a "Debbie Downer" a lot when I bring this stuff up but, hey! What the hell do I know, right?
For now, Space-X holders are happy, Elon has a "T" in front of his net worth and AI is gonna save us all from unmitigated disaster...somehow.
For now, we're all good. President Trump even said "I love Inflation"! C'mon, get with the program!
The rest of us plebs and business owners have to figure out a way to make real money using real molecules and attracting real clients that demand actual products or services from us at a fair price. We have to do these things in an environment where the costs of our basic needs are exploding higher and becoming less available. These aren't simply headwinds but rather existential issues that have an exceedingly short time frame to resolve themselves while, at the same time, "markets" and media are all telling a profoundly different story while ignoring glaringly obvious facts staring all of us in the face like, for example, the fact that global oil supplies have fallen 20% since February. Losing 20% of your blood supply in a week would put you in the hospital but we're acting as if it's time to start taking Pilates. I suggest business owners hope for the best but prepare for the worst.
Meanwhile, here are where interest rates are for commercial capital:
Here are some interesting articles I saw this week which could be of interest:
“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.” - Carl Sagan, The Demon-Haunted World
"When businesses expect costs to rise, many try to purchase inventory before prices increase further.
By buying goods earlier, companies may be able to reduce future costs and protect themselves against potential supply disruptions.
Recent data suggests that many businesses are doing exactly that.
Reuters reported that U.S. wholesale inventories increased for a third consecutive month."
"The upside is we know where we stand now. Like the man who finds his wife in the truck with the guy he thought was his best friend."
"The scale of the supply shock we're seeing in the aluminum market is probably the largest single supply shock a base metals market has suffered in the post-2000 era."
"This morning the Bureau of Labor Statistics reported another really ugly wholesale inflation print, adding to a growing pile of evidence that inflation pressures are proving far more persistent than policymakers, economists, and investors had hoped."
“We’re seeing the ending of an era, not a decline, but an abrupt change. And this change is not stemming from without: The ending of the American power did not result from any foreign civil war or other war against American dominance. The end came from the United States itself in trying to juxtapose its interest as hegemon against that of every other country”.
