As Bank Earnings Unfold, We’re Watching Gold

Earnings season has once again started, and Wall Street’s “too big to fail” banks are up in the spotlight.

Results are still strong, with no significant sign of deterioration from JPMorgan Chase, Wells Fargo, and Goldman Sachs.

Goldman and Morgan bear a close watch, as both companies are heavily involved in creating the debts that go into today’s AI funding supercycle. If there’s a slowdown or blowup in the AI funding space, so would go tge AI investment thesis.

Already, we’re hearing that many of the big banks that backed debt deals are having trouble entirely unloading their book. That’s giving echoes of 2008’s credit crisis and the 2000 dotcom bubble top at the same time.

One measure caught our eye – the correlation between bank stocks and gold. It looks like it is breaking down. If so, the yellow metal is a better investment than shares in the “too big to fail” crowd, which periodically fails.

Looking at JPMorgan, the best of the big banks in terms of management and balance sheet, and gold, we can see the relationship starting to break down.

The past is no guarantee of the future. But gold is holding up mighty well considering the surge in interest rates this year. And in a crisis, gold will get a bid, right as investors flood back into the bond market and push down yields there.

Also in a crisis? The banks are usually in the spotlight. This time around, we may finally get a sense of who really controls all the “off balance sheet” and “special purpose vehicles” that are being used to fuel the AI debt boom.

Given the choice between buying banks here, even with their decent earnings numbers, or continuing to back gold, the data looks stronger for gold. Andrew’s trade today is unique…

~ Addison

P.S. Last week, Grey Swan Live! returned with John Robb.

We continued the conversation that John started in recent issues of the Grey Swan Bulletin.

Specifically, we reviewed John’s thesis that the age of “mass” – dominated by large nation-states and large corporations –  is giving way to a new geopolitical order.

• Mass media has already fractured into millions of competing voices.
• Politics no longer produces anything resembling national consensus.
• AI is beginning to dismantle the mass market.
• And cheap drones and robotics are changing warfare so dramatically that relatively small countries can increasingly frustrate much larger military powers.

John argues these aren’t separate stories.

They’re manifestations of the same technological shift.

The replay is up on the site for members. Make sure you take advantage of this feature of membership – we love being able to share our conversations with some of the smartest minds today in Grey Swan Live!

We’re traveling this week, but will return with our regularly scheduled Grey Swan Live!