DFCF, LLC
Drulard Family Capital Fund (DFCF, LLC)
Bubble Magic
Drulard Family Capital Fund
Fortnightly Macro View
JD Straight Up:
S&P 500 at 6796 – down 1% from 6875 two weeks ago
VIX at 19 – up 19% from 16 two weeks ago
10yr Treasury yielding 4.09% (up 2% from 4.00% two weeks ago)
Agg (US Aggregate Bond Index) at 100.18 – down 1% from 101.21 two weeks ago
Gold at 4103 per oz (up 3% from 4005 two weeks ago)
Crude Oil (WTI) at 60 per barrel (down 3% from 61 two weeks ago)
Bitcoin at 105k (down 8% from 114k two weeks ago)
JPM shares at 316 (up 4% from 304 two weeks ago)
Deutsche Bank shares at 37.55 (up 11% from 33.94 two weeks ago)
Truist shares at 44.96 (up 1% from 44.63 two weeks ago)
Blackstone shares at 144.68 (down 6% from 153.85 two weeks ago)
Magnificent 7 Index at 423 (down 1% from 426 two weeks ago)
US unemployment: at 228,000 in latest claims – down 2% from 232,000 two weeks ago
EUR at 1.15 USD (down 1% from 1.17 two weeks ago)
GBP at 1.32 USD (down 1% from 1.33 two weeks ago)
Macro Environment
US inflation continues at 3%. US government shutdown persists beyond 40th day. War continues in Ukraine while ceasefire remains in place in Gaza. US and China agree to trade deal framework and trade truce. AI investment continues to dominate headlines and earnings calls.
Macro View
The key question that determines the outcome of nearly all current theses is whether the AI investment produces the expected return. Is the vast scale of investment in AI infrastructure, modeling, partnership, and talent going to be returned through productivity and shear genius that is currently barely imaginable? There have been multiple articles from credible and insightful writers in the last two weeks talking about the importance of this investment to the economy, the world, and even mankind. Some have worked around to the AI Bubble topic and endeavored to justify even the wreckage of a bubble. Typically, at this phase of the cycle, the mantra becomes, "its different this time". This new rationalization is different this time even if the cyclical nature of capitalism and productivity revolution is not.
Relevance
The rationalization argues that bubbles and their subsequent popping are not a negative thing at all. In the parlance of Silicon Valley that is clearly one of the sources of this argument, bubbles and their popping are a feature of capitalism and not a bug. The argument is that only the energy, inertia, mania of a bubble would allow enough capital to flow to something that is truly new and unique and transformational. Further, that the energy also provides a focus for great minds and great fortunes to channel their power into bringing about the change. The fact that this deprives other parts of the economy or the world from that power is a small byproduct or collateral price of bringing about great change. The additional fact that much capital and energy will be lost in the popping of the bubble is just another small price of the glory of the change. This suggests that bubbles are magical and can do things that would otherwise be impossible to contemplate. It is hard to recall that argument being wheeled out following the securitization bubble, or in the telecom carnage or dotcom collapse or subprime debacle, and it is even more impressive that it is here now before the AI Bubble has even popped. Maybe it really is different this time. At least in terms of the power of rationalization.
Head Scratchers
1 - If a company (e.g. NVDA) is now worth $5trn, your nest-egg of $5m that you thought made you rich cannot be worth what you thought it was worth when NVDA was worth under $1trn can it? Is this dynamic inflating away value and destroying your cash savings? Is it forcing you to activate your cash and put it to work? That activation inevitably further feeds the bubble. The realization that the $5m you thought you would comfortably retire on now has a small fraction of the purchasing power of the nominal amount forces you into action, investment and risk that you did not intend to engage in. Now are you just another lemming running for the communal cliff? Is there an alternative?
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Drulard Family Charitable Fund
#29- 10Nov25