Doubtless THE story of financial markets in 2023 has been the astonishing comeback of MegaTech. When rates went to zero during the pandemic, the explosion in Tech valuations made sense both in terms of mechanics and narrative. If discounted cash flows were governed by the 10-year rate, then companies like Apple became something like 100 year bounds. Look far enough into the future and it was hard to imagine how the likes of Apple, Amazon, Facebook and the like could fail.
But then the Fed tightened, rates went parabolic and old man favorites like Exxon Mobil had a moment in the sun. Surely MegaTech couldn't flourish until the return of ZIRP! Unless of course a narrative could sweep away all talk of mundane calculations like discounted cash flow. Because Artificial Intelligence is the end of business history. Right?
Meanwhile out in the wilderness, buffeted all around by the winds of winter, Crypto has secretly grown up. This week Bitcoin was de facto legitimized by the SEC as the only investment grade asset in the whole ecosystem. In a way the Bitcoin Maxis were accidentally correct. No, Bitcoin won't sweep away the nation state, but it will be offered up by legitimate Wall Street firms. Like any good revolution, it has successfully been co-opted by the establishment.
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