Good morning, and God bless, #Team42! Today’s Key Macro Question(s): Is #AI inherently inflationary? A slew of Mag-7 and other big tech earnings events have us revisiting the topic of AI. A cursory review of the following Bloomberg News headlines shows just how dominant the theme has become to every investor in the world — either explicitly via direct exposure or implicitly via the concentrated global macro market risk that the AI theme represents: -Meta Gains After Zuckerberg Predicts ‘Really Big Year’ in AI $META -Tesla Rises on Optimistic Robotaxi Rollout Plans $TSLA -IBM Shares Jump on Strong Sales Outlook and AI Bookings $IBM -Inside Amazon's Plan to Cut Managers: More Direct Reports, Fewer Senior Hires, and Pay Cuts $AMZN Said simply, when the AI trade stops working, investors are unlikely to generate positive absolute returns by rotating into other risk assets like #Bitcoin to manage risk. Correlations will approach 1 across asset classes when capital is destroyed on the scale it eventually will be when the AI trade stops working. To be clear: we are still bullish and see upside through the spring. The summer is when we anticipate the development of a series of interconnected hawkish catalysts triggering a potential crash in US stocks and, by extension, global risk assets. It is January, not July, so we have time to confirm or disconfirm that thesis and continue maximizing upside capture in the raging bull market we began anticipating in Jan-23. Respect the x-axis! Over a much longer-term time horizon, we believe AI will likely transform the US from a democracy into an oligarchy. When AI replaces a critical mass of the white-collar workforce, the economy will eventually feature AI agents selling products to other AI agents on behalf of companies at scale.  As such, we can envision a future where the share of income generated by AI exceeds that generated by humans. Reread the $AMZN headline from above. Income and wealth inequality will skyrocket to unprecedented levels in that scenario—hence, the inevitable oligarchy. Remember who was sitting where during President Trump’s inauguration and future US presidential inaugurations. If that AI-dominance scenario proves remotely prescient, it raises the following question: Who is in charge then? What happens to the fiscal coffers? Recall that ~85% of federal tax receipts currently come from human beings via individual income taxes at ~50% and Social Security taxes at ~35%. We are in a Fourth Turning — an era of GREAT institutional, technological, and geopolitical CHANGE. Once-in-a-lifetime outcomes occur during Fourth Turnings.  As such, the distribution of probable outcomes is much wider than uninformed or poorly read people realize—which, unfortunately, is a rapidly growing share of society. According to the New York Times, 33% of US eighth graders read at a substandard level. That figure is 40% for fourth graders. Both are record-high rates of illiteracy. Be sure to thank your local CCP official for gifting your kids #TikTok! What happens if an AI-driven US fiscal crisis is the thing that catalyzes the potential loss of US dollar hegemony and the US’ exorbitant privilege? If those institutions are ever up for serious debate, we should expect such disagreements to eventually catalyze WWIII because, of course, we are not going to relinquish that immense power without a fight. All this suggests the ultimate outcome of AI may be more inflation, after a transitory period of disinflation or deflation. We saw a preview of how both Republicans officials and Democrat officials respond to mass unemployment during COVID: MASSIVE budget deficits that were largely monetized by the Fed. Moreover, total war is the most inflationary dynamic that has ever existed in society. Protect your family. Protect your wealth. Know that we built our KISS Portfolio Construction Process to help ordinary people do just that. Please like and repost if you found this note helpful. Thank you!