The McAlvany analysts focus this week on the nature and prospects of the AI phenomenon, the Fed’s no-win dilemma, and the prospects for a continuing bull market in gold despite hesitancy in the metal’s recent rise. Some of these subjects entail important updates on long-term developments that move slowly but are portents of possible major dislocations in the future.
Jack Gamble is David’s guest on the Commentary, and they discuss the meteoric rise in AI spending and its likely payoff. Their conclusion isn’t what you normally hear—its facts-reliant nature will give you pause, so be sure to listen for their assessment of how AI developments could affect markets going forward. Given the amount of money being spent in this sector, the effects will be extreme one way or the other.
Key Takeaways:
- AI way over its skis
- Morgan gives insight into recent Fed pronouncements
- Gold hurries slowly
The McAlvany Weekly Commentary: The AI Bubble’s Circular Financing Problem with Jack Gamble
David and Kevin bring in Jack Gamble—“nobody special” in his words, yet clearly sharp enough to follow the financial breadcrumbs behind AI mania—framing the episode as a tour of where the money is going and why it may not be coming back. They start with the headline concern: a “circular financing” setup linking major players (including Nvidia, CoreWeave, OpenAI, Microsoft, and others), where massive data-center spending, GPU depreciation, and mounting debt create a growing mismatch between towering expectations and real economic payoff. Jack leans on the idea of capex today becoming depreciation tomorrow, arguing that accounting timing (e.g., “construction in progress”) and obsolescence cycles can mask risk until the bill arrives. From there, the hosts branch into bubble mechanics—vendor financing, round-tripping of revenue, the inflationary drag of suppressed yields—and the policy/market incentives that keep the hype engine running. They also touch on the shortening runway for centralized cloud value as inference trends more local (even on modest hardware), plus the role of private credit and special-purpose vehicles that may obscure leverage. Overall, the vibe is: the tech may matter, but the financing may matter more.
Hard Asset Insights: A New Accord?
Morgan argues that the United States is nearing a major tipping point as its already “unsustainable” fiscal path worsens and collides with the Federal Reserve’s inflation-fighting mandate. The central tension is between Treasury’s need to keep borrowing costs contained and Fed Chair Kevin Warsh’s stated willingness to raise rates if inflation remains above target. In Morgan’s view, Treasury Secretary Scott Bessent’s recent efforts amount to a soft form of yield-curve control, signaling that fiscal dominance is now likely overtaking monetary independence. He cites Robin Brooks’s interpretation that Warsh’s hawkish Jackson Hole remarks may have been less about imminent hikes and more about anchoring long-term yields—part of a possible new Treasury-Fed accord focused on keeping government financing costs down. Morgan sees this as supportive of a weaker dollar, financial repression, inflation, and the “debasement trade,” with gold likely benefiting over time even if rate hikes cause near-term softness. He also notes August’s strong jobs report, Trump’s call for lower rates, weekly market moves, and mixed precious-metals performance.
Golden Rule Radio: Metals Correct as Demand Builds
Rob, Miles, and Tory frame the week’s pullback in precious metals as a healthy pause rather than a change in trend, noting that gold slipped below $4,400, silver eased into the mid-$60s, and platinum and palladium also softened after a strong August. They emphasize that the broader setup still looks constructive: gold had surged roughly 16–17% from mid-July before retracing, while August gains were strong across all four metals, suggesting a possible summer bottom and a base for another move higher. The hosts also highlight “smart money” activity, pointing to heavy COMEX gold accumulation by money managers and major inflows ahead of Jackson Hole as an important tell. Gold, they say, has already broken key resistance, while silver lags and may offer ratio-trading opportunities, especially in tax-advantaged accounts. Beyond price action, they return to the big macro drumbeat: U.S. debt above $40 trillion, rising interest costs, weak GDP growth versus debt growth, and likely currency devaluation. Their closing message is to measure wealth in ounces, not dollars, and use quiet markets wisely.
