Global

The biggest misunderstanding in the markets right now is that to keep expected inflation well-anchored at 2 percent, inflation must <i>undershoot</i> 2 percent for some time. This implies that interest rate futures curves are mispriced, and that the probability of a ‘soft landing’ is lower than assumed. Plus: we show that the rally in oil has become fractally fragile, and recommend a tactical underweight.

In this report, we highlight why there are upside risks to Brent crude oil and copper prices going into 2024, with the production side expected to drive deficits in these markets. To take advantage of a potential rally, we suggest basket plays for hedging this outcome.

This Special Report is a timely reprise of a speech that I gave at the London School of Economics on our understanding and misunderstanding of generative AI. In neurological terms, generative AI has a ‘super-neocortex’ which means that it can thrash humans in abstract thinking, or IQ. But crucially, generative AI does not have a ‘limbic system’ which means that it will lag well behind humans in emotional intelligence, or EQ. I hope you find the speech insightful and provocative, especially on how we might have completely misunderstood human intelligence and super-intelligence, and the economic and societal implications for the coming decade.

In this week’s report, we assess the key reasons why the dollar has risen, and if that is set to continue.