Chief Investment Strategist, The Freeport Society
Hello, Fellow Navigator.
Prepare yourself, because I’m about to torture you this Saturday morning with a dad joke.
And yes, I promise you it ties back to your investment portfolio, so hear me out. It will be worth the groans.
I was introducing my kids to the delightfully bizarre world of the Spanish painter Salvador Dalí.
If you need a refresher, Dalí was one of the best-known surrealist artists from the 1920s. His most famous work was “The Persistence of Memory”.. sometimes known as “The Melting Clocks.” (If you watched the Netflix series Money Heist/Casa de Papel, the crazy masks with the handlebar mustaches that the thieves were wearing were Dalí masks.)
Here’s “The Persistence of Memory” for reference.
Just for grins, we tested what artificial intelligence was capable of and asked ChatGPT to create “a surrealist painting in the style of Salvador Dalí featuring a llama eating a hot dog.”
And here’s what it gave us. I call this masterpiece “Dalí Llama.”
Stop groaning. It got a laugh out of my kids. I’m an investment writer, not a comedian.
But that’s not all. We were just getting started.
You may recall that I live part time in Lima, Peru. And one of the tragic downsides of living here is that I can’t get a decent Mexican street taco. Peruvians eat well, but they overthink Mexican food and make it “foodie” fare.
That’s culinary apostasy.
The secret to a good taco is simplicity. Grilled steak with a sprinkling of diced white onion and chopped cilantro, a squeeze of lime, and a little salsa.
That’s it. Don’t make it fancy.
I have only one friend in Lima who truly gets it: Gustavo, who was born and raised in Mexico City. If I want Mexican food worth eating, it’s going to be at Gustavo’s house.
On a recent cab ride to meet Gustavo and his son for lunch, my son and I decided to prank Gustavo with ChatGPT. I asked it to make a “revolutionary mural in the style of Diego Rivera featuring the chihuahua from the 1990s Taco Bell commercials.”
And the AI chatbot gave us this masterpiece:
I know, I know. This is the most powerful technology known to man, and I’m using it to send joke texts to my friends while stuck in Lima traffic.
But here’s where it gets serious – and where the opportunity comes in.
That cigar-smoking chihuahua used approximately one iPhone battery’s worth of electricity. “Dalí Llama” used the same.
In the first 15 months after its launch, DALL-E 2 – OpenAI’s image generator – cranked out close to a billion images. Adobe Firefly reached 1 billion images created within just three months of its launch.
The most comprehensive study found that we’ve generated more than 15 billion AI images… just through August 2023. It’s safe to assume that in the year that has passed, we’ve doubled or tripled that number.
Over 1.5 trillion photos have cumulatively been uploaded to Facebook and hundreds of billions more to Instagram, Pinterest, and other social media sites. Plus, an estimated 14 billion new images are uploaded every day. If even a small fraction of those have AI enhancements, you’re talking about an insane amount of AI workload.
And that’s just image creation.
Conversational generative AI – i.e., “talking” with ChatGPT to get it to write a work email (or an eighth-grade assignment at the last minute) – uses a crazy amount of resources as well. ChatGPT’s daily power usage is equal to that of 180,000 American households.
By 2026 – less than two years from now – AI will consume as much electricity as the entire nation of Japan… the world’s fourth-largest economy.
And this brings me to one of the most important themes of the next decade… and possibly our lifetimes. The massive jump in electricity consumption is going to lead to a boom in nuclear energy. As I reported on Wednesday, Microsoft (MSFT) just inked a deal to reactivate a mothballed nuclear reactor to fuel its AI plans.
I can’t tell you which particular AI application will be the next big thing. Whatever answer I give you today might be different next week.
But I can absolutely tell you that power consumption will only accelerate from here, and the only way to satisfy that demand is with massive investments in nuclear energy.
This is an investable trend you can hang your hat on, and I shared one way to play it on Wednesday: the Global X Uranium ETF (URA), a collection of the world’s major publicly traded uranium miners.
I’m also keeping my eye on several nuclear energy companies for potential addition to The Freeport Investor Portfolio. Learn more about how to join my paid-up members by going here.
Now, let’s dive into what we covered this week at The Freeport Navigator…
You’re Invited to the Billionaire Investor Club
A pattern we see over and over again is well-informed hedge fund managers making decisions that seem counterintuitive… who then make out like bandits after their reasoning is known. In Monday’s Freeport Navigator InvestorPlace Markets Analyst Thomas Yeung tells the story of the “good” Marriott and the “bad” Marriott… and how billionaires made out like bandits on both. Click here to continue reading.
How AI Is Supercharging a Nuclear Renaissance
Microsoft, along with every other major tech player, needs a massive amount of juice to make its artificial intelligence vision a reality. And a reactivated Three Mile Island unit could power a large chunk of the company’s AI data centers. On Wednesday, Charles explained why it makes sense to have nuclear energy power not only AI, but 100% of the grid. Continue reading here.
The Case for Offshore Real Estate
Real estate is a natural hedge against inflation and currency debasement, it’s tax efficient and generates income. But it may be time to broaden your horizons by exploring the opportunities offshore real estate has to offer. To learn more from Ronan McMahon, click here.
Looking Ahead
Well, well. Congress passed an emergency funding bill on Wednesday to avoid a government shutdown. It seems that business will go on as usual until December 20.
In other words, we get to go through this entire song and dance again the week before Christmas.
A hardy “bah humbug” to you, too, Speaker of the House Mike Johnson.
I could have sworn I’d seen this movie before… You know, the one where our fearless leaders perform Kabuki theater over excessive government spending… only to sign off on it anyway and keep the spending flowing.
In case you’re wondering why this keeps happening, the nonpartisan, nonprofit Committee for a Responsible Federal Budget sums it up nicely in a recent paper:
What is a government shutdown?
Many federal government agencies and programs rely on annual funding appropriations passed by Congress. Every year, Congress must pass, and the President must sign budget legislation for the next fiscal year, consisting of 12 appropriations bills, one for each Appropriations subcommittee. Congress has not yet enacted any of the 12 bills for FY 2025 that make up the discretionary spending budget. In a “shutdown,” federal agencies must discontinue all non-essential discretionary functions until new funding legislation is passed and signed into law. Essential services continue to function, as do mandatory spending programs.
But, hey, it’s all good, right? The occasional shutdown at least saves us a little money, right?
Wrong.
As the Committee continues,
While estimates vary widely, evidence suggests that shutdowns tend to cost – not save – money for several reasons. For one, putting contingency plans in place has a real cost. In addition, many user fees and other charges are not collected during a shutdown, and federal contractors sometimes include premiums in their bids to account for uncertainty in being paid. While many federal employees are forced to be idle during a shutdown, they have historically received and are now guaranteed back pay, negating much of those potential savings.
Shutdowns also carry a cost to the economy. The Congressional Budget Office (CBO) estimated that the 2018-2019 shutdown reduced Gross Domestic Product (GDP) by a total of $11 billion, including $3 billion that will never be recovered. On top of that effect, CBO notes that longer shutdowns negatively affect private-sector investment and hiring decisions as businesses cannot obtain federal permits and certifications or access federal loans. A 2019 Senate report found that the three government shutdowns in 2013, 2018, and 2019 wasted nearly $4 billion of taxpayer dollars.
Here’s a thought: Perhaps Congress could do its job, write a balanced budget, and then hold the government accountable to living within its means?
Might that make more sense than stumbling into shutdowns, debt-ceiling caps, or any of the other unforced errors they can’t seem to avoid?
I know, I know. That’s just crazy talk.
Enjoy your weekend knowing that our fearless leaders are in control.
To life, liberty, and the pursuit of wealth,