This morning, as I shake my head at the lack of JOLTS data from the BLS, I watch the great ball of money lurch from Tech to not-Tech, like staples. Unfortunately, the multiples for many consumer staples companies are already on the high side of normal. For example, PG is at 23, which represents confidence in what is essentially a flat business. Unlike the mythical tech company (and I say mythical with great intention), PG and the other staples are businesses that are both stable, with low but predictable margins, and scale linearly. If they take a little market share this year in one category, it doesn’t mean winner take all. They don’t have 40% ore more margin products. There is no network effect around dish soap.

I have a number I think of when I look at a fair valuation for Nvidia (hint – it’s much lower than it is now). And while I look at AI as having merit, my arguments relate to how much do you want to pay for the productivity. In my own field that productivity is mixed and sometimes requires you to ignore quality. But right now investors are heavily subsidizing AI for consumers and businesses. The question of how much a company would have to charge for a sustainable AI service is open for discussion. We may have a gentle deflation out of Tech but it may mean that PG winds up at a PE of 30? Or maybe 35? That’s a little rich. Because the big ball of money doesn’t know where to go so it just keeps buying and selling.

The impact the draw down on Tech is having is an advance decline ratio of roughly 6:4 (meaning out of 10 random stocks six are up and four are down), but the NASDAQ and SP500 are down. The DOW is treading water, but the Russel 2k is up. People are looking to higher-risk, smaller stocks. As I look at that, the big ball of money is pushing into not-Tech with industrials, consumer cyclicals, and basic materials punching up. That’s in line with the data suggested by yesterday’s ISM – that low inventories are going to drive up production.

It seems like there’s more money sloshing around than value to absorb that money. It’s not floating around in the economy as money to spend (other than through the wealth effect). So it’s not growing anything. It’s sloshing around inside markets, driving growth through multiple-expansion, drafting in more money as people look at the number go up and want to join in. All of which, I’m afraid, makes this gambling more than investing. Jump on the band-wagon, ride it up and then bail before the hammer comes down. But you better get in now, otherwise you’ll only get in at a higher valuation in the catch-up trade and have less runway.

The big ball of money will concentrate into a smaller and smaller chunk of the economy as it sloshes around. With dumber money getting swept up by smarter money. Assuming we just plod along for another couple of years and look for articles that say the top 5% are 50% of spending. Only at those levels they don’t go out to eat more, they just buy $25,000 pizza ovens for their $750,000 kitchen remodel. So the economy will look weird as McDonalds, Walmart, and Target struggle, as household consumer names lurch in and out of bankruptcy and private equity, while Porsche and Rolls Royce are making book. GDP is up. The market is up. But the bottom 80% are just fucked. And you can’t have a democracy when the bottom 80% feel like they’re getting the shaft and locked out of number go up.