The Grant Williams Podcast Ep. 130 - Gerard Minack

**Grant Williams** (0:10)
Before we get going, here's the bit where I remind you that nothing we discussed should be considered as investment advice. This conversation is for informational and hopefully entertainment purposes only. So while we hope you find it both informative and entertaining, please do your own research or speak to a financial advisor before putting a dime of your money into these crazy markets.
You're about to listen to a very special preview edition of The Grant Williams Podcast featuring my mate and special guest, Gerard Minack of Minack Advisors down in Sydney. Gerard's a regular visitor to the show and every time he brings an awful lot to the table and this time is no exception. You can find out more about his work by emailing him gerard at minackadvisors.com and I would heartily suggest you do that. Every episode of The Grant Williams Podcast, including The End Game, The Super Terrific Happy Hour, The Narrative Game, This Week In Doom, Shifts Happen, Kaos Theory and The Hundred Year Pivot is available to Copper and Silver Tier subscribers at my website grantwilliams.com. Copper Tier subscribers get access to all the podcasts, while members of The Silver Tier get both the podcasts and my monthly newsletter Things That Make You Go Hmmm. So if you enjoy what you hear on the show, and if you'd like more high quality content like it, then please make your way over to grantwilliams.com. You can become part of our exciting community today. And now, on with the show.
Gerard, hello mate, how are you, it's good to have you back.

**Gerard Minack** (1:46)
Great to be here. Glad to see you're enjoying your summer.

**Grant Williams** (1:49)
Listen, there's nothing like being in a good northern hemisphere summer and speaking to an Aussie who's in the depths of winter. Because normally the tables are turned.

**Gerard Minack** (1:57)
It's probably the same temperature. Bright sunshine and 21 degrees here.

**Grant Williams** (2:01)
I know, that's the annoying thing. I can see the sun pouring through the window.

**Gerard Minack** (2:04)
And it does get too hot. We have the aircon, which a lot of people up there don't have. So it's our secret strength.

**Grant Williams** (2:10)
Touche. Well, listen mate, there's so much going on. And you've written so many great notes recently, so I was really keen to have a chat. And there's a through line in a lot of your recent work, and it is AI and its place, how it bleeds into so many different parts of what's going on right now. So I guess we should start with that, because I dare say it will permeate everything else we talk about.
In thinking how to characterize how I wanted to frame this, I think the angle you've taken, which I really found interesting, was this idea that this is an earnings bubble and not a valuation bubble. Because obviously there is substance to an earnings bubble. The question is, when do the earnings dry up? Whereas a valuation bubble is a lot more tenuous. So let's start with that and let's start about how you do categorize this. So I don't put words in your mouth and pick apart the difference between the two and what's happening in the AI trade.

**Gerard Minack** (3:05)
Okay. Thanks, Grant. Now, the first thing to say is, in whatever follows from here, I am not dissing the technology. AI may be as transformative as the bulls say. So the investment debate, I think, is quite separate from how important the technology is. For me, the big issue is how profitable will the business of selling AI services be?
And arguably, that's exactly the mistake that investors made back in the TMT cycle when digital technology did prove to be transformative. Here we are, we're talking to each other. You're in London, I'm in Sydney, and all through digital technology. They made a mistake about how profitable the big digital suppliers would be. Now, the big difference between the markets, however, is that the market in the TMT cycle bid up the digital providers to astronomical levels, levels that even when they did, in some cases, deliver on earnings, they were terrible investments. Cisco, for example, delivered 20 years of double-digit EPS growth, and still only last year was back at its 2000 high. Yeah, it took that long to grow into the valuation of 2000
This time, it is true that actually the providers of AO services still aren't making a lot of money, but we don't have valuations for them because the big pure plays aren't yet listed. That's obviously anthropic and AI, although now that-

**Grant Williams** (4:30)
Oh, it's coming. It's coming.

**Gerard Minack** (4:31)