The Profits Come Now. The Costs Come Later. Kevin Muir on Whether AI Earnings Are the Bubble

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**Matt Zeigler** (0:58)
You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use, where better questions lead to better decisions. I'm Matt Zeigler. And if this tourist doesn't kill you, I will, which is a puff reference, Canada, I have love for you. Don't let anyone tell you otherwise. The MacroTourist himself, Kevin Muir, is back with us. How are you doing, Kev? Good.

**Kevin Muir** (1:19)
Thanks. How about yourself, Matt?

**Matt Zeigler** (1:21)
I am doing fantastic on this lovely day that can't decide if it wants to rain or be sunny or anything in between. So this is good to catch up. I've got you've been on fire all summer with MacroTourist things, and I keep flagging them and going, this could be a whole episode. This could be a whole episode. This could be a whole episode. So starting off, I wish, I wish, I wish we were talking about Sean Connery or even Barry's home run record. But alas, today we start with bonds. What the hell is the bond market doing?
This is a wild one.

**Kevin Muir** (1:53)
It is fun, isn't it though? Like bonds were so boring for so long, so we shouldn't be complaining too much. And like we have all the drama. We have Scott Bessent, who was worked with George Soros, who was, you know, hired Stanley Druckenmiller. And, you know, we have Bessent doing something.
And then Druckenmiller using AI, you know, who would have had that on their bingo card, right? Like, and what I liked about that though, Matt, was he was just like, yeah, of course I use AI. Why wouldn't you? You're an idiot if you don't.

**Matt Zeigler** (2:27)
I loved his response for that reason.

**Kevin Muir** (2:29)
I saw someone say the other day that I don't pay for sex and I don't let AI write my stuff. So I'm gonna be in that same category. I think that Druck should write his own stuff and not let AI do it.

**Matt Zeigler** (2:44)
The audacity by which he responded though, like clearly not considering anything else and just like, this is who I am. I mean, I'm not gonna borrow the prostitution reference, but we've seen other un-hologenetic behavior.

**Kevin Muir** (2:57)
Hey, that wasn't mine. I just thought it was funny. It wasn't mine.

**Matt Zeigler** (3:00)
All right, all right. It was good. So the bond market like Barry Bonds might be on steroids right now. Certainly bond vol.
It's been pretty crazy. Is this, when's the last time you feel like the bond market was this volatile?

**Kevin Muir** (3:15)
So I guess I'm gonna push back a little there on you, Matt, because although it does feel like it's lots exciting and is happening, it really is actually somewhat stayed in terms of its actual ranges. It's not like we're getting big, huge monster moves.
One of the things that I've been surprised about is how everyone's losing their stuff over the fact that bonds have backed up over the last little while and they, you know, so what? Like, you know, the long end has gone from 485 to 530 or something like that, right? So we're talking 50 basis points. But let's just, you know, let's think about the environment that we're in, okay?
A year ago, nominal GDP was four and a half or four or something. Today, it's six and a half, okay? In that period, we've also had the deficit continue to stay at elevated levels in terms of the US federal deficit. So the actual supply is, continues to be large. We also have record issuance of corporate bonds as we have this just huge ignition of animal spirits in terms of the AI build out. You know, the largest, you know, infrastructure build out since the railroads of 1850 or whatever it is. And even I'm not old enough to remember that.