When AI Replaces You

How to protect against the darkness—that’s where we’re going today.

Yesterday, I sent you a dispatch all about the dark cloud that AI represents.

To be clear, lots of good will come from Artificial Intelligence, for sure. AI is far better at detecting various cancers much earlier than human docs. AI can process and analyze data faster; find useful patterns easier. Lots of things are about to get quicker and more accurate.

But as I noted in that previous dispatch, all of this “quicker and more accurate” stuff means jobs that allow us humans to pay the bills will go bye-bye in shockingly large numbers.

Meaning: We’re looking at a job-apocalypse that has no other option but to fundamentally reshape society and the economy.

And in not-so-good ways.

The British econ-mag The Economist recently took a crack at explaining how to hedge what it sees as an “AI bubble”—the vast runup in the share price of AI/tech stocks in recent years. Palantir Technologies, for instance, one of the poster brats for AI, trades at more than 200x its annual per-share earnings—a truly stupid valuation for a company with an annual growth rate of about 32%. 

The Economist is right to address the AI bubble. The collapse of said bubble could very well bring down the stock market as a whole, since it’s AI that’s keeping stock market indexes inflated at unnaturally high levels.

Equally right, The Economist notes that “the idea that the best way to hedge equity risk is with equities feels unsatisfying.”

Wrong, however, is The Economist’s follow-on assertion that, “Considering the alternatives, though, it might just be the best shareholders can do.”

Nope.

Sticking to traditional equities—traditional stocks—is not the best shareholders can do. The shareholders—that’s us—can do so much better to protect ourselves from financial pain in the offing.

AI, as I’ve explained, is simultaneously constructive and destructive. The constructive part I’ve already hinted at above. The destructive part is going to weaken employment, which weakens the consumer, which radically changes the economy.

Moreover, it’s likely to outright destroy certain companies.

Monday.com, for instance, and other software-as-a-service providers face an existential threat from AI. In some sense, those stocks remind me of Blockbuster in a world where streaming video was just emerging.

Amid the economic rejiggering that AI will bring about, I want to own assets that benefit from upheaval, as well as those that benefit from AI’s unstoppable propagation.

Atop the list is gold.

It is the ultimate port-in-the-storm asset.

Used to be that the US dollar was the go-to safe-haven asset. But the dollar, as you know from my ad-nauseum musings over the years, is a deeply troubled currency. That’s not the dollar’s fault; it’s because of the DC clown car and economically illiterate policies coming out of the White House—not just the Trump White House, but the Biden version as well.

The dollar is no longer the asset the world flocks to as a safe harbor.

Instead, the world is increasingly ghosting the buck as well as US Treasuries to pack away more and more gold.

Non-US central banks have been selling off dollars in recent years to gobble up the yellow metal. Central bank gold-buying in recent years has been occurring at record levels last seen in the 1960s, when the world knew the US dollar was in trouble just before Nixon was forced to end the gold standard.

All the gold buying today is sending the same vibe.

In terms of what to own in the gold space: Pretty much anything gold.

Bullion bars and coins; collectible gold coins; gold miners, primarily the major miners like Newmont and Barrick, as well as some exposure to explosive junior miners that are very close to their first gold production. (I recently recommended one to attendees of my gold masterclass and that is playing out now; we’re up 50% in just two months. But there are several other similar miners out there at the moment).

Second on the list is silver.

AI is a glutton for silver.

AI data centers, as well as AI hardware, suck up many tons of silver. Moreover, AI is consuming vast amounts of electricity, and the utility grid is beginning to change to meet AI’s gargantuan demand and that, too, is a silver play.

Overall, the AI boom represents a tectonic shift in silver demand at a time when silver miners cannot keep up with that demand.

So, owning physical silver in the form of bars and bullion coins, as well as owning silver-mining stocks, is absolutely a way to hedge against the AI bubble.

AI stock prices might well collapse, but AI isn’t going anywhere. Demand is only going to grow, which means pressure on silver supplies is only going to grow. The analogy to consider: The dot-com bust in 2001. Internet stocks imploded… but the internet itself continued growing into what we have today.

And, finally, bitcoin.

Despite the volatility of a possessed rollercoaster, bitcoin is an asset to continually accumulate.

It has no overseer. No one, no government, no central authority that can change the amount of bitcoin that will ever exist—just 21 million coins overall. That gives bitcoin a measure of safety in a debt-addled global economy that will fundamentally change going forward.

The West—led most prominently by the US—will have to address its monolithic debts at some point, sooner rather than later. Adding to that inferno, my bet is that AI’s impact on jobs will force Western governments to institute universal basic income plans, or UBI as it’s called, in order to keep the masses from revolting like French revolutionists and Soviet Bolsheviks.

Western governments have no capacity to afford that kind of ongoing financial demand and, so, governments are absolutely going to find creative ways to haircut their debt by monkeying with the value of the currency.

The hoi polloi are going to realize at some point that the pieces of paper in their wallet are increasingly worth the same or less than the toilet-tickets in their bathroom. At that point, the masses are going to rush to the safety of any asset the government doesn’t control… which means they will quickly find religion on the bitcoin blockchain.

I know bitcoin is down sharply from recent highs near $125,000. And I know that bitcoin has regularly dished up big, gut-wrenching selloffs over the years. But that’s the nature of an immature asset in a highly unregulated market.

Things will change as bitcoin matures, and as the people who buy bitcoin begin to look upon it more as a port-in-the-storm asset when that storm is swirling around the dollar.

So, I would tell you to set up a dollar-cost averaging program at a crypto exchange like Coinbase or Kraken. Decide how much you can afford to invest every month, divide by four, and set that as your weekly investment.

Your crypto exchange will methodically invest your prescribed amount every week, regardless of price, allowing you to methodically build a position in bitcoin over time without having to think about it.

One day, when bitcoin is 10x higher or more, you’ll log into your crypto account and realize you’ve done an amazing job of protecting your wealth from the destruction wrought by the dark side of AI and the AI bubble.