3. "Don't Fight the Train" Despite the long-term risks, Menon advises investors not to bet against this dynamic yet. As long as the CapEx spending continues to grow, the "profit juice" will keep flowing, keeping aggregate earnings per share (EPS) high and supporting the stock market. The signal to watch is not the level of spending, but the rate of

... See more

The "Old Economy" (The Bust): Reality: Outside of AI, traditional cyclical industries are contracting. Investment in industrial equipment, residential housing, and non-residential construction is falling. The Divergence: If you strip out the AI spend, the "real" business cycle looks like a recession. High interest rates are successfully crushing

... See more

The "AI Profit Juice" (The Boom): Mechanism: Corporations are spending massive amounts on AI infrastructure (data centers, chips). In the immediate term, this CapEx is recorded as revenue for other companies (like NVIDIA or construction firms), boosting GDP and corporate profits instantly. The Accounting trick: Crucially, the cost of this

... See more

3. The "Circularity" Trap Menon identifies a critical flaw in this setup: The current boom is circular and ultimately unsustainable. The Logic: Currently, companies are spending billions on AI (CapEx) hoping it will lead to massive future efficiency and sales. The Problem: For that investment to pay off, there needs to be end-market demand

... See more

Aahan Menon argues that because the private sector now owns a massive amount of US government debt, high interest rates are feeding cash into the private sector rather than sucking it out. 1. The Traditional Mechanism (How it Used to Work) Historically, "monetary policy transmission" relied on a simple pain channel: The Action: The Fed raises

... See more

2. The Mechanism: "Broken" Monetary Transmission The most critical insight here is how high interest rates have failed to stop spending and may have even boosted it for the wealthy. Traditional View: The Fed raises rates → borrowing costs rise (mortgages, credit cards) → consumers spend less → economy cools. Current Reality (The "Interest Income"

... See more