Episode summary
The Profits Come Now. The Costs Come Later. What If AI Earnings Are the Bubble?
Excess Returns
· · Hosts: Matt Zeigler · Guests: Kevin Muir
Summary
Kevin Muir argued that the recent rise in long-term Treasury yields looks less extreme when set against stronger nominal GDP, persistent U.S. fiscal deficits, record corporate issuance, and the AI capex boom. He said investors are too conditioned to low rates, and that the bigger issue is not just higher yields but the market signal being distorted by policy tinkering. He also linked the gold rally to the growing odds of debt monetization, saying markets quickly understood the implication of Scott Bessent’s Treasury buyback talk.
On Treasury plumbing, Kevin Muir said the buybacks are meant to support liquidity by taking off-the-run bonds out of circulation, but warned that replacing long-dated issuance with more T-bills could force reserve management purchases by the Federal Reserve if front-end funding pressure rises. He thought the direct size of the buyback program is small, but the signaling effect matters more, especially with the Treasury General Account sitting near a trillion dollars.
He also framed the AI earnings boom as an “earnings bubble”: data-center spending boosts current earnings at chip and infrastructure suppliers while the expense is amortized over years. That, he said, can let stock prices roll over before forward earnings do. He added that daily-reset leveraged ETFs make markets more reflexive and fragile, and closed by arguing that Canada-focused tariffs look politically symbolic and economically counterproductive rather than a serious manufacturing strategy.
Key takeaways
- Kevin Muir said long-term yields are not obviously mispriced when nominal GDP, deficits, and corporate issuance are all running hot.
- He argued Scott Bessent’s Treasury buybacks matter more for signaling than size, but could still become de facto debt monetization if they force Fed reserve purchases.
- Muir said the AI capex cycle can inflate reported earnings now while the real costs show up over years, creating an “earnings bubble.”
- He thinks stock prices can fall before next-12-month earnings estimates roll over because equities are forward-looking.
- Muir warned that daily-reset leveraged ETFs create reflexive selling and buying that can amplify a sharp semiconductor or single-stock break.
- He said Canada tariffs are a poor way to restore U.S. manufacturing because policy volatility discourages businesses from building new plants.
Notable quotes
“the concern is is that Bessant is going to go buy back a 28-year off ther run bond and instead of issuing more 30s, he's going to go and issue more bills”
“we could get into a um an environment where that T bill issuance overwhelms the the amount of capital that is willing to be invested at that part of the curve”
“the benefits from that in terms of buying chips from Innovia, buying uh you know Bloom Energy, you know doing it those are the benefits are immediately felt”
“this is not a bubble um in terms of those prices that they're paying in terms of multiples on the stock”
How the episode opens
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 Ziggler, and if this tourist doesn't kill you, I will. Which is a puff pup reference. Canada, I have love for you. Don't let anyone tell you otherwise. The macro tourist himself, Kevin Weir, is back with us. How you doing, Kev?
Good, thanks. How about yourself, Matt? 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 I've got you've on you've been on fire all summer with macro tourist things and I keep flagging them and going this could be a whole episode. This could be a whole this could be a whole episode.
So, starting off I wish I wish I wish we were talking about Shan Connory or even Barry's home run record but alas today we start with bonds. What the hell is the bond market doing?
This is This is a wild one. — It is fun, isn't it, though? Like the 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 Bessant who was worked with George Soros who was uh you know hired um Stanley Draen Miller and uh you know we have best
And then yeah Dr. Miller using AI, you know, who would have had that on their bingo card, right? Like, and and the 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."
I loved his response for that reason.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai capex and earnings bubble
- long-term treasury yields
- treasury liquidity buybacks
- leveraged etf risk
- gold and precious metals
Watch the episode
Watch “The Profits Come Now. The Costs Come Later. What If AI Earnings Are the Bubble?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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