Disagree. To correct the market, the yield of these bonds would have to go way up, which means the price needs to go way down, which means current TIPS holders need to sell, and/or people need to short.
Since TIPS are basically the safest asset, market participants who don’t want volatility have few other options to balance riskier assets like stocks. So your pension fund would be crazy to sell TIPS, especially after the yield goes up.
And for speculators, there’s no efficient way to short treasuries. If you’re betting on 10 year AI timelines, why short treasuries and 2x your money when you could invest in AI stocks and get much larger returns?
The problem is AI stocks will go up a lot even if transformative AI won’t happen (and it instead just has a lot of mundane utility). You can short treasury futures relatively easily too. I imagine the people shorting these futures will have TAI priced in before it’s obvious to us through other metrics.
Disagree. To correct the market, the yield of these bonds would have to go way up, which means the price needs to go way down, which means current TIPS holders need to sell, and/or people need to short.
Since TIPS are basically the safest asset, market participants who don’t want volatility have few other options to balance riskier assets like stocks. So your pension fund would be crazy to sell TIPS, especially after the yield goes up.
And for speculators, there’s no efficient way to short treasuries. If you’re betting on 10 year AI timelines, why short treasuries and 2x your money when you could invest in AI stocks and get much larger returns?
The problem is AI stocks will go up a lot even if transformative AI won’t happen (and it instead just has a lot of mundane utility). You can short treasury futures relatively easily too. I imagine the people shorting these futures will have TAI priced in before it’s obvious to us through other metrics.