Stock options: how to hedge an AI bubble

Overview

This episode opens with the market anxiety around enormous AI spending. Alphabet, Amazon, Meta and Microsoft are said to be planning a combined $660bn in AI investment over the next year, raising the question of whether investors are overpaying for the promise of a transformative technology.

The discussion argues that selling out of stocks is not necessarily the best response to a suspected bubble. Bonds have historically cushioned stock-market falls, but recent inflation-driven crashes have weakened that relationship; gold has surged but become volatile; and some stock baskets, such as reliable dividend payers and low-volatility companies, may be more practical hedges.

The episode then turns to Turkey, where Recep Tayyip Erdogan’s long rule, term limits and age have prompted succession speculation. It closes with an obituary-style portrait of Georges Beauchard, a refugee from Nazi Europe who became a literary agent and championed writers including Samuel Beckett and Elie Wiesel.

Segmented Summary

[00:40] Episode setup

[Fact] The host, Rosie Bloor, introduces The Intelligence from The Economist and previews three topics: AI-related stock-market worries, possible succession after Turkey’s Recep Tayyip Erdogan, and the life of literary agent Georges Beauchard.

[Fact] The episode frames the AI story around whether the stock prices of companies investing heavily in artificial intelligence may be artificially high.

[01:41] AI spending and market nerves

[Fact] Alphabet, Amazon, Meta and Microsoft plan to spend a combined $660bn on AI over the next year.

[Fact] Capital markets correspondent Josh Roberts says investors previously cheered big AI spending announcements, but more recently stock markets have wobbled in response.

[Fact] The concern is not only the size of the spending, but whether companies will earn sufficient returns from it.

[Speculation] The nervous market response suggests investors are starting to separate belief in AI’s long-term importance from confidence in near-term profits.

[02:52] Why bubbles can form around real technologies

[Fact] Roberts compares AI with earlier technologies such as railways, canals, electricity and the internet, which did transform the world.

[Fact] In those historical cases, investors often became overexcited, pushed share prices beyond underlying profits, and sometimes picked the wrong companies.

[Fact] Even when a technology succeeded, many investors still lost large sums of money.

[Speculation] The discussion implies that an AI bubble would not necessarily mean AI is unimportant; it could mean expectations and valuations have run ahead of reality.

[03:53] Why simply selling stocks may not work

[Fact] Professional stock-fund managers often cannot simply sell shares and sit on cash because their mandates and clients expect them to invest in stocks.

[Fact] Individual investors can sell, but the dot-com boom shows the danger of exiting too early: share prices rose by a factor of 12 during the boom.

[Fact] Even after the dot-com crash, investors who held through both the rise and fall would still have made money, while those who sold early would not.

[Speculation] The segment presents market timing as especially difficult during bubbles because large gains can occur before the eventual crash.

[05:08] Bonds as a traditional hedge

[Fact] The classic way to hedge stock-market risk is to hold bonds alongside stocks.

[Fact] Historically, bond prices have often risen when stocks fell, helping cushion losses.

[Fact] During the dot-com period, bonds rose as stocks rose, though by less, and then rose again when stocks fell.

[Fact] Roberts says this relationship has weakened recently, citing 2022, when both stocks and bonds crashed because inflation hurt both asset classes.

[Speculation] Bonds may still be useful, but their protective role is less dependable if the next sell-off is driven by inflation fears.

[06:10] Gold’s appeal and limits

[Fact] Gold is described as a time-honored hedge against chaos and has performed very well recently.

[Fact] Its strong bull run has made some investors uneasy because rapid price rises can be followed by large swings.

[Fact] The gold price recently dropped by about 9% in a single day and then swung sharply afterward.

[Speculation] Gold’s recent volatility makes it harder to treat as a reliable safe haven in a portfolio designed to cushion a market crash.

[06:58] Hedging stocks with other stocks

[Fact] Roberts says the best way to hedge stock-market risk may, counterintuitively, be with other stocks.

[Fact] He cites a recent Goldman Sachs study on hedges that would have worked well during the dot-com bubble.

[Fact] The study found that baskets of stocks with high reliable dividends and stocks with low volatility performed well on both the way up and the way down.

[Speculation] The practical message is that defensive equity selection may be more useful than abandoning equities altogether.

[07:45] The boring answer: buy and hold

[Fact] Roberts says there may be no way to completely bubble-proof an investment strategy.

[Fact] He describes the safest strategy as buying and holding for the long term.

[Fact] Investors who rode out the dot-com boom, crash and following years still did well.

[Fact] He says the worst thing investors can do is sell during the depths of a crash, when losses are locked in.

[Speculation] The episode’s investment advice favors steady long-term participation over attempts to predict the exact top or bottom of an AI-driven market cycle.

[08:39] Turkey’s succession problem

[Fact] The episode notes that the average age of world leaders has been rising, driven by autocracies.

[Fact] Turkey’s president Recep Tayyip Erdogan has ruled since 2003, first as prime minister and then as president.

[Fact] Turkey correspondent Piotr Zilevsky says people in Erdogan’s camp are jockeying for position in case he names a successor or cannot run in coming elections.

[Speculation] Erdogan’s long dominance has made succession unusually sensitive because so much political power has been concentrated around one person.

[09:33] How Erdogan might run again

[Fact] Erdogan has dismantled many checks on his power, but he still faces elections and term limits.

[Fact] Technically, he cannot run again after his current term expires in 2028.

[Fact] He could seek another term through constitutional changes or through an early election called by parliament.

[Fact] Zilevsky says constitutional changes are less likely because Erdogan lacks the numbers for a new constitution without a referendum and risks losing a referendum.

[Fact] A more likely outcome is a snap election called by parliament, presumably in late 2027.

[10:45] Possible successors

[Fact] If Erdogan does not stand, he is expected to anoint a successor to lead the Justice and Development Party and run on its ticket.

[Fact] Publicly, party leaders refuse to discuss a future without Erdogan, but behind closed doors a struggle for his favor is taking shape.

[Fact] Four names are said to be in contention: Erdogan’s son-in-law, a former interior minister, current foreign minister Hakan Fidan, and Erdogan’s youngest son Bilal Erdogan.

[Fact] In a December survey, about a third of Turks said they would like Hakan Fidan to be party leader and Erdogan’s successor; Bilal Erdogan came third with just over 14%.

[Speculation] The survey suggests Fidan has broader public appeal than Bilal, even though family proximity may matter inside Erdogan’s political circle.

[12:10] Hakan Fidan and Bilal Erdogan

[Fact] Hakan Fidan headed Turkey’s intelligence agency for a decade, previously led the country’s development agency, and has spent the past two years as foreign minister.

[Fact] Bilal Erdogan does not hold public office but sits on the boards of several pro-government foundations.

[Fact] Bilal has become more visible in media and party politics, including appearances at rallies for Palestine and alongside his father in meetings with foreign dignitaries.

[Fact] Analysts who held focus groups with Justice and Development Party voters found early opposition to the idea of government as a family business or dynastic succession.

[Speculation] Bilal’s visibility may be designed to make him look politically credible, but his lack of electoral legitimacy is a major weakness.

[13:48] Why succession remains uncertain

[Fact] Bilal Erdogan already has significant support among some Justice and Development Party politicians and members of parliament.

[Fact] Zilevsky says the clearest sign of Bilal being groomed would be his appointment as head of the Justice and Development Party.

[Fact] The party may struggle to survive a leadership change.

[Fact] Erdogan himself may struggle to win another election because high interest rates, new taxes and spending cuts have eroded his popularity, while inflation remains above 30%.

[Fact] Ekrem İmamoğlu, the mayor of Istanbul and one of Erdogan’s opponents, has been in prison since March 2025 on what the correspondent calls trumped-up charges.

[Speculation] Erdogan’s camp appears to see Erdogan himself as a stronger candidate than any successor, including one from his own family.

[15:58] Georges Beauchard’s wartime childhood

[Fact] After the war, Georges Beauchard and his oldest sister tried to reclaim their family apartment in Paris’s Trocadero section.

[Fact] Ahead of the Vélodrome d’Hiver roundup, a warning helped 14-year-old Georges, his mother and two older sisters hide briefly in Paris before fleeing south.

[Fact] His mother was later arrested, and Georges fled to Aix-en-Provence, where he attended school unofficially under a pseudonym.

[Fact] When he returned to Paris, the family apartment was empty and his books and stamp collection were gone.

[Fact] His father had died of cancer, and his mother died in Auschwitz.

[17:07] A lifelong love of books

[Fact] As a child, Georges asked for books or for favorite books to be bound at Christmas.

[Fact] He loved books both for their contents and as objects, including end papers and leather bindings.

[Fact] At school he excelled at memorizing and reciting Racine and Molière, and he read Walter Scott, James Fenimore Cooper, Proust and Gide.

[Speculation] The obituary presents his later literary career as rooted in an early, intense attachment to books as both art and refuge.

[18:07] Arrival in New York and literary agency work

[Fact] At 19, Georges arrived in New York with few connections and schoolboy English.

[Fact] After placing employment ads in The New York Times, he received two letters from the same person: Marion Saunders, who ran a literary agency representing French authors.

[Fact] Saunders had recently sold American rights to Albert Camus’s The Stranger for $350.

[Fact] She hired Georges, who began with filing, bookkeeping, errands and reading books.

[18:45] Championing Samuel Beckett

[Fact] In 1953, Georges believed he had found an important writer in a middle-aged Irishman writing novels and plays in French.

[Fact] Editors dismissed the work as a pale imitation of Joyce and unreadable.

[Fact] Georges persisted and eventually sold Waiting for Godot, Malloy and Malone Dies for $1,000 for all three.

[Fact] Sixteen years later, Samuel Beckett won the Nobel Prize for Literature.

[Speculation] This episode is used to show Georges’s willingness to trust his literary judgment before the market recognized a writer’s value.

[19:15] Championing Elie Wiesel

[Fact] Later that decade, Georges championed a Romanian Jewish journalist who had written a memoir about Auschwitz.

[Fact] In his cover letter to publishers, Georges said he felt more strongly about the book than any other he had sent.

[Fact] Fifteen publishers rejected it, and one publishing-house co-founder said the writer would never find an audience in America.

[Fact] Georges sold the rights to Elie Wiesel’s Night for $250, conditional on finding a British publisher to share translation costs.

[Fact] Its first print run of 3,000 copies took three years to sell, but by 2018 it was selling that many copies each week; Wiesel won the Nobel Peace Prize in 1986.

[20:17] Building his own agency

[Fact] In 1967, Georges and his American wife started their own agency.

[Fact] The work suited him because it required judgment, taste and confidence.

[Fact] His client list grew, and he preferred novelists, critics and historians whose books won high-brow prizes over smash-and-grab genre bestsellers.

[Fact] He was known for conversation, dry humor, a slight French accent, fierce negotiation, reserve and politeness.

[Speculation] The portrait emphasizes literary seriousness over commercial flash as the defining principle of his career.

[21:10] A reader to the end

[Fact] Georges had enough stories to fill a memoir, but he declined to write one.

[Fact] He preferred helping writers to being one.

[Fact] Asked what he looked for in writing, he said he wanted to fall in love with it and would know it when he found it.

[Speculation] The closing line frames his career as a life spent recognizing and defending books before others understood their worth.

Podcast Commentary / Summary

The strongest segment is the AI-market discussion because it separates two ideas that are often blurred: a technology can be genuinely transformative while the investments around it still become dangerously overpriced. The comparison with the dot-com boom gives the argument useful historical grounding.

The practical investment takeaway is deliberately modest. The episode does not promise a perfect hedge; instead, it weighs the weaknesses of bonds and gold, then points toward defensive equity baskets and long-term holding as more realistic responses to bubble risk.

The Turkey segment is valuable for explaining why succession talk can intensify even when an autocrat has no intention of leaving. Its limitation is that the outcome remains highly uncertain, and several claims about succession dynamics depend on private maneuvering that cannot be fully observed.

The Georges Beauchard obituary gives the episode a literary and human ending. It is best suited to listeners interested in markets, international politics and cultural history, though the three topics are only loosely connected beyond the magazine-style format.