Thistles sailing on Willamette River
There are two reasons for posting this blog.
- With Recession in the title, readers a year from now can Google the word and come up with this post showing when ITA was sounding the alarm for the coming recession – or worse. In fact, I have been hinting at the coming market draw-down for months.
- The blog contains three links to what I am talking about. In an earlier post I provided another link along the same lines. I don’t expect all readers will enjoy or even track the logic behind the money exchanges between the large AI companies. One of the links is quite long so listening might require several sittings.
This first blog lays out the tangled web of money moving around these companies in order to keep debt off their balance sheets. Readers will also find how AI companies are lengthening out the depreciation time for their hardware in order to boost earnings.
How to protect capital? I’ve been buying short-term treasuries (SHV) and reducing exposure to U.S. Equities such as VOO or SPY. This move may be early as the equities market could easily rise for another 12 to 15 months. However, it certainly looks like a market crash has a high probability of happening in the near future. Keep checking on the Buffet Indicator and Shiller P/E Ratio.
This is an interview with a woman who has written a book on the problems surrounding AI and the harm created by the immense data centers.
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Lowell
This is very scary stuff. I knew something about the AI circular economy, and I’m currently reading Karen Hao’s book (“Empire of AI”), but what I did not appreciate is the scale of the financial engineering. This level of double dealing also occurred in the 2006-2008 timeframe, but with subprime mortgages. This financial engineering is getting to be global and therefore very dangerous.
This is a great set of clips. Keep up the good work Lowell.
Craig
Craig,
Karen Hao’s book is on my library waiting list. Based on the long wait list this book is getting some attention. I’ve listened to her on some videos and what is scary is that AI developers are undermining our democracy.
Assuming you have been following this blog, I’m currently 55% in cash and short-term treasuries and moving more to treasuries each week. I’ve yet to short the market, but it is tempting.
Lowell
Lowell,
I have concerns about what happens 5 years from now if technology has developed to the point that data centers no longer need the tremendous amount of power that is currently required. The companies that own data centers will do all they can to lower their power bills and there will be demand for chips that are more efficient and have more computing capability. I am convinced the demand will be met. Less chips required would mean less power required. Would that mean power companies would have less revenue to pay down the debt incurred? What would happen to the lenders who hold the debt if the result is default? There is a tremendous amount of money involved. Power stations and the grid are essential to the everyday lives of individuals. Would the public be on the hook to make the power companies whole to keep the power coming? This is one of many areas about our race to be first in AI that are concerning. Looking forward to reading Karen Hao’s book
Richard
Richard,
Somehow your post got caught up in a Spam filter and was hidden from view until this morning. Apologies.
The public frequently is on the hook for all kinds of shenanigans. Think unnecessary ballroom.
Lowell