Artificial Intelligence
Today is Saturday and X is on fire. Anthropics Dario Amodei posted We must pace the frontier and all the bros are coming out. Arguements against Dario are that he is trying to do regulatory capture before the IPO and that Dario has a god syndrome that only he knows how to save us from Ai. Oddly enough Sam Altman at OpenAi has followed and even Elon is onboard with the takeaways.
Here’s Sam Altman’s interview with Fortune discussing safe Ai.
Where do I stand on this? Don’t really think my input matters here. It’s out of my control. I also don’t have any grand visions to push or deter the narratives out there. I’m just on the sidelines watching and keeping my ears and eyes open. If it’s really that bad then my next 10 years and previous 5 are well spent being with my loved ones. If its not that bad then i’m still content with spending the rest of life with my family. There definitely will be economic and societal outcomes which stem from this. Economic we will discuss below but societal it can go so many ways that i’m not really interested in thinking through the hypotheticals here.
The Debt
This month US crossed $40 Trillion in Federal Debt (see the screenshot below).
And here is a chart of US Debt since 1980.
Notice on a % basis we are not growing debt at the pace of either previous periods. The sheer size of the supply of debt is obviously concerning no doubt.
Most recently Treasury did a Yen intervention and Bessent chalked it up as standing up for our allies. USD/YEN blew through 160 and Japan is short energy, and to get money for energy Japanese would need dollars. Bessent provided a swap line to protect the allies. Now another read of this is that Bessent wasn’t just protecting the allies, he is, but more importantly he is also protecting the Treasury. If Japan does not get the swap line they have to sell US equities or Treasuries, neither in which the administration can afford to have a drawdown before mid-term elections, swap line it is then.
Now once the market knew that Bessent will defend the Yen, market started testing him. Then in another move On August 19th, Bessent came out and said they were raising the amount on the Treasury buyback program from $2B to $4B (for longer-dated 10-to-30-year securities, effective September 9th through November 4th). The next day, he went on to say we have more that we can do and will do as needed, adding that the buyback could go beyond $4B depending on market conditions. Initially long duration rates dipped on the August 19th announcement, but then went right back up the next day as Bessent spoke, with the 10-year yield rising back up about 5bp. Bessent came back about three weeks later, around September 9th–11th, and said he is upping the buyback to $6B for that week's 10-to-20-year operation, this time yields didn't dip first, they rose to multi-year highs, since the market had been pricing in an even bigger number and was disappointed. Bessent is suiting up as Mario Draghi “We will do whatever it takes and believe me it will be enough”
When Bessent was talking at SMU earlier this week he said “he is now the house” (see clip below).
10’s @ 4.94% and 30’s @ 5.36 this Friday.
Rates have spiked across the curve and many are predicting that the Fed has to raise the rates due to inflration. See Polymarket below. Now, I might add that I can definitely see a scenario where Warsh comes out and says look you guys CPI was in line and yes PPI was a bit higher but the market has already done the tightening for us and just like equities rally into mid terms. Warsh has already said he prefers markets without forward guidance. Trump would also be pretty pissed of any rate hikes before the election.
USA vs Iran vs China vs Russia vs Europe vs Canada
Xi is visiting the US in about 2 weeks.
Canada wants to cozy up with the rest of the world and China to counter US.
US and Canada trade talks fell apart at last moment and they traded tariffs in return. Trump renamed Lake Ontario to Lake America
Afd won in Germany, Europe is moving to the right.
We took over Venezuela and they committed to 60B barrels of heavy crude to the US. US refining is designed for the heavy crude coming from Venezuela. South America is moving to the right.
Essentially US has solidified its over South America and the entire Western Hemisphere. Monroe Doctrine.
Russia and Ukraine are still at war. CIA gave both of them a visit last week.
India is already on the right with Modi government and playing a game of being everyones friend.
El Salvador is secretly building for its people, but many are worried that Bukele is a dictator. El Salvador has abolished most crime, about to spend 8% on education and is becoming a beacon of what transformation in a society looks like when criminals are behind bars. The human rights groups say many are put into jails who have committed no crimes and also those who oppose him. No one knows the truth.
Humans
We are a crazy and amazing animal. Hopefully Ai won’t kill us and would like to keep us around. If it chooses to keep us around then ill be hoping its with my loved ones, if it chooses to kill us all well? Well i’ve enjoyed the ride.
Me Personally
I’m coaching tennis these days. Boredom has crept up on me and now its time to win against it.
Onwards with Education.