Is that an incoming financial crash on the horizon?
I MENTIONED the Shiller ratio before, and I’m mentioning it again. The reason is it has gone up to a level almost never seen before.
Part of that is to do with AI stocks – and you know my opinion of AI, Spanglish et al.
Nvidia has dropped $500 billion over the last couple of weeks, to push it below Microsoft as the world’s most valuable company. And I can’t say I’m surprised, at some point the creators and makers of AI processes are not going to be able to sell their pretty useless systems and hence no one will need to buy Nvidia’s chips.
I don’t know if you have been speaking or texting to digital assistants recently. Everyone and his dog have installed these. Why, I really don’t know. I have unfortunately had to deal with three over the last week at three different companies – all big tech companies - who, I suppose, feel obliged to have them. In every case, the “assistant” was unable to help in any way and eventually (after a suitably long time trying to get a coherent answer) I was passed to a real, honest to goodness, human being. Who sorted the problems in a trice, or two. Humans 3 - AI 0.
I can’t believe I’m the only person suffering this nonsense, and far from productivity gains we are clearly seeing things going backwards. It may well be we have all succumbed to mass apathy and are so used to hanging on to the phone or tapping away in the little box to get an answer that we fail to appreciate the sheer waste of time and inefficiency involved.
In case you don’t know, many years ago I used to be involved with property in Glasgow. At that time there was a wonderful little old lady who had been in what was called 'the rates department' for years (none of that community charge nonsense) who literally knew everything. You could phone her up anytime and get an answer within a few minutes. Something wrong on the ground? Tell her and she would align it with the paperwork. Efficiency, speed, reliability.
Eventually, it was decided this was an old fashioned way of doing things and they would computerise it all. Which they did. Now they have something like 50 people overseeing the computers that are incapable of erasing any mistake. Oh, and it can take TWO YEARS to resolve a problem.
It seems to me that AI is going the same way. There are other straws in the wind (holiday companies are clearly in dire straits as we speak) and more and more people are falling behind with payments of various types.
Add in the number of US banks that are effectively bankrupt (what did they think would happen when they were lending at 5% and they then started borrowing at 10%?) .and Jerome Powell’s speech the other day trod a very careful line about interest rates and inflation.
I’ve argued before that inflation is more entrenched than the Twitterati (or whatever they are called now) would have you believe. What will be critical is central bank reaction at the time – print more dollars or stand pat? If they stand pat, can they afford to pay for the bailouts? If they print more, can they afford to do that either?
And if there really is a crash, don’t for one minute think that crypto is going to be immune. Everyone with a few Satoshi will be desperate to sell to get back into fiat cash. I’ve never been one for cash in deposit accounts, but I am beginning to see the plus side. More importantly, a taxi driver the other day told me he and his mates had got out of crypto and into gold.
You couldn’t have a better endorsement than that. You have been warned.
