nancy

As Seth klarman’s mentor used to say, wall street uses opacity to increase margins

Kushner and Witkoff have discovered a "new" European security architecture: permanent consultations, crisis hotlines, military transparency, risk-reduction measures. It already exists. It's called the OSCE. I was its spokesperson in Ukraine. Russia is a member and has spent years gutting it. Europe's problem was never missing architecture. It was Moscow tearing up the rules.

🚨 The entire U.S. financial system is becoming dangerously dependent on AI. And the numbers are much worse than most people realize. According to a Bloomberg analysis, AI has become so deeply connected to the U.S. stock market, pension funds, corporate debt and economic growth that a serious downturn could affect almost everyone. Here's how big this has become. 1. The stock market Since ChatGPT launched in November 2022, the S&P 500 added nearly $32 TRILLION in market value through November 3. More than HALF of those gains came from just 10 companies, all connected to AI. Technology and tech-related companies now account for nearly 50% of the S&P 500's value, even more than during the dot-com bubble. Nvidia alone recently represented around 8% of the entire index. This means a crash in a handful of AI companies could drag down the broader stock market, even if other businesses are performing well. 2. Retirement savings The risk isn't limited to people buying AI stocks. Bloomberg analyzed more than 70 U.S. pension funds and found that around 44% of their stock investments, worth $610 BILLION, are now tied to technology. Hedge funds and insurance companies have also increased their exposure. So even people who have never bought Nvidia, Microsoft or other AI stocks could be affected through their retirement savings. 3. The massive debt problem This is probably the most concerning part. Technology companies issued $296 BILLION in investment-grade bonds through October 12, making tech the largest nonfinancial borrowing sector. Meanwhile, AI infrastructure developers issued more than $43 BILLION in high-yield debt, compared with just $8.5 billion last year. Technology's share of the junk-bond market has nearly tripled to 19.7%. And the six biggest cloud companies are expected to spend more than $850 BILLION this year on AI-related projects. That's an 83% increase from 2025. The concern is that companies are taking on enormous financial commitments today based on profits they expect to earn years from now. If those profits disappoint, the damage won't be limited to shareholders. Banks, bondholders and investment firms financing these projects could suffer losses too. 4. The U.S. economy AI-related investment has become one of the biggest drivers of American economic growth. Spending on technology hardware, software and data centers now makes up more than one-third of all U.S. business investment. And these categories accounted for most of the growth in business investment over the past year. So if companies suddenly cut AI spending, it could affect construction, electricity demand, equipment suppliers, jobs and overall economic growth. That's why the recent AI stock selloff is so important. The U.S. economy has become increasingly dependent on companies continuing to spend hundreds of billions building AI infrastructure. But there's still a major unanswered question. Can AI companies eventually generate enough profits to justify all this investment? Because right now, the same industry is supporting stock valuations, retirement portfolios, corporate borrowing and a significant part of economic growth. If the AI boom suffers a prolonged collapse, this won't just be another tech stock crash. The consequences could spread across the entire U.S. financial system.

WHAT WOULD ALAN GREENSPAN SAY ABOUT US MONETARY POLICY RIGHT NOW? At the FOMC meeting on 17 November 1992, Fed chair Alan Greenspan said: “I’m basically arguing that we are really in a sense using [unintelligible] a nominal GDP goal of which the money supply relationships are technical mechanisms to achieve that.” Greenspan never wrote the rule down. But from the 1990s onwards the Fed de facto followed an implicit target for nominal demand. Whenever it strayed from that target for long, things went wrong. Today I present The Forgotten Greenspan Rule. The idea is Greenspan’s, the formulation is mine, and this is the first time it is presented publicly. The implicit target is the inflation target plus trend growth in real GDP. In the US that is 2% + 2.6% = 4.6%. The rule then asks three questions, in this order: 1) Is nominal demand growing at least 1 percentage point faster or slower than the implicit target - without the gap narrowing? 2) Is the 10-year yield moving away from the implicit target - a sign the market does not believe the central bank? 3) Is the policy rate far from neutral? The first yes decides whether to hike or cut. Otherwise, hold. Unlike the Taylor rule, it says nothing about the level of rates - only direction and timing. Since 2015, across 19 central banks, the rule has called the direction of rates 12 months ahead in 61% of quarters. A naive rule manages 43%. For the Fed alone the hit rate is 68%, and the rule was ahead of the Fed at 9 of 13 turning points. In May 2008 the rule said cut, but the Fed held at 2% until October. Once rates hit zero, quantitative easing was the right policy - but by then the Fed had hesitated for too long. In May 2021 the rule said hike, and the Fed waited until March 2022. Right now US nominal demand is growing at 5.9% against an implicit target of 4.6%, according to the BEA. 10-year yields are above the target and have moved higher this year. The rule has said hike three quarters in a row. This has nothing to do with the labour market or energy prices. It is about the one thing the Fed actually controls - nominal demand. Globally, 12 of 19 central banks should hike. Monetary policy is too easy almost everywhere, and we are going to see many more rate hikes. Last week eight central banks made rate decisions, and five followed the rule. The ECB has already followed it, hiking to 2.50% in June and September. The Riksbank has started - it hiked to 2% on 4 November, but that is still below the neutral level. Of the banks where the rule said hike, only Norges Bank did not listen. It left rates unchanged with nominal demand at 4.7% against a target of 3.4%. It will have to hike if it wants inflation down. In Denmark the rule said hike in 2021 - Danmarks Nationalbank waited until July 2022. Looking ahead, the rule says seven of the next eight central banks should hike - including the Fed on 9 December and the ECB on 17 December. Watch the film and tell me what you think.

For normal jobs, yes. For freelance/consulting work, no. I've often negotiated with big employers and gotten what I want. Many of my colleagues have. I know this legislation well, haven studied and written about it. Fixing would be throwing out the basic concept.

It could, but the fundamental intent of the heavily union backed and directed (obvious in CA and in the first NJ attempt) legislation is the elimination of as many ICs as possible because the unions want a greater chance of controlling jobs. This is well documented.

Oracle is COOKED. In addition to the news about the Tencent data centre, Microsoft just announced they are not renewing an Oracle cloud deal. And, on the same day, Bloomberg is reporting its Project Jupiter is facing ANOTHER delay! That all explains their plan to raise another $20B announced just this week. Larry is hoping to push that boat out, but the tide is too strong...

Five predictions about what might come next: 1. AI isn’t not over. [Did anyone actually say “AI is over” after the DeepSeek moment? (I did not. Is anyone saying that now? I am not.] 2. What might actually be over is the era of insanely high valuations - for generative AI — and exponentially increasing investments in data centers. 3. People will continue to use generative AI (now mostly via harnessed neurosymbolic models with tools and loops rather than the once dominant pure LLMs that are no longer popular). 4. New, more reliable architectures will eventually displace today’s AI, but it may take several years, or more. 5. A newer generation of AI will actually be worth a lot of money; this one was overrated and people will eventually see that in hindsight. cc @dee_bosa

Wall Street playbook: Repackage the AI circular hype, bury the risk, lever it up till the whole damn thing's too big to fail. When it blows, taxpayers/savers eat the tab. Too big to fail ain't a bug, it's the exit. Profits stay private, pain gets socialized.

I had Claude and Gemini work together on analyzing the size of the AI bubble (including the circular-funding circus), the exposure of retirement savings to AI-linked stocks, and a comparison to the size of the 2008 subprime mortgage crisis -- then had Claude cross-check everything and write a combined report. Claude's executive summary: -- The AI bubble by the numbers (Nov 6, 2026) SIZE • AI-linked stocks: ~$30T, ~40% of the US stock market • Value above long-run trend: ~$12-14T (central estimate; range $2-22T) • Funded AI debt: ~$1-2T, plus ~$4-5T of purchase and lease commitments BUBBLE INDICATORS • S&P 500 CAPE: 41 (dot-com peak: 44) • US market cap/GDP: ~229%, near its 240% all-time record (dot-com peak: 144%) • Top 10 stocks = 40% of the S&P 500 (16% in 2016) • AI revenue covers at most 20% of the $1T+ spent on AI infrastructure in 2026 • Big Tech capex ($1T in 2026) exceeds operating cash flow ($804B); hyperscaler free cash flow projected negative by early 2027 • Circular financing: IMF counts $300B equity + $650B debt flowing between AI firms, tied to $1.4T of revenue commitments back to the investors • Suppliers guaranteeing their customers' debt: ~$260B of explicit backstops (Broadcom alone up to $43B) • Profits flattered: $160B of $285B in Q2 profit at 5 megacaps came from marking up private AI stakes; longer server depreciation lives add billions per year • Credit stress: Nvidia CDS hit a record in July; neocloud borrowing now costs ~10% • Nov 5: Nasdaq -5.5% into correction; chip stocks -12%, worst day since March 2020 RETIREMENT SAVINGS EXPOSURE • Total US retirement assets: $51.2T (IRAs $19.9T, 401(k)/DC plans $15.0T, pensions $13.6T, annuities $2.7T) • Invested in AI-linked stocks: ~$10T (range $6-16T), or 12-32% of all retirement assets • Retirement accounts and pensions hold ~1/3 of all US stocks • An S&P 500 index fund puts ~40 cents of every dollar into the top 10 stocks, mostly AI-linked • 80%+ of 401(k) plans default savers into target-date funds; the 10 largest active 401(k) funds hold an average 38% in tech and communication stocks • Stocks are 34% of US household wealth (dot-com peak: 26.7%) • Estimated retirement losses: Magnificent 7 fall 25%: ~$1.7T. AI stocks return to trend: ~$4-5T (range $0.7-7.3T). Broad market reversion: ~$12-15T VS. THE 2008 SUBPRIME CRASH (today's dollars) • Subprime debt outstanding: $2.1T. AI funded debt: ~0.5-1x that. Including commitments: ~2.4-3.3x • Housing bubble excess value: $13.4T. AI excess value: ~$12-14T, about the same • Household wealth lost 2007-09: $22-28T. AI stocks returning to trend: ~$12-14T lost. A broad market reversion: $35-45T KEY DIFFERENCE: 2008 was leveraged household mortgage debt held by banks. The AI boom is mostly equity, so losses land on shareholders and retirement savers; default risk is concentrated in neoclouds, AI labs and their off-balance-sheet financing vehicles. -- Full report with sources: claude.ai/artifact/AFTSWS8gN…

The economy in 2022 and 2026 looked similar, as did voter moods; 75% thought the economy "not so good/poor" both years. But in 2022 the popular vote margin swung six points against D's, whereas in 2026 it swung 14 points against Rs. This year's more severe backlash shows the economy wasn't as big a driver of Tuesday's results as the popular narrative suggests. A deeper anxiety about where the country was headed and how Trump governed was at work. I unpack it in my column here. wsj.com/economy/voters-were-…

Lena had a ruff night & morning with lots of rolling thunder...even with calming bites, she couldn't stop shaking until we finally got a break in the storm. More to come later, but for now she's resting.

What millions want is the right to work and not organize because they're running their own businesses.

So, if I invited you to my winter home for some frybread and a hot cup of coffee or tea and tales of Lakota yore — would you accept my invitation?

It was a great October jobs report, but that doesn't erase this painful fact: Inflation has wiped out all wage gains for 7 straight months. Average wage gains in past year: 3.1% Inflation: ~3.5% (we'll get the latest data Tuesday) In fact, the inflation resurgence has been so strong that it's basically wiped out all wage gains since January 2025. That was the key voting issue in the mid-term elections. #economy #jobs #inflation