We are seeing the collapse of the U.S. financial system drawing closer and closer each day.
Last year, the only thing that supported the U.S. financial system and stopped it from completely collapsing, was investment into AI and the 7 technology stocks, referred to as the “Magnificent 7”.
Today, as we head into the last couple of weeks of the First Quarter in 2024, many of those “Magnificent 7” stocks are beginning to fall back from the AI bubble created in 2023, and there is now really only one of these stocks that has been basically stopping a full stock market crash, Nvidia, the leading manufacturer for the power-hungry computer processors needed to run AI.
Nvidia is now worth more than all of these companies combined: AT&T, Boeing, Coca-Cola, Disney, FedEx, General Motors, IBM, McDonald’s, Nike, Starbucks, UPS, and Walmart. (Source.)
Nvidia recently reached a $2 trillion market value and has easily beat the previous most valued Big Tech company, Apple. Apple’s valuation continues to decline, along with other Big Tech companies like Tesla, partly because of their dependence on the China market. See:
APPLE IPHONE SALES SLUMP 24% IN CHINA TO START THE YEAR, REPORT SAYS
And many investors are wise enough to see that Nvidia’s current valuation is also a huge bubble that is going to burst.
NVIDIA’S $2 TRILLION MARKET CAP LOOKS BUBBLY
AI chipmaker Nvidia topped $2 trillion in market cap on Friday less than nine months after crossing the $1 trillion threshold.
Why it matters: AI-drunk investors have bid up Nvidia, whose advanced chips power AI systems, to bubble-like levels. The company’s stock chart parties like it’s 1999 — and we all remember what happened to the dotcom era darlings a year later.
- AI is no fad, but neither was the internet. That didn’t stop dotcom stocks from collapsing.
Driving the news: The company gained $277 billion in value Thursday — Wall Street’s biggest single-day gain ever, per Reuters — after its quarterly earnings, reported Wednesday, suggested the AI boom has legs.
- Nvidia’s wild ride is propelled by demand for its graphics processors, which have turned out to be ideal not only for Bitcoin mining — which drove a previous wave of Nvidia mania — but also for the kind of number-crunching that ChatGPT and similar AI programs demand.
Yes, but: That demand is probably at its peak right now.
- Both the moment’s AI mania and global shortages of the most advanced processors have placed a premium on Nvidia’s products. That premium is a lot more likely to erode than hold.
- You can’t ramp up a chip powerhouse overnight, but over time Nvidia will face a rising wave of competitors.
- New research breakthroughs could radically alter the technical needs of AI systems, reducing reliance on Nvidia’s super-chips.
The stock market, in other words, is doing the opposite of what it’s supposed to — it’s responding to the present moment’s obsessions rather than predicting future profit growth. (Full article.)
Besides Nvidia, the other “product” that is holding up the financial system right now is the new Bitcoin ETF that the SEC approved recently.
For those who are unfamiliar with what ETF funds are, they are basically gambling funds where you bet on what is going to happen in the future, without actually owning anything.
So if you invest in the new Bitcoin ETF, you don’t actually own Bitcoins. You own a share in an ETF fund that increases or decreases in value based on the price of the actual Bitcoins.
There are even “Inverse ETFs” that one can invest in, where you basically bet that a certain stock or commodity is going to DECREASE in market value, and the more it decreases, the more you earn in Inverse ETFs.
I suspect that an Inverse ETF will soon be approved for Bitcoin as well, where you can make money when the price of Bitcoin decreases.
This is what the financial system, our debt-based financial system where nobody really owns anything as it is all leveraged against debt, has become. It is one huge Ponzi scheme, controlled by the Central Bankers.
Some are even asking if a Central Bank is now hoarding Crypto assets in order to stay liquid.
Judging from the price action last week, the everything rally remains resilient to the effects of monetary tightening. Have we sprung a monetary leak somewhere that is providing mysterious liquidity into markets? Or is this all just a huge lag effect as the Covid-era torrents of easy money continue to wash through the economy and the US deficit remains close to 6.5% of GDP?
Whatever the case, some of the moves are very interesting. News has emerged of a crypto whale dubbed ‘Mr 100’ who has been quietly accumulating a $3.1bn stash of Bitcoin. Decrypt.co reports that the mysterious whale is unlikely to be US-domiciled, and unlikely to be one of the new Bitcoin ETF operators since those have already disclosed their blockchain addresses. Could a central bank somewhere be buying crypto assets? (Source.)
One investor has stated that Bitcoin will “live and die” by the new ETF fund:
Bitcoin also surged back above $60,000 after the SEC approved bitcoin ETFs.
Peter thinks Bitcoin’s revival this week is the last gasp of breath before the asset blows up completely:
“These ETFs are really the tail that is wagging the Bitcoin dog. I think it’s all now about the ETFs, and of course, Bitcoin lives by the ETFs, it’s going to die by the ETFs and [it’s] probably not going to be a very long life.”
Full article. (Note: this person is biased toward gold investments.)
The success of Bitcoin, and all cryptocurrencies, of course depends on two things that power cryptocurrencies: electricity and the Internet. If you lose access to either of these life-bloods that allow cryptocurrencies to exist, your cryptocurrencies are dead and worthless.
And while physical gold and silver can be stored in your home safe and increase in value as inflation takes off, what good will it do you in a total collapse of the financial system, especially if the supply chains break down, as they did during COVID?
The most current “predictive programming” that is occurring in both the corporate and “alternative” mass media is that we are heading to a Civil War as we get closer to the elections this year, allegedly due to the crisis at the border. If that happens, who is going to exchange your precious metals into something you can use to purchase food and other basic necessities?
Big Tech “Capitalism” = Central Planning
Tim O’Reilly, founder and CEO of O’Reilly Media, Inc., wrote an excellent opinion piece that was published today by the technology publication The Information where he wrote that Silicon Valley venture capitalists subscribe to central planning: “Rather than competing to win in the marketplace, entrepreneurs compete for funding from the Silicon Valley equivalent of the Central Committee.”
Excerpts:
AI HAS AN UBER PROBLEM
A handful of deep-pocketed investors distorts the market, fueling a race for monopoly that inhibits product-market fit.
Silicon Valley venture capitalists and many entrepreneurs espouse libertarian values. In practice, they subscribe to central planning: Rather than competing to win in the marketplace, entrepreneurs compete for funding from the Silicon Valley equivalent of the Central Committee.
[…]
But in the Central Committee version of Silicon Valley, Uber and Lyft, backed by billions of dollars of venture capital, drove out the competition rather than defeating it, subsidizing customer acquisition with an unsustainable business model—and in the case of Uber, continuing to attract new capital with promises of speculative future cost savings via self-driving cars. Instead, once the market had consolidated, Uber and Lyft only reached profitability through massive price increases.
What might have happened if there had been true competition in this market? We will never know.
Expecting Big Returns
In the case of artificial intelligence, training large models is indeed expensive, requiring large capital investments.
But those investments demand commensurately large returns. The investors who pile billions of dollars into a huge bet are expecting not just to be paid back, but paid back a hundredfold.
The capital-fueled race to build the largest models has already led to bad behavior.
OpenAI, for example, has trained not just on publicly available data but reportedly on copyrighted content retrieved from pirate sites. This has led to lawsuits and settlements.
But even those settlements are likely to be bad for the development of a healthy entrepreneurial ecosystem. As Mike Loukides points out, “Smaller startups…will be priced out, along with every open-source effort. By settling, OpenAI will eliminate much of their competition.”
For those of us who have been following this issue for the past few years, since COVID, we know where this is heading, which is total Centralized Top-Down Control through digital finances such as Central Bank Digital Currencies (CBDCs), where you will need to “prove you are you” and not some AI clone, which will be used as an excuse to implement and require biometric IDs, such as a scan of your eyeball, or your palm.
There are no “solutions” coming from those who control the economy. The only solutions are from those the economy depends upon: The Consumers. Elections are rigged to make sure that only those who serve the Central Committee comprise both political parties, so voting and politics are NOT the solution.
The only solution that has ever existed is for the masses of consumers to start voting with their spending habits, but the consumers are too distracted with their political idols and fighting those on the other political side whom they believe, incorrectly, are their enemies.
