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US CPI | Musk vs. Brazil | #freespeech | Web 1.0 to 3.0 | AI productivity

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Here's a quick comment ahead of today's US CPI release, before a less time-sensitive examination of market fund flow data. We intended to send a longer update, but an exciting UEFA Champions League game between Real Madrid and Manchester City disrupted our plans.

Elon Musk vs. Brazil

Elon Musk, the owner of X (formerly Twitter), is once again stirring up controversy in Brazil with his characteristic combative style over the platform's clash with local free speech laws and content moderation policies. Content moderation remains a contentious topic with no universally accepted guidelines. How do you legislate such that the libertarian middle-aged male conspiracy theorist is not denied his right to drink bleach as a cure for Coronavirus so Darwinism can get to work; while protecting a grandma from losing her life savings to a crypto scam that uses an AI-generated persona resembling her late husband for building trust?

Disagreeable content mistaken for mis/disinformation

Often, content that some groups find disagreeable on social media is wrongly labeled as fake news or disinformation. If we applied a strict ban on mis/disinformation in financial services, then half of the Morgan Stanley research analysts, and plenty others on Wall Street, would be out of a job. And we would have no entertainment.

Ideally, internet users would be rational, responsible individuals practicing higher levels of critical thinking than currently observed, without automatic distrust of governments and authorities.

The real chaos will ensue when it becomes economically viable to generate hyper-personalized content on a mass scale with AI, reducing the room for common facts and shared experiences. Conversations will shift from “What did you think of the movie?” to “How did your movie end?”

Web 3.0 & 5G Networks

What happened to the Web 3.0 decentralization protocols that were supposed to solve these problems by…. well… circumventing the law? And wasn’t 5G supposed to offer more than just faster speeds than 4G, like providing more precise cellphone GPS coordinates? Perhaps it was all just an elaborate scheme by Western intelligence agencies and the military-industrial complex for better precision in drone targeting. The data from the battlefield seems to confirm this, doesn’t it?

Alan Brazil on Higher for Longer

We've received several pieces of feedback on Alan Brazil's 73-page report mentioned in our previous update. To avoid repetition, here is a previous update on how we incorporate Alan's work, along with others, into our current thinking: US Inflation | What's next for bond yields?

AI impact on labor productivity and inflation

Regarding the potential impact of technology, specifically AI, on productivity and the labor market, an in-house study by Google's Chief Economist Hal Varian and colleagues mentioned in the update serves as a useful guide. The productivity gains by most other organizations leveraging the same technology are likely to be lower than Google's.

Will the economic impact of AI differ from prior technologies?

As Larry Summers has pointed out, the deflationary impact of technology on the economy is a major factor that macroeconomic forecasters have consistently underestimated over the past couple of decades. Often, this is due to a lack of imagination than access to knowledge.

During the tech 2.0 revolution, productivity gains from convenience apps freed up more leisure time, which was then occupied by other low-productivity technologies, such as less time cooking and more time binge-watching Netflix series.

The advent of the internet (Web 1.0) promised free open access to knowledge for everyone. How did that turn out? As far as we can tell, the areas where mass consumer AI adoption is taking hold are in the gaming and entertainment industries, which are not the most conducive sectors for aggregate labor productivity growth.

It's still unclear (to us) whether the current suite of AI tools and features will be more deflationary than recent technological advances, such as non-AI robotics in Amazon warehouses or smartphones for business use. Meanwhile, there has been a significant increase in energy consumption by AI technologies, which engineers are working hard to reduce through improvements in hardware and new algorithms.

An inequitable distribution of the benefits from AI technologies is increasingly certain. New rules and legislation are necessary, but are unlikely to change course on what is inherent to human behavior and tendencies. We can all be better people, read and exercise more.


According to Brent Donnelly at Spectra Markets, who is far more attuned to market sentiment and short-term tactical trading than we are, the risk-reward favors a soft CPI print today. We cannot say whether this reflects the broader fast-money positioning.

As previously discussed, recent deviations from consensus expectations on inflation are much less significant than market fluctuations would suggest. Ultimately, bond yields are determined by net supply/demand dynamics, not inflation or other economic metrics.

Recently, borrowers, including governments, have refinanced or issued new debt as mid/long-term interest rates have fallen. We believe recent changes in US interest rates are more attributable to:

i) Temporary net imbalances in fixed income fund flows and origination.
ii) Unwinding of crowded positions since the start of the year due to overly optimistic assumptions about inflation.
iii) Reduced recession risk and its significant impact on average expectations for future Fed policy, now normalized.


Ouch! That didn't go the way we would have liked.

It's one thing to get a market call wrong, all part of the job. But we shouldn't deny the data. One really has to wonder if the JP Morgan AM chief economist truly believes the words coming out of his mouth whilst he carefully studies the data on a live TV broadcast.

For historical reference… in September 2021, the transitory vs. non-transitory inflation debate shifted once price increases became broad-based, prompting the big-sell off in bond yields. We'll look out for good unbiased analysis/commentary on the CPI report.

Julia Coronado and her team at Macropolicy Perspectives are usually very good presenting the fact without spin.

US CPI | Musk vs. Brazil | #freespeech | Web 1.0 to 3.0 | AI productivity | Speevr
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US CPI | Musk vs. Brazil | #freespeech | Web 1.0 to 3.0 | AI productivity

Disinformation or disagreeable? A quick comment ahead of today’s US CPI release