Having in another life been a jarhead I’m of course looking with a worried eye at what’s going on over in Iran. However there is an awful lot going on here at home and in proverbial walk and chew gum times. Multiple wads of gum and one of them involves the economy. Especially that stock market Bondi touted when she was supposed to be answering Epstein questions. Remember the bursting of the dot.com bubble? It looks like we’re about to have a repeat, this time due to AI.
Huge stock market ‘corrections’ happen of course. When some hot new thing comes along, creates a bubble and it bursts the fallout goes beyond just that one big thing. Is a stock bubble burst about to happen. This Motley Fool article makes a pretty good case it’s almost certain to happen. While reading financial stuff makes the average person (include me) eye’s glaze over it’s worth a look. After some discussion about Wall Street seemingly cruising along under Trump 2.0 there are signals that say we should be asking if a crash could happen with Trump in office. More to the point, it suggests if we have a crash it won’t be Trump’s dumbass, destructive tariffs:
While seemingly everything has gone right for Wall Street under Trump — interest rates are coming down, inflation has eased since the summer of 2022, corporate earnings are better than expected, and the artificial intelligence (AI) revolution is boosting equity valuations — headwinds are quietly piling up. It begs the question: Could a stock market crash materialize with Donald Trump in the White House?
This news outlet plays cheerleader at times so I treat what they say with a dose of ‘prove it.’ For example the part highlighted above talking about inflation is a case in point. Biden had already gotten the rate down to around three percent and it’s been volatile since. Creeping back up (tariffs) and while some items that got a lot of attention like freaking eggs are down, a lot of other key grocery items are up. Gas isn’t as low as Trump claims either and of course the price will shoot up again now that we’re at war with Iran. THAT creates large ripple effects. For all that, what the linked article digs into is that although there’s talk about tariffs causing a crash, what we should be looking at is AI and how quickly so much has been invested in it.
Motley Fool makes the case that while tariffs might get blamed for a crash three other factors are what we should be concerned with. They go on to provide ‘receipts’ as the saying now goes. They first talk about the historical price of equities. Even for a non economics person they make it easy to understand by going beyond the P/E (profit & earning ratio) usually talked about when it comes to value. The standard measure looks at at the past 12 months, but argues the standard measurement of a year’s performance is too subjective:
However, the S&P 500’s Shiller Price-to-Earnings (P/E) Ratio, also known as the Cyclically Adjusted P/E Ratio (CAPE Ratio), cuts directly through this subjectivity and provides investors with apples-to-apples valuation comparisons for the broader market when looking back 155 years.
Whereas the traditional P/E ratio is arrived at by using trailing 12-month earnings and can be easily tripped up by a recession or shock event, the Shiller P/E is based on average inflation-adjusted earnings over the previous decade. Examining 10 years of earnings history means short-lived recessions and shock events won’t diminish the usefulness of this valuation tool.
It’s now at the second highest in history, with the dot.com bubble being the highest. Uh Oh.
Since January 1871, the Shiller P/E has averaged approximately 17.3. But over the last three months, this valuation yardstick has danced between 39 and 41, marking the second-priciest stock market in history.
Over the last 155 years, there have been just six instances in which the CAPE Ratio topped 30, including the present. The previous five occurrences were all eventually followed by 20% or greater declines in one or more of Wall Street’s major stock indexes.
All the financial markets are affected and a bursting bubble is the kind of thing of which recessions are made, especially when there are other factors in play. As the linked article notes and if you follow the news including basic economic stuff you already know the economy is facing headwinds. Hell, from your own lives and just keeping up (or trying to) the cost of living you know that!
I urge you to read the linked article, even though you might find it a bit tedious and boring as I’ve sometimes been said (not without justification I must painfully admit) to be. It goes on to explain two more factors that make up what could well, is even likely to be Terrible Trio for the economy and therefore Trump. This includes more comparison between the arrival of AI being widely invested in and what happened with the internet that led to the dot.com bubble. Like it or not (for the record I don’t) business has been investing huge in AI and putting it to use even though it’s not as mature as it’s proponents would have us believe. Now, with Trump causing a problem by having the Pentagon ditch Antrophic with a designation that forces other major companies and contractors to stop doing business with them a tech sh*tstorm is about to rain down.
Don’t think Trump’s tech bros are going to be down with him throwing AI into turmoil. Or that they won’t work like hell to protect themselves and their own fortunes at the expense of the rest of us. What it does mean is that in a year when the economy is already a problem for Trump and the GOP we might be in for another major hit. Pissed off voters don’t vote for the Party in power. When hurt, they lash out at those responsible for their pain and Trump/Republicans will be the target no matter how much Trump tries to blame it all on Biden.
Friends, I know everyone begs you for money. I promise, among all those asking for spare change, we are the smallest and the hardest working. We’re a group of old, disabled people, except for one writer in his mid-50s. The rest of us are in our sixties and seventies, and this is a labor of love. All we’re asking for is the chance to keep telling the truth about Trump and help ensure democracy survives. If you can help, please do. Thank you. Ursula
I’m deeply pissed with this bullsh!t with Anthropic, and I dearly hope something will turn around in their favor. They’re the adults in the room, and refusing to remove those safeguards is definitely the correct thing to do.
Trump and Petey Boy want their toys like they want their toys, and any variation isn’t allowed.
AI is too damn dangerous without safeguards. If we think about what the rumors say they might use it for, well, yea. That. Big Brother really will be watching you.
Bang on. Could not possibly agree with you more, Susan. Every word!
Wars are supposed to be ‘good’ for the economy – particularly in the case of the US, because it’s never been bombed like Europe.
But war has never coincided with an asset bubble bursting before, so we are in uncharted waters. But one of the price indices most watched is Brent Oil, now at about $73/barrel. Watch for it to hit $80, and watch the price of gasoline in The USA to go up by the same percentage, now the main transit route from the Middle East, The Straits of Hormuz, is closed.
World air travel is similarly affected by the closure of airspace over the Middle East including the closing of the worlds busiest airport hubs taking 1/3 of world air traffic at Dubai and the UAE. The amount of air travel in the area having increased lately because of the closure of Russian and Ukrainian air space. The costs of all this disruption will be soon shared as well.
History has already shown us that Dimwit Donny gives little thought to the foreseen consequences of his actions, let alone the unforeseen ones.
Concinnity, I’m going to open myself up for public ridicule with this post, but since I believe it, I will share, on this, my absolute favourite blog, and let the chips fall where they may if I am proved a moron, or just plain wrong. Turn off BBC and CNN (and def MSNBC or whatever they foolishly call themselves now) and open jpost.com and even Haaretz.com (Ha Aretz means The Country in hebrew). Read just a little behind the lines.
As you can see, Israel is heavily bombing targets, both real estate and personal, of agencies and PEOPLE heavily involved in running the country. For the most part they are leaving military targets to the States ( these targets are more vulnerable to B2’s and heavier bombs Israel doesn’t have cuz it’s really never needed them). I know what people think about Trump and his team’s intelligence, but regardless of what some people may think of Bibi, “stupidity” was NEVER one of his criticisms. He and his ministers know Iran just like locals. Jews have lived in Iran continuously for at least 2500 years, and still do (google “Purim”). Shaul Mofaz, a former top minister in the Israeli government is Iranian and surely still has numerous close ties inside the country. He and thousands of other Jewish and Bahai (and probably Muslem) Iranian-Israelis. Further, I have little doubt that Bibi and Reza Pahlavi are in frequent communication and have been for years. In short, what started yesterday has been in the works and detailed planning for years (there was an excellent article in Jpost yesterday about the intricate detailed planning as to why they started the bombing in the morning and not overnight.) In short while pundits on American and British TV have been gnashing teeth about Trump et al’s forward thinking abilities and Democrats have been bashing him (except the wisest Dem of all: Fetterman) Israelis seem to be acting with one laser-focussed goal: Orderly regime change. It is my guess (having also discussed with several Israeli friends who essentially agree) that Israel’s plan (in conjunction with what’s left of the PROFESSIONAL American military) is to obliterate the current Iranian managerial echelon, and somehow (don’t ask me how) bring in Reza Pahlavi as a temporary leader with him committed and supported for only one goal, create a democratic system whereby within 2-3 years there are REAL elections and political parties in Iran and the country becomes a REAL functioning democracy, following which Reza steps back and becomes just citizen Pahlavi.
Could a million things go wrong every step of the way?
Sure.
But do I believe all the hand-wringing “experts” on US and British TV?
Not at all.
I truly believe there is a very detailed serious plan to turn Iran into a genuine functioning democracy.