CPI comes in hotter than forecasted … how AI will lead to massive wealth concentration … will the future be utopian or dystopian? … leveraging AI for lifechanging portfolio returns
Inflation didn’t do what Wall Street wanted this morning.
The Consumer Price Index rose 0.3% in January and 3.1% year-over-year. Both readings were higher than the respective forecasts of 0.2% and 2.9%.
Core CPI, the Fed’s preferred measure of CPI which strips out volatile food and energy prices, also topped expectations. It was up 0.4% on the month and 3.9% on the year, above the forecasts of 0.3% and 3.7%.
Now, these aren’t bad readings. The 3.1% headline inflation number was the lowest reading since last June. And the year-over-year core reading of 3.9% matched December’s gain, which was the lowest reading since mid-2021.
But for Wall Street, which refuses to take the Fed at its word about the timing and scope of rate cuts, this is awful news. Any inflation readings that come in on the high side give the Fed more reason to go slow with rate cuts. And Wall Street loathes “slow.”
From The Wall Street Journal:
…Bond yields rose after the release, which fueled worries that firmer-than-expected inflation would reduce the probability of the Federal Reserve lowering interest rates in the coming months.
Interest-rate futures, which before Tuesday’s report implied the central bank would probably begin cutting rates by its May meeting, now suggest a June start date is more likely.
Remember, back in December, Wall Street put 90% odds on the Fed beginning to cut rates in March. And here we are now, adjusting to a new “probably in June” outlook.
Today’s sea of red in the market is a selloff of Wall Street’s own making. It’s what happens when a “priced for perfection” market runs into imperfections.
We’ll have more to say on this in tomorrow’s Digest. But for now, let’s shift gears.
Tonight at 8 PM eastern, our hypergrowth expert Luke Lango is holding an important live event – AI Endgame . The focus of the evening is simple: how to put tomorrow’s AI winners in your portfolio today.
As we get into the details, let’s begin with an image…
Imagine an uneven billiards table where all the balls roll into the same corner pocket
That’s a bit like what Artificial Intelligence (AI) is going to with our global economy, redirecting the flow of trillions of dollars of wealth into the “pocket” of a tiny sliver of recipients.
Consider just one aspect of how this will work…
Today, AI is beginning to reshape the global workforce – a euphemism for “replace human jobs.”
Yesterday, the related job cuts were mostly limited to basic process-oriented tasks. Today, they’re increasingly coming from content creation and brain-powered processing tasks. Few jobs are 100% safe anymore.
Here’s The Wall Street Journal:
Decades after automation began taking and transforming manufacturing jobs, artificial intelligence is coming for the higher-ups in the corporate office.
The list of white-collar layoffs is growing almost daily and include jobs cuts at Google, Duolingo and UPS in recent weeks…
Company executives and management consultants are also signaling that generative AI could soon upend a much bigger share of white-collar jobs.
Unlike previous waves of automation technology, generative AI doesn’t just speed up routine tasks or make predictions by recognizing data patterns. It has the power to create content and synthesize ideas—in essence, the kind of knowledge work millions of people now do behind computers.
Now, with AI increasingly performing these roles, what happens to all the salaries of the employees who are no longer needed?
Well, that money stays within the company.
So, all things equal, the same volume of revenues flow into the company coffers, but fewer dollars flow out. This makes the company substantially wealthier. Eventually, those riches funnel to senior managers and investors through bonuses, dividends, and stock price appreciation.
Great for managers and investors…but what happens to those replaced workers?
Here’s The Guardian:
“Even if AI takes your job away, you don’t necessarily just become unemployed for the rest of your life,” [Economist and political theorist Karl Widerquist, professor of philosophy at Georgetown University-Qatar] says. “What happens is you go down in the labour market, you start crowding the lower-income professions.”
Widerquist believes, at least in the short term, that the growth of AI will push white-collar workers into the gig economy, and into other forms of poorly paid, insecure work.
Such a shift in the workforce would, he fears, drive down wages and conditions, while increasing inequality.
This is where visions of the future diverge
On one hand, you have a utopian perspective like the one held by Elon Musk.
From Fortune, last fall:
Elon Musk predicted that AI would inevitably remove the need for all jobs.
“It’s hard to say exactly what that moment is, but there will come a point where no job is needed,” Musk told U.K. Prime Minister Rishi Sunak.
“You can have a job if you want to have a job, or sort of personal satisfaction, but the AI will be able to do everything” …
He also suggested AI will lead to a “universal high income,” an apparent superior to universal basic income (UBI), which other Silicon Valley figures like Sam Altman and Mark Zuckerberg have advocated for. “We won’t have universal basic income. We’ll have universal high income,” Musk said…
Even if this comes to pass, it’s still value-additive for companies and investors. Consider why…
How would we fund this AI-based universal basic income?
Well, there are a handful of suggestions, but a front-runner endorsed by Bill Gates is a heavy tax on companies that replace human jobs with robots and/or AI software.
But the higher this tax goes to fund the living expenses of billions of people around the globe, the lesser the incentive for companies to turn to AI/robotics.
After all what sort of value proposition is it for senior managers to spend big on upgrading to an AI/robotics workforce, but then have to funnel the lion’s share of the ensuing cost savings to the government for redistribution?
So, for this to work, the value proposition for companies must be net positive…which means managers and shareholders are still coming out better than before.
But there’s also the dystopian view of AI’s impact on the world and the labor force
From the International Monetary Fund:
We are on the brink of a technological revolution that could jumpstart productivity, boost global growth and raise incomes around the world. Yet it could also replace jobs and deepen inequality…
We may see polarization within income brackets, with workers who can harness AI seeing an increase in their productivity and wages—and those who cannot falling behind.
In most scenarios, AI will likely worsen overall inequality, a troubling trend that policymakers must proactively address to prevent the technology from further stoking social tensions.
As with all things, the most likely outcome is neither fully utopian nor dystopian, but somewhere in the messy middle
If AI is everything it’s cracked up to be, then it’s going to increase productivity while eliminating a substantial part of the global workforce. It’s reasonable to assume this will require some form of subsidization.
And who will ultimately drive the details of such subsidy payments?
The IMF piece we just quoted told us…
“Policymakers.”
In other words, our elected officials.
Unfortunately, it’s very hard to mention “elected officials” without also mentioning partisan bickering, squabbling, waste, delays, corruption, you name it…
So, even if universal basic income comes to pass because of AI, there are likely several years in front of us during which nothing substantive is accomplished. Instead, it’ll be a period when corporations at the cutting-edge of AI adoption reap outsized profits before new policies redirect the flows of those profits.
The moral dilemma of AI and UBI aside, we want to be investors in those companies. We want to align our portfolio with that one pocket of the uneven billiards table.
Tonight at 8 PM Eastern, Luke will zero in on how he’s investing in tomorrow’s leading AI companies
Here’s Luke speaking to the wealth divide thanks to AI:
AI stock investors are making money hand over fist, while other investors are not.
I am confident that this is the new norm, and that artificial intelligence will divide society into two groups.
On one side are investors and businesses who embrace AI, invest in it, and use it to enhance productivity…
On the other side are those who neglect AI, do not invest in AI stocks, and fail to adopt the technology in their daily lives. I believe these individuals are setting themselves up for failure for the next several decades.
We’re expecting an enormous turnout for tonight. After all, Luke has already helped investors lock in a slew of triple-digit AI winners over the last year – even a 1,000% winner from Nvidia.
But Luke believes the vast majority of AI’s investment wealth creation remains in our future. This megatrend is only just beginning to reshape our culture and investment markets.
As we’ve covered today, this transformation likely means some degree of social upheaval and growing pains as our world adapts to this technology. But it also means enormous wealth creation for a small group of individuals who position themselves wisely.
Join Luke tonight at 8 PM Eastern to learn the steps he’s urging investors to take to be among this small group. You can reserve your seat by clicking here.
Have a good evening,
Jeff Remsburg
