Beware A.I. and The Silver Tsunami

Stock market bubbles don’t grow out of thin air. They have a solid basis in reality… ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ February 27, 2024  |  [Sign Up]( Beware A.I. and The Silver Tsunami “Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by misconception.” - George Soros, Everyone’s Favorite Billionaire [Special Reminder: In case you missed our late-day announcement yesterday, [The Real October Surprise]( The Essential Investor has merged with legacy contributors to Agora Financial. The new, larger, more inclusive project is called The Grey Swan Investment Fraternity. If you’re interested in the scope and benefits of our new endeavor, please see what prompted us to merge [here](. If you’ve been a member of The Essential Investor, please keep an eye out for your new benefits.] Dear Reader, “Fire can burn your house,” Pete K. writes, “but a fire in a fireplace – a controlled environment – can do useful things. How degenerate are we, how eager are we to abuse the new tools to torment our neighbors, is the only question. What good or evil will AI work? No doubt a lot of both.” No doubt, indeed. (Before we dig in, take a moment to write your own thoughts and send them toaddison@greyswanfraternity.com. I appreciate every thought. Unique and pithy, preferred.) The middle class is getting raked over the coals right now by inflation, which anyone can see is only going to get worse. AI and tech advances will leave the “withouts” even more dependent on a world they don’t have a stake in or understand... resulting in even more political violence. Same as it ever was — but with AI, we’re confronted with change at a faster pace. An example. There's a BMW plant in Greenville, South Carolina. It was established 30 years ago with a few hundred employees. The GDP of SC at the time was $76 billion. Last year, the plant employed 11,000 people in the Greenville area and contributed $48 billion to the local economy. With SC's economy now worth $220 billion, that means one local plant generated more than 20% of SC’s entire GDP. BMW only employs skilled labor that can run the plant's robots. What’s going to happen when AI sweeps through the plant? Already, the influx of “skilled” labor is pushing out the “unskilled,” who then look toward the government to support them to make things “fair.” South Carolina’s GDP has more than tripled in the time that BMW has grown. But it has only benefited people who move in to take those jobs and the elite who control the legal, political, and social apparatus.  As capitalists, we understand. Classical economists have explained the displacement of manual labor with skilled labor for 300 years. A rising tide lifts all boats, that kind of thing. There don’t seem to be a lot of writers – definitely not in the mainstream – who write about the great displacement or even care. They mostly pander, looking for the quick-hit heart-string stories of the people who get trampled. As a result, the media itself has become a story. There’s a ton of interesting characters to write about in the demise of legacy media, growth of alternatives and social media, the censorship industrial complex et cetera. Tech is driving a wedge there, too. AI will make it more complicated. Because, as we pointed out yesterday, AI itself comes replete with its creators’ bias.  The media, particularly the internet and social media, have already morphed, polarized, shaped, and incited our views. The plot to seize the truth already dominates the business side of the media industry. What role is AI going to play? Who really owns the truth? What is truth anyway if people just choose what to believe? How do the guardrails of prosperity — political and individual freedom — survive in a vidiot-driven, AI-induced comatose society of mutant droids? Apologies, that was probably a bit much. But these are the questions that arise when we consider the implications of Artificial Intelligence. We’re wary. The active word in AI, after all, is “artificial.” It’s synthetic, created by humans. To your point, Mr. Pete, innovation gives us good things. Email, the commercial use of the internet, even social media, were positive detritus from the turn-of-the-century tech boom. They have also wrought mayhem. Either way, the AI genie is out of the bottle. We’re all too aware the economics of any creative enterprise are in jeopardy. AI-induced best-selling book rip-offs on Amazon, for example, was a feature story on NBC news this morning. That hits a little close to home. More immediately to the purpose of The Grey Swan mission, the money-management industry is getting ahead of itself. It’s become obvious — AI is creating a stock-market bubble like we haven’t seen since the 1999-2001 dot-com bust. But who cares? Well, you should. If you’re nearing retirement… or have some use for the money you have invested in stocks… best beware what your money manager is telling you. CONTINUED BELOW... 2024 – The Real Election Year Surprise In 2016, the October Election Surprise was Hillary Clinton’s email scandal… In 2020, the October Election Surprise was the suppression of all the dirty material on Hunter Biden’s “forgotten” laptop… Now, in 2024, we’re forecasting an October Election Surprise that almost no one sees coming — and this time it’ll be way more devastating than anything you’ve seen before. [Click here to learn about 2024’s real October Election Surprise »]( It’s not at all what you think. CONTINUED... In 2020, there were 56 million people aged 65 and over in the United States, up nearly double from a decade before. Globally, the trend across the West is similar. We first wrote about the “Silver Tsunami” in our book Financial Reckoning Day in 2003. The entire West is aging. The so-called “replacement rate” – those paying into state sponsored retirement programs – continues to drop. Japan paved the way a decade before our book was published. The Nikkei Dow peaked in 1989 at 39,000… then crashed as retirees got spooked and started taking their money out. Last week, the Nikkei closed for the first time above 39,000 in three and a half decades. In the U.S., 65 year-olds look at their 401(k) and, especially because of the AI boom in 2023 and early 2024, they’re thinking, “What, me worry?” The average 401(k) balance increased 15% in 2023, according to a report by Bank of America. Tech has elevated the entire market. The number of 401(k) “millionaires” has increased by over 100,000 in the last year alone. These are the kind of stats that get people all lathered up about the stock market. 401(k) contributions, for example, have increased as a direct result. But here’s the rub. What if the silver tips get spooked, as they did in Japan all those years ago? What happens when 100,000 newly-minted millionaires want to cash in their 401(k)s at the same time? How about a million of them? Tech titans and Wall Street insiders aren’t usually considered stupid. Some of them are selling. In total, Jeff Bezos, Mark Zuckerberg, and JP Morgan’s Jamie Dimon have sold $9 billion of their own companies’ stock in 2024. Think they know something? “Unless you’re Bezos, Mark Zuckerberg, Elon Musk, or Jamie Dimon,” Dan Denning writes for Bonner Private Research, “$9 billion is a lot of money.” Denning continues: It’s the insider selling you want to pay attention to. Why? There are a lot of reasons an insider might want to sell. Taxes. Estate planning. Profit taking. They try to be transparent about it so as not to spook shareholders. It CAN spook you to know the people who know the most about the company are selling. Mr. Denning points to this chart: Jamie Dimon sold 125 million shares in JP Morgan. He’s the company’s CEO. He’s been the CEO since 2006. “This is the first time Dimon has sold shares,” Denning points out. “Ever.” Shares in Nvidia and the tech sector have floated a lot of boats in the current market. Now, it might be prudent to consider what a pivot in the primary trend might look like. Bezos, for example, had a heck of a ride during the dot-com bust. In November of 1999 AMZN peaked at $4.25. Eighteen months later, AMZN was selling for $.30. The future of the everything-online store looked so bleak at the time, we included an entire chapter in Financial Reckoning Day called “The River of No Returns.” Of course, it was only an online bookstore at the time. While Bezos was figuring out how to turn the company into a logistics juggernaut, it lost money on every book it sold and shipped. Today, AMZN shares are trading at $174. Even after the 9-day period in which Bezos offloaded 50 million of his own shares for a motherlode of $8.5 billion. Another insider, AMD CEO Lisa Su, released documents earlier this week indicating she sold $20 million of shares in her own company. AMD is another AI chipmaker, in Nvidia’s shadow, but benefitting from the buying frenzy for AI shares all the same. Ms. Su, notably, joined the billionaire’s club last week when her own shares in Nvidia skied along with everyone else’s. Lisa Su and Nvidia CEO Jensen Huang are both Taiwanese-born American citizens… and are cousins. Insiders. Sell now, avoid the rush. So it goes, Addison Wiggin, The Wiggin Sessions P.S. On a lighter note, reader Pete also took umbrage with our use of “wrought” in yesterday’s missive: The Nightmare AI Will Wrought. Technically, as “wrought” is only used in the past tense, the correct headline ought to have read “Will Have Wrought.” Maybe Google’s Gemini would have caught it. But then what fun is that? It would have stripped me of the play on words… and headline writers are notoriously bad at grammar. We’re human, after all. Please send your comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com In the meantime, take a look at our inaugural invitation to join The Grey Swan Investment Fraternity, [here](. The Daily Missive from The Wiggin Sessions is committed to protecting and respecting your privacy. We do not rent or share your email address. 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