Is AI Too Powerful?

CPI came in higher than expected and higher than last month. But despite them trying to slow us down, markets powered through. [The Daily Peel... ]( September 14, 2023 | Peel #542 Silver banana goes to... [Caplinked. ]( In this issue of the Peel: - CPI came in higher than expected and higher than last month. But despite them trying to slow us down, markets powered through. - Redwire and Moderna had a ripe day, whereas American Airlines and MGM Resorts International declined. - Names including Elon Musk, Bill Gates, Mark Zuckerberg, Jensen Huang, and others came together at Washington's Senate AI hearing. Market Snapshot Happy Thursday, apes. Thirsty Thursdays are back as college campuses have refilled across the country, and given that we survived another inflation report yesterday, there’s no better time to celebrate. We can’t promise we’ll be saying that next month, but let’s just enjoy it (aka get hammered) while we can. Anyway, equity markets took the report in stride here in the U.S. The four major indexes had a mixed showing where large caps were clearly taking the W on the day. The large-cap-focused Nasdaq and S&P both rose, with the former gaining almost 0.3%, while the price-weighted Dow and small-cap Russell 2k shed 0.2% and 0.66%, respectively. Treasury yields spiked immediately following the report, only to trade lower into Thursday’s late-night international open. Both the 2-year and the 10-year fell through anchored levels, dipping below 5% and 4.25% respectively. The U.S. Dollar was range-bound while [the odds]() of holding rates steady at next week’s FOMC meeting moved 5% higher to 97%. Let’s get into it. There’s A Better Way To Choose Data Room Providers [image]( We all like drinks on someone else’s dime. But choosing a VDR provider just because they took you to happy hour is a questionable way to pick software that you’re going to use all the time. Those drinks may have been free, but the hours you’ll waste attempting to use a VDR that sucks costs you (and your clients) cold hard cash. But [CapLinked](=) knows they don’t have to get you drunk before showing you their VDR software, and won’t waste time pretending to be your best bud. That’s because instead of investing in sales guys pestering you to hang out, they’ve spent their money where it counts: creating the easiest VDR to use on the market. Schedule a 15-minute demo of CapLinked’s VDR today, and they’ll send you a gift card to Uber Eats to stock your own bar cart. So, you know, you can have drinks with your actual friends. [Schedule your demo now.](=) Macro Monkey Says The Market’s Smallest Violin They really tried to get us this time didn’t they… Yesterday, in case you missed it, we had our 9th monthly economic holiday in the form of the CPI report. Spoiler alert: the print came in higher than expected and higher than last month. But despite them trying to slow us down, markets powered through. Let’s take a look at the numbers: - Headline CPI increased 0.6% monthly and 3.7% annually - Core CPI (more important) rose 0.3% in August and 4.3% for the last 12 months - Shelter costs jumped 7.3% annually and drove 70% of the Core increase - Motor vehicles saw a massive 19.1% annual jump simultaneously with transportation services seeing an increase of 10.3% - Energy costs were down 3.6% annually and up 5.6% monthly with a 10.6% monthly vault in the price of gasoline So, despite the BLS’s attempt to play the market’s smallest violin, we shrugged it off largely due to the decision to actually read into the data this time. "... seeing headline inflation leap from 3.2% to 3.7% annually and triple from 0.2% to 0.6% monthly will cause a little nausea." Obviously, seeing headline inflation leap from 3.2% to 3.7% annually and triple from 0.2% to 0.6% monthly will cause a little nausea. But reading the report was like downing a Dramamine before a flight; it got us feeling alright. That’s because if you simply take shelter out of the equation, the CPI’s annual increase was closer to 1%, according to [CNBC]( and Bright MLS Chief Economist Lisa Sturtevant. You could argue that this CPI print should actually be a cause of concern but just in the completely opposite direction. No sector has more of a lag than housing, especially when the market gets frozen between high rates and high prices, meaning that without that lone sector, we’re actually below the Fed’s 2% target. But, as housing is easily the most important asset/good/service/whatever the hell it is to most Americans, it’s shouldn’t be excluded as it generally doesn’t seem to have the same volatility as food and energy. Energy was another huge driver of the annual gain. If you recall, energy prices chilled tf out last Summer when the Joe Biden administration was flooding the oil market like BP in 2010 with releases from the SPR in response to Russia’s invasion of Ukraine. Earlier this month, we got news that Russia, Saudi Arabia, and the OPEC+ gang were extending supply cuts too, so it’s not surprising. Like food, energy costs are 1) volatile and 2) far outside the Fed’s control through monetary policy actions alone. Unless JPow wants to start building rigs and pipelines himself, we may have to wait on our OPEC+ friends to chill tf out. "Unless JPow wants to start building rigs and pipelines himself, we may have to wait on our OPEC+ friends to chill tf out." [image] [Source](=) Plus, with the SPR still nearly setting record lows, as you can see above, there isn’t a whole lot of firepower for the U.S. government to bring costs down. But, with 2024 being an election year in which the soon-to-be 81-year-old Biden is steadfast on winning, you never know what could happen. Next to low taxes, there’s nothing Americans love more than low gas prices. What's Ripe Redwire (RDW) ↑ 9.32% ↑ - Space is hard, infrastructure is hard, and space infrastructure is only possible in Star Wars. Right? - Maybe not, or at least not for long if Redwire has anything to say about it. Shares in the space manufacturing/technology/infrastructure firm spiked higher on calls from investment bank Roth MKM that this thing could triple. - Basically, the thesis seems to be that space infrastructure demand is expected to boom over the next decade or so, with Redwire’s “several billions worth of pipeline revenue opportunity” as the primary selling point. - At a ~$220mn market cap, those claims might be a tad overstated, but as the firm only has one or two real competitors in the form of SpaceX and potentially others as technologically advanced as they are, maybe they’re onto something. Moderna (MRNA) ↑ 3.18% ↑ - After going quiet on us for way too long after saving the world (and portfolios) in 2020 and 2021, Moderna has brought itself back into the news cycle as summer rolls to a close. - The revival in attention stems from a slew of testing data being released. This time, however, it was actually a good thing. The biotech firm reported strong results for its flu vaccine that I’m not even going to try to interpret along with announcing intentions to combine that and the C-19 jab into one vax by 2025. - Furthermore, a phase 3 lung cancer trial in concert with Merck is planned before year-end, which simply needs no further explanation. The news obviously got investors hyped, but the depression among holders of Novavax also spiked, with shares plummeting 6.95% on the day. What's Rotten American Airlines (AAL) ↓ 5.67% ↓ - Richard Branson famously said the quickest way to become a millionaire is to first become a billionaire and then start an airline. As far as our portfolios are concerned, owning an airline yesterday took us from thousand-aires right back into negative net worth. - Better luck next time. Airline stocks across the board fell, but it was really all America’s fault. Earnings estimates for the next quarter were brought lower by the company as a new contract increasing pilot salaries threatened to increase costs. - Personally, I didn’t think airline tickets could get any pricier, despite the 13.3% annual drop per the CPI report. - Spirit also lowered their expectations going forward, largely due to heavy discounting through a series of promotions. But then again, investors don’t really care about Spirit in nearly the same way as the others. And of course, their customers hate them way more than the others too. MGM Resorts International (MGM) ↓ 1.24% ↓ - Sure, no one wants themselves or their company to fall victim to a cyberattack. But if it means my work email will be down, I’ll give them whatever they want to know. - That's the position MGM employees were apparently in after reports yesterday that the company has been cyberattacked. While little detail is known on specifics, we do know that MGM considered the threat “material” to their business while Moody’s is already sharpening their pencils for a downgrade. - Restaurant reservation and hotel booking systems remain down as well, meaning the company is unable to, y’know, serve and host guests in the future. Needless to say, that's far from ideal for a resort stock. Thought Banana AI’s Intelligent Regulation(s) Yesterday, the highest concentration of net worth wasn’t residing in its normal locations of New York, Tokyo, San Francisco, London, etc., but found itself right at the seat of the U.S. government in sunny, swampy, Washington DC. That’s because names including Elon Musk, Bill Gates, Mark Zuckerberg, Jensen Huang, and others all gathered in the storied city to tell the government how best to do their job. And before you ask, reports indicate that there was no squaring up between Elon and Zuck at this meeting, sadly. But what we did get was some classic dramatization from Musk saying that the gathering “may go down in history as being very important for the future of civilization.” "... technology has a non-0% chance of killing us all and ending humanity." The main problem, again as identified by the media-shy Musk, is that technology has a non-0% chance of killing us all and ending humanity. It’s one of those low-risk, highly disruptive events Nassim Taleb would call a “Black Swan” if everyone didn’t see it coming. As with atomic bombs, the last time we had a new technology capable of killing us all, obviously the end of the species wasn’t enough of a threat to stop us, and it won’t be this time either. This was the first of, like, nine sessions in the Senate, which have outlined the explicit goal of maximizing eudaimonia, Aristotle’s word for “human flourishing” (and a great tattoo idea) while minimizing the risks that we all die. Easy enough, right? As this was the first installment of what’s sure to be a great series of hearings, the primary goal was mostly to justify the need for oversight of the industry. "... the primary goal was mostly to justify the need for oversight of the industry." No one seems to disagree that there needs to be oversight, and legitimately no one at the hearing thought that anybody is better equipped to do so than the Federal Government. Most even seem to want a brand new agency created to take on the task. Satya Nadella, CEO of Microsoft, arguably said it best in a way that even your grandparents could understand, explaining that, “When it comes to AI, we shouldn’t be thinking about autopilot. You need to have copilots. So, who’s going to be watching this activity and making sure that it’s done correctly?” The big question: Great question, Satya. Who is going to be watching that activity and in what form? Will AI ultimately be the end of humanity and our species’ Great Filter? How can I make money off of it now that Nvidia’s already more than tripled?? Banana Brain Teaser Yesterday — 14,500 people are sitting in a stadium. One of them is picked out. What are the chances that that person's birthday is on a Sunday? Answer: 1/7. The number of people in the crowd is irrelevant. Today — What day would tomorrow be if yesterday was five days before the day after Sunday's tomorrow? Shoot us your guesses at vyomesh@wallstreetoasis.com. Wise Investor Says “Cash is trash. Invest in assets that will hold their value in inflation.” — Ray Dalio How would you rate today’s Peel? [All the bananas](=) [Decent]() [Rotten AF](=) Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? [Be smart like your friend.](=) [ADVERTISE](=) // [WSO ALPHA]() // [COURSES]( // [LEGAL](=) Don't want The Daily Peel? [Unsubscribe here](. Click to [Unsubscribe]( from ALL WSO content IB Oasis Corp. 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