Corporate profit margins just hit 20.6%, the highest on record, but the average worker keeps falling behind. It's not greed. It's not just Big Tech. The real cause has a name. Here's what's happening: 1/

The Pentagon identified some of China’s biggest companies including Alibaba, BYD and Baidu as entities that support the Chinese military, in a move that risks provoking new friction with the government in Beijing bloomberg.com/news/articles/…

Good take My guess is - demand for intelligence is near infinite - but 80% of workloads will be running on 99% cheaper models within 12-18 months - 20% of workloads will still run on latest gen models where IQ maxing is important (scientific breakthroughs, higher level ochestrator agents?) - rough analogy might be what % of macbooks or gaming PCs sold have the maxed out specs for CPU/GPU, prices are falling much faster than Moore's law here though - this leads me to think the limiting factor will be energy and compute, not better models At Coinbase we're working hard on routing prompts to cheaper models where appropriate, and in some cases have been able to keep costs roughly flat, while token usage continues to grow exponentially.

The lost US tax revenue from US companies routing profits through Ireland and paying Irish not US tax in the first instance is now so big that if the US reclaimed this tax base, it could build an impressive fleet (with no new borrowing ... ) 2/2 cfr.org/articles/the-luck-of…

Solid(ish) jobs report. But, too many are extrapolating a labor boom. Unemployment rate unchanged. 70k leisure/hospitality jobs and 92k jobs from Educ/HC/Govt. Over the past year, job creation ex-Govt/HC/Education is flat. This is a muddle through labor market still.

Reminder that except for MSFT, all the Mag 7s are now cash flow negative

Wealth inequality in the US has never been wider: The real wealth of the top 0.001% of US households has grown 3,500% since 1976. At the same time, inflation-adjusted wealth of the top 0.01% and 0.1% has surged 2,200% and 1,200%, respectively. By comparison, the average household has seen just a 200% increase. As a result, there are now ~430,000 households worth $30 million or more, with ~74,000 worth over $100 million. Meanwhile, ~72% of wealth for the top 0.1% is concentrated in corporate equities, mutual funds, and private businesses. To put this into perspective, the bottom 50% of US households had more debt than assets for nearly 2 decades, with their average wealth turning positive after the 2020 pandemic, following stimulus checks and growing home values. Asset owners are the only winners.

$NVDA is a textbook case of a stock growing into its multiple.

The EU is gearing up to warn its citizens and companies about a potential trade war with China as the bloc starts weighing new restrictive measures against Beijing bloomberg.com/news/articles/…

🚨Michael Burry just said Elon Musk and Nvidia's deal is built on fake numbers. Burry published a detailed breakdown calling the entire structure "Fugazi", his word for fake. He is alleging that billions of dollars in Nvidia chips are being hidden off balance sheets, and that American retirees are unknowingly funding the whole thing. Nvidia, the world's largest AI chip company sold $5.4 billion worth of its most advanced GPUs, the GB200, to a company called Valor. Valor is not a real operating business. It is a special purpose vehicle, a shell company created specifically to hold these chips and nothing else. Nvidia also invested $1.9 billion of its own money directly into Valor on top of the sale. Those 100,000 chips are now physically inside xAI's data center. xAI is Elon Musk's artificial intelligence company, the one that builds Grok. xAI is using every single one of those chips right now to run its AI models. But here is what Burry is flagging. Neither Nvidia nor xAI owns those chips on paper. Valor, the shell company holds legal title. That means $5.4 billion in GPU assets do not show up on Nvidia's balance sheet as inventory. They do not show up on xAI's balance sheet as assets. They are legally invisible to both companies. Nvidia gets to book the $5.4 billion as a completed sale and record it as revenue. xAI gets full use of the chips without owning them. And the risk disappears into a shell company in the middle. Now here is where American retirees enter the picture. Valor needed $3.5 billion in debt to fund this structure. Apollo provided it. Apollo is one of the largest asset managers on earth with $1.03 trillion under management and $834 billion specifically in private credit. Apollo raised the $3.5 billion, packaged it into debt securities, and sold those securities to Athene. Athene is Apollo's own insurance company. It sells fixed and indexed annuities, retirement savings products, to ordinary Americans. When a retiree buys an Athene annuity, they believe their money is sitting in safe, stable investments. That money is now inside a structure funding Elon Musk's AI data center. The numbers inside Athene are most alarming. Athene holds $74.2 billion in reserves. It has moved $217 billion in assets into a captive insurer based in Bermuda, meaning those assets sit outside normal US insurance regulation and oversight. Of the entire portfolio, 34.7%, equal to $103 billion, is classified as Level 3 assets. Level 3 is an accounting classification that means there is no observable market price for these assets. No outside party can independently verify what they are actually worth. The leverage sitting on top of those unpriced assets is 16 times. Burry's says: Every step of this structure is technically legal and publicly disclosed. But the entire thing was deliberately engineered across 8 to 12 steps to move credit risk off balance sheets and away from any market pricing. - Nvidia books the revenue. - Apollo collects the fees. - xAI gets the computing power. - And retirees sitting at the bottom of a 16x leveraged Bermuda insurance structure, holding $103 billion in assets with no market price carry the risk without knowing it exists.

Why things will eventually fall apart: 1. Everybody, even Google, seems to be treating AI as if it were some kind of winner take all competition like web search was, in which Google taking over 95% 2. But everybody is building essentially the same technical solution with essentially the same data, so there is no moat. 3. If there is no moat, nobody is going to take 90% of the market. 4. With no clear winners, nobody can charge monopoly prices; instead, you get price wars and commodity pricing. 5. Which means everybody will wind up overpaying compared to the modest profits they will be able to make in an intensely competitive regime. Am I missing something?

Free to anyone interested. Part IV of the Heretic’s Guide to AI’ Stars is coming along nicely. In light of the news today about Apollo’s $38 billion debt raise for $GOOG TPUs (not $NVDA GPUs) for Anthropic, I have decided to pre-release one visual from Part IV. Enjoy. open.substack.com/pub/michae…