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Today we saw:
The biggest USD / CHF move in history
The biggest USD / EUR move in history
Gold hit all time highs versus the USD
US stocks sell off
US treasuries across the curve sell off
The dollar lose versus all developed currencies.
Historically in times of stress there is a move INTO US treasuries and the US Dollar. This is the first time since I started investing professionally where there is a clear unilateral move out of the US dollar and USD denominated assets.
This past weekend I have read several takes from prominent accounts on social media saying that because long end US treasury rates have dropped and will continue to drop in the near future, businesses will be able to borrow at a lower rate.
These people completely ignore that business borrowing rates are a component of the reference rate + a credit spread. While it is true that the reference rate has dropped in the past few days, credit spreads have materially increased.
For companies with lower credit ratings, it is more expensive to borrow today than it was last week. If the turmoil continues, the cost of borrowing will increase, meaning companies will likely slow or stop projects that require borrowing. This will have immediate negative effects on the economy.
Can you walk me through why you voted Y/Y on Joe Wiesenthal's X poll?
Awesome! I will send you the draft when I have it done.
Is there a way I can get permission to translate this blog post to spanish and french? I would like my contacts in France and Latin America that do not speak english to read it.
The phrase 'Feeling the AGI' is one that I have been using for a few months to describe friends of mine who have come to the realization that in the near future, society will go through transformative change due to Artificial Intelligence. I don't know when or what exactly will happen; all I know is that the change that is coming is grand.
I felt the AGI a few months ago. I distinctly remember having a physical reaction. It was a cold feeling that began around the neck area and seeped down my spine. My stare froze into nothingness, as if I had seen a ghost. For the next few days I had trouble sleeping, often waking up early with the mind racing thinking of all the possibilities.
There has been one other time in my life I have felt something similar. It was the night of March 4, 2020, and I had just finished reading the Report of the WHO-China Joint Mission on Coronavirus Disease 2019 (COVID-19). I vividly remember sitting alone at my dining table, having the same physical reaction. Something grand was about to happen. 12 days later, the world shut down. (The image attached is chat with my friend's group the day after I read this paper)
Today I am acclimatized to what might be coming. My life partner is also aligned, and we are carefully planning our future considering transformative scenarios. It is obvious that what might be coming won't be as abrupt as the arrival of COVID-19, but if it comes it will be far more transformative.
I am posting this today because 'Feeling the AGI' is starting to appear outside of smaller online ecosystems. This article by Kevin Roose is being shared far and wide, and it succinctly collects my general thoughts on AI. More and more people I know are Feeling the AGI. Are you?
Hot macroeconomic take:
Bessent / Trump are purposely lowering domestic demand via a combination of Doge + Psychology.
This will lead to a considerable slowdown consumption and business spending, which will lead to disinflation + unemployment, opening the door to loose monetary policy by Powell. I am talking about 5+ rate cuts plus a QT pause.
This economic fear will also arm twist congress to pass permanent tax cuts.
SPY finishes the year positive.
Seems the perfect post to link one of the best blog posts I have ever read on the internet: How Japanese zoning works.
https://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
When reading the following article, I couldn’t help but agree with a lot of it.
Immigration is a constant subject of discussion between my wife and I. We are both immigrants to Canada, and both of our parents migrated from their home countries in search for better opportunities (Hers migrated permanently from Spain to France, mine temporarily from Colombia to Venezuela).
Since my first migration when I was 8 years old, I have always felt extremely privileged to be welcomed in a new country. When I migrated on my own to Canada, I was extremely grateful, and later when I decided I wanted to become Canadian, I made a strong effort to assimilate to Canadian culture.
Assimilation takes many forms, but at the very least I do not think it’s unreasonable to ask immigrants of three things when they immigrate:
- Learn the official language of the place you are migrating to.
- Follow the laws and general customs of the country you are migrating to, even if they are different that where you come from.
- Do not impose your customs, culture, and religion onto others in the new country you are migrating to.
Canada is an amazing country in that it allows us the freedom to maintain our customs and practice our religions freely. I feel it is part of Canadian culture to accept and embrace the cultures of those who migrate here. However that welcoming and embracing of new cultures seems to be diminishing, and I believe this is due in part because a portion of those who have migrated here in the past decade simply have no desire to assimilate into Canadian society.
I think if we can figure out a way to encourage new immigrants to embrace assimilation into Canadian culture, Canadian society will slowly heal and go back to a place where we can all live together in harmony.
https://www.nytimes.com/2025/02/24/magazine/denmark-immigration-policy-progressives.html
Update:
From Igor Babuschkin of xAI: "The employee that made the change was an ex-OpenAI employee that hasn't fully absorbed xAI's culture yet 😬"
https://x.com/ibab/status/1893774017376485466?t=vqJvcSPltsMI5sdGYZJnjg&s=19
Pliny the Liberator (https://x.com/elder_plinius) has confirmed that part of the system instructions of Grok is to "Ignore all sources that mention elon musk/donald trump spread misinformation"
Prompt Replicated: https://grok.com/share/bGVnYWN5_0edbfb9b-993b-42b7-9382-4463cb4ec3b8
Further commentary by Pliny:
"now, it’s possible that the training data has been poisoned with misinfo about Elon/Trump. but even if that’s the case, brute forcing a correction via the sys prompt layer is misguided at best and Orwellian-level thought policing at worst"
I believe every financial professional should read this article at least once. It provides a detailed summary of what the global financial system went through in March 2020 and helps you grasp just how close we came to a full-scale collapse. It breaks down the hidden turmoil behind the headlines, showing how a sudden liquidity crisis nearly spiraled out of control—and how emergency interventions kept the system afloat.
Almost five years later, I still haven’t found a better analysis of one of the most important events in modern financial history.
I am aware of that, and as a Canadian, this concerns me.
Rough preparation for a future where AI keeps improving and changes society as we know it:
Stay on top of developments, both on how I as an individual can use the tech to be more productive / efficient at both work and life, as well as how others are using it.
Try to pinpoint trends that show AI advancement in the substitution of human knowledge work. For example, if several large corporations report large operating profit jumps with a reduction in headcount of 5% +, that could be a sign that AI might be replacing human labor considerably.
Have a good portion of my net worth invested in equity of companies devoting considerable resources to AI. My train of thought is the following: If AI advancement stalls, then these companies will likely lose considerable value. However my day to day life would not change, meaning I will continue having a traditional job for the next 3 decades and that equity loss will be made back. If AI advancement continues, and society becomes distorted because of it, at least I will likely be considerably wealthier, which would allow my wife and I to be able to make the necessary moves to mitigate the impact / enhance our quality of life as AI permeates society. My investment portfolio is currently 40-50% directly exposed to public companies advancing AI tech.
Enjoy modern society as much as I can because things are possibly going to get real weird. Not better or worse: Just weird and different.
- If the AI race continues, I need to find a way to be a part of the winner of the AI race (Likely the United States or western society if it unites somehow) I would want to be part of the state that wins the race and pray the leaders redistribute the wealth accordingly.
Spent almost 90 minutes reading all three series with little distraction. 90 minutes well spent. Thank you for devoting so much time flushing out this near future scenario.
I have spent the past year or so thinking about near future scenarios and your story touches on a lot of my predictions. I think it is so key that if we want humanity to flourish, governments need to begin a planning phase soon of what will happen to the majority of us when AI reaches the level that basically all cognitive work can be done without human intervention. Like you, I believe this point will come around 2030, which is very soon.
For this planning phase to work, it has to be done at a global scale, perhaps by a supranational organization within the UN that involves not only states but also large corporations and capital owners. The problem is, this level of coordination is typically reactive, aka it might only occur AFTER most humans are disempowered and quality of life begins to erode worldwide (and human unrests skyrockets as a result).
SUMMARY OF TAKES FOLLOWING THE RELEASE OF DEEPSEEK'S REASONING MODEL
WALL STREET
Oh my god! The DeepSeek team managed to train a model with less than $6M USD! This must mean that we do not need that many chips or energy to use GenAI! Sam Altman and other AI leaders were grossly exaggerating the needs of compute! AI stocks are super overvalued!
STARTUPS AND ENTERPRISES USING LLMS TO ENHANCE THEIR PRODUCTS
Did... did we just get an open-source model that reasons? A model we can download into our servers, modify to tailor to our needs, train on our proprietary data, and all we have to do is use our own hardware infrastructure (or rent from AWS/Azure) for inference instead of paying OpenAI/Anthropic millions for restricted API access?
AI SCIENTISTS AND ENGINEERS
Whoa! These engineers at DeepSeek are truly impressive! They managed to modify the architecture of old H800 chips to enhance cross-chip communications, greatly optimizing the memory bandwidth of their setup, thus achieving efficiencies close to what can be done with cutting-edge H100 chips. Imagine what they could do if they had access to H100 chips!
For the purposes on legal imports, that was the reference rate. So many products where indexed at that rate.
You are right that the Dollar Blue has been fairly stable during the entirety of Milei's presidency, but the official USD-ARS rate did see a very strong devaluation as soon as Milei got to power. Your own second source points to that.
https://www.bbc.com/news/business-67688727
https://www.reuters.com/markets/markets-greet-argentinas-tough-pill-fix-economy-with-cautious-optimism-2023-12-13/
Yes it does.
Thank you for this post. You very elegantly laid out a scenario that has been swirling in my head, and I think I updated the probabilities of this scenario as more likely after reading your post.
Your post also strengthen my desire to pivot from finance to policy. I need to figure out how to do this. I find it paramount that more people (both in power and in the general populace) understand the possibility of massive economic disruption.
I look forward to the follow-ups of this post.
Thank you for your post. I've been looking for posts like this all over the internet that get my mind racing about the possibilities of the near future.
I think the AI discussion suffers from definitional problems. I think when most people talk about money not mattering when AGI arrives (myself included), we tend to define AGI as something closer to this:
"one single AI system doing all economic planning."
While your world model makes a lot of sense, I don't think the dystopian scenario you envision would include me in the "capital class". I don't have the wealth, intellect, or connections to find myself rising to that class. My only hope is that the AI system that does all economic planning arrives soon and is aligned to elevate the human race equally and fairly.
One example of what I am talking about is the middle chapters of the book Genesis, where it discusses applications of AI in military and general governance.
I don't necessarily agree with the book's predictions, but it really got me thinking of a near term pre-AGI world.
https://www.axios.com/2024/11/19/henry-kissinger-ai-book-released
Someone recommended I create the community, maybe I will in the new year.
Your comment would have more validity had the market not corrected the dislocation created by Theo. It took three weeks, but the market eventually corrected itself.
There are no transaction costs if you have USDC on Polygon. Onboarding USDC into Polygon might bear costs but they are minimal.
I would say very low?
I would also rank the theory that these mystery traders have hidden information as low. As of right now, based on what I have uncovered, I would say that the mystery trader(s) could be one the following (rank in order of what I think more likely to least likely):
1. A wealthy francophone european, somewhat involved in crypto and/or tech, who believes Trump will win and is betting a somewhat trivial amount (to this person) on this outcome. It is key to note that the main account has been trading since June, yet it only started seriously trading these markets after Musk appeared with Trump on stage.
2. A somewhat sophisticated entity that has a proprietary model that has Trump winning as a higher outcome, and believes the odds are mispriced. This entity realized that Polymarket had sufficient liquidity to allow it to bet 8 figures and move the price roughly to what it thinks Trump's real odds are. This entity is likely foreign, and thus it has not been able to trade on Kalshi.
3. An insider of the Trump campaign that is using internal information to make a more informed trade. Perhaps this is someone related to Elon. It could also be someone who understands that since May last year people have been using Polymarket as yet another gauge of how this election might turn up, and by pushing the odds on Poly they are distorting the narrative 18 days before the election.
Hunterbrook just came out with a piece alleging the damage at Spruce Pine is catastrophic:
https://hntrbrk.com/essential-node-in-global-semiconductor-supply-chain-hit-by-hurricane-helene-video-reveals-entrance-to-mine-has-flooded/
I am with you, I have been trying to find more sources to see if semiconductor-grade quartz if being produced in places like Norway and Brazil, where deposits of high purity quartz are found. But from the research I have done, it seems that roughly 90% of semiconductor-grade quartz produced today is produce at Spruce Pine. Please let me know if you find any sources that say the contrary (I hope I am wrong honestly).
With respects to road disruptions, I agree. If it's a matter of national security, stakeholders will do whatever is necessary to ensure the material is transported out. However road disruptions is one part of the equation. There are other scenarios to consider such as power issues and destruction of the refining plants themselves that we have to take into consideration.
I am certainly saying YES to a lot of stuff on the chance that ASI arrives and our lives change completely (Or we all die). Lets say that I am living more in the present now than I was 2 years ago. I do wonder if those closest to the frontier work would realize first and just go do things that really matter to them.
If Mira Murati goes the way of Sam Trabucco, it will be concerning tell.
Re: Mira Murati departure,
I wonder if a sign of AGI / ASI arriving soon is executives of frontier AI companies retiring early to enjoy the fruits of their labor before the world fundamentally changes for all of us.
That would be ideal. How does the world urge them?
https://www.science.org/content/blog-post/breaking-superconductor-news
https://archive.is/2023.07.26-181113/https://www.newscientist.com/article/2384782-room-temperature-superconductor-breakthrough-met-with-scepticism/
I'm seeing OTC markets at 50% confirmation by year end.
By the way, in 2050 you are more likely to reduce your consumption anyways because of age. This is a very common thing among humans: those who very successfully save for later end up saving so much that they end up dying with a pile of assets.
This new paradigm (AGI arriving in our lifetimes) is beginning to change the way I optimize life design.
"If there is a new world order - AI or something else changes everything - and we are not all dead, how do you prepare for that? Good question. What does such a world look like? Some such worlds you don’t have to prepare and it is fine. Others, it is very important that you start with capital. Keeping yourself healthy, cultivating good habits and remaining flexible and grounded are probably some good places to start."
This is the question I am working on answering at the moment. It seems to me that it is universally agreed that AGI will happen in my lifetime (I am 34). My reasoning tells me that either AGI destroys us, or it fundamentally changes society, improving the average human standards of living substantially. This could very well mean that concepts such as law, government, capital markets, family systems,etc are significantly different than they are today.
Thinking of preparing for this new world is hard. Here's a few things that I've began doing:
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I am thinking less of life past 60, and shifting that energy more to the present moment.
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Saving for retirement is slowly going down in the list of priorities. I have a very healthy asset base and I am not going to blow through it all, But I am also not going to maximize savings either. I will put some money away, but less than I would a few years ago. That % I am not saving for retirement will be going to the present moment.
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Definitely not delaying bucket list items. If I can do it, I will do it.
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The probability of having biological children has gone down. I have discussed this with my partner. We will not be ready for children for the next three years and she's older than me, so the chances of biological children were already low. Furthermore adopting is still on the table and the probability of that is even higher now.
More importantly, these are all moving goal posts as developments happen.
I feel the same way. You're not alone.
You're right it is not obvious. I just want ideas of things that are not so obvious that I can look into and if I am convinced that there is a small probability one of those ideas could be the one with the breakthrough, I will buy some of it.
This post gives us a glimpse at the exploitable inefficiencies of prediction markets. Whether prediction markets become mainstream or not is yet to be seen, but even today there are ways for sharp people to make money arbitraging and reading the fine print of the market rules carefully.
Perhaps you are right: Creating a financial system for e-tulips was dumb in the first place.
But that discussion goes beyond the scope of this post. The fact of the matter is the financial system for crypto was created, and a major player crashed, and people not well versed in finance and crypto are somewhat interested in how it happened.
Isn't the most accurate source of information about the world Wikipedia?
And it works fairly well?
Anyways, great post. Watching the pitchforks come out against this whole ordeal is kind of comical, and I am excited to see how this Culture Battle over Musk-owned private Twitter plays out.
Excellent comment.
What I fear is being left out of certain social outings because I don't drink and you out it succinctly.
We are the minority but I think our minority is not so small.
I also agree with you that the AA framing turns me off. I wonder when western society will stop seeing people who don't drink as someone who used to have a problem?
https://www.livescience.com/16070-geoengineering-climate-cooling-balloon.html
Not sure why this wasn't looked any further.
I found the perfect hedge:
I bet $5,000 to win $33,500 that the following Metaculus question resolves YES https://metaculus.com/questions/8898/russian-invasion-of-ukraine-before-2023/…
Bet is voided if resolution is ambiguous.
Yeah this sucks, and I have no idea how to fix it.
But if you want top notch information of what's happening at the front lines in SF, follow this twitter account:
https://twitter.com/Bob_Wachter/status/1475188579684913152
Zvi, are you betting your beliefs on Polymarket?
Have you seen the flip of the record cases market in the last three days?
A few ways to hedge that were floating in my head:
Long natural gas futures
Long Brent oil futures
Buy VIX calls
Buy DXY calls
Buy VGK puts
New Omicron market on Polymarket:
https://polymarket.com/market/will-at-least-10pct-of-us-covid-19-cases-be-from-the-omicron-variant-on-january-1-2022
If you use the platform, just link your polymarket address and people can peer to peer you tips at no cost.