Chips suddenly on tilt into Micron earnings Wednesday.

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Today’s Links

How FOMO and leverage are amplifying tech stock correction risks
Especially when leverage is added to the mix, what goes up...

Is AI too expensive to replace human labor meaningfully?
Dan Davies looks at whether we are modelling the costs of AI correctly relative to human labor and judgment and whether mass deployed AI could prove like nuclear fusion, with huge gaps between its plausibility versus the difficulty and expense of making it work. What will memory and AI data center hardware stocks say if we need to redo those calculations?

Today in cosmic angst - are you sure you want to go there?
I went down a Great Filter rabbit hole after yesterday’s discussion of El Niño and the AMOC collapse. First I downloaded The Light of the Stars by Adam Frank (there is a Talk Nerdy episode interviewing Frank if you don’t want to read or download the book), which looks at how to frame the Fermi paradox: i.e., why we don’t see any aliens if there are thousands and potentially millions of worlds even in our own galaxy capable of evolving intelligent life?. Connecting that discussion with our transition to the Anthropocene is critical stuff as the human impact on climate continues to rise. This also relates to the intensity of interest in SpaceX, the first company to IPO by teasing the public with a serious attempt to reach beyond the bounds of our planet, using the word no less than 12 times in its prospectus. Why not intergalactic? Becuase getting to an appreciable speed relative to light requires drive system not even on Elon’s drawing board, and that’s just for starters. By the way, some Neil Degrasse Tyson Star Talk episodes discussing Fermi Paradox, Drake Equation and the Great Filter, consider this one (Great Filter, end of the world stuff), this one (especially Drake equation), and this one.

Space nerds take note: NASA is launching another cool telescope.
The Nancy Grace Roman telescope is a big-un that will ride a Falcon heavy launch next week. It will observe the heavens at a resolution similar to Hubble’s, but with 100 times the field of view and a thousand times the amount of data collection, with methods for blocking stars to pick up images of planets and planetary discs around stars.

Ex Fed member sticks up for (now dead) forward guidance policy.
Give up - it’s a losing battle, but, yes, a “delphic” Fed like the one Greenspan (RIP) tried to run might cause accidents. Still, Taleb’s principle of “anti-fragility” suggests that a system needs more regular test via shocks, as it is far worse in the long run to constantly bail out the system, which vastly expands the potential scale of a meltdown in a system that assumes it can’t, or won’t be allowed to fail.

Too early to talk bear market just yet, but…
Jim Grant says that the next bear market won’t be like 2008 - these gray champions (like Grantham) of financial and market rationalism are always going to be worth listening to.

Chart of the Day - EURUSD

I have to post a EURUSD today with the technical situation finally so pivotal with this move lower. Here we are having traded this morning just below the prior lows of 2026 from March, although the context back then was the big macro shock of the still-new Iran war and oil prices exploding to USD 100 a barrel. Now we have a perceived hawkish shift from the FOMC to contend with as one of the chief drivers of USD strength. I’m not convinced the US dollar can really spread its wings here, but the momentum is at its back for now and if this ugly risk-off move extends in equities, it may offer further USD support for now. The next key area of interest to the downside on a sustained break of 1.1400 is the 1.1200-1.1250 zone, with the high 1.10’s to 1.10 as the existential area in the bigger picture (i.e., below 1.1000 and structural arguments that we are in a EURUSD bull market more or less disappear.