The AI apocalypse trade - when does it stop?

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Today’s Links

Yesterday saw THE viral post for the AI Apocalypse trade. And some great ripostes.
A Citrini Research report entitled THE 2028 GLOBAL INTELLIGENCE CRISIS - A Thought Exercise in Financial History, from the Future composed as if the present day is June 30, 2028 and we are looking back at the devastating impact for white collar workers and software and other companies from the rolling implications of AI disruption after AI has replaced whole categories of human labor and software services, spiked unemployment and devastating profits for a widening swatch of business models. It was sufficiently impactful for the WSJ and Bloomberg to pick it up for having injected further energy into fears of AI disruption. Fascinating to see if this was a local low point for the recent “AI overlay” and even “AI apocalypse overlay” trade. A couple of follow on posts are worth consider here, the one an FTAlphaville piece that points out how much of the market impact here is narrative more than evidence-driven, with some worrying conclusions. And the Kobeissi Letter also specifically referenced Citrini’s piece in a long X post entitled It’s too obvious. What if AI doesn’t actually end the world? suggesting that we can’t have anticipated all of the second order effects from a possible paradigm shift in productivity, which could include dramatically positive demand growth as prices for services and other things collapse - even resulting in an “abundance economy”.

So how do we tax the economy on the other side of the AI job apocalypse?
The NBER takes a stab - think “robot labor taxes” and “compute taxes” and even “token taxes”.

The Trump administration is engaged in total economic war with China.
Michael McNair points out the many ways that the US is taking the threat from China very seriously and very comprehensively.

Did you know that yesterday was the 70th anniversary of a major “ground level event?”
Me neither - nor did I know what a “ground level event” is, which is when solar eruption events are sufficiently violent (and pointed at the earth - an important and totally random variable) that sub-atomic particles penetrate the earth’s atmosphere and show up on nuclear radiation measurements on the earth’s surface. The radiation if far worse at cruising altitudes for aircraft. A great website, spaceweather.com, measures all of this and has intriguing articles like this one describing the 1956 ground level event, which saw a solar eruption sufficiently violent for ground-based measurements of radioactivity to go completely haywire. Higher up in the atmosphere, the radiation would have been far worse and “would have delivered as much as 10 millisieverts of radiation to passengers on a high-altitude transatlantic flights--comparable to multiple chest CT scans in a few hours”. Who knows how many satellites of the thousands now in space would be fried by such an event if (when?) it happens again. Most of these events happen at solar maximum, when the sunspot activity on the sun is at its highest. Currently, Sunspot cycle 25 is winding down and the next time frame of higher danger is in the mid-2030’s. And just so you sleep extra well at night, the 1956 event, the modern benchmark of extreme solar particle events, pales in comparison to so-called Miyake events of the more distant, but still historical past, and there was also the more recent Carrington event, which is slightly different (a geo-magnetic storm) but could cause untold disruption of our satellites. Isn’t nature fun?

Waiting for the possible Iran war
A very old guy is in charge in Iran - what is he thinking and will an Iranian regime with its back up against the wall figure that it has nothing to lose when it might think it will lose everything if it gives up, so it might as well go down fighting…

Creepy!
Dude hacks into his robot vacuum to control it with his game controller, only to find that he has mobile video access to 7,000 other robot vacuums in other homes.

Chart of the Day - USDJPY and US and Japanese rates.

It is clear with 20/20 hindsight that there was a regime shift in USDJPY’s behavior relative to the US 10-year treasury yield that often dominated over the prior twenty years or so. Was the focus subsequent to that more on Japan’s bond market (the vicious further rise in 30-year JGB yields) pointing to concerns of an unsustainable fiscal trajectory and the idea that Japan would have to be first to reach for currency-damaging measures to transfer the pressure to FX in an effort to control its bond market? The ongoing rise in long JGB yields while USDJPY and other JPY crosses rose inexorably since last spring suggests this was at least one narrative, while US yields merely wandered around in a range (some would argue to to mature efforts by US Treasury Secretary Bessent and company to keep issuance at the short end of the US yield curve). But over the last few weeks strong comeback in long JGB’s (lower yields) together with a decline in US treasury yields, we have strong ingredients in place for the JPY to remain at least stable and possibly able to firm further. Let’s see - the specific reason for today’s JPY sell-off was Japanese PM Takaichi’s “apprehension” about further BoJ rate rises, but the overall Japanese bond market and US policy and US treasury yields, as well as global risk sentiment (Japanese savers have moved much of their savings abroad and will only take it home if incentivized to do so by weak global markets or new policies from Japan aimed at encouraging repatriation.) may all weigh far heavier in the mix than the timing of the next 25 or even 50 basis points of BoJ policy moves.