Thursday, May 29, 2025

Labor's Share Of National Income: "Are Employers Playing a Game of Monopsony?"

 From the University of Chicago, Booth School of Business' Chicago Booth Review, May 19:

Labor’s share of national income has fallen, and competition for workers may have something to do with it. 

Talk to almost anyone about the forces at work behind Western politics’ contemporary upheaval, and it will not take long for your conversation to reach the discontents of the working class. In the United States, President Donald Trump, who campaigned heavily on policies such as restricting immigrant labor and boosting domestic manufacturing, won the 2024 election in part due to the support of voters making less than $100,000 a year. Polling data suggest that economic policy was more important to voters than during any presidential election since the Great Recession.

One source of this anxiety may be the labor market. Although unemployment has been low in recent years, some evidence suggests wages—particularly for those outside the managerial ranks—have not kept pace with economic growth for decades. An analysis by the Economic Policy Institute finds, for example, that since 1979 US productivity has increased more than 85 percent, but hourly pay for production and nonsupervisory workers has gone up just over 30 percent.

Meanwhile, the corporate world’s most familiar names seem to be thriving as economic power is consolidated among fewer and fewer companies. Many markets have what Chicago Booth’s Christina Patterson and her colleagues in a 2020 paper describe as a “winner takes most” dynamic, with sales increasingly accruing to the most productive companies over time. Researchers are only beginning to get their arms around the social, economic, and political implications of this concentration.

Economists’ textbook method of measuring a company’s leverage over markets has involved estimating how much it’s able to charge for goods and services above its marginal costs of producing them. The wider this gap, the greater the seller’s market power. Taken to the extreme, the ability to dictate prices reflects one of the best-known, and best-studied, phenomena in economics: monopoly.

In many cases, however, companies may be flexing their market power in a somewhat less obvious way—not by marking up what they charge for products, but by marking down what they pay for the inputs those products require. In such a case, market power wouldn’t take the form of a monopoly, but rather its close cousin, a monopsony, or the ability of a buyer to dictate the prices it pays.

Monopsony
The inverse of a monopoly, monopsony occurs when a market has a single buyer. 
Lack of competition from other buyers means the monopsonist can influence prices 
or other terms of exchange without fear that sellers will seek alternatives.

“A lot of people had ignored it,” Chicago Booth’s Chad Syverson says of monopsony power. “In the past 10 years, there’s been a concerted effort to measure it, and it does seem to be a big deal.”

If monopsony is more prevalent than economists have traditionally assumed, it may play an important role in suppressing the price of one of the most closely watched and socially important inputs to virtually every product: labor. Economists’ efforts to detect and understand monopsony, therefore, could be pivotal to revealing the causes of workers’ frustration

A world of wedges

In the free-market nirvana that provides the setting for many theoretical economic models, competition is unfettered and alternatives are always close at hand. So many producers vie to sell goods and services that none can raise prices without sending their customers scurrying to rivals. The result is that the price a company charges for its product equals or is very close to its marginal cost of production—that is, the cost of producing one additional unit.

Conversely, buyers are so plentiful that any who demand discounts from suppliers get turned away. Therefore, the price a company pays for any given element it uses to produce its goods or services—its inputs—should be equal to how much an additional unit of that element increases the company’s output. Economists call this the input’s marginal product.

In the real world, things get complicated. For one, companies don’t just have variable costs—the costs of the labor, materials, and other inputs that go into the product—but also fixed costs such as facilities, equipment, insurance, and other overhead. The need to pay off these costs is one reason companies might charge more than the marginal cost of production....

....MUCH MORE

As noted in the intro to 2018's "Let's Get Ready to Rumble: Paul Krugman vs Joan Robinson on Trade":

Joan Robinson was a Cambridge economist who helped develop post-Keynesian econ. We first mentioned her in 2007 in relation to her coinage of the word "monopsony".
As a female economist she went straight up against the male hierarchy, eventually becoming the first female fellow of Kings College.... 

We had a couple posts using the word before that, in relation to commodities, here's 2008's "Today's Word is Monopsony: mə-ˈnäp-sə-nē, II". But we posted only once using the term in regards to labor—capital, March 2019's  "Some Peculiarities of Labor Markets: Is Antitrust an Answer?":
From Timothy Taylor, The Conversable Economist:

    Labor markets are in some ways fundamentally different from markets for goods and services. A job is a relationship, but in general, the worker needs the relationship to begin and to last more than the employer does/ John Bates Clark , probably the most eminent American economist of his time, put it this way in his 1907 book, Essentials of Economic Theory

        "In the making of the wages contract the individual laborer is at a disadvantage. He has something which he must sell and which his employer is not obliged to take, since he [that is, the employer] can reject single men with impunity. ... A period of idleness may increase this disability to any extent. The vender of anything which must be sold at once is like a starving man pawning his coat—he must take whatever is offered."

    In the last few years, an idea has emerged that the same government agencies that are supposed to be concerned about monopoly power--that is, when dominant firms in an industry can take advantage of the lack of competition to raise the prices paid by consumers--should also be concerned about "monopsony" power--that is, when dominant firms in an industry can take advantage of the lack of competition to reduce the wages paid to workers. Eric A. Posner, Glen Weyl and Suresh Naidu offer a useful overview of this line of thought in "Antitrust Remedies for Labor Market Power," published in the Harvard Law Review. (132 Harv. L. Rev. 536, December 2018). My own sense is that their discussion of the power imbalance in labor markets is fully persuasive, but it also seems to me that antitrust is at most a very partial and incomplete way of addressing these issues.  

    Here's a nice explanation from Posner, Weyl, and Naidu of why workers have reason to feel vulnerable to the monopsony power of employers in labor markets (footnotes omitted)...

Nothing against Professor Taylor, after all he's a founder (along with Stiglitz and Shapiro) and current managing editor of the AEA-published Journal of Economic Perspectives and we've linked to his personal blog for years, but I've never felt the urge to introduce him with this:

 

Capital Markets: "US Trade Court Roils Markets: Trump Administration to Appeal"

The the knee-jerk exuberance for the broader equity market seems a bit much.

On the other hand, Nvidia delivered nicely.

From Marc to Market:

Overview: There is one driver today. The US Court of International Trade ruled against the Trump administration's "Liberation Day" tariffs. The court rules that the 1977 law used to justify the actions did not apply. The ruling also applies to the earlier tariffs on security of the US borders and fentanyl trafficking. The dollar initially rallied but is now more mixed, with the dollar bloc and Scandis firmer on the day. Emerging market currencies have not recovered as well, but after the Russian ruble, the South African rand, Mexican peso, and Chinese yuan are making advances.

Equities mostly like the development, but the Trump administration will appeal. Taiwan and India were notable exceptions. The Stoxx 600 recovered a little more than half of yesterday's losses and is rising for the third time this week. US index futures are broadly higher (S&P ~1.5%, Nasdaq ~2%). Bonds are under some pressure. Japan's 30-year yield rose nearly eight basis points to almost 3.0%, the 40-year yield fell by 22 bp. European 10-year benchmark yields are around two basis points higher while the 10-year Treasury yield is up almost six basis points to 4.54%. Gold is recovering after dropping to $3245 from $3287 at yesterday's settlement. It is little changed on the day in late European morning turnover. July WTI is extending yesterday’s gain. It traded above $63 before pulling back toward $62.50, which is still $1 above last week's settlement.

USD: The Dollar Index gapped higher in response to the US Court of International Trade ruling....

....MUCH MORE

Earlier today: 

Goldman Sachs: "Four tools at the Trump administration’s disposal after a U.S. court blocks tariffs"

Goldman Sachs: "Four tools at the Trump administration’s disposal after a U.S. court blocks tariffs"

From CNBC, May 29: 

  • A U.S. trade court ruled that Trump had overstepped his authority by invoking an emergency law to impose sweeping tariffs on nearly every country.
  • Economists at Goldman Sachs said the White House likely has a few tools at its disposal to ensure it is only a temporary problem.
  • Lawyer James Ransdell said the ruling marks the first in many cases still pending — and is the first opinion “to really address the meat of the plaintiffs challenge.”

U.S. President Donald Trump is expected to find a workaround after suffering a major blow to a core part of his economic agenda.

The U.S. Court of International Trade on Wednesday ruled that the president had overstepped his authority by invoking the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs on numerous countries.

The Manhattan-based court not only ordered a permanent halt to most of Trump’s tariffs, but also barred any future modifications to them.

A panel of three judges gave the White House 10 days to complete the formal process of halting the tariffs. The Trump administration swiftly appealed the ruling.

Economists at Goldman Sachs

said the White House has a few tools at its disposal that could ensure it is only a temporary problem.

“This ruling represents a setback for the administration’s tariff plans and increases uncertainty but might not change the final outcome for most major US trading partners,” analysts at Goldman Sachs said in a research note.

“For now, we expect the Trump administration will find other ways to impose tariffs,” they added.

Options on the table

The Wall Street bank said the ruling blocks the 10% baseline tariff imposed by Trump on most imports, as well as the additional tariffs on China, Canada and Mexico – but not sectoral tariffs, such as those imposed on steel, aluminum and autos.

The Trump administration does have other legal means of imposing tariffs, however, according to Goldman. These include Section 122 of the Trade Act of 1974, Section 301 and Section 338 of the Trade Act of 1930.

Section 122 does not require a formal investigation and could therefore be one of the swiftest ways to get around the court roadblock.

“The administration could quickly replace the 10% across-the-board tariff with a similar tariff of up to 15% under Sec. 122,” analysts at Goldman said. They noted, however, that such a move would only last for up to 150 days after which law requires Congressional action....

Wednesday, May 28, 2025

"Russia is quietly carrying out a modernization of its nuclear missile infrastructure near the Kazakh border"

With all the caveats pertaining to mystery documents and how/why a media organization came to possess them, and why they are being released at this time, and WOW!

Danwatch and Der Spiegel has gained access to hundreds of highly detailed blueprints showing how Russia is carrying out an enormous modernization of some of the world’s most sensitive nuclear weapons facilities.

Massive security breach: Russian nuclear facilities exposed online...

....MUCH MORE, scroll past the maps and other multimedia for the narrative

Trump Administration Cancels $3 Billion Loan [Guarantee] to Troubled Sunnova Energy (NOVA)

Yeah, don't be stepping up to guarantee stuff for a company that has already issued a Going Concern warning.

From Bloomberg, May 28:

  • Solar developer told officials it wouldn’t tap into facility
  • Sunnova has been laying groundwork for a bankruptcy filing

The Trump Administration terminated a $3 billion loan guarantee awarded to Sunnova Energy Intentional Inc. after the solar company told officials it no longer intended to tap into the facility.

The US Department of Energy canceled the loan obligation Friday, according to Sunnova. The company had used about $371 million of the government loan guarantee, part of billions of dollars of financing offered by the Biden Administration to accelerate the deployment of clean energy and combat climate change.

While President Donald Trump has worked to undermine federal support for the clean energy industry including freezing funding, halting permits and backing Republican efforts to undo former President Biden’s signature climate legislation, Sunnova’s troubles preceded the change in administation.

The solar developer has been laying the groundwork for a bankruptcy filing that could come within weeks, Bloomberg News reported  last week. The [sic] Sunnova ran into trouble with high interest rates and lower state incentives that made it more expensive for homeowners to buy or lease panels. The residential solar business is now facing the prospect of losing generous tax credits under the Republican tax and spending bill that passed the US House last week....

....MORE

Nvidia Earnings Call Transcript—Q1 2026, May 28, 2025 (NVDA)

Having been through forty or so Nvidia quarterlies we don't have quite as much urgency to get the numbers on the page as a lot of folks do.* We like transcripts.

From Investing.com, May 28:

Earnings call transcript: NVIDIA beats Q1 2025 expectations....

NVIDIA Corporation reported strong fiscal Q1 2025 earnings, surpassing both earnings per share (EPS) and revenue expectations. The company posted an EPS of $0.96, exceeding the forecast of $0.93, and achieved revenue of $44.1 billion against a projected $43.31 billion. Following the announcement, NVIDIA’s stock rose by 4.29% in aftermarket trading, reflecting investor confidence in its growth trajectory. The company’s impressive performance is backed by a perfect Piotroski Score of 9, according to InvestingPro data, indicating exceptional financial strength. Based on InvestingPro’s Fair Value analysis, NVIDIA currently appears to be trading above its intrinsic value.

Key Takeaways

  • NVIDIA’s Q1 2025 EPS of $0.96 beat the forecast of $0.93.
  • Revenue reached $44.1 billion, surpassing the $43.31 billion forecast.
  • Stock surged 4.29% in aftermarket trading, closing at $140.59.
  • Data center revenue saw a significant increase of 73% year-on-year.
  • The company launched several innovative products, including the Blackwell architecture.

Company Performance

NVIDIA’s performance in Q1 2025 underscores its leadership in the AI and gaming sectors. The company’s data center revenue reached $39 billion, marking a 73% year-on-year increase, while gaming revenue set a record at $3.8 billion. This growth is attributed to the rising demand for AI applications and gaming technologies, positioning NVIDIA favorably against competitors. InvestingPro data reveals impressive year-over-year revenue growth of 114.2%, with a robust gross profit margin of 75%. The company maintains exceptional financial health with a current ratio of 4.44, indicating strong liquidity.

Financial Highlights

  • Revenue: $44.1 billion, up 69% year-over-year
  • Earnings per share: $0.96, above the forecast of $0.93
  • Data Center Revenue: $39 billion, up 73% year-on-year
  • Gaming Revenue: $3.8 billion, up 48% sequentially

Earnings vs. Forecast

NVIDIA’s actual EPS of $0.96 represented a 3.23% surprise over the forecasted $0.93. Revenue also exceeded expectations by $800 million, highlighting the company’s ability to capitalize on market trends and maintain strong financial health.

Market Reaction

The positive earnings report led to a 4.29% increase in NVIDIA’s stock price in aftermarket trading, reaching $140.59. This reaction reflects strong investor confidence, driven by the company’s robust performance and promising outlook, despite broader market volatility.

Outlook & Guidance

Looking ahead, NVIDIA expects Q2 revenue to be approximately $45 billion, plus or minus 2%. The company is preparing for modest sequential growth across its platforms, with a focus on expanding its AI infrastructure and enterprise solutions. However, it anticipates a decrease in China data center revenue due to geopolitical factors. With a beta of 2.11, investors should note the stock’s higher volatility compared to the market. For deeper insights into NVIDIA’s valuation and growth prospects, InvestingPro subscribers can access comprehensive research reports and 18 additional ProTips that provide valuable context for investment decisions.

Executive Commentary

CEO Jensen Huang emphasized the rapid growth of AI, stating, "AI is growing faster and will be larger than any platform shifts before, including the Internet, mobile, and cloud." He also highlighted NVIDIA’s multiple growth engines and the onset of the robotics era.

Risks and Challenges

  • Potential decrease in China data center revenue due to geopolitical tensions.
  • Economic uncertainties that could affect demand for NVIDIA’s products.
  • Competition in the AI and gaming markets, which could impact market share.
  • Supply chain challenges that may affect production and delivery timelines.

Q&A

During the earnings call, analysts focused on the impact of China export controls and NVIDIA’s strategic initiatives in AI and enterprise markets. Discussions also covered the company’s networking and compute technologies, providing insights into its competitive advantages.

Full transcript - NVIDIA Corporation (NVDA) Q1 2026:

Sarah, Conference Operator: Good afternoon. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to NVIDIA’s First Quarter Fiscal twenty twenty six Financial Results Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. There you. Toshiya Hari, you may begin your conference.

Toshiya Hari, Investor Relations, NVIDIA: Thank you. Good afternoon, everyone, and welcome to NVIDIA’s conference call for the first quarter of fiscal twenty twenty six. With me today from NVIDIA are Jensen Huang, president and chief executive officer and Colette Kress, executive vice president and chief financial officer. I’d like to remind you that our call is being webcast live on NVIDIA’s investor relations website. The webcast will be available for replay until the conference call to discuss our financial results the second quarter of fiscal twenty twenty six.....

 
The stock settled at $141.37 up $6.56 (+4.87%) in the after-hours session.
*It worked out.
NVDA NVIDIA Corporation monthly Stock Chart

 March 22, 2024:

I Have Heard Of This Nvidia You Speak Of (first call for a $10 trillion market cap) NVDA

I have heard wondrous tales of immense wealth,

Of amazing deeds performed as if by magic.

Yes I have heard*of all of this....but hang on one 'effin minute with the $10 trillion talk. Let's get to $1000 on the stock before we join Coleridge at the hookah. [In Xanadu did Kubla Khan...]

{adjust the $1000 by the 10:1 split effective June 10, 2024}

If I'm reading the decimal places correctly the company's market cap after-hours is $3.466 trillion.

Or $34 trillion if I squint real hard. (no hookah required)

In Xanadu did Kubla Khan
A stately pleasure-dome decree:
Where Alph, the sacred river, ran
Through caverns measureless to man
   Down to a sunless sea....

UAE's ENEC And GE Vernova Hitachi Sign Memorandum To Explore Deploying Small Modular Reactors Internationally (GEV)

From Utilities Middle East, May 28:

ENEC, GE Vernova eye global shake-up with SMR tech
ENEC and GE Vernova Hitachi have signed an MoU to jointly evaluate the international deployment of the BWRX-300 small modular  

The Emirates Nuclear Energy Corporation (ENEC) and GE Vernova Hitachi Nuclear Energy have signed a memorandum of understanding (MoU) to jointly evaluate the potential international deployment of the BWRX-300 small modular reactor (SMR) technology.

Signed during a private ceremony at the World Utilities Congress in Abu Dhabi, the agreement builds on an MoU signed during COP28 in 2023. It forms part of ENEC’s broader ADVANCE programme, which aims to accelerate the assessment and potential integration of next-generation nuclear technologies.

Under the new MoU, both parties will collaborate on a development roadmap that includes site identification, licensing frameworks, investment planning, commercialisation strategies, and supply chain development.

His Excellency Mohamed Al Hammadi, Managing Director and CEO of ENEC, said the agreement supports ENEC’s ambition to expand its clean energy portfolio both in the UAE and globally....

....MUCH MORE 

Earlier:

"Trump nuclear power orders could open small reactors in the U.S. by 2030, GE Vernova CEO says" (GEV)

"Trump nuclear power orders could open small reactors in the U.S. by 2030, GE Vernova CEO says" (GEV)

The stock notched another all-time high today, closing at $485.01 up $13.50 (+2.86%).

From CNBC, May 28, 2:22 PM EDT: 

  • President Donald Trump ordered the Nuclear Regulatory Commission to decide on applications for new nuclear plants within 18 months.
  • Trump’s order could help launch small modular reactors in the U.S. by late 2030, GE Vernova CEO Scott Strazik said.
  • The reactors are viewed as the future by many in the industry.

President Donald Trump’s executive orders on nuclear power could lead to the deployment of small modular reactors in the U.S. by late 2030, GE Vernova

CEO Scott Strazik said Wednesday.

Trump on Friday ordered the Nuclear Regulatory Commission to decide on applications to construct and operate new nuclear plants within 18 months. The order also calls for the NRC to “adopt shorter deadlines tailored to particular reactor types.” The nuclear industry has long complained that the NRC’s approval process takes too long.

Trump’s order could result in approvals to start building small modular reactors in the U.S. by 2027, Strazik told the research firm Bernstein in an interview. This would create a “credible shot” of adding these reactors to the U.S. nuclear fleet in late 2030 or 2031, the CEO said.

Small modular reactors (SMRs) are plant designs that many in the industry view as the future of nuclear power. SMR developers including GE Vernova believe the reactors will one day lower the cost of building nuclear plants and speed up construction because they are smaller and assembled onsite with prefabricated parts. Large nuclear plants such as Plant Vogtle in Georgia have been plagued with multi-billion dollar cost overruns and lengthy construction delays.

“It’s just the beginning of what could very much become a very meaningful part of our business in the 2030s. We’re very encouraged by this,” Strazik said of Trump’s executive order....

....MORE

Also today:
UAE's ENEC And GE Vernova Hitachi Sign Memorandum To Explore Deploying Small Modular Reactors Internationally (GEV)

Locust Watch: "Seasonal precipitation predictions"

Following on the post immediately below, "We've Entered The Predation Phase Of The A.I. Boom: Chamath Palihapitiya Edition"

From the Food and Agriculture Organization of the United Nations:

21/05/2025
Overview:

Contrary to earlier forecasts, both seasonal and subseasonal models now predict a relatively dry June in the Sahel, while pre-monsoon rains may still occur in India and Pakistan. However, a generally wet summer is expected across all three regions, with above-normal rainfall likely from July to September in the Sahel and southern Sahara of northern Africa, along the Red Sea and Gulf of Aden coasts, the Horn of Africa, the interior of the Arabian Peninsula, and the Indo-Pakistan border. Dry conditions are expected to return with the onset of winter. The anticipated above-normal rainfall this summer is associated with weak La Niña-like conditions.

Full article

 Most recently:

May 8 - Locust Watch: "Desert locust outbreaks persisted in southern Sahara and Northwestern Africa"

*****

https://www.fao.org/media/images/locustwatchlibraries/briefs/49388195443_0d3194c600_o763f06fb-ce31-4826-9d92-408a24079a0f.jpg?sfvrsn=424c2fe7_1

Nasty buggers. The FAO/USDA rule of thumb is that a square-kilometer swarm contains 40 million insects and eats enough food to feed 35,000 people for a day. Note camels barely visible through the swarm.

We've Entered The Predation Phase Of The A.I. Boom: Chamath Palihapitiya Edition

This sure reads like the set-up to a giant self-dealing/self-aggrandizing machine.

From ZeroHedge, May 27: 

Chamath Palihapitiya Unveils Plans For AI Data Center Near Bill Gates' Arizona Smart City

Industry insiders—particularly those on the financing side of AI data centers—describe to Zero Hedge the current buildout as a "sprint" expected to continue through President Trump's second term.

Last week, we covered the major development in Abilene, Texas—a massive data center project widely considered the first "Stargate" project under President Trump's broader AI infrastructure initiative. 

Backed by Crusoe and Blue Owl Capital, the Abilene facility will be operated by OpenAI—the creator of ChatGPT—positioning it as a flagship project in President Trump's effort to rapidly scale U.S.-based AI infrastructure amid an intensifying AI race with China. 

Adding to the wave of data center investment news, Chamath Palihapitiya, CEO of Social Capital, wrote on X in response to CAPITAL.news, "We're going to build a 1 GW AI data center in Arizona," signaling another major deal to expand US AI infrastructure. 

Verbiage continues:

 Announced this today! We’re going to build a 1 GW AI data center in Arizona.

I’ve never done a RE deal so working with a great RE investor, @anitavlallian
, with a vision for the project was key. Anita is a star.

Ultimately this will require us investing $25B to get the entire project done but it will happen in phases and we will appropriately scale in debt but the equity will be significant.

We own 2000 acres right beside Bill Gates’ smart city and down the road from a nuclear reactor.

Now we continue the process of entitlements and regulatory permitting so we can start construction.

Onwards!

....MUCH MORE

From September 2022's "A Look At Chamath Palihapitiya's SPAC's":
Anyone in the media who gave this guy any oxygen, at all, is an idiot.
(after typing that I thought, "maybe one should check the archive before, rather than after, using the word 'Idiot').*

*****

*And our mentions of Mr. Palihapitiya? There were three or four, here's another one on the SPACs
May 11, 2021
I'm A SPAC Cowboy....
Bet you weren't ready for that.

Because shorting stocks based on valuation (vs fraud) in a bull market is so dangerous, we don't talk about it all that much. There have been a few, the Great Kinder Morgan short of '14* being a wonderful memory, along with a few tactical i.e. quick shorts of Tesla over the years (in direct violation of the decade-long "Don't short TSLA" admonition), but as a general rule, on the blog we only short frauds in a bull. In a bear, "Short 'em all" as one of my mentors used to say.

The fact we don't put every last thought that pops into our collective heads out in public actually benefits our readers as a couple of things that hurt results in 2020 never made it to the blog.

But I don't like blind pools.

And I especially don't like SPAC's with PIPES

And with that confessional we'll turn the narrative over to the professional.....

Here are a couple of the SPACs:

OpenDoor


BigCharts

Virgin Galactic


BigCharts

There are a dozen more, SoFi might work out.

"Oracle has reportedly placed an order for $40 billion in Nvidia AI GPUs for a new OpenAI data center" (ORCL; NVDA)

Even if they are double-ordering (just to assure their place in the queue) that's still a lot of chips.

From Tom's Hardware, May 24: 

During a gold rush, sell shovels.

Oracle has reportedly purchased about 400,000 Nvidia GB200 AI chips, worth about $40 billion, for deployment in Abilene, Texas. According to the Financial Times, this site will be the first to host the U.S. Stargate project —a $500 billion investment in AI infrastructure by OpenAI, Oracle, SoftBank, and Abu Dhabi sovereign wealth fund MGX that President Trump announced earlier this year.

Upon completion, the site is estimated to deliver up to 1.2 gigawatts of computing power, making it one of the most powerful data centers in the world and competing against Elon Musk’s Colossus in Memphis, Tennessee.

The project’s ownership is a bit complicated, though. The Abilene site is owned by Cruso, an AI infrastructure company, and Blue Owl Capital, a U.S. investment firm. Both have poured over $15 billion into the site through debt and equity financing.

In September 16's "Elon Musk and Larry Ellison begged Nvidia CEO Jensen Huang for AI GPUs at dinner" I forgot to mention the combined net worth at that table was over a half-trillion dollars, Larry Ellison had briefly popped into the #2 spot trailing Musk at #1 before falling back to fourth or fifth.

From October 5, 2024's "AI versus the climate as data center emissions soar":

...The AI business has a lot of money, OpenAI just raised $6 billion at a $157 billion valuation, or my favorite recent example, the three centi-billionaires Jensen Huang (NVDA), Elon Musk (TSLA+++) and Larry Ellison (ORCL) having dinner at Nobu, Palo Alto, combined net worth at the table $550 billion, with Musk and Ellison begging Huang to get them more chips:

“Please take our money. By the way, I got dinner. No, no, take more of it.
We need you to take more of our money please.
”

—Ellison on the table-talk

"Some signs of AI model collapse begin to reveal themselves"

From The Register, May 27:

Prediction: General-purpose AI could start getting worse 

I use AI a lot, but not to write stories. I use AI for search. When it comes to search, AI, especially Perplexity, is simply better than Google.

Ordinary search has gone to the dogs. Maybe as Google goes gaga for AI, its search engine will get better again, but I doubt it. In just the last few months, I've noticed that AI-enabled search, too, has been getting crappier.

In particular, I'm finding that when I search for hard data such as market-share statistics or other business numbers, the results often come from bad sources. Instead of stats from 10-Ks, the US Securities and Exchange Commission's (SEC) mandated annual business financial reports for public companies, I get numbers from sites purporting to be summaries of business reports. These bear some resemblance to reality, but they're never quite right. If I specify I want only 10-K results, it works. If I just ask for financial results, the answers get… interesting,

This isn't just Perplexity. I've done the exact same searches on all the major AI search bots, and they all give me "questionable" results.

Welcome to Garbage In/Garbage Out (GIGO). Formally, in AI circles, this is known as AI model collapse. In an AI model collapse, AI systems, which are trained on their own outputs, gradually lose accuracy, diversity, and reliability. This occurs because errors compound across successive model generations, leading to distorted data distributions and "irreversible defects" in performance. The final result? A Nature 2024 paper stated, "The model becomes poisoned with its own projection of reality."

Model collapse is the result of three different factors. The first is error accumulation, in which each model generation inherits and amplifies flaws from previous versions, causing outputs to drift from original data patterns. Next, there is the loss of tail data: In this, rare events are erased from training data, and eventually, entire concepts are blurred. Finally, feedback loops reinforce narrow patterns, creating repetitive text or biased recommendations.

I like how the AI company Aquant puts it: "In simpler terms, when AI is trained on its own outputs, the results can drift further away from reality."

I'm not the only one seeing AI results starting to go downhill. In a recent Bloomberg Research study of Retrieval-Augmented Generation (RAG), the financial media giant found that 11 leading LLMs, including GPT-4o, Claude-3.5-Sonnet, and Llama-3-8 B, using over 5,000 harmful prompts would produce bad results.

RAG, for those of you who don't know, enables large language models (LLMs) to pull in information from external knowledge stores, such as databases, documents, and live in-house data stores, rather than relying just on the LLMs' pre-trained knowledge.

You'd think RAG would produce better results, wouldn't you? And it does. For example, it tends to reduce AI hallucinations. But, simultaneously, it increases the chance that RAG-enabled LLMs will leak private client data, create misleading market analyses, and produce biased investment advice.

As Amanda Stent, Bloomberg's head of AI strategy & research in the office of the CTO, explained: "This counterintuitive finding has far-reaching implications given how ubiquitously RAG is used in gen AI applications such as customer support agents and question-answering systems....

....MUCH MORE, including a Perplexity sidebar and further reading.

But no boffins or Super Cali...

"Chinese laser cracks spy dream, can read letters size of a sesame seed from a mile away"

From Interesting Engineering, May 25:

Turns out lasers are better than telescopes, binoculars, and lenses at reading text written on a target located miles away.

Imagine standing on one side of a large valley and being able to read a label on a bottle sitting on the opposite hill, without using a camera, telescope, or binoculars. 

Sounds like a scene from a spy movie, right? Well, you’d be surprised to know that scientists in China have just made it real. They have developed a new laser-based system that can clearly pick up small details, like millimeter-sized text, from a distance of 1.36 kilometers (about 0.85 miles), which is roughly 14 football fields away.

This laser-based imaging system could be of great use in many fields. For instance, it might allow archaeologists to examine ancient carvings on cliffs without climbing them, and help environmental researchers monitor distant wildlife habitats. 

The science of long-distance reading....

....MUCH MORE 

Time to start studying-up for my next eye exam.

"UAE’s AI University Aims to Become Stanford of the Gulf"

That's ambitious.

From Bloomberg, May 22:

Mohamed bin Zayed University of AI is focused on building an engineering pipeline, incubating homegrown startups, and hypercharging the region’s AI development

A few weeks before Donald Trump announced plans to lift semiconductor restrictions on the United Arab Emirates, a move with the potential to supercharge the region’s AI development, Eric Xing sat in his office in Abu Dhabi and discussed what the future might look like.

Xing, a computer scientist who previously taught at Stanford and Carnegie Mellon, is president of Mohamed bin Zayed University of AI, a six-year-old institution uniquely positioned to shape the coming AI boom. During an interview with Bloomberg, Xing repeatedly mentioned his ambition of making MBZUAI the Stanford of the Gulf, pointing to the California school’s role in nurturing a culture of innovation and entrepreneurship whose effects have rippled far beyond Silicon Valley. 

The UAE is on a mission to become a global player in AI. The country appointed the world’s first AI minister back in 2017, and mandated this month that all primary schools add AI-based topics like algorithmic bias and prompt engineering to their curriculums. With MBZUAI, named after the UAE leader, it is taking things further: the school is aiming to be a feeder for Emirati companies, which now mostly hire engineers from abroad; an incubator for homegrown startups; and an AI research and development arm for the UAE. While the UAE has poured billions into building AI, MBZUAI wants to make the country less dependent on foreign talent and companies. Its role, in Xing’s words, is “train the people who can carry out the work.”

Trump may have just given the school a leg up in these ambitions. On his recent trip to the region, the US president framed a potential “U.S.-U.A.E. A.I. Acceleration Partnership” as a way to strengthen business ties between the two countries, and to solidify the US lead in the field. Under the terms of the agreement, the UAE would be allowed to import 500,000 of the most advanced chips every year between now and 2027, with a fifth set aside for G42, the country’s all-purpose AI company.

That’s a notable break with previous US strategy, said Kristin Diwan, a senior resident scholar at the Arab Gulf States Institute in Washington, D.C. Over the past two decades, as the country has strengthened its ties with China, US administrations responded by restricting UAE access to semiconductors and sensitive technologies. Last year, G42 agreed to divest from China upon entering a partnership with Microsoft. By contrast, this latest proposal does not demand any Emirati concessions on ties with China. Diwan described that as “a massive win for the UAE’s ambitions to become a central hub in the global tech economy.”....

....MUCH MORE

Recently on the Emirates:

That's the last couple weeks.

Tuesday, May 27, 2025

"How Third-Century China Saw Rome, a Land Ruled by 'Minor Kings'”

Eighteen hundred years later that still sounds very Chinese. From the introduction to 2023's "What was the longest-lasting civilization?":

My Chinese friends and acquaintances say it is the Chinese civilization. When I ask why that happened they say it is because Chinese people are superior.

When I tell them that is racist they laugh at me....

From Smithsonian Magazine, September 3, 2013:

When archaeologists work to understand an ancient civilization, they often use that civilization’s texts to get a clue as to how they saw themselves. But these people didn’t live in isolation. They traded; they invaded. They carried inventions and knowledge back and forth down the Silk Road, the Tea Road and Roman roads. They also, sometimes, wrote down what they thought of each other.Translations of a 3rd century Chinese text describe Roman life 

A few years ago, the University of Washington’s John E. Hill drafted an English copy of the Weilüe, a third century C.E. account of the interactions between the Romans and the Chinese, as told from the perspective of ancient China. “Although the Weilue was never classed among the official or ‘canonical’ histories, it has always been held in the highest regard by Chinese scholars as a unique and precious source of historical and geographical information,” says Hill.

The translated text gives a curious look at the way of life of third century Rome, a land ruled by “numerous minor kings.” The chronicle even comes with extensive directions on how to get there—go across the Indian Ocean, cut up to Egypt, duck through the Nile, sail across the Mediterranean (about six days) until you find yourself in Da Qin, the Roman Empire.

The text describes the organization of Roman society, and a list of the products they had on offer.

This country (the Roman Empire) has more than four hundred smaller cities and towns. It extends several thousand li in all directions. The king has his capital (that is, the city of Rome) close to the mouth of a river (the Tiber). The outer walls of the city are made of stone.

…The ruler of this country is not permanent. When disasters result from unusual phenomena, they unceremoniously replace him, installing a virtuous man as king, and release the old king, who does not dare show resentment.

The common people are tall and virtuous like the Chinese, but wear hu (‘Western’) clothes. They say they originally came from China, but left it.

They have always wanted to communicate with China but, Anxi (Parthia), jealous of their profits, would not allow them to pass (through to China)....

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Javier Blas: India's Influence On The International Oil Market

From Bloomberg via Advisor Perspectives, May 27:

The Oil Market Has a Bigger Problem Than a Slowing China – India 

India is the stuff of dreams for OPEC and Big Oil: a rapidly developing nation of nearly 1.5 billion people where petroleum consumption is still in its infancy. It’s the next China — so the theory goes. Perhaps one day, but in 2025 it’s still the stuff of dreams.

For years, energy economists have talked about “structural tailwinds” — including benign demographics, a burgeoning middle class and accelerating urbanization and industrialization — that would propel Indian oil demand.

Those phenomena turned China into the world’s engine of petroleum demand growth (along with everything else) for a quarter century. From 2000 to 2025, the Asian giant added an average of 485,000 barrels a day every year to global consumption. Now, the boom is ending.

https://www.advisorperspectives.com/images/content_image/data/a1/a1913d9f203a800430bfcd83068c36a6.jpg

Weighed down by slower economic growth and the rapid uptake of electric cars, Chinese oil demand will expand by 135,000 barrels a day this year, according to the International Energy Agency. Except for the pandemic period, that would be the smallest annual increase since 2005.

If the bulls were right, India would be taking over by now. But it isn’t: For the last three months, its oil demand growth has been contracting. As things stand, India consumption may increase by as little as 130,000 barrels a day this year, about half what many thought a year ago; if confirmed, that would be the smallest annual increase in a decade, excluding the pandemic period.

Until now, the consensus – but perhaps optimistic -- view was that New Delhi would add about 1 million barrels of extra demand from 2025 to 2030. No other country was expected to see such large increases.

Even if large when compared to other rapidly growing economies – Brazil, Indonesia and Pakistan, to name a few — that increase would still be far smaller than what Beijing managed during its heyday. For example, from 2010 to 2015, Chinese oil demand increased by a cumulative 3.7 million barrels a day.

The expectation that India would add lots of extra oil consumption is in part anchored in comparing it today with China. The average Indian consumes today about 1.4 barrels of oil a year, well below the 4.3 barrels a year of the average Chinese.

Before we finish, here’s a detour into commodity demand 101: The amount of oil that a country consumes is, for the most part, a function of two factors: population and incomes. The sweet spot for commodities demand starts when annual per capita income rises above $4,000. At that point, countries typically industrialize and urbanize, creating a strong, and sometimes disproportionate, relationship between further economic growth and extra commodity demand. China hit the commodity sweet spot around 2001. And oil demand boomed. India hit the sweet spot five years later, around 2006, but demand there didn’t balloon....

*****

...To understand why one needs to dig into the details of its gross domestic product. While China relied on oil-intensive heavy industries, manufacturing, and large investment in public infrastructure, India did the opposite, growing its services, which use comparatively less energy....

....MUCH MORE

"The Alienated ‘Knowledge Class’ Could Turn Violent"

Rather than "Knowledge class" they act more like entitled wannabe elites.

From the Wall Street Journal, May 21:

Societies that exile their intellectuals risk turning them into revolutionaries. It happened in the 1970s. 

In the 1970s, Western democracies faced a wave of political violence. In the U.S., a radical left-wing group called the Weather Underground bombed federal buildings to protest the Vietnam War. In West Germany, the Red Army Faction waged armed resistance against what it saw as a fascist state. Italy’s Red Brigades kidnapped and assassinated public figures, including former Prime Minister Aldo Moro. These groups shared a trait: Many members were highly educated, middle- or upper-middle-class young people. These weren’t the oppressed proletariat of Marxist theory, but the disillusioned children of privilege and university lecture halls.

A similar dynamic could take root in the U.S. As the Trump administration downsizes public agencies, dismantles DEI programs and slashes academic research funding, it risks producing a new class of people who are highly educated but institutionally excluded. History suggests this group may become a source of unrest—and possibly violence.

Historian Peter Turchin illuminates this possibility with his theory of “elite overproduction.” When societies generate more elite aspirants than there are roles to fill, competition for status intensifies. Ambitious but frustrated people grow disillusioned and radicalized. Rather than integrate into institutions, they seek to undermine them. Revolutions, in this view, are often fueled not by the downtrodden but by the downwardly mobile children of the elite.

This framework helps explain the rise of 1970s radical leftist groups. The Weather Underground emerged from Students for a Democratic Society, rooted in elite university campuses. Its leaders, including Bill Ayers and Bernardine Dohrn, were educated at the University of Michigan and the University of Chicago. In Germany, Ulrike Meinhof of the Red Army Faction was a prominent journalist with degrees in philosophy and sociology. Many Red Brigades members in Italy held law or political science degrees. Their radicalization stemmed not from poverty but from moral outrage and estrangement from institutional power.

Today, a similar form of status frustration is building. The postwar expansion of higher education has created a surplus of advanced degree holders. People with doctorates far outnumber tenure-track positions. Many members of the American intelligentsia face precarious employment, rising debt and declining institutional pathways. Meanwhile, the Trump administration’s agenda has disproportionately harmed the “knowledge class”: policy analysts, researchers, educators and civil servants who once found stability in public institutions.

This is more than a mere bureaucratic shake-up. When large numbers of educated, politically engaged people lose access to institutional influence, they often seek alternatives. For now, most are channeling their frustration through protests, digital activism and ideological writing. But under certain conditions—state repression, widespread disillusionment or charismatic leadership—radicalism can escalate. We already see hints in environmental sabotage, anarchist organizing and violent clashes involving Antifa and far-right groups. These remain on the fringe, but so were the Weather Underground and the Red Army Faction in their early days.

President Trump’s policies could intensify this dynamic. By hollowing out state infrastructure and devaluing educational institutions, the administration risks creating a surplus of ideologically driven people with no outlet for their talents. Many are trained in critique, moral reasoning, and systems thinking—the very profile of earlier generations of radicals. Most won’t resort to violence, but history shows that a small, committed vanguard can inflict enormous damage.

Granted, today’s left is more fragmented and less doctrinaire than in the 1970s. Surveillance, polarization and the internet make underground organizing harder. Digital activism tends to favor symbolic over violent resistance. Yet political violence often originates from isolated cells of disillusioned idealists. The conditions for radicalization—grievance, peer networks, ideological justifications—are already in place.

The question is whether political leaders will mitigate or exacerbate the risks. Defunding and demonizing higher education may offer short-term political gains, but doing so carries long-term dangers. By targeting perceived left-wing strongholds, some on the political right may cultivate the very radicalism they fear....

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The author Jukka Savolainen is an academic (sociology) at a large third tier school, Wayne State University.

Although we've visited Turchin a few times I'm still not sure if he is on to something with the violence prediction. On the other hand you can see the mass-production of wannabe elites anywhere you turn.

If interested see also:

C.S. Lewis On Different Types Of Readers
Although these days we use pseudo-psycho-mumbo-jumbo like "Confirming my priors" and "Validating the reader", this old boy was writing about such things in his SciFi novel 76 years ago:

“Why you fool, it’s the educated reader who CAN be gulled. All our difficulty comes with the others. When did you meet a workman who believes the papers? He takes it for granted that they’re all propaganda and skips the leading articles. He buys his paper for the football results and the little paragraphs about girls falling out of windows and corpses found in Mayfair flats. He is our problem. We have to recondition him. But the educated public, the people who read the high-brow weeklies, don’t need reconditioning. They’re all right already. They’ll believe anything.”

— C.S. Lewis, That Hideous Strength, 1945

As we saw in "Planet of the Grifters" with it's quick look at Turchin's idea that there are too many elites and wannabe elites, there is money to be made from feeding the fantasy of the wannabe. (as the degenerate state of academia shows)

Pity the poor avocado-eating graduates: "University-educated millennials have absorbed elite values but will never enjoy the lifestyle"

And that probably accounts for some of the crabbiness we see from folks who, compared with our billions and billions of forebearers, back into the mists of time, are among the most privileged and advantaged ever to walk the earth.

They also get grumpy when reminded of that fact....

And "The Fragmenting of the New Class Elites, or, Downward Mobility" and "The Problem with The Mass-Production of Elites, Looking into DoorDash's S-1 Filing"

The introduction to our last visit:
Narratives vs. Reality

Be careful when dealing with Turchin. Although it appears that he correctly forecast the violence of 2020, it is difficult to unravel whether he's on to something, got lucky or, in superimposing a worldview onto the world, is driving square pegs into round holes, shaving the corners to make them fit his template.

That said, on the other hand I distrust anyone who leads with "narrative" as that is the tool of charlatans and other deceitful peeps. With a carve-out for Professor Shiller who uses the concept as an explanatory model for economic and market zeitgeist....

"Gold Erupts From Hawaiian Volcanoes, Scientists Discover"

 From Newsweek, May 27:

There's gold in them thar hills—or, at least, in the volcanoes of the Hawaiian Islands—along with other precious metals.

This is the conclusion of an international team of researchers who found evidence that metals are leaking from Earth's core into the mantle, before being erupted at the surface.

"When the results first came in, we realized that we had literally struck gold," said paper author and geochemist Nils Messling of Göttingen University, Germany, in a statement.

"Our data confirmed that material from the core—including gold and other precious metals—is leaking into Earth's mantle above."

According to the researchers, more than 99.999 percent of Earth's total reserves of gold and other precious metals lie within our planet's metallic core—buried beneath some 1,864 miles of rock....

....MUCH MORE

Boston Consulting Group, Ripple Predict Tokenization To Reach $18.9 Trillion by 2033

And pretty soon you're talking real money.

From Ledger Insights, April 8:

Yesterday Ripple published a tokenization report developed by Boston Consulting Group (BCG), which predicts tokenized assets will reach $18.9 trillion by 2033, including stablecoins and tokenized deposits.

The report outlines three stages of adoption. It describes the first phase as low risk adoption, including pilots involving money market funds and corporate bonds. BlackRock’s BUIDL tokenized money market fund launched in 2024 is given as an example, alongside Singapore’s Project Guardian. Rather than attempting to scale, the goal of this phase is institutional readiness.

Phase two starts to involve more complex assets such as private credit, structured finance and corporate bonds. The aim is to earn a return, enhance liquidity and enable composability, as opposed to the simpler transactions in the earlier phase. This is when institutions start to move beyond private blockchains to explore permissioned public blockchains. However, BCG observes some reluctance from institutions to collaborate to reshape markets as they want to defend existing revenue streams.

Market transformation is achieved in phase three. The tokenized asset classes expand to include private equity, hedge funds, infrastructure and real estate-backed debt. This step requires secondary markets with sufficient liquidity, as well as the willingness to accept tokenized assets as collateral. We’d observe that aspects of each phase are currently in evidence, although the current market status fits closest with the early steps of phase two.

Profitable tokenization use cases....

....MUCH MORE

Most recently: 

Also at Ledger Insights:

April 30 - BlackRock to issue DLT shares in Treasury fund via BNY 

BlackRock recently filed a registration statement about plans for the issuance of DLT shares in its $143 billion Treasury Trust Fund (TTF). The shares will only be available via Bank of New York Mellon (BNY), which will use blockchain to mirror the share ownership on-chain. Institutional investors are the primary target with a minimum investment of $3 million, which is the same across the whole fund.

While BlackRock has leaned into tokenization with its BUIDL tokenized treasury fund issued on permissionless blockchains via Securitize, the target market (for now) is primarily crypto institutions. Stablecoin and tokenized money market fund (MMF) issuers are the primary BUIDL token holders....

May 6 -  Citi plans to tokenize private companies on SIX Digital Exchange

May 12 - Hong Kong arm of China’s largest broker to launch tokenized securities

May 13 - VanEck launches tokenized money market fund with Securitize

May 16 - Franklin Templeton unveils Singapore tokenized money market fund

The outro from that post on the SEC roundtable: "It's all happening right now and as the kids used to say, ya snooze, ya lose"

Previously on the commercial side of things:
"Tokenized, Inc: BlackRock's Plan To Own The Fractionalized World"

Investor's Business Daily Says Nice Things About GE Vernova's New All-Time High (GEV)

Actually the fifth consecutive day of all-time closing highs, eclipsing the $437.71 ATCH of January 23. 


In premarket trade the stock is up again, +$12.04 (+2.59%) at $476.43.

From IBD, May 27:

A Nuclear Power Play And TurboTax Stock Reach New Highs  

While the general market saw weakness Friday ahead of a three-day weekend, Intuit (INTU) stock and GE Vernova (GEV) each reached fresh new highs.

GE Vernova stock got a boost as nuclear names rallied on news President Donald Trump is expected to sign executive orders Friday to support the nuclear energy sector. GE Vernova's Hitachi business provides nuclear power services. Intuit soared after the company's positive earnings report late Thursday.....
*****
.... GE Vernova Stock Hits A New High

Ge Vernova stock broke out of a deep cup base with a 447.50 buy point Tuesday and is in the buy range up to 469.88.

Shares are on pace for seven straight weeks of gains and hit a record high Friday. And its relative strength line also reached a new high.

GE Vernova easily beat first-quarter profit and sales estimates on April 23. Forecasts show full-year 2025 earnings per share climbing 22% and then a robust 61% in 2026.

Mutual funds boosted their positions in the stock, with 2,454 owning shares in March, up from 2,305 in December. And its 2.0 up/down volume ratio shows positive demand over the last 50 days.

IBD Leaderboard name GE Vernova offers technology and services for gas, nuclear and hydro power, wind turbines, and power grids....

....MUCH MORE (GEV chart, Intuit commentary)