Economics

I’m analyzing what happens to the US economy in the short-term aftermath of the typical job being replaced by AIs and robots. Will there be a financial crisis? Short answer: yes.

This is partly inspired by my dissatisfaction with Tomas Pueyo’s analysis in If I Were King, How Would I Prepare for AI?.

Let’s say 50% of workers lose their jobs at the same time (around 2030), and they’re expected to be permanently unemployed. (I know this isn’t fully realistic. I’m starting with simple models and will add more realism later.)

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This post is a response to Tyler Cowen’s A household expenditure approach to measuring AI progress, discussing how AI will affect productivity over the next 5 years (i.e. until the summer of 2030) via the effects on typical household expenses.

I mostly predict that the effects will be larger than Tyler expects, but the 5 year time period that he chose is short enough that the effects won’t be obvious until near then end of that period.

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I’ve been shifting my investments to more AI-focused bets.

Here’s an overview of my larger positions, in descending order of how eager I am to recommend further purchases now:

  • MU – AI is memory hungry, and MU is in a good position for almost NVDA-like growth
  • CSIQ – solar, for AI-related power demand
  • ASML – semiconductor equipment
  • SCIA – semiconductor equipment
  • GOOGL – for TPUs, DeepMind, and Waymo
  • SMCI – datacenter
  • NVDA
  • AMPX (and AMPX.WS) – batteries suitable for drones
  • TSSI – datacenter
  • CLS – close to half of its business involves datacenters
  • PDEX – a fairly safe way to diversify my portfolio
  • MTG – a fairly safe way to diversify my portfolio
  • ASTS – expanding cell phone coverage; I’ll likely sell when I can get long-term gains

Short positions:

  • SP500 futures – hedging against risks such as tariffs
  • SOFR futures dated 2029 through 2032 – betting that interest rates will rise due to AI
  • WMT – it’s got a high PE ratio, and little sign of growth

[This is not at all a complete list, as I have smaller positions in something like 150 other companies.]

AI stocks are likely to form a bubble someday, but I’m guessing the peak of that bubble is more than a year away.

I still have some concerns about tariff-related damage causing some declines sometime this year. I’m optimistic that the courts will strike down the per-country tariffs this fall. It shouldn’t take long for the country to recover from the tariff damage once the tariffs have been removed.

Beware that even in a strong bull market, there will be periodic scares, such as January’s DeepSeek-trigger panic, that cause sharp drops in leading stocks. AI-related stocks had a big rally in June, and are likely to consolidate for a while before the next such rally.

This post is a response to a claim by Scott Sumner in his conversation at LessOnline with Nate Soares, about how ethical we should expect AI’s to be.

Sumner sees a pattern of increasing intelligence causing agents to be increasingly ethical, and sounds cautiously optimistic that such a trend will continue when AIs become smarter than humans. I’m guessing that he’s mainly extrapolating from human trends, but extrapolating from trends in the animal kingdom should produce similar results (e.g. the cooperation between single-celled organisms that gave the world multicellular organisms).

I doubt that my response is very novel, but I haven’t seen clear enough articulation of the ideas in this post.

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On May 16, news sources reported that Republicans planned to eliminate subsidies for nuclear power, leading a number of pundits to complain that Republicans were destroying nuclear power in the US (e.g. this otherwise good Noahpinion post).

The stock market told a very different story. I will illustrate with the stock prices of the two companies that seem most focused on building new nuclear power plants.

NuScale (NYSE:SMR) was up more than 52% between April 30 and May 22.

It was up a further 19.6% on May 23 in reaction to an executive order that is aimed at speeding up approvals of nuclear plants.

Oklo (NYSE:OKLO) was up more than 67% between April 30 and May 22. It was up a further 23% on May 23.

Both stocks were up slightly on May 16 and the subsequent trading day, indicating little interest in the news about subsidies.

The market seems to be pretty clear: the benefit of reducing regulations is so much larger than the benefit from subsidies that the subsidies are hard to distinguish from a rounding error.

It’s also fairly likely that some of the market rise up through May 22 was influenced by the executive order that was published on May 23. In other words, it seems pretty likely that somebody profited from advance knowledge of the executive order. I’m pretty sure that’s covered by the SEC’s rules as illegal insider trading.

I can’t prove insider trading here. It’s possible that there was public information that contributed to the pre May 23 rise. The NYT reported relevant rumors on May 9, but both that article and the stock market reaction to it suggest that the administration didn’t decide until sometime later on what kind of executive order to make.

I don’t care enough about insider trading to be too outraged about this particular example of likely corruption. But I’m a bit sad that the most corrupt administration in US history manages to look better than its critics on nuclear issues.

Note: I own stock in NuScale, and some uranium processing companies.

I’ve been creating prediction markets on Manifold in order to better predict AI strategies. Please trade them.

If I get a bit more trading in these markets, I will create more AI-related markets. Stay tuned here, or follow me on Manifold.

In 2015, I posted some investing advice for people who only spend a few hours per year on investing.

I intended to review it after five years, but a pandemic distracted me. It looks like this whole decade will end up being too busy for me to write everything that I want to write. But I’ve become able to write faster recently, maybe due to the feeling of urgency about AI transforming the world soon. So I’m getting a few old ideas for blog posts off of my to-do list, in order to be able to devote most of my attention to AI when the world becomes wild.

My advice worked poorly enough that I’m too discouraged to quantify the results.

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Book review: Boom: Bubbles and the End of Stagnation, by Byrne Hobart and Tobias Huber.

Hobart and Huber (HH) claim that bubbles are good.

I conclude that this claim is somewhat true. That’s partly because they redefine the concept of a bubble in ways that help make it true.

Boom is densely packed with relevant information. Alas, it’s not full of connections between the various pieces of information and any important conclusions. Nor does it excel at convincing me that its claims are true.

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