What we’re reading (10/22)
“Bubble-Talk Is Breaking Out Everywhere” (Financial Times). “The whole point of financial stability reports is to warn about stuff that might go wrong in the future but probably won’t. Even so, the latest missive from the IMF last week was bracing…These things are extremely precisely worded. When such august institutions talk of valuations ‘well’ in excess of observable reality, and of ‘sharp’ or ‘disorderly’ corrections, they are very much switching on the fasten-your-seatbelts sign.”
“Is There An ‘AI Bubble’? We Asked The Experts: AI Chatbots.” (Forbes). “‘Yes, there’s an AI bubble,’ Grok said, adding the hype around AI’s potential has ‘driven massive investments, inflated valuations and unrealistic expectations, reminiscent of the dot-com bubble.’ The chatbot said many AI startups ‘lack sustainable business models,’ and the ‘gap between promised breakthroughs and actual deliverables is growing,’ but—in the first defensive note—noted ‘AI’s transformative potential remains real.’ ChatGPT—responding ‘yes and no’—argued that while there existed ‘classic bubble behavior,’ including ‘undeniably high’ investment and hype as well as some companies being ‘overvalued or chasing AI without real substance,’ AI is ‘already delivering real utility across industries.’”
“Is The Flurry Of Circular AI Deals A Win-Win—Or Sign Of A Bubble?” (Wall Street Journal). “During the late 1990s and early 2000s, such dependency loops mainly consisted of telecom-equipment makers lending money or extending credit to customers so the customers could afford to buy their gear. In those days, this was widely referred to as vendor financing. The poster child for vendor financing run amok was Lucent Technologies. It lent billions of dollars to upstart telecom providers building out their infrastructure and networks. In the boom years, their purchases helped fuel Lucent’s rapid sales growth. When those customers went bust—because they ran out of cash and couldn’t raise fresh capital—Lucent had to write off their bad debts and book huge losses.”
“‘Finances Are Getting Tighter’: US Car Repossessions Surge As More Americans Default On Auto Loans” (The Guardian). “Alarm bells are ringing on Wall Street. The recent collapses of Tricolor, a used car seller and sub-prime auto lender, and First Brands, an auto parts supplier, have put the finance industry on edge, almost two decades after problems in the sub-prime mortgage lending market set the stage for the global financial crisis. ‘When you see one cockroach, there are probably more,’ Jamie Dimon, the JPMorgan Chase CEO, ominously cautioned analysts this week, after the US’s largest bank disclosed a $170m charge tied to Tricolor’s bankruptcy. ‘Everyone should be forewarned on this one.’”
“RIP Zoomtowns” (Business Insider) .”[T]he big ‘winners’ of the work-from-home reshuffle — metros that drew hordes of footloose workers and disaffected coastal dwellers — have turned into losers. Fewer people are moving to so-called Zoomtowns. Home listings are piling up on the market. Prices are dropping. The anxiety has shifted from buyers trying to elbow their way in to sellers just trying to offload their properties. A new report by the real estate analytics firm Parcl Labs, shared exclusively with Business Insider, shows that home sellers in the lower half of the US, also known as the Sun Belt, are the most desperate in the country.”
