Month: January 2025

Authored by Ron Paul via The Ron Paul Institute,

“Delivering Emergency Price Relief for American Families and Defeating the Cost-of-Living Crisis” is the title of one of the many executive orders President Trump issued in his first week back in the Oval Office. This executive order directs federal agencies to “deliver emergency price relief” to the American people by reducing federal regulations that increase the cost or limit the supply of healthcare, housing, energy, and other goods and services.

Repealing regulations is an effective way to reduce costs and increase supply in the affected industries. However, the price increases caused by regulations are sector specific. Economy-wide price increases are caused by the Federal Reserve.

Widespread price increases are the result of inflation. Inflation occurs when the central bank lowers interest rates by increasing the money supply.

In his remarks by video on Thursday before the World Economic Forum’s yearly meeting in Davos, Switzerland, President Trump said he would soon meet with Federal Reserve Chairman Jerome Powell to “demand” the Fed cut interest rates in order to help Americans cope with high prices. Pumping more money into the economy may give some consumers a temporary boost in purchasing power, but a long-term effect of the cut will be further erosion of most Americans’ standard of living as the influx of new money causes the dollar to lose value.

The short-term benefits of any increase of the money supply and reduction in interest rates are mostly felt by the well-off since they receive the new money before other Americans. So they enjoy increased purchasing power before the Fed’s inflationary policies cause prices to rise.

Interest rates are the price of money. As with all prices, interest rates inform market actors about market conditions. When the central bank manipulates the interest rates, it distorts the signals sent to market actors, causing misallocation of resources. The result is a “bubble” that produces a short-term boost in employment and incomes. However, the bubble will eventually burst, causing a recession. Just as middle- and lower-income Americans suffer most from the Federal Reserve-caused price increases, they are the primary victims of the Federal Reserve-caused recession.

The best thing Congress and the Federal Reserve can do when a bubble bursts is let the recession run its course. Recessions are necessary to remove the distortions caused by the Federal Reserve’s easy money policies. Of course, Congress and the Federal Reserve refuse to take the sensible, though politically difficult, path. Instead, they set the stage for the next bubble via “stimulus” spending and low interest rates.

President Trump claims he knows more about interest rates than does Federal Reserve Chair Jerome Powell. Whether or not President Trump’s experience in real estate development (a business that is very sensitive to changes in interest rates) makes him more of an expert on interest rates than Chairman Powell is beside the point. No politician, bureaucrat, or central banker can know the correct interest rate. The only way to know the correct rate is to allow individuals acting in a free market to set the interest rate.

Despite his misunderstanding of monetary policy, President Trump deserves credit for publicly criticizing the Federal Reserve.

President Trump should follow through on his critiques of the Fed by working with Congress to pass the Audit the Fed bill and legislation allowing people to use alternatives like precious metals and cryptocurrencies.

Restoring a free market in money is key to fulfilling President Trump’s inaugural pledge to bring about a new golden age.

Ahead of earnings of the world’s largest company which however has been going through a painful period of remarkable underperformance vs the Nasdaq, UBS had Apple sentiment at a quite subdued 5/10, saying that a number of folks are “treating the name as a funding short – a view mirrored in its elevated short interest (though it’s not a stand-out short in our Prime book, and the recent -11% pullback may have taken out some of that caution).” That said, UBS writes that there’s “no doubt AAPL finds itself well-positioned to mediate consumer AI adoption – a fact that keeps long-onlies engaged at these multiples… which are not worrisome for a services company like the one AAPL continues to become, notwithstanding the loss of GOOGL’s TAC fee.”

Still, for a stock that owes its last 50% in price upside to the euphoric post CCDC 2024 meltup, when the narrative emerged that AAPL would capitalize on the AI boom, only to find itself in a dismal position with virtually zero uptake, the downside for the company could be substantial if the market finally starts demanding some returns on the what is now becoming a very long AI hype cycle for the world’s most valuable smartphone company with virtually no IRR to show for it.

Even Bloomberg admits that it’s undeniable that Apple is in a bit of a troubled period. While rivals are thriving in artificial intelligence, Apple is a clear laggard with an inferior product that has missed the boat in the age of ChatGPT, Gemini and, now, DeepSeek. While Apple Intelligence was meant to help sell iPhones, it’s likely that the year-over-year bump we may see today in revenue is stemming from other changes — like slightly bigger screens and new camera features — as well as pent-up demand. The AI features have rolled out slowly and are thus far not much more than a marketing gimmick.

In any case, Apple is set to report its holiday quarter earnings results, which naturally is the most important period of the year, given that the company sees most of its sales over the holidays and saves its major new products for release during the quarter. Wall Street, matching Apple’s forecast from last fall, expects Apple’s sales to increase about 4% on an annual basis as the company reports its strongest results ever. As we previewed earlier, analysts estimate Apple will report $124 billion in revenue and its best iPhone quarter since 2022. Here are the average estimates compiled by Bloomberg for the major categories:

• iPhone revenue: $71 billion
• iPad revenue: $7.35 billion
• Mac revenue: $7.94 billion
• Wearables, Home and Accessories revenue: $12 billion
• Services revenue: $26.1 billion

If these numbers hold, that would mean Apple is looking at a clean sweep of growth annually in all of its product categories.

So how did AAPL do? Well, as many warned, the two weakest links – namely iPhone sales and China – is precisely what Apple disappointed. Here are the details:

• Adjusted EPS $2.40 vs. $2.18 y/y, beating estimate $2.35
  • Revenue $124.30 billion, +4% y/y, beating estimates $124.1 billion
    • Products revenue $97.96 billion, +1.6% y/y, missing estimates of $98.02 billion
    • IPhone revenue $69.14 billion, -0.8% y/y, badly missing estimates of $71.04 billion
    • Mac revenue $8.99 billion, +16% y/y, beating estimates of $7.94 billion
    • IPad revenue $8.09 billion, +15% y/y, beating estimates of $7.35 billion
    • Wearables, home and accessories $11.75 billion, -1.7% y/y, missing estimates of $11.95 billion
• Service revenue $26.34 billion, +14% y/y, beating estimates of $26.1 billion

The one – very big – fly in the ointment was the usual suspect: China, where revenues unexpectedly tumbled, sliding a whopping 11%, and badly missing estimates of a $21.57BN print

• Greater China rev. $18.51 billion, -11% y/y, estimate $21.57 billion

Going down the line:

• Total operating expenses $15.44 billion, +6.6% y/y, above estimates of $15.34 billion
• Cost of sales $66.03 billion, +2% y/y, above estimates of $65.98 billion
• Gross margin $58.28 billion, +6.2% y/y, above estimates of $57.98 billion
• Cash and cash equivalents $30.30 billion, -26% y/y, below estimates of $36.45 billion

And so on:

Looking at a breakdown of sales by product category it goes from bad to worse, because not only did revenue from the iPhone came in much lower than expected, at $69.1 billion, below estimates of $71.0 billion but it was actually down 1.4% YoY. So much for any hopes of an AI supercycle.

The rest of the product suite was mixed with Mac and iPad revenue coming in above estimates while wearables missed. Here are the details: .

• IPhone revenue $69.14 billion, down 0.8% y/y, and missing estimate $71.04 billion
• Mac revenue $8.99 billion, +16% y/y, beating estimates of $7.94 billion
• IPad revenue $8.09 billion, +15% y/y, also beating estimates of $7.35 billion
• Wearables, Home and Accessories was another disappointment, declining considerably and missing Wall Street expectations, wit: 11.75 billion, down 1.7% y/y, and missing estimate $11.95 billion

Bottom line, there simply is not a lot of excitement in Apple’s wearables segment right now where we already know the Vision Pro has been a huge flop and is doing nothing to help the top line, while Apple only released one new Apple Watch (versus its usual two or three) during the quarter. The new low-end AirPods and hearing features for the AirPods Pro are quite compelling technology-wise, but clearly not commercially enough to grow the overall category.

Here is the full revenue breakdown by product:

But if soft iPhone sales news was bad, the devastation that is China sales was catastrophic: contrary to expectations for a modest rebound, China sales declined for a sixth consecutive quarter, down a whopping 11.1%, and printing at only $18.5BN in what is supposed to be the strongest quarter, below the $21.6BN estimate. The rest of the world saw growth, modest in the Americas at 3.9%, and stronger in Europe and APAC, both double digits.

Greater China continues to be a very weak spot for Apple and the company hasn’t done much to push new products, pricing and initiatives in that market — or other emerging areas — to offset the issues.

The weakness there, which Apple will try to explain away in its conference call, is because of a combination of nationalism and interest in local products, whose designs are getting better. The local players are also trying new things like foldables while Apple continues to use the same design it rolled out five years ago.

The result: revenues declining now for an unprecedented 5 quarters!

There was a slight silver lining in the company’s Service revenue, which after missing last quarter, come in stronger than expected, rising to a new record $26.34 billion, 14% YoY and above the $26.1 billion expected. The question is what will happen once this last saving grace flatlines or, worse, starts contracting.

In the press release, CEO Tim Cook tried hard to stay positive, calling it the company’s “best quarter ever.”

“Today Apple is reporting our best quarter ever, with revenue of $124.3 billion, up 4 percent from a year ago. We were thrilled to bring customers our best-ever lineup of products and services during the holiday season. Through the power of Apple silicon, we’re unlocking new possibilities for our users with Apple Intelligence, which makes apps and experiences even better and more personal. And we’re excited that Apple Intelligence will be available in even more languages this April.”

And while Cook said the iPhone reached an all-time revenue record in dozens of markets and regions, the reality is that, sales declined and missed Wall Street expectations.

New CFO Kevan Parekh also got his first quote:

“Our record revenue and strong operating margins drove EPS to a new all-time record with double-digit growth and allowed us to return over $30 billion to shareholders. We are also pleased that our installed base of active devices has reached a new all-time high across all products and geographic segments.”

Elsewhere, Apple’s board of directors declared a cash dividend of $0.25 per share of the Company’s common stock. Translation: no $50 billion stock buyback announcement this quarter. .

Yet despite management’s valiant attempt to put lipstick on this particular pig, investors would have none of it and after an early headfake after hours which briefly sent the stock as high as $245, AAPL is now at session lows, dropping to $234 and falling.

 

President Donald Trump on Jan. 30 alleged that the midair crash that killed 67 people near Ronald Reagan National Airport was influenced by the Biden administration’s diversity, equity, and inclusion (DEI) hiring practices at the Federal Aviation Administration (FAA).

“I put safety first. Obama, Biden and the Democrats put policy first…” Trump said.

The accident – the deadliest U.S. plane crash since November 2001 – occurred at around 9 p.m. on Jan. 29.

Trump accused former President Joe Biden of weakening hiring standards for air traffic controllers, alleging that the Transportation Department led by former Secretary Pete Buttigieg prioritized hiring “[controllers] with severe disabilities.”

“They put a big push to put diversity into the FAA program,” Trump alleged.

“The FAA is actively recruiting workers who suffer severe intellectual disabilities, psychiatric problems, and other mental and physical conditions under a diversity and inclusion hiring initiative spelled out on the agency’s website.”

Trump: “I do want to point out that various articles that appeared prior to my entering office. Here’s one — ‘the FAA’s diversity push includes focus on hiring people with severe intellectual and psychiatric disabilities.’ That is amazing.” pic.twitter.com/pRrmzDtWSu

— Aaron Rupar (@atrupar) January 30, 2025

Buttigieg responded to Trump’s allegations in a post on X.

“Despicable. As families grieve, Trump should be leading, not lying,” he said.

“We put safety first, drove down close calls, grew Air Traffic Control, and had zero commercial airline crash fatalities out of millions of flights on our watch.”

The former transportation secretary pointed out that the Trump administration now leads both the military and the FAA.

“One of [Trump’s] first acts was to fire and suspend some of the key personnel who helped keep our skies safe. Time for the president to show actual leadership and explain what he will do to prevent this from happening again,” Buttigieg said.

As Jacob Burg reports for The Epoch Times, during the previous administration, the FAA had a “Diversity and Inclusion” webpage that said:

“Diversity is integral to achieving the FAA’s mission of ensuring safe and efficient travel across our nation and beyond.”

The agency’s “Aviation Safety Workforce Plan” described its policy of “attracting and hiring talented applicants from diverse backgrounds,” with a commitment to diversity and inclusion to create a “workforce with the leadership, technical, and functional skills necessary to ensure the United States has the world’s safest and most productive aviation sector.”

In February 2024, a group of 11 Republican attorneys general wrote a letter to the FAA accusing the Obama administration of seeking out applicants with “severe intellectual” and “psychiatric” disabilities.

However, the FAA’s “Diversity and Inclusion” webpage was established in February 2013 and stayed active throughout the entire first Trump administration. It was not spearheaded or developed by Biden or Buttigieg.

Trump: No Confirmation Controllers Were to Blame

In April 2024, the FAA declined to comment on the “diversity hiring” allegations but said its top priority is to hire “highly qualified air traffic controllers” in a statement to The Epoch Times.

“Every FAA-certified air traffic controller has gone through months of screening and training at the FAA Academy, and that is before another 18-24 months of training to learn specific regions and airspace,” an agency spokesperson said.

The FAA did not respond to a request for comment on Trump’s Jan. 30 allegations.

Trump later said that it might not have been the fault of air traffic controllers or the FAA’s hiring practices, “We don’t know that necessarily.”

Defense Secretary Pete Hegseth said in a morning briefing that the helicopter pilots were wearing night vision goggles at some point during their flight.

Trump said night vision could have affected the pilots’ view of the incoming American Airlines jet.

“That would be, maybe, a reason why you wouldn’t actually see as well as on a clear night,” he told reporters at the White House press briefing.

Juan Browne, a pilot for one of the major U.S. airlines, told The Epoch Times that night vision goggles could have completely obscured the airplane’s landing lights if the helicopter pilots were wearing them at the time of the collision.

He said it was potentially a “huge contributing factor.”

Not only would night vision pose issues with Washington’s city lights below, but also with the airplane’s landing lights, which would have been blinding for the helicopter pilots wearing the night vision goggles, Browne added.

Trump said the helicopter should not have been at the same altitude as the commercial jet. The crash occurred at around 400 feet above the ground.

“The people and the helicopter should have seen where they were going. I can’t imagine people with 20–20 vision not seeing what’s happening up there,” he said.

“They shouldn’t have been at the same height.”

Military helicopters have an “above ground level” (AGL), which is the maximum altitude the aircraft can operate at in specific airspace.

The Transportation Department and FAA did not respond to requests for comment on whether the military helicopter was operating within an authorized altitude. The Pentagon referred that question back to the FAA.

The National Transportation Safety Board has yet to release any official causes for the accident.

Trump said all 64 people on board the American Airlines flight died in the collision. The military officers on the helicopter, who have not yet been named publicly, also perished.

The president will be releasing a list of the victims’ names soon, “in coordination with American Airlines” and the military.

Authored by Victor Davis Hanson via American Greatness,

Mexican nationals, likely cartel members, recently crossed the border and shot and wounded an American hiker. Did they assume that Joe Biden was still president, and so it was still a veritable open season on Americans without consequences?

Mexico also recently balked at allowing a U.S. transport plane to land, returning its own nationals apprehended as illegal aliens.

Was its attitude that Alejandro Mayorkas was still Homeland Security Secretary and thus working with Mexico to ensure that millions of illegal aliens could stay in the U.S. indefinitely?

After four years of Biden’s appeasement, Mexico seems to assume that it has a sovereign right to encourage the flight of millions of its own impoverished citizens illegally into the U.S. and further assumes that it can fast-track millions of Latin Americans through its territory and across our border.

Mexico either cannot or will not address the billions of dollars of raw fentanyl products shipped in—mostly from China—and then processed for export to the U.S. by its cartels across a nonexistent border.

Mexico seems to have little concern that some 75,000 Americans on average die from mostly Mexican-imported fentanyl each year—more deaths in just the last decade than all the Americans killed in action during World War I, World War II, the Korean War, and the Vietnam War combined. Who then is our friend, and who is our enemy?

This appalling death toll is in part due to the deliberate efforts of the cartels to mask fentanyl as less deadly narcotics or camouflage the poison by lacing it into counterfeit prescription drugs.

Mexico encourages its expatriate illegal aliens to send back some $63 billion per year in remittances. That huge sum constitutes one of Mexico’s largest sources of foreign exchange, surpassing even its tourist and oil revenues.

These billions are often subsidized by U.S. taxpayers. America’s local, state, and federal governments provide billions of dollars in food, housing, and health care entitlements that allow Mexico’s citizens, illegally residing inside the U.S., to free up the cash to be sent home.

According to U.S. census data, almost every year, the trade deficit with Mexico has increased from about $50 billion twenty years ago to $160 billion today.

That astronomical figure neither includes the $63 billion American outflow in remittances nor the multi-billion income from the cartels’ illicit drug sales in the U.S.

Although one would never know it from the rhetoric of Mexican politicians, the entire Mexican economy, both legal and illicit, hinges on America accepting a worsening asymmetrical relationship.

Yet the U.S. has a lot of leverage with Mexico to ensure that it no longer assumes a permanent huge trade surplus with the U.S., turns a blind eye to massive fentanyl shipments that kill thousands of Americans, encourages its own citizens to enter their neighbor’s country illegally, and counts on massive cash remittances from the U.S.

Loud rhetoric, threats, and ultimatums do not work.

Usually, they earn Mexico’s furious retorts about Yanqui imperialism and ancient bitterness about a lost Aztlán.

Former Mexican President Andrés Manuel López Obrador used to brag about the millions of illegal aliens that were residing in the U.S. He further advised expatriate Mexican-Americans not to vote for Republicans, whom he felt one day might close the border.

Obrador rarely reflected on why millions of his own citizens were fleeing his own country—only that it was a “beautiful” thing that they did.

Did Obrador hate Trump more for challenging him by trying to stop the illegal influx or Biden for embarrassing him by welcoming millions of them into the U.S.?

So, what should be the U.S. response to Mexico’s passive-aggressive policies?

Smile, praise Mexico as our greatest trading partner, and then quietly inform them that illegal aliens will be bussed to the border.

Once there, they could be given a generous care package, escorted through a border door, and left on the Mexican side from which they entered and thus could then be escorted in caravans home in the same manner that they arrived.

To maintain cordial relations and politely gain Mexico’s attention, we need a radical change in tone and action beyond just ending catch-and-release, finishing the wall, and making refugee status requests possible only in the home country of the applicant.

Rather than worry about who is sending remittances, why not politely place a 20 percent tax (about $12 billion) on all cash sent from the U.S. to Mexico?

We could also hail our mutual friendship and then reluctantly slap tariffs on imported assembled goods until the two-way trade is roughly balanced.

Who knows, once the U.S. is respected again and not considered an easy mark, Mexico could once again become a fine and reciprocal friend to the United States.

Via SchiffGold.com,

While home prices increase in price exponentially, many worry as to whether they will one day own a home. 

For years the American dream consisted of home ownership and financial independence. The increasing price of homes makes it seem as though only a select group of elites can afford them.

The graph below shows median price of home sales exponentially outpacing real GDP per capita, not even taking into account that individual purchasing power trails far behind real GDP. 

The urgency of desire for a homeownership creates perverse, long-term incentives for both home buyers and builders.

Rather than building homes that are intended to last, construction companies, lured by high present demand, will build homes from cheap materials and use  techniques that prioritize speed.

The drastic decrease in the size of a 2×4 since the 1920s paints a vivid picture of the decline in home quality. 

The material quality as well as the design quality of homes has shot through the floor because homebuyers are not able to see the full risks of their investment. Because homes include the limited resource of land as well as a traditional durable structure, they have historically been a solid investment. Houses that were built over 100 years ago are often still hot commodities and they seem to constantly appreciate. Homes used to be built with the idea that they would last a long period of time and be repaired as they needed it. While each house is different, the public still mentally places them into one asset category when they are deciding whether to buy a home or not. Specific companies earn trust through years of repeated performance, and it would be easy to think that homes as an asset function the same way. Fundamental differences in durability will stratify houses into different categories of investment as buyers see how newly built homes disintegrate. 

Just as companies utilize different profit maximizing strategies, so also do home builders try unique approaches. Some builders plan for long-term success by creating homes that will bolster their reputation far into the future, but many home builders in recent years have planned for their investment to peak shortly after they build it, counting on housing shortage and buyer indifference to keep home prices in general high. While this is a good strategy for maximizing profit in the current market, people will slowly start to become more critical of new builds as they see their young homes disintegrate.

Two limiting factors for homebuilders of the past were more scrutinizing buyers and a smaller selection of materials. With lower demand for homes, sellers did not have the same negotiating power that they have been given since the housing shortage after World War II. Homebuyers  were also more likely to have had experience in construction, or at least some knowledge of craftsmanship. Their more trained minds would let them see signs of fast and cheap construction more easily than the modern eye. Homes were often bought with the idea of keeping them in the family for an extended period of time, so they were more carefully examined for quality. The second limitation to the wiles of builders in the past was that they did not have access to the same cheap materials that are currently available. While homebuilding materials are by no means cheap, they are far cheaper than the logs and stone used to fashion homes of the past. Cheaper transportation costs along with cheaper methods of production have allowed the building materials of all types to decrease in price. While some would have thought that this could have made high-quality houses more accessible, it seems to have only stirred up exponential cravings for bargains among homebuilders. They try to use far less framing and ever smaller 2x4s to make up for a lack of more stable and durable materials. 

Additionally, modern conveniences have shifted many costs away from building companies and towards residents. Homes in hot places that would have been built with thick, cooling walls are now fully reliant on air conditioning. Pre-fabricated parts also reduce producer cost and ultimately shift costs to long-term homeowners. pre-built units are much more difficult to repair and they are much more likely to fall apart if a single weak link is broken. Houses that are simple can be repaired simply, and that often pays off the higher cost of more substantial natural materials. While quickly built houses solve the housing problem for now, they will just exacerbate the problem 30 years from now when builders who could’ve been building new houses must waste time rebuilding where their old ones were demolished. 

While their work may be questionable, builders cannot bear the blame for responding to the self-centered nature of their target market. The American consumer does not think about their children as they used to. A house becoming worthless in 50 years doesn’t weigh heavily in their mind of one who cares only for deals today. Building a house that can last is objectively more expensive, but it used to be expected, and it pays off in the long run. 

Authored by Charles Hugh Smith via OfTwoMinds blog,

In summary: bloated headcounts, no new sources of revenue from AI, and limitless content with no scarcity value. Welcome to the DSD: DeepSeek Disruption.

I’ve been fruitfully engaged in a lively dialog with readers on my Substack regarding my post yesterday Is DeepSeek a Sputnik Moment? (titled Is (Chinese) Software Suddenly Eating The World? on Zero Hedge) and my conversation with Adam Taggart on his Thoughtful Money channel: SPECIAL REPORT: Did China’s DeepSeek Just Pop The AI Stock Bubble? (56 minutes).

I can’t summarize all the topics discussed on the thread, but these two comments and my responses illustrate the tremendous range of dynamics now in play in the DSD: DeepSeek Disruption. (One favor to ask: since a bunch of folks borrowed my “Sputnik Moment” phrase without crediting me yesterday, if you use DSD – DeepSeek Disruption, please credit me. Thank you.)

Although the reader comments are only visible to paid subscribers, I post my own comments as Notes on Substack, which are visible to everyone.

Comment posted by Brad M.:

“I’ve always had a hunch that there are simpler methods to achieve high performing artificial intelligence. Of course, we should note that the chips China did this on are vastly superior than anything prior to the year 2000 lets say. And China does have decades of manufacturing experience and a literal army worth of engineers to throw at the problem. So we shouldn’t say that what China did was easy. It was just easier than throwing a mountain of money at the problem. You can’t fake scarcity that easily and the Mag 7 as you call them will continue to struggle while the smaller teams given freedom to try anything with their limited resources will continue to find success.

Or that mountain of money might end up working. Who knows for sure until it happens?”

My response:

Brad, those are very interesting points for exploration.

I’m reminded of various stories in TechLand about small teams developing the breakthroughs while thousands of employees in the corporation generated little value beyond maintaining the status quo. So each Big Tech has (for example) 175K employees, all smart, all dedicated, but a much smaller team blew the 175K teams of the Mag 7 away. Steve Jobs famously kept the Macintosh team isolated from Corporate Apple and exerted obsessive control over the development team. He knew better than to let Corporate do the Corporate Thing to the team.

Since finance and tech dominate the economy now, the big question is: how do I make a killing by investing in DeepSeek? This is a koan because there is no “owner” of the software techniques DeepSeek has shared with the world.

To Brad’s question, so what do the tech monopolies / behemoths do with their 175K “teams” now? For sure they can try to replicate DeepSeek, but does that require 175K employees? And since everyone else has access to the same concepts, techniques and approaches, then where is the scarcity value that generates revenues? There is none.

This all leads to a sobering conclusion: there is little justification for these huge headcounts going forward.

Comment posted by Simple John:

“I’d appreciate correction if I’m wrong. I believe I’ve read that the DeepSeek models are strongest on math and physics. In fact, aren’t LLM and image generating AI playing in a universe that is immensely less specific than math and physics and thus really just playing with words and images without any real insights?”

My response:

This is very insightful, as the examples of DeepSeek (or competing tools) solving math problems are “problems” where the “correct answer” can be determined. The “answer” to the “question” *write an essay on Charles Darwin for my class assignment” has no equivalent “correct answer.” The AI Bot can hallucinate a response that might pass muster if the hallucination is not too wild.

I’ve played around with Big Tech free AI tools for generating podcasts, essay summaries, etc., and have watched developments in the video-creation space. These are examples of brute-force processing working with templates assembled from “machine learning,” i.e. sampling human-generated videos, stories, essays, etc. As John noted, this kind of extrapolation of existing content is a different kind of “answer” to a different kind of “problem.”

So there are video-generation tools where you enter text instructions such as “a young man is walking through a 4th of July party holding a beer,” and the program generates a video clip of this scene based on its vast database of 4th of July clips, people holding a beer, etc. This is fascinating and fun, because there is no “correct answer.”

But what’s the value proposition here when everyone (or anyone with a keen interest) can access the same tools and generate limitless AI content? Who’s going to watch all this in an Attention Economy that’s already saturated with content?

Based on my limited understanding of the many software techniques DeepSeek employs, it seems likely that these structures may well be superior ways to solve “problems” that have testable “correct” answers.

Without going too deeply into specifics, a key concept in high-end machine learning (Google’s DeepMind, etc.) is estimating the accuracy of the answer, i.e. the probabilities of various potential solutions being correct. The “wait a minute, maybe this isn’t the best path, let’s start over” function of DeepSeek is based on the same idea, which is extremely valuable when the “correctness” of the answer actually matters.

In summary: bloated headcounts, no new sources of revenue from AI, and limitless content with no scarcity value. Welcome to the DSD: DeepSeek Disruption.

*  *  *

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One of the wildest real estate charts we’ve seen in some time—aside from existing home sales plummeting to their lowest level since 1995 and new home supply reaching a 17-year high—was shared by Nick Gerli, CEO and Founder of real estate analytics firm Reventure Consulting.

“Probably my favorite housing market graph right now. Orange line is inventory levels in Florida & Texas, combined. Blue line is inventory level across entire Northeast US,” Gerli wrote on X. 

He continued: “In Texas and Florida, there are 261,000 active listings on the market, 207% higher than the level in the Northeast, which covers nine states. Prior to the pandemic, these regions were the same. This highlights the very bifurcated nature of this housing market. The downturn is happening in TX/FL, but we are still suffering a historic inventory shortage in the Northeast.”

Focusing on the supply dynamics in Florida and Texas, Gerli outlined seven key points about boomtown areas in Sun Belt states that are rapidly losing momentum due to housing affordability challenges driven by elevated mortgage rates and high home prices:

1. I’m shocked at how few people actually know this in real estate circles. In my mind, it’s the biggest story of the housing market. The boomtown areas during the pandemic are falling fast. While the cold weather climates that everyone left during pandemic are still appreciating.

2. I have some theories on why this trend is underreported. I suspect it’s because many real estate outlets don’t want to admit the TX/FL dominos have fallen. As those are the states with the most realtors, investors, wholesalers, and people who buy housing market-related products and services.

3. A huge portion of the overall revenue earned in the real estate industry is from Texas, Florida and other southern states, so admitting those markets are in a downturn is a tough thing to do. Meanwhile – the Northeast has comparatively little investor and realtor activity on a relative basis. So it’s not much of a sell to talk about the outperformance.

4. However, what many in the real estate industry fail to realize, is that a downturn in the Sun Belt will actually be a good thing for the housing market in the long-term. Because more inventory and cheaper prices will ultimately be what draws buyers back into the market.

5. The level of home sale transactions today is comically low, and almost hard to fathom. 2024 had 4.06M existing sales. The worst performance of any where since 1995. Adjusted for the number of houses in America, this was the worst year for demand in 42 years.

6. The reason demand is so low is because home PRICES are too high. Not that mortgage rates are too high. 

7. And so that’s it. Prices need to drop to bring buyers back in. Very simple. However, for prices to drop, inventory levels need to go up enough to force sellers into meaningful price reductions. In South and Texas/Florida more specifically, that’s happening. In Northeast, it’s not. Too few homes for sale means high competition and even bidding wars, still.

Gerli told X users to visit the Reventure App for more details on the current state of the US housing industry. 

8) At Reventure App, we make inventroy data for every ZIP code in America publicly available so users can understand the trends in their market for free.

Head there right now, type in your ZIP code, and see how the inventory trends look. This will give you a good first…

— Nick Gerli (@nickgerli1) January 27, 2025

Meanwhile…

And this. 

The key takeaway is that home prices in these boomtown areas must return to affordable levels to attract buyers. Florida and Texas are the two markets to watch for the most volatility, driven by extremely elevated inventory levels.

Authored by Mike Shedlock via MishTalk.com,

Trump pulls the US out of the Paris Accord. And the long-suffering Green New Deal is on the deathbed in Europe.

Joining Forces in Europe

Euractiv reports France’s Far-Right Asks EPP to End the Green Deal Together.

French far-right leader Jordan Bardella senses an opening for a right-wing coalition to tear down the European Green Deal.

Bardella, chairman of the European Parliament’s far-right Patriots for Europe grouping and president of Marine Le Pen’s National Rally, said Monday morning that he would ask Manfred Weber, leader of the center-right European People’s Party, to “join forces” and halt the European Union’s efforts to curb climate change.

Bardella’s move, made during his New Year’s address to the French press, comes after EPP leaders attacked the bloc’s green legislation last week.

Describing the Green Deal, a package of measures aiming to make the EU climate-neutral by 2050, as a constraint on economic growth, he also cited the return of United States President Donald Trump as a reason for putting environmental legislation on hold.

Bardella said he would write to Weber as well as the leaders of the far-right Europe of Sovereign Nations and right-wing European Conservatives and Reformists groupings to “propose we join forces to propose the suspension of the Green Deal in response to the extremely attractive measures for the economy and for businesses … that Donald Trump is going to introduce in the United States.”

The European far right has long opposed the Green Deal. But Bardella’s comments came after several leading EPP figures — as well as France’s centrist government — demanded revisions or outright repeals of core Green Deal legislation last week.

He specifically cited Polish President Donald Tusk’s recent criticism of EU climate measures, saying he had “listened with interest” to the EPP politician’s remarks.

Even the Center Seeks Change

Also note France urges Brussels to indefinitely delay EU green rules for business

France is pushing to delay EU rules requiring companies to report on their environmental footprint and exposure to climate risk and to check that their suppliers comply with environmental and forced labor rules.

In a document obtained by POLITICO and dated Jan. 20, France pushed to delay indefinitely a new European directive on corporate due diligence (CSDDD) and to delay by two years the corporate sustainability reporting directive (CSRD).

“The French authorities are in favor of delaying sine die the entry into force of the [CSDDD] directive,” reads the document.

“The delay must give the necessary time to improve the directive,” the document added, specifically regarding its scope, which France argues should not apply to companies smaller than 5,000 employees and whose revenue does not exceed €1.5 billion.

“We need to focus on legislation that complicates the daily lives of your companies and slows down their growth,” French economy minister Eric Lombard said on Thursday in his annual new year greetings, calling for a simplification of the CSRD and for postponing the due diligence directive until the day “it will be simplified.”

The European Commission is expected to unveil this review, known as the omnibus, on Feb. 26. 

Earlier this month, French President Emmanuel Macron also made that message clear. “We need to make a massive regulatory break, but we also need to review regulations, including recent ones, which are hampering our ability to innovate,” Macron said. 

Germany also called for a two-year delay to the implementation of the reporting rules, as well as “a significant reduction in the content of CSRD,” in a letter addressed to von der Leyen dated Dec. 17.

The End of Green Nonsense

The current German coalition includes the Green party. I highly doubt Greens will be any part of the next government.

European Commission president Ursula von der Leyen will try to put a brave face on this, but effectively the Green Deal heads to the ash heap of history where it belongs.

Europe will have its hands full with Trump’s tariffs, their own immigration issues, the deindustrialization of Germany, and Trump’s demand for 5 percent of GDP on defense to have any time for Green nonsense.

The German request for a 2-year delay will morph into an 8-year delay with France, Italy, Poland and Hungary, at a minimum, in on the suspension.

Trump Pulls the US Out of the Paris Accord

Meanwhile, back in the US, Here’s what to know about Trump’s executive actions on climate and environment.

Pulling the U.S. out of the Paris Agreement

Trump signed an executive order Monday directing the United States to again withdraw from the landmark Paris climate agreement aimed at global cooperation on climate change.

The agreement requires participating countries to come up with nationally determined contributions to the effort to limit greenhouse gas emissions that are heating the planet. Trump’s move means the federal government won’t be trying to meet emissions reductions goals, nor any financial commitments to the United Nations Framework Convention on Climate Change.

Declaring a “national energy emergency,” doubling down on oil and gas

Trump declared an energy emergency via executive order amid a promise to “drill, baby, drill.”

The order urges oil and gas expansion including through federal use of eminent domain and the Defense Production Act, which allow the government to use private land and resources to produce goods deemed to be a national necessity.

Revoke Biden’s goals on electric vehicles

Trump promised to eliminate what he incorrectly calls Biden’s “electric vehicle mandate.”

What that means in practice is that the order will revoke a non-binding goal set by Biden to have EVs make up half of new cars sold by 2030. He will also likely seek repeal of a $7,500 tax credit for new EV purchases approved by Congress as part of Biden’s landmark 2022 climate law, the Inflation Reduction Act.

Eliminate a push for environmental justice

When the government reviews new facilities that emit pollution, officials are no longer likely to consider a concept known as environmental justice, or how that new pollution will add to the emissions that have tended to fall more heavily on poor and minority communities.

Those are sweeping moves that Rena Payan, chief program officer at nonprofit Justice Outside, called “rolling back decades of progress in addressing environmental discrimination.”

Three Out of Four Ain’t Bad

The idea we have a national energy emergency is nonsense, but I agree with Trump on the rest.

The Paris Accord was never ratified by the US Senate so Trump is not breaking a legitimate deal.

United Parcel Service (UPS) shares tumbled 15% at the cash open, marking the stock’s largest intraday decline in decades and putting it on track for its lowest level since July 2020. The selloff follows a dismal 2025 revenue forecast and news that the company plans to slash 50% of its shipping volume with Amazon by the second half of 2026. 

What has fueled the decline in UPS shares is its agreement, in principle, with its largest customer, Amazon, to reduce shipping volume by more than 50% in the second half of 2026.

“We are making business and operational changes that, along with the foundational changes we’ve already made, will put us further down the path to becoming a more profitable, agile and differentiated UPS that is growing in the best parts of the market,” UPS Chief Executive Carol Tomé.

UPS said reconfiguring its network will save about $1 billion. 

Evercore ISI analyst Jonathan Chappell told clients while the fourth-quarter results had some positives, the bears were more focused on the deal with Amazon. 

“Even though the SurePost insourcing agreement was well known, though not clear on impact, the agreement with [Amazon] to reduce volumes by more than 50% in 18 months is a surprise and acceleration of the glide down of this business that has long represented a tail risk,” Chappell said. 

Here’s a snapshot of fourth-quarter earnings (courtesy of Bloomberg): 

Adjusted EPS $2.75 vs. $2.47 y/y, estimate $2.53

• EPS $2.01 vs. $1.87 y/y

Revenue $25.3 billion, +1.5% y/y, estimate $25.39 billion

US package revenue $17.31 billion, +2.3% y/y, estimate $17.24 billion

International package revenue $4.92 billion, +6.9% y/y, estimate $4.83 billion

Supply Chain Solutions revenue $3.07 billion, -9.7% y/y, estimate $3.35 billion

• Average daily package volume 26.11 million, +0.9% y/y, estimate 26.47 million

• Total package volume 1.62 billion, -0.7% y/y, estimate 1.65 billion

• Average revenue per package $13.44, +2.5% y/y, estimate $13.33

• Adjusted operating margin 12.3% vs. 11.2% y/y, estimate 11.5%

• Total operating expenses $22.38 billion, -0.3% y/y, estimate $22.4 billion

2025 Forecast: 

• Sees revenue about $89 billion, estimate $94.9 billion (Bloomberg Consensus)

• Sees adjusted free cash flow about $5.7 billion

• Sees capital expenditure about $3.5 billion, estimate $5.08 billion

Other analysts commentary (courtesy of Bloomberg):

JPMorgan analyst Brian Ossenbeck (neutral)

• Expects the stock to “materially underperform as the market digests the strategic and financial implications of the unexpected and accelerated glide-down of Amazon by 50%+ combined with the in-sourcing of the SurePost business”

• Adds that the execution risk and Amazon-related headlines will make UPS difficult to own even if the latest news is seen as a clearing event

• Expects FDX to be down in sympathy, but believes the implications are generally positive, as the largest competitor focuses more on margins and yields

Jefferies analyst Stephanie Moore (buy)

• Would look for additional information on the call regarding the strategic decisions and what specific actions will be taken to achieve the $1 billion saving target

• Says the magnitude of the premarket stock reaction is overdone

• “That said, the announcements today add to what has been a frustrating several years for investors,” Moore says

BMO analyst Fadi Chamoun (outperform)

• says lower Amazon volumes will drive significant re-alignment of US domestic network

• Says that while a planned reduction in low-margin business- to-consumer volumes and reduced reliance on Amazon are not negative by themselves, more details are required to assess the path for the US Domestic segment and the agreement surrounding the remaining 50% Amazon volumes

Goldman analyst  (buy)

• Net, net however we think most focus will be on the 2025 Guide which calls for total revenue of $89bb or down 2% and in the context of three strategic initiatives: 1) agreeing with its largest customer (Amazon) to lower its volume at an accelerated pace by 2H26 (>50% reduction), 2) insourcing 100% of its UPS SurePost product (instead of USPS delivering a portion), and 3) a $1.0bn multi-year cost savings plan via reconfiguring the US network.

The question is whether the selloff is overdone… 

Authored by Andrea Widburg via AmericanThinker.com,

One of the biggest battles in the last four years has been over parents’ rights. Basically, Democrats don’t think they have any. That’s changing with the Trump Department of Education, which immediately put the kybosh on fallacious claims that removing pornographic LGBTQ+ books from schools is “book banning.”

Leftists agree with Lenin, whose precise words are debated, but who said something along the lines of “Give me a child for six years, and the seed I have sown will never be uprooted.” One-time MSNBC personality Melissa Harris-Perry was less poetic but made the same point:

We have never invested as much in public education as we should have because we’ve always had kind of a private notion of children. Your kid is yours and totally your responsibility. We haven’t had a very collective notion of these are our children. So part of it is we have to break through our kind of private idea that kids belong to their parents, or kids belong to their families, and recognize that kids belong to whole communities.

Or, as gamers might have said, “All your children are belong to us.”

This leftist philosophy has meant that, for the past four years, the government has gone to war against parents. The FBI classified them as terrorists, school boards had them arrested, and the Department of Education backed up any kind of leftist madness.

While parents of all races disliked Critical Race Theory instruction in schools, the real battle raged over sexual material in schools, especially in school libraries.

Gone were the days of “when a daddy plants a sperm in a mommy’s egg, that makes a baby.”

Now, schools across America are teaching children that the biological reality of their bodies is a lie.

However, if the Trump administration has anything to do with it, the leftist heyday is finally over. As he’s shown with one Executive Order after another, Trump is totally dismantling the federal government’s support for “Diversity, Equity, and Inclusion,” the practical goals of which were racism and sexual perversion.

In a sign of just how quickly the Trump administration has taken control of every branch of the federal government (as is its right under the Constitution), one of the first things it did was have its Department of Education (“DOE”) dismiss spurious “book banning” complaints that leftists filed with the DOE when schools started withdrawing pornographic books. (And yes, they are graphically pornographic and would never have been allowed if they were about heterosexual sex.)

On Friday, the DOE issued a press release that goes to war in the caption: “U.S. Department of Education Ends Biden’s Book Ban Hoax.” 

The U.S. Department of Education’s Office for Civil Rights (OCR) today announced that it has dismissed 11 complaints related to so-called “book bans.”

The complaints alleged that local school districts’ removal of age-inappropriate, sexually explicit, or obscene materials from their school libraries created a hostile environment for students – a meritless claim premised upon a dubious legal theory.

Effective Jan. 24, 2025, OCR has rescinded all department guidance issued under the theory that a school district’s removal of age-inappropriate books from its libraries may violate civil rights laws. OCR is also dismissing six additional pending allegations of book banning and will no longer employ a “book ban coordinator” to investigate local school districts and parents working to protect students from obscene content.

The entire press release is worth reading because it shows how aggressively the Biden administration sought to force the LFBTQ+ agenda onto America’s youth:

In June 2023, then-President Biden announced that he would appoint a “book ban coordinator” within OCR. The coordinator’s responsibilities included developing guidance and training to deter schools from limiting student access to sexually graphic or racially divisive books by claiming that these efforts may contribute to a hostile environment that may violate students’ civil rights.

Not only is the DOE’s new stance wonderful (and Americans will support it), but it also shows the new administration’s “shock and awe” efficiency. Axios, probably to a backdrop of weeping employees, acknowledged as much:

No modern president has done more — across more areas of American policy, culture and life — than Trump in the past six days. This new operating style and system enabled a strategy of flooding the nation with so many huge moves that it’s hard for critics to attack specific ones.

In other words, leftists are now playing a losing game of whack-a-mole, and it’s a beautiful thing.