Artificial Non Intelligence - Egg on Trump's Face - Time to Sober Up - DeepSeek Happened - Stargate an Embarrassment - Tariff Wars Again? Huh?

WEEKLY -- On Sunday -- All previous Editorials are available on the Substack Archive Further long term archives are available at LinkedIn and Wordpress https://boomfinanceandeconomics.wordpress.com/

ARTIFICIAL NON INTELLIGENCE – EGG ON TRUMP’S FACE – TIME TO SOBER UP

Last week, on Sunday morning, BOOM published “Artificial Intelligence is Not Intelligent - Can Machines "Think"? - Can They Care?”. Since then the whole world of Artificial Intelligence has been turned upside down. BOOM’s article was prescient. Some excerpts are worth reading again.

Quote: “BOOM is sceptical about the claims being made about Artificial Intelligence (AI). It embodies two great threats to our civil societies – Technocracy and Transhumanism.”

AI’s “tendency to always preference certainty and to present certainty is a major obstacle to ever really understanding the complex, uncertain world that most humans are very aware of and begin to discern at a very early age.”

“machines can organise certainty in a very impressive manner. However, humans can also organise uncertainty with impressive precision. And some humans can do that using parallel processing. Some (admittedly rare) individuals have trained themselves to do that rapidly. They are high level critical thinkers.”

“BOOM is sceptical about Artificial Intelligence (AI) and about the claims being made for it.”

In that analysis, BOOM did not discuss some other important aspects of Intelligence — the application of Ethics, Imagination and Invention.

Machines by their very construction lack ethics (unless they have been programmed in by the machine’s creator). AI machines can have some predictive power. However, that must always be dependent upon past data which may be biased or incomplete. An AI using a Large Language Model will never invent a new word or a previously unknown concept.

By comparison, humans bring these three elements to solving problems. The best decisions are made within a framework of ethics. And problem solving often requires imagination and invention when past knowledge (data) cannot provide the best solution, especially if it may have an internal bias or is possibly incomplete.

In summary, seven days ago, BOOM suspected that Artificial Intelligence was being hyped for commercial reasons. Its limitations in the real world of uncertainty appeared obvious. So why did others not see the inherent weaknesses in the overblown narratives about AI?

BOOM did not know then what was to happen next. But happen it did. The real world of uncertainty came to town and caused a huge disruption which was not anticipated by the machines of Artificial so-called Intelligence or by the humans (in the United States) in charge of their construction.

NVDIA SHARES COLLAPSE

On the Monday following BOOM’s Sunday editorial, Nvidia shares CRASHED to a Low of $ 116.70. In the week previous, they hit a High of $ 148.97.

That is a fall of almost 22 % IN ONE DAY from the previous week’s High.

This was a staggering fall from grace for the leader of the Artificial so-called Intelligence bull market in the United States.

Gravity took hold very quickly. From a technical analysis standpoint, the future for Nvidia now looks full of uncertainty with all the price support levels broken since October last year. It seems obvious that the future price trend may well be down from here.

None of this was anticipated by the enthusiastic promoters of AI or by their “amazing” machines. They should be reading BOOM.

CHART OF NVDA – WEEKLY OVER TWO YEARS

WHAT THE HELL HAPPENED? — DEEP SEEK HAPPENED — UNEXPECTEDLY?

The Chinese Open Source release of its DeepSeek AI software blew apart the cosy, biased narratives coming from the USA. The Chinese Whiz Kids of DeepSeek demonstrated that they were already a very long way ahead in the AI development game. And that difference was all about using inventive software rather than hardware to boost the abilities of AI machines.

By comparison, Donald Trump’s proposed “Stargate” project, announced just the previous week, was all about investing US $ 500 Billion into a massive “BIG” – “IT’S GOTTA BE BIG ” — project. It was dependent upon building a vast hardware infrastructure closely allied to new power plants to feed the monsters with electricity.

Instead, DeepSeek uses advances in software that can be used on smartphones. The software negates the need for expensive processors. It does not require vast supplies of electricity and it is extremely cheap compared to what the American AI companies were hoping to charge for it because anyone can download DeepSeek onto their phone or laptop for free. Thus, it became instantly accessible to millions, if not billions of people. It is essentially a gift to the world, not an attempt to corner a market and extract exorbitant fees from customers.

STARGATE — AN EMBARRASSMENT

In retrospect, Trump’s “Stargate” announcement was poorly considered at best and a major embarrassment at worst. It is important to note that Musk was missing from the scene.

But it was badly marred by the speech made by Larry Ellison on the Presidential Podium in which he (effectively) explained that humans are nothing more than machines. In a display of Magical Thinking, he said (words to the effect) -- “with Artificial Intelligence, we can take a little malfunctioning piece out of the DNA software code and, using MRNA technology, switch it over for a new part within 48 hours and, hey presto, we can rapidly detect and cure all cancers”.

To anyone who knows anything about the many thousands of cancerous diseases and the massive complexity of human biology, the statement was ridiculous in the extreme. But Trump just nodded and smiled and implied that “America the Great will be the Leader in this with $ 500 Billion invested”.

BOOM suspects that $ 500 Billion was selected as the proposed funding because it is a “BIG” number that (surely) guarantees success (?) and will “make America GREAT again”. Is this another Moonshot? Can Hollywood play a role?

THE FUNDING OF “STARGATE”

As to where the money would come from, well that seemed like a pesky detail. Presumably, it would come from private investors with stars in their eyes because Musk and Trump are committed to cutting US Government expenditures by $ 2 Trillion ASAP.

$ 500 Billion ….. $ 2 Trillion ……. pretty soon you are talking real money.

BOOM has stated a strong preference for Trump as President over the cackling Democrat candidate and the previous demented President. BOOM wishes Trump and America well in the years to come. However, let’s call this out for what it is.

This so-called “Stargate” mix of Artificial Intelligence, MRNA Technology and massively increased production of electricity is jingoism, mixed with hubris, mixed with ignorance, mixed with unrealistic optimism, mixed with poor quality information, mixed with visions of omnipotence. In BOOM’s opinion, it was unwise in the extreme for a US President to associate himself with such a mish-mash of Technocratic Transhumanism and Ego.

Trump needs better information, better advice, better advisers and a more sober approach to the problems of the world. BOOM can only hope that this will be the course from hereon and is happy to offer assistance if requested.

SENATE CONFIRMATIONS TO COME

To date, 8 of Trump’s proposed Cabinet members have been confirmed by the Senate, 16 are still uncertain. Next week, we should learn the ugly truth.

BOOM is watching the Confirmation Hearings very closely. If the Trump appointments are not confirmed in full, then that will be very damaging to the Presidency especially in regard to Robert Kennedy and Tulsi Gabbard.

Sadly, if that happens, Trump will probably throw his hands in the air and say “I did my best but the bastards in the Senate refused to cooperate”.

But that won’t fool anyone. That is called Plausible Deniability.

DEEP SEEK BANNED IN ITALY

The DeepSeek website makes the following boast about its AI software. “DeepSeek-V3 achieves a significant breakthrough in inference speed over previous models. It tops the leader board among open-source models and rivals the most advanced closed-source models globally.”

Sounds great? So what’s the catch?

Italy has become the first country to ban the Chinese AI model, DeepSeek, after its data protection authority blocked the app on Thursday, citing concerns over its handling of personal data. The Italian regulatory authority, Garante, has asked DeepSeek for detailed information about the application’s data usage, including what personal data is collected, its sources, the intended purposes, legal grounds, and whether the data is stored in China. They have given DeepSeek just 20 days to reply -- “the data of millions of Italians is at risk.”

The Irish Data Protection Commission has also sent a request to DeepSeek for details on how the company processes the data of Irish citizens. Meanwhile, South Korea’s privacy watchdog also plans to send a similar request, according to Reuters. And The US Navy has already advised its personnel to avoid using DeepSeek software, both for work and personal use, citing concerns over ethical and security risks.

By the way, the US Navy has also banned the use of ChatGPT and for the same reasons.

TARIFF WARS – AGAIN? – HUH?

Today, Trump has started his Tariff Wars against Mexico, Canada and China. The Tariffs will be 25% on Mexico, 25% on Canada and 10% on China but oil from Canada will only attract a 10 % Tariff. Notably, approximately 40% of the crude oil for US oil refineries is imported, and the vast majority of it comes from Canada. BOOM can predict that China may quickly become a buyer of Canadian oil. The President also said he planned to impose tariffs on the European Union in the future, saying the bloc had not treated the US well.

In his first Presidency from 2017 to 2021, Trump attempted to wage a Trade War against China but it had very little effect. This is what happened. Trump raised Tariffs and China followed. It was all piss and wind as they say outside Washington DC.

For those who don’t know, according to the online Free Dictionary, All Piss and Wind is a Slang term meaning “Full of boastful, arrogant, or shallow talk, especially by a male who then cannot deliver on his claims.” Rings a Bell?

TARIFF WAR US CHINA

The Trump “Trade War” against China from 2017 – 2020 had little effect on the overall picture of US Exports and Imports to and from China. The deficit was reduced a little but then resumed its expansion. Joe Biden did not remove the Trump Tariffs when he assumed office in 2021 and recently increased them.

Tariffs are inflationary. In September, Biden announced he would add tariffs ranging from 7.5 to 100 percent to Chinese products such as solar cells, semiconductors, medical supplies, electric vehicles and lithium-ion batteries.

So Tariffs have not worked …… “let’s increase them until they do”.

Albert Einstein had something to say about this approach —

“The definition of insanity is doing the same thing over and over again and expecting a different result.”

TRADE DEFICIT US CHINA

China mainly exports goods. These charts do not reflect trade detours where goods can be sent to intermediate nations and then on-sold into the USA from there. That can be effected with a few phone calls between trading entities. It takes minutes.

Since 2020, US Imports directly from China have increased markedly and so have US Exports directly to China. Indirect trade flows are much harder to track especially for components of products finished inside the US.

US EXPORTS TO CHINA

US IMPORTS FROM CHINA

US DOLLAR STRENGTH HAS FALTERED SINCE DECEMBER

Since Trump’s win in the election, the US Dollar initially strengthened from early November to 20^th December. However, since then, it has weakened significantly against other currencies but not dramatically. This weakening can be clearly seen in the chart for UUP – the US Dollar Index – the Invesco US Dollar Bullish Fund.

The Fund is designed for investors who want a cost effective and convenient way to track the value of the U.S. dollar relative to a basket of the six major world currencies - the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc (collectively, the "Basket Currencies"). The Index is a rules-based index composed solely of long U.S. Dollar Index futures contracts that trade on the ICE futures exchange (USDX® futures contracts). The USDX® futures contract is designed to replicate the performance of being long the US dollar against the Basket Currencies.

Please note that a Distribution to investors occurred on December 23^rd of $ 1.31709 per share. Return of Capital Distributions are made annually around that date each year.

However, on this occasion, this may have broken the camel’s back. BOOM will watch closely from here for ongoing US Dollar weakness. At present, it looks like long term Holders are still not selling but new buyers are not bidding the price higher. Any significant weakness in the US Dollar is always a significant event. A change of long term trend is very significant, indeed.

UUP CHART -- ONE YEAR DAILY CHART

In economics (and finance), things work until they don’t. Do your own research. Make your own conclusions. BOOM does not offer investment advice.

Disclaimer: All content is presented for educational and/or entertainment purposes only. Under no circumstances should it be mistaken for professional investment advice, nor is it at all intended to be taken as such. The commentary and other contents simply reflect the opinion of the authors alone on the current and future status of the markets and various economies. It is subject to error and change without notice. The presence of a link to a website does not indicate approval or endorsement of that web site or any services, products, or opinions that may be offered by them.

Neither the information nor any opinion expressed constitutes a solicitation to buy or sell any securities nor investments. Do NOT ever purchase any security or investment without doing your own and sufficient research. Neither BOOM Finance and Economics.com nor any of its principals or contributors are under any obligation to update or keep current the information contained herein. The principals and related parties may at times have positions in the securities or investments referred to and may make purchases or sales of these securities and investments while this site is live. The analysis contained is based on both technical and fundamental research.

Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

Disclosure: We accept no advertising or compensation, and have no material connection to any products, brands, topics or companies mentioned anywhere on the site.

Fair Use Notice: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of economic and social significance. We believe this constitutes a ‘fair use’ of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit. If you wish to use copyrighted material from this site for purposes of your own that go beyond ‘fair use’, you must obtain permission from the copyright owner.

Subscribe to BOOM Finance and Economics Substack

BOOM has developed a loyal readership which includes many of the world’s most senior economists, central bankers, fund managers and academics.