While most people are paying attention to other things -- notably the raucous political theater in the US and EU and the various wars raging in eastern Europe and the Middle East -- certain things going on in US speculative markets have my hackles up. 

First, crucially, is the ongoing frenzy around LLM ("AI") companies. Unbelievable amounts of money have poured into the "AI" market and everything connected to it. Investors seem to be convinced that "AI" is the biggest thing ever. As a business proposition, though, "AI" appears to be turning into a massive flop. Most companies that have introduced "AI"-based applications have not profited at all from the investment, and most of the companies that produce the applications survive solely on vast ongoing infusions of money from venture capitalists. If this reminds you of the run-up to the dotcom crash of 1999-2000, let's just say you're not alone. 

None of this is surprising if you've stayed away from the hype around LLMs. The reason I put quotes around the letters "AI" is that these programs aren't intelligent. All they do is generate strings of statistically likely words or other symbols in response to queries. They've been labeled "stochastic parrots," and the label's a good one. Is that technology useful in some applications? Sure, but that doesn't come close to justifying the hype, or the valuations. 

All this is bad enough, but it comes at a time when the US economy in particular has been so thoroughly riddled with financialization that any significant shock could cause drastic repercussions. That was shown a few weeks ago by the sudden collapse of First Brands, an auto parts company. First Brands looked financially sound, but it produced that illusion via an impressive amount of financial gamesmanship, including such things as taking out loans from different lenders using the same assets as collateral. It turns out some billions of dollars have vanished without a trace, and a lot of high-end investment banks are facing huge losses. It's likely safe to assume that the games played by First Brands are also under way in many other companies -- which implies in turn that any sort of sudden shock could bring down a great many firms in a hurry. 

Then there's the elephant in the room, the possible role of diverted federal funds in propping up US speculative markets. Billions upon billions of dollars were being siphoned off federal agencies such as USAID through a labyrinth of consultancies and shell corporations. Quite a bit of that was ending up in the pockets of congresscritters and top-level bureaucrats, and some was being used to fund political activities, but it would not surprise me if at least some was flowing into speculative markets. That tap is being turned off. The impact may be impressive. 

Trying to time the collapse of a speculative bubble is a fool's game. (Isaac Newton tried to time the collapse of the South Sea Bubble and lost his shirt in the crash. I am not as smart as Isaac Newton, and neither, dear reader, are you.)  Even so, readers whose interests might be affected by a sudden crisis in the tech and banking industries may want to prepare for rough weather, and all of us may find it wise to brace for hard times. Clearing your debts, getting any investments you may have out of vulnerable sectors, and making other sensible preparations for collective crisis would be wise. 

Also, if you haven't done this yet, please pick up a copy of John Kenneth Galbraith's book The Great Crash 1929 and read it. It's a good lively read -- Galbraith was one of those all but unimaginable figures, an economist who was genuinely good at writing -- and his chronicle of the great boom and bust of 1929 is the best intro I know of to the mechanics of speculative bubbles and crashes. Once you've read it, look at the financial news and see how many parallels you spot. Yes, the phrase "target-rich environment" comes to mind. 

Oh, and avoid the sidewalks around your local financial districts. You don't want to be hit by falling financiers. (Ahem: highly NSFW due to language. It's still funny, and besides, the singer was my t'ai chi teacher when I lived in Oregon.)