Re: the economy rolling over—
The biggest reason to think that this is happening isn’t AI entering bubble territory (although FWIW, capability growth clearly leveled off this year and the OpenAI spend that a lot of CoreWeave and Oracle’s projected data center buildout are financed against probably won’t happen unless they can get that going again very quickly; as with dot coms in the late 1990s, the underlying tech is economically valuable but there’s a good chance that related capex is overshooting), but much more boring movements in “normal” macroeconomic indicators:
1: ISM manufacturing PMIs have been in contraction for most of the year
2: Services PMI stalled to flat territory in the last print
3: Activity indicators in trucking and logistics are way down
4: Quit rates in construction (a typical leading indicator) dropped to levels not seen since the GFC
5: Retail and manufacturing companies started seeing significant margin contraction even last quarter, and FIFO inventory accounting effects are likely to make this worse over time
6: Employment in the most cyclical private sector categories is in contraction
7: We’re seeing significant credit default problems in cyclical industries (Tricolor and First Brands bankruptcies).
8: Employment growth in general has rolled over, and although we don’t have the latest NFP print due to the shutdown, ADP’s private sector payroll growth estimate is in the red two months in a row (after revisions).
And all of this is happening in a stagflationary policy-engineered supply shock (tariffs, shift to immigration restrictionism, permitting regime that’s increasingly and irrationally hostile to low-LCOE wond and solar power deployment)— and because of that, inflation has been accelerating at the same time that employment is rolling over, making it much harder to do a monetary rescue of the economy without causing really high inflation.