The Wife Is Always Right, Even ChatGPT Agrees

Sometimes we just don't know what is going on with financial markets

Jan 29, 2023

The four most dangerous words in investing are: “this time it’s different.”
Sir John Templeton

Watching financial markets, it looks like the world has turned a corner, and the secular bull market can resume. Since the beginning of the year, the S&P 500 is up 6%, the NASDAQ is up 11%, and Bitcoin is up by close to 40%! So, what is going on?

Over the years, my wife would often ask me why the price of Bitcoin was going up or down on any given day. Sometimes I would have an answer, but more often than not, I wouldn’t have a good one.

Her conclusion was that despite all the time I spent watching the market and paying attention to the economy, I couldn’t explain what was happening most of the time. She was right.

When it comes to Bitcoin, it’s understandable. It’s a fairly new asset, and nobody knows how to price it and what role it may play in the future. What is more concerning is that the stock market started acting more like Bitcoin recently, going up or down by more than 2% for no particularly good reason.

There are several theories for the current renewed optimism: The US Fed may soon stop hiking, the upcoming recession may not be so bad after all, or China’s reopening.

It turns out Trevor Noah was right when it comes to the economy: Nobody knows!

After a year of rate hikes that took the base interest rate in the US from 0% to 4%, Wall Street financiers are getting anxious about the consequences. They got so used to living with interest rates at close to zero that they are panicking now that money has a cost again. Watch the CEO and Chairman of Starwood Capital Group (a private equity firm that invests in real estate) on CNBC.

Squawk Box @SquawkCNBC

"If Powell keeps hiking rates, you have the Weimar Republic," says Barry Sternlicht. "He has to keep printing dollars to pay interest on the deficit. That will really slow the economy. He risks the entire financial stability of the [global economic] system."

I would argue the exact opposite of what he is saying: You get a Weimar republic if you don’t act to tackle inflation. Where is right, however, is that the current situation is unsustainable: High budget deficit plus high interest rate means that the endgame is clear, more money printing is coming. But unfortunately, it doesn’t look like anyone has the appetite for fiscal responsibility in Washington.

Back in Europe, the rhetoric is escalating about Russia. Earlier this week, the German foreign minister declared “We are fighting a war against Russia.”

Words matter in diplomacy, and saying you are at war with a nation that has nuclear weapons is not something anyone should say lightly.

Michael Tracey @mtracey

German foreign minister declares war on Russia

Artificial Intelligence

Even since ChatGPT was released in December 2022, there has been a tsunami of other AI products and released. People started giving tests to ChatGPT, and the results have been impressive. ChatGPT received honorable scores at the Bar Exam, the US Medical License Exam, and it did very well in a Wharton MBA class.

Ethan Mollick @emollick

I think we haven't fully absorbed the fact that careful academic papers have found ChatGPT clearly passes some of the most challenging American professional exams: 🩺United States Medical Licensing Exam 🎓MBA-level Operations exam 🧑‍⚖️The Bar Exam (based on typical exam questions) https://t.co/SIEAVWdf9j

Media news website BuzzFeed announced this week it was going to use ChatGPT to generate content such as quizzes for its website. Following the announcement, the share price of BuzzFeed jumped 92%.

AI is going to impact many industries. This is just the beginning.

Genevieve Roch-Decter, CFA @GRDecter

BREAKING: BuzzFeed will use ChatGPT to create content instead of writers The stock is up 92% today

People have been playing with ChatGPT for more than a month now, and it’s amazing what some people have managed to do with it. Look at how a user managed to make ChatGPT doubt basic math. Even ChatGPT is no match for this user’s wife!

My first reaction was to laugh when I saw this. But then I thought about deeper implications of this type of behavior. What happens when AI becomes ubiquitous, and people manage to convince, or coerce, AI into thinking things that are just wrong?

One field that is already directly impacted by AI is art. Last week, I shared a thread with drawings of women generated by AI. This week, click on the thread below to see historical variations of Spider-Man entirely generated by AI.