TAM - part the ninth

Well... boy howdy!! As you all must recognize, I've been pissing on the prospects of AI, as currently implemented, to ever be profitable. And, of course, more and more of the lamestream media pundits, and some few within the so-called industry, are beginning to see the big red flags. A bit of hard-ish data always helps in showing how history will unfold. Some few made a bundle off the housing implosion which manifest as The Great Recession. They saw all those red flags, and acted accordingly. If you've got some Bongo Bucks you can afford to risk (and shorting ability with your broker, of course), it's getting near the point of shorting the AI market. The froth is on the bubble. Bigly. Way too much Other People's Money being spent on AI.

Most of that hard-ish data is locked up in the companies involved (and they make every, legal they hope, step they can to hide from the public) and some few pundit factories who have, more or less, inside information at said companies. By and large both the AI companies and the factories keep mum to the Rest of Us. Wouldn't want to spoil the gag, now would they? Of course not.

Well... one of Sleepy Joe's Lunatic Libtard econ types has spilled some of those beans at the NYT. Where else, of course? Jeff The Bald One^© will have none of that these days. Wouldn't want to piss off Our Malignant Narcissist^{©John Gardner}.

Thus ecouraged, here are some of the highlights, supportive as they are of these essays, from that report.

A small group of companies are buying and selling large amounts of a hot product to one another, inflating demand for the product and obscuring the risks of the system in a web of complexity. The accountants and credit-rating companies that analyze the situation — and that are financially beholden to the debtors — are deploying shaky excuses to declare it all fine.

That's a round about way of admiting that AI, as currently implemented, is a producers' good nearly always, with little to no consumer spend to support the enterprise. If that sounds more than a bit like the prelude to The Great Recession... hell yeah. And, naturally, Our Malignant Narcissist^{©John Gardner}, is in love with debt as he proclaims all the time. Naturally, a wastrel real estate "developer" can only damage a bit of our economy. A wastrel President is another matter entirely.

With more U.S. funds in A.I.-heavy stocks than in homes, a crash could destroy more wealth than the 2008 financial crisis did. And the Trump administration, reportedly eager to prevent a bust, is making changes that inject new opacity and more risk into the situation.

Ya feel that sphincter getting a bit tighter? It gets better.

A Wall Street Journal analysis in August concluded that the nine largest tech companies, Nvidia and Meta included, have managed to accrue $3 trillion of debt, or roughly 10 percent of the entire U.S. economy, off their balance sheets. Keeping the debt off the books (and away from the figures investors and regulators watch most closely) makes it easier for those companies to spend enormous sums constructing the data centers that drive A.I. — centers they believe will both improve the technology and satisfy an expected takeoff in demand.

Ah, "an expected takeoff in demand". The mother's milk of scammers. Again: the only demand that matters is the end-users' (aka, consumer). Everything else is embedded in companies' BoM, and that drives up cost/price of widgets. Unless, naturally, AI, as currently implemented, will eliminate trillons of Bongo Bucks going to labor. According to FRED total labor compensation is about $12 trillion. So lop off a quarter of those who work (well... given the level of income inequality, you'll have to decimate the lower classes). Forever. May be. Let's ponder that. And shall we not forget that recent research shows that the top 10% of earners do 50% of consumer spending. Will the Damn Gummint conscript the redundant from the top 10%? Do pigs fly? Will it have to be most of the bottom 90%? Who'll buy then? What will the The United States of Alabama produce then? Just financial services and physical goods from the Shithole Countries? Now, to meet that $3 trillion nut, will anything less than a full blown Socialist State protect that remaing 90%? A simple fact that's still not acknowledged by the lamestream media.

In 2018, Congress, worried about the potential impact on small businesses, loosened rules to allow many private creditors to stretch their balance sheets. It ignored objections that money would always flow like water to the least regulated corners of finance.

Love that last sentence. Mirrors the classic "race to the bottom" of capitalism. A few winners, many losers. Wait... isn't that Our Malignant Narcissist^{©John Gardner} play with crypto? Yes, yes it is.

Recent estimates indicate that A.I. would need to generate as much as $3 trillion annually in perpetuity to return the capital extended. That's 9 percent of the U.S. gross domestic product, or twice what Americans spend on food.

So, where's all those Bongo Bucks going to come from? If AI, as currently implemented, continues on the intermediate/producer goods path, then those goods must needs yield to aggregate prices at least 3 trillion Bongo Bucks above baseline. Forever. It matters not whether AI is embedded in prices or bought directly by consumers. The difference is, of course, if the latter, then AI is directly useful to whoever has the moolah to buy it. If the former, it's just a cost balloon for what you've always bought. Wonderful.

[T]he basic aim is simple: Our most powerful A.I. models, which are perhaps proving too expensive for any private firm to build, could then answer to democratically elected leaders and be pointed more clearly to public good than to quarterly profits.
[my emphasis]

Jennifer goes all La La Land with that last bit, certainly if Our Malignant Narcissist^{©John Gardner} or his anointed successor is the "democratically elected leaders". No way in Hell will such use AI for anything more than universal repression; even his "base" will feel the pain just as they do now. That's what dictators do when they have the ultimate weapon.

[UPdate]
Guess I was right. Google took it in the neck after the first post of this essay.

Alphabet (GOOGL) had its worst day ever on Thursday. The stock fell nearly 13% after its third quarter results, steeper than any session since it went public in 2004, including its drops of more than 10% in March 2020 and September 2008.

In dollars, it was Alphabet's worst day by far. Its previous worst was about $275 billion on July 23.

Amazon (AMZN), the last of the big three cloud providers to report this week, posted faster growth and a record cash burn after Thursday's close. Amazon Web Services grew 39%, its fastest in nearly five years, while its 12-month free cash flow sank to a record outflow of more than $42 billion. Its stock fell after hours, a sign the pressure on AI spenders reaches well beyond Google.

Not all lambs and buttercups in the AI world anymore.

I Told You So - 28 October 2026

well... sorta, kinda. The NYT reports that of six prognosticators, five say that the Lunatic Lefties will take both House and Senate while the Outlier says they only get the House. Were I to make for only one house of Congress, it would be the Senate. Again: you can't gerrymander a state-wide race. Time will tell, of course. The MAGAnauts are clearly worried, what with all DoJ activity.

Which seems a good time to vent at the Founding Fathers. They made dictatorship, in effect if not name, inevitable. See the Franklin quote above; he knew from the gitgo. While it's true that many, if not most (I haven't taken a census), countries don't put the national police system under the judicial; now we see why putting the Executive in control of the police system often (if not inevitably) leads to de facto dictatorship. Hungary and Turkey and Philippines come to mind. Garfield 2.0 (a step closer) is just the latest in a long line. Serbia and Brazil might give one hope.

TAM - part the eighth

Time to cherry pick some numbers from Coy's report on AI's tenuous hold on reality. Avid readers and some professionals alike see an analog with the Great Recession, fueled by stupid lending to prop up the vast housing market. And, some times mentioned, household goods.

[T]here are rumblings that the artificial intelligence boom could similarly end in tears. How worried should we be?

You may remember the ouroboros from a history class. It's that snake like symbol where it's eating its own tail. It goes back, at least, to King Tut. Been around a while.

Nvidia is a prime mover in this incestuous endeavor. Huang wants all the money.

A.I. doesn't have to fail for high rates to do damage. It just has to succeed more slowly than its lenders and shareholders are counting on — making it one more reason that there might be more peril in U.S. markets than meets the eye.

IOW, in keeping with this series, if TAM doesn't materialize in the volume that the zealots assert, kaboom.

There's lots of ink spilled the last couple of days wrt Anthropic's Godsirra IPO. To be discussed soon. Spoiler: so far, none of the reports (and the NYT alone has a bundle) I read makes any presentation that AI is (or ever will be) a Consumer Good. And that's where the justification is. If AI is just another intermediate good, it's most likely to increase average cost. How many trillions of Bongo Buck of labour are there to eliminate, and if so, what happens to aggregate demand? Nothing good.

In the long run, though, A.I. is likely to displace people from jobs and push down wages, which is "profoundly deflationary," Mr. Kedrosky said. Deflation, if it occurs, would raise the risk of a crisis. Why? Because debts stay fixed while wages fall, leading to defaults on mortgages, car loans and other forms of debt.

IOW, not only is this version of AI modelled on the Housing Crisis/Great Recession, but also on crypto. Remember that? The last Great Inhaler of GPU. The lure of crypto, at least the ones I've seen, is that such "currency" is explicitly deflationary, which is the pure love of Goldfinger and his acolytes. Now, that's not a near term win, and more difficult if bitcoin (or some other) never makes it to dollar's status of Reserve Currency. If you think Vlad and the Oligarchs is just a washed up garage band, you'd best hope that none of the crypto gain reserve status: I'll wager no one can point to a time in the Industrial Period when both deflation and economic growth coincided.

TAM - part the seventh

Yet another report from the NYT, which you might be able to see.

But basically, the idea was something like: These systems are merely good at seeming clever and are not going to be even capable enough to do a ton of economically valuable work.

AKA, TAM ≡ 0. Ha Ha Ha

This is the original from which that quote was built. It's not shown in quotes, and the original is behind a paywall, so it should be a precis of the original. But being behind a paywall... OTOH, the wiki has a page devoted to stochastic parrots. The term means what you think it does.

Again, from the NYT report

I thought: This is going to be a useful tool, and it's going to be powerful for a lot of things, partly because I believed then it would continue to get better. But I didn't think that people who were worried about more catastrophic scenarios were right.

He's changed his mind.

Two conflicting notions: 1) AI/LLM/whatever will never produce anywhere near enough end-user revenue to offset the trillions of Bongo Bucks already spent and 2) Ayatollah 17% Don^©'s newly annoited AI czar has surely been given the remit to take AI for Batshit J. Fucking Moron^©Tillerson's control of the United States of Alabama. Just as I, and ever more others, have been warning for a while. If you disagree: why wouldn't he? He does take whatever he wants, under threat of annihilation. This is the crown jewel of Dictatorship. He's going to pass it up?

Clayton unqualified for DNI, and unqualified for AI. Well... appointing a Gumby is kinda what he do. He's just a Gumby his own self.

I Told You So - 2 October 2026

Well... may be. Turns out, the AI hacking community does know SQL

In another case, the agents used what is called a S.Q.L. injection attack — where unexpected information is injected into a database in an effort to break through the network's defenses — to burrow into the systems of a company that operated a call center. They could then listen in on any of its customer calls.

Naturally, there's no guarantee that these AI engines either know how to build 5NF databases or care to. Since they're, so far as anyone knows, driven by kiddlie coders, they're most likely trodding the same RBAR world as their COBOL slinging GrandPa. Oh well. One might speculate that the "open weight" models have sense enough to store such weights in a RDBMS. Time will tell.

TAM - part the sixth

This is starting to feel like shooting ducks in a barrel. (I wonder whether the kiddies even know that sentence???) Yet more reporting on AI, but from a distinct perspective: ok vendors, you've gulped from the AI punch bowl to make a cheaper (may be?) and/or better product. God damn it, give me a lower price!!! I don't give a shit about your market share, only my wallet's share.

Now that AI is firmly entrenched in the business of killing off every last God damned white collar worker on the planet, let's have us some Shakespeare.

The first thing we do, let's kill all the lawyers.

Well... apparently not first, but they were the first to suck Ayatollah 49% Don^©'s dick, as you may recall.

First, of course, the ambulance chasers boast about embracing AI

Outsiders often cite law as an industry under threat from artificial intelligence. But the nation's biggest firms are eager to show off how they've embraced the technology.

After OpenAI announced a version of its latest A.I. model for lawyers last week, for example, a handful of top-tier firms proudly unveiled new tools.

Then, they get hoisted on their own petard; karma's a bitch

Some clients are using A.I. to make their argument for A.I. markdowns. Jennifer Leonard, the founder of Creative Lawyers, which advises law firms and corporate legal departments on adapting to A.I., said some law firms and their clients used A.I. agents to spot line items in bills where A.I. could have saved hours. "They literally have struck that out, and say, 'I want a discount on this, we don't want to pay for this part of the work anymore,'" she said. "Or, 'We know you have this new A.I. tool in house because we saw your splashy press release.'"

How will they pay for that summer house in the Hamptons???

I Told You So - 22 September 2026

Well... it's been rather a long while since I took up the mantra: "It's the Senate, stupid!!" The logic to that being, naturally, that gerrymanders don't (at least directly) affect state wide votes.

Now, the great and powerful Nate Cohn more or less agrees.

James Talarico has led every recent survey of the Texas Senate race, with polls showing him ahead among Hispanic voters by at least 20 points. Although his lead is often mostly dismissed as a reflection of the profound flaws of his Republican opponent, Ken Paxton, the polls also show the Democrat Gina Hinojosa to be surprisingly competitive in the race for governor against the incumbent, Greg Abbott, who leads by an average of three points in recent polls.

Now, of course, TX is, as always, an anomaly but nevertheless points to the obvious: state wide is easier to defeat than the gerrymander. There also remains the chance that the gerrymander in TX will come up short, so to speak

In a sign that the G.O.P. itself doesn't consider the races safe, Republican groups are spending in all six of these seats — which include four of the five districts Republicans thought they could flip with their new gerrymander.

Chocolate sauce on your pudding.

The Democratic Party's chances of having a truly exceptional midterm election — one that yields a large congressional majority and control of the Senate — could depend on whether Democratic gains among Hispanic voters translate into breakthroughs in Texas and Florida.