Inflation News: Real Inflation Set to Surge

Inflation News: Critical Resource Conflict Looms, Driving Real Inflation

Sept 15, 2023

A resource conflict is looming, involving critical materials like Uranium, Copper, Neon Gas, etc. These resources, which the Western countries either lack the means or willingness to mine or produce, are poised to drive actual inflation. But what does this term mean? It’s distinct from the type of inflation that the US caused by disrupting supply chains or intentionally inducing shortages through stringent sanctions (AKA Manflation). Take Russia as an example; such actions destabilized the ones imposing the sanctions more than those being sanctioned.

The hype around the BRIC currency is hot air (at least for now), diverting attention from a more substantial issue. Developing nations have grown discontent with exporting inexpensive raw materials to the West, only to witness these materials being turned into high-value finished products, resulting in the West reaping substantial profits. It’s akin to selling gold for next to nothing.

A coalition of countries has joined forces, and more are expected to follow suit in the years ahead. While the AI super trend continues, another powerful trend is emerging in the resource sector.

The coming resource war is discussed in more detail here: Resource Wars: Navigating a Shifting Global Landscape.

AI’s Swift Rise and Current Challenges: A Closer Look

Elements like Neon Gas and Copper are crucial for the Semiconductor industry to thrive; without them, it would be left in the dust. However, the real super trend in AI is not what many experts proclaim. The super trend is the swift rise of AI in various fields and how it could make many human roles obsolete unless they adapt quickly. Yet, a notable challenge emerges: the expense of AI-related infrastructure is skyrocketing, while the companies investing in AI aren’t reaping profits. Take OpenAI, for instance; they spend $700K daily and show no signs of becoming profitable anytime soon. In fact, with their current spending rate, they could run out of funds by 2024.

People expect AI to quickly provide exceptional answers or solutions with a fundamental question. However, current language models aren’t close to achieving this level of simplicity. These models are helpful for users who invest the time to learn them, needing a deep understanding of their field to sort through results effectively and the skills to give proper prompts to the models. Consumers won’t be eager to spend on AI until it becomes Idiot-proof. However, as of now, the models are like clueless individuals despite the processing might of supercomputers.

If you’re unfamiliar with programming, these models won’t make you a top programmer. However, they can make someone without programming knowledge seem brilliant, until a critical moment exposes the truth – that this person was merely a “Glorified Idiot.” These models can enhance the skills of an average programmer, and good programmers might elevate to super programmer status. Currently, these models enhance efficiency, taking over many routine tasks. Hence, a skilled programmer could potentially complete the work of 10 or more mediocre programmers without going crazy.

Challenges and Opportunities in the World of AI and Resources

In a nutshell, the current set of language models primarily benefits those aiming to enhance their skills and those knowledgeable in their specific fields. This leaves out about 90% of the market, spelling trouble for many companies. A product needs to be idiot-proof to earn substantial profits, yet current AI models cater to experts. As, it’s the average consumer who often buys unnecessary items to impress people they don’t need to, using money they lack, all in pursuit of the illusion of greatness.

So, until these AI models function as competent personal assistants with an IQ of 180 plus, the average person won’t be interested in them.

Regarding AI, remember that NVDA provides the tools (like shovels), but those buying the tools need to hit pay dirt. If they don’t, they’ll stop buying the tools. So, even if NVDA has the most cutting-edge chips, it doesn’t matter if the buyers can’t turn a profit.

This leads us to some essential opportunities, specifically in Uranium and Copper. Although Uranium was briefly discussed earlier, we’ll now look closer at it before transitioning to copper. We’ll cover the rest of the opportunities in our upcoming updates.

Inflation News: Americans’ Changing Sentiment and the Impact on Markets

Will Americans continue to maintain this sentiment? What happens if oil prices continue their ascent? This could result in a ripple effect on the cost of various other products, as higher energy costs tend to impact everything else. The housing market is already showing signs of a pullback, with some individuals selling their homes at a loss because very few can afford a mortgage with an interest rate of 7%, particularly considering the current home prices.

Americans’ outlook on inflation is improving. According to recent data from the University of Michigan, consumers’ expectations regarding inflation have reached their lowest point since the Federal Reserve initiated interest rate hikes in 2021.

The University of Michigan’s data indicates that consumers anticipate a 3.1% price increase over the next year, down from 3.5% the previous month. This marks the lowest level of inflation expectation since March 2021. Furthermore, expectations for price increases over the next 5-10 years dropped to 2.7% in September, compared to 3% the previous month.

While the overall consumer sentiment index for September dipped slightly to 67.7 from 69 in the previous month, it is still significantly higher than the reading of 58.6 recorded in July 2022.

Joanne Hsu, the director of the University of Michigan’s survey of consumers, noted that consumers have been observing a slowdown in inflation throughout the survey. However, they do anticipate that this deceleration will eventually pick up again.