bubble, bubble, hardship and trouble
Welcome to Friday. This is, Breitbart Business Digest’s weekly news roundup. This week, investors seem to be reconsidering their stance on AI, finding some merit in its recent performance. Meanwhile, the Cato Institute is celebrating increased tax revenues linked to immigration, and Disney has indicated a shift away from its traditional entertainment focus. We’re not folks who just summarize the week—there’s plenty of AI bots for that! We prefer to delve deeper into the news and its context, wandering a bit into history along the way.
Will the AI bubble burst?
It used to be a widely accepted notion that investment “bubbles” were simply impossible. Widespread anxiety about an investment bubble was the prevailing thought. In theory, when worry spreads, it suggests we’re likely not in a bubble.
The flaw in this thinking is that, during recent bubbles, many people were indeed concerned. The dot com bubble received its fair share of discussions, and the housing bubble became such a hot topic that people faced mockery for even mentioning “bubble talk.” Magazines even featured covers depicting houses in bubbles. So, the uncertainties surrounding the AI bubble don’t strike me as proof that we’re in the clear.
Interestingly, it’s been rather challenging to invest directly in AI. How difficult is it to invest directly in AI? Most significant AI companies remain private, leading most investors to take an indirect approach. They invest in vendors of AI firms, like Nvidia, or in companies that have stakes in AI businesses. Both strategies tend to be quite inefficient, with profits often siphoned off by intermediaries. This leads to diluted returns.
There’s an odd tension here. On one hand, vendors are withdrawing funds from AI, yet investors continue to pump money in. It feels a bit redundant to be invested on both ends. Maybe we should redefine a bubble as a situation where the market stops considering its cyclic trends, or even embraces them as a positive. This was certainly true during the housing bubble; people were enamored with lenders, builders, and homes themselves. Let’s all fund ourselves and build limitless wealth!
Of course, there comes a time when you run out of that wealth. Typically, this shift happens when the fear of missing out (FOMO) evolves into a dread of needing to cash out immediately (FUGIT-OUT). It always feels a tad unfair to those who were all in during the height of excitement. Consider the companies that watched their competitors’ stocks soar just by hinting at AI investments. There were executives scrambling to funnel more money into AI, but this week, the narrative began to shift. Investors have seemingly decided it’s time to cut back on AI capital expenditures.
But no need to panic. The CEO of Nvidia declares that capital investments in AI should focus on being appropriate and sustainable.
Cato derenda est!
In Washington, DC, there’s a progressive think tank that still goes by its original name, the Cato Institute. This week, they released a lengthy report suggesting that to increase government spending, we should welcome more immigrants. According to their findings, immigrants contribute significantly to government revenues, and this should be music to the ears of those advocating for expansive government budgets.
The oddest aspect of the report was the assertion: The benefit of mass immigration is that it drives up housing prices. This feels a bit off, especially since housing affordability is a pressing concern in the nation these days. Are we truly all about seeing house prices increase faster? It’s not that immigrants are improving our living spaces, just that we’re paying more for the same. So, yay?
This sentiment has even spawned internet memes: That’s not happening. Well, that’s true, but it’s not a big deal. Yeah, that’s a big deal, but that’s actually a good thing. When J.D. Vance argued that rents and home prices were surging due to higher housing demand from immigration, he faced ridicule. Now it’s said to be a feature, not a flaw of the immigration system.
Cato praises this trend of immigrant-driven inflation for a specific reason: Increasing housing prices supposedly boosts property tax revenue. So, immigration leads to higher housing prices, which translates to everyone paying more in property taxes, all calculated as a boon for immigrants. Again, we end up paying more for what we already have. But look, at least that helps the government collect more of our income. How very progressive!
I’m not even sure they’re right about that last point. If states and local authorities want to garner more revenue from homeowners, it’s quite easy to simply raise property tax rates. It’s not set in stone; tax income surges only as housing prices climb. This allows for stealth tax increases where officials don’t even have to vote on new taxes, forcing people to fork over a larger share of their income to the government. It’s difficult to see how this aligns with Cato’s mission of promoting “individual liberty, limited government, free markets, and peace.”
When you buy a home or pay higher taxes, there’s less income left for other goods and services. Thus, while the government benefits from increased revenue and the banking sector might profit from more loans, ultimately everyone else ends up poorer.
Disney becomes a tourist company
This week saw the conclusion of a highly discussed succession saga in corporate America. Disney has appointed Josh D’Amaro, the parks and resorts director, as its new CEO, following Bob Iger’s tenure aimed at addressing the fallout from Bob Chapek’s time. After three years swirling around speculation, the board made the expected choice: selecting a longtime company veteran who dresses just like Iger—think light sweaters over collared shirts.
D’Amaro’s selection illustrates a reality reflected in the numbers. Disney has essentially transformed into a hospitality company. The parks division brought in 60 percent of the profits last year and is thought to represent about 80 percent of Disney’s overall value, with a hefty $60 billion committed to its experiences sector by 2033.
The catch? D’Amaro lacks experience in overseeing the entertainment side. In essence, he lacks knowledge about running Disney’s organized divisions. Marvel, Star Wars, and various classic comics have grown estranged from mainstream America. His predecessor, Chapek, was also from the parks division. The bigger question isn’t whether D’Amaro can ward off culture warriors from tarnishing the tourism sector as they have with other aspects. It’s whether he even wants to. Chapek’s experience within the Magic Kingdom didn’t grant him the insight to protect beloved characters from radical ideologies.
Happy Birthday to Corrupt Bargain!
On February 9, 1825, John Quincy Adams was elected president by the House of Representatives, as no candidate had secured a majority during the 1824 elections. Though Adams lost both the popular vote and the Electoral College to Andrew Jackson, Speaker Henry Clay backed Adams during the House vote. Adams subsequently appointed Clay as Secretary of State, which led Jackson’s supporters to label it as a “corrupt deal.”
Jackson spent the next four years campaigning against what he saw as a stolen election, eventually defeating Adams in 1828, marking the second populist uprising in the annals of our republic—the first being Thomas Jefferson’s election.
