CELENTE: No Connection Between Main Street and Wall Street
AI is the opposite of job creation… it is job elimination, and it has just begun.
NOTE TO READERS: The following is our weekly Economic Update — Market Overview found in this week’s issue of The Trends Journal. Consider subscribing here for in-depth, independent geopolitical and socioeconomic trends and trend forecasts that you won’t find anywhere else.
Dot.com Bust 2.0 coming?
Not according to The Street. It’s a Nvidia world of AI… which is no surprise to Trends Journal subscribers. “AI WE OWN YOU” was a Top Trend for 2023.
Yes, there is a very big difference between the AI boom and the Dot.com bust.
During the Internet Revolution years, there was massive job creation. Remember the “Tech City” boomtowns? How about all those H1-B visas the tech industry invented so the government would allow masses of cheap tech-skilled workers from Asia to flood into the United States so they could keep down the wages of American workers?
Yes, there was a Dot.com bust back then, as we had forecast, there would be one in 2000 in our Fall 1999 edition of The Trends Journal (back then it was a monthly newsletter. Today, it is a weekly magazine.) In our “DOT COM THIS” article we wrote that “Dot-com overload will short circuit many high expectations for huge profits in Internet commerce, entertainment and the wide array of dot-com services. Following the holiday season, many of today’s high-flying Internet stocks, the hottest IPO-wannabees will have begun their descent from their overvalued heights.
We concluded by forecasting that “By mid-2000 the fall-out from the failing dot-coms will have worked its way through Wall Street,” but also noted that “Internet companies that produce real-time profitability and performance, rather than promises of long-term potential, will win both a secure place on the net and investor dollars.”
Then and Now
Again, as we had noted back then, companies were making up stuff that had no reality. That’s why there was the Dot.com bust. But those companies that were creative would thrive—and again—they created jobs… and cities.
AI is the opposite of job creation… it is job elimination, and it has just begun. Trends are born, they grow, mature, reach old age and die. AI has just been born.
In a 28 April 2024 CNBC article, How working for Big Tech lost ‘dream job’ status, they wrote what we had forecast:
“Layoffs.fyi, a platform monitoring job cuts in the tech sector, recorded more than 263,000 job losses in 2023 alone. As of April, there have been more than 75,000 job losses in the industry in 2024.
“‘So instead of rewarding the growth that we saw [tech companies] all pursue years ago, they’re now rewarding profit,’ said Jeff Shulman, professor at the University of Washington’s Foster School of Business. ‘And so the layoffs have continued. People have become used to them. Regrettably and sadly, it seems that the layoffs are going to be the new normal.’”
We note this since AI is a prime mover of the equity markets, while Wall Street keeps climbing, Main Street is falling.
Take a look at some of the articles in this week’s Trends Journal:
“THE AMERICAN MIDDLE CLASS IS VANISHING, PEW STUDY FINDS”
“RETAIL SALES FALL FLAT IN MAY; NEW HOME CONSTRUCTION SLOWS IN MAY”
“U.S. HOME PRICES SET ANOTHER RECORD IN MAY”
“WHEN THE ECONOMY FALLS JOBS GO WITH IT”
“GOING OUT OF BUSINESS TRENDS”
“EUROZONE’S BUSINESS ACTIVITY SLUMPS IN JUNE”
“EUROPE’S CONSUMERS NOT RESPONDING TO DISCOUNTS”
“SPOTLIGHT: THE DEBT BOMB”
While the Dow, which represents more of what is made and sold on Main Street, dropped some 300 points today, the hi-tech Nasdaq had a happy day. CNBC quoted Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, who said, “Tech is again leading the way, and Nvidia is being bought off the dip.”
Making it clear that it is a tech-driven market, he said, “This year is still all about tech and AI” and “Clearly valuations are pretty high. But the AI rally has a lot more substance than the dot-com bubble. All the stocks doing well have strong earnings” and “AI has replaced rate cuts in terms of kind of keeping the bull market moving forward.”
So there you have it. It is AI-driven. And the faster AI drives, the more jobs will be lost: AI will widen inequality, IMF warns, was a headline article in the Financial Times last week. They wrote that:
“The IMF said it had ‘profound concerns’ about massive labor disruptions and rising inequality as societies move towards generative AI, and it urged governments to do more to protect their economies. In a report published on Monday, the fund said countries should take action such as improving unemployment insurance, warning that, unlike past disruptive technologies, AI could lead to job losses in higher-skilled occupations.
“While the IMF said that generative AI held immense potential to boost productivity growth and advance the delivery of public services, it cautioned that it also ‘raises profound concerns about massive labor disruptions and rising inequality’.”
TREND FORECAST: Once again, there is no connection being made between Wall Street and Main Street. For months we have been reporting on sagging consumer optimism and weakening consumer spending that keeps hitting the retail sector. And today we have noted that the Dow, which does not represent the hi-tech world, went down some 300 points in part because of weaker sales at Home Depot and Walmart.
Take a look at the Russell 2000 Index which represents smaller companies. Nearing bear market territory, it is down 17 percent from its 2021 high. And as reported by the Wall Street Journal, “In the S&P 500, which includes the biggest companies, the average stock is about where it was at the start of 2022, and more than half of the current constituents are down since then. Worse still, only 214 have managed gains this month.”
While the mainstream media ignores the dire economic conditions impacting millions of Americans, as we detail, the United States, once the Land of Opportunity, has declined into Slavelandia.
As to where the equity markets are going and what to expect, we suggest you read Gregory Mannarino’s article in this issue: “HYPER-ECONOMICS, HYPER-DEBT, AND ANOTHER GREAT DEPRESSION.”