Inflation, NVidia, FedNow

Inflation

Truflation’s US inflation metrics fell to 2.98% this week. This is a decent proxy for the direction of the CPI and PCE, the official government inflation statistics used to set policy. I’ve seen a lot of complaints in the media about prices still being high. An obvious but important note is that falling inflation does not translate to falling prices. Overall this is good news.

Inflation worries, however, have been replaced by debt ceiling worries. The debt ceiling has routinely increased under both Democratic and Republican leadership. I don’t predict Warren Buffett selling his $150B stake in Apple on US default worries. He’s also one of the largest US government investors, with over $100B in short-term treasuries on Berkshire’s balance sheet.

Unfortunately, a default, or technical default, would say more about the ineffectiveness of our government and less about the state of markets. A default would permanently increase borrowing costs for the US by introducing a credit risk premium, a severe and counterproductive price to pay for a solvable issue.

NVidia and AI

The world’s top AI company, NVidia, reported incredible performance in their earnings yesterday and is now back above all-time highs. As of writing this, the valuation is just 5% away from hitting the $1T mark, a milestone achieved only by Google, Amazon, Microsoft, Apple and Saudi Aramco. Most of this year’s S&P500 and Nasdaq performance can be traced back to AI-leading technology companies. NVidia is one of the most expensive companies in the world by just about every valuation metric.

AI is allowing marketers to venture into mass customization. Carvana (an app-based car dealership) recently sent personalized AI videos to each of its 1.3 million lifetime customers. The video is from the car’s perspective, recounting what it was like on the particular day when it met its owner.

AI has an unbelievably wide range of use cases. The Indian government has worked with Microsoft to combine OpenAI, WhatsApp and a language translation engine called AI4Bharat to create a universal government program chatbot. OpenAI has been trained (”briefed”) on 171 of India’s 20,000 different government programs and can handle 10 of India’s 22 official languages. Anyone with WhatsApp in India can interact with the system via their local language through text or voice. The input is translated into English and fed into OpenAI to generate the appropriate response and then retranslated back to the original language. The interaction can also be handled entirely through voice.

FedNow in July

The new 24/7 instant payment transfer system FedNow is set to go live in July of this year. it will allow consumers to pay bills and transfer money instantly, including on weekends. While it’s a valuable development, PayPal has had instantaneous 24/7 financial transfers for nearly twenty years. Finance is routinely one of the slowest industries to innovate. That’s just how it is. Pretty soon, the concept that our banks simply don’t work on weekends will be a vestige of the past.