CPI inflation surprises to the upside … the latest twist in the battle for OpenAI … the far bigger story underneath the surface … a hopeful chart for crypto investors
From yesterday’s Digest:
Three inflation reports this week could be catalysts to help stocks resume their march higher.
[If today’s CPI numbers] come in soft, the report could act as a defibrillator, jolting stocks back to life.
Unfortunately, we’re 0-for-1.
This morning, the January Consumer Price Index (CPI) inflation report came in hotter than expected. As a result, the 10-year Treasury yield is up while stocks and the odds of multiple rate cuts in 2025 are down.
Digging into the details of the report, prices climbed 0.5% between December and January, higher than the 0.3% Dow Jones estimate. The yearly figure was also above the estimate, coming in at 3.0% instead of 2.9%.
Core CPI, which strips out volatile food and energy prices, rose 0.4% on the month, putting the annual rate at 3.3%. This was also hotter than the forecasted 0.3% and 3.1%.
Shelter costs continue to be a thorn in the side. They rose 0.4% on the month, accounting for roughly 30% of the entire CPI increase. Food prices also jumped 0.4%, driven higher by a 15.2% pop in the price of eggs.
Earlier this morning, the 10-year Treasury yield surged 12 basis points up to 4.66%, its highest level in about a month. Meanwhile, the CME Group’s FedWatch Tool shows that most traders are now betting on just one rate cut in 2025.
As for stocks, all three indexes were down earlier this morning, but it wasn’t a major selloff. Instead, it was mostly choppy performance – more of a continuation of the recent sector rotation out of tech into other sectors including financials and healthcare.
Legendary investor Louis Navellier isn’t viewing the report or today’s market response with concern. Here’s his quick take in his Growth Investor update:
Because of the CPI, the Fed’s probably not going to cut rates anytime soon. Fed Chair Jerome Powell did confirm that.
They will be cutting rates later in the year, because Europe and the Bank of England will be slashing rates…
[Due to the CPI reading], bond yields are up about 12 basis points this morning…
[Because of this], there will be an adverse market reaction, but then I think the market will just regroup and be fine.
On Louis’ last note, I’ll add that as I write at lunch, all three stock indexes are well off their lows of the morning, and the Nasdaq has even turned positive.
Bottom line: This isn’t the cool CPI report we were hoping for, but it’s no reason to throw in the towel on this bull market.
We’ll circle back tomorrow with the details of the Producer Price Index (PPI) report, and hopefully, some more bullish data.
The real story behind the Musk/Altman feud
Earlier this week, a group of investors led by Elon Musk offered $97.4 billion to buy the nonprofit company that controls OpenAI (the group behind ChatGPT).
This is the latest in a feud between Musk and OpenAI CEO Sam Altman.
Back in 2015, Altman and Musk were partners, co-founding (with others) OpenAI as a non-profit.
Its original mission was to “advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return.”
Musk left in 2019, though there are different explanations why. Some say that Musk departed to avoid “a potential future conflict” since Tesla was pushing into the AI space with autonomous driving. A second explanation suggests that Musk wanted more than 50% of the equity, leading to pushback.
In the years since, the relationship between Musk and Altman has soured, devolving into ad-hominem attacks.
Fast-forward to Musk’s unsolicited buyout offer…
Of the various points of disagreement between Musk and Altman, perhaps the biggest is the vision for OpenAI – will it be “for profit” or not?
Here’s The Wall Street Journal:
[Musk’s] unsolicited offer adds a complication to Altman’s carefully laid plans for OpenAI’s future, including converting it to a for-profit company and spending up to $500 billion on AI infrastructure through a joint venture called Stargate. He and Musk are already fighting in court over the direction of OpenAI.
“It’s time for OpenAI to return to the open-source, safety-focused force for good it once was,” Musk said in a statement… “We will make sure that happens.”
Musk has filed various legal complaints accusing OpenAI of abandoning its original nonprofit mission. He points toward the creation of the for-profit arm of OpenAI and its partnership with Microsoft.
While this makes for interesting gossip, the far bigger issue is how this might impact the timing of achieving “AGI”
“AGI” stands for “artificial general intelligence.” This is the theoretical level of AI advancement at which machines are as intelligent – or more intelligent – than humans.
We’re rapidly approaching this tectonic line in the sand.
Musk claims he wants to delay this or at least have protective regulatory frameworks in place for its arrival.
From Musk:
I’m increasingly inclined to think that there should be some regulatory oversight, maybe at the national and international level, just to make sure that we don’t do something very foolish.
I mean, with artificial intelligence, we’re summoning the demon.
Altman appears to be more pedal-to-the-metal. And if he’s right, AGI is almost here.
From Altman:
We are now confident we know how to build AGI as we have traditionally understood it.
We believe that, in 2025, we may see the first AI agents “join the workforce” and materially change the output of companies…
We are here for the glorious future. With superintelligence, we can do anything else. Superintelligent tools could massively accelerate scientific discovery and innovation well beyond what we are capable of doing on our own, and in turn massively increase abundance and prosperity.
We’d love for that to be the outcome. But even Altman has highlighted the potential for a far different reality:
There will likely be some major decisions and limitations related to AGI safety that will be unpopular, directionally, as we get closer to achieving AGI.
We believe that trending more towards individual empowerment is important; the other likely path we can see is AI being used by authoritarian governments to control their population through mass surveillance and loss of autonomy.
Though we don’t know which future AGI will usher in, our global macro expert Eric Fry believes it’s fast arriving
Back on September 12, Eric started a “1,000 Days to AGI” countdown.
He did this after seeing the writing on the wall – which, at the time, was OpenAI releasing a series of AI models designed to reason instead of recognizing patterns. The advancement enabled AI models to work through problems step by step, similar to human reasoning.
Here’s Eric with how his thoughts on AGI’s timing have changed since September:
I’m convinced 1,000 days is the far end of when we’ll achieve AGI.
And with each new AI milestone, we’re getting ever closer.
While the societal impact of AGI is unclear and perhaps impossible to prepare for, Eric believes we can position ourselves wisely from an investment perspective
If you favor the dystopian vision of what AGI will be, then generating wealth from AGI might be one of the few ways to prepare for it (beyond building a bug-out bunker).
Such wealth creation could be especially critical if AGI replaces the labor force as many analysts believe it will.
On that note, here’s Brian Aghazadeh, the Principal Civil Engineer at Concept Engineers:
According to some estimates, 10-50% of current jobs could be affected by automation in the coming decades, especially those involving predictable manual labor, basic data processing, and even roles like accounting and administrative assistance…
AGI goes far beyond narrow AI. While today’s AI can perform specific tasks, AGI would be capable of performing nearly any intellectual task that a human can. This means that entire industries—not just specific jobs—could be disrupted.
Back to Eric for the investment implications:
Investors who are unprepared will miss the transformative opportunities that AGI will bring.
However, those who position themselves correctly could witness the greatest moneymaking opportunity in human history – with the possibility to surpass even the Internet Revolution.
Eric has identified a handful of companies that are positioned to capitalize on our current “pre-AGI” market. You can click here to check out his free 1,000 Days to AGI special broadcast, where he jumps into the implications of AGI’s arrival – and how you can financially prepare yourself for it.
However this Musk/Altman drama plays out, recognize the bigger story: AGI is coming fast, and it’s going to usher in enormous change.
Before we sign off, a quick word of encouragement for crypto investors
As we noted in yesterday’s Digest, Bitcoin appears stuck in neutral.
After setting an all-time high at roughly $108,000 in December, Bitcoin has pulled back and can’t seem to retake $100,000 – let alone make that run toward $120,000 that many have predicted.
Is a crash coming?
It’s possible. We don’t have a crystal ball, and crashes are common for this volatile asset.
But at times like these, it’s critical to remember history.
Here’s Mario Nawfal, an entrepreneur and investor known for founding the Athena Group of Companies, which spans industries like e-commerce, blockchain, and consulting:
Crypto has hit 300M users in just 12 years—43% faster than mobile phones and 20% faster than the internet, per BlackRock.
Younger generations, inflation fears, and Trump’s pro-crypto stance are fueling the surge.
With Bitcoin ETFs projected to hit $250B and regulatory wins piling up, crypto’s mainstream takeover is accelerating.
For a visual on this, here’s a fascinating chart from BlackRock comparing Bitcoin’s user adoption (in gold) to the internet’s user adoption (in black).
Just a reminder to analyze the big picture before you make any major decisions with your crypto holdings.
Speaking of “Trump’s pro-crypto stance,” as Nawal just put it, our own crypto expert Luke Lango believes the biggest pro-crypto moves from Trump are ahead of us.
In fact, Luke believes three Trump decisions are coming our way in the first 100 days of his second term that will ignite the biggest crypto super-cycle we’ve ever seen.
Luke pulled back the curtain on those details in his presentation last week, the Great American Crypto Project. If you missed it, you can catch a free replay right here.
We’ll keep you updated on all these stories here in the Digest.
Have a good evening,
Jeff Remsburg
