Hello there,
This week's pullback in U.S. stocks has kept talk of an "AI bubble" alive and well on Wall Street. Any weakness is being scrutinized as potentially the start of more severe declines. Comparisons have been drawn with the dotcom bubble. But there is one big difference between then and now: geopolitics.
Unlike the consumer-focused stocks of the dotcom era – remember Pets.com - the AI boom has a strong national security element. A Reuters exclusive out today illustrates the trend. Google is planning to build a large AI data center on the remote outpost of Christmas Island after signing a cloud deal with Australia's Department of Defence. The island is increasingly seen by defence officials as a critical frontline in monitoring Chinese submarine and other naval activity in the Indian Ocean.
And the U.S. is expanding its military presence in certain regions, despite - and in some cases, because of - President Trump's "America First" doctrine. Reuters has an exclusive today on the U.S. preparing to establish a military presence at an airbase in Damascus and we've done some great reporting on how it's preparing a military staging ground near Venezuela.
Speaking of "America First", Trump's tariffs are on trial at the Supreme Court. The court's tough questioning has fuelled speculation that the tariffs will be struck down. If that happens, the Trump administration is expected to simply invoke other trade laws. But that will still mean more uncertainty for companies and countries which had just started to get used to the idea of a somewhat more stable trade environment.
The question of refunds is particularly thorny should the administration lose at the Supreme Court. Companies have already paid out more than $100 billion under Trump's tariffs and Justice Amy Coney Barrett said it "could be a mess" for the courts to administer refunds if the tariffs were declared illegal.
What is already a mess is the scramble now afoot among airlines to rejig schedules after the U.S. ordered flight cuts at some of the nation's busiest airports. It's the latest travel disruption from the prolonged government shutdown.
The shutdown, now the longest in U.S. history, has forced some 13,000 air traffic controllers and 50,000 Transportation Security Administration agents to work without pay and staffing shortages have already caused tens of thousands of flight delays nationwide.
The shutdown has also halted the publication of data about the U.S. economy, muddling the picture for investors. But private sources of information are offering a sobering glimpse at the labor market. U.S.-based employers cut more than 150,000 jobs in October, the biggest reduction for the month in more than 20 years, according to a report from Challenger, Gray & Christmas. AI adoption and cost-cutting are behind the layoffs.
And finally, over on the Reuters Econ World podcast, with the Louvre heist still making headlines, we are diving into the economics of art theft with Christopher A. Marinello, the CEO and founder of Art Recovery International. Hear why rare watches are so sought-after by thieves and what collectors and museums can do to better protect themselves. Listen here.
As always, I'd love to hear from you by hitting reply on this email or finding me on LinkedIn.
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