Elon’s “Impossible” Summer
Elon: Always Something New to Do
You can’t say Elon Musk ever hesitates to burn the candle at both ends.
Four weeks from today, Tesla will roll out its long-awaited robotaxi — which will go by the name “Cybercab.”
Whether you realize it or not, self-driving technology relies on artificial intelligence. It’s just not the “generative” AI based on large language models that’s been all the rage since late 2022.
And so we call on Paradigm’s AI authority James Altucher to help us set the table today…
“Musk has described the robotaxi as a combination of Uber and Airbnb… allowing customers to order a Cybercab from the Tesla app… and for Tesla owners to lend their car to friends and family or rent out their Tesla to others for as long as they like.”
Yes, skeptics abound. “Musk has repeatedly made promises over the past seven years that Full Self-Driving technology was just around the corner,” James allows.
“Although Tesla has made great progress in that time, the technology is still not quite fully self-driving and requires a human operator.”
Tesla’s claims are also drawing scrutiny from regulators. Today’s Washington Post has a story detailing investigations by the U.S. Justice Department and California’s DMV. The headline: “Tesla Sells ‘Self-Driving’ Cars. Is It Fraud?”
“Although I’ve been skeptical of Elon’s ability to deliver on Full Self-Driving (FSD) in the past, I expect he could have something impressive to announce on Aug. 8,” says James.
“The stakes are higher than ever and Musk has a history of achieving the impossible.”
Two weeks ago, James had a conversation with a former member of Tesla’s management who said this: “I wouldn't bet against Elon — he has a track record of making the impossible happen, although sometimes he delivers a bit later than promised.”
Which brings us to Musk’s other big project in what James calls “the summer of Elon.”
Last week, Musk revealed on X-formerly-Twitter that the platform’s new AI model — dubbed “Grok 2” — will also be rolled out next month.
As you might know, Grok’s unique selling proposition is that it’s not subject to the “woke” biases that afflict ChatGPT, Claude and (especially) Google Gemini.
Still, that’s not enough by itself to be competitive. “The current version of Grok, 1.5V, was released in March and is already starting to show its age against the latest versions of ChatGPT and Claude released in the past two months,” says James.
“With Grok 2, Musk intends to surpass the competition in the chatbot’s ability to integrate real-time web search results. The new bot will also likely have a strong emphasis on capabilities in math and software development — two skills Musk is especially keen to master with AI.”
So yes — Grok 2 coming out at roughly the same time as the vaunted Cybercab announcement? That’s ambitious.
“Musk is betting big that he can deliver on two big projects at a pivotal time,” says James.
“To be fair, the man has a history of pulling off the impossible — making electric cars sexy, desirable and cheap while also launching more satellites into space than everyone else combined.”
We interrupt James for some news in progress…
This just in: “Tesla Inc. is delaying its planned Robotaxi unveiling to October,” Bloomberg reports, “to allow teams working on the project more time to build additional vehicle prototypes, according to people familiar with the decision.”
Suddenly TSLA is down 7% on the day. What was it that fellow was saying about Musk delivering “a bit later than promised”?
Well, this bit of breaking news reinforces something that James has been thinking about for a while. The investment thesis on the Cybercab rollout is just too hard. Too many unknowns — especially the regulatory ones.
In contrast, James says there’s a much more investable proposition taking shape within the next three weeks. Members of the Paradigm Mastermind Group are already hip to what I’m talking about.
About That “Lower-Than-Expected” Inflation…
The markets are giving a mixed reception to a lower-than-expected inflation number.
The consumer price index ticked down 0.1% in June. Literally no one among dozens of Wall Street economists polled by Econoday expected that outcome.
Thus the official year-over-year inflation rate clocks in at 3.0% — exactly where it was a year ago at this time. Progress!
As we warned a year ago, the research is clear that once inflation sails beyond a certain level, getting it back to a “normal” 2% range is a years-long process. It might be the early 2030s before inflation retreats to levels we were accustomed to in the 2010s.
The mainstream spin is, of course, infuriating…
Yeah — a teensy one-month blip driven mostly by a 2% drop in energy prices. Which, as you might have noticed at the gas station, has already reversed. Hooray!
If you’re a newer reader, and you suspect the official inflation numbers don’t reflect your actual cost of living… you’re absolutely right.
In the early 1980s, federal statisticians started monkeying with the numbers to make inflation look like less of a problem than it was. (The objective was to keep a lid on Social Security cost-of-living increases. Worked like a charm.)
The manipulations have continued apace over the decades. Two of the most egregious statistical sleights-of-hand are these…
- Hedonic adjustments. If the price of a new car goes up, but the manufacturers add new features to the new models, well then the price of a new car hasn’t really gone up, has it?
- Substitution. If you start buying hamburger because steak is too expensive, well, your price of beef hasn’t really gone up, has it?
It’s with tricks like these that the official inflation rate allegedly peaked at 9.0% in the summer of 2022 (see the chart above) — even though nearly everyone’s real-world experience was worse than the record 14.8% set in March 1980. (According to Shadow Government Statistics, an outfit that still runs the numbers the way the feds did in Jimmy Carter’s day, the summer 2022 peak was actually 17.3%.)
Of course, the markets look at the inflation numbers through the prism of how soon the Federal Reserve might “pivot” to cutting interest rates.
Today’s number doesn’t really change the state of play. Judging by the futures markets, the Fed will stand pat at the end of this month — waiting to cut until the following meeting in mid-September.
The market reaction is… curious. The Nasdaq — chock-full of poorly capitalized tech companies that would welcome lower interest rates — is down over 1.8% from yesterday’s record close. The S&P 500’s loss is more modest, but still over three-quarters of a percent. The Dow is slightly in the green.
In contrast, precious metals are blasting higher — gold up 2% in record territory at $2,419 and silver at $31.46. The HUI index of gold stocks is on the verge of breaking through 300 for the first time in over two years.
Crude’s pullback didn’t last long; it’s back up to $82.65. Paradigm’s 30-year veteran floor trader Alan Knuckman says if it can push past $85 — a level last seen less than three months ago — look for a quick sprint to last September’s peak of $95.
Bitcoin: No “Trump Bump” in Sight
Bitcoin languishes a little over $57,000. It did not experience a “Trump bump.”
Yesterday, Donald Trump was confirmed as a speaker at the Bitcoin 2024 conference in Nashville on July 27. The Cointribune site ventures that his appearance “could mark a decisive turning point in the integration of cryptos into the heart of American political debate.”
Perhaps — but in the meantime, the heady projections of Bitcoin at $150,000 or $175,000 are looking a wee bit ambitious. At least right now.
Four months after notching an all-time high over $73,000, “Bitcoin’s pops and drops have been confined to a wide trading range of roughly between $57–72K,” says Paradigm chart hound Greg Guenthner.
At this stage, Bitcoin is in “an uncomfortable position as it teeters in no-man’s land, a cool 25% off those all-time highs set back in March. More importantly, Bitcoin has lost a critical support level as it falls to prices not seen since February.”
Of course the “hodlers” couldn’t care less; they’re in it for the long haul. For everyone else, Greg says a likely scenario is “a similar sideways consolidation to what we witnessed last year. The sideways trend in 2023 had its fair share of rallies and dips, yet never got to a point that would have warned of a bigger breakdown (Bitcoin never fell back below $25K following the March rally).
“Taking a more bearish view, I could also see Bitcoin tumbling back to the $43K–44K range, which was an area that acted as resistance back in December–January. If this scenario were to play out, I suspect we would have to endure a longer drawdown period before expecting crypto to reset for its next bull run.”
All that said, “I doubt crypto is completely broken. Instead, it probably just needs time to regroup. Whether this takes three weeks, three months or longer remains to be seen. This isn’t a dip I’m rushing to buy. Not yet!”
Update: Power Outage Threats
Apart from hurricane-driven power outages in Texas, the threat of summertime power disruptions is rising on both coasts.
Out west, the California Independent System Operator is warning that hot weather is taxing the grid this week — especially today.
"If weather or grid conditions worsen,” says a press release, “the ISO may issue a series of emergency notifications to access additional resources, and prepare market participants and the public for potential energy shortages.”
The ISO is also bracing customers for a “Flex Alert” — in which they’d be asked to voluntarily cut their usage between 4:00 p.m.–9:00 p.m.
Meanwhile, there are no immediate threats in the Northeast… but officials from 10 states have signed a memorandum of understanding to share power among the three independent system operators serving the region. That’s New York, New Jersey, Delaware, Maryland and all the New England states.
The idea is to make sure the lights stay on as more of those states aim to get rid of fossil fuels for electricity; several of them have a 100% “clean” energy mandate as early as 2030.
Yeah, good luck with that at a time when AI is propelling an 8X increase in power demand by data centers between now and… 2030.
Meta-mailbag: What Happened to 5 BULLETS?
“Can you bring back ‘5 BULLETS’ in the subject line?” a reader asks after we made a subtle shift a few days ago. “It makes it easier to spot them from the other emails.
“I've been thinking that there was something wrong or that the 5 Bullets weren't being sent out for the last week since the subject line changed and I have been deleting them. I found the archives and got caught up,
“Love the 5 Bullets every day and the work that Dave and Emily put into it and don't want to miss them!”
Dave channels Yoda:
So yes, about a half-dozen of us at Paradigm Press collectively decided last week to drop “5 BULLETS:” from the subject line.
And I swear up and down the objective was not to make it harder to distinguish the daily issues from what you delicately call “the other emails” — i.e., the sales-y stuff that pays the bills around here. (Please remember what our business model is, and why it gives us an advantage as purveyors of fiercely independent research.)
When this e-letter went through a rebrand and facelift a little over a year ago, we felt the “5 BULLETS:” was essential to reinforce the new identity.
But as time has gone on, that need has lessened… and it’s become painfully apparent that there’s only so much real estate to work with in a subject line. Best to use it to come up with something catchy that hopefully stands out from the massive email clutter all of us experience nowadays.
Sorry for any inconvenience. Hope you understand the rationale… and we thank you for your continued patronage!
