TheBRRR’s Thoughts

GM,

Hope you had a great Thanksgiving.

Many of us shopped on Black Friday to take advantage of deep discounts and sales - US consumers spent $9.8B online on Friday, up 7.5% vs last year, potentially foreshadowing tomorrow’s consumer confidence data.

Today we’re covering the ongoing Open AI saga, as reports circulate that scientists and researchers within the company sounded the alarm due to a shocking breakthrough. So shocking, that it compelled the board to fire Altman.

We also covered surging usage of the Federal Reserve’s BTFP bailout program devised for underwater banks. The uptick suggests financial conditions are too tight and that the Fed will need to cut rates sooner than markets expect.

Editor’s Note: We’ve released V1 of our technical analysis chatbot. Premium subscribers can see the link in the premium section at the bottom of the email. I released a preview of what it can do in this post, where I ask it to analyze the daily and hourly bitcoin charts.

AI News

Q* Quake: AI Advance Sparks OpenAI CEO Shuffle

WHAT HAPPENED:

• Development of Project Q*: OpenAI developed a new AI model called Project Q*, aimed at advancing towards Artificial General Intelligence (AGI). This model, showcasing advanced mathematical reasoning abilities, raised significant concerns among OpenAI researchers about its potential risks to humanity​​.

• CEO Sam Altman's Dismissal and Reinstatement: The concerns about Project Q* led to the initial dismissal of CEO Sam Altman, following a warning letter from researchers to OpenAI's board. Altman's subsequent reappointment as CEO came after a strong pushback from a large number of OpenAI staff, highlighting internal disagreements and the complexities of managing cutting-edge AI research​​.

• Ethical and Safety Concerns: The development of Project Q* ignited a debate about the ethical implications and safety of such advanced AI technologies. This includes discussions about the balance between technological innovation and responsible development, reflecting the ongoing challenges in the field of AI​.

WHY IT MATTERS:

• Advancing AI Capabilities: Project Q* represents a meaningful advancement in AI, especially in the realm of mathematical intelligence, potentially leading to new applications in scientific research.

• Ethical and Safety Concerns: The project underscores ongoing concerns about the safety and ethical implications of rapidly advancing AI technologies, highlighting the need for careful consideration and potential regulation.

• OpenAI's Direction and Leadership: The controversy surrounding Project Q* reflects broader issues within OpenAI regarding commercialization, leadership decisions, and the pace of AI development, which are crucial in shaping the future of AI technology.
  
  Business Insider, DigitalTrends

Macro News

Banking on BTFP Amidst Financial Fluctuations

WHAT HAPPENED:

• Surge in BTFP Borrowing: November witnessed a notable increase in banks' reliance on the Federal Reserve's Bank Term Funding Program (BTFP), with outstanding loans reaching $114.1 billion. This surge, following a period of relative stability, signals ongoing distress in the banking sector.

• Changing Dynamics in Bond Market: Despite a recent rally in the bond market, banks continue to heavily utilize the BTFP. This trend indicates that the temporary recovery in bond values has not fully alleviated the pressures on banks' balance sheets.

• Shift in Discount Window Usage: While borrowing from the Fed's Discount Window spiked following the collapse of Silicon Valley Bank and Signature Bank, it has since returned to normal levels. In contrast, the use of the BTFP has not only persisted but also intensified, highlighting its role as a critical financial lifeline.

WHY IT MATTERS:

• Indicators of Underlying Financial Instability: The sustained and increasing dependence on the BTFP suggests that the banking sector is still grappling with significant vulnerabilities, despite surface-level stabilizations. This reliance is a clear indicator of underlying financial instability.

• Consequences of Interest Rate Hikes: The Federal Reserve's interest rate hikes, aimed at controlling inflation, have had a profound impact on the bond market and the overall financial health of banks. These measures have exposed the fragility of financial institutions in a higher interest rate environment, challenging the previous status quo of low rates and easy money.

• Potential for Wider Economic Impact: The ongoing financial strain within the banking sector, coupled with the broader implications of the Fed's policies, raises concerns about the potential ripple effects across other economic areas, such as commercial real estate. The situation underscores the interconnectedness of financial systems and the broader economy, highlighting the risk of further disruptions.

  
  ZeroHedge

AI Art of the Day

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The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.