Why Dario Amodei and Sam Altman Are Faking the AI Doomsday Crisis | The Weekly Wrap

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Steve Eisman (0:56)

Oil prices approached $110.

This has sparked more inflation fears and the market is feeling dicey. The crypto world had a bad week and it is unclear where the industry goes from here. FICO wields a monopoly in mortgage credit scoring and its monopoly is going to break. Is AI really going to destroy us all or is something else going on? Dario Amodei, the CEO of Anthropic, followed up with his own doomsday thoughts. The entire future of Anthropic and OpenAI depends on there not being any slowdown. AI won't cause extinction, but these two CEOs are creating massive damage. It's a perfect storm, so what's really going on? Here's my theory.

Hi, this is Steve Eisman, and welcome to The Weekly Wrap. This is for the week ending Friday, September 18th, but recorded Thursday night, September 17th. This last Wednesday, September 16th, on our Premium Substack Subscription Service, we posted part one of a two-part masterclass on how to analyze banks.

I'm providing you with all the tools to understand how banks work and how to think about large cap, mid cap, and small cap banks and the investment banks as well. Originally, we had planned for part two to drop in two weeks. However, we changed our minds, and part two will now drop next Wednesday, September 23rd. On this week's wrap, we will discuss, one, the war in Iran, the rising price of oil, the Fed, and interest rates. Two, has Scott Besson lost all credibility? Three, more news on FICO, the credit bureaus, and now the mortgage insurers. Four, the crypto world had a bad week. And five, is AI really going to destroy us all, or is something else going on? The war in Iran continues, with no sign of any let up. Both sides are bombing each other and doing damage. As a result, oil prices approached $110, but then pulled back. This has sparked more inflation fears with the result that the 10-year yield climbed for a time above 5%.

Now for quite some time, I have been saying that the market will not be able to stomach some level of long-term rates. Originally, I thought that level was 4.5%, and that was wrong. But here we are at 5%, and the market is feeling dicey. Also, because of these renewed inflation fears, investors have been worried that the Fed will raise rates at its next meeting. And in fact, this week the Fed did raise rates by 25 basis points to a range of 3.75 to 4% to contain inflation. Fed officials also penciled in an additional hike later this year. This rate increase defies President Trump, who has been calling for the Fed to lower rates. On Wednesday, the market was not pleased by the Fed's actions. Not so much because of the hike, but because of the intimation that there would be more. However, it's all about long-term rates. And on Thursday, long-term rates declined below 5% because the market, at least for the moment, is assuming that higher short-term rates will cause the economy to slow. As a result, the market rallied back on Thursday. For now, 5% on the 10-year year does seem to be the demarcation line. A few more points on interest rates. The rise in long-term yields, I believe, is not just due to the war or oil prices or even inflation fears. These have all played a role. But there's something else. This year, approximately 500 billion in AI-related debt has been raised. That's a lot of long-term debt and it is creating a crowding out effect. In other words, some investors would rather buy AI long-term debt than long-term US treasuries. It's a perfect storm for Treasury Secretary Scott Besant, and I don't envy him his position. Clearly, he wants to drive long-term rates lower. With US debt at 40 trillion, higher rates feed the deficit even more. That is why he announced a program to buy $4 billion, later increased to $6 billion, in long-term treasuries. Unfortunately, it worked only for one day, and rates have simply marched higher since then. He needs a much bigger bazooka, or an alternative buyer. Now, I don't think that Besant is going to go off and hide in a cave. He will come back with some new plan. What that plan will be, I am not yet sure. Moving on. I have been short FICO for a while. My thesis was that the company got greedy and raised prices 1,600%.