The Hidden Dangers Of AI In Finance

 by Adam Sharp via DailyReckoning.com,

Jim Rickards recently published a compelling article on AI risk for Insider Intel subscribers.

In it, Jim discusses a different way in which AI could crash markets. One that is totally separate from the DeepSeek, China, and NVIDIA angle we’ve been covering for the past week.

Today we’re going to review his key points and explore them in detail.

Here’s Jim:

“The ultimate danger arises when a large cohort of asset managers controlling trillions of dollars of assets all employ the same or similar AI algorithms in a risk management role. An individual robot working for a particular asset manager tells the manager to sell stocks in a crashing market. In some cases, the robot may be authorized to initiate a sale without further human intervention.

Taken separately, that may be the best course of action for a single manager. In the aggregate, a selling cascade with no offsetting buy orders from active managers, specialists or speculators takes stock prices straight down. Amplification through feedback loops makes matters worse.

Individual AI systems have various trigger points for selling. Not all will be triggered at once, yet all will be triggered eventually as selling begets more selling, which triggers more automated systems that add to the selling pressure, and so on. There are no contrarians among the robots. Building sentiment into systems is still at a primitive stage.”

This is a good example of why I read Jim’s work. He always approaches issues from a unique and thoughtful angle.

This risk is clearly real. We are now at the point where trading firms are integrating LLMs (AI models) into their proprietary algorithms.

What happens if a majority of trading firms are using the same AI software to drive their trading? For example, it’s likely that many money managers have integrated OpenAI’s ChatGPT models into their algos.

Now that DeepSeek R1 is the new shiny object, maybe a significant portion of firms are switching to that model.

Perhaps DeepSeek approaches trading in a completely different way. What happens if ChatGPT interprets data bullishly, but DeepSeek sees the same information as bearish?

This means that the release of a new cutting-edge model could actually change the market’s direction. It’s newer, it’s smarter, and it thinks stocks are overvalued by 40%! Sell!

Or perhaps even more disturbing, what if all the leading models come to very similar conclusions? Everybody deciding to buy or sell at the same time is a recipe for trouble. It would magnify moves on the way up and down, and could create a nasty feedback loop (as Jim points out).

70% of Markets

Today algorithmic (software-driven) trading accounts for an estimated 65-70% of American stock market volume. And this number is only increasing.

We don’t know how deeply AI models (specifically LLMs) are integrated into trading algorithms at this moment. Investment software is notoriously secretive. But my guess is it’s a significant part of the market and growing fast.

For example, we can assume that large trading firms are using LLMs/GPTs for market sentiment analysis. They’re reading and digesting social media like LinkedIn and X to figure out if the public is scared or greedy. This data is then integrated into core algos.

AI sentiment analysis has the potential to be a very useful tool for traders. However, the risks Jim mentions do apply. We will likely see increased “herding” behavior as a result.

Sentiment analysis is one thing. But are we at the point where LLMs are actually making trading decisions at a large percentage of firms? My guess is that if we aren’t there yet, we will be soon. Using AI models is an order of magnitude cheaper than hiring Harvard MBAs and Princeton PhDs.

As I mentioned earlier, AI users tend to latch onto the latest, hottest model. ChatGPT dominated early on, then Anthropic’s Claude became the trending new thing. Now, China’s DeepSeek is making waves.

There’s a very real risk of herding reactions if everyone is trading off similar analysis. And if everyone is constantly switching to the hot new model, there are countless ways in which it could affect markets going forward.

Mr. Rickards closes his piece with a powerful metaphor:

“You might want to re-read Frankenstein by Mary Shelley. The novel centers on the creature made by Dr. Victor Frankenstein. The term “creature” is not incidental; it’s intended to evoke the term Creator. Contrary to movie portrayals of the creature as a brutish, homicidal monster, the literary version was actually highly intelligent and learned French, read Shakespeare, and was able to engage in long philosophical discourses.

Of course, such natural language processing and self-learning are exactly what AI is about. The creature can be thought of as the first fully realized AI system in literature. The central dilemma in Frankenstein was not whether the creature was intelligent (it was). The dilemma was whether it had a soul. You can draw your own conclusions. My view was that the creature did not have a soul … but perhaps it deserved one. Now we face the same dilemma with AI.”

One way to prepare is to hedge the digital world with the analog (gold and silver), as Jim suggested yesterday. I especially like silver here (which is +3.6% on the day as I write this and looking good).

https://www.zerohedge.com/markets/hidden-dangers-ai-finance

"It's Like A Switch Was Flipped": Border Encounters Plummet 94% Under Trump

 Since President Donald Trump's inauguration on Jan. 20, illegal alien encounters at the southern US border have plummeted an average of 94% during his first 9 days, compared to President Biden's last 19 days in office.

Screenshot, Truth Social

During Trump's first 9 days in office, after new border measures were implemented, there were an average of 126 daily encounters at the border vs. 2,087 per day during the last 2.5 weeks of the Biden administration.

As Rasmussen's Mark Mitchell put it last week, "It's like a switch was flipped."

During his 2024 campaign, Trump vowed to crack down on illegal immigration by continuing construction on the border wall, conducting the largest mass deportation in US history, slapping tariffs on Canada and Mexico until they control the situation from their end, and increasing penalties for illegal aliens.

To that end, there were more than 3,500 illegal immigrants who were arrested during Trump's first week in office, including over 1,100 in a single day.

As American Greatness notes further, on Wednesday, shortly before signing the Laken Riley Act into law, the 45th and 47th President announced his intention to send 30,000 of the most dangerous criminal illegals to Guantanamo Bay, Cuba.

The Laken Riley Act, named after the 22-year-old Georgia nursing student who was murdered by a Venezuelan illegal, is the first bill signed into law during President Trump’s second term. It gives federal immigration authorities broader power to arrest illegals who commit dangerous crimes, including drunk driving and assaulting police officers.

https://www.zerohedge.com/political/its-switch-was-flipped-border-encounters-plummet-94-under-trump

Syria's Al-Qaeda Branch Dissolves, Says Goals Completed By Regime Change

 by Dave DeCamp via AntiWar.com,

The Salafi jihadist group Hurras al-Din, Syria’s official al-Qaeda affiliate, announced this week that it was dissolving, saying its goals were complete following the regime change that ousted former Syrian President Bashar al-Assad.

"[T]he sons of the Al-Qaeda Jihad organization rushed to support the people of the Levant and assist them in removing injustice from them until God permitted this Sunni Muslim people to triumph over one of the most unjust tyrants of the modern era," Hurras al-Din said in a statement.

Masked terrorists in Syria. via Getty Images

The group said al-Qaeda had ordered it to dissolve. "In light of these developments on the Levantine scene, and by an emir’s decision from the general command of al-Qaeda in the Levant organization, we announce to our Muslim nation and to the Sunnis in the Levant the dissolution of the Guardians of Religion Organization (Hurras al-Din)," the group said.

Hurras al-Din formed in 2018 as an offshoot of Hayat Tahrir al-Sham (HTS), the militant group that led the offensive against Assad and now rules Syria. HTS was previously the official al-Qaeda affiliate in Syria when it was known as the al-Nusra Front, but it rebranded in 2016 to gain international support.

Over the years, there have been tensions between HTS and Hurras al-Din, which were both based in Syria’s northwest Idlib before HTS took Damascus. In 2020, HTS began arresting some senior members of Hurras al-Din. The US had also waged a drone war against Hurras al-Din and bombed them in Idlib as recently as August 2024.

Hurras al-Din told its members to keep their weapons and urged Syria’s new leaders to keep Sunni Muslims armed.

"We advise them to keep the weapon in the hands of the Sunnis in the Levant in order for a nation to remain carrying weapons so that no tyrant will enslave it, and no occupier will covet it," the group said.

Hurras al-Din’s fighters may merge with Syria’s new HTS-led military, which has appointed foreign jihadists to senior positions. The dissolution announcement came after HTS’s leader, Abu Mohammad al-Julani, now known by his real name Ahmed Hussein al-Sharaa, said there would be no armed groups outside of the new HTS-led government’s control.

In the meantime, the Pentagon announced the following development:

Sharaa, the founder of al-Qaeda in Syria, was declared the president of Syria on Wednesday. The US, under President Biden, helped Sharaa and HTS take over Syria despite their al-Qaeda history and the fact that HTS is listed by the US as a terrorist organization.

https://www.zerohedge.com/geopolitical/syrias-al-qaeda-branch-dissolves-says-goals-completed-regime-change

NYT, NBC, NPR, Politico Evicted From Pentagon Press Offices In Favor Of Trump-Friendly Outlets

 The innumerable consequences of the 2024 election keep gushing forth at a pace that's hard to keep up with. Here's a new gem: On Friday evening, the Department of Defense told The New York Times, NBC News, National Public Radio and Politico that they have two weeks to vacate their long-held and treasured offices inside the Pentagon. 

Three of their four replacements skew decidedly to the Trump-friendly sector of the political spectrum: the New York Post, One America News Network and Breitbart. Throwing a bone to leftists, HuffPost news snagged Politico's old slot. The Pentagon Press Association said it was "greatly troubled by this unprecedented move by DOD to single out highly professional media."

The short-notice evictions from the hallowed "Correspondents' Corridor" spring from the launch of a "new annual media rotation program for [the] Pentagon Press Corps," according to a memorandum sent by DOD spokesman John Ullyot on Friday and posted by CNN Pentagon correspondent Haley Britzky. The program seeks to "broaden access to the limited space...to outlets that have not previously enjoyed the privilege and journalist value of working from physical office space in the Pentagon," said Ullyot.

The booted outlets will retain their status as full members of the Pentagon Press Corps, entitled to attend briefings and be considered for travel with officials. "The only change will be giving up their physical workspaces in the building to allow new outlets to have their turn to become resident members of the Pentagon Press Corps," wrote Ullyot. 

An excerpt from the DOD announcement that four of the left's favorite news outlets are being kicked out of their Pentagon press offices

Make no mistake: Those physical workspaces are a big deal. "Kicking out reporters HURTS coverage. If you can’t file your stories from inside the building you are disadvantaged. If you don’t have a work space you are disadvantaged," wrote former Pentagon Press Corps VP Kevin Baron on X. That commentary was part of a thread condemning the development as "the erasure of journalism at the Pentagon." 

The Pentagon Press Corps comprises more than two dozen outlets. The program calls for one outlet from each press medium to rotate from the premises every year. As if Breitbart's invitation into the Pentagon weren't enough to outrage establishment media types, the fact that it's taking the "radio" slot from NPR only compounded the indignation. In a Friday night article, CNN's Brian Stelter called foul:  

"Breitbart – a well-known web site for pro-Trump coverage and commentary – barely has a radio operation of its own. The word 'radio' doesn’t appear on its home page at all. The media outlet has a distribution deal with SiriusXM and one big podcast, Breitbart News Daily. Its footprint pales in comparison to NPR, which provides news coverage for local stations all across the country."

In another hilarious, leftist-pummeling swap, One America News Network will be sliding into NBC's slot. Expressing sympathetic disbelief, CNN's Britzky emphasized that NBC "has an entire booth w/ cameras etc." NBC News promised to soldier on, telling Reuters,

"We’re disappointed by the decision to deny us access to a broadcasting booth at the Pentagon that we’ve used for many decades. Despite the significant obstacles this presents to our ability to gather and report news in the national public interest, we will continue to report with the same integrity and rigor NBC News always has."

For the many Americans who are still angry about legacy media's aggressive role in working to derail Trump's 2020 re-election bid, Politico's punishment is perhaps the most satisfying. The outlet took the lead in spreading the consequential, Deep State lie that Hunter Biden's "laptop from hell" -- first reported by the New York Post -- was part of a Russian misinformation scheme. That lie helped ignite unprecedented censorship of the Post's coverage. Fittingly, the Post -- the country's longest-running newspaper -- is among the outlets graduating to space in the Pentagon. 

This infamous 2020 Politico article paved the way for broad social-media censorship of the New York Post's legitimate reporting of Hunter Biden's scandalous laptop contents 

"The National Press Club is deeply concerned by the Defense Department's decision to remove certain media organizations from their dedicated spaces in the Pentagon," club president Mike Balsamo said in a statement. "Any action that restricts the ability of journalists to report on the operations of the U.S. government should alarm all who value transparency and press freedom." Balsamo pointed to the Pentagon press corps' history of "diversity," yet the announced swaps inarguably increase viewpoint diversity. 

The Pentagon's shot across the bow of legacy media follows Trump press secretary Karoline Leavitt's announcement that the White House will significantly broaden media access, with an emphasis on alternative media. "The Trump White House will speak to all media outlets and personalities, not just the legacy media that are seated in this room,” she said in her first press conference. 

https://www.zerohedge.com/political/nyt-nbc-npr-politico-evicted-pentagon-press-offices-favor-trump-friendly-outlets

Which Senators Are Owned By Big Pharma? RFK Jr.'s Confirmation Hearings Are Showing Us

 Via American Greatness,

Robert F. Kennedy Jr.’s confirmation hearings for Secretary of Health and Human Services (HHS) have seen some of some of the harshest questioning of any of President Trump’s cabinet nominees by D.C. hardliners.

One upside to the acrimony is that Kennedy’s harshest critics and defenders of the status quo are now being publicly revealed as the lawmakers to whom the pharmaceutical industry has donated the most money.

Sen. Bernie Sanders, who is the largest recipient of money from Big Pharma, asked Kennedy if healthcare was a human right and then refused to let the HHS nominee answer his question with anything other than a “yes” or “no” answer.

Sanders would not let Kennedy differentiate between unalienable rights like free speech and man-made “rights” that create ever-increasing obligations to the government.

Sen. Sanders has been the recipient of nearly $2 million in donations from pharmaceutical companies.

Sen. Elizabeth Warren (D-MA) showed herself to be one of Kennedy’s most strident detractors and was, by far, the angriest of the lawmakers questioning him during yesterday’s confirmation hearing.

Sen. Warren accused Kennedy of wanting to sue vaccine manufacturers whose vaccines cause harm as a means of personally enriching himself and warned that holding Big Pharma accountable for any harm caused could bankrupt the industry.

Kennedy responded, “Senator, you’re asking me not to sue pharmaceutical companies,” to which Warren became enraged shouting, “No, I’m not!”

Warren is third on the list of U.S. Senators who have accepted large amounts of Big Pharma money having received nearly $1.2 million in donations from the drug industry.

Sanders and Warren are just two of the Senators engaging in astonishing hypocrisy for accusing Kennedy of trying to get rich at the expense of the health of the American public while lining their pockets with cash from Big Pharma.

Pay attention to who has accepted the most in drug industry money and it’s easy to connect the dots to who is fighting the hardest to prevent Kennedy from being confirmed.

https://www.zerohedge.com/political/which-senators-are-owned-big-pharma-rfk-jrs-confirmation-hearings-are-showing-us

Trump's Overhaul Of The Federal Bureaucracy Backed By Recent Survey Research

 by Elizabeth Sheld via RealClearPolicy,

Since returning to office for a second term, President Trump has taken aggressive action to overhaul the federal bureaucracy. After a week in office some of Trump actions towards federal workers include: removing employment protections for civil servants, firing17 inspectors general, reassigning career officials in the Department of Justice, sending home 160 staffers from the National Security Agency and firing the lawyers at the Department of Justice who prosecuted Trump under special counsel Jack Smith.

Trump’s efforts have been met with hostility and criticism from the media and predictably from his political opposition.

Opinionist Phillip Bump at the Washington Post  writes Trump’s actions are “a sharp disruption of how the government works.” Bump laments that “Trump is clearly interested in...seeding loyalists throughout the executive branch.”  At Axios, Zachary Basu and Dave Lawler explain that Trump is “transform[ing] the federal bureaucracy into an army of loyalists.” Democratic Senator Tim Kaine, who represents 140,000 federal workers in Virginia, told reporters "This gleeful hatred of the federal workforce will lead to nothing good."

But are Trump’s efforts to transform the government workforce justified by a real concern that his policy platforms--which earned him a presidential victory--will be thwarted by anonymous bureaucrats?

Recent survey research suggests Trump is right to be concerned. Napolitan Institute found that just 45% of Federal Government Managers would follow a legal order from President Trump if they thought the order was bad policy and instead would do what they thought was right. Among managers who voted for Kamala Harris that figure jumps to nearly three-quarters (69%.) The survey also found a majority (52%) of the federal managerial class voted for Kamala Harris in the 2024 election.

Those current survey results are consistent with events that developed in the first Trump Administration, where we learned how bureaucratic opinions on “right” policy interfered with the power of the duly elected executive officer.

Former diplomat Jim Jeffrey revealed that his team routinely mislead the Trump Administration after the president had ordered the withdrawal of troops from Syria. “What Syria withdrawal? There was never a Syria withdrawal,” Jeffrey said. “When the situation in northeast Syria had been fairly stable after we defeated ISIS, [Trump] was inclined to pull out. In each case, we then decided to come up with five better arguments for why we needed to stay. And we succeeded both times. That’s the story.”

“We were always playing shell games to not make clear to our leadership how many troops we had there,” Jeffrey said in an interview.

While Jeffrey’s revelation came after Trump had left office from his first term, there was a real time revelation of a policy conflict between President Trump and the “interagency consensus” that would become foundation of the first Trump impeachment.

The policy difference originated from a phone call between Trump and Ukrainian President Volodymyr Zelensky when Trump requested Zelensky open an investigation into possible corruption at the Burisma energy company before receiving a military aid package. Trump’s 2020 election opponent Joe Biden’s son was on the board of Burisma.

A central part of the subsequent impeachment case was testimony from Lt. Alexander Vindman (ret.), who had been detailed to the National Security Council and present for the phone call. Vindman explained in his opening statement to the House impeachment committee he was concerned the president chose to wield his executive authority in a way that was at odds with the “interagency consensus.” Vindman testified "...a false narrative of Ukraine inconsistent with the consensus views of the interagency," Vindman said in his opening statement. "This narrative was harmful to U.S. government policy. While my interagency colleagues and I were becoming increasingly optimistic on Ukraine's prospects, this alternative narrative undermined U.S. government efforts to expand cooperation with Ukraine."  But Vindman and the “interagency consensus” have no authority to determine or execute their interpretation of U.S. government policy or in other words, “do what they thought was right.”

The New York Times editorial board supported and encouraged the usurpation of executive authority in favor of the “right” bureaucratic opinion by praising the government bureaucracy overriding or ignoring President Trump’s lawful authority. “...patriotic public servants — career diplomats, scientists, intelligence officers and others...have somehow remembered that their duty is to protect the interests, not of a particular leader, but of the American people.”

There is no way to know exactly how extensive bureaucratic resistance interfered with Trump’s ability to govern in his first term, but we do know 46% of current Federal Government Managers would ignore the legal order of President Trump and instead do what was “right.” Trump is making the correct move to overhaul the federal bureaucracy in order to deliver on the campaign promises that got him back in office.

Elizabeth Sheld is a veteran political strategist and pollster who has worked on campaigns and public interest affairs.

https://www.zerohedge.com/political/trumps-overhaul-federal-bureaucracy-backed-recent-survey-research

Emaciated American-Israeli & Other Hostages Released In Gaza As Truce Progresses

 Three hostages abducted during the October 7, 2023 have been freed by Hamas on Saturday after 484 days in captivity as the ceasefire deal continues to hold and advance.

They were let go in a ceremony in Gaza's Khan Younis, which has become a familiar scene - set up almost like a 'graduation' but with anti-Israeli banners set up behind the stage. They were released to the International Red Cross and then went back to Israel at the Gaza City port. Among the freed was 65-year old American-Israeli dual national Keith Siegel, as well as Ofer Calderon, 54, and Yarden Bibas, 35.

Hamas militants stand next to Keith Siegel, via Reuters

Various reports and eyewitnesses commented on Siegel's significant weight loss during the lengthy captivity. But all hostages appeared generally in good health, and the handover took place without the chaos of the Thursday freeing of three Israelis and five Thai nationals.

Siegel is the first hostage with American citizenship to have been freed during this current ceasefire. He's been living in Israel for four decades, and is originally from North Carolina. There were half a dozen dual US-Israeli nationals taken on Oct.7, as CBS reviews:

It is believed that at least two of the six American hostages still held in Gaza are alive — Sagui Dekel-Chen, 35, who grew up in Bloomfield, Connecticut, and Edan Alexander, 19, from Tenafly, New Jersey. Four other Americans are believed to have been killed in captivity.

Siegel's wife Aviva was also taken hostage by Hamas militants on Oct. 7, but was released in an earlier hostage and prisoner swap in November 2023.

Speaking to CBS News about a year after her release, Aviva Siegel said there were moments as Hamas militants forced her and her husband through tunnels under the Gaza Strip that they felt "sure we were going to die."

Strangely, Hamas has been issuing "gift bags" to each freed hostage, apparently containing photographs of the duration of their detention in Gaza. 

The Times of Israel describes as follows:

Dual US-Israeli national Siegel was handed over at Gaza City’s port, paraded on a stage overlooking the sea as he carried two of the “gift bags” forced on the hostages by the terror group. According to the Walla news site, the second bag was for his wife Aviva, freed by Hamas in November 2023.

This latest, third round of exchanges included 183 Palestinians set free who were held in Israeli prisons. They returned to Gaza Strip and the West bank to scenes of jubilation.

Israel has been trying to prohibit and crackdown on these large Palestinian celebrations. Al Jazeera has meanwhile written that "As Palestinians are released from Israeli prisons as part of the Gaza ceasefire deal, many show signs of severe beatings inflicted before their release, a prisoner rights group says."

https://www.zerohedge.com/geopolitical/american-israeli-two-other-hostages-released-gaza-truce-progresses