Fake news, real market crash
For a few minutes on Monday, an ominous image of black smoke billowing from what appeared to be a government building near the Pentagon sparked investor fears, sending stocks plunging.
experts quickly dismissed the photo as a hoax, likely cobbled together with artificial intelligence, and markets quickly recovered. But it illustrated one of the big fears behind the government’s zeal to regulate AI: that the technology could be used to stoke panic and sow misinformation, with potentially disastrous consequences.
It may have been the first time that an AI-generated image moved the markets, according to Bloomberg. The image – which claimed an explosion was reported near the Pentagon – first appeared on Facebook. It then quickly spread to Twitter via accounts with large followings, including the financial news site ZeroHedge (which displays a blue check mark through its Twitter Blue subscription service) and the Kremlin-controlled RT.
Within minutes, internet sleuths began debunking the image, and soon after, ZeroHedge and RT deleted it from their accounts, while Facebook blocked access to the original post. Still, the incident underscores how even unsophisticated fakes can spread misinformation quickly, especially through credible social media channels.
Regulators have warned of exactly this type of problem:
Gary Gensler, chairman of the SEC, said last week that bad actors could use AI to exploit the “fragility” of financial systems.
And the FTC has raised the alarm about how AI-generated deepfaked images and cloned voice systems can be used to trick people into new types of fraud schemes.
More potent threats may lie ahead. In a blog post on Monday, Sam Altman — the CEO of OpenAI whose Senate testimony on AI dominated Washington last week — and two top lieutenants warned that within a decade, these systems could reach “superintelligence.”
In response, they said, global governments should consider creating a regulator, similar to the International Atomic Energy Agency, that can inspect, audit and, where necessary, restrict systems that go beyond a certain level of capacity. “The governance of the most powerful systems, as well as decisions regarding their deployment, must have strong public oversight,” write Altman and his colleagues.
AI isn’t always terrible for stocks, it’s worth noting. Investors boosted the market values of tech companies including Alphabet, Meta, Microsoft and chipmaker Nvidia.
As of last week, seven stocks accounted for 85% of the S&P 500’s gains this year, according to Morgan Stanley Wealth Management. All but one member of this group invest heavily in AI
Even so, many of these actions are vulnerable to interruptions caused by the AI. At a conference in San Francisco on Monday, Bill Gates suggested why: “You’ll never go to a search engine again,” he said. “You will never go to a productivity site. You will never go to Amazon again.”
HERE’S WHAT’S HAPPENING
TikTok sues Montana for banning the video app. The Chinese-owned company argued in federal court that the effort to stop it from operating within state borders was unconstitutional. Meanwhile, The Information reports that Oracle, TikTok’s cloud provider, has only limited access to the app’s source code, undermining claims that the company’s plan to satisfy US data privacy concerns was moving forward.
Western states strike a deal to preserve the Colorado River. Arizona, California and Nevada have agreed to temporarily draw less water from the drought-stricken river in exchange for $1.2 billion in federal payments to irrigation districts, cities and Native American tribes in the three states. But the pact runs until 2026, and future droughts could further deplete the river’s supply.
Glenn Youngkin reportedly reconsiders running for president. Virginia’s Republican governor had second thoughts after ruling out a 2024 race, according to Axios. He was encouraged by Republican donors eager to see a more moderate alternative to Donald Trump, who leads the Republican polls.
E. Jean Carroll seeks new damages from Donald Trump. The writer, who this month won $5 million from the former president after a jury found him responsible for sexual abuse and defamation, now wants a “very substantial” additional sum after he insulted her at a town hall on May 10 in CNN. Carroll’s lawyers accused Trump of continuing to defame their client.
Investors continue to flee cryptocurrencies. Cryptocurrency assets saw a fifth straight week of investor outflows last week, totaling $232 million, according to digital asset investment firm CoinShares. The dwindling enthusiasm for cryptocurrencies was palpable at the Bitcoin Miami industry event, where attendance this year was halved from 2022.
How New Energy Rules Can Feature in a Debt Deal
As the White House and House Republicans continue to negotiate a deal to raise the debt ceiling, with Treasury Secretary Janet Yellen reiterating that the country could run out of cash next week, an unlikely issue has become a sticking point. in the negotiations.
Changes to the way energy projects are approved — known in Washington parlance as permission — have become an increasing focus for lawmakers on both sides in the past year. Even so, the two sides disagree on how to revise the process, and it is unclear whether this can be resolved in time to reach an agreement to avoid a US default.
Permitting has bipartisan support. Lawmakers argue that under the current system, getting approval for critical new energy projects can take up to a decade, while Canada and the European Union have regulations designed to get projects up and running in three years.
But what each party wants to achieve with the permission is different:
For Republicans (and Senator Joe Manchin, the West Virginia Democrat who was instrumental in passing the Inflation Reduction Act last year), reform would mean accelerating fossil fuel projects like coal-fired power plants.
For Democrats, this would lead to faster approval of clean energy projects and the construction of high-voltage transmission lines from these facilities.
A key area of contention is federal preemption. Currently, states can reject electrical transmission projects that pass through their territory, making the country’s energy transition plans more difficult. Giving the federal government preemptive rights, advocates argue, would accelerate the adoption of renewable energy, particularly in places where it is not generated.
Manchin’s new legislation, backed by the White House, would set time limits for states to approve or deny interstate transmission projects before the Federal Energy Regulatory Commission, which would assume centralized federal authority over the concession, could intervene.
But in recent talks, Republicans have proposed settling the federal preemption authority issue down the road, leaving Democrats worried about meeting the IRA’s clean energy goals.
Anyway, time is ticking. On Monday, Yellen ramped up the language of her debt ceiling warnings, saying it was “highly likely” that the US would run out of cash in early June, rather than “likely”. And House Speaker Kevin McCarthy said a deal needed to happen this week to avoid default.
In other debt ceiling news: how extreme weather in California brought forward a potential default date and why Republican demands to cut IRS funding could deepen federal budget deficits by an estimated $120 billion.
“My intensity is the same. I think when I don’t have that intensity, I should leave.”
— Jamie Dimonthe CEO of JPMorgan Chase, addressing questions about who will succeed him at the bank’s investor day on Monday.
Recording the mountain of evidence against Bankman-Fried
As FTX founder Sam Bankman-Fried awaits trial, federal prosecutors are amassing one of the greatest troves of evidence ever assembled in a white-collar securities fraud case.
Authorities have already gathered more than six million pages of evidence, reports The Times. (By comparison, the 2004 case against Martha Stewart involved 525,000 pages.) Here’s a little bit of what’s on that list of evidence:
the content of Mr. bankman-friedwhich alone represent 2.5 million pages.
A notebook belonging to Caroline Ellison, a longtime lieutenant and ex-girlfriend of Mr. Bankman-Fried, who ran FTX’s sister company, the trading company Alameda Research. (She has pleaded guilty to fraud and is cooperating with prosecutors.)
A cell phone belonging to Ryan Salamea top FTX executive whose $4 million Maryland home was raided by FBI agents last month.
four laptopsincluding one belonging to former FTX executive Gary Wang (who is also cooperating with prosecutors) that was so full of data that FBI experts were having trouble deciphering it.
Many of FTX’s corporate records were held by the law firm Sullivan & Cromwell, which took over the company after it declared bankruptcy — and which has so far made $55 million, including document detective work, according to The Times.
THE SPEED OF READING
Offers
Chevron has agreed to buy shale oil producer PDC Energy for $6.3 billion to focus on energy production in the United States. (WSJ)
Japan’s Mizuho has agreed to buy Greenhill, the controversial American boutique investment bank, for $550 million. (Bloomberg)
Activist investor TCS Capital, which has a 4% stake in Yelp, asked the recommendation site to sell itself. (WSJ)
“Shareholder activists drag companies into America’s culture wars” (WSJ)
Policy
best of the rest
Amatriciana fans, look away: Pasta prices are rising in Italy, prompting an emergency government meeting and calling for a consumer “mass strike”. (CNBC)
“Your company doesn’t want you to take Ozempic for weight loss. Here’s why.” (WSJ)
Amazon founder Jeff Bezos allegedly proposed to Lauren Sanchez, his girlfriend, aboard his mega-yacht. (The Online Courier)
Plastic recycling has an unintended consequence: emissions of microplastics into the air and water supply. (WaPo)
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