News Brief 11.14.25 - K-Shaped Economy, Banana Tariffs, Burry AI Short

K-shaped Economy

A K-shaped economy describes a recovery in which different groups diverge sharply—some rising while others fall. Instead of everyone rebounding at the same pace, one “arm” of the K represents people and industries that grow stronger, such as high-skill workers, large corporations, and sectors like tech or finance. The other “arm” reflects those who continue to struggle, including low-wage workers, small businesses, and service industries that face slower recoveries or lasting setbacks. This split highlights widening inequality, as opportunities and financial stability improve for some while declining for others, even though overall economic indicators may suggest that conditions are getting better.

Trump Cuts Banana Tariff, Lower Prices Likely for Walmart’s Top-Selling Item

Bananas are Walmart’s top-selling item, making any change to their cost especially noticeable for consumers. With President Trump reducing the tariff on imported bananas, retailers are expected to see lower wholesale prices, which could translate to slightly cheaper fruit on store shelves. Because bananas are a staple purchase for millions of households, even small price shifts can have a meaningful impact on family grocery budgets. The tariff reduction may also boost import volumes and strengthen relationships with major banana-exporting countries, further stabilizing supply and keeping prices competitive.

Michael Burry Targets AI: GPU Wear-and-Tear Fuels His Big Short Bet

Shorting a stock is a way to bet that its price will fall, and a key point for beginners is that the investor borrows shares, not money. A short seller borrows stock from a broker and immediately sells those shares at the current market price. If the stock later drops, they buy the same number of shares back at the lower price and return them to the broker, keeping the difference as profit. If the stock rises instead, they’re forced to repurchase the shares at a higher price, creating a loss. Because there’s no limit to how high a stock can climb, shorting carries significant risk and is typically reserved for investors who believe a company is sharply overvalued.

GPUs, the backbone of today’s AI boom, face significant stress under nonstop, high-intensity workloads—an issue central to why Michael Burry is reportedly shorting parts of the AI sector. Training large models pushes GPUs to run at maximum power and temperature for long stretches, accelerating wear on components like VRAM, cooling systems, thermal paste, and power delivery circuits. Over time, this strain leads to performance loss, higher failure rates, and shorter usable lifespans, meaning companies must constantly replace or expand their hardware just to maintain output. Burry’s thesis leans on the idea that this rapid GPU degradation creates hidden costs and unsustainable demand cycles, suggesting that the market may be overestimating the longevity and profitability of AI-related hardware.

The Fed "Hunting License Analogy"

The Federal Reserve acts as a manager of the economy, much like a state manages its wildlife resources. When the Fed wants to stimulate economic activity and create jobs, it lowers interest rates, which is functionally similar to "printing money." This makes capital cheap and abundant, encouraging businesses to borrow for expansion and consumers to spend. This new spending creates demand for workers, driving unemployment down. This action is akin to the state of Ohio deciding it wants to increase the "opportunity" for people to hunt. To achieve this, it dramatically increases the number of available hunting licenses.

However, this stimulation has a critical side effect: devaluation. In the economy, when the Fed floods the market with new dollars, that money chases a finite amount of goods and services. With more dollars bidding for the same items, prices rise—this is inflation. Each individual dollar loses its purchasing power. This directly mirrors the hunting license scenario. If Ohio issues only one license for its entire herd of 800,000 deer, that single license is priceless. But if the state issues 400,000 licenses for that same herd, the "opportunity" is widespread, but the value of each individual license has plummeted; each hunter now only has a theoretical claim on two deer.

The fundamental constraint in both situations is the clear line between demand and supply. The Federal Reserve can easily print money to increase the demand for goods, but it cannot build more factories, grow more food, or stock more shelves to increase the supply. Similarly, the state of Ohio can print an infinite number of hunting licenses to increase the demand for hunting, but it cannot magically create more deer. In both cases, when the manufactured demand (dollars or licenses) drastically outpaces the real-world supply (goods or deer), the value of the token used to access that supply—whether it's a dollar bill or a hunting permit—inevitably falls.

The Stock Market - Primary and Secondary Markets

 The Stock Market — Primary Market

The primary market is the part of the stock market where new securities — stock shares or pieces of paper that state an investor owns a piece of a company — are created and sold for the very first time. This is where a company, rather than investors, directly sells its shares to the public to raise capital (cash). The most well-known example of this is the Initial Public Offering (IPO), which is the specific event when a private company "goes public" by offering its shares to investors for the first time. During an IPO, all the money raised from selling those initial shares goes directly to the company itself, funding its growth, paying off debt, or financing new projects, before those shares begin trading between investors on the secondary market.

The Stock Market — Secondary Market

The secondary market, often called the "aftermarket," is where the vast majority of stock trading occurs after securities have been sold for the first time in the primary market. Unlike an IPO where investors buy directly from the company, the secondary market consists of investors trading amongst themselves, buying and selling existing shares from one another. This is what people typically refer to as "the stock market," with major examples being the New York Stock Exchange (NYSE) and the Nasdaq. The original company is not involved in these transactions and does not receive any money. The secondary market is a market where nothing is produced, but some earn profits by “Buying Low, Selling High.” It’s similar to a trading card store or a casino — nothing tangible is produced, but money is earned, and the economy grows. How does the economy grow? Investors borrow money to purchase stocks. When they borrow money, this introduces cash into the economy that did not exist previously. Eventually, the investor sells their stocks for cash. They spend the cash. An increase in spending results in the need to make more stuff and hire more workers — the economy grows. 

The secondary market is not a completely useless casino. Investors research the companies they are gambling on. They buy good businesses — an increase in demand increases the price of the stock — and sell bad businesses — a decrease in demand decreases the price of the stock. Large investment banks use the price of a stock, which is the result of intense research by investors, to determine whether to loan money to businesses that want to borrow money to grow their business. Basically, the investors on the secondary market serve as researchers for large investment banks. This research helps banks direct capital (cash) to the best companies and not weak businesses. Over time, this leads to the growth of good companies and the decline of bad companies in the economy.

The Federal Reserve - Buying and Selling Bonds

 When The Federal Reserve Buys Bonds, The Economy Grows But Inflation Increases

When the Federal Reserve buys bonds, it injects cash into the banking system, increasing banks' reserves (money in their vaults). If banks have ample cash, this liquidity — when banks own cash rather than valuable assets like loans or bonds — encourages them to compete fiercely for borrowers by offering more loans to households and firms. This intense competition and high supply of available credit (cash) drive down the price of a loan—the interest rate. As interest rates fall, borrowing becomes cheaper, stimulating both consumer spending and business investment. This increase in overall spending creates a higher demand for goods and services, leading companies to hire more workers, which in turn reduces unemployment and fosters economic growth. The primary trade-off for this stimulus is that the heightened demand across the economy can also lead to an increase in inflation.

When The Federal Reserve Sells Bonds, The Economy Shrinks But Inflation Decreases

When the Federal Reserve sells bonds, it drains cash from the banking system, reducing banks' reserves (money in their vaults). With less cash on hand (liquidity), banks become more cautious and households and firms compete to secure the few loans available. This reduced supply of available credit (cash) drives up the price of a loan—the interest rate. As interest rates rise, borrowing becomes more expensive, causing households and firms to take out fewer loans. Consequently, they spend less, and this decrease in spending results in less need for workers, leading to slower hiring or even layoffs. As unemployment increases, the economy slows down, with the intended trade-off being that the decrease in demand helps to lower inflation.

Everything You Need To Know About AI

 🤖 Part 1: The Big Picture: AI's Economic Revolution

Artificial Intelligence (AI) is a transformative technology, much like the automobile was a century ago. Its primary economic function is to make businesses more efficient and productive. This cuts costs, lowers prices, and leads to the creation of new goods, services, and jobs that we can't yet imagine.

The best historical parallel is how the automobile made the entire horse-powered economy (blacksmiths, carriage makers) obsolete. While this caused initial job losses, it created a ripple effect of unimaginable new industries:

• A "roadside economy" of fast-food chains, drive-thrus, and motels (motor hotels) emerged to serve a population on the move.

• The assembly line, perfected to build cars, became a template for efficiency that spread to every other industry, making everything from refrigerators to radios affordable for the average family.

This process of "creative destruction" is how major technologies drive economic growth.

AI makes firms more efficient and productive. This cuts costs and lowers prices and will likely result in the production of goods we didn't know we needed and jobs that never existed before. A perfect historical parallel to this is how the automobile wiped out the horse industry and, in doing so, created a world of new jobs and industries.

---

🐎 The End of the Horse-Powered World

At the dawn of the 20th century, the horse was the engine of the economy. A vast ecosystem of jobs existed to support it:

• Blacksmiths and Farriers: To shoe the horses.

• Wainwrights and Carriage Makers: To build and repair wagons.

• Stable Hands and Grooms: To care for the animals.

• Breeders and Trainers: To supply the horses.

• Farmers: Growing hay and oats for feed on millions of acres of land.

When Henry Ford introduced the affordable Model T, it was vastly superior for transportation. It was faster, stronger, and didn't get tired. Within a couple of decades, the industries built around the horse almost completely vanished. From the outside, it looked like a massive economic disaster, with millions of jobs lost.

---

🦋 The Butterfly Effect of the Automobile

However, the collapse of the horse industry was just one side of the story. The rise of the automobile created a ripple effect of new industries and jobs on a scale that would have been unimaginable to a carriage maker in 1900.

• Manufacturing and Supply: The most obvious new jobs were in car factories on assembly lines. This required engineers, designers, steelworkers, and rubber manufacturers. The assembly line itself was a revolutionary benefit, as its principles of mass production and efficiency spread to every economic sector, lowering the cost of everything from home appliances to clothing.

• Infrastructure: Cars needed roads. This led to a massive, ongoing project of building highways and streets, creating jobs for civil engineers, construction workers, and paving companies.

• Fuel and Maintenance: The new vehicles needed fuel and upkeep, giving rise to a nationwide network of gas stations and auto-repair shops, creating jobs for mechanics and attendants.

• New Ways of Living: The ability to travel easily and affordably completely reshaped society and created entirely new sectors of the economy:

• Suburbs: People could now live far from their city jobs, leading to the development of suburbs and a boom in home construction.

• Tourism: The road trip was born. This created the motel (a blend of "motor" and "hotel") industry, specifically designed for motorists, and gave rise to roadside diners and fast-food chains with drive-thrus to serve a population on the move.

• Retail: Shopping malls and "big-box" stores became possible because people could drive to them.

No one in the horse industry could have predicted that the smelly, loud machine replacing their animals would one day create jobs for motel managers, fast-food cooks, or highway construction crews. They saw only the loss of their own profession.

This is the parallel for AI. While it may automate certain tasks and change some current jobs, its true economic impact will come from creating new industries, services, and job titles that we cannot yet imagine.

---

⚙️ Part 2: The Physical Engine: Hardware and Data Centers

This AI revolution isn't happening in the abstract; it runs on specialized hardware housed in massive physical buildings.

• CPU vs. GPU: Your computer's brain has two key parts. The CPU (Central Processing Unit) is like a master chef—a genius that can perform any complex task in sequence. The GPU (Graphics Processing Unit) is like an army of line cooks—thousands of workers who can perform the same simple task (like a mathematical calculation) all at the same time. AI's immense workload requires the parallel processing power of thousands of GPUs working together.

• AI Data Centers: These powerful AI GPUs aren't in office buildings; they are located in highly secure, warehouse-sized data centers. Inside, you would see long aisles of tall server racks packed with thin computer "blades." The entire facility is a web of organized cables and is blasted with cold air from industrial-grade cooling systems to prevent the thousands of processors from overheating. 

---

💬 Part 3: The Language of AI: Tokens and Efficiency

• What is a Token?
  A token is the basic building block of text for an AI. Think of tokens like LEGO bricks for language. Before an AI can read a sentence, it breaks it down into these smaller pieces. A token can be a whole word, part of a word, a number, or a piece of punctuation.
  For example, the sentence "AI is very helpful." breaks down into five individual tokens:

• AI

• is

• very

• helpful

• .

• So, for the AI, that sentence isn't one thing—it's five individual pieces that it processes through its GPUs.

• Power In, Tokens Out
  This phrase describes the efficiency of an AI model, and it's a crucial concept.

• "Power In" is the total energy cost to generate a response. This is more than just the electricity going to the GPUs. It's the massive amount of power consumed by the entire data center—including the thousands of servers running simultaneously and, just as importantly, the industrial-scale cooling systems that use a huge amount of energy to prevent all that hardware from overheating. It's the total electricity bill for the entire operation.

• "Tokens Out" is the result of all that energy consumption. It is the stream of tokens the AI generates to form its answer. This is a measure of the AI's productive output and its speed. An AI that can generate more tokens per second feels more responsive and can handle more user requests at once.

• Think of the relationship like a car's miles per gallon (MPG). The goal is always to get more miles (Tokens Out) for each gallon of gas (Power In). In the world of AI, developers are constantly working to increase the number of tokens they can get out for every kilowatt of electricity they put in. A more efficient AI is faster, cheaper to operate, and has a smaller environmental footprint.

---

💧 Part 4: The Real-World Costs: Resources and Infrastructure

These data centers, the physical heart of AI, have an enormous appetite for resources, creating tangible costs for the communities around them.

• Power Consumption: A single large data center can consume as much electricity as a small city. This puts a massive, constant strain on local power grids that were not built to handle such a concentrated load.

• Water Usage: To cool the thousands of hot servers, many data centers use evaporative cooling, a process that can consume millions of gallons of water per day. This creates direct competition for a vital resource with local communities and agriculture, especially in water-scarce regions.

• Higher Utility Costs: This huge new demand for power and water often requires expensive infrastructure upgrades by utility companies. The cost of building new power plants and pipelines is typically passed on to the entire customer base—including residential homes and small businesses—in the form of higher monthly utility bills.

---

📈 Part 5: The Financial Stakes: The Investment Bubble (Expanded Explanation)

The final piece of the puzzle is understanding who is paying for this multi-trillion-dollar transformation and the enormous financial risk involved. This process can be understood in three stages: the setup, the "pop," and the contagion.

1. The Setup: Building the Bubble

It begins with a powerful and exciting promise: AI will revolutionize every industry and create unimaginable wealth. This creates a "gold rush" mentality where investors, from large corporations to venture capital firms, are desperate to get in on the action, driven by a fear of missing out (FOMO).

To make these huge bets, many investors use leverage, which simply means they are investing with borrowed money. This is like using a magnifying glass on your investment—it makes potential profits look massive, but it also makes potential losses catastrophic. The critical issue is that many AI startups are being valued at billions of dollars based purely on this future promise, not on any real-world profits they are making today.

2. The "Pop": When Hype Meets Reality

A bubble "pops" when the collective belief in the promise begins to crack. This can be triggered by a few big AI companies failing to deliver, or by rising interest rates that make all the borrowed money more expensive to pay back. Whatever the cause, a few major investors begin to sell.

This selling triggers a panic. FOMO instantly flips to a fear of losing everything. Everyone rushes to the exits at once, trying to sell their investments before they become worthless. This causes a crash within the tech sector. AI startups, unable to raise more money, go bankrupt. The billions of dollars in "paper value" vanish into thin air.

3. The Contagion: How the Problem Spreads to Everyone

This is the most dangerous stage. The problem doesn't stay in the tech world; it infects the entire economy.

• Banks Get Hit: The banks and lenders who loaned out billions for these investments suddenly don't get their money back. They are forced to absorb massive losses, which damages their financial health.

• The Credit Freeze: In response to these losses, the banks panic. They stop lending money, not just to other tech companies, but to everyone. This is called a credit crunch. Think of credit as the lifeblood of the economy; the banks are the heart, and after the shock of the bust, the heart stops pumping.

The Main Street Impact: This freeze brings the real economy to a halt. A healthy construction company can't get a loan for a new project. A successful restaurant can't get credit to make payroll. A family with a perfect credit score is denied a mortgage. This is how the crisis spreads, causing layoffs in every sector and leading to a deep recession, just as the collapse of the housing market in 2008 triggered a financial crisis that affected the entire world.

NEWS BRIEF 10.28.25

🎃 Shutdown Halts November SNAP Payments

The ongoing federal government shutdown is creating an immediate food security crisis for over 41 million Americans. SNAP benefit payments are staggered by state, with most recipients getting their monthly funds within the first two or three weeks of the month. This means that as Halloween approaches, many households have already exhausted their food budgets and are awaiting their next payment. Now, due to the shutdown, the USDA has confirmed that its funding has "run dry" and has instructed states to not issue November's benefits. As a result, millions of families who expected their EBT cards to be refilled, many as early as November 1, will receive no money.

---

🌾 Soybean Prices Rally on Tentative China Trade Deal

Soybean futures surged to their highest price since June following reports of a new, tentative trade framework between the U.S. and China. The deal, which is being finalized ahead of a potential meeting between Presidents Trump and Xi, would reportedly see the U.S. suspend its threat of 100% tariffs on Chinese goods. In exchange, China has agreed to resume "substantial" purchases of U.S. agricultural products, with a specific focus on soybeans. This news has injected significant optimism into the commodities market, offering a lifeline to American farmers who saw exports to the once-dominant buyer fall to nearly zero during the trade dispute.

---

🍬 SNAP Crisis Casts Shadow Over Halloween

The imminent threat to SNAP benefits is poised to severely impact Halloween, potentially making this one of the worst years for trick-or-treating on record. The timing of the crisis is critical: with millions of families being warned this week that their entire November food budget may disappear in a matter of days, households are being forced to cut all non-essential spending immediately. This acute financial panic means discretionary purchases, such as bags of Halloween candy to hand out, are an impossibility for a significant portion of the population. As a result, widespread participation is expected to plummet as families struggling with food insecurity are forced to opt out of the holiday tradition.

Mortgage, Interest Rates, and Inflation

Compounding Interest

Compounding interest occurs when the interest you owe is added to your balance each month, causing you to pay interest on both the original amount and the accumulated interest. This monthly compounding makes your debt grow faster over time. Even small interest rates can add up significantly if the balance is not paid down. The longer the debt remains unpaid, the more the total amount owed increases.

Mortgage
A mortgage is a loan used to buy a home or property. The borrower agrees to make monthly payments of principal and interest over a set period, usually 15 to 30 years. The property itself serves as collateral for the loan. If the borrower fails to pay, the lender can take ownership through foreclosure.

ARM (Adjustable-Rate Mortgage)
An adjustable-rate mortgage (ARM) has an interest rate that changes over time based on market conditions. It often starts with a lower “introductory rate” for the first few years before adjusting at set intervals. Monthly payments can increase or decrease depending on how interest rates move. ARMs carry more risk but can be cheaper initially.

Fixed-Rate Mortgage
A fixed-rate mortgage keeps the same interest rate for the entire life of the loan. That means monthly payments stay consistent, making budgeting easier for homeowners. Fixed-rate loans are popular because they provide long-term stability. They are especially beneficial when interest rates are low.

Households, Firms, and Government
In economics, households, firms, and the government are the three main sectors that interact in an economy. Households provide labor and consume goods and services. Firms produce goods and services while employing labor. The government collects taxes, provides public services, and regulates economic activity to maintain stability.

Gross Domestic Product (GDP)
Gross Domestic Product (GDP) measures the total value of all goods and services produced within a country’s borders during a specific period. It’s a key indicator of economic performance. When GDP grows, it signals a healthy, expanding economy. Declines in GDP often point to economic slowdowns or recessions.

Buying on the Margin
Buying on the margin means purchasing stocks or other investments using borrowed money. Investors only pay a small percentage of the cost upfront and borrow the rest from a broker. This increases potential profits—but also magnifies losses. Excessive margin buying in the 1920s helped trigger the stock market crash of 1929.

Great Depression
The Great Depression was the worst economic downturn in U.S. history, lasting from 1929 to the late 1930s. It began after the stock market crash and was made worse by bank failures, high unemployment, and falling prices. Millions lost jobs, homes, and savings. The crisis led to major government reforms and safety nets like Social Security.

Great Recession
The Great Recession occurred from late 2007 to 2009 and was the most severe economic downturn since the Great Depression. It was caused by a housing market collapse, risky mortgage lending, and financial institution failures. Unemployment rose sharply, and millions lost their homes. The government intervened with bailouts and stimulus programs to restore stability.

Inflation
Inflation is the general rise in prices of goods and services over time. When inflation occurs, the purchasing power of money decreases, meaning each dollar buys less. Moderate inflation is normal and often signals a growing economy. However, high inflation can hurt consumers and savings, while too little inflation can slow economic growth.