"If there's fear in the market, it's wearing noise canceling headphones."

The ominous foreshadowing continues.

It’s like a buy-one-get-one-free deal, except with billions of dollars’ worth of chips and 10% of AMD.

From Matt Levine

The basic situation is that if OpenAI announces a big partnership with a public company, that company’s stock will go up. Today OpenAI announced a deal to buy tens of billions of dollars of chips from Advanced Micro Devices Inc., and AMD’s stock went up. As of noon today, AMD’s stock was at $213 per share, up about 29% from Friday’s close; it had added about $78 billion of market capitalization.

How do those negotiations go? Like, schematically:

OpenAI: We would like six gigawatts worth of your chips to do inference.

AMD: Terrific. That will be $78 billion. How would you like to pay?

OpenAI: Well, we were thinking that we would announce the deal, and that would add $78 billion to the value of your company, which should cover it.

AMD: …

OpenAI: … 

AMD: No I’m pretty sure you have to pay for the chips.

OpenAI: Why?

AMD: I dunno, just seems wrong not to.

OpenAI: Okay. Why don’t we pay you cash for the value of the chips, and you give us back stock, and when we announce the deal the stock will go up and we’ll get our $78 billion back.

AMD: Yeah I guess that works though I feel like we should get some of the value?

OpenAI: Okay you can have half. You give us stock worth like $35 billion and you keep the rest.

And Allison Morrow 

Under the deal announced Monday, which sent the chip designer’s shares up 23%, AMD is effectively subsidizing demand by issuing OpenAI warrants for up to 160 million shares, investor Paul Kedrosky noted Monday. “That makes OpenAI a 10% shareholder: part customer, part financier — a risk transfer from cash to stock, as well as making OpenAI the largest and thus controlling AMD shareholder,” Kedrosky said.

 

As I wrote here last week, intertwined setups, including some known as “vendor financing,” are common in the frothy world of artificial intelligence. But the many layers of overlap, concentrated among the companies whose stocks have been propping up the US stock market, have made it hard to disentangle how much demand for AI is authentic hunger from customers and investors and how much of it is just capital being recycled to keep up the appearance of progress.

 

Vendor financing — along with the doubling, tripling or quadrupling of companies’ valuations — is one of the unflattering echoes some analysts see in comparing today’s AI frenzy with the late-90s dot-com bubble. Back then, telecom equipment giants like Cisco, Nortel and Lucent borrowed heavily to offer their customers financing deals that essentially ensured sustained demand for telecom equipment.

Because that high-tech equipment was in short supply, customers — many of them startups trying to build out fiber-optic cable — inflated their orders, contributing to a glut that left them reeling when, in 2001, it became clear the tech and telecom companies had overestimated demand. The equipment makers like Cisco were left holding bad debt while the startups went bust.

 

  I’m not a finance guy, let alone the kind of high-powered expert who could guide you through these weeds, but you don’t need a weatherman to know which way the wind blows, and you don’t need an MBA to see the broad outlines of this story.

The value of the Magnificent Seven now exceeds the GDP of the European Union — and that doesn’t include adjacent companies like Oracle, AMD, or Palantir that have also been inflated by the bubble. Most of that value goes away when it bursts, which means the people running these companies have trillions of dollars worth of incentive to keep it going. All sorts of decisions that would range from ill-advised to disastrous viewed in isolation suddenly make sense in this context.

Talk to a robotics engineer and they will almost certainly tell you that bipedal humanoid designs only make sense in a vanishingly small number of use cases. The future may belong to robots, but they’re not going to look like C-3PO. That said, humanoids are part of the larger AI narrative, and so AI bubble companies can spend billions of dollars on this dead-end technology knowing that they will still come out far ahead because it helps keep the bubble going.

Coming back to the finance question: these deals make everything more opaque. They provide all sorts of opportunities for fraud and self-dealing. For those with long memories, they are rife with disturbing precedents.

And yet the stocks keep going up…

Until they don’t.

The Libertarian Movement and Women -- It's not just a Robin Hanson thing

 This article from Tyler Cowen has been catching a lot of online flak.

Under pretty much any circumstances, complaining—even jokingly—that none of the actresses you see on screen are virgins is in questionable taste. But when you look at the details in this case, it gets much, much worse.

We’re talking about an animated and depiction of a woman who appears to be somewhere in her mid- to late teens. This is not made better when you learn that Tyler Cowen is 63 years old.

At this point, we are edging into the territory of fanboys insisting online that Sailor Moon needs to be “sexy but not slutty.” This is not a good corner of the internet.

Obviously, Cowen was going for mildly edgy snark. While that might cut him some slack (or might not—that’s a debate for another day), the comment looks considerably worse when taken in the context of what Cowen and others in his movement have been saying for years.

The fixation on virginity has been something of a recurring topic.



Discussions of virginity and purity are closely tied to the even creepier obsession with cuckolding. The most notorious example is the hat-tipped Robin Hanson’s argument that it might be more moral for a man to “gently” rape an unconscious woman than it would be for her to commit adultery.

 Any discussion of the libertarian movement's attitude toward women has got to address what Peter Thiel said in a widely disseminated Cato Institute essay from 2009. (Ever since then, Thiel and his apologists have been dancing around what he said about women's suffrage. It's best to ignore the distractions and focus on his actual words.)

The Peter Thiel connection leads us to seasteading and other plans for libertarian utopias, which in turn bring us to another disturbing aspect of this story. While I don’t want to paint with too broad a brush here, when you read the proposals from people pushing these sovereign states of unlimited freedom, one common refrain is that there should be no age of consent. There is no context in which this is not troubling, but as part of a larger pattern, it is particularly damning.

 Though they are two distinct groups, there’s a great deal of interconnection between the George Mason libertarians and the Silicon Valley alt-right. They share many common roots and have a symbiotic relationship and something of a mutual admiration society. Tyler Cowen, in particular, has done more than his share to build up the reputations of people like Elon Musk.

Here's some relevant context on tech bro culture.

Becca Lewis writing for the Guardian:  

At the height of the dotcom mania in the 1990s, many critics warned of a creeping reactionary fervor. “Forget digital utopia,” wrote the longtime technology journalist Michael Malone, “we could be headed for techno-fascism.” Elsewhere, the writer Paulina Borsook called the valley’s worship of male power “a little reminiscent of the early celebrants of Eurofascism from the 1930s”.

Their voices were largely drowned out by the techno-enthusiasts of the time, but Malone and Borsook were pointing to a vision of Silicon Valley built around a reverence for unlimited male power – and a major pushback when that power was challenged. At the root of this reactionary thinking was a writer and public intellectual named George Gilder. Gilder was one of Silicon Valley’s most vocal evangelists, as well as a popular “futurist” who forecasted coming technological trends. In 1996, he started an investment newsletter that became so popular that it generated rushes on stocks from his readers, in a process that became known as the “Gilder effect”.

Gilder was also a longtime social conservative who brought his politics to Silicon Valley. He had first made his name in the 1970s as an anti-feminist provocateur and a mentee of the conservative stalwart William F Buckley. At a time when women were entering the workforce in unprecedented numbers, he wrote books that argued that traditional gender roles needed to be restored, and he blamed social issues such as poverty on the breakdown of the nuclear family. (He also blamed federal welfare programs, especially those that funded single mothers, claiming they turned men into “cuckolds of the state”). In 1974, the National Organization for Women named him “Male Chauvinist Pig of the Year”; Gilder wore it as a badge of pride.

 

 As far as I can tell, there’s nothing innate to libertarian philosophy that leads one to have a problem with women, and I certainly don’t want to generalize about its followers. But there is definitely something going on with the George Mason/Silicon Valley chapters of the movement, and it’s getting difficult to ignore.

When "create more wealth before the bubble bursts" is the bull case

[An earlier draft of this went up for a little while Saturday. Apologies if you were one of the non-bots who saw it.] 

Not a finance guy, so I’m not sure how much to make of this, but the major players in AI are pulling all sorts of unusual and often questionable financial moves—such as suppliers finding ways to channel money to the companies buying their products. Given that, by most estimates, the AI bubble is now far larger than the dot-com bubble, it seems like this is a big deal.

1 big thing: A big sign of an AI bubble starts to appear

    Madison Mills

Debt is the canary in the coal mine for market bubbles. Housing debt fueled the global financial crisis. Corporate debt led to dotcom bust. Now, the tech companies driving today's bull market are quietly levering up, sometimes through private lenders that make their debt less visible to shareholders.

Why it matters: That debt — and how it is getting structured — is "almost an acknowledgement that this is getting out of hand," Dario Perkins, managing director of global macro at TS Lombard, tells Axios.

...

Zoom out: Big Tech is turning to private debt markets and special purpose vehicles. The catch? That kind of borrowing doesn't have to be reflected on balance sheets.

• "SPVs mean companies like Meta do not need to show the debt as their debt," Perkins writes in a note to clients. He likens today's financing tactics to the subprime era, when firms shifted risk off their books to reassure investors.
• Meta is raising $29 billion via private capital for its AI data center buildout.
• Other tech giants are tapping the public market for debt. Oracle recently issued $18 billion in debt to fund its AI and infrastructure expansion.

Like I said, I'm not a finance guy and definitely not the person you'd want to guide you through these weeds, but the AI sector is filled with other curious and often worrisome arrangements that might be inflating revenue and masking sustainability issues. 

Yes, but: Plenty of strategists have reminded Axios of the old Keynesian adage that "the market can stay irrational longer than you can stay solvent."

• In other words, this tech-driven bull market could still have legs to create more wealth before the bubble bursts. Perkins, however, isn't convinced.
• "I wouldn't touch this stuff now," Perkins says, adding that comparing this market with the dotcom bubble, "we're much closer to 2000 than 1995."

The "market can remain irrational" line is highly significant if you're trying to time the market; it's not all that important if you're concerned with the potential impact of the implosion. 

I'd also argue that bubbles don't create wealth; they create the temporary illusion of wealth.  

Between the lines: Why are tech companies spending this much to win the AI race if the bubble risk is so prescient?

• The market is rewarding them even if it "makes no economic sense to spend at this level because there's no way they can recoup the value of the capital spending," investor Paul Kedrosky explains on the Plain English podcast.
• Kedrosky is also watching how companies are moving financing off the balance sheet: "That for me is a reflection of not wanting the credit rating agencies to look at what they're spending."

So, the major players in the AI bubble are engaged in some possibly questionable and certainly opaque financial practices. How big a deal could that be?

 

Magnificent Seven surpass EU GDP: Is this a tech bubble warning?

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— Euronews (@euronews.com) October 3, 2025 at 11:09 PM

Guess what I got in the mail this weekend?

 

 

Registered voters in California just got their ballots for the upcoming special election on Prop 50. As of a couple of weeks ago, the proposition was polling fairly well. 

They will decide how to vote while the Trump Administration is attempting to occupy Chicago and Portland, with L.A. and San Francisco next on the list. Not sure how the timing on that works for the administration.

To address the oversupply of soybeans, RFK Jr. announced that the Health Department has developed new crackers combining the legume with lentils for a tasty and nutritious snack.

Soybeans — adding insult to injury, and then piling on more injury. 

 

 Jesus Mesa writing for Newsweek:

A photographer’s snapshot of Treasury Secretary Scott Bessent at the United Nations General Assembly last week revealed a private message that captured the Trump administration’s deepening concern over collapsing U.S. soybean exports to China—a crisis now entangled with a controversial economic bailout of Argentina.

“Finally – just a heads up, I’m getting more intel, but this is highly unfortunate,” read the message, which appeared to be sent from Agriculture Secretary Brooke Rollins. “We bailed out Argentina yesterday (Bessent) and in return, the Argentine’s [sic] are removing their export tariffs on grains, reducing their price, and sold a bunch of soybeans to China, at a time when we would normally be selling to China. Soy prices are dropping further because of it. This gives China more leverage on us.”

...

The missive has also drawn new scrutiny to the Trump administration’s pledge to support Argentina with a possible $20 billion swap line and direct U.S. purchases of government debt. Days after the deal, Chinese importers bought more than a million metric tons of Argentine soybeans just as the American harvest season began.

...

China, once the largest buyer of American soybeans, has not purchased a single shipment since May, according to U.S. Department of Agriculture data. In 2024, China bought $12.5 billion of the $24.5 billion worth of soybeans the U.S. exported globally—more than 50 percent. For months now, the figure has been zero. 

As an Arkansas good ol' boy and some times press critic, I'm usually annoyed by how little attention the press normally gives agriculture stories, but this one appears to have legs.  

Soybean farmer: Our entire cost structure has increased, but our revenue has decreased. It's quite challenging. It's a bloodbath

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— FactPost (@factpostnews.bsky.social) October 2, 2025 at 7:13 AM

As ag scientist Sarah Taber points out, once you cut off a market, demand for a crop doesn’t simply bounce back when the supply reopens. Sometimes it never fully returns.

Absolutely true. The crop that has been mainstay of (especially) South Dakota economy now zeroed out, in exports to their biggest customer. Those farmers know (have told us) that they will never get those markets back. The PRC has switched to Brazil and Argentina.

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— James Fallows (@jfallows.bsky.social) October 2, 2025 at 3:02 PM

Angus: American farmers who bought into Trump, thinking tariffs would help them—their markets are gone. Canada’s not making noise about it; we’re just moving in. Canadian corn is now being sold in Ireland, Spain, and the UK. Those used to be guaranteed American markets. Not anymore.

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— Acyn (@acyn.bsky.social) October 1, 2025 at 12:50 PM

The textbook example is cotton. In the first half of the 19th century, America dominated the high-grade cotton trade while Egypt was a minor player. But when the Civil War disrupted U.S. supply, British textile mills grew desperate for raw material, and Egypt rushed in to fill the vacuum. By the time the war ended, Egypt had become the dominant supplier, with the added advantage of being geographically closer to Britain. It also built a reputation for quality that persists to this day. 

West Coast Stat Views Correction: it turns out August wasn't the worst possible time to start playing Kriegspiel with the US economy

We made that assertion in this post, but it turns out that doing it during a government shutdown is probably even worse.

From Allison Morrow's newsletter: 

In normal times, when the US government is functioning, we the people are entitled to a steady stream of reports that allow us to take the temperature of the US economy. In these not-normal times, when the federal government has shut down, that data stream dries up because the agencies that produce them can’t staff their operations without funding from Congress.

 

That means the monthly jobs report from the Bureau of Labor Statistics, which should have landed this Friday, won’t arrive until the shutdown ends. Ditto two key inflation reports due in the coming weeks.

 

Without those reports, investors, policymakers and business leaders — already navigating the uncertainty of Trump’s on-again-off-again tariffs, his attempted takeover of the Federal Reserve, sporadic bailouts of select foreign nations and random social media outbursts — are flying blind.

 

The longer the shutdown lasts, the more indicators may be delayed, and the more uncertainty takes over. Without a full staff, the BLS can’t collect employment data, which means the September and October reports could both be delayed.

Here at West Coast Stat Views we strive to give you accurate information and well-informed opinions. We apologize for our error. 

Making sense of the senseless

While almost everyone agrees that we have never had an administration like this one, very few are adjusting their thinking accordingly.

Even in the Reagan administration—when the president was often out of it and at other times heavily influenced by what he happened to see on TV—the underlying administration was conventional by 2025 standards. The people actually running the government tended to be fairly professional, with extensive experience in government and business. Even the first Trump administration was relatively normal by comparison.

What we have now is something truly unprecedented, and it is foolhardy to use the assumptions and heuristics that worked with previous presidencies to describe what we're seeing now. Often the worst mistake an observer can make is seeing a coherent strategy or conventional tactics when none are there.

When trying to make sense of Trump, you need a new set of guiding principles. Here are the ones I've been using, and they've served me fairly well:

Domination/Catharsis

These are the big two, and they are so closely intertwined that it is often difficult to tell when one starts and the other stops. Josh Marshall, who has perhaps the best track record of any political analyst working today, has long argued that the need to dominate—and possibly even more importantly, to appear dominant—is the key to understanding Donald Trump. 

 Here's what we said in the aftermath of the Kimmel suspension:

With respect to other aspects, however, this is both huge and unprecedented. Josh Marshall, whose track record is unequaled in these matters, has argued that the key to understanding Trump is dominance and submission. I would add catharsis, distraction, and possibly feral disinformation, but Marshall is certainly right about the main driver. Marshall has termed this the “bitch slap theory” of politics, and that’s about the best description I’ve seen.

The approach of looking overwhelmingly dominant while making your opponent look and feel helpless and weak often works very well, but it has a couple of major downsides. First off, if it fails, you can often find the intended roles reversed, with the bully looking small and ineffectual. On a somewhat more subtle level, a focus on shock-and-awe politics can undermine more low-key and often devious tactics, particularly “boiling the frog.” If you start with boiling water and taunt the frog as you’re throwing it in, it is likely to notice the temperature change. 

Catharsis has never gotten its due as a political force—not from news commentators, and certainly not from political scientists. Everything from policy changes to entire movements are heavily influenced by anxious and angry people looking for emotional release. That said, the role of catharsis in the public statements and decision-making of previous administrations is nothing compared to what we've seen under Trump, and we should expect this to grow even greater as the stresses of the office accumulate. 

Feral Disinformation

 While we can never truly know what's in another person's mind, we can be reasonably confident that Trump believes a large part of the rumors and conspiracy theories that he sees on Fox, on NewsMax, on social media, even when the claims conflict with his direct experience. 

LAST WEEK: “Don’t take Tylenol. Don’t take it.” THIS WEEK: … 🤡 @thedailybeast.bsky.social www.thedailybeast.com/trump-79-pos...

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— Carl Quintanilla (@carlquintanilla.bsky.social) September 28, 2025 at 8:52 AM

(At first glance, I thought this said a "Weird AL video," which would have been both funnier and less disturbing.)

Trump tonight appears to have pushed the false "medbed" conspiracy theory, which has spread in the far-right internet over the years. www.yahoo.com/news/qanon-c...

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— Alex Kaplan (@alkapdc.bsky.social) September 27, 2025 at 8:14 PM

 Just so there's no confusion, he shared an AI fake of himself pitching a product that only exists in QAnon fantasies.

From Wikipedia: 

Videos and podcasts about medbeds have become popular in far-right communities of Telegram, Discord, and Rumble. There are supposedly three types of medbeds, located in secret military tunnels: a holographic medbed, which supposedly diagnoses and cures any sickness,^[3] a medbed that supposedly regenerates missing limbs in minutes, and a medbed that supposedly reverses aging.^[4] Various companies sell devices or access to medbeds that supposedly heal ailments via pseudo scientific technologies while also including the Quack Miranda warning on their websites.^[1][2] The term "medbed" is also used by one company that offers nightly rentals in rooms in their facilities with "highly-energized" beds.^[5][1]

Medbed conspiracy theories often involve claims that the devices are utilized by members of a deep state, billionaires, or that John F. Kennedy, is still alive and youthful on a medbed.^[1] Belief in these devices is popular among QAnon influencers such as Michael Protzman, Romana Didulo, and YamatoQ.^[2][6] On 27 September 2025 Donald Trump posted to Truth Social an apparently AI-generated video (purportedly "breaking news" from My View with Lara Trump on Fox News) depicting himself announcing "medbed hospitals" as a new "healthcare system" for the United States, their nonexistence notwithstanding.^[7][8][9] The post was deleted the next day, on Sunday morning.^[10]

 

The Iger Sanction*

We spent most of last week discussing the Jimmy Kimmel suspension and its aftermath. Much of that discussion was based on speculation about what was going on inside the corporate offices of Disney, Nexstar, and Sinclair. This opening segment from KCRW’s essential Hollywood podcast The Business is also speculation, but it’s coming from the most informed and trusted sources in the field.

Plus, Jimmy Kimmel’s return to late-night (in most markets) was greeted with strong ratings and warm audience reactions. But behind the scenes, the decision to put him on indefinite leave has become another headache for Bob Iger. The Disney CEO, already navigating a difficult chapter, now faces questions about whether the move could leave a lasting mark on his legacy. Kim Masters and her partner in Banter Matt Belloni weigh in on the fallout — including what it might mean for his heir-apparent Dana Walden.

[Sorry, no transcript, but it’s 8 minutes long and well worth your time.]

When it comes to the business of entertainment, Masters is arguably the dean of Hollywood journalists. No one knows the studios better, which is why, when you want to know what’s really going on in the industry, this is the first place you look. When Masters and the also very good Belloni assess the aftermath of last week’s events, they tell a story of C-level executives having their reputations damaged and their careers knocked off track. 

All of this because Disney capitulated to Trump. As we said before, when it came to giving in to Trump, the basic calculation had been weighing principle and reputation on one side and financial gain and safety from harassment on the other. It’s not surprising that the overwhelming majority of CEOs opted for the latter, but one of the lessons of the past week is that C-level executives can no longer assume their self-interest lies with caving in. 

 

* I have to admit I'm way too pleased with myself over this title.  

That was quick

 From the Hollywood Reporter:

There Goes the Jimmy Kimmel Boycott: Nexstar, Sinclair Fold as Late Night Show Returns

The local TV giants backed away from opting to preempt the show on their ABC stations, which impacted nearly one quarter of the country. 

That capitulation (if anything a bigger and more complete surrender than Disney's) came a bit quicker than I anticipated, though the outcome was not much of a surprise. Here's our read on the situation from last Wednesday:

 In particular, Nexstar and Sinclair may well be looking at a rough stretch for one of their biggest sources of advertising, local news. By not only becoming the story but by reinforcing it every weeknight with the preemption, ratings are likely to suffer and advertisers are likely to be chased away. Disney has huge incentives not to back down again, while these two companies are looking at a fight with enormous downsides. It’s likely this will go on for a while. Sinclair, in particular, committed itself by making outrageous demands when it thought it had the upper hand. 

 Sinclair’s biggest advantage has always been the fact that most people neither know nor care who owns their local television station. They could put a heavy thumb on the news without consequence. They may be about to find out that some businesses are better off without brand recognition.

 While all of the analysis of the Sinclair/Nexstar situation relied heavily on speculation (ours included), and like us, many other commentators—such as Josh Marshall—talked about the damage that public scrutiny could do to these companies, particularly Sinclair, as far as I can tell, ours was the only one that also discussed the impact on local news revenues. Given how quickly the two broadcasters caved and how little effort they made at face-saving—especially Sinclair, after having demanded apologies and financial contributions from Kimmel only to turn around and get nothing—the local news aspect would seem to be a large and obvious part of the story, which begs the question: why was it left out of seemingly every report on the story?

Part of the problem is that coverage of the television industry in the mainstream press has become hopelessly narrative-locked—so driven by PR flacks and invested in discredited assumptions that it only occasionally and tangentially relates to reality.

According to the standard narrative, Sinclair and Nexstar shouldn’t still exist, let alone become powerful, profitable, multi-billion-dollar companies. One of the reasons they are still around is their nightly local news broadcasts. 

Nightly local news is where these companies make much—perhaps most—of their profits, and these programs are closely associated with the shows they lead into, particularly the 11:00 (10:00 Central) broadcasts. Rather than miss any of the opening monologues, the Colbert fan will tend to opt for the CBS local news, the Kimmel fan will tend to go with ABC, and so forth. The shows are also linked in viewers’ minds in other ways, and that association carries over to the advertisers who support those news broadcasts. The result is a nightmare scenario for the station owners: simultaneously chasing away the viewers and pissing off the advertisers for the shows that kept you in the black. 

If this were just a question of bad PR and brand damage, I suspect both companies would have toughed it out for at least a few more days in an effort to placate Trump and put a slightly better spin on a humiliating defeat. Giving in before the end of the week suggests they had some additional incentive, such as multiple stations suddenly going into the red. 

Weekend Videos -- Would-Be Tyrants and Real-Life Giants

This is an extraordinary piece of television. It is, almost without fail, pitch perfect. It acknowledges the gravity of the moment while keeping a healthy sense of perspective. As he himself points out, the fate of a talk show is trivial compared to many other things going on, but the issues it raises are not trivial at all.

For those of us who are way too into the history of the medium, the monologue opens with a 65-year-old callback to perhaps the first talk show censorship scandal.

As Josh Marshall and many others have pointed out, possibly the worst outcome for Sinclair is having its viewers learn more about who owns their local stations. A few years ago, John Oliver did an excellent segment on Sinclair that has only become more relevant.

I particularly liked the way around 1:20 Oliver followed up his teasing of local news by acknowledging that local television journalists often do extraordinary work, and have, to some degree, stepped up to fill the void left by the decline of newspapers. 

Finally, just to end on a less infuriating note, here is a very cool story about the making of The Princess Bride.

“The Princess Bride” turns 38 today. Here’s a great tale about Andre the Giant — as told by Mandy Patinkin.

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— Carl Quintanilla (@carlquintanilla.bsky.social) September 25, 2025 at 7:27 AM

Back on the cautionary beat

If you listen to Marketplace, read the FT, or follow lots of econ and finance nerds on Bluesky, this is probably old news to you. If not...

From the too-good-for-CNN Allison Morrow's Business Nightcap Newsletter.  

One way to think of the economy right now is like a big party on a roof deck your buddy Kyle built in college with little more than a hammer and a YouTube tutorial. It looks fine, and it’s been holding up shockingly well for the past five years. But now the party is getting crowded, the DJ is going wild, the keg is tapped and suddenly you zoom in on the pillars and see there are basically just two posts holding this thing up.

 

In our economy, those posts are called “Nvidia" and "rich people."

 

...

 

When economists talk about “consumer spending” going up, it’s important to note they’re talking in aggregate. And right now, rich people are having such a good time, they’re skewing the data.

 

See here: The top 10% of wealthy people accounted for half of total spending in the second quarter, per Bloomberg News, citing an analysis by Mark Zandi, chief economist for Moody’s Analytics.

 

Think about that. Just 10% of the American consumer base is buying so much stuff, it accounted for half of all the spending in the economy. That’s a record. In the boom and bubble of the 1990s, high-income Americans accounted for about a third of overall spending, Bloomberg notes. 

 

Meanwhile, the middle- and lower-income tiers are leaning on credit cards to keep up with the cost of living. The national average credit score dropped by two points this year — the steepest drop since 2009, aka the peak of the Great Recession, my colleague Matt Egan wrote Tuesday. 

 

This is what economists call a K-shaped economy, which is a handy visual cue reflecting the upward trajectory of the upper class versus the downward trajectory of everyone else. 

 

...

 

Yes, the stock market is clocking record highs, but it’s also got a concentration problem. The so-called Magnificent 7 (a handful of tech companies worth trillions of dollars apiece) now make up more than 30% of the value of the S&P 500. (Nvidia alone makes up about 8% of the index.)

 

Absent those juggernauts, the US stock market is more or less flat for the year.

 

 Add to that the previously noted fact that "Capex spending for AI contributed more to growth in the U.S. economy in the past two quarters than all of consumer spending" and the numerous indicators that we are in a bubble, and we have a situation that can turn very ugly very quickly.

 

AI hasn't reshaped our world, but the AI bubble certainly has.

Kimmel part 2 -- the business

Yesterday, we talked about the politics of the Kimmel suspension in return. Today we’re going to focus on the business side, something I feel a bit more knowledgeable about and where the schadenfreude really starts to flow.

It is difficult to overstate just how badly ABC/Disney handled this and what a cautionary tale the company has become. It’s easy to understand that initial calculation. It was the same one so many companies have made in the past few months. When faced with an obviously illegitimate demand, they weighed the potential costs of pushing back against the loss of reputation and decided it wasn't worth fighting. However, even by this debased standard, this was taken to a new level. The company was so eager to comply that (unlike CBS with Colbert) they didn’t even bother to lay a bare minimum of plausible deniability or acceptable optics.

We’ve seen this story play out God knows how many times recently, but this time ending was different. Through some combination of the flagrancy of the attack on free speech, the naked lack of principle on the corporation’s part, and underestimating both how likable Jimmy Kimmel was and how many people were tired of this administration, this blew up in their faces and did considerable damage to the people they were trying to appease.

Disney is extremely—perhaps even uniquely—brand-dependent. This is the main reason it has historically defended its copyrights so obsessively. That silhouette of Mickey Mouse’s head generates huge profits, particularly with the company’s big cash cows: cruises, theme parks, and merchandising. While there are hardcore Disney fans who would book these vacations regardless, this story has the potential to cost the company billions of dollars in revenue in its most profitable business lines.

The company is also extraordinarily vulnerable with respect to what has historically been its biggest money-losing line: streaming. The previous management set out to make Disney the world’s largest streaming service, and if you count the combined audiences of Hulu, Disney+, and ESPN, they did it. They also lost billions of dollars in the process. While Hollywood accounting is always murky, the situation has certainly improved. Bob Iger seems to have managed to get the platforms at least close to profit-neutral. 

Though all of the major streaming services outside of Netflix lose money most of the time, they keep those losses manageable for their parent companies by leaning heavily on the gym membership model. People underutilize the service but never get around to unsubscribing—either because they kind of like having the option of watching something on the service, or because they are waiting for the debut of their favorite show, or simply because they forgot.

One problem with trying to apply the gym membership model to a streaming platform is that you can’t pack 6 to 12 months’ worth of exercise into a single month’s membership. (And that’s assuming you’re not locked into a 12-month contract.) Most streaming services don’t require extended contracts and most of their original series are short runs ranging from 6 to 10 episodes a year. As a result, most viewers can burn through about a year’s worth of programming from a service like Paramount in a month or two.

The rise of SBU customers—those who subscribe, binge, then unsubscribe—is the nightmare scenario for the services. I did that a few years ago with Hulu due to an overwhelming desire to revisit Justified (which was as good as I remembered). I discovered that, if I focused all my viewing on the one platform, the exclusives they offered that I really wanted to watch were exhausted in about 4 to 6 weeks.

It will take a long time for Disney+ to repair this brand damage and lure its lost subscribers back into the fold. This comes at an especially challenging time for the company, which was planning on a rate increase for the service and which has seen lackluster performance from such previously bulletproof business lines as Marvel and Pixar.

At this point, I don’t see Disney even considering getting out of the streaming business—they’ve invested too much—but based on what's been reported and Disney's reaction, the service was facing devestating losses and could be again if the now more popular than ever Kimmel is forced out a second time.

Kimmel: "Disney has asked me to read the following statement and I agreed to do it. 'To reactivate your Disney+ and Hulu account ... '"

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— Aaron Rupar (@atrupar.com) September 23, 2025 at 8:51 PM

Ironically, it is the lack of brand value that further complicates this situation—not the Disney brand, of course, but the largely non-existent ones of Nexstar and Sinclair. Under normal circumstances, virtually no one watching a linear television station could tell you the name of its owner.

For these companies, having no real brand has no negative effects and often plays to their favor. [Marshall makes some similar points here.] On net, people would be less likely to watch their local ABC station if they knew Nexstar owned it, even more so for Sinclair.  

In particular, Nexstar and Sinclair may well be looking at a rough stretch for one of their biggest sources of advertising, local news. By not only becoming the story but by reinforcing it every weeknight with the preemption, ratings are likely to suffer and advertisers are likely to be chased away. Disney has huge incentives not to back down again, while these two companies are looking at a fight with enormous downsides. It’s likely this will go on for a while. Sinclair, in particular, committed itself by making outrageous demands when it thought it had the upper hand. 

 Sinclair’s biggest advantage has always been the fact that most people neither know nor care who owns their local television station. They could put a heavy thumb on the news without consequence. They may be about to find out that some businesses are better off without brand recognition.

One aspect that almost everyone is getting wrong is the idea that Disney deserves credit for now taking a principled stand. That’s roughly analogous to arguing that a robber deserves credit for giving up a life of crime as he’s being arrested. Pressure was applied to suspend Jimmy Kimmel, they folded immediately. When they realized greater pressure was being applied from the other side, they immediately reversed themselves. It is possible that a sense of right and wrong played a role in there somewhere, but there’s no evidence suggesting it.

ABC/Disney pursued what has become standard operating procedure in 2025, treating pressure from the Trump Administration as a simple calculation of expediency versus principle, with expediency winning without a fight. This turned out to be a huge and immediately obvious miscalculation that threatened to do serious long-term damage to multiple major business lines.

It is very much an open question how applicable lessons from Bob Iger’s humiliation are to other industries. This was a special case along multiple dimensions — but it would be foolhardy for the next CEO publicly threatened by the Trump Administration to forget what happened to the last guy.

 

Kimmel Part 1 -- the politics

Well, that didn't take long. 

Within the course of a week, ABC totally capitulated to threats from the FCC and right-wing station owners, spectacularly screwed up the optics, completely failed to foresee the obvious business consequences, and then unconditionally surrendered six days later. I can't think of a more humiliating week for a CEO of Bob Iger’s stature, but we’ll get to that next time when we talk about the business side of the story.

For now, let's talk politics. 

In some ways, we are seeing people make both too little and too much of this story. In terms of stifling free speech, it is probably less significant than the firing of Washington Post op-ed columnist Karen Attiah. It might even be less significant than the Vichy water that Ezra Klein has been doling out at the New York Times.

With respect to other aspects, however, this is both huge and unprecedented. Josh Marshall, whose track record is unequaled in these matters, has argued that the key to understanding Trump is dominance and submission. I would add catharsis, distraction, and possibly feral disinformation, but Marshall is certainly right about the main driver. Marshall has termed this the “bitch slap theory” of politics, and that’s about the best description I’ve seen.

The approach of looking overwhelmingly dominant while making your opponent look and feel helpless and weak often works very well, but it has a couple of major downsides. First off, if it fails, you can often find the intended roles reversed, with the bully looking small and ineffectual. On a somewhat more subtle level, a focus on shock-and-awe politics can undermine more low-key and often devious tactics, particularly “boiling the frog.” If you start with boiling water and taunt the frog as you’re throwing it in, it is likely to notice the temperature change.

With the Colbert firing, CBS—in its attempt to appease Trump and the Ellisons—applied a veneer of plausible deniability. It was comically transparent, suddenly announcing that the number-one late night show was hemorrhaging cash (showing that enormous hits like Forrest Gump actually lost money has always been the foundation of Hollywood accounting). But the rules of the modern establishment press insisted that the obviously disingenuous claim be given equal coverage and virtually no scrutiny.

By comparison, Kimmel's suspension was an abuse of government power so flagrant it would make Richard Nixon blush, and it struck a nerve.   

Seems pretty clear to me: "the First Amendment forbids the government from using coercion backed by threats of punishment to suppress speech." Gift link. www.nytimes.com/2025/09/19/u...

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— Dan Froomkin/Press Watch/Heads Up News (@froomkin.bsky.social) September 19, 2025 at 10:36 AM

Keep cancelling! creators.yahoo.com/lifestyle/st...

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— DevinCow (@devincow.bsky.social) September 19, 2025 at 6:56 PM

"Regardless of the truth or falsity of Kimmel’s remark, the government should not serve as the arbiter of truth in public debate." It is all to easy for the government to use a truth-policing power "as a tool to threaten and punish disfavored speakers."

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— Thomas Berry (@thomasberry.bsky.social) September 18, 2025 at 3:34 PM

Rats-leaving-a-sinking-ship conservatives spoke up.

Wanna see a bigger sign? www.bbc.com/news/article...

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— docslacker (@docslacker.bsky.social) September 20, 2025 at 4:21 AM

The one person Bob Iger least wanted to speak up spoke up.

Like we said, dominance-based strategies have penalties for missed shots and they tend to be zero-sum games. The pro–Kimmel/anti-Trump side clearly won this last round, which means that someone else lost. Obviously, everyone slapped ABC around, but neither Nexstar, Sinclair, nor the administration came out of this looking stronger.

Elliott Morris argues that the backlash showed that the CEOs of companies like Disney don’t realize how unpopular Trump actually is. He might be right, but one thing’s for certain: they realize it now more than they did a few days ago.

I was going to start a two-part post on the Kimmel suspension, but given the news, I though I'd hold off

I work remotely so this probably wouldn't be as effective.

Apparently on Christian tiktok they're predicting a rapture on Tuesday. So I'm going in to work early, laying out an outfit of clothing in my office and pretending it got me.

— Elle (@elleisanisland.bsky.social) September 20, 2025 at 5:37 PM

I share your inclination to be skeptical, but it can't be a coincidence that this comes exactly a week after Peter Thiel's “off-the-record” lecture where he suggests that Greta Thunberg is the biblical Antichrist. (You think I'm joking, but I'm not.)