Breitbart Business Digest: The Corrupt Bargain Edition

Bubble, Bubble, Toil and Trouble

Welcome back to Friday. This is the Breitbart Business Digest weekly news wrap. This week, investors decided that maybe it was time to give AI a bit of time off for good behavior, the Cato Institute celebrated rising tax bills due to immigration, and Disney made it clear that its future isn’t in entertainment. As some of you may have noticed, we’re not really in the business of summarizing the news of the week (ask an AI bot for that). We enjoy getting in our last digs at the news and the people who stumble through it before they shuffle off into history.

Is an AI Bubble Popping?

It used to be conventional wisdom that you could not have an investment “bubble” so long as everyone was worried about an investment bubble. The idea was that bubbles are moments of widespread irrational exuberance and that if there’s lots of worry going around, you probably aren’t in a bubble.

The trouble with this idea is that all of the recent bubbles have also had plenty of people worrying about bubbles. The dot-com bubble was certainly widely discussed. The housing bubble was so widely discussed that people were derided for “bubble-talk,“ and magazines ran covers of houses floating on bubbles. So, we do not think that all the consternation about an artificial intelligence bubble is proof that we’re not in one.

One of the weirder things about the recent AI cycle is how hard it has been to invest in AI directly. The big AI companies are not public. So, most investors can only approach AI indirectly, either by buying shares in businesses that are vendors to AI companies (like Nvidia) or by buying shares in businesses that are themselves investing in AI companies. Neither is a very efficient investment strategy because the middleman is taking his vig; so, your returns will always be diluted.

And there’s a bit of tension between these two strategies. The vendors are extracting funds from AI and the investors are contributing funds. Investing in both seems a bit circular. Perhaps a better definition of a bubble is when the market stops caring about that circularity or even embraces it as a virtue. We certainly saw some of that in the housing bubble, when investors loved lenders, home builders, and even the houses themselves. We’ll all finance ourselves into infinite wealth!

Eventually, that tends to run out. Typically, it’s when fear of missing out (FOMO) on the latest trend becomes fear you’ve got to immediately trade out (FUGIT-OUT). This always feels unfair to those who were building their plans around the enthusiasm age. Think of all the companies that saw their competitors’ shares rise whenever they hinted at spending money on AI. So, the C-suites were packed with folks figuring out how to pour more money into AI. And then, this week, it all started to unravel as investors decided that it was time to rein in the cap-ex spending on AI.

But don’t worry. Nvidia’s CEO says all that AI capital spending is both appropriate and sustainable!

Cato Delenda Est!

There’s a progressive think tank in Washington, DC, that is using the name that once belonged to a libertarian outfit called the Cato Institute. This week, it put out a very long paper explaining to politicians that if they really want to be able to spend more money, they should allow more immigrants. According to the Cato math, immigrants are massive net contributors to government revenues, and so they should be welcomed by big government spenders of all types.

The weirdest part of the paper was the claim that one of the benefits of mass immigration is that it pushes up housing prices. In an era where housing affordability is one of the public’s greatest concerns, this is an oddly discordant note to strike. Is our struggle today really about getting home prices to rise faster? The argument is not that immigrants are somehow making our homes better—just that our homes are getting pricier. So, we’re paying more for the same stuff. Hurray?

It is also an internet meme come to life: It’s not happening. Okay, it is, but it isn’t a big deal. Fine, it’s a big deal, but it’s a good thing. When JD Vance claimed that rents and house prices were being pushed up by immigrants increasing housing demand, he was pilloried. Now we’re told that this is a feature not a bug of immigration.

Here’s why Cato celebrates the immigrant housing inflation phenomenon: higher home prices allegedly mean higher property tax revenues. So, immigrants push up home prices, which means everyone pays more in property taxes, and that counts in Cato math as a fiscal benefit of immigration. So, again, we’re paying more for the same stuff. But at least the government gets more of our money. Yay libertarianism!

We’re not even sure they’re right about the last part. If state and local governments want to collect more money from homeowners, they can just raise the property tax rate. It’s not like this is somehow fixed, and only higher home prices can raise tax revenues. In fact, it happens quite often. What the higher home price channel does is allow for a stealth tax hike, forcing people to pay a larger share of their income to the government without government officials having to vote for a tax hike. We’re still trying to figure out how this counts as “moving public policy in the direction of individual liberty, limited government, free markets, and peace,” to quote Cato’s mission statement.

If we’re paying more for homes and more in taxes, this leaves us less income to pay for other goods and services. So, the government is getting more revenue, the banking sector gets to make bigger loans, and everyone else gets poorer.

Disney Becomes a Tourism Company

Corporate America’s most-watched succession drama finally ended this week when Disney picked Josh D’Amaro—the parks and resorts chief—to replace Bob Iger as CEO. After three years of speculation since Iger came out of retirement to fix the Bob Chapek disaster, the board went with the most predictable choice: a 30-year company veteran who literally dresses like Iger (thin-knit sweaters over collared shirts, naturally).

D’Amaro’s selection confirms what the numbers already showed: Disney is basically a hospitality company now. His parks division generated 60 percent of the company’s profits last year; and, by some estimates, it accounts for 80 percent of Disney’s total value, while the experiences business is getting a massive $60 billion investment through 2033.

The problem is D’Amaro has zero experience running the entertainment side — you know, the part of Disney that systematically alienated middle America by woke-ifying Marvel, Star Wars, and its classic cartoon franchises. His predecessor Chapek came from parks too. The real question is not whether D’Amaro can keep the culture warriors from destroying the tourism business the way they wrecked everything else. It’s whether he even wants to. Chapek’s magical kingdom experience certainly did not provide him with enough common sense to protect the princesses from radical gender theory and critical race animation.

Happy Birthday to the Corrupt Bargain!

On February 9, 1825, the House of Representatives elected John Quincy Adams as president after no candidate won an electoral majority in the 1824 election. Adams lost both the popular vote and the electoral college to Andrew Jackson, but Speaker Henry Clay threw his support to Adams in the House vote. Adams then appointed Clay as Secretary of State in what Jackson supporters called the “Corrupt Bargain.“

Jackson spent the next four years campaigning against the alleged stolen election, and he crushed Adams in 1828. That election was the second great populist uprising in the history of our Republic. The first was the election of Thomas Jefferson.