Weeks ago, I was writing about the “financing deals” between major AI companies that looked to me like an illusion of strength rather than actual strength. The reason for my skepticism is that, just like much of the private credit market, the disclosures were extremely weak and the slight of hand- while apparent to anyone looking- had virtually no mainstream reporting.

The financial game shows need the “markets” to keep rising for their ratings and since just a handful of companies are driving most of the returns- SILENCE IS GOLDEN.

The main concern for me is that there are promises being made with the idea that the scale of growth will be exponential and that the financing will stay cheap. It is imperative for the AI companies that financing costs stay LOW. Goldman Sachs has reported that they believe $765 BILLION will be spent on AI infrastructure in 2026. Morgan Stanley says $2.9 TRILLION will be spent between 2025-2028.

Most of this spending is being made with BORROWED money. If interest rates rise will these projects still have the same allure?

A huge problem, as I explained in a previous article, is that you have companies that are signing long-term deals based upon ASSUMED future earnings and massive debt-based spending to set up the infrastructure. This would be fine if it were being reported as it is, but most are unaware that a lot of this debt is “off the books.” The companies are liable but do not account for it on their disclosures.

I also talked about NVIDIA- when you look at the numbers- they are outstanding. Are they real? There is evidence that they are leasing chips, reporting them sold and using the same chips as collateral for loans.

It would be one thing for a small financial advisor to mention this, and you might even think I am just being alarmist. One small detail. A few months after my warning, the BIS (Bank of International Settlements-Central Bank of Central Banks) has issued the same warning.

The pressure points that they have warned on are:

· “Repricing of risk this time, whether triggered by higher interest rates or an AI bust, has the potential to be similarly disruptive.” Just to mention an AI bust is telling.

· “Disappointment in returns could trigger a sudden pullback in financing and turn the capex boom into a protracted investment bust, with potential knock-on effects on financial conditions.”

· Regarding AI they mentioned that there are vulnerabilities linked to funding, including complex arrangements such as “circular financing” that can mix debt (bonds) and equity (stock) with supplier-client contracts. Morgan Stanley also has a visual (AI Ecosystem Capital Flows) that shows how the “promises” that I have been talking about are being made with little more than hopes for the future. There are also “out” clauses that could derail the whole train.

· Possibly the most telling warning- “The terms of such deals are typically poorly disclosed, with risks of the SAME ASSET being pledged multiple times. This has been a LARGE problem for private credit in the recent bankruptcies. Since there is virtually no oversight this is likely rampant.

· BIS Chief Pablo Hernandez de Cos mentioned that there is a higher probability of second-round effects for inflation. So much for “prices going way down”

· High Sovereign debt levels loom large. Since hedge funds have been major buyers and are reliant on short-term low-cost financing as they use leverage. My take: If rates rise the buying could become sales and have many unintended consequences.

So why is this important? Those “in charge” always warn prior to major events because they can say “We warned you about that.”

The illusion of “all is well” is being held up by a few companies. The reality of all is NOT well can easily be seen.

Inflation is still a problem and is likely to get worse. Jobs that can support a family are getting harder and harder to find. Foreclosures, bankruptcies, loan defaults, and small business closures are all moving up substantially. The illusion of bringing back factory jobs to America is being exposed. Hopefully, manufacturing can be done again here. The image in our minds is that the factory floors will be filled with willing workers getting excellent pay. The reality is that to be competitive the exact opposite is true.

In a clear shot across the bow GM has laid off one thousand employees and replaced them with fifty robots at Factory Zero. (Yahoo Finance) This is likely the future and anyone envisioning a return to the booming jobs of the 1950s-1970s will be stunned by how unrealistic that is in today’s world.

Prices are rising, wages are not keeping up, people are turning to credit to survive, and the propaganda stations point to higher spending as proof the consumer is strong.

Meanwhile, real money (gold) along with silver has been managed lower as the major banks are making a major move to Asia as I reported last week. Please read that if you have not. It appears that the pricing mechanism is moving away from the paper manipulation and that the very entities that have kept the price suppressed are all onboard. I believe that they have crushed prices to accumulate the assets cheaper. I also believe that they have done this to scare mom and pop away until a MAJOR move higher when they will possibly get interested again allowing those “in charge” to profit.

Finally, I am getting older. I remember 1976- our 200th. Anniversary as a country. Pride and enthusiasm were off the charts. America was still the shining beacon on the hill.

Today, 50 years later and we are just a shell of what we used to be. Hard work and pride have been replaced with dependence and a lack of respect for others and in some cases, even for ourselves.

In 1976 as a 17-year-old I had high hopes and enthusiasm for the future. Today, I see a lot of discouraged young people that will have a hard time having the same opportunities that existed then.

In 1976 we still had manufacturing and produced goods that were desired around the world. Today, we import most of everything we use day to day besides food and energy. Today, we produce weapons and use them to manipulate and destroy rather than to build.

In the past we looked for win-win situations. Today we try to destroy others for personal gain. It could not be more obvious when we see politicians actively trading markets with inside information that would land us in jail for a long time. It is also obvious that big money has corrupted business after business by buying out doctors, hospitals, major companies, insurers, dentists, etc. This has led to a lack of service and endless waiting times to speak to a human being. After the wait I keep my fingers crossed so that I can understand the person on the other end of the line.

While I love this country I am disgusted with the leadership- or lack of it and the constant beatdown of the average citizen for the benefit of a VERY FEW.

Things are likely to get a lot worse before they get better.

Be Prepared!

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