Consumer remains resilient

In the second quarter, GDP growth came in at 2.8%, exceeding expectations of 2% and showing a significant increase from the prior quarter’s 1.4%. This initial estimate indicates strong consumer spending, which is crucial since consumer activity accounts for 70% of the economy. While this positive trend is encouraging, it’s important to remember that there will be two more revisions, and the final figure might change. Additionally, the inflation data showed that the PCE, the Fed’s preferred measure, was at 2.5%, aligning with expectations, while the core PCE slightly exceeded expectations at 2.6%, suggesting a stable inflation trend that could lead to potential rate cuts soon.

• When the economy decelerated in Q1, and inflation accelerated, we began to hear more recession and stagflation calls
• The first reading of Q2 GDP and the downturn in inflation during the quarter should put many of those fears to bed
• The consumer remains resilient in the face of continued high interest rates and consumer prices
• The recessionistas point to government spending, inventory, and savings drawdowns as the reasons why the number came in as high as it did
• It is also important to remember that this is an initial read, and there will be 2 revisions

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Zuck open sources Llama

Meta recently released Llama 3.1, an open-source large language model available in three sizes: 8 billion, 45 billion, and 70 billion parameters. This release marks a significant shift in AI development, as Meta’s open-source approach contrasts with the proprietary models from companies like OpenAI, Anthropic, and Google. Meta likens Llama 3.1 to Linux in the early days of personal computing, aiming to foster innovation and avoid centralization by allowing anyone to build on top of it. This development highlights the evolving landscape of AI, where open-source models are becoming competitive with closed-source counterparts. Separately, OpenAI has introduced a new search engine function within its ChatGPT platform, directly challenging Google’s dominance in the search market. This prototype aims to leverage the capabilities of large language models to enhance search experiences, a move that has already impacted Google’s stock, which dropped by 3% following the announcement.

• There is an emerging narrative that AI models will eventually become commoditized
• Meta making their models open source and competitive to the leading closed source models is a step in that direction
• If an open-source model can provide the same functionality as a closed-source model, then is there an actual moat?
• We think this is an important development given our view that AI will be implemented across many industries and use cases
• Having a powerful open-source model available for all to use is a big step in that direction
• ChatGPT directly going after Google in search is also significant
• While many have used ChatGPT as a search replacement, this formalizes that use case
• We continue to believe AI will alter the technology landscape over the coming decade

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Ethereum ETF begins trading

The cryptocurrency market witnessed a significant development with the introduction of the first Ethereum ETFs. Unlike Bitcoin, which is often compared to digital gold due to its limited use case, Ethereum functions as a platform for building decentralized applications through its smart contract technology. The availability of Ethereum ETFs is significant for the crypto ecosystem, with Blackrock, Van Eck, and Grayscale all providing their own offerings.

• While this is a big development for the cryptocurrency ecosystem, it is important to understand the difference between Bitcoin and Ethereum
• Bitcoin being offered in an ETF makes sense if you believe in its use case as digital gold
• Ethereum, in essence, is more like a software that developers can build on top of, making it a versatile platform for decentralized applications
• Ethereum has competitors like Solana and Avalanche
• It is important to look at Ethereum in its ETF wrapper through that lens

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