Friday charts: The Marvin Minsky moment is here

This is a segment from the Blockworks Daily newsletter. To read full editions,  subscribe .

Have markets been obsessing over the wrong Minsky?

After Liberation Day, we seemed to be headed for a “Minsky moment” in which global investors suddenly lose faith in the US dollar, triggering the kind of market collapse that economist Hyman Minsky warned about.

But after a big rally this week, the Nasdaq is back to within 1.4% of where it was before President Trump shocked the world with his “reciprocal” tariffs.

1.4% hardly seems like a disaster. 

Stocks may have recovered because the president seems to be having second thoughts on tariffs — especially after the CEOs of three major retailers warned that their shelves would soon be bare if the trade war doesn’t resolve itself more or less immediately.

That may have prompted the president to tell Time magazine on Tuesday that President Xi had called him seeking a deal on tariffs.

On Wednesday, Treasury Secretary Bessent also hinted at de-escalation, saying “there is an opportunity for a big deal” with China.

But even an immediate deal, however big, might not come soon enough, according to Bloomberg’s Chief Economist Anna Wong.

On this morning’s Odd Lotts podcast , Wong warned that, due to the long lead times in retail supply chains, “there’s a high probability that we’ll be seeing some empty shelves in the holiday season.”

Also this morning, China clarified that trade talks with the US haven’t even begun — in fact, they’re not even talking about talking as of yet.

The president seemed to disagree, telling a reporter , “They had a meeting this morning. It doesn’t matter who they is. We may reveal it later.”

Maybe “they” did have a meeting, who knows. 

But none of this seems concrete enough to explain this week’s rally in equities.

So perhaps something else is afoot?

AI developments

One concrete bit of news this week was the good earnings report from Alphabet, which CEO Sundar Pichai attributed to the company’s “full-stack approach to AI.”

That’s only one quarter of earnings from one company (whose stock was only up small today).

But it might serve as a timely reminder that what’s happening in AI right now is probably far more important than what’s happening with tariffs. 

To name just a few recent developments: An academic study found that large-language models like ChatGPT now pass the Turing Test; Tyler Cowen believes artificial general intelligence (AGI), by his definition, is here; AI-empowered robots are running marathons and working as cameramen ; and you can now buy your very own humanoid robot for less than the cost of a compact car.

Most impressively, an AI startup announced that it’s made great strides towards a “generalized physical intelligence” that will give robots “the ability to figure out how to correctly perform even a simple task in a new setting or with new objects.”

To get a sense for what that means, check out this video of a robot cleaning up houses it’s never been in before. 

All of this was anticipated by the father of artificial intelligence, Marvin Minsky (no relation to the economist Hyman Minsky).

Marvin predicted way back in 1994 not only that robots would “inherit the earth” but also that they would do so peacefully — as our “children.”

That’s looking more and more prescient.

How good will the world be when the cost of a humanoid, house-cleaning robot gets so cheap that nearly everyone can afford one?

That is a Minsky moment to look forward to — and it may be nigh.

Future sight

Let’s check the charts.

Predictions are hard (especially about the future):

Despite all the news this week, the Polymarket odds of a recession are about unchanged at 55%. But you can take your pick of predictions: Bank of America thinks the odds of a US recession are still only 35% ; Ed Yardeni sees a 45% of “stagflation/recession”; and Torston Slok sees a 90% chance of a “Voluntary Trade Reset Recession.”

Own goal?

New forecasts from the IMF suggest that the “supply shock” for the US (GDP down, inflation up) will be worse than the “demand shock” is for China (GDP down less, and inflation down, too).

The supply shock is underway:

A study of daily prices at retailers across the US finds that the price of goods from China rose immediately after the April 2nd announcement of tariffs and have continued to rise since. The price of goods from Mexico and Canada, however, have fallen (because of exemptions and chances of a trade deal, they think).

As bad as the last guy?

A Reuters/Ipsos poll out this week shows that President Trump’s approval rating on his handling of the economy is all the way down to, well, Joe-Biden levels.

What is this? A Minsky moment for ants?

As recently as a week ago, the biggest concern in markets was that foreign investors had lost faith in the US dollar and would therefore be selling all of their US assets. But TIC data shows that foreign selling of US equities has been “moderate.” 

Not much has happened — yet:

“The softness in US soft data [eg, sentiment surveys] still has not spilled over to hard data,” Augur Infinity writes. “Based on our calculation, soft data is now implying a meaningful contraction, while hard data continues to indicate above-trend growth.”

The canary in the Korean coal mine:

Exports from South Korea to the US are considered a leading indicator for global GDP. In April, they fell 14% from the year before.

Everything on hold?

Citadel CEO Ken Griffin opined this week that, thanks to the tariff turmoil, the US “has devolved into a nonsensical place” where business leaders spend all their time worrying about supply chain disruptions. “People are not going to raise [money] to build manufacturing in America,” he added, “because with the policy volatility, you actually undermine the very goal you’re trying to achieve.” The above survey data on capex intentions suggests he’s right.

Zooming out:

The SP 500 has outperformed gold by about 4,700% since 1980 — which makes the recent trend reversal seem a little less foreboding. 

The contrarian indicator:

The “Magazine Cover Indicator” (which is real enough to have a Wikipedia entry ) was flashing green at the start of the week after the Economist ran an unprecedented fourth straight cover story that was bearish on the US and its currency.

That’s probably the real reason stocks were up this week: When everyone’s worried about the same thing at the same time, it probably won’t turn out as bad as everyone thinks.

So maybe we should get back to thinking about AI again — and hope it will be better than everyone thinks. 

Have a great weekend, Minsky-moment readers.

Get the news in your inbox. Explore Blockworks newsletters:

• Blockworks Daily : Unpacking crypto and the markets.
• Empire : Crypto news and analysis to start your day.
• Forward Guidance : The intersection of crypto, macro and policy.
• 0xResearch : Alpha directly in your inbox.
• Lightspeed : All things Solana.
• The Drop : Apps, games, memes and more.
• Supply Shock : Bitcoin, bitcoin, bitcoin.