It’s Your Choice

Free will, as we all know, is a thing some people believe in, and some people don’t. The people who don’t believe in it tend to freak me out. Like my friend Dave. But Dave would say that’s fine. It’s not something I have a choice about. Dave can be a bit annoying when you get him onto this subject, which is why I like to get him onto it as often as I possibly can because it annoys his wife. I’m a monster.

On that note I’ve included two stories today: One about AI being good, the other about AI being bad. You choose! Cheesemaker’s Choice, meanwhile, is a taster pack of four whole cheddars for just $89 from Shelburne Farms in Vermont.

Today's Cheddlines You Need2Know

1. Wall Street tumbles on worries about economy

2. A car could cost an extra $4,711, thanks to tariff …

3. Frank founder not so frank, after all

4. New AI drone watches for wildfires

5. Those AI Ghibli images are not entirely popular

And they deliver!

—Matt Davis, Need2Know Chedditor

P.S. There’s some scary robots on our ‘gram—again.

Quote of the Day

Should You Check Your 401(k) Today?

👎

(nope)

Companies mentioned in today’s newsletter

$SPX ( ▲ 0.36% )  $LULU ( ▲ 1.12% )  $JPM ( ▲ 0.89% )  

Wall Street tumbles on worries about economy

On Friday, Wall Street experienced yet another tumultuous day, as the S&P 500 $SPX ( ▲ 0.36% ) dropped by 2%, one of its most challenging days in the past couple of years.

From tech giants to fashion retailers, no sector was immune to the selloff that marked the index’s fifth losing week in the last six months. Concerns include inflation and a significant slowdown in the U.S. economy, exacerbated by a global trade war that is seemingly shrinking consumer spending power.

It was a broad-based selloff that saw shares of companies such as Lululemon $LULU ( ▲ 1.12% ) plunge by 15.4% despite reporting a stronger profit than expected. The brand's CEO cited a potential slowdown in revenue growth linked to consumers’ increasing apprehensions about the economy and inflation.

One of Wall Street's biggest fears is the possibility of President Donald Trump's rising tariffs leading to a deep freeze in spending by U.S. households and businesses. This concern is not without foundation. According to a University of Michigan survey, consumer pessimism is at its highest since 2009, with two-thirds of Americans anticipating worsening unemployment within the following year — a worrying sign for the job market, which has been a major propellant of the U.S. economy's strength.

Reports on inflation also present a murky outlook. A critical measure that the Federal Reserve pays close attention to indicated that inflation in February was slightly worse than economists had predicted. This comes at a time when the Fed has put interest rate cuts on hold after the reductions made in late 2024 due to inflationary pressures remaining above their 2% target.

The fear that swept over Wall Street did not spare sectors reliant on consumer confidence either. Major airlines, cruise operators, and entertainment companies faced significant losses, signaling that discretionary spending sectors are particularly vulnerable.

Globally, stock markets are on edge as the specter of a global trade war looms large. Japan and South Korea's indexes tumbled, particularly hurting auto manufacturers, following Trump’s proposed 25% tariffs on auto imports. This casts a long shadow not just on foreign auto firms but also on American carmakers whose intricate supply chains span across North America.

A car could cost an extra $4,711, thanks to tariffs

Economist Arthur Laffer, renowned for his influence on economic policy and recently honored by President Trump with the Presidential Medal of Freedom, has expressed concern about the potential impacts of proposed tariffs on auto imports. In a thorough 21-page analysis, Laffer said that the addition of a 25% tariff could increase the cost of a vehicle by a striking $4,711 on average.

The warning comes amid ongoing discussions about trade policy and its effects on the U.S. economy. Laffer, whom we all know for his creation of the Laffer Curve and as a principal architect in the economic ideology of tax cuts underpinning Reaganomics, cautions that the tariffs proposed by the Trump administration could weaken the key advantages U.S. automakers have gained through the intricate supply chains established under the 2019 United States–Mexico–Canada Agreement.

The economist, who has served on policy advisory boards since the Reagan administration, told The Associated Press that his report was not a critique of Trump’s negotiation skills or the strategic approach to trade. He said the report had caused a “kerfuffle.”

“The report shows the economics of what would happen were the tariffs to be put in place," he said. "This is about facts, not how we feel.”

From @cheddar

Frank founder not so frank, after all

Charlie Javice, the once-celebrated founder of Frank, a company aimed at transforming how students apply for financial aid, was convicted in a New York court last week for defrauding JPMorganChase $JPM ( ▲ 0.89% ) . At the heart of Javice's downfall was the ten-fold inflation of Frank's customer base during the bank’s acquisition process in 2021.

Javice claimed the platform had over 4 million clients, a figure she expected to balloon to 10 million by year's end. However, Frank only had 300,000. That’s a lot less.

Javice embarked on her entrepreneurial journey with Frank in her mid-20s, identifying and addressing a real pain point for millions: the daunting complexity of the Free Application for Federal Student Aid. With the mission of expediting the process, Frank was designed not unlike tax prep software, promising to simplify the financial aid application process for a fee. This promise, coupled with Javice's “effective” “media presence” and accolades, including a spot on Forbes' "30 Under 30" list, propelled Frank into the limelight.

Javice's defense posited that JPMorgan was suffering from buyer's remorse, especially after finding the acquired data less valuable due to regulatory changes. Javice’s lawyer argued that the bank was well aware of what it was getting into and that the fraud allegations were a smokescreen for the bank's misjudgments. Furthermore, the defense attempted to discredit a key testimony by suggesting personal grievances influenced the witness's statements, a claim flatly denied.

It didn’t work.

New AI drone watches for wildfires

The Silvaguard drone uses AI to enhance early wildfire detection, location, and monitoring. Wildfires, exacerbated by extreme heat and climate change, are becoming increasingly frequent and perilous worldwide. The response to this mounting threat may now be soaring above us, equipped with cutting-edge technology.

The drone is not only equipped to provide infrared imagery but also works in tandem with an already-existing fire detection system developed by Dryad Networks. The established system, known as Silvanet, is designed to detect wildfires at the crucial smoldering stage using an array of solar-powered gas sensors interconnected through wireless networks.

I’m often at the crucial smoldering stage, myself.

Each Silvanet gas sensor can cover an area comparable to a football field and can be mounted on a tree. When Silvanet sniffs out a fire, it triggers the strategic dispatch of a nearby Silvaguard drone to swoop over to the hotspot and transmit real-time, detailed images.

"Today we saw a combination of Silvanet — the solar-powered gas sensors that detected the fire within minutes — with Silvaguard, the first prototype of an autonomous, an AI-enabled drone that we dispatched in response to a fire," said Carsten Brinkschulte, CEO and co-founder of Dryad Networks.

"When it comes to wildfires, time is of the essence; you cannot be fast enough," Brinkschulte said.

Although it turns out, there’s a delay. Despite the promising capabilities demonstrated by the Silvaguard drone, it is still pending regulatory approval for commercial use. Wildfires will not wait for us to catch up, and with AI-based drone technology, we stand a fighting chance to spot and respond faster than ever before.

Those AI Ghibli images are not entirely popular

Known for its iconic movies like "Spirited Away," Studio Ghibli's unique animation style, crafted by founder Hayao Miyazaki, is unmistakable. But the recent ability of ChatGPT's new version to transform internet memes and personal photos into this distinctive style has sparked concerns about AI, copyright, and the future of artistic creation.

The issue isn't just about the capability of AI to mimic a certain "look" but also touches on the legality of how these AI models learn their craft. If an AI model, like ChatGPT, is trained on copyrighted materials without permission, it could pose a significant legal challenge.

The capability to generate art in the "style" of Ghibli raises intriguing copyright debates. "Style" in itself may not be copyrightable, but the nuanced, unique elements that make Studio Ghibli's work distinctive could potentially be protected.

The good news is: This is going to generate billions of dollars in fees for lawyers.