Fannie Mae’s rate predictions are totally worthless!
I ignore predictions from “expert economists” because they simply cite a bunch of data that I can find myself with this newfangled thing called “an internet,” and then make predictions with myriad caveats.
Fannie Mae might be the worst example, followed closely by the Mortgage Bankers Association and the National Association of Realtors:
Economist: “Rates could either be higher or lower, but they could stay the same…”
Me: “No way! Really?”
This is why President Harry Truman famously wanted a one-armed economist – so he could get sound predictions without “on the other hand” caveats.
John Downs (loan officer and friend) reminded us today that Fannie Mae was predicting 6.0%ish interest rates through 2027 in January. But today Fannie Mae is predicting 6.8% through 2027.
This simply corroborates the point I make repeatedly.
Nobody can make accurate predictions because there are just too many variables at play, e.g., hot wars, pandemics, supply chain disruptions, QE, money printing, credit crises, currency crises, stock market crashes, AI booms, tariffs, trade wars, inflation, etc.
Hence, this is my prediction, and I am absolutely sticking to it: Rates could either be higher or lower, but they could stay the same…
II. China Desperately Wants Americans to Be Terrified of AI and Data Centers!
The Soviet Union dominated numerous industries in the 1950s, including steel, coal, rocketry, hydroelectricity, cement, and machine tools. This is why my communist 5th-grade teacher ( Mr. Vanderpohl) loved to gleefully tell us that the Russians were going to take over the world.
But it turns out governments can’t prop up and support huge money-losing industries forever. Who knew? If they could, we might all be wearing funny fur caps and eating borscht, and yes, speaking Russian.
I bring this up because Paul Warburg recently posted this excellent video:
Something Utterly Bizarre Just Happened In China
He points out the paradox of China.
On the one hand, we hear about China’s massive debt load, exploding real estate bubble, huge ghost cities, mass corruption, shrinking population, and capital flight (investors desperately want to get money out of China), while on the other hand we hear about China’s ultra-modern infrastructure and booming industries such as AI, solar, EVs, drones, and shipbuilding.
Is China booming or busting?
Warburg makes the case that China fosters the appearance of “booming” in the same way the Soviets did – and it can’t last because so many of the industries China supports are losing money or running on paper-thin margins.
In early June, I blogged about how important it is for America to dominate AI. I pointed out how we need it for defense purposes, stating that AI-dominant countries will be able to bring other countries to their knees like Britain did to a much larger China with superior weaponry in the 19th century. I also pointed out that AI will drive massive economic growth and productivity gains, much like the internet did.
China knows this – and is thus desperate to win the AI race itself.
But – China likely can’t afford to compete in the AI race while dealing with a real estate crisis and subsidizing money-losing industries at a scale the world can hardly fathom.
So, China’s best bet may be to convince Americans themselves to hold back their own AI – much like America irrationally quashed its own nuclear energy program.
Axios and other news outlets recently reported that X’s safety team identified a 200,000-account bot farm – linked to China – that was solely devoted to anti-AI-data center content.
And – it seems to be working. A lot of Americans are panicking over false claims about data centers (they don’t use nearly as much water, and they don’t drive up electricity prices nearly as much as we’ve been led to believe).
TLDR: China is likely suffering the same issues the Soviets faced; we need AI; China can’t afford to compete on the AI front; and maybe don’t listen to Chinese bots.
