The Federal Reserve left interest rates steady earlier this week citing a solid labor market and inflation remaining somewhat elevated. The Federal Reserve removed language from their statement that inflation “has made progress toward” the Federal Reserve’s 2% target. Leading up to this meeting, the Federal Reserve cut interest rates three straight times. Fed Holds Rates Steady | CNBC
As the Federal Reserve shifts from cutting to pausing, all eyes are on President Trump. In Jerome Powell’s press conference, he said he has not had any contact with President Trump since Trump’s comments on demanding lower interest rates. No Contact with Trump | CNBC
The independence of the Federal Reserve is crucial to maintaining its credibility towards its policy goals. Here is how the Federal Reserve remains independent but accountable: Federal Reserve Independence and Accountability | In Plain English | St. Louis Fed
Chinese AI Application: On Monday, semiconductor and technology stocks sold off as a new artificial intelligence chatbot released by DeepSeek, a Chinese startup, performed comparatively well to other artificial intelligence apps (ChatGPT, etc.) on benchmark tests. DeepSeek developed this chatbot using less sophisticated and cheaper chips than those produced by Nvidia, indicating that the cost of creating a comparable AI model may be lower than the spending made by AI developers like Meta and Microsoft. What Is China’s DeepSeek and Why Is It Freaking Out the AI World? | Bloomberg
There are several implications to this development.
- The United States has banned the export of advanced chips to China to slow China’s technology and AI development. This forced DeepSeek engineers to produce a more efficient AI model, with less advanced chips, bringing into question the effectiveness of the ban. The techniques in DeepSeek’s model were not unknown to AI developers, they were just used in creative ways to build the model.
- This may mean it is cheaper to produce effective AI models than initially thought. Overall, this will be good for other companies as AI adoption rates increase and the energy required to produce AI models is less than expected.
The story, much like the technology, is moving quickly where there is some question about how much DeepSeek had access to other AI models to develop its own model. This concept is called ‘distilling’ where a teacher model trains a student model to become comparable to the original model but uses less energy. AI developers are likely using this practice, they just do it internally and do not allow third-parties to do it. In the most exciting twist to the story, DeepSeek may have violated OpenAI’s terms of service using ‘distillation’ to create their model. Critics of OpenAI would allege that they may have built their AI model in a similar (ironic) way: violating copyright laws gathering data. OpenAI Believes DeepSeek ‘Distilled’ Its Data For Training | Forbes
At the writing of this week’s newsletter, news was coming out about the plane crash in DC. Our thoughts are with the families of those involved.
Financial Planning/Investment Strategy Corner:
We’ve welcomed a new addition to our family, Ottilie Marjorie. She’s named after my wife’s great-great-grandmother; her middle name is my grandmother’s. The moments are overwhelming, and we are excited about her every new movement and squirm. In the days after coming home from the hospital and offering my full support to my wife and new daughter, reliance naturally waned, and I found myself listless for a day or two. I realized that with this new significant life change, I needed to be more purposeful and intentional about what I set out to do for the day.
Where we need to consciously consider purpose is the purpose of investing, saving money, and evaluating if you are enjoying your day-to-day activities. Jordan Grumet, author of The Purpose Code: How to Unlock Meaning, Maximize Happiness, and Leave a Lasting Legacy, addresses this question by looking at purpose in two ways, ‘big P’ purpose’, which is goal-based and ‘little P’ purpose, which is process based. ‘Big P’ purpose, he finds can be destructive because these goals tend to be achievement or prestige-based and not about meaning. If your purpose lacks meaning, it will be difficult to find happiness because you likely will move from one achievement to another. ‘Little p’ purpose you enjoy the activities you are engaging in. Ultimately, sacrifices and choices may need to be made but as we age it’s important to minimize the activities we loathe and seek purposeful and fulfilling ones. Why Chasing Money and Prestige Could Leave You Searching for Purpose | Morningstar
Quick Hits
- With (a little) the recent snowfall in Maine: Where to go cross-country skiing in Maine
- I am still head chef in the household and this looks like a nice winter meal: How to make gumbo – recipe | Stew | The Guardian
- See 15 Winning Images From the Close-Up Photographer of the Year Competition | Smithsonian
- I just finished “Say Nothing” by Patrick Radden Keefe. It may be my favorite non-fiction book: Patrick Radden Keefe Spent Weeks Waiting for Dua Lipa's Call for His Book Say Nothing
Quote: “Quit and do what, and with who? – Roy Wood Jr.’s mother in his latest comedy special when asking her to retire
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