Albert Edwards, the outspoken Global Strategist at Société Générale—a figure who even refers to himself as a “perma bear”—is certain that the current U.S. equity market, driven largely by high-flying tech and AI, is experiencing a dangerous bubble. (Société Générale, to be clear, does not hold the view that U.S. stocks or AI stocks are in a bubble, noting that Edwards is employed as the in-house alternative view.) While history often repeats itself, Edwards warned recently that the circumstances surrounding this cycle’s inevitable collapse are fundamentally different, potentially leading to a deeper and more painful reckoning for the economy and the average investor.
“I think there’s a bubble but there again I always think there’s a bubble,” Edwards told Bloomberg’s Merryn Somerset Webb in a recent appearance on her podcast Merryn Talks Money, noting that during each cycle, there is always a “very plausible narrative, very compelling.” However, he was unwavering in his conclusion: “it will end in tears, that much I’m sure of.”
Edwards told Fortune in an interview that previous theories about a bubble were “very convincing in 1999 and early 2000, they were very convincing in 2006-2007.” Each time, he said, the “surge in the market was so relentless” that he just stopped talking about bubbles, “because clients get pissed off with you repeating the same thing over and over again and being wrong,” only to change their tune after the bubble bursts. “Generally, when you’re gripped by a bubble, people just don’t want to listen because they’re making so much money.”
As he himself frequently points out, Edwards is known as a very bearish market strategist who has made some high-profile and dramatic predictions, often warning about major stock market crashes and recessions. His track record includes famously calling the dot-com bubble, but it also includes warnings that haven’t panned out, such as predicting a potential 75% drop in the S&P 500 from peaks—worse than the 2008 financial crisis lows. When The New York Times profiled Edwards in 2010, they noted that the chuckling, birkenstocks-wearing analyst had been predicting a Japan-style stagnation for U.S. equity markets since 1997 (a prediction he repeated in his interview with Fortune).
Still, Edwards insists that the current parallels to the late 1990s NASDAQ bubble are clear: extremely rich valuations in tech, with some U.S. companies trading at over 30x forward earnings, justified by compelling growth narratives. Just as the TMT (Technology, Media, Telecom) sector attracted vast, sometimes wasted, capital investment in the 1990s, Edwards argued that today’s enthusiasm echoes that earlier era. There are two key differences that could lead to a much worse outcome this time, though.
The Missing Trigger and the Meltup Risk
In previous cycles, Edwards explained, the catalyst for a bubble’s demise was usually the monetary authority’s tightening cycle—the Federal Reserve hiking rates and exposing market froth. This time, with the Fed lowering rates, that trigger is conspicuously absent. Bank of America Research has noted the rarity of central banks cutting rates amid rising inflation, which has occurred just 16% of the time since 1973. Ominously, BofA released a note on the “Ghosts of 2007” in August.
Instead of tightening, Edwards anticipates the Fed will move away from quantitative tightening and likely shift to quantitative easing “quite soon,” due to issues in the U.S. repo markets, another ghost from the Great Recession. The Fed itself issued a staff report in 2021 on repo issues, writing in 2021 that trading between 2007 and 2009 “highlighted important vulnerabilities of the US repo market.” Repo issues reemerged in the pandemic, with the Richmond Fed noting that interest rates “spiked dramatically higher” starting in 2019.
Edwards told Bloomberg that the absence of hawkish policy could lead to a “further meltup,” making the eventual burst even more damaging. Poking fun at himself, Edwards said, “I just got bored being bearish, basically rattling my chains saying, ‘This is all a bubble, it’s all going to collapse.’” He said that he can see how the bubble can actually keep going for much longer than a perma bear like himself would find logical, “and actually that’s when something just comes out the woodwork and takes the legs from out from under the bubble.”
“What’s more worrying about the AI bubble,” Edwards told Fortune, “is how much more dependent the economy is on this theme, not just for the business investments, which is driving growth,” but also the fact that consumption growth is being dominated far more than normal by the top quintile. In other words, the richest Americans who are heavily invested in equities, are driving more of the economy than during previous bubbles, accounting for a much larger proportion of consumption. “So the economy, if you like, is more vulnerable than it was in the ’87 crash,” Edwards explained, with a 25% or greater correction in stocks meaning that consumer spending will surely suffer—let alone a 50% lurch.
Edwards told Bloomberg he was concerned about the widespread participation of retail investors who have been dragged into the market, encouraged to “just buy the dips.” This belief that “the stock market never goes down” is dangerous, Edwards warned, arguing that a 30% or even a 50% decline is very possible. The inequality of American society and the heavy concentration among high earners whose wealth has been “inflated by the stock market” is a major concern for Edwards, who pointed out that if there is a major stock-market correction, then U.S. consumption will be “hit very, very badly indeed” and the entire economy will suffer. This view is increasingly shared by less uber-bearish voices on Wall Street, such as Morgan Stanley Wealth Management’s Lisa Shalett.
In many ways, Edwards told Fortune, we’re overdue for a correction, noting that apart from two months during the pandemic, there hasn’t been a recession since 2008. “That’s a bloody long time, and the business cycle eventually always goes into recession.” He said it’s been so long that his perma-bear instincts are confused. “The fact I’m less worried about an imminent collapse [right now] makes me worried,” Edwards added with a laugh.
Edwards told Fortune that he’s been through various cycles and bubbles and he gained his perma-bear status in the mid-1990s, when he felt a distant earthquake happening in Asia. “You’ve been around the block a few times, you just do become cynical,” he said, before correcting himself: “That’s not the right word. You become extremely skeptical of the full narrative.” He proudly repeats the story about how, when he was at Dresdner Kleinwort in the ’90s, he wrote with skepticism about Malaysia’s economic boom at the time, only to be surprised when Thailand blew up first. Nevertheless, he said, “we lost all our banking licenses [in Malaysia] because of what I wrote,” adding that the story is still proudly pinned to his X.com account.
“I had to sort of basically hide under my desk,” Edwards said of the inward reception to the emergence of his inner bear. “Corporate finance banking departments certainly didn’t appreciate losing all their banking licenses. But in retrospect, you know, they avoided a final year of lending to Malaysia before it blew up. They didn’t thank me afterwards.”
Fiscal Incontinence and Cockroaches
Beyond equity valuations, Edwards has been highlighting two other major underlying risks point to systemic vulnerability. First, Edwards highlighted the long-term risk of inflation in the West, driven by “fiscal incontinence.” Despite short-term cyclical deflationary pressure emanating from China—which has seen 12 successive quarters of year-on-year declines in its GDP deflator—Edwards said he believes the path of least resistance for highly indebted Western politicians will be “money printing.” At some point, the mathematics for fiscal sustainability “just do not add up,” forcing central banks to intervene through “yield curve control” or quantitative easing to hold down bond yields.
This is where Edwards’ long-held thesis about Japan comes in, what he calls “The Ice Age.” Around 1996, he said, he started thinking that “what’s happening in Japan will come to Europe and the U.S. with a lag.” He explained that the bursting of the Japanese stock bubble led to all kinds of nasty things: real interest rates collapsing, inflation going to zero, bond yields going to zero. Ultimately, it was a period of low growth that Japan still has not been able to break out of. The difference with the U.S., he added, is that Japanification actually started happening in 2000 with the dot-com bubble bursting, but “the relationship broke” between the economy and asset prices as the Fed began “throwing money” at the problem through QE. The U.S. has essentially been in a 25-year bubble since then that is due to burst any day now, he argued—it’s been due any day for a quarter-century.
“We’re going to end up with runaway inflation at some point,” Edwards told Fortune, “because, I mean, that’s the end game, right? There’s no appetite to cut back the deficits. We bring back the QE, if and when this bubble bursts, the only solution is more QE, and then we end up with inflation, maybe even worse than 2022.”
Edwards also sees a smoking gun in home prices. “You look at the U.S. housing market, you think, ‘Well, actually, is the Fed just too loose relative to everywhere else?’ Because why should other housing bubbles have deflated in terms of house price earnings ratio, but the U.S. is still stuck up there at maximum valuation or close to it?” In a flourish that shows why Edwards is so respected despite his broken-record reputation, he notes that in a Bloomberg Opinion piece from 2018, legendary former Fed chair Paul Volcker “eviscerated the Fed just before he died.” The central banker who famously slew inflation in the 1980s argued that the modern era’s loose monetary policy was “a grave error of judgment … basically just kicking the can down the road.” Edwards shared an OECD chart with Fortune to show just how much U.S. housing has decoupled from global markets because the Fed has been too loose.
The analyst also said he applied his skepticism to private equity, an asset class that he sees having benefited immensely from years of falling bond yields and leverage. Private equity’s advantage has been its tax treatment and the fact that “it doesn’t have to mark itself to market, so it isn’t very volatile.” However, the sector is highly leveraged, and if the global environment shifts to a secular bear market for bonds, he said that would be a “major problem.” Recent high-profile bankruptcies have started to leak into bond markets, prompting concern of “credit cockroaches,” as JPMorgan CEO Jamie Dimon recently labeled the issue.
Drawing on the metaphor that “you never have just one cockroach,” Edwards warned that these bankruptcies signal deeper issues in a highly leveraged sector that has spread its “tentacles… deeply into the real economy.”
Fortune notes to Edwards that more mainstream, less bearish voices are sounding similar warnings, Mohamed El-Erian at the Yahoo Finance Invest conference and Jeffrey Gundlach, the “bond king,” who takes a similarly skeptical view of private equity. Edwards agreed that something is in the air. “I would say there are more voices of skepticism. And again, this is one thing which makes me worry. This bubble can go on. If it is a bubble can go on quite a long while. Well, we can kick the can down the road many times. Normally, the skeptics are swept aside.”
For investors trapped between the fear of a collapse and the fear of missing a meltup, Edwards told advised investors to take him with a grain of salt but be mindful of potential warning sings. “I say that I predict a recession every year, don’t listen to me, but these are the things you should be looking out for.” Paraphrasing an infamous quote from former Citi CEO Chuck Prince that summed up the bubble mentality with a metaphor about a dance party, Edwards recommended: “In terms of dancing while the music’s still playing, you have to decide whether to be in front of the band, pogoing, or dancing close to the fire escape, ready to get out first.”
The Committee for a Responsible Federal Budget (CRFB) is a nonpartisan watchdog that regularly estimates how much the U.S. Congress is adding to the $38 trillion national debt.
With enhanced Affordable Care Act (ACA) subsidies due to expire within days, some Senate Democrats are scrambling to protect millions of Americans from getting the unpleasant holiday gift of spiking health insurance premiums. The CRFB says there’s just one problem with the plan: It’s not funded.
“With the national debt as large as the economy and interest payments costing $1 trillion annually, it is absurd to suggest adding hundreds of billions more to the debt,” CRFB President Maya MacGuineas wrote in a statement on Friday afternoon.
The proposal, backed by members of the Senate Democratic caucus, would fully extend the enhanced ACA subsidies for three years, from 2026 through 2028, with no additional income limits on who can qualify. Those subsidies, originally boosted during the pandemic and later renewed, were designed to lower premiums and prevent coverage losses for middle‑ and lower‑income households purchasing insurance on the ACA exchanges.
CRFB estimated that even this three‑year extension alone would add roughly $300 billion to federal deficits over the next decade, largely because the federal government would continue to shoulder a larger share of premium costs while enrollment and subsidy amounts remain elevated. If Congress ultimately moves to make the enhanced subsidies permanent—as many advocates have urged—the total cost could swell to nearly $550 billion in additional borrowing over the next decade.
Reversing recent guardrails
MacGuineas called the Senate bill “far worse than even a debt-financed extension” as it would roll back several “program integrity” measures that were enacted as part of a 2025 reconciliation law and were intended to tighten oversight of ACA subsidies. On top of that, it would be funded by borrowing even more. “This is a bad idea made worse,” MacGuineas added.
The watchdog group’s central critique is that the new Senate plan does not attempt to offset its costs through spending cuts or new revenue and, in their view, goes beyond a simple extension by expanding the underlying subsidy structure.
The legislation would permanently repeal restrictions that eliminated subsidies for certain groups enrolling during special enrollment periods and would scrap rules requiring full repayment of excess advance subsidies and stricter verification of eligibility and tax reconciliation. The bill would also nullify portions of a 2025 federal regulation that loosened limits on the actuarial value of exchange plans and altered how subsidies are calculated, effectively reshaping how generous plans can be and how federal support is determined. CRFB warned these reversals would increase costs further while weakening safeguards designed to reduce misuse and error in the subsidy system.
MacGuineas said that any subsidy extension should be paired with broader reforms to curb health spending and reduce overall borrowing. In her view, lawmakers are missing a chance to redesign ACA support in a way that lowers premiums while also improving the long‑term budget outlook.
The debate over ACA subsidies recently contributed to a government funding standoff, and CRFB argued that the new Senate bill reflects a political compromise that prioritizes short‑term relief over long‑term fiscal responsibility.
“After a pointless government shutdown over this issue, it is beyond disappointing that this is the preferred solution to such an important issue,” MacGuineas wrote.
The off-year elections cast the government shutdown and cost-of-living arguments in a different light. Democrats made stunning gains and almost flipped a deep-red district in Tennessee as politicians from the far left and center coalesced around “affordability.”
Senate Minority Leader Chuck Schumer is reportedly smelling blood in the water and doubling down on the theme heading into the pivotal midterm elections of 2026. President Donald Trump is scheduled to visit Pennsylvania soon to discuss pocketbook anxieties. But he is repeating predecessor Joe Biden’s habit of dismissing inflation, despite widespread evidence to the contrary.
“We fixed inflation, and we fixed almost everything,” Trump said in a Tuesday cabinet meeting, in which he also dismissed affordability as a “hoax” pushed by Democrats.
Lawmakers on both sides of the aisle now face a politically fraught choice: allow premiums to jump sharply—including in swing states like Pennsylvania where ACA enrollees face double‑digit increases—or pass an expensive subsidy extension that would, as CRFB calculates, explode the deficit without addressing underlying health care costs.
Netflix Inc. has won the heated takeover battle for Warner Bros. Discovery Inc. Now it must convince global antitrust regulators that the deal won’t give it an illegal advantage in the streaming market.
The $72 billion tie-up joins the world’s dominant paid streaming service with one of Hollywood’s most iconic movie studios. It would reshape the market for online video content by combining the No. 1 streaming player with the No. 4 service HBO Max and its blockbuster hits such as Game Of Thrones, Friends, and the DC Universe comics characters franchise.
That could raise red flags for global antitrust regulators over concerns that Netflix would have too much control over the streaming market. The company faces a lengthy Justice Department review and a possible US lawsuit seeking to block the deal if it doesn’t adopt some remedies to get it cleared, analysts said.
“Netflix will have an uphill climb unless it agrees to divest HBO Max as well as additional behavioral commitments — particularly on licensing content,” said Bloomberg Intelligence analyst Jennifer Rie. “The streaming overlap is significant,” she added, saying the argument that “the market should be viewed more broadly is a tough one to win.”
By choosing Netflix, Warner Bros. has jilted another bidder, Paramount Skydance Corp., a move that risks touching off a political battle in Washington. Paramount is backed by the world’s second-richest man, Larry Ellison, and his son, David Ellison, and the company has touted their longstanding close ties to President Donald Trump. Their acquisition of Paramount, which closed in August, has won public praise from Trump.
Comcast Corp. also made a bid for Warner Bros., looking to merge it with its NBCUniversal division.
The Justice Department’s antitrust division, which would review the transaction in the US, could argue that the deal is illegal on its face because the combined market share would put Netflix well over a 30% threshold.
The White House, the Justice Department and Comcast didn’t immediately respond to requests for comment.
US lawmakers from both parties, including Republican Representative Darrell Issa and Democratic Senator Elizabeth Warren have already faulted the transaction — which would create a global streaming giant with 450 million users — as harmful to consumers.
“This deal looks like an anti-monopoly nightmare,” Warren said after the Netflix announcement. Utah Senator Mike Lee, a Republican, said in a social media post earlier this week that a Warner Bros.-Netflix tie-up would raise more serious competition questions “than any transaction I’ve seen in about a decade.”
European Union regulators are also likely to subject the Netflix proposal to an intensive review amid pressure from legislators. In the UK, the deal has already drawn scrutiny before the announcement, with House of Lords member Baroness Luciana Berger pressing the government on how the transaction would impact competition and consumer prices.
The combined company could raise prices and broadly impact “culture, film, cinemas and theater releases,”said Andreas Schwab, a leading member of the European Parliament on competition issues, after the announcement.
Paramount has sought to frame the Netflix deal as a non-starter. “The simple truth is that a deal with Netflix as the buyer likely will never close, due to antitrust and regulatory challenges in the United States and in most jurisdictions abroad,” Paramount’s antitrust lawyers wrote to their counterparts at Warner Bros. on Dec. 1.
Appealing directly to Trump could help Netflix avoid intense antitrust scrutiny, New Street Research’s Blair Levin wrote in a note on Friday. Levin said it’s possible that Trump could come to see the benefit of switching from a pro-Paramount position to a pro-Netflix position. “And if he does so, we believe the DOJ will follow suit,” Levin wrote.
Netflix co-Chief Executive Officer Ted Sarandos had dinner with Trump at the president’s Mar-a-Lago resort in Florida last December, a move other CEOs made after the election in order to win over the administration. In a call with investors Friday morning, Sarandos said that he’s “highly confident in the regulatory process,” contending the deal favors consumers, workers and innovation.
“Our plans here are to work really closely with all the appropriate governments and regulators, but really confident that we’re going to get all the necessary approvals that we need,” he said.
Netflix will likely argue to regulators that other video services such as Google’s YouTube and ByteDance Ltd.’s TikTok should be included in any analysis of the market, which would dramatically shrink the company’s perceived dominance.
The US Federal Communications Commission, which regulates the transfer of broadcast-TV licenses, isn’t expected to play a role in the deal, as neither hold such licenses. Warner Bros. plans to spin off its cable TV division, which includes channels such as CNN, TBS and TNT, before the sale.
Even if antitrust reviews just focus on streaming, Netflix believes it will ultimately prevail, pointing to Amazon.com Inc.’s Prime and Walt Disney Co. as other major competitors, according to people familiar with the company’s thinking.
Netflix is expected to argue that more than 75% of HBO Max subscribers already subscribe to Netflix, making them complementary offerings rather than competitors, said the people, who asked not to be named discussing confidential deliberations. The company is expected to make the case that reducing its content costs through owning Warner Bros., eliminating redundant back-end technology and bundling Netflix with Max will yield lower prices.
Nearly all leading artificial intelligence developers are focused on building AI models that mimic the way humans reason, but new research shows these cutting-edge systems can be far more energy intensive, adding to concerns about AI’s strain on power grids.
AI reasoning models used 30 times more power on average to respond to 1,000 written prompts than alternatives without this reasoning capability or which had it disabled, according to a study released Thursday. The work was carried out by the AI Energy Score project, led by Hugging Face research scientist Sasha Luccioni and Salesforce Inc. head of AI sustainability Boris Gamazaychikov.
The researchers evaluated 40 open, freely available AI models, including software from OpenAI, Alphabet Inc.’s Google and Microsoft Corp. Some models were found to have a much wider disparity in energy consumption, including one from Chinese upstart DeepSeek. A slimmed-down version of DeepSeek’s R1 model used just 50 watt hours to respond to the prompts when reasoning was turned off, or about as much power as is needed to run a 50 watt lightbulb for an hour. With the reasoning feature enabled, the same model required 7,626 watt hours to complete the tasks.
The soaring energy needs of AI have increasingly come under scrutiny. As tech companies race to build more and bigger data centers to support AI, industry watchers have raised concerns about straining power grids and raising energy costs for consumers. A Bloomberg investigation in September found that wholesale electricity prices rose as much as 267% over the past five years in areas near data centers. There are also environmental drawbacks, as Microsoft, Google and Amazon.com Inc. have previously acknowledged the data center buildout could complicate their long-term climate objectives.
More than a year ago, OpenAI released its first reasoning model, called o1. Where its prior software replied almost instantly to queries, o1 spent more time computing an answer before responding. Many other AI companies have since released similar systems, with the goal of solving more complex multistep problems for fields like science, math and coding.
Though reasoning systems have quickly become the industry norm for carrying out more complicated tasks, there has been little research into their energy demands. Much of the increase in power consumption is due to reasoning models generating much more text when responding, the researchers said.
The new report aims to better understand how AI energy needs are evolving, Luccioni said. She also hopes it helps people better understand that there are different types of AI models suited to different actions. Not every query requires tapping the most computationally intensive AI reasoning systems.
“We should be smarter about the way that we use AI,” Luccioni said. “Choosing the right model for the right task is important.”
To test the difference in power use, the researchers ran all the models on the same computer hardware. They used the same prompts for each, ranging from simple questions — such as asking which team won the Super Bowl in a particular year — to more complex math problems. They also used a software tool called CodeCarbon to track how much energy was being consumed in real time.
The results varied considerably. The researchers found one of Microsoft’s Phi 4 reasoning models used 9,462 watt hours with reasoning turned on, compared with about 18 watt hours with it off. OpenAI’s largest gpt-oss model, meanwhile, had a less stark difference. It used 8,504 watt hours with reasoning on the most computationally intensive “high” setting and 5,313 watt hours with the setting turned down to “low.”
OpenAI, Microsoft, Google and DeepSeek did not immediately respond to a request for comment.
Google released internal research in August that estimated the median text prompt for its Gemini AI service used 0.24 watt-hours of energy, roughly equal to watching TV for less than nine seconds. Google said that figure was “substantially lower than many public estimates.”
Much of the discussion about AI power consumption has focused on large-scale facilities set up to train artificial intelligence systems. Increasingly, however, tech firms are shifting more resources to inference, or the process of running AI systems after they’ve been trained. The push toward reasoning models is a big piece of that as these systems are more reliant on inference.
Recently, some tech leaders have acknowledged that AI’s power draw needs to be reckoned with. Microsoft CEO Satya Nadella said the industry must earn the “social permission to consume energy” for AI data centers in a November interview. To do that, he argued tech must use AI to do good and foster broad economic growth.
Politics8 years ago