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Sunday, February 23, 2025

2025-02-23

***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:





The incoming economic data remains strong. But we are starting to worry about the downside risks to the economy and markets from: 1) the impact of DOGE layoffs and contract cuts on jobless claims and 2) persistently elevated policy uncertainty weighing on capex spending decisions and hiring decisions. .............


Bassman: Got Duration?

............................................. This opinion does not contradict the prior 7 pages, rather I will say the Bond Bull is simply a more efficient manner to access Duration.

The Bond Bull is the “151 proof” of duration assets; a 15%-dollar allocation will match the duration of the Aggregate Bond Index.

Instead of the standard 60%/40% portfolio, consider 70% stock, 10% Credit, 10% Commodities, and 10% the Bond Bull.

For Hedgers, one should use the Bond Bull not because you know rates will decline, but rather because you are bearish, and might be wrong.

Remember: For most investments, sizing is more important than entry level.



Bubble Fare:

Forget the damage to markets when the passive bid dries up and the Fed is stuck cutting rates into stagflation. The psychological damage will be worse.

............... It’s difficult to ignore that Tom Lee has “nailed it” on markets over the last decade, and I need to give credit where it’s due. Holding your nose and buying stocks without giving a single solitary fuck about valuations or the macroeconomy has sadly been the most effective way to generate returns over the last decade or two. But as every piece of financial literature you’ve ever read says somewhere on it: past performance is not indicative of future results.

And people that don’t make daily appearances on CNBC — like, oh, say, Warren Buffett, for instance — are taking another road: getting into cash.

Maybe it’s a just a coincidence?

Though the tune of buying the dip has hardly changed, the environment it’s being sung in has. Stocks now trade at a Shiller PE that’s approaching 40x, a level only eclipsed once in history during the 2000s dot-com bubble.

But if the market’s price-to-earnings ratio and the macroeconomy didn’t matter when stocks were trading at 30x earnings, why should they matter with stocks trading at 40x earnings?

This indifference to valuations—helped along by the “passive bid” of 401(k)s and ETFs consistently buying the market at any given price (well explained by Bill Fleckenstein here on Julia LaRoche’s podcast, and then updated here during his appearance last week), combined with what is widely perceived to be an unlimited Fed put, combined with the unprecedented amount of liquidity doled out as a result of COVID, combined with the stock market becoming accessible to literally any human being on earth that wants to take their shot thanks to the advent of retail trading apps—has distorted expectations and psychology not just about the stock market, but also about the basic fundamentals of economics and finance, in a way that many of us probably would not have even thought fathomable 50 years ago. 

Modern monetary theory has acted like a risk-hunger marijuana edible that all traders and investors have been forced to swallow, resulting in an insatiable, decades long case of the market munchies.

In fact, liquidity has been so ubiquitous and markets have been so rigged that people are speculating upwards of $3 trillion in an asset class — crypto — that, to the best of my understanding, offers very little product or service and exists almost entirely digitally.

If you want to try to make the argument that overvalued equities can sometimes be hard to recognize, especially when they only seem to continue to go up and valuations only seem to continue to expand, that’s one thing. But how, with a straight face, can anyone argue that $3 trillion worth of crypto is in some way “undervalued,” let alone serves a purpose at all? ............


Should you change your investment position here? We haven’t. Whether or not we’re at a market peak, we were already defensive based on extreme valuations, unfavorable internals, and overextended conditions. If you’re a passive investor, my intent is not to encourage you to abandon your discipline. What I do believe, however, is that this is an extraordinarily good moment to examine your risk exposures and to take them seriously. If your notion of passive investing doesn’t allow for a realistic possibility of a market loss well in excess of 50%, or a decade or more in which the S&P 500 lags Treasury bills, you’ve not only decided to be a passive investor, you’ve decided to ignore history. So, whatever your discipline, examine your risk exposures.

It’s helpful to keep in mind that anytime you change part of your investment position, there will be regret. If you sell part of your holdings, and the market continues to advance, you’ll regret having sold anything. If you sell part of your holdings and the market declines, you’ll regret not having sold more. The same is true for purchases. There will always be regret. The key is to realize this up front, and choose an acceptable level of regret. You do that by examining your exposure to risk, considering both potential returns and potential losses.
With our most reliable valuation measures more extreme than both the 1929 and 2000 market peaks, we continue to believe that the stock market is tracing out the extended peak of the third great speculative bubble in U.S. history. Since the initial January 2022 market peak, the equal-weighted S&P 500 has clocked a cumulative total return less than 2.4% ahead of Treasury bills, while the small-cap Russell 2000 has lagged T-bills by more than -10.6% since then. The capitalization-weighted S&P 500 Index has performed better during this period only by driving the price/revenue multiple of the information technology sector to levels that easily exceed the 2000 extreme.

While record valuations, unfavorable market internals, and recurring warning flags have held us to a bearish outlook since the June comment, You Can Ring My Bell, our investment discipline has benefited despite a further market advance since then, partly as a result of the hedging implementation we introduced in the fourth quarter (see the section titled “Good News and Good News” in the October comment, Subsets and Sensibility).

What appears to be an endless bull market advance is actually a classic two-tiered blowoff in speculative glamour stocks. If you missed Bill Hester’s excellent analysis of large-cap market concentration, Slimming Down a Top-Heavy Market, now may be a worthwhile opportunity to recognize how extreme the current situation has become. The chart below offers some sense of how much investors now need to rely on a “permanently high plateau” in valuations. ............

While valuations are extremely informative about likely 10-12 year market returns, as well as the potential depth of market losses over the completion of a given market cycle, valuations are not reliable indications of shorter-term market outcomes. Investor psychology – particularly speculative psychology versus risk-aversion – has an overwhelming impact on shorter-term market outcomes. Since speculators tend to be fairly indiscriminate, and increasing selectivity has historically preceded the most severe market losses, our most reliable gauge of speculation versus risk-aversion is the uniformity of market internals ..............

........... On the economic front, it’s worth reviewing our current position in the economic cycle. Investors may not entirely appreciate is that U.S. real GDP is now running 2.7% above its sustainable full employment potential as estimated by the Congressional Budget Office (CBO). The CBO estimate is closely aligned with our own estimates that simply use productivity and labor force demographics, so while one might find a little bit of wiggle room in the estimates, real potential GDP has generally been a reliable guide to the general position of the U.S. economy within the economic cycle.

...

Keep in mind that the chart above is a “baseline” projection, and that recessions typically produce a striking shortfall from these estimates. Only the projections in the third and fourth quarter of 2007 were lower than the current baseline. From the standpoint of the complete economic cycle, the U.S. economy was already in a vulnerable position before the global financial crisis. In my view, the same is true today. ..............

Recessions are first and foremost periods when a mismatch emerges between what the economy has been producing, and what the economy now demands. Those mismatches can be driven by shifts in consumer preferences, interest-sensitive investment, technology, government spending, credit strains, or crises like the pandemic. Disruptions triggered by these mismatches take time to resolve, absent massive bailouts and deficit spending. It’s not just the direct disruptions, but the broader uncertainty that they produce, that contribute to economic downturns.

In my view, we’re suddenly soaking in exactly this sort of disruption. Keep your eye on financial markets, credit spreads, and surveys of purchasing managers and consumer confidence. Emphatically, further deterioration would be needed in order to expect a recession with confidence, but the thresholds are surprisingly close. Indeed, just 5% lower in the S&P 500, 15 basis points wider in Baa credit spreads, and 1 point down in the ISM Purchasing Managers Index would be sufficient to move our Recession Warning Composite into the red. More sensitive composites have been hovering at their own thresholds for some time, but they’re prone to occasional false signals. As usual, our preference is to draw a common signal from multiple measures, without relying on any single component.  ................

............................................. 
From 2016 through 2020, $8.4 trillion in new 10-year deficit spending was approved – a combination of tax cuts and net spending increases, with about $3.6 trillion of that related to pandemic response. From 2020 through 2024, another $4.3 trillion in 10-year deficit spending was approved, about $2.1 trillion of that being pandemic response (Committee for a Responsible Federal Budget). Government deficits, again, are always matched by surpluses in other sectors. In recent years, the primary beneficiaries have been business profits and household savings, though the household savings have gradually been spent down, largely becoming business profits as well.

With regard to the record ratio of financial market capitalization to GDP, the government deficits of the past eight years have bloated the corporate profits on which investors are placing extreme price/earnings multiples while calling it “stock market capitalization.” Meanwhile, the highest income earners have also accumulated the cash and securities that the government issued to finance the deficits. As a result, the massive deficits of recent years are a significant portion of what the deepest pockets presently call “wealth.” .................................


Vid Fare:

Michael Hudson, Alexander Mercouris & Glenn Diesen



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(not just) for the ESG crowd:




........... The unspoken premise behind the plan to keep capitalism going is that the world will be saved by sociopathic tech plutocrats like Elon Musk. The idea is to just continue the plan of infinite growth on a finite world until hopefully some tech company produces technology that makes such growth sustainable in a way that both (A) benefits everybody and (B) turns billionaires into trillionaires.

That’s the assumption underlying the decision to keep capitalism in place even as we watch our biosphere disappear before our eyes, and it’s pure fantasy. As long as mass-scale human behavior is driven by the pursuit of profit, you’re going to see the interests of humanity and the ecosystem subverted by that pursuit. .................



U.S. B.S.:


........ And the thing about this genre of tweet is that they’re kind of right — Obama didn’t have any “scandals” of the level we see from Trump. But the fact that the evil things Obama did weren’t considered scandalous says profoundly ugly things about the kind of society we are living in.

Obama committed all kinds of atrocities while president that would be considered scandalous if we lived in a world that is even remotely sane. Destroying Libya and leaving it a smoldering crater of humanitarian disaster. Tearing apart Syria with the dirty war that featured pouring weapons into the arms of al-Qaeda affiliates. Initiating the US-backed incineration of Yemen. Lighting the fuse for the ruination of Ukraine with the US-backed regime change op in 2014. His notorious drone program. The list goes on. .................



Geopolitical Fare:

Lawrence: “Trump crosses the Atlantic.”

Eight years ago, at precisely this moment in Donald’s Trump’s first term, the new president was pushing his case for a restored détente with Russia. Trump went on to summit with Vladimir Putin five times and conducted at least 16 telephone exchanges with the Russian president.

This was the count by mid–2019. After that and until the end of his term, the Deep State—notably the intelligence apparatus, the Democratic National Committee, and the mass media—had Trump bound in the rope of subterfuge so thoroughly that the relationship developed no further.

The neo-détente Trump favored—that Trump was correct to favor, better put—never came to be. Joe Biden and his people, to state the obvious, were by contrast neo–Cold Warriors—mere ideologues, neoliberals wholly incapable of autonomous thought, initiative, imagination, or anything else that sophisticated statecraft requires of its practitioners. 

................. In this context, extricating the U.S. from the Ukraine quagmire is more than a footnote but nothing like the main attraction. Assuming all goes to Trump’s apparent plan—and we must make this assumption with unsparing caution—the center-stage attraction is discarding what has passed for a world order since the 1945 victories ................

...................... The panic easily detected among the Continent’s besieged elites, whose leaders have convened twice this week for emergency summits in Paris, has also been legible, pitifully enough, in the press coverage of Munich and Trump’s various demarches. All I have read in corporate and state-sponsored media on both sides of the Atlantic has been shockingly distorted, featuring more than the usual measure of outright lies.

Vance spoke in favor of neo–Nazi and “far-right” parties. (He went nowhere near the topic.) The Trump–Putin telephone call was all about the Russian leader’s cynical manipulations and Trump’s appeasement. (It was about the restoration of workable bilateral relations.) Trump has opened the door for “Putin” to advance through Europe. (He entertains no such ambition.) “Putin’s” objective is to destroy the European Union and NATO. (Ditto.) ..................


The End may be further away than you think.

............... As I write, the ground in Europe is still vibrating from the shock, and the political and media classes are still trapped between incredulous disbelief and barely-concealed anger that any such thing could have happened. They are still trapped in Cliché Land (“abandoning Ukraine”) and it may be some time before anything resembling reality actually penetrates their skulls. But in the meantime, and while we wait for some kind of rationality to gain a limited purchase, there are a couple of general points to make, and then I will get more deeply into the question of “talks.”

The first is the belief that the apparent disengagement of the US from Ukraine will actually make much difference. The only way in which this would be true is if a Ukrainian victory (generously defined) would be possible with further US assistance, but not without it. ................................ 

.......... The anger now arises from the fact that the pretence and discourse of eventual western victory have been officially undermined by the US, and so cannot be sustained any longer. ................................


Yascha Mounk and Wolfgang Münchau discuss the failure of the German model.




***** Israel And Its Apologists Weaponize Sympathy In Order To Facilitate Genocide

Activist and author Yves Engler has been jailed by Montreal police for criticizing media figure Dahlia Kurtz and her support for Israeli atrocities in Gaza, after Kurtz said Engler’s comments made her feel “afraid for my safety”.

After Engler wrote about the charges against him, he reported that he was subsequently charged for “harassing the police” by drawing public attention to his case.

It’s fascinating how everyone who supports Israel always collapses into playing the victim at the earliest opportunity—even western police forces tasked with persecuting Israel’s critics. Israel models this victim-LARPing behavior, and its entire goon squad follows its example. ............

........................ The real currency of our world is not money or resources, nor gold, nor even weapons. The real currency of our world is narrative and the ability to control it, because if you can control the narrative, you can control everyone.

The average human life is dominated by mental stories, so if you can control the stories that humans are telling each other about their world, you can control the humans. ....................



Sci Fare:

Evolution itself can evolve, new study argues
A new computer model suggests that the process of evolution can get better at evolving in the face of environmental change



Other Fare:




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Monday, February 17, 2025

2025-02-17

 ***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:

Protectionism threatens to fuel inflation, push up interest rates and end the bull run in equity markets

....................... Over the past three years, the US has defied worries that a slump may be imminent – most notably during 2022 and 2023 as the US Federal Reserve aggressively tightened the monetary screws to curb surging inflation.

After consistently surprising to the upside, the risk of a US recession is low on financial markets’ list of concerns.

So maybe now is the time to be worried. When confidence exceeds fundamentals, the risk of downside surprises increases.

Of course, it does not necessarily follow that a period of fast growth needs to give way to a slump. But a close examination of fundamentals suggests some cause for concern. ..................


The rise and fall of construction and manufacturing determine the strength of economic cycles.


......

......... It’s often misstated that the economy declines because consumers stop spending or that you need to wait for the services economy to slow down - the US economy is a services economy, after all, right?

Tightening of monetary policy impacts the Leading Economy. Once the Leading Economy turns down with enough magnitude and enough duration, the Cyclical Economy turns down, which means actual production and actual employment in key industries are falling.

Job losses that occur in the Cyclical Economy create downstream effects on services.

People who become unemployed in construction, manufacturing, and the tangential industries immediately stop discretionary spending and eventually may default on credit cards, auto loans, and home mortgages.

Banks then experience rising delinquencies and further contract credit, and only then do the services business experience a fall in revenues. At this point, the Federal Reserve and the broader public notice the trouble, but in reality, the sequence has been playing out for usually a few years. .............



The transformational upward shift in U.S. stock market valuations appears to be broad-based across nearly “all” parts of the stock market.







MMT Fare:


..................... Meanwhile, the so-called national debt remains nothing more than a historical record of US$ that have been spent by government and not taxed away from us over the centuries (i.e. part of our financial savings); the coveted r < g debt sustainability condition continues to hold; issuing Treasuries and paying interest remains a policy choice (not an economic imperative) so r < g can always be achieved by design; and the numbers used to generate CBO’s scary debt graph “are completely bogus.”


Bubble Fare:

China's futures traders drove a remarkable $400 surge in gold prices this past spring, and now they are positioned to propel it to $3,000 and beyond.




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(not just) for the ESG crowd:





Let me present a “worst case” climate scenario to you.

................ They HOPE that global temperatures will stop going UP and that they even decline a little. Pretty much the way they have behaved over the last 60 odd years that we have been closely monitoring the Climate System.

That HOPE, isn’t based on anything. Planetary conditions have CHANGED. The earth’s ALBEDO has “dimmed” a LOT since 2014. That “dimming” means a LOT more ENERGY from the Sun is going into the Climate System, 90% of it right into the oceans

.......................... The ongoing, long term reduction in albedo has produced more than twice as much warming effect in recent decades as the radiative forcing from CO2.

James Hansen has stated that the change in the earth’s albedo since 2014 is roughly equal to increasing the CO2 level by +100ppm. That’s as if it suddenly JUMPED from 425ppm(CO2) up to 525ppm(CO2) in JUST 10 years.

That’s IN ADDITION to the roughly +100ppm of CO2 equivalent climate forcing that he estimates is happening due to the sharp increase in “the other” GHG’s like methane (CH4) and nitrous oxide (NO). Gases which have also increased dramatically in the atmosphere since 2000.

Essentially it’s as if CO2 levels increased by about +250ppm since 2020. ......................


The Trump administration has already rolled back planned limits on PFAS chemicals, which have been linked to cancer and other health problems.



U.S. B.S.:



These billionaires will make a fortune “harvesting” the remains of the empire. But they are ultimately slaying the beast that created American wealth and power.



Commenting on all the stupid (like Musk’s antics) is tiring sometimes.

I was trying to figure out what to write today. There are about a dozen possible posts, all of which amount to “Trump or Musk are flinging poo at the wall.”

So let’s forget all the stupid little details and cut to the chase.

America is in irreversible decline. If you think otherwise, you are living in a fantasy world .........


We need to reimagine what it means to serve the common good.

........................... The message I got from this then-aspirational culture blending hyper-nationalism with cosmopolitanism: To serve the public was to enmesh your existence with the federal bureaucracy in some way.

Not only was that untrue all along—there were many ways to work for your fellows, then and now. The real problem, in hindsight, was that Washington’s political class was able to do horrible things around the world by exploiting our willingness to serve. And we can’t put all the blame on self-interested politicians, unfortunately.

We who served also never questioned whether or how often the state actually worked in the public interest, the common good. “Trust the process” was very much a belief system—one that made Washington uniquely unprepared for Trump. Clinging to process as if it were rosary beads in The Exorcist alleviated the need to think critically about who benefited and who was harmed by the choices we were helping the state make.

The Iraq War? A one-off mistake. The Global War on Terror, extraordinary rendition, black sites, torture programs, and drone strikes? Good intentions. Barreling toward a nuclear war with North Korea? Trump did it.

Insane. Insane. But such is the power of American exceptionalism—an almost impressive inability to see the world in a way that would implicate Washington’s exercise of state power in the global worsening of extreme inequality, racism, and militarism.

.............................................. Gen Z—and all the generations that come after—are facing a radically different, and more daunting, situation than their elders. For the most part, they didn’t grow up on Jack Ryan movies. Professionally, they have no incentive to believe in a theory of saving democracy that relies on deep-state heroes.

At any rate, there’s a certain intellectual and moral poverty in depending on cliques of well-educated, unelected elites to save our way of life, and I say that as someone who both very much thought that way circa 2017 and does not want to demobilize anyone who is doing the resistance thing inside the machine. If you’re a well-educated, unelected elite quietly working to save democracy, by all means you do you.

But the thing is, if you’ve ever worked in government, you know 1) how extraordinarily difficult it is to change anything, and 2) that the intellectual and political pressures to conform to the going concerns of those around you are immense. ...............................



Geopolitical Fare:

Consolidation of the New Colossus by Canadian colour revolution

................................ If Canada needs regime change, and Canada cannot achieve regime change internally, the obvious answer is to impose regime change. Either circulate the elites, such that a friendly albeit still nominally independent regime comes to power, or simply annex the country outright.

Annexation is far more complex than just bullying Ottawa into becoming a compliant, well-behaved vassal state again. But it is also a unified application of two core American principles: Manifest Destiny, and the Monroe Doctrine. .......................




............... Kicking the Palestinians out of Gaza to neighboring Arab states has always been the plan; it didn’t just emerge out of nowhere when Trump became president.

................... This has always been about ending the existence of Palestinians in Palestine.

And that’s all it has ever been about. Not October 7. Not hostages. Not fighting terrorism. Not self-defense. This is about driving Palestinians out of their homeland so that their territory can eventually be fully and officially absorbed by Israel.

❖

Democrats are as happy as a pig in shit right now. Suddenly they get to pretend all the unfathomable evils their president inflicted upon our world never happened, just because there’s a different president doing bad things who people are feeling big feels about. .................


The Truth about Rare Earths in Ukraine

................................ It is a strange case of a non-war for non-resources. But if mythical rare earths are used as a trick to end the war, I have to say that these people are admirable in a certain sense. True masters of deception, they play with the naiveté of the public as if they were violin virtuosos. And the public seems to love being played. From the time when Rumsfeld said that reality can be created, we became real-life Cinderellas, easily convinced that if we keep on believing, the dream that we wish will come true




Sci Fare:


........... What you’re looking at, is damage to the immune system, observed through most of the human population. It seems to be a combination of damage from SARS-COV-2 and damage from the vaccination campaign. ................................



Other Fare:

Rise of the Real Technocracy



Zeitgeist Fare / TL;DR Fare:

Why Conservatives encourage bright young men to waste years flipping burgers — while holding up 'reformed' prostitutes as tradwife icons

......... Billionaire Psycho - the mind behind the transcendent Pygmalion and the Anime Girl, and the author of an excellent ongoing series on the fundamentals of storytelling - has performed a Herculean task with this piece, which doesn’t simply express his own sentiments, but pulls together hundreds - yes, hundreds - of posts from accounts large and small, infamous and obscure, anonymous and onymous, collecting them all in one place. As you read this, the collective howl of fury from our dispossessed generation rolls over you like the shockwave from an Olympian thunderbolt cracking through the firmament of a cultural consensus that you can see shattering in real time. 

..........................................................

..................... Conservative think tanks are mirrored reflections of government’s inertia, stagnation, and self-satisfied neglect, overshadowed by the federal Leviathan they pretend to oppose.

Political movements require talent pipelines. And these talent pipelines operate on a generational delay. There’s a significant lag. Investment into the nation’s best minds won’t pay off for a couple decades. If you want a forest, these seeds need to be planted far in advance.

Where is the right-wing Barack Obama?

Where is the right-wing Aaron Sorkin? Where are the right-wing versions of Saul Alinsky, James Carville, Noam Chomsky, Bill Clinton, Van Jones, Al Sharpton, Rahm Emanuel, Lena Dunham, Michael Moore? The list goes on. ........................................

In retrospect, it’s almost funny how everything the proponents of NAFTA promoted was revealed to be deceptive, and everything they characterized as a hysterical fear tactic ended up understating the full scale, impact, and intensity of deindustrialization that has occurred since the 1990s. ...........................................................


.................. a couple of quote excerpts:

“We’re not spending another dime to help the destruction of this country…
NGOs (Non Governmental Organizations) have been perverted into a shadow government. An NGO is sometimes an operation that does things that the government can’t do, because it’s not legally allowed to do it. So they create an entity to legally use government dollars, taxpayer dollars to do something that the federal government isn’t allowed to do — a shadow government used to undermine our country’s national security.”
—Kristi Noem, January 29th, 2025

"Elders rarely acknowledge their own role in fostering the conditions that led to spiritual and cultural decline... Conservatives should offer the young a future worth embracing instead of ridicule for the world they inherited."
—Auron MacIntyre


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Saturday, February 8, 2025

2025-02-08

 ***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:

Education, health care and government have kept payroll numbers buoyant, but hiring momentum even in those areas is fading.

..................... There’s a world in which a mix of interest rate cuts from the Federal Reserve and the new administration’s pro-business policies encourage a labor market handoff from less-cyclical industries to more-cyclical industries. But that’s not the situation we find ourselves in at the moment



Tett: Gold glitters as the unimaginable becomes imaginable
The US president wants to weaken the dollar while preserving its exorbitant privilege



Book Fare:


............... Galbraith thinks the real issue is that economists have been avoiding one essential truth: entropy. In physics, entropy is the force that drives the universe, and it’s fundamental to all living systems, including economies. But neoclassical economists have stubbornly stuck with equilibrium, even though entropy and equilibrium are incompatible. One is a universal law of nature; the other is just a convenient abstraction.

In his new book, Entropy Economics: The Living Basis of Value and Production (co-authored with Jing Chen), Galbraith makes the case for an economic model that embraces entropy, aligning economic theory with life processes and physical laws—something that has real implications for how we understand markets, power, and regulation. He spoke with the Institute for New Economic Thinking about the implications of entropy economics and how it helps us better understand real-world events—from the rise of crypto to climate change—by revealing them for what they truly are. ..............................



Quotes of the Week:

Steinhardt: "I began to consciously articulate the virtue of using variant perception as an analytical tool. I defined variant perception as holding a well-founded view that was meaningfully different from market consensus. Understanding market expectations was as least as important as, and often different from, fundamental knowledge. .......most of our success resulted from our implementation of perceptions that were meaningfully at variance with consensus wisdom. We shorted near the top, in the face of great bullishness, and we got long at the bottom, in the face of keen pessimism."



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(not just) for the ESG crowd:

Holding long-term global warming to two degrees Celsius -- the fallback target of the Paris climate accord -- is now "impossible," according to a stark though hotly debated new analysis published by leading scientists.


Carbon Dioxide Has Driven Drastic Changes In Earth’s Global Temperature Over The Past 485 Million years

................................ Refining how Earth’s temperature has fluctuated over deep time provides crucial context for understanding modern climate change.

“If you’re studying the past couple of million years, you won’t find anything that looks like what we expect in 2100 or 2500,” said Wing, the museum’s curator of paleobotany whose research focuses on the Paleocene–Eocene Thermal Maximum, a period of rapid global warming 55 million years ago. “You need to go back even further to periods when the Earth was really warm, because that’s the only way we’re going to get a better understanding of how the climate might change in the future.”



U.S. B.S.:


........... To be fair, bits and pieces of this story had surfaced over the years. We've written at length about USAID's corruption—from its funding of the Wuhan Institute of Virology to its murky dealings in Ukraine. But the full scope of the rot—the elaborate facade—only came crashing down when Elon Musk and his team made USAID their first target. That was no coincidence. What they uncovered wasn’t just scattered incidents of corruption—it was a pervasive, systemic problem. The corruption wasn’t confined to specific projects or agencies; it was everywhere, a deep and entrenched network of grift. ................

The post-war era saw a surge in federal spending and a dramatic shift in the government’s role within the American economy. New agencies were created, and existing ones swelled in size and power. Notable among them were the Department of Defense and the Central Intelligence Agency. The federal government also entrenched itself in managing economic growth, overseeing civil rights, and expanding the welfare state. The proliferation of agencies, departments, and personnel created a system increasingly detached from executive authority and, in many ways, from the will of the people themselves.

Critics warned of government overreach, but bureaucratic momentum proved nearly impossible to reverse. Agencies took on permanent lives of their own, wielding unchecked power in their respective domains. ....................

As Elon put it in his assessment of USAID, the agency isn’t just a rotten apple with a worm inside—it’s a ball of worms with no apple. This metaphor encapsulates the essence of what has become a fundamentally corrupted system, one that exists not to serve the public but to perpetuate itself and enrich its insiders.  ..............



Geopolitical Fare:


Let’s deal with the big, almost certain effects first.

This is the beginning of the end of  the American alliance system, empire and world economic system.

Trump is planning on putting tariffs on Europe, too. He put higher tariffs on Canada, supposedly one of America’s closest allies, than on China. Hitting the majority of America’s vassals/allies all at more or less the same time, with them retaliating with their own tariffs means an end to the American created world economic system. .............

Ironically it’s the tariffs on Canada which will do the US the most international harm: everyone knows that Canada has been a completely supine vassal giving to the US everything it wants. Canadian exports, minus oil and gas, are less than its imports from the US, so there’s no legitimate re-balancing argument, even. .............................

The American cost structure is high and American “capitalists” prefer to play financial games to make things. The American competency crisis is real, and not caused by DEI. The market has high barriers to entry, incumbents addicted to oligopoly profits and no basic machine industry and almost no basic electronic parts manufacturing.

The transition period will be ugly. Beyond ugly. Quite likely “economic collapse” level ugly.

There was a way to use tariffs and industrial strategy, but starting a trade war with half the world all at almost the same time was not the way to do it. ......................



.................. Russia, like the majority of the world community, has never had any difficulty doing so. But the West was never cured of its syndrome of exceptionalism, and retains its neocolonial habits, i.e. living at the expense of others. Interstate relations based on respect for international law were, from the very beginning, not to the West’s liking.

Former U.S. Under Secretary of State Victoria Nuland once frankly admitted, in an interview, that “Yalta was not a good deal for us, it was not a deal we should’ve cut.” That sort of attitude goes a long way in explaining America’s international behavior; in 1945, Washington was practically forced to grudgingly agree to the postwar world order, already perceived as a hindrance by the American elite, which soon sought to revise it ...............



.......... The other development we’re seeing is how Team Trump is going to manage the continuing decline of the Outlaw US Empire, a development for which only a small amount of evidence has surfaced from which predictions can be made. .....................

The balance has moved toward a better managing of resources, and a drive for greater tribute from the vassals to maintain the massively indebted and deindustrialized imperial core, and greater extraction at home to keep the oligarch wealth growing. With this big change, the previous set of ideologically-ingrained courtiers need to be exchanged for a better aligned to the new reality bunch - especially the die-hard committed ones. So the neocons, lunatic Russia-haters etc. are out. Also, the state must be shrunk to allow for greater oligarch extraction, so the committed technocratic and competent managers who believe in "public service" need to be replaced/dumped as well.

The attempt at rejuvenation will not work given the rentier, extractive, selfish and traitorous toward the American people (they consider them as a rabble to be used and abused as needed) nature of the US oligarchy, which includes Trump and Musk. ...............................


Trump and Netanyahu casually revealed the disappearance of up to 800.000 Palestinians - and nobody even blinked at this revelation of one of history's fastest genocides



............. It’s been truly remarkable watching the official imperial narrative pivot from (A) claiming it’s outrageous to suggest Israel was waging a genocidal campaign of annihilation on Gaza, to (B) saying obviously everyone in Gaza needs to leave because the entire place has been annihilated and how dare you suggest otherwise. ...............................


Trump unleashes the ultra–Zionists.

................... But nothing comes close to the shock of Trump’s declaration Tuesday that the U.S. will assert its sovereignty over the Gaza Strip, remove the two million Palestinians who live there, and turn the territory into “something really nice, really good”—into, indeed, “the Riviera of the Middle East.” The implications of this plan—to the extent Trump makes plans as against making it up as he goes along—are nearly too far-reaching to calculate.

Let’s do our calculations to the extent we can at this early moment. We will find that, among all that is shocking about Trump’s Gaza thinking—is this my word?—there are things that are, on careful consideration, entirely in keeping with American policy over the course of many decades and so are shocking only to those lost in the game of eternal pretend that prevails in our late-stage imperium. ...............

These last remarks may read like mere flattery, but there is something important in them. They seem to me key to our understanding of what just happened between Trump and his criminal guest. Among Trump’s various sins, so far as orthodox Washington considers it, is his habit of saying the unsayable, as I like to put it: He makes statements that seem preposterous but are perfectly true and have long been true but are carefully kept out of accepted discourse. .................

But are we now supposed to continue pretending Washington has not run an empire for nearly 80 years? Caitlin Johnstone, the spiky Australian commentator, occasionally remarks of the skill required to maintain an empire and hide it from the American populace. True enough. But so far as I can make out, fewer of us by the day are so deceived. If there is any virtue in Trump’s plans, Gaza and the rest of them, there is no hiding the reality of empire anymore. .............




Sci Fare:

New research uncovered an alarming accumulation of plastic particles in human brains, raising concerns about their potential role in neurodegenerative disease


Science's Biggest Self-Control Failure

................. I had to confront an uncomfortable truth: the foundation of our celebrated paper was crumbling. Ego depletion—the once-famous idea that self-control relies on a finite resource that can be depleted through use—wasn’t real. That award? It was like winning a Nobel prize for developing the frontal lobotomy as a treatment for mental illness; and, yes, that really happened.

This isn’t just another story about failed replications or p-hacking (though those shenanigans will make an appearance). It’s a story about what happens when we fall in love with our theories more than the truth. The replication crisis didn’t just shake the foundations of psychology; it shook those of us who had built our careers on ideas that no longer held up to scrutiny. .............

....................................... Ego depletion’s collapse isn’t just a story about one flawed theory—it’s a cautionary tale for all of science. The replication crisis has shown us how easy it is for compelling ideas to gain traction, even when the evidence is weak. Ego depletion was built on an elegant theory and many studies that appeared to work, but elegance isn’t evidence, and quantity isn’t quality.


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Sunday, February 2, 2025

2025-02-02

***** denotes well-worth reading in full at source (even if excerpted extensively here)


Economic and Market Fare:

***** Welsh: Trump’s Doing Everyone A Favor With His Tariffs (Emphasis on Canada)




A.I. Fare:

A global stock market this dependent on a few huge companies in a sector whose valuations are under high scrutiny is a recipe for volatility




Where next for AI?

...................................................... The truth is that even if DeepSeek is stopped through legal or government action or fails to deliver on its promises, what its entry has done to the AI story cannot be undone, since it has broken the prevailing narrative. I would not be surprised if there are a dozen other start-ups, right now, using the DeepSeek playbook to come up with their own lower-cost competitors to prevailing players. Put simply, the AI story's weakest links have been exposed, and if this were the tale about the Emperor's new clothes, the AI emperor is, if not naked, is having a wardrobe malfunction, for all to see.


How a Chinese app built by a hedge fund has upended not just Silicon Valley, but an economy increasingly tethered to a story about AI

............................................................ This is a truly fascinating moment. Things could go in so many different ways: Will tech stocks continue to tumble? Will it become clear that Silicon Valley is over-invested in a very resource-intensive strategy, perhaps needlessly? What then? Will the talk turn more pointedly Sinophobic, both within the industry and out, in an effort to try to demonize the company and its approach, as politicians, lawmakers, and industry insiders did with TikTok? Will Silicon Valley AI stalwarts like Altman be able to muster a convincing enough argument to keep the money flowing into their increasingly outsized enterprises? Will OpenAI and Anthropic press their case with the state and drive even harder to become too big to fail, angling for government contracts? What happens to the current construction of the AGI mythology, if it turns out a Chinese startup can make a serviceable AI clone for cheap? Does this puncture the armor of the AGI investment complex, and start to steer backers and partners away for real? Is the AGI fever breaking?

And why, we’ll be left wondering, regardless how the dust settles, with the vast majority of resources for AI research concentrated in the United States, was it a Chinese hedge fund’s side project that unearthed this leap in efficiency? Could it be that the major AI players were more interested in fortifying their approach of more-is-better, broadening the scope of their project, and accumulating power, than attempting to innovate in a way that makes AI more nimble, more democratized, to use one of the industry’s preferred terms, and more efficient? Could it be that Lina Khan was right all along to want to break up the tech giants to encourage innovation?

I guess we’ll see soon enough.




The Bank of Canada vs Deepseek



Quotes of the Week:

Roberts: Investing in 2025 will require a blend of optimism and caution. With slowing economic growth, fiscal policy uncertainties, global challenges, overconfident sentiment, and ambitious earnings expectations, investors have plenty of reasons to approach the markets carefully. There will be a time to raise significant cash levels. A good portfolio management strategy will ensure exposure decreases and cash levels rise when the selling begins. That remains our suggestion as “bullish exuberance” increases.


Charts:
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(not just) for the ESG crowd:

The environmental agency just scrubbed most mentions of the global crisis from its online presence.




................... O.K., there is a long, unfortunate history here. But since the Clinton years in the 1990s, matters have taken another turn.  Capitulation itself has become the position, the value. 

This became perfectly obvious once Hillary Clinton — warmonger, interventionist, cultivator of coups, all-around authoritarian — assumed a prominent voice among liberal elites. Since the 2016 political season, and one can scarcely fail to notice, liberals have vigorously favored … wars, interventions, coups, censorship, a certain apple-pie authoritarianism. ..........





Geopolitical Fare:




.................... Our ancestors set sail to conquer the world; their ancestors built a wall. ........

They’re just a better civilization than ours — not because theirs is miraculous or perfect, but because ours is just that murderous and dystopian. They simply do the normal thing while we do the freakish thing: they make the lives of their citizens better and better and avoid unnecessary wars, while western governments make the lives of their citizens worse and worse while plunging into new acts of mass military slaughter every few years.



Pics of the Week:



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