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Monday, August 25, 2025

2025-08-25

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


Economic and Market Fare:

a report from one of my profs at LU:

............. In 1960, Ontario has the highest real per-capita GDP of all 10 provinces. By 1990, it was in second place just behind Alberta but ahead of British Columbia. In 2005, Saskatchewan surpassed Ontario moving it to third place while by 2022 Ontario’s rank had moved to fifth place. Essentially over the course of just over half a century, Ontario went from the top province in terms of per-capita GDP to mid-ranked. Ontario is exhibiting more characteristics associated with the Atlantic provinces—Ontario received equalization for the first time in 2009—than the more dynamic western parts of the country. A province that once had hopes as high as the tallest tree, now is lucky to aspire to economic heights akin to a lilac bush.

What has happened to Ontario is more than a re-equilibration of the federation as resource rich provinces developed or the effects of adjustment to a more competitive free trade world in the wake of the FTA and NAFTA. Simply put, Ontario has experienced a productivity decline rooted in a failure to boost business investment. While Ontario is a mineral and resource rich province, it has been unable to bring resource projects online—the Ring of Fire a case in point. This has been accompanied by a governmental and business culture focused more on process and regulation than on trying to get things done and a cultural shift to gaining wealth through supply restraint and asset appreciation rather than hard work.

Nowhere is this more evident than in housing investment where population growth has outstripped additions to housing stock. The regulatory framework towards getting projects approved, permitted and built is generally a labyrinth. Large amounts of both suburban and northern land were environmentally sequestered from development without steps to ensure density development creating artificial scarcity particularly in the Greater Toronto Area (GTA). The effects on new supply were worsened by the fact that new housing began to be treated as an investment by the public and a revenue source by governments given the plethora of tiny investor driven condo buildings and the development charges accounting for a large proportion of the price of new housing.

While there are signs that the Ontario government is finally trying to overcome these past missteps, it’s an uphill struggle given the continual grasping at quick fixes ...........



........... And Powell probably knows that massive jobs data revisions are coming: on 9 September, the Bureau of Labor will release its preliminary benchmark revision to net jobs increases for the year to last March 

............. The irony is that the Fed, like other central banks, has little effect on the economy through monetary measures.  So the Fed has been reconsidering its monetary policy ‘framework’.  It still holds to the view: that “the inflation rate over the longer run is primarily determined by monetary policy,” but it has to say that, because otherwise there is no need for ‘monetary policy’! Yet in 2010s, the US inflation rate dropped below the 2% target even though the Fed cut rates to zero, and after the COVID pandemic ended, inflation rocketed despite sharp rate hikes by the Fed and has remained stubbornly above the 2% rate. Indeed, US inflation has remained above ‘target’ for more than four years. And now both inflation and unemployment are likely to rise from here, whatever the Fed does.  Monetary policy does not work. ............

................................. In summary, what do all these papers at the Jackson Hole symposium tell you?  First, it is the value created by human labour that is key to economic growth and living standards, not changes in the cost of borrowing or lending money and the decisions of central bankers on interest rates.  The ‘supply side’ of an economy is what matters.  All the papers implied that. ..............



............... we are sticking with our associated targets for the S&P 500 of 6600 by year-end 2025 and 7700 at the end of next year.

........ We expect that the bull market will be increasingly earnings-led rather than valuation-led through 2026. Both Q1-2025 and Q2-2025 S&P 500 earnings were much better than expected (chart).


Mega-caps churn but bull market behavior persists

The S&P 500 is dominated by just a handful of mega-cap companies. The seven largest companies account for more than a third of the total market cap of the entire index (equivalent to the smallest 440 companies in the index). Half of the market cap of the index is in the largest 23 companies. The S&P 500 did NOT make a new high last week.

However, the equal-weight S&P 500 did manage to make a new high last, with a (hopefully) decisive move above the December peak that has been repeatedly challenged in recent weeks.

More than 70% of the companies within the S&P 500 are now trading above their 200-day averages.  ................



It’s a Bull Market.
We know that from risk-on metrics.
We know that from breadth.
We know that from sector positioning.
It might seem redundant at this point, but after a decade of studying markets, one lesson always comes back to me:
Once you have a solid foundation, you need to be reminded more than you need to be taught.
Yes, there are new lessons every day. 
But the truths that build prosperity are usually the simple, foundational ones.
Repetition is underrated, while novelty is overly celebrated.  ...........



........... Current earnings projections for 2025 suggest a nearly 20% increase, well above historical growth trends. While such detachments of the market from earnings are not uncommon, they tend not to be sustainable over more extended periods. We suspect that the risk to stocks in 2025 will be a failure of earnings to meet optimistic expectations.

..... It is worth repeating that valuations are unreliable market-timing tools. Elevated valuations reflect heightened investor optimism and expectations of robust earnings growth in bull markets and can remain that way for extended periods.

However, excess market valuations leave investors vulnerable to unexpected, exogenous events. Those “events,” when they occur, lead to sharp sentiment reversals. What would cause such a sentiment reversal? No one knows. This is why when the “unexpected” happens, Wall Street’s immediate response is to suggest that “no one could have seen that coming.”

As such, investors must continue managing risk into 2025 and navigate the markets accordingly.


PIMCO Macro Signposts | The Economy Isn’t the Stock Market (and Vice Versa) (via the Bond Beat)

… Consider the U.S. stock market. The S&P 500 Index is up almost 10% year to date (a significant rise but a bumpy ride, given the roughly 20% drawdown in April). Yet this performance may obscure important realities about the broader U.S. economic situation. Real consumer spending grew at a 1% annualized pace in the first half of 2025, down sharply from the 4% annualized pace in the second half of 2024, according to the U.S. Bureau of Economic Analysis (BEA). Real GDP growth has been slowing – it grew at a 1.2% annualized pace in the first half of 2025 – down from the 2.7% in the second half of 2024, the BEA reported. U.S. employment growth has decelerated to below 1% so far in 2025, according to the Bureau of Labor Statistics, a threshold that has historically preceded recessions…


Surviving the New Age of Economic Coercion



Charts:
1:
2: 


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(not just) for the ESG crowd:


Geopolitical Fare:



....... It’s 2025. There’s an Internet. Who can now pretend they have no idea what Israel has done, is doing, aims to do?

It’s obvious to the entire world that the Biden and Trump administrations have run cover for Israel while enabling the horrors before us.

But for those seeking a deeper understanding, or perhaps sources to encourage others to understand what is taking place, many important documentaries stand ready to enlighten. .................





................. And that brings me to the last reason I will mention in this piece, one that has been made many times before, but is not mentioned often enough. The American-led post-World War II order made much in its propaganda and even in reality of a commitment to universal human rights that organically included at a least highly publicized prohibition of genocide or ethnic cleansing as an integral part. That an American-sponsored state created–in however a haphazard way–precisely in response to a genocide can participate, in anything that smacks of ethnically-based mass violence, speaks of a moral or civilizational rot of a special kind. Only a much more vigorous resistance can deliver us from its seemingly inevitable spread.



......... Brandishing their warped logic, they cannot possibly understand that if Ukraine is instrumentalized – actually since before Maidan in 2014 – to harass and destabilize Russia in its western borders, Russia will forcefully counter-attack.

That’s at the heart of the Russian concept of “underlying causes” of the Ukraine tragedy, which must be thoroughly addressed if there is any real shot at Trumpian or not Trumpian “peace”. .............


Nothing Has Changed in the War in Ukraine ........

....... The two sides (Russia vs. USA/EU/NATO/Ukraine) continue to talk past one another, with the main actor on the side, the USA, hilariously positioning itself as a mediator. The fact of the matter is that there are two wars being fought simultaneously, and the USA is the main actor in the more important one (USA vs. Russia). A belligerent USA managed to position itself as a mediator in the conflict between Israel and Hamas/Hezbollah/Iran, but trying to pull the same trick with Russia is too tall an order to fulfill.

At the same time, Russia has to humour to the USA as a recognition of its unrivaled power. This was the reason for the recent summit in Alaska, one which ended quickly and served only to remind Trump and his team that the Russian position has not fundamentally changed. Russia came away from this summit with a small victory in which US demands for an immediate ceasefire were dropped.

Fast forward to this past Monday where Ukrainian President Zelensky arrived in Washington with the cream of the crop of the European National Branch Managers of USA Inc. (including EU VP of USA Inc. Ursula von der Leyen) to reiterate Ukraine’s position, one that is effectively unchanged from the time of Boris Johnson parachuting into Kiev in 2022 to urge Ukraine to keep fighting. The only thing of note to occur during that meeting was that Trump informed the world that the EU would buy weapons from the USA to continue to arm Ukraine so that it can defend itself against Russia. ............

............ 
This is just NATO. These people are shameless.

Left outside of my commentary is what has been agreed to in back channels between the relevant parties. There is a growing sense that Kiev is willing to accept territorial losses in return for strong security guarantees, but Russia will not accept security guarantees such as those that have been floated.

This war is far from over.


Anatomy of a propaganda op.

preamble:
“The information age is actually a media age,” the late John Pilger once remarked. “We have war by media, censorship by media, demonology by media, retribution by media, diversion by media—a Surreal assembly line of obedient clichés and false assumptions.”

I have quoted John to this effect numerous times since he offered these observations. The occasion of his speech was the coup in Kiev the United States cultivated in February 2014. And how right he has since proven. As John also noted at the time, not in his lifetime (and, so, not in mine) have we been subjected to so pervasive an onslaught of media-driven propaganda in the service of another of America’s imperial adventures.

There is propaganda by way of omission, an insidious and highly effective technique, and propaganda by way of disinformation—the less subtle strategy. The Ukraine crisis has precipitated numerous examples of both. In the latter line we have had some notable cases. There was the mass grave outside Mariupol, where the Russians allegedly buried hundreds of civilians but which turned out to be an ordinary cemetery. There was the massacre at Bucha, supposedly conducted by Russian units as they withdrew; that turned out to be the work of Ukrainian soldiers taking revenge against townspeople who did not resist the Russian presence.

With this piece The Floutist begins a two-part series dedicated to exploding various of these lies. Both pieces come to us from German-speaking writers.

In this investigation Helmut Scheben, a Swiss correspondent of long experience, takes on the extended and unfortunately effective propaganda operation concerning the removal of Ukrainian children from war zones after the Russian intervention began in February 2022. In a brilliant bit of lateral thinking, Scheben deploys history to unmask hypocrisy. As he points out, the United States has evacuated thousands of children in every war from Vietnam to Afghanistan, always declaring this a humanitarian mission. When Russia removes orphans from combat zones in Ukraine, an overwhelming Western propaganda apparatus portrays this as child abduction and a crime. ..............


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