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Sunday, April 23, 2023

2023-04-23

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


Economic and Market Fare:



A US recession is looking increasingly imminent, but the usual playbook of a deep equity selloff and Treasuries acting as a hedge may not apply to the same extent. The US looks as if it will be in a recession very soon, if it isn’t already in one. The chart below shows the average evolution of the main assets around a downturn.

The chart shows that gold typically fares best of the selected assets shown after a recession, followed by USTs and corporate debt. Equities and commodities (Bloomberg Commodity index) come off worst in the six months after the recession begins. But this recession will come with an unwelcome helping of elevated inflation, which means the usual rules cannot be relied upon. ......


Traditional leading economic indicators place a heavy focus on data from the construction and manufacturing sectors.
Over the last several decades, the US economy has become less cyclical, with more service sector jobs and fewer construction and manufacturing payrolls.
The shrinking share of the cyclical economy has led many people to question the validity of traditional leading indicators that still focus on the construction and manufacturing sectors.
Construction and manufacturing jobs have declined from almost 40% of total employment to 13% today. 
While the construction and manufacturing sectors are a relatively small share of total employment, the data proves that the cyclical economy still drives almost all the job losses around recessionary periods.
.... Job losses from the manufacturing and construction sectors consistently make up most of the job losses around recessionary periods.
Job losses in other sectors usually result from the secondary damage caused by the earlier decline in the cyclical economy. 
.... Business cycle analysis must remain heavily focused on the cyclical economy. Despite the shrinking size, the construction and manufacturing sectors will more than likely drive the majority of job losses in the next recession.
In fact, at the start of the last 12 business-cycle recessions, service payrolls were at a peak.








Chart watchers looking to technicals to assess the recent rally are taking positive cues from measures of market breadth that are expanding in ways that have signaled further gains in the past. ........................ That said, there’s more room for improvement. The share of S&P 500 constituents with a rising 200-day moving average line needs to go from above 40% to above 70% to confirm that a bull market is in full force, the analysis by SentimenTrader shows.


US Leading Economic Indicators Tumble For 12th Straight Month, Signal Recession Imminent


After February's massive surge in existing home sales, expectations were for a modest pullback in March. The 14.,5% jump in Feb was revised down to 13.8% surge (still huge), but March printed a 2.4% MoM decline (worse than the expected 1.8% drop). ... That is the 13th monthly decline in the last 14 months and leaves existing home sales down around 22% YoY




.....“The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January. The latest reading is indicative of GDP growing at an annualized rate of just over 2%. Growth is also reassuringly broad-based, led by services thanks to a post-pandemic shift in spending away from goods, though goods producers are also reporting signs of demand picking up again."


As amazing as it sounds, ECB President Christine Lagarde is making sense.







Quotes of the Week:
AMEX: 
  • “Our first-quarter results reflect strong growth in Card Member spending and continued high engagement with our premium products.”
  • Revenue grew 22% year-over-year, to a quarterly record
  • Card Member spending rose 16% on an FX-adjusted basis.
  • Travel and Entertainment spending soared 39% on an FX-adjusted basis.
  • ...
  • “Millennial and Gen Z customers also continued to be our fastest growing U.S. cohort in terms of spending, growing 28% from a year earlier.”


Vid of the Week:




Charts:
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(not just) for the ESG crowd:



Most of the green energy tax benefits provided by President Joe Biden’s $750 billion Inflation Reduction Act (IRA) of 2022 are going into the coffers of big banks and billion-dollar corporations, according to House Ways and Means Committee Chairman Jason Smith (R-Mo.).






To get people to shift to more climate-friendly behavior, what works best? Education? Payments? Peer pressure?



Sci Fare:

Researchers can "clearly see features of this invisible world that are hundreds of millions of light-years across"


A new theory of embodied consciousness


Income and emotional well-being: A conflict resolved
Abstract
Do larger incomes make people happier? Two authors of the present paper have published contradictory answers. Using dichotomous questions about the preceding day, [Kahneman and Deaton, Proc. Natl. Acad. Sci. U.S.A. 107, 16489–16493 (2010)] reported a flattening pattern: happiness increased steadily with log(income) up to a threshold and then plateaued. Using experience sampling with a continuous scale, [Killingsworth, Proc. Natl. Acad. Sci. U.S.A. 118, e2016976118 (2021)] reported a linear-log pattern in which average happiness rose consistently with log(income). We engaged in an adversarial collaboration to search for a coherent interpretation of both studies. A reanalysis of Killingsworth’s experienced sampling data confirmed the flattening pattern only for the least happy people. Happiness increases steadily with log(income) among happier people, and even accelerates in the happiest group. ....


Decades of research support the fact that much age-related deterioration is the result of the effects of sedentary lifestyles and the development of medical conditions rather than of aging itself. Elite older athletes, who demonstrate enhanced performance compared with historic cohorts and even some younger peers, are models of this paradigm. Many non-elite middle-aged adults and older adults continue to remain increasingly active throughout middle age and beyond. A continually growing body of basic science and clinical evidence demonstrates how active persons modulate physical decline through training. An updated understanding of how active adults defy age helps orthopaedic surgeons not only manage their patients' performance but also improve their lives. A large segment of sedentary older adults will benefit from counseling that encourages the pursuit of more active and healthier lifestyles



Other Fare:

Who to read, and why

Sometimes people ask which political writers and thinkers I like to read, and they usually end up surprised when I name a lot of centrists and leftists.

Apparently, most people prefer authors who tell them what they want to hear, even while paying lip service to the idea that a healthy intellectual diet involves exposure to a wide range of individuals with different political views. But I don’t believe in simply seeking out ideological diversity for the sake of diversity. I think there are entire movements, bodies of research, and ways of thought that add nothing to human knowledge and are better to avoid. If my favorite writers don’t share a common ideological orientation, exactly what separates them from other authors that I choose to spend less time reading and engaging with?

After giving the topic some thought, I’ve found that the writers I think are most insightful tend to have certain traits that are worth spelling out. My thinking here was heavily influenced by covid-19. It was important to get policy in this area right, so I spent a lot of time looking into various issues surrounding how to respond to the pandemic. ....

............ That being said, I noticed that there was a group of writers who came to the correct position throughout the pandemic, and they crossed the right-left divide. In February of last year, Ezra Klein interviewed Alex Tabarrok on the failures of the FDA, and they basically agreed on everything. I noticed that many of the liberals skeptical of NPIs after vaccines became available were the same ones I found to be reasonable on other issues, like the influence of teachers unions. And the conservatives or more right-leaning intellectuals tended to also be the most sensible thinkers on their own side.

Yet I’ve seen strikingly little analysis of what these individuals do have in common, if it wasn’t a conventional political ideology or orientation.

I would propose that we call them “Enlightened Centrists” (EC). In politics, we usually think of a centrist as someone who is a moderate on most issues, like say Joe Manchin. That’s not the way I use the term here. In this context, a centrist is simply someone who has a constellation of views that don’t completely line up with either the right or the left. This centrism is “enlightened” based on certain traits, listed below, that such individuals share that I think make for sound political and social analysis.

If you’re going to understand important issues, it is Enlightened Centrists you should seek out. ......

EC is not, and will not become, a political movement. Nor is it simply a cognitive style. Some degree of rationalism is necessary but not sufficient for being an Enlightened Centrist. Rationalists are known to think in probabilities, take cost-benefit analysis seriously, have reasonable priors and weigh them against new information in measured ways, and be low in tribal instincts. The same is true for Enlightened Centrists, but one can think of the term as referring to how rationalist thought tends to manifest itself in how one approaches political and social issues. ...........................




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