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Wednesday, March 13, 2024

2024-03-13

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


Economic and Market Fare:





"Hot CPI" read the headlines today, referring to the 0.4% rise in the February CPI and the 3.2% year over year change in the CPI. My take: inflation is running hot only if you think it makes sense to look at the year over year rise in nationwide housing prices 18 months ago. If you omit that one item (which comprises about one-third of the CPI), then you find that the year over year change in the CPI has been less than 2% for the past 8 months.




............ For Bank of America strategist Michael Hartnett, 2024 is a year of abnormal times and abnormal gains. The 25% rally in the last five months is typically only seen when markets emerged from recession lows like in 2009 and 2020, or at the start of bubbles, like in 1999. While the strategist sees the market “stretched and extended,” a history of bubbles shows it can go further. “Fed causes bubbles and Fed pops bubbles and in 2024 Fed’s determination to cut rates means we’re not too far from it,” he says.

According to Hartnett, it paid to be a “cynical bull” into 2024, and those in this camp are determined to stay long until the day before the Fed cuts rates, BofA’s Bull & Bear Indicator shows a sell signal, 10-year real rates exceed 2.5%, and the forward P/E of the S&P 500 exceeds 25. Until then, only a negative US payroll reading would be “likely to melt this determination,” he adds. ........




Prices reflect near perfection yet today’s world is particularly imperfect and dangerous

Well, the U.S. is really enjoying itself if you go by stock prices. A Shiller P/E of 34 (as of March 1st) is in the top 1% of history. Total profits (as a percent of almost anything) are at near-record levels as well. Remember, if margins and multiples are both at record levels at the same time, it really is double counting and double jeopardy – for waiting somewhere in the future is another July 1982 or March 2009 with simultaneous record low multiples and badly depressed margins.But for those who must own U.S. stocks (most institutions) even when they are generally very overpriced, there is a reasonable choice of relatively attractive investments – relative, that is, to the broad U.S. market.

Quality: Although not spectacularly cheap today, U.S. quality stocks 1 have a long history of slightly underperforming in bull markets and substantially outperforming in bear markets (although they did unusually well in the recent run-up). In addition, their long-term performance is remarkable. AAA bonds return about 1% a year less than low-grade bonds – everybody gets it, and always has. In bizarre contrast, the equivalent AAA stocks, with their lower bankruptcy risk, lower volatility, and just plain less risk, historically have delivered an extra 0.5% to 1.0% a year over the S&P 500 (to be precise, an extra 1.0% a year for the past 63 years, with the gains concentrated in the period since 2008). What on earth is that? Even holding their own should be inconceivable. It is the greatest aberration of all time in the market ........



China Fare:





The annual meeting of China’s National People’s Congress (NPC) is underway right now.  The NPC is officially China’s highest deliberative body, ostensibly deciding economic and social policies each year.  In reality, those policies have been drawn up by the Chinese Communist Party leaders in advance and then presented to the NPC to vote on (unanimously).  Nevertheless, the NPC meeting offers the CP leaders an opportunity to spell out their policy answers to deal with the current economic and social problems of the country.



Quotes of the Week:

Ellen Zentner, Morgan Stanley’s chief U.S. economist:
“We will have a hard landing at some point. I guarantee you that. We’re all wondering: When does that come?” 


Charts:
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(not just) for the ESG crowd:



The average temperature for December, January and February was more than five degrees warmer than historic norms, preliminary figures show, an average all the more remarkable because it combines weather station data from places as distant as Nunavut, Ontario and P.E.I.



Geopolitical Fare:

The White House unveils a new PR stunt for Gaza aid while hiding US arms transfers to Israel.


Israel Accused Of Torturing UN Workers To Obtain False Testimony About UNRWA

..........  If we had anything remotely like an objective news media in the western world, reports that Israel tortured United Nations staff to get them to make false statements against a UN aid agency would be the top story everywhere for days. .................

But that’s what the information ecosystem looks like in the shadow of the empire. The flimsiest allegations against enemies of the US-centralized power alliance are spun as gospel truth and kept in the headlines for months, while even the most damning evidence against the empire never gets anything better than a cursory nod from the mass media and is then promptly memory-holed as the daily news churn moves on.


Academic’s models predicted 2020 instability. Was it just luck?

............... Those at the top, meanwhile, become too numerous. Too many rich people — Turchin gives Michael Bloomberg and Peter Thiel as examples — compete over a finite amount of political power. Too many graduates emerge from university overqualified. “What brings down the states is intra-elite infighting.” Right now, Trump is “the counter-elite”. The ruling class is “really throwing everything at him”, says Turchin, citing the plethora of lawsuits.

“The question is whether there’s going to be a macro-violence outbreak.” By macro-violence, he means truly macro: civil war, revolution, political fragmentation, territorial break-up or foreign invasion. ............

Surely it matters whether Joe Biden or Trump wins? “Not really, because neither of them are going to shut down the wealth pump.” ..............



Other Fare:

A dose of working-class realism can save journalism from groupthink.

...... The main thing that I learned in journalism school was that I didn’t belong in journalism school. The other thing I learned was that journalists were deeply anti-intellectual. They were suspicious of ideas; they regarded theories as pretentious; they recoiled at big words (or had never heard of them). For a long time, I had contempt for the profession on that score. In recent years, though, this has yielded to a measure of respect. For notice that I didn’t say that journalists are anti-intellectual. I said they were. Now they’re something else: pseudo-intellectual. And that is much worse. ..............

A couple of years ago, writing in The Chronicle of Higher Education, an Ivy League professor said the quiet part out loud. “Not all of our students will be original thinkers,” she wrote, “nor should they all be. A world of original thinkers, all thinking wholly inimitable thoughts, could never get anything done. For that we need unoriginal thinkers, hordes of them, cloning ideas by the score and broadcasting them to every corner of our virtual world. What better device for idea-cloning than the cliché?” She meant academic clichés, having mentioned “performativity,” “normativity,” “genderqueer,” and others. “[W]e should instead strive to send our students forth—and ourselves too—armed with clichés for political change.”

And that’s exactly what has happened, nowhere more so than in journalism. ........... Facts are now subordinated to the “narrative,” a revealing word: first, because it comes from academia (it is one of those clichés); second, because it’s almost always misused, a particle of garbled theory cloned and memed (as the professor would have wanted). When journalists say “narrative,” they mean “idea.” And it is always an idea they’ve received from someone else.

They think they’re thinking, but they’re wrong. ...........



Pics of the Week:

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