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Sunday, April 7, 2024

2024-04-07

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


Economic and Market Fare:

another fake unemployment report

When I was in academics, my research program was on the application of psychology to economics, especially the fundamental psychological law of sensitivity to adaptation level. Back in the 1990s, I was featured in a front-page article in the Wall Street Journal on “animal spirits” or confidence levels.

I discovered that when the unemployment level rises above a 4-year exponential moving average of the unemployment rate (in which more recent observations are weighted more heavily), confidence collapses, the unemployment rate skyrockets upward, and economic activity contracts sharply. This event marks the end of the business cycle.

While the economy has been stagnating for most people recently, we have not experienced this signal event, the collapse of confidence that occurs when the recession begins. ...



Summary
  • The US economy is highly unusually ‘inverted’. The constraint on the economy is not labor demand, it is labor supply.
  • Hence, the US economy has highly unusually entered a labor demand recession without entering a GDP recession.
  • Nevertheless, for the stock market, a labour demand recession implies a profits headwind, because it is only when profits come under pressure that labour demand goes into recession.
  • Against this, wage disinflation would allow long-duration bond yields to fall, which would provide a countervailing valuation tailwind.
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US high yield credit spreads have dropped down to the bottom end of the range, and likewise equity volatility has been lulled into slumber.

And fair enough, the macro backdrop has improved, financial conditions have eased, and sentiment has been overwhelmingly bullish as stocks move up to the right.

It echoes what I recently noted in emerging markets, where the composite risk pricing indicator (EM credit spreads, sovereign CDS pricing, equity volatility, and FX volatility) was approaching a record low.

There is definitely an upside from this: it can form a self-reinforcing feedback loop where lower volatility enables confidence effects; a more bullish mood, which plays out in higher asset prices, cheaper and more freely available funding.

BUT

It also means complacency.

With the exception of the great moderation in 2004-07, volatility and credit spreads rarely spend long at the lows. ......


Why has the stock market been so ebullient?

Even by very forgiving measures like price-to-earnings, which presupposes extraordinary profit margins will be permanent, stocks are overvalued.

The question is academic to me now. The recent rally has wiped me out, replacing my short position with a shirtless one. Still, why does valuation seem more definitively and durably than ever before simply not to matter?


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......... While analysts still make huge optimistic forecasts in 2024 for the Magnificent Seven, earnings forecasts for the rest are dismal.  In 2023, the Magnificent 7 grew sales by 15% yoy leading to earnings growth of 58%. In contrast, the remaining 493 stocks in the S&P 500 grew sales by only 3%, while earnings fell by 2%.  So the market index depends on the Magnificent Seven sustaining these profit gains.  Earnings growth estimates in 2024 for the Magnificent Seven are 20.8%, and S&P 500 sans-Magnificent Seven at only 6.7% respectively.

........ Fundamentally, if US corporate profit growth slows (and it is) and interest rates on borrowing stay high, then the squeeze on stock prices will eventually lead to a reversal of the current market boom. 


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China Fare:




Quotes of the Week:



Charts:
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(not just) for the ESG crowd:


........ Addictive, overindustrialized, consumerist culture will not find some magical technofix to rescue it from climate change. Sustainability should always be questioned by first asking, “What is it you are trying to sustain?”

.......... We are being dragged into this unknowable future, either kicking and screaming or quietly protesting, but we can’t avoid it. That ship has sailed. The greatest challenge will be altering our behavior to comport with newly discovered realities

........ Smil argues, realistically, that most climate “solutions” presuppose “unreliable assumptions” that existing or non-existent technologies will be deployed at fantastic rates or that humanity’s ever-growing appetite for energy will suddenly be curbed. Smil labels such fantasies the academic equivalent of science fiction.


Simply mind-boggling’: world record temperature jump in Antarctic raises fears of catastrophe.

................. See the words “POLAR AMPLIFICATION” — that means global warming makes the Poles warm up MORE than the rest of the world. Potentially a LOT more. We have known about this since 1975.

.......... This paper is a KEY piece of documentation in detailing the “moral collapse” of the Climate Moderates. This is when they started deliberately lying to themselves and by extension to us.

.......... The fossil evidence was clear, and it cast serious doubts on the “Paradigm” of the Climate Science Moderates.

Because there was NO WAY that was possible using their models.

........................ Instead of addressing the evidence Rind “casts out” paleoclimate studies from “Climate Science” and dismisses them as “speculation” not worthy of serious consideration.

BUT WAIT, IT GETS WORSE.

Because these fossils imply that the Moderate guesses about Climate Sensitivity are DEEPLY FLAWED and far too LOW.

Think about it for one second. If the Moderate’s forecast of only +2C to +3C at CO2 levels of 560ppm is true, how high would the CO2 level have to get to warm up the High Arctic by +35C?

.................. Our results indicate that the recent four-fold Arctic warming ratio is either an extremely unlikely event, or the climate models systematically tend to underestimate the amplification.”

DO YOU SEE WHAT THIS MEANS?

This is how the Arctic warms up enough for alligators to live there, this is how Antarctica warms up enough for aspen forests to grow there.

HEAT “builds up” at the Poles REALLY FAST and a WHOLE LOT MORE than the Moderates thought.

.......... What the paleoclimate data indicates, is that an “avalanche of heat” is in the process of raising the High Arctic temperature by about +20C.

........... What’s happening to the Climate System isn’t “mysterious”, unless your academic career requires it to be so.

.................. Dust Bowl 2.0, here we come. 2024 -2028 is probably going to see the collapse of the Great Plains agricultural zone.

The list goes on and on.

This is not THEORETICAL anymore. This is our NOW.

We are “in crisis” right now and it’s about to get a lot hotter. ..................


How food becomes unaffordable

Our production of food requires climatic stability. Without enough rain, we suffer droughts that make food production impossible. With too much rain, we suffer the opposite problem: Fields covered in water that cause the crops to rot. So after England just had the wettest 18 months ever recorded, things are not looking good. ........



...... This is the problem. You started this war and I don’t get the impression that nature is planning to sit around and let you all kill off the Amazon rain forest in a death spiral of droughts and forest fires that destroy its ability to generate its own clouds.

Half the world’s arable land is directly or indirectly used for meat production. If all that land was released, nature would produce shrubs there, that store and release moisture. Methane concentrations in the atmosphere would begin to reduce within a few years. Carbon dioxide would start to be sequestered. The plants that grow on land no longer used for food production would regulate rainfall, regulate global and local temperatures and sequester carbon.

Don’t be an idiot and show up here insisting that your grassfed beef grazes on natural pastures. We’re above 420 parts per million. The world you remember is gone. Grasslands around the world are supposed to be transitioning to shrubs and forests, to do their job of enabling life to survive.

Look, you just have this ability. Your governments can just decide that enough is enough. You can just start feeding the population the plants that you’re now feeding to the animals in these concentration camps. Soybeans and grain are fed to cattle. Chickens receive grains and even fish from the ocean. This is stuff you can feed to humans. You can also wait of course for Mother Nature to solve the problem. You’ll all insist it was some monstrous conspiracy of course, you’ll go into your grave denying what happened.

But I just don’t get it. Why isn’t there some kind of global emergency program by governments to revamp the food production system and get rid of this reliance on 1200 million tonnes of animals eaten by humans? Do they not realize how late into the game we are .........



........... A stable climate is requisite for successful agriculture. The fact that some colder areas will become warmer and theoretically prone to higher crop yields than at present becomes irrelevant if weather is too unstable to support commercial farming. .......

Society is in a terrible predicament. Not only is the planet getting too hot for human civilization to flourish but over-consumption of all energy is destroying earth’s ecosystem—the true basis of wealth that forms the foundation for human prosperity.

Well-intentioned people look for solutions. Populist con-artists profit by telling people there is nothing to worry about, and that climate change is either a hoax or will actually make things better for the planet.

I’d like to tell people that renewable energy is part of a solution but I fear that substituting renewable for fossil energy will make that problem even worse. It will enable continued growth of the human enterprise which is unfortunately the primary source of our predicament. Climate change is but one of growth’s many serious consequences. .......

We are well beyond a soft landing for the planet. There are no moderate pathways ahead. The only move we have left is radical acceptance of our situation, of the human predicament.


A climate-future look at property values



Geopolitical Fare:

Ukraine’s humiliation and Gaza’s shame accelerating estrangement of West and the rest at a crucial turning point in global power relations



....... It’s the McCarthyism of the 21st century. As the great Mark Twain said, if you don’t read the US media you are uninformed. If you do follow America’s media, you are misinformed.

Britain, Canada and Australia fall into the same media prison. The old Soviet media, as I remember, was freer in its opinions and more robust in its criticism. None of this is new; just worse. .........


Genocide Apartheid Israel can only exist by constantly harming others and even itself 

.................... The same idea has been applied to Israel’s neighbors, close – such as Jordan (corrupted to the core), Egypt (bought off), and Syria and Lebanon (constantly disrupted with perfectly illegal military interventions) – and far, Iran (isolated, boycotted, blockaded, and under constant attack by assassinations and terrorism, all with the help of the USA) and the Gulf States (mostly, corrupted). ...........



Sci Fare:

is that so much of it simply isn't

Jay Bhattacharya is one of the few heroes to emerge from that society-wide misadventure we call “Covid”. A professor of health policy at Stanford, he was one of the authors of the Great Barrington Declaration. It urged adherence to longstanding pandemic plans that emphasized the isolation and protection of the most vulnerable, rather than locking down society at large. He also conducted, with colleagues, the first seroprevalence study of the virus that causes Covid, in nearby Santa Clara county. It revealed that infection was widespread. This was crucial information, as it indicated that, despite widespread infection (estimated by them at 53,000 people), the vast majority of people were not having a significant enough health crisis to show up as a “confirmed case” (of these there were 1,200). This gave us a measure of how dangerous the virus was.

For these contributions, Jay was attacked by every organ of the Government/ Big Science complex that meters out status and funding to its own loyalists. Fauci and Francis Collins, in private emails, called for a smear campaign against him and a handful of other “fringe epidemiologists” at backwater, fringe universities such as Harvard and Oxford. His own institution of Stanford hung him out to dry. Yet he never backed down, and has been vindicated on every particular. He is a plaintiff in what is likely to be the most consequential free speech case in recent history, Missouri v. Biden, which is currently headed to the Supreme Court. It alleges that “federal government officials violated the First Amendment by ‘coercing’ or ‘significantly encouraging’ social media companies to remove or demote content from their platforms,” including true information about Covid that was inconvenient because it would have lessened the sense of crisis.



Other Fare:


We have lived under representative democracy for a long time now, and while it has had its victories and there have been good leaders, it’s fair to say that most of the leadership, most of the time, has been bad or even evil, and that representative democracy has failed its biggest test—managing climate change and environmental collapse.

The other forms of leadership we’ve tried since the invention of agriculture have all, likewise, been more bad than good or have failed to scale well enough to protect themselves. Kingship, rank societies, big man societies, feudalism, imperialism, direct democracy and so on. On the economic side, when it’s not identical to the political, we’ve also tended to choose bad leaders, whether they were merchant lords, corporate CEOs and boards, guild masters or slavers. Most systems work well for a few generations, then fall apart. Seven generations when you’re lucky, more commonly three, as with neoliberalism.

Just thinking back over my life, I can’t think of a President who wasn’t doing more evil than good. This even includes Carter, who was the neoliberal leader before neoliberalism. The case for every other President is clear: Obama, for example, ramped up drone assassinations and encouraged the banks to steal people’s homes without the necessary paperwork, while massively ramping up shale oil and gas production and bragging about it. .........


Boeing's Suicides, The War on Citizenship, The USA as the Centre of the First World Government, Napoleon Bonaparte on the English, A Historical Panic in Zanzibar



Pics of the Week:




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