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Saturday, May 18, 2024

2024-05-18

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


Economic and Market Fare:


With US inflation and retail sales both cooling, bets that the Federal Reserve will cut interest rates are back, and there isn’t much left that could stop stocks from hitting new highs.

After most equity markets fully erased April losses — brushing off a perceived delay in rate cuts, sticky inflation and signs of slowing in the US job market — nothing seems to be able to halt stocks. Financial conditions are loose, the economy is holding up and even recovering in Europe, the technical picture is bullish, and the earnings season was overall pretty reassuring once again. ........

Momentum is running in favor of bulls as all major markets are moving firmly into higher gear, with only a few minor overbought warnings flashing so far. It leaves stocks with upside room, while also limiting setbacks for the time being unless there is a major change in the fundamental perception of the environment. ......



The economy is signaling a more volatile, potentially recessionary period. Markets, however, aren’t paying attention. Not only are the twin tail risks of a downturn or resurgent inflation being ignored, but a near-impossible “immaculate acceleration” of boomy growth and benign price appreciation is becoming the base case.

It’s not the first time that markets and the economy have been at odds, but this is one of the most egregious. Just as the economic mood music becomes more somber and underlying signs of persistent price pressures continue to fester, the market has virtually eliminated the tail risks of a recession or an inflationary shock. ......

You don’t have to believe either a recession or unruly inflation are particularly likely to agree that the scant probability they are ascribed is negligently low.

That leaves the stock market in a more precarious position. It has been content to rally through this cycle with the belief the Fed would aggressively cut rates if a recession looked likely, i.e. the tail risk was underwritten. That’s ultimately still the case, but stocks are now happy to power ahead even though this tail is no longer priced by the rates market. ........



The Superstar Economy
  • The stellar performance of the S&P 500 superstars is not representative of the profits of wider corporate America.
  • For the direction of the US jobs market, we should closely monitor the profits of the 6.4 million non-superstar US companies that account for 85 percent of US jobs. These profits have been softening.
  • The US stock market’s record 50 percent valuation premium versus the non-US stock market is pricing generative AI to do through the next decade what the Web 2.0 network effect did through the last decade.
  • But it will be very difficult for the Web 2.0 superstar companies to become generative AI superstar companies, all assuming there are indeed any lasting generative AI superstar companies.
  • Hence, the long-term message is to underweight the US stock market versus the non-US stock market, and the preferred non-US stock market is Europe.
...................... There are two important messages from the stellar performance of the S&P 500 superstars, one for the short term, one for the longer term.

First, the stellar performance of S&P 500 profits is not representative of the profits of wider corporate America. This is crucial because while the evolution of S&P 500 companies’ profits drive their hiring and firing plans, S&P 500 companies account for no more than 15 percent of the 158 million jobs in the US.

For the US jobs market, much more important than S&P 500 companies is wider corporate America that accounts for at least 85 percent of all jobs.

The short-term message is that to pre-empt the direction of the US jobs market, we should closely monitor the evolution of profits at the 6.4 million non-superstar US companies.  These profits have been softening.

Second, even though almost all the last decade’s growth in world stock market profits has come from the US stock market, relative valuations are pricing last decade’s superstar profit outperformance to persist through the next decade. The US stock market is trading at a more than 50 percent premium to the non-US stock market – well above the early 2000s high, and now in uncharted territory.



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... So, what’s behind copper’s strength relative with its peers in the metals group, to crude oil and to the pace of growth in China. The answer seems to boil down to two factors: the energy transition and supply. ....





......... 2023 was an unusual year—despite the headwind of a rising market and mega-cap strength, only 60% of all active large-cap U.S. equity funds underperformed the S&P 500®

.... Among top-quartile funds within all reported active domestic equity categories as of December 2019, not a single fund remained in the top quartile over the next four years








Charts:
1: downward revisions
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(not just) for the ESG crowd:



IPS report says replacement fuels well off track to replace kerosene within timeframe needed to avert climate disaster



........... Steel, concrete, plastic, and fertilizer are fundamental to modern civilization yet we have no idea how to make any of them at scale without fossil fuels. Those who think that the solution to our climate crisis is to end the use of fossil fuels do not understand this. Ending fossil fuels would cause society to collapse, and result in more short-term human death and suffering than is expected even in the worst-case scenarios for global heating.

Those who think that a solution is to substitute renewable energy for fossil fuels don’t understand this either. Even if true, we’re a long way from that. At present, wind and solar account for only two-and-half percent of global energy consumption, and all renewables—including hydroelectric and nuclear energy—account for only seven percent using the direct equivalent method.

The larger problem is that energy substitution is only a theory. It is naive and flawed because it only considers amounts of energy while ignoring rates of energy output.

Society runs on power, not energy. Energy is the potential to do work. Energy must be converted into work for anything to happen in the physical world. Work takes place when energy is transferred to an object by application of force along a displacement. ..........

Renewables have an important place in our energy future but they don’t produce enough power to run modern civilization.

Howard Odum explained this in 1955 when he published his work on the Maximum Power Principle. .........


A Tour of the Jevons Paradox: How Energy Efficiency Backfires

...... In short, boosting efficiency seems like a straightforward way to reduce your use of natural resources. And for you personally, efficiency gains may do exactly that. But collectively, efficiency seems to have the opposite effect As technology gets more efficient, we tend to consume more resources. This backfire effect is known as the ‘Jevons paradox’, and it occurs for a simple reason. At a social level, efficiency is not a tool for conservation; it’s a catalyst for technological sprawl. .................

................................... While this top-level tech is important, when it comes to the Jevons paradox, it’s the bottom-level technology that’s most crucial. And at the very bottom of the industrial stack lies the mainspring of fossil-fuel-based civilization: the heat engine.

For those who are unfamiliar, a heat engine is a machine that converts heat into mechanical work. It’s no exaggeration to say that these machines are the primary driver of industrialization. Without them, fossil fuels are of limited use — they are little more than a source of heat. But with a heat engine, the energy contained in fossil fuels can be converted into more useful forms of work. Today, heat engines are what drive our cars, push our trains, fly our planes, and sail our ships. And heat engines generate the vast majority of our electricity. ................

To summarize, humans play the same game as life — we use efficiency to catalyze sprawl. And for most of human history, we played the game within tight constraints, using only the energy made available by the sun. But our exploitation of fossil fuels obviously changed everything, supercharging our activity beyond what the solar budget could maintain. It’s this lack of constraint that converts the Jevons paradox from a blessing into a curse. .........



Geopolitical Fare:

Johnstone: I Criticize The US Power Alliance Because It's The Most Destructive Force On Earth

I don’t spend my time attacking the US war machine because I have any special love for Hamas, Iran, Russia, China, or any other power. I do it because the US empire is quantifiably the most destructive and tyrannical force on this planet, by an extremely massive margin.

No other power has spent the 21st century killing people by the millions and displacing them by the tens of millions. No other power is circling the planet with hundreds of military bases, starving people around the world with blockades and economic sanctions, staging proxy wars, color revolutions and coups all over the earth, and working to destabilize and destroy any nation anywhere on this planet who dares to defy its dictates.

Only the US empire is doing this. No other power comes anywhere remotely close.

That’s as murderous and tyrannical as it gets. Propaganda-addled empire simps sometimes try to act like it’s strange and suspicious that I spend all my time criticizing the US war machine, when what’s actually strange and suspicious is that everyone else does not. .....


....... With Israel launching genocide 2.0 in Rafah (Gaza) as this is being written, the implied purpose of the violent police repression of protesters on college campuses last week, in conjunction with the media effort to label anyone who objects to the events unfolding as ‘anti-Semitic,’ is to provide political breathing room for the assault of Rafah. It won’t work. The implied logic is clear— the protesters must be cleared before the images of more murdered Palestinians light the world on fire. Missing from ‘the conversation’ is the self-reflection needed to understand that it is the genocide that is politically incendiary, not objections to it. .........

......................... List: remarkably, five of the ten countries with the largest oil reserves have been governed by ‘the new Hitler’ in the last twenty years. Imagine, one Hitler in all of the twentieth century, but five in the last twenty years. In contrast to this Hitler-heavy concentration, four of the remaining countries, Saudi Arabia, UAE, Kuwait, and the US, are liberal democracies (not). Readers are encouraged to read Osama bin Laden’s letter to America (link above) to understand how insidious fake liberal democracy (US) can be for we little people. 


.............. The problem that Ms. Weiner— as well as the Biden administration, the NYPD, and the exterminationist-right in Israel, are trying to overcome is that the protesting students have heard their explanations of the events in Gaza and come to different conclusions. Rather than trying to convince the students otherwise, the official response in the US has been slander, propaganda, censorship, and police violence. This is fundamentally different from making one’s views known as citizens regarding the affairs of state by protesting. Shutting down ‘free-speech’ isn’t its opposite. Coerced speech is. Shutting down ‘free-speech’ is political repression.

One illuminating / particularly troubling aspect of this police repression is that billionaires hired private militias to attack the protesters. The protesters didn’t attack these private militias, they were attacked by them ............


....... And so the war in Western Ukraine is going to be not so much against the Ukrainian army, which is now pretty depleted, but against other NATO troops. And it’s going to be an escalation, and it’s going to be a forever war.

And the objective of the administration here is simply they believe that a forever war will keep depleting Russia’s arms and missiles and tanks and army so that it will be in a lesser position to defend China when Mr. Biden says that he intends to follow the military plans to attack China in 2025 and 2026. So the United States plan is for a forever war basically, extended from the Ukraine to China, and probably in the Near East, because Iran is the third main enemy designated by the United States.

NIMA ROSTAMI ALKHORSHID: Dr. Stein, how do you find the foreign policy of Biden administration in Ukraine?

JILL STEIN: As Michael describes it, this is absolutely Orwellian. It is terrifying. It reflects this mindset of a state of permanent war of a country that thinks that it is the sole imperial power, which is basically rampaging around the world and butting up against conflicts that are huge, that could go global, that could go nuclear. This is unfortunately a microcosm of that mindset.

It has been absolutely clear from the get-go that for NATO to continue to move to the East, violating the promise of the United States and NATO basically to Russia that it would not expand to the East, not one inch after the reunification of Germany, which constituted an existential threat to Russia, which was just recently recovering from the Second World War and the loss of some 20 million, maybe 27 million of its citizens after an invasion over the Ukrainian border.

So Russia is understandably touchy about its border, but no more touchy than the United States is about its borders. In the same way that the United States was ready to go to nuclear war, in fact, we had the nuclear bombs launched and in the air when it was discovered that Russia had placed nuclear missiles in Cuba, we were ready to go to war to prevent that threat of nuclear missiles placed so close to our capital and to our country that there would really be no defense against a launch.

It’s exactly the same for Russia. This is understandable. This is what all informed Russia experts and Russia watchers had advised for years. It was considered insane to be butting up against Russia’s border and to be breaking the promise that had been made to Gorbachev.

It is an extremely warmongering, ill-informed, aggressive policy. When did this war surge? Actually, it goes back to 2014 and the interference of the U.S. in domestic Ukrainian politics in participating very much in the overthrow of the democratically elected ruler, president of Ukraine at the time, who simply wanted neutrality for Ukraine, which is essentially what Russia was asking for, was neutrality, not to take one side or the other. This war has been specifically ginned up by the U.S.

When the war in Afghanistan basically came to its disastrous end, as the whole war had been a disaster, when it finally wrapped up, that’s when the war industry cannot bear for there to be a peace dividend for the people of the world and the people of the United States. Instead, we were then plunged into this ginned up, absolutely unnecessary war, which could have been averted at any point.

Russia was begging for negotiations, which the U.S. basically refused to participate in. After the war had begun, there were negotiations that took place under the auspices of [Türkiye], where Russia showed that it did not want this war, it was ready to come to the table to negotiate and to compromise substantially. The U.S. and the U.K. basically shut it down.

This is a war being ginned up by the war industry. It’s absolutely a disaster. It’s part of an endless war machine that is impoverishing the American people and endangering the whole world. This could go nuclear. .......................








Sci Fare:


........ We found robust evidence for short- to moderate-term beneficial effects of plant-based diets versus conventional diets (duration ≤ 24 months) on weight status, energy metabolism and systemic inflammation in healthy participants, obese and type-2 diabetes patients. Initial experimental studies proposed novel microbiome-related pathways, by which plant-based diets modulate the gut microbiome towards a favorable diversity of bacteria species .........



Results
Overall, vegetarian and vegan diets are significantly associated with better lipid profile, glycemic control, body weight/BMI, inflammation, and lower risk of ischemic heart disease and cancer. Vegetarian diet is also associated with lower mortality from CVDs. ......



Other Fare:

In a scorching talk, marketing professor and podcaster Scott Galloway dissects the data showing that, by many measures, young people in the US are worse off financially than ever before. He unpacks the root causes and effects of this "great intergenerational theft," asking why we let it continue and showing how we could make it end. (Note: This talk contains mature language.)



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