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Sunday, August 25, 2024

2024-08-25

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


Economic and Market Fare:


The outlook for a soft landing is still in play, and the Leading Economic Index continues to signal otherwise. The LEI declined 0.6% in July, bringing the streak to 29 consecutive months without a gain. At 100.4, the index has now fallen below the prior cycle's low reached in April 2020. .........


........................ Despite the indicator's trend decline and recession risks that remain elevated, the long downdraft in the LEI overstate recent weakness in the economy.



The latest retail sales report seems to have given Wall Street something to cheer about.

Headlines touting resilience in consumer spending increased hopes of a “soft landing” boosting the stock market. However, as is often the case, the devil is in the details.

We uncover a more troubling picture when we peel back the layers of this seemingly positive data. Seasonal adjustments, downward revisions, and rising delinquency rates on credit cards and auto loans suggest a more cautious view. The consumer—the backbone of the U.S. economy—may be in more trouble than the headline numbers indicate. .....



Rate cuts won't prevent a recession and the economy is deteriorating 'quite rapidly,' investment strategist says



........ Since 1980, only two easing cycles have seen the Fed cut Fed Funds by less than 5%. The most recent, 2020, was limited as the Fed could only bring rates down to 0%. The other was 1995-1998.

Based on history, the market is betting on an anomaly, like 1995-1998, and not normal monetary policy behavior.

Given that the market expects a relatively minimal rate cut, we should suppose it’s expecting a 1995-1998 economic scenario, i.e., no recession.   

John Authers of Bloomberg recently opined what Fed Funds futures may imply regarding inflation. To wit:
So even if markets buy the notion that the Fed will have to cut soon, they also seem convinced by the theory that the very low rates of the last three decades were an aberration, and that the norm for monetary policy will be tighter in future. That presumably goes hand-in-hand with slightly higher inflation rates.
Presuming the collective market thinks this time is different, they must believe that economic growth and inflation trends of the pre-pandemic have been reversed. We have discussed such a forecast many times. To wit, we share a section from Our Elevator Pitch For Bonds, published in July 2023.

Our view of the attractiveness of bonds can be honed into an elevator pitch. It essentially boils down to a straightforward question – Is this time different? Have the forty-year pre-pandemic economic trends reversed, and the economy’s inner workings changed permanently over the last three years? More specifically, are slowing productivity growth, weakening demographics, and rising debt levels about to reverse their prior trends and become a tailwind for economic growth?

If you think, as we do, that the last three years are an economic, fiscal, and monetary anomaly, then the opportunity to earn 4% or more on a longer-term bond is a gift.

We think yields will revert to low levels when the pre-pandemic economic and inflation trends reemerge. Negative interest rates are not out of the question. ...



Nautilus Research: Another Signal for Lower U.S. Yields (via TheBondBeat)
Significant Deceleration in 1-year Net Change in U.S. 10-year Treasury Yield

Over the past few months, we have consistently focused on U.S. yields, building a comprehensive narrative around a significant peak in rates. While much of our analysis has aligned with broader market consensus, our primary objective remains to deliver actionable signals and metrics. By examining historical precedents through various technical lenses, we aim to provide our clients and readers with perspectives that instill greater confidence in their decision-making.

Importantly, we were ahead of the curve in identifying the timing of peak yields—this is well-documented in our previous posts. Today, we bring attention to a new signal that points to lower U.S. yields across the curve. Specifically, when the 1-year net change in the U.S. 10-year Treasury yield drops below -50 basis points after previously exceeding +50 basis points, it historically signals continued declines in yields. The table below illustrates that 10-year, 5-year, and 12-month rates typically decline by approximately 50 basis points over the next 6 months and by 80 basis points over the following year. 




The blows keep coming for manufacturing



Bubble Fare:




Tweets of the Week:
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Tweet Vid of the Week:


Quotes of the Week:



... My favorite quip ever said about the stock market was by Sir John Templeton. ... He perfectly summed up what really drives the stock market—notably not using a single word that isn't directly tied to investors' emotional state:
"Bull markets are born on pessimism, they grow on skepticism, they mature on optimism and they die on euphoria."
Some of the messages imbedded in Templeton's most famous quote—as well as in those below—are even more important to ponder given today's lofty valuations and signs there still exists some investor complacency. There is nothing wrong with rejoicing in bull markets; but as recent volatility reminded investors, markets don't rise in a straight line. As such, we should always heed the messages from some of the greats of finance. ......................



Charts:
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(not just) for the ESG crowd:




... “As the Greenland ice sheet melts, it will probably rise sea level +10 feet by 2100"
..........
..........

The last million years have been the coldest period in the last 300my. What we think of as the “warm interglacial” periods between ice ages, are still colder than it has been for about 300my.

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........................
So, what’s your “takeaway” from all of this?
Did you see or hear about it on ANY mainstream news source?
Before reading this, how much did you think the sea level was going to rise by 2100?
How much do you think it’s likely to rise now?
We cannot “stop” sea level rise.
If it’s ten feet by 2100 then we are going to lose almost every port city in the world by then.
The Moderate climate models are still showing less than two feet of sea level rise by 2100. ...



................... How long had this moment been coming?  The unmatched resource for answers is Spenser R. Weart’s superb 2003 book The Discovery of Global Warming, and its greatly expanded, steadily updated, richly linked hypertext version online. ..............


Carbon dioxide’s powerful heat-trapping effect has been traced to a quirk of its quantum structure. The finding may explain climate change better than any computer model.







Geopolitical Fare:


I keep seeing liberal commentators like George Takei trying to frame Kamala Harris as the best candidate to bring peace to the middle east, despite her coming directly out of the administration which has been lighting the region on fire with its insane warmongering.

So let’s be clear here: Peace is not on the ballot in November. Americans are voting for Red War or Blue War. That’s it. Those are the choices.

I repeat: Peace. Is. Not. On. The. Ballot. Nobody who stands an actual chance at winning is going to bring about peace, because the US president is a manager of the US empire, and the US empire depends on constant warmongering.

Any debates over whether Trump or Harris are the one to bring about peace are nonsensical, because neither of them are. It’s like arguing over which car salesman might start handing out free cars — that’s not the job. It’s not what the people who have that job do. .............



........................ We look like lunatics. We are acting as crazy as someone whistling and dancing in the middle of a roaring house fire. Surely it would be a hell of a lot saner to be screaming all the time than to be going along our merry little way like this horror isn’t happening. 

But that would be socially inappropriate. It would make people uncomfortable. Here, in this dystopian civilization, it’s considered rude to even bring it up.



The main reason I’m not looking forward to another Trump presidency is because of how fake and insipid political discourse gets when he’s around. It’s not because of his policies and actions (the US empire’s depravity continues uninterrupted regardless of who’s in office), it’s because of the widening effect he has on the gap between reality and narrative when he’s president.

Trump’s presidency oversaw huge new cold war escalations against Russia, genocidal atrocities and deliberate starvation in Yemen, brutal new starvation sanctions on nations like Venezuela, Iran and Syria, brinkmanship with Iran, massively expanded bombing campaigns, turning the situation with Israel into an incendiary tinderbox, and the arrest of Julian Assange. But if you ask the average American liberal what was the worst thing Trump did during his time in office, they’ll start babbling about Russian collusion and insurrections and a conspiracy to end American democracy. They spent the entire time ignoring all of Trump’s worst crimes and shrieking hysterically about pretend nonsense and rude tweets.

And it’s just as bad with Trump’s supporters, who generally have no idea that Trump even did those things. They believe he spent four years “fighting the Deep State”, waging a brave populist revolution against the establishment to Make America Great Again. They’re just as clueless as the Democrats as to what Trump actually did, because both sides spent the entire time in a media-generated narrative matrix that kept them blind to the whole thing. The gap between the raw data of what actually happened and the narratives about what happened is immense.

At least with Biden people are actually sometimes talking about the actual evil things his administration is actually doing, like the Ukraine proxy war and the genocide in Gaza. The reality of the situation has much more in common with the topics of political discourse. Under Trump everyone enters into this bizarre, contorted reality tunnel where fake nonsense is all that matters and real problems are invisible to everyone who’s anywhere near the mainstream.

Really not enthusiastic about the idea of experiencing that moronic bullshit again.



.......... Republicans are so fucking stupid that every few years they start shrieking that they’re under attack from “communism”, and by “communism” they mean the opposing US party which supports the exact same capitalist status quo they support but with tampons in the boys’ bathroom.

God I wish Democrats were as cool as right wing idiots make them sound.

❖

Imagine there was a mass shooting in a major US city. Easy, I know.

Now, imagine that instead of stopping the shooter, the US government started sending him boxes of ammunition.

Now imagine instead of going on for a few minutes, the mass shooting rampage went on for ten months.

Now imagine that instead of being treated like an earth-shattering tragedy in mass media headlines, people just kind of got used to it and it sort of faded into the background of mainstream news reporting.

Now imagine the mass media started reporting on the mass shooting as though the mass shooter is only defending himself, and reporting on casualties of the rampage using passive-language headlines which don’t attribute the killings to the shooter.

Now imagine there was a presidential race, and everybody started talking about which candidate is best qualified to keep giving ammunition to the shooter.

It’s like that. 



Celebrity progressive Alexandria Ocasio-Cortez falsely claimed that Vice President Kamala Harris “is working tirelessly to secure a ceasefire in Gaza” at the Democratic National Convention on Monday night. There is literally no evidentiary basis anywhere for this assertion. She made it up.

Kamala Harris is not “working tirelessly” to do anything at this time besides become the next president. ..............

The Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action, was one of the only decent foreign policy moves made by the Obama administration, and killing it was one of the nastiest things Trump did as president — along with his other recklessly hawkish actions against Iran like implementing starvation sanctions and assassinating Soleimani. But rather than pledging to re-enter the Obama era of de-escalation and detente with Iran, the Democrats are attacking Trump for not fighting a war with Iran while pledging ironclad support for the nation that’s doing everything it can to get that war started.

So yeah, that’s the Democratic Party for you. Vote for them and you get a nicer-looking mask on the blood-spattered face of the US war machine. It’ll kill just as many middle eastern kids as the Republicans will, but it will kill them under the presidency of a woman of color with “she/her” in her Twitter bio.



.................. So, so many of the world’s problems wouldn’t exist if the Democratic Party simply was what it pretends to be. If it really did stand against the sickest impulses of the Republican Party, if it really did stand for peace and justice and equality and ordinary working people, things would be unrecognizably different — not just for the United States, but for the entire world. Because good people would be doing something instead of nothing, evil would not triumph. 

The Democratic Party exists to prevent this from happening. ..........

That’s the effect of the Democratic Party, and it’s been doing this since long before October 7. Obama made a whole political legacy out of weaving tapestries of flowery prose expressing deep compassion and a love of peace and justice, while spending eight years continuing and expanding all the most depraved and murderous policies of his predecessor. Biden gave liberals throughout the western world a sigh of relief when he took office, because at long last “the adults are back in the room,” and now he’s waging a steadily escalating proxy war against a nuclear superpower while backing an actual genocide. .........

The empire has weaponized the insight that the only thing necessary for evil to triumph is for good people to do nothing, so spreading awareness of the reality that the Democrats are not good people and are not doing good things helps take away that weapon.

Evil will continue to triumph as long as good people continue to do nothing, and good people will continue to do nothing as long as they believe their values and desires are represented by a political party whose sole purpose is to ensure the triumph of evil. Shattering that belief is an absolutely essential step toward a healthy world. ...



Before NATO invaded Kursk–and make no mistake, it was a NATO incursion by proxy–the Ukraine was not in any existential danger. Now, however, words this evening from former Russian president Dmitri Medvedev, “you’ll know it when you see it and you’ll see it soon,” make it abundantly clear that the peace will be dictated by Russia.

Full stop.

No third party intercessors, except maybe China. Non-zero chance for India.

But for the West and NATO? How you like that crow you pack of corrupt idiots? .......




Murray: We Are The Bad Guys

........... Somehow I mentally compartmentalised this as an aberration, due to overreaction to 9/11 and the unique narcissism and viciousness of Tony Blair. I did not lose faith in western democracy or the notion that the western powers, on the whole, were a positive force when contrasted with other powers.

It is a hard thing to lose the entire belief system in which you were brought up – probably particularly hard if like me, you had a very happy life right from childhood and were highly successful within the terms of the governmental system.

I have however now finally shed the last of my illusions and I am obliged to acknowledge that the system of which I am a part – call it “the West”, “liberal democracy”, “capitalism”, “neo-liberalism”, “neo-conservatism”, “Imperialism”, “the New World Order” – call it what you will in fact, it is a force for evil.

Gaza has been an important catalyst. I am not lacking in empathy, but my knowledge of the horrid butchery by the Western powers in Iraq, Afghanistan or Libya was an intellectual knowledge, not a lived experience. 



............... Palestine is the moral litmus test of the day, just as Iraq and South African apartheid were in their day. Eventually everyone will either pretend they were against it, or mea-culpa “how could I have known?”

But just as with Iraq, everyone who wanted to know, knew. ......



Watching the Democratic National Convention is like watching the tackiest version of the Nuremberg Rallies. The Democrats are committing genocide and using actual Nazis in Ukraine as we speak, and people are excited about what color the meaningless candidate is. It's not a convention (nobody voted for this person), it's a gender reveal. Meanwhile, and I repeat, these people are committing genocide right now. These people are committing ecocide against all living beings, drilling more oil than ever in their history. These people are committing national suicide, killing more people than ever with COVID-19. And the Democrats are somehow the lesser evil? Not numerically.

By any of the metrics above, the Democrats are worse than Donald Trump. The Democrats are not fighting for democracy lol. They're just 'Nice' Nazis. I put the 'nice' in scare quotes because they're actually scary. World War III, genocide, ecocide, a police state, crackdowns on free speech. That's all coming under the Democrats. That's all happening right now, it's not some hypothetical fear you need to vote out of being.  ...

They're committing a genocide as we speak. Everything else is just branding, AKA lying through their bloody teeth.

The Democrats keep positioning themselves as the lesser evil than Trump, but that's pure appearances, and appearances are deceiving. On every issue the Democrats claim to care about—war, democracy, environment, immigration—they're actually worse than their enemy. Check the record and see. .........

Does this mean I support Trump? Lol, a pox on both your houses. Jill Stein is on the ballot, a Jewish woman that opposes genocide, it's not like it's impossible to cast an ethical vote. Or to ethically not cast in your lot with this lot at all, and join the Resistance. Many iterations of voting for the lesser evil have evolved the most malignant evil in the heart of Whitistan. America always gets worse, one lesser evil at a time.

To return to Trump, as this house of cards only has two suits, Trump is actually the lesser evil. He is of course a vulgarian, but look at his record dispassionately and the numbers don't lie. Trump killed less people with COVID and gave out more assistance, Trump did not start major wars with Russia and in the Middle East, and he was at least honestly evil. Trump is the last honest American just as Hitler was the last honest European. These men were honestly evil representatives of honestly evil empires. The other 'good' rulers were (and are) just lying. ....................................

I used to wonder what ordinary citizens were thinking during the Nazi era, but I don't wonder anymore, I see it with my own eyes all the time, that's Americans .......





Sci Fare:






Other Fare:

Welsh: Intelligence v.s. Judgment v.s. Creativity

.......... Judgement is the ability to know what ideas and mental operations are useful and appropriate. People without judgment apply the processes and paradigms they have learned and come up with “correct” answers which are wrong in the real world, or which are harmful.

For the paradigm of this think Larry Summers. Brilliant, but no judgment. He’s a reliable indicator of what you shouldn’t do because he applies the economic paradigm without any judgment, and since economics is a crap discipline to start with, being based on faulty axioms, he produces very intelligent garbage results. He’s a GIGO (garbage in, garbage out) machine.





RIP Fare:

Phil Donahue passed away Sunday night, after a long illness. He was beloved by those who knew him and by many who didn’t.

He started as a local reporter in Ohio, was a trailblazer in bringing social issues to a national audience as a daytime broadcast TV host, and then he was pretty-much banished from TV by MSNBC because he—accurately, correctly, and morally—questioned the horrific U.S. invasion of Iraq.

In the 1970s, Phil took progressive issues and mainstreamed them to millions through his syndicated daytime show. He was a pioneer in syndication. He also pioneered on the issues; his most frequent guests on his daytime show were Ralph Nader, Gloria Steinem, and Rev. Jesse Jackson. They appeared dozens of times as Phil boosted civil rights, women’s rights, and consumer rights. He regularly hosted Dr. Sidney Wolfe warning of the greedy pharmaceutical industry and unsafe drugs. Raised a Catholic, he also featured advocates for atheism. ........



Poetic Fare:

 
Orwell knew.
As did Illich, and Gandhi.
And a few other farsighted in the century prior.
But the rest of us?
The hoi polloi.
Do we know?
 
*
 
That the system we live in.
And celebrate.
This veritable ‘best of all possible worlds’.
Progress, Development, and all the rest of the
self-validating cataract of cliches that sensurround
our senses making us near insensible.
Is a Death Machine.
 
*
 
Just 400 years of it.
And everything around us is dying.
Flora, fauna, all of it.
Habitats dissolving, ecologies dissipating.
The Planet itself, or that part which sustains life, in mortal stress.
 
*
 
And we?
How about us?
Exalted King Vampires astride the top of the food chain.
Masters of the Universe.
How are we doing?
 
*
 
What is left of culture, society, civility , in the
heartlands of where the Great Game originated ?
Sociopaths and psychopaths rule the roost, with societal empathy
derided, disdained, and debauched.
War criminals govern us.
Billionaires buy and sell our fragmenting Republics with brazen impunity.
An Amoral Society (mark the oxymoron) is the latest contribution in the long-drawn saga of EuroModernism (European Modernism).
We live in, and by, dread alone.
And all around us Human Devolution spreads its dissolute wings.
 
*
 
The civilisation-mongers that claim(ed) to be paragons of reason and liberty are racing, joyously, even tumultuously, to raze the world (the same way it began?) with a Big Bang.
Cannon and chicanery had them seize the world, once upon a time.
The very same twin tools now stand put to end it.
Bravo!
 
*
 
What price now the hoary liturgy of liberte?
Freedom?
What a concept!
Yes, we are become ‘free’.
From the prospects of even mere continuity.
In a fact-free, conscience-free, value-free, world.
We are free: free-wheeling, free-dealing, Zombies run amok.
 
*
 
Unabashedly, Post-Truth, Post-Morals, and Post-Human.
That is the Collective West today.
The First World, no less.
First in a world they have securely ensured will not last.
 
*
 
Yes, they are inveterate, intrepid, fighters for freedom.
Yours and mine, that is: except we are trying to preserve it – from their very onslaughts.
I refer to the real autonomies of life: far more concrete than the sloganised memes of ‘freedom’.
 
*
 
Of course, they can claim no monopoly of barbarism.
They have (had) plenty of competition.
But no Others, in human history, have brought us, insouciantly, to the very edge of Exterminism, all the while preaching a meretricious Litany of Rights.
 
*

What is it about EM (European Modernism) that has wrought this?
Its ideology and praxis has deracinated the very roots of our humanity, silting the eternal founts of human affections – viz., family, kindred, and community that keep us sane – with the venal sludge of competitive cupidity, avarice, and accumulation, reducing us to atomised, anomie and angst ridden, solitary, adversarial, asocial individuals ever swirling to higher and higher spirals of mortal alienation from our inherent species-being of Conviviality, Cooperation, and Caring.

In so doing, they morphed a band of convivials into a company of strangers.
Forever lost, lonely, lorn, and disconsolate.
Worse, in metaphor, they almost turned us mammals into reptiles.

The perennial Qualities of Life have been buried, entombed, in the varied avalanches of this misanthropic Age of Quantity.
Madness is the inevitable societal condition of humans when stripped of their baseline affective supports.
We are, and have long gone, mad.
 
*
 
Orwell , Illich, and Gandhi.
Time to read them again, as institutions crumble about us?
And as the Dystopian EM Juggernaut slashes and burns its way onwards , hurtling us all toward a mutually-assured extinction.



Pics of the Week:


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Sunday, August 11, 2024

2024-08-11

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


Economic and Market Fare:

Markets are pretty good at bullying monetary authorities, and now the BOJ has fallen into a pattern that started after Paul Volcker.
  • Moral hazard is back on the agenda; should central banks cave to markets?
  • The BOJ was able to talk the yen back to where it started the week.
  • Meanwhile, US bond vigilantes managed to turn the stock market around.
  • Amazing to relate, a soft landing still looks more likely than a serious recession.


... The turbulence in the equity markets hasn’t been a product of hidden risk, but rather the big stinking obvious risks. Big tech was crowded, thematic beneficiaries jumped the shark, small-caps lagged, growth was slowing, rate cuts were coming, volatility was compressed. This column has covered all of these factors over the past several months, just as most financial publications have. The hard part was knowing when the music would stop.

In many cases, it is hard to pin market moves on a specific catalyst, but in this case it seems pretty clear. The June Consumer Price Index report, released on July 11th set the wheels in motion.

The negative inflation data solidified the expectation of rate cuts, sparking a historic rotation out of mega-cap tech into small-cap laggards as investors absorbed the bright side of rate cuts. The dimmer side of rate-cuts — the implication of a weakened and price-sensitive consumer — came later, taking down stocks both large and small. Macroeconomic concerns led to sudden rush to protection and a collapse in overseas markets led to the biggest squeeze in volatility since March 2020.

Yet after four weeks of chaotic market action, the net results are modest. The bloody month in the Nasdaq, down 11% since CPI, merely unwound the prior month’s gains. Similarly the S&P 500’s close of 5,319 yesterday is unchanged since late May. The Russell 2000 survived a wild round trip and remains modestly positive over the period. ......



............. This brings us to today’s single most important question: is the current shakedown in the Nasdaq, Nikkei, and US dollar an opportunity to buy more of these assets on the dip? Or is it now time for investors to look for new stories?

The answer to this all-important question might well be provided by the Federal Reserve. Unsurprisingly given the recent market action, the clamor for the Fed to cut interest rates is now as loud as a pair of Justin Trudeau’s socks. But what would a cut mean for asset prices?

Let’s start with the old Gavekal notion that assets have value (i) because they are rare, like gold, diamonds, vintage Ferraris and impressionist paintings, or (ii) because they are useful, i.e. because they generate cash flows. Bearing this distinction in mind, it becomes obvious that the bull market of recent years was primarily a bull market in “efficient” assets rather than a bull market in “scarce” assets. And few things are as efficient at generating cash flows as large-cap technology stocks. So, what has triggered the market meltdowns of recent days? ..........


A comprehensive review of the structure of the economy and which segments you should track to understand the state of the Business Cycle.


The Duncan Leading Index was made popular by economist Wallace Duncan and it was designed based on the concept that changes in the economy stem from a few select categories.

Despite popular opinion, most segments of the economy do not contract and are generally extremely stable.

We often hear comments such as:
“The consumer is fine.”
“The consumer is holding up the economy.”
“We are a services economy.”

These comments are generally accepted as true given the frequency that they are repeated, but the reality is that these comments are exactly the opposite of what you want to focus on if your goal is to track and get ahead of major changes in the Business Cycle.

In this post, we’ll review the structure of the economy and which segments you should track to understand the current state of the Business Cycle.

The economy has four primary categories: private consumption, private investment, net exports, and government spending.

It’s true that private consumption, or “the consumer,” makes up about 70% of total GDP, but that leads to the incorrect conclusion that the consumer drives the ebbs and flows of the Business Cycle.

The Duncan Leading Index involves tracking three narrow segments of the economy: durable goods consumption, residential investment, and non-residential investment. 

At EPB Research, we’ve found that it’s very easy to improve the Duncan Leading Index by tracking durable goods consumption, residential investment and business equipment investment. ........






Total household debt rose by $109 billion to reach $17.80 trillion, according to the latest Quarterly Report on Household Debt and Credit. Mortgage balances were up $77 billion to reach $12.52 trillion, while auto loans increased by $10 billion to reach $1.63 trillion and credit card balances increased by $27 billion to reach $1.14 trillion. The volume of mortgage originations remained low, primarily due to subdued refinancing activity. Homeowners continued to increase balances on home equity lines of credit (HELOC) as an alternative way to extract home equity; HELOC limits rose by $3 billion, marking the ninth consecutive quarterly increase.  Aggregate delinquency rates remained unchanged from the previous quarter, with 3.2 percent of outstanding debt in some stage of delinquency.


Why a genuinely alternative economic agenda is not currently on offer in Canada



Bubble Fare:


During each speculative run-up in asset prices – whether the dot-com bubble, the housing bubble, or more recently the rapid rise (and fall) of the stocks of electric vehicle companies – there’s typically a moment when Wall Street strategists, analysts, and investors go all-in on that theme.

At the end of 1999, year-ahead profit margins for the S&P 500 Index were projected to be 8.5%, according to Factset estimates. By the time the market peaked in September of 2000, year-ahead profit margin estimates had jumped by more than 4 percentage points, as analysts looked for large and immediate benefits from the wide-spread spending on technology that occurred during that period. As it happened, S&P 500 profit margins would peak at 8.7% by January 2001, falling by a quarter over the following year. An economic recession would follow later that year. From its peak, the S&P 500 Index would fall nearly 50% by October 2002, as expectations for growth and profitability were reset.

How far and how long periods of “all in” expectations last is only known with hindsight. And it’s impossible to know how optimistic investors might become about the prospects for artificial intelligence. But when looking at current estimates for S&P 500 Index revenues and earnings for the next few years, it can be said with confidence that the all-in phase is already here. Now that we’re in the middle of second-quarter earnings announcements, it’s a good time to highlight some of these expectations. .........
.........................................
............................... If earnings miss estimates by a few dollars next year, that probably wouldn’t be a major event. The larger concern, by far, is that the persistent increase in profit margins in recent decades — and particularly the forecasts for continued expansion — has been a key driver of the current elevated stock market valuations. If the widely held belief that public companies will perpetually become more profitable begins to falter, the steep valuation premium that has been priced into U.S. large-cap stocks over the past decade may evaporate.

It may seem like an overstatement to credit higher margins as a primary catalyst for the rise in valuation multiples during the recent market advance. But the relationship between the change in valuation multiples and the change in profit margins at the company level has been surprisingly strong.

.............. This reliance of high valuation multiples on expanding profit margins is probably one of the most underappreciated risks in the market right now. Not only are investors paying record valuation multiples that rely on record profit margins, but the rise in market valuations has been much more tightly linked to those elevated margins – and expectations for even higher margins next year and the year after – than investors may realize. Record price to sales multiples and expectations for inexorably rising profit margins are tied at the hip.

.............. the chart below highlights how far current forecasts are from longer-term average levels, and also the pace at which margins are expected to keep rising. Profit margins are shown for each overall index and three key sectors of each index. For each benchmark, expected profit margins for this year (in orange) and next year (in blue) are shown.

Additionally, I’ve included the average year-ahead forecasts for the 20-year period ending in 2020. This data provides insight into the improvements already achieved in profit margins but it also underscores the potential risk if these improvements aren’t permanent. The amount of risk at hand can be estimated by the amount of spread between the red dots and the blue dots. The data also reflects the high level of optimism regarding these companies’ continued profitability over the next couple of years. A significant portion of their valuation likely hinges on these optimistic margin projections.

............................
................... What the results suggest is that having some exposure to value is almost always warranted. It typically doesn’t pay to chase profitable stocks at any price.

............  Recovering from the losses incurred by buying stocks at peak multiples on peak profit margins is extremely challenging, even over very long periods.

......... Seth Klarman famously said that the root of all financial bubbles is a good idea carried to excess. By the time this market cycle is complete, investors may find that the expectation of inexorably rising profit margins was the idea that was carried too far. Missing profit margin expectations next year could pose risks beyond just lower reported earnings. The greater risk is that progressively rising profitability has been the primary catalyst driving market valuations higher this cycle. If this central pillar gets knocked out, the premium valuations of U.S. large-cap stocks could be left with little support.



China Fare:

Pettis: Why Is It So Hard for China to Boost Domestic Demand?
Beijing’s unwillingness to boost the consumption share of GDP is not as bizarre as it seems.




Charts:
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4: 
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6: 





(not just) for the ESG crowd:


............................................... It is systemic lock-in that explains why the most predictable feature of civilizations’ course to this moment has been the sustainability of accelerating unsustainability.

The emergent thermodynamic-evolutionary adaptations and constraints that have brough homo sapiens and its civilizational niche within the earth system into being situate the trajectory lock-in as natural, systemic, and inevitable.



.........  Of course, he [Rockstrom] is in denial that what we face is a predicament with an outcome rather than a problem with a solution. His denial of the facts, however, does not change those facts, and making recommendations that will lead society in the wrong direction is precisely what Nate has repeatedly talked about with other scientists. .................

I can appreciate the message that Johan brings to the table without embracing his "solutions" which amount to complete garbage. Recently, I have been reading and listening to Tom Murphy's articles and videos regarding modernity and they point out most of Johan's concerns without going into bargaining. This article and video and this article and video are both excellent at pointing all of this out without the constant bargaining crap to go with it. If Tom Murphy can figure this all out and look at the predicaments we face with a critical assessment of where we are, how we got here, and where we're headed, then why are so many other scientists, professors, and people in general out to lunch? Much of the answer has to do with personality types .............

While there are definitely things that people can do to mitigate our circumstances somewhat, the idea of "saving the planet" or "reversing climate change" are misguided ideas based on either ignorance or denial of reality. As long as the goal is to continue civilization rather than search for a more sustainable existence (what I think most of society is motivated to do), we will continue sliding down the ecological collapse ramp.


In 2023 the world’s forests stopped acting as a carbon sink


No Buzz, Just an Anxious Hum: Insect Decline and 2024’s Wet and Silent Spring






Geopolitical Fare:


.......................... Are you not tired of having your intelligence insulted like this? I know I am.



Immediately after Joe Biden announced that he would not seek re-election and instead endorsed Kamala Harris, she was anointed as the Democratic Party presidential nominee with little analysis of her record or her program. In fact, her website, KamalaHarris.com , makes no mention of a political program at all. While foolish debates about whether she should be considered Black garner media attention, questions about policy are largely ignored. Black Agenda Report has been writing about Harris for some time, and we share what we and others have noted about her record over the years.




The Kamala Campaign has a problem.

Kamala’s campaign faces its first real controversy. And it started soon after she picked Minnesota Governor Tim Walz as her running mate.

After his selection, a tweet from @KamalaHQ featured a video of Walz falsely claiming that he served “in war.” ..........




Sci Fare:




........... They point out something unusual is happening right now:

Such high infection circulation rates in the northern hemisphere’s summer months are atypical for respiratory viruses, which tend to spread mostly in cold temperatures.

And they’re right of course. It’s a consequence of a population that’s stuck with an inappropriate immune response to this virus. It doesn’t happen with other respiratory viruses and it didn’t begin until we started vaccinating, there was no such summer wave in the northern hemisphere in 2020. ........

At least the good news is everyone is gradually abandoning the idea now that this would just turn into another benign respiratory virus. That only happens, when you don’t intervene in the development of immunity.

When you intervene in people’s immune response to this virus, you interfere in the mechanisms that would normally lead the population to spread more benign versions of the virus over time. The previous influenza pandemics got better over time. The new hCov that emerged in the 19th century stopped causing us problems after a few years too.

But we didn’t vaccinate against those viruses. When you vaccinate with inactivated vaccines during a pandemic, you get droves of people who are infected before the antibodies have matured to increase their binding strength, so the virus mutates to escape them while they’re still weak. ...........



Poetic Fare:


The Tragedy
of Our
Existence
 
Is not that
Life
is Short
 
And its
Meaning
Inscrutable
 
But that We,
whose Highest
Need
 
Is but To
Huddle
 
Can so
let
ourselves
 
Be
deluded
 
That we are,
in the
Modernist world
 
Living
Unrequitedly
 
*

Entrenched
in Tasks
we loathe
 
Engaged
in rites that
Mean Nothing
 
Giving Fealty
to specious
Idylls
 
Dissipating
precious
Time
 
Ingratiating
Others
 
And Powers
that
Should Not Be:
 
*

Kept apart
from

What/whom
we love
 
Squandering
Vital
energies
 
Vying with
Those
Equally Wrought
 
In Dubious
Struggle(s)
 
That amount to
Less than
Nothing
 
*

And all the
While

Like a
Muffled Chorus
 
In the far
gloaming
 
The Sacred
River of Life
 
Murmuring
Sweet Enticements
 
Meanders
on –
 
Eager ,
racing,

To dissolve
 
In the dank,
sodden,
Estuaries
 
Of ever
hastening
Decline
 
And nameless,
Unmarked
Dread
 
In the
brooding
Backwaters
 
Of the
Ominous
Sea
 
*

There is no
Panacea

Save to
Capitulate
to Love
 
Of that
we cannot
help but love
 
Soon as we
find It
 
Cling ,
adhere,
nay Clench
 
In hoops
of burnished
steel
 
Abandoning
all distraction
 
Despite
the ravening
Wolf
at the Gate
 
And the
hovering
Vulture
 
In the
churning
skies
 
*

Their bite,
their sting

Is not so
keen
 
As Life
frittered
 
In Sysiphian
gather of
faggots
 
To stave
encroaching
Winter
 
Day after
Unavailing
day
 
*
 
‘Tis the Heart
that must be
warmed
 
The Soul
that must be
fed
 
The Spirit
that must be
succored
 
*

We survive
slings
and shot
 
Misfortunes,
calamities
 
But not the
peerie
achings
 
Of the
Yearning
Heart
 
And the
stifled cries

Of the stricken
Soul
 
*

There is no
Anguish
greater

Than Spirit
benumbed
by love’s labors
lapsed –
 
*

So steady
on,
Fond
Traveller
 
In this
confuting

Unchartable
Land
 
Find the
Right
Rudder
 
Not minding
the frothing
current(s)
below
 
*

Most Tests
and
Trials
 
Get
Absolved

When you Move
in Kindred
With your
Master
Spirit
 
The Lodestar,
Lamp,
and Pathfinder
 
*
We were forged
to Live

In Affinity,
not Discord

In cognate,
consanguinal,
Communal Kinship
 
Close to
our
embedded

Anchoring
species-being

That fires
our Anthropic
Flame

In this
Delphic
Realm

And lends
Healing
Solace
 
To the
fulgent
ravages
 
Of parching
Day
 
And the
Phobic
Disquiet
 
Of that
ever so
 
Phantasmagoric
fearful
 
And petrifying
Stairwell
 
That descends
to nether
reaches
 
Of Endless
Augural
Sepulchral
Night
 
*

Love
Alone
Indemnifies

Against the Scylla
of Chance
and the Charybdis
of Chaos




Pic of the Week:


...


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