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Sunday, September 15, 2024

2024-09-15

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


Economic and Market Fare:


This August, Federal Reserve Chairman Jerome Powell delivered his annual address to top central bankers and economists, sparking what Bloomberg described as an ‘all-conquering Wall Street rally’. The reaction was in stark contrast to that which met his last two speeches at Jackson Hole. In 2022, a contrite Powell accepted he had been wrong about the recent bout of inflation being ‘transitory’ and committed to continued interest rate rises; in 2023, having raised rates to almost 5.5%, he announced they would have to stay ‘higher for longer’. On both occasions, markets plummeted.

This year’s rally appeared to rest on three claims: first, that inflation was ‘on a sustainable path back to 2%’, which meant it was ‘time for policy to adjust’; second, that while the labour market had ‘cooled considerably’, this was not because of ‘elevated layoffs’, as in a downturn, but rather ‘a substantial increase in the supply of workers and a slowdown from the previously frantic pace of hiring’. The Federal Reserve’s ‘dual mandate’ to keep inflation low and employment high therefore required it consider lowering rates in order to maintain a strong labour market. Of course, Powell cautioned that ‘the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks’, but the overtones of his speech were clear: that he had won the fight against the inflation and effected a near impossible ‘soft landing’, stopping the economy from overheating without causing a downturn. Should we believe him? ..................

........... What of his claim to have achieved a ‘soft landing’? There is equal reason to be sceptical. On the one hand, adverse jobs data suggest that a recession could still be looming. On the other, if interest rate cuts manage to prevent a recession, this leaves the door open to continuing inflation and ‘no landing’ at all. Raising the curtain on neoliberalism in 1979 with historically unprecedented rate hikes, the Federal Reserve has since, by nursing successive asset bubbles, deprived itself of the ability to use the only anti-inflationary weapon in its arsenal. Having arrogated to itself responsibility for managing the economy, it has now proven unable to do so.


The goal should be getting to "neutral" as quickly as possible. Since no one knows where that is, optimal policy should consist of moving down quickly while preserving the option to correct later.

Federal Reserve officials believe that it is time to start lowering short-term interest rates. But they are unsure of how rapidly to do so, even though they told us in June that they broadly agree that short rates should drop by about 1.25 percentage points by the end of 2025 and by more than 2 percentage points by the end of 2026.

My suggestion: they should lower rates to their best estimate of “neutral” immediately, while remaining willing to raise rates rapidly again if that estimate turns out to be too low. This approach may lead to substantial interest rate volatility, but it also reduces the risk of meaningful policy errors. By contrast, the “gradualist” approach that seems to be most officials’ current preference is much more likely to lead to a mistake—in either direction. ..............

Moreover, the risks are asymmetric. If rates go “too low”, they can always be raised again. But if rates are too high for too long, the resulting damage could be difficult to repair even if the Fed eventually responds as the textbooks recommend. The great reopening from the pandemic was the only time that the U.S. job market snapped back quickly from a drawdown. Normally, it takes many years for employment rates to fully recover even from “mild recessions”. ........


Plotting the change in Federal Reserve interest rate policy before and after a trigger of the Sahm Rule.

.......... The Sahm rule was triggered in the July Employment Situation Report. Historically, the Sahm rule has been a slightly lagging indicator, meaning the trigger dates occur after a recession has already started.

In this post, we won’t address whether a recession has started or not but rather look at historical changes in the Federal Reserve's interest rate policy around historical Sahm rule trigger dates. ..........

If we follow the more modern, non-inflationary historical path, which I think is appropriate, we can see on the left chart that the Fed is behind the curve.

The right-hand chart shows the path of inflationary recessions.

If we take the average of 2008, 2001, 1990, and 1960, the Fed Funds rate is down about 200bps when the Sahm rule is triggered.

This implies the Fed should have the policy rate at 3.5% today. 







China Fare:






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(not just) for the ESG crowd:

A flawed energy strategy means our country now has to import electricity

In its monthly update on energy trends, Statistics Canada reported this week that this year, for the first time ever, Canada has become a net importer of electricity. The switchover in our electricity trade balance reveals the shortcomings of an energy strategy that now emphasizes decarbonization over energy security, leaving customers vulnerable to supply shortfalls and higher prices.

Traditionally, Canada has generated surplus electricity that it has exported to the U.S. But in April total electricity generation was down 6.9 per cent from a year ago, continuing a trend that began earlier this year. The decline is the result of droughts across much of the country that have curtailed hydroelectric generation as well as planned maintenance at nuclear stations.

Hydro and nuclear account for just over two-thirds of all electricity generation in Canada. Hydro contributed 26.0 million megawatt-hours (MWh) and nuclear 5.2 MWh of the total electrical production of 45.7 MWh in April. With hydro and nuclear power generation falling at home, we had to import 2.6 million MWh from the United States in April, while our exports plunged a whopping 64.4 per cent to 1.7 million MWh. .........

.... As former Ontario cabinet minister Dwight Duncan observed at a recent conference on energy policy, Ontario and Quebec have the highest energy demand in the world because of peak demand in both winter and summer. But there is a disconnect between Canada’s ambition to electrify our power grid and our reluctance to expand electricity capacity. Electrifying our homes and vehicles while using energy-hungry technology implies a massive increase in our electricity consumption. 

Only recently have governments begun to realize projected electricity demands far exceed supplies. That is why Ontario and Quebec recently announced ambitious and expensive plans to boost generation. Ontario is expanding and refurbishing its extensive network of nuclear plants. .........



Yves here. I imagine readers will take issue with this post, analytically and practically. Let’s start out with the lack of authority economists have to discuss climate change analyses, given their acceptance of the destructive work of William Nordhaus, appallingly legitimated by giving him a Nobel Prize. The authors are on extremely thin ice in criticizing the caliber of degrowth studies in light of how they’ve celebrated appalling poor studies that fit their preferences. Steve Keen is good one-stop shopping for an evisceration of his claims.

This article pointedly ignores the lack of any solutions to our accelerating climate change crisis that are remotely adequate to the scale of the problem. It also takes the position that the needs of the economy take precedence over the future of the biosphere and the intermediate -term survival of something dimly representing modern civilization (we are likely past that being an achievable outcome, but it should at least be acknowledged as an aim). And it also implicitly ignores that absence of evidence is not evidence of absence. .............




Now that the election is closer and the Democrats have switched out Biden for Harris, I feel like I should reiterate my position that you’re not actually punishing the Democrats if you refuse to vote for them in November. I often see people talking about making the Democratic Party pay a price for Gaza and for ignoring calls from progressives to end the genocide, but it doesn’t actually work that way. They don’t care.

They don’t care if you don’t vote for them. They don’t care if they lose. Their political careers will be fine either way.

It’s entirely okay and legitimate to not vote for Democrats, but don’t let that act dupe you into thinking your vote matters. It doesn’t matter how you vote, and it doesn’t matter how you don’t vote. The US power structure is set up to be completely unaffected by voters. Acting like you could teach the Democrats a lesson by refusing to vote for them only feeds into the illusion that voting matters inside a power structure that has been deemed too important to be left to the hands of the voters.

There’s a viral tweet from Glenn Greenwald going around that says “The US has no functional president and has not had one for months, and it’s barely noticeable and barely matters because there’s a permanent unelected machine that runs the government.” ..........



It was Kamala Harris For the Oligarch People all the way on Tuesday night.  With taunt after taunt, platitude after platitude, she utterly destroyed Donald Trump's portrait of her as a Marxist Commie radical. Beyond any reasonable doubt, she established her right-wing cred as both a neoliberal and a neoconservative.

It has taken gallons of the recombinant political DNA of Dick Cheney, Barack Obama and both Clintons to create the ultra-processed finished product known as Kamala Harris.



The presidential debate sucked and they were both horrible, but Harris clearly came out looking more coherent and in control. In other words, Harris did what anyone debating Trump should have been able to do on day one. The fact that it’s taken three whole election cycles to see a candidate dominate Trump in a basic presidential debate shows what braindead morons the Democrats have been serving up all these years. 

As a debater, she did her job. As a presidential candidate, she showed why so many warmongering Republicans have been so eager to support her. She showed that she’s a Republican with pronouns in her bio, talking about how tough she’s going to be on China and how much she loves fracking and oil and Israel and how many Republicans have endorsed her and her policies. 

This is what the “left wing” looks like in the world’s most powerful government. US politics is so intensely stupid. ...............

❖

“If you’re anti-war than why don’t you support Trump?”

Because I fucking paid attention when he was president.

I watched the warmongering and militarism rolled out by his administration instead of mindlessly ingesting right wing media like a drooling idiot.

I watched the evil things he did in nations like Yemen, Venezuela, Iran and Syria.

I watched him ramp up cold war aggressions against Russia and pave the way to the war in Ukraine.

I watched him assassinate Soleimani and shred the Iran deal.

I watched him lock up Assange.

I watched him veto attempts to save Yemen.

I listened to him say he’s keeping troops in Syria “to keep the oil”.

I watched him starve Venezuelans to death while staging the most transparent foreign coup attempt in history.

I watched him appoint bloodthirsty PNAC neocons like Elliott Abrams and John motherfucking Bolton to high positions within the US murder machine.

I listened to Mike Pompeo say they’re squeezing Iranian civilians with starvation sanctions in the hope that it will spark a civil war.

I listened to Rex Tillerson brag about boats full of dead North Koreans washing up on Japan’s shores because US sanctions had successfully starved them to death.

I watched him shamelessly facilitate agendas that had long been promoted by the worst neocons and war whores in Washington while you dopes who are now asking me “why don’t you support Trump?” were letting Alex Jones and Tucker Carlson tell you how to think.

I don’t support Trump because I spent four years of my life staring right at the administration he was running and writing about what I saw unfiltered by the lens of party politics instead of letting a bunch of asshole pundits confirm my biases for me like you did. That’s the one and only reason we see him differently.

❖

Democrats said if Trump was re-elected in 2020 he’d unleash hell on earth, then Biden was elected and he unleashed hell on earth. Democrats will blame everyone but themselves if they lose in November, but it will be nobody’s fault but their own.






Geopolitical Fare:


.............. And it’s so obnoxious. It’s like yes, you win elections under the current system by being a warmongering corporate whore. That’s the problem the real left is trying to address. Duh.

Yes, those who align themselves with the Democratic Party win elections. But then what do they do with that win once they’ve won? They commit fucking genocide. They start wars. They kill the ecosystem. They repay favors to the donor class at the expense of everyone else. Republicans also win elections, and then do these same things.

If the current system means you will lose elections unless you are loyal to a murderous, ecocidal, exploitative and tyrannical power structure, then is the problem really losing elections, or is the problem the current system? ........

Some of the worst people in the world have won elections. It’s not enough to win, you’ve got to do good things with your win. Democrats do not do good things when they win, they do profoundly, shockingly evil things when they win. This is a problem, and the real adults in the room are trying to fix it by changing the system which is responsible for it. ....



........................ There’s so much going on in the world right now, and the US-centralized empire is doing so many terrible things, but every once in a while I think it’s important to highlight the fact that all these individually awful things are just the mundane daily manifestations of a power structure that has us on a trajectory toward a final global confrontation that would make them all look like a picnic in the park. 

Status quo politics are quite literally driving us to armageddon. Freeing ourselves from these murderous tyrants is swiftly moving beyond the morally correct thing to do for the sake of the empire’s victims around the world, to an existentially urgent action we must take for our own self-preservation.



I shouldn’t be able to do this for a living. Criticizing the warmongering of a single power structure shouldn’t be anyone’s full-time job. No government should be murdering people so consistently and reliably that people can plan their whole lives around it.

Yet here we are. Not only are people like me able to focus on commentary about the mass military violence of the US and its satellite states as a full-time gig, but we usually find there’s too much to talk about from day to day. ...........



.............. Our civilization is cruel and savage, but we compartmentalize away from its cruelty and savagery and laugh at our sitcoms and vapid comedians and make believe the worst things happening politically in our society are the mainstream culture war wedge issues that pundits and politicians prefer to keep us talking about. We live out our lives sedated by entertainment and social media and food and pharmaceuticals while genocide, nuclear brinkmanship and ecocide unfold all around us, thinking ourselves good and virtuous if we are kind to our pets and hold the correct opinions about racial justice and vaccines. 

If we as a society were actually good, none of this would be happening. Moral clarity would find all this intolerable, and would reject it and eject it by any means necessary. Which is why the powerful pour so much energy into keeping us all sedated and confused. A lot of power and wealth rides on our lack of moral clarity. ...........



DURING the entire post-war period when it has been in existence in the metropolitan countries, democracy has never been in as bizarre a state as it is today. Democracy is supposed to mean the pursuit of policies that are in conformity with the wishes of the electorate. True, it is not that the governments first ascertain popular wishes, and then decide on policy; the conformity between the two is typically ensured under bourgeois rule by the government deciding on policies in accordance with ruling class interests, and then having a propaganda machinery that persuades the people about the wisdom of these policies The conformity between public opinion and what the ruling class wants is thus achieved in a complex manner whose essence lies in the manipulation of public opinion.

What is currently happening however is altogether different: public opinion, notwithstanding all the propaganda directed at it, wants policies that are altogether different from those being systematically pursued by the ruling class. The policies favoured by the ruling class in other words are being pursued despite public opinion being palpably and systematically opposed to them. This is made possible by having most political parties line up behind these policies; that is, by getting a very large spectrum of political formations or parties backing these policies against the wishes of the majority of the electorate. The current situation is thus characterised by two distinct features: first, a broad unanimity among the bulk of political formations (parties); and second, a total lack of congruence between what these parties agree on and what the people want. Such a situation is quite unprecedented in the history of bourgeois democracy.These policies moreover relate not to minor questions concerning this or that matter, but to fundamental issues of war and peace. ...........



As the Gaza war enters its 12th month with no end in sight, the ongoing horrors continue to be normalized in U.S. media and politics. The process has become so routine that we might not recognize how omission and distortion have constantly shaped views of events since the war began in October. .......


John Wight on the grim context of the latest escalatory development in the blood-soaked proxy conflict between Russia and the West.

............ This is the grim context in which must be viewed the latest escalatory development when it comes to the conflict in Ukraine between Russia and the West. Yes, you read that correctly. This is in truth a conflict between Russia and the West, not per se Russia and Ukraine.

Ukraine in this regard is merely a convenient and bloodsoaked proxy  — a cat’s paw whose manhood has and is being sacrificed on the altar of U.S.-led Western hegemony. ...........

It  bears repeating again and again that this ugly and bitter conflict was eminently avoidable. It is a conflict not of Russia’s but of the West’s choosing. .......









Sci Fare:

Scientists are worried that persisting cognitive issues may signal a coming surge of dementia and other mental conditions

Many of Covid’s earliest and most alarming effects involve the brain, including a lost sense of smell, sluggish thinking, headaches, delirium and strokes. More than four years after the pandemic began, researchers are recognizing the profound impacts Covid can have on brain health, as millions of survivors suffer from persistent issues such as brain fog, depression and cognitive slowing, all of which hinder their ability to work and otherwise function. ......



Other Fare:

Radagast: A parody of a tragedy

The world we live in is unfortunately getting dumber at a rapid pace. This is not unique to leftists or rightists, although the general pattern that leftists are a few IQ points above the right continues to hold. When I was younger I would have been interested in arguing about subjects like abortion, but I don’t think there’s really a point to it.

To be quite honest, I don’t think there’s much of a point to anything anymore. I spend my days working on my own creative little hobby projects, vaping cannabis or watching birds. I don’t really think it’s possible in our day and age to beat the stock market anymore either, not because the market is efficient, but because it’s impossible to tell when it will behave rationally again. Money is just flooding into the biggest American companies and there is no clear mechanism visible to me that would trigger a correction. I just can’t get myself to invest in bubbles. ..........
 
I would recommend to just enjoy what we have available, while you still can. If you look back at today ten years from now and all you remember is working, you’re probably going to regret how you spent your days. You have essentially all music from all around the world available to you for ten euro a month. It won’t be here forever. ..............

Again, none of this insanity is going to last forever. If you were to put a child on the world, the insanity would be over before the child becomes an adult. We’re really late into the game, we already burned down most of the world and the walls that hold the piles of ashes back are starting to collapse. 

Your first SARS2 infection reduces your IQ by 3 points on average, the second one by 2. That’s what the studies say. We’re all brain damaged from a new virus, so political debates in the world’s major superpower now revolve around whether or not Haitians are eating people’s pets. We’re sinking into a deep sleep from which we won’t recover, gently fading out of this decaying world, as everything around us grows ridiculous, a parody of a tragedy. ........



Poetic Fare:

Nature has a Plan
a bit part of it
is (Wo)Man
 
Other Species
not a few 
have a right
to be here
too
 
*
 
If that is
mostly
understood 
most everything
is
good
 
but when we
think we’re
IT
 
and Nature’s
but a
Tool

She sends us
wailing
back to School
 
to Relearn
The Goodly Rule
 
*
 
Imperil None
(wo)man nor
beast

but share
her ample
feast
 
*
 
but if we
that solemn
trust betray
 
in all due
and dire
distrait

She will
(with nary a
mournful tear)

cast our kind
away

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Sunday, September 8, 2024

2024-09-08

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


Economic and Market Fare:


 




A modified McKelvey recession indicator with no false positives or false negatives since 1953 suggests we are in recession now.


......... The PMES recession indicator combines job vacancy rates with unemployment data. The indicator is the minimum of the McKelvey indicator—the difference between the 3-month trailing average of the unemployment rate and its minimum over the past 12 months—and a similar indicator constructed with the vacancy rate—the difference between the 3-month trailing average of the vacancy rate and its maximum over the past 12 months.

 




China Fare:





Quotes of the Week:

… I believe our patience over the past 18 months has served us well. But the current batch of data no longer requires patience, it requires action…
… Determining the pace of rate cuts and ultimately the total reduction in the policy rate are decisions that lie in the future. As of today, I believe it is important to start the rate cutting process at our next meeting. If subsequent data show a significant deterioration in the labor market, the FOMC can act quickly and forcefully to adjust monetary policy


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(not just) for the ESG crowd:



Radagast: The Cure for Climate Anguish



Geopolitical Fare:



********** Johnstone: "Why Should I Care About Gaza?"


Condi Rice Calls for Turbo America, Almost Everyone Now is a Fascist, US/CAN vs. Mexico's Judicial Reforms, Marxist to Rawlsian Liberal Pipeline, Who Killed Pasolini?

When Donald Trump caved into pressure and gave the order to lob a few cruise missiles against Syrian Government targets, Bill Kristol excitedly remarked: “for the first time, he is acting presidential!”.

The unrelenting torrent of accusations leveled against Trump from 2016 to the present has flooded every single aspect of political life in the USA and beyond. But make no mistake, it was the perceived threat that he appeared to pose to the bipartisan consensus on foreign policy that made him Public Enemy #1 in the eyes of the governing elites. Think about it: the first thing that Congress did when Trump entered the White House was to take power out of his hands regarding US policy towards Russia. From the very first minute of his time in office, he was handcuffed to the established bipartisan policy that insisted that the Putin regime be overthrown, or at least, increasingly isolated.

Trump’s approach to China yielded different results back home because his administration’s approach was completely aligned with the established consensus that sought a tougher approach to Beijing. I’m sure that there was some criticism of Trump and his China policy, but I can’t think of any offhand and I doubt that most of you could either. The Americans have been seeking to “Pivot to East Asia” for some time now, and part of this pivot demanded a somewhat more belligerent tone towards the Chinese.

In 2016, Trump ran on Patrick Buchanan’s 1992 platform of less intervention abroad and more economic protectionism. This put the fear of God into the foreign policy blob as such a radical turn away from traditional policy would have upended decades of established norms and, in their collective view, eroded US power on the global stage. .......


Russiagate seems too good of a weapon for the Democrats to give up. Its initial appearance, beginning in 2016, dangerously raised tensions with nuclear-armed Russia.  But in the midst of today’s escalating crisis in Ukraine, a Russiagate repeat recklessly raises risk to insane heights.


The semiology of flowers.

Many commentators have attempted to describe the astonishing devolution of Democratic Party politics into sheer marketing: Kamala Harris as product, “new and improved” like a laundry detergent or a frozen dinner. Vanessa Beeley comes up with “cartoon theatrics,” and it is as good as I have seen. In two words the British journalist captures from a useful distance the infantilism of the Harris-for-president campaign along with the Hollywoodization of American political culture.

I thought I had seen everything in this line until a few days ago, but in this, the most unserious political season of my lifetime, it is incautious to make any such assumption. There is always more, something worse, another step down into a sort of political nihilism that leaves the electorate stupefied as the imperium conducts its violent, illegal business. ......


********** Johnstone: Revolution Is Now

People are always asking me what we can do to fight the tyranny and depravity of the empire and create a healthy world.

“But what can we do?” they ask. “You always talk about the problems, but we need solutions! How do we solve the problems you keep pointing to?”

It’s especially common during US election season, because I tend to spend a lot of time pointing to the fraudulent nature of western electoral politics and saying Americans will never be able to vote their way out of their problems.

Which is of course fair. If I’m saying “Not that way, it’s a dead end,” it’s only fair that I should be asked which way actually leads to the exit.

Trouble is I talk about solutions all the time here, and I’m always practicing what I preach and leading by example; some people just can’t seem to hear what I’m saying. It goes in one ear and out the other, because I don’t have any solutions that are as easy and immediate as “Cast your vote for Donald Trump, he’ll fight the Deep State” or “Cast your vote for Kamala Harris, she’ll stop fascism.”

The truth of the matter is that in the here and now there are no easy and immediate solutions to the problems we face in our world. The system is far too deeply entrenched, and people are far too deeply indoctrinated with propaganda to be persuaded to fight against it right now.

And I emphasize the words “right now”. My solutions might not be easy or immediate, but unlike voting for Trump or Harris in November, they will actually work if put into practice in sufficient numbers. 

An effective solution that we can all begin applying in the here and now is working to foment a revolutionary zeitgeist by spreading awareness of the depravity and deceit of the empire. The primary obstacle to real change is the fact that far too many people are far too brainwashed by propaganda to rise up against our rulers, so our first task is to begin working to wake people up out of that propaganda-induced coma so they can see how desperately real change is needed.

The tyrants won’t end their tyranny until they are forced to, and they can’t be forced to as long as enough people are propagandized into believing things are fine. That’s why so much energy goes into narrative control measures like mass media propaganda, censorship, government secrecy, the war on journalism, and Silicon Valley algorithm manipulation. They wouldn’t pour so much energy into protecting that part of the imperial machine if it wasn’t very vulnerable to attack.

So we attack it. We cultivate a habit of small acts of sedition, trying to do something every day to de-normalize the abuses of the empire in the eyes of the public.



Sci Fare:

Researchers found that people with upper gastrointestinal conditions were far more likely to develop Parkinson’s disease later in life



Pics of the Week:

i don't love that it's from Musk, but truth is truth, no matter whom the source:





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Wednesday, September 4, 2024

2024-09-04

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


Economic and Market Fare:


Part One of this article described the burgeoning bull steepening yield curve environment and what it implies about economic growth and Fed policy. It also discussed the three other predominant types of yield curve shifts and what they suggest for the economy and Fed policy.

Persistent yield curve shifts tend to correlate with different stock performances. With the odds growing that a long bull steepening may be upon us, it’s incumbent upon us to quantify how various stock indices, sectors, and factors have done during similar yield curve movements.

Limiting Losses With Yield Curve Analysis

Stocks spend a lot more time trending upward than downward. However, in those relatively brief periods where longer-term bearish trends endure, investors are advised to take steps to reduce their risks and limit their losses. An active approach puts you on higher ground than you otherwise might have been. Moreover, when the market resumes its upward trend, you have ample funds to purchase stocks at lower prices and better risk-return profiles. ...........


Recession forecasts have been wrong for years. Here's why a 'perfect indicator' doesn't exist.

It hasn't been a great time for folks in the business of predicting recessions.

The Conference Board's Leading Economic Index signaled a recession in 2022. The highly regarded inverted yield curve recession indicator has been activated since November 2022. Even the commonly accepted layperson's definition of recession — two negative quarters of GDP — occurred in 2022. Most recently, the Sahm Rule, which measures short-term rises in unemployment, triggered its recession red flag in early August.

But as many economists will tell you, the US isn't and hasn't been in recession. ........


$HY: Anti-Recession Signals? (excerpt via the BondBeat)

… But what are $HY bond markets telling us about the likelihood of a near-term recession? We analyze three indicators below that have proven to be a good leading signal of future credit stress, future S&P 500 weakness, and ultimately weaker economic growth.

1) $CCC Spreads: $CCC bonds are the most vulnerable to default, given very high leverage and weak free-cash-flow generation. But $CCC spreads have tightened 40bps since August 1, and are near 3yr lows, supported by hopes of a meaningful Fed cutting cycle. This performance remains consistent with our view that US spec-grade default rates will slowly decline through Q2'25 and with our preferred portfolio expression to overweight a barbell of $BBs & $CCCs over $Bs.

2) $HY Funding Costs: $HY funding costs generally rise before a recession begins, using 1990, 2001 & 2008 as prime examples. Today, $HY funding costs are falling, with market yields having declined nearly 100bps from mid-April to 7.3% today. This easing of financial conditions for leveraged companies is highly inconsistent with a near-term downturn.

3) $HY Total Returns: Similar to 2) above, negative $HY total returns on a trailing 12m basis generally signal major weakness in the S&P 500 and ultimately the US economy ahead. But trailing $HY returns are becoming more positive in recent months.

Simply put, there is little recession signal coming from $HY credit. And post Jackson Hole, the presence of an effective Fed put is likely to keep credit concerns at bay. 



Bubble Fare:

"On Tuesday, July 16, our most reliable gauge of U.S. stock market valuations hit the steepest extreme in U.S. financial history. We cannot, and do not, assert that this places a ‘limit’ on speculation – even the previous January 2022 peak slightly exceeded the high of 1929. In our investment discipline, valuations are not enough. The uniformity or divergence of market internals is critically important (particularly following our 2021 adaptations), and we also attend to syndromes of extremely overextended market conditions. Our discipline does not rely on forecasts, scenarios, or projections of market action. Instead, we try to align our investment stance with observable, measurable market conditions as they change over the market cycle. Still, there’s a very rare set of market conditions extreme enough to deserve a ‘warning.’ As Madge said in the old Palmolive dish soap commercials, ‘you’re soaking in it.’
– John P. Hussman, Ph.D., You’re Soaking in It, July 21, 2024

From the standpoint of full-cycle investment prospects and risks, little has changed since July. Valuations remain near record extremes. Certain elements of market internals have improved somewhat despite a slight decline in the S&P 500 from its peak, but our key gauge remains in an unfavorable condition. While recent economic data have been comfortable, many reliable leading gauges remain just at the border that distinguishes expansion from recession (though we would need more evidence to expect a recession with confidence). Meanwhile, we see numerous stocks being taken behind the shed and clobbered by 10%-30% on earnings reports that are quite good but notch down guidance even slightly. When you see that behavior at extreme valuations, it tends to be a sign of underlying skittishness and risk aversion. When valuations are setting record extremes because the news can’t get any better, even a slightly less optimistic outlook becomes a risk. ..........................................

............................

I’ve always believed that investors underestimate the extent to which precious metals can support a diversified approach to the fixed income markets. The reason is that except when inflation is very high and rising (e.g. core consumer price inflation on the order of 6% or more), we find that the main driver of returns in precious metals stocks isn’t inflation but rather the behavior of interest rates. The chart below illustrates this in data since 2003, but the same relationship holds true across history. Generally speaking, we find that the strongest return/risk profile in precious metals shares is associated with periods of falling interest rates, while the weakest outcomes are associated with periods of rising interest rates – again, unless inflation is quite high and rising. .......................

...... given that we can expect a pivot toward lower rates in the near future, how much do valuations tend to increase, on average, in the 3, 6, 12, and 24 months following a Fed pivot?

The answer is simple. They don’t. See, Fed tightening tends to occur when the economy is running hot and the financial markets are doing quite well. The pivot tends to happen in response to increasing risk of economic weakness. As it turns out, both the median and average response of stock valuations is a decline over subsequent quarters, particularly if valuations have been elevated, as they were in 2001 and 2007. In fact, with the exception of the August 2019 pivot, where much of the subsequent advance was driven by trillions of dollars of pandemic subsidies over the following year, the only instances when valuations rose following a Fed pivot (1957, 1980, 1981, 1984) were periods when valuations started at or below historically run-of-the-mill norms. .............


.................. When a speculative bubble collapses – and I suspect this one will end like others before it – it isn’t because people take money “out” of the market. Every dollar a seller takes out is the same dollar a buyer just brought in. Prices collapse because the sellers are more eager to get out than the buyers are to get in, and a price decline is needed in order for stocks and cash to exchange hands (that’s why it’s called a stock exchange). The hypervalued market capitalization people call “wealth” simply vanishes because market capitalization is just price times shares, and the only way to get sellers and buyers to trade with each other is for the trade to happen at a lower price. With market valuations just shy of their recent record extreme, it may be helpful to seriously consider your exposure to risk, and the full-cycle losses that have resolved speculative episodes across history.



Tweet of the Week:


Quotes of the Week:
Keynes: It is of the nature of organised investment markets, under the influence of purchasers largely ignorant of what they are buying and of speculators who are more concerned with forecasting the next shift of market sentiment than with a reasonable estimate of the future yield of capital-assets, that, when disillusion falls upon an over-optimistic and over-bought market, it should fall with sudden and even catastrophic force. 
......
Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.  
......
We should not conclude from this that everything depends on waves of irrational psychology. On the contrary, the state of long-term expectation is often steady, and, even when it is not, the other factors exert their compensating effects. We are merely reminding ourselves that human decisions affecting the future, whether personal or political or economic, cannot depend on strict mathematical expectation, since the basis for making such calculations does not exist; and that it is our innate urge to activity which makes the wheels go round, our rational selves choosing between the alternatives as best we are able, calculating where we can, but often falling back for our motive on whim or sentiment or chance.


Charts:
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(not just) for the ESG crowd:


........... All they know, and which they keep reminding us of, is that “things are worse than predicted” i.e. climate science is largely failing to make forecasts.

........... The main reason why climate science is virtually dead at this point is simply that the models, theorems, assumptions and parameters on which it operates are based on a planet which no longer exists. 

......... For any scientific discipline to thrive it is essential that the system it studies does not change.  Whether it is biology, cosmology, physics or climate science, in order to study these systems, they have to remain relatively constant ..................

We have entered a Great Uncertainty whereby, even if we try to speed up and understand this new planet, by the time we do this it will have changed again, as new climate tipping points are crossed.  From global ocean currents to glaciers, to the permafrost and rainforests, all moving parts of the climate sphere are changing rapidly and radically, to comprise a brand-new planet that has never been studied before, by anyone. ...........

So climate science as we knew it is almost dead, or at least, it has become orders of magnitude more difficult. Why is nobody talking about this? Because of a number of typical human behavioural biases and hindrances. ........

Most of all, science is forbidden from crossing the knowledge-society barrier, to actually articulate the implications of its data and its findings on wider society. Climate scientists collect the evidence, but the most crucial role, that of interpreting it, is left to politicians and PR spin doctors. The greatest failure of climate science has been the failure to panic in the most public and affirmative way. ..........

....... Every climate scientist at this point should be an activist. Acting otherwise would be a fatal disservice to society.



The Democratic Party’s attempt to associate militaristic policies with a campaign centered on hope and joy represents a dangerous conflation of progress and military power.

............. True hope for the future lies in reimagining our approach to national security, global cooperation, and economic progress. One where movements social movements around the world can unite to support one another in resisting and replacing economic and political oligarchs locally and globally. By challenging the normalization of militarism within progressive discourse and presenting alternative visions for a more peaceful and just world, we can reclaim the concept of hope from those who would use it to justify endless war and surveillance.


.......... And these are just highlights. One could make a list of thousands.

We are swimming in an ocean of shit.

No one can make good decisions: who to vote for, who to support, what to believe, or what to do, if they believe large numbers of lies.

And it truly is an Ocean of Shit: there’s so much that no one can keep up, certainly no one who doesn’t make it one of the main things they do. .........



You’ll often hear Democrats calling people “privileged” if they talk about voting third party, or if they say it doesn’t matter whether Donald Trump or Kamala Harris wins the election in November. The idea is that if you’re not doing everything you can to make sure the Democrat wins, it must be because you are white and wealthy and coddled enough to be unconcerned about Donald Trump getting in and implementing racist and discriminatory policies.

This narrative is false. Nonvoters in the United States are statistically much more likely to be poor and nonwhite, because those groups tend to see both mainstream political factions as more or less equally worthless at helping to improve the condition of their lives. .......

.... The truth of the matter is that you simply don’t get to vote on any of the most consequential things your government does.

You don’t get to vote on whether wars, militarism and imperialism should continue.

You don’t get to vote on whether your government should engage in nuclear brinkmanship with Russia and China.

You don’t get to vote on whether your government should keep systems in place which ensure the destruction of our biosphere.

You don’t get to vote on whether your government should be continuously working to subvert and destroy any nation anywhere on earth who dares to disobey its commands. ..........

You don’t get to vote on whether billionaires should remain billionaires while so many ordinary people struggle to survive.

You don’t get to vote on whether you and your compatriots should be subjected every single day to mass media propaganda which serves the information interests of your government and the status quo politics it relies on. ..........

Noam Chomsky was correct when he said “The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum.” Until you really understand that quote and how far it goes, you can’t understand anything about mainstream western politics and political discourse.



.............. A lot of Americans seem to suffer from the delusion that they live in a normal country with a normal government, so they should be allowed to go about their business in private without unwelcome scrutiny from foreigners. But the US is not a normal country with a normal government; it’s the hub of the most powerful empire that has ever existed, which uses its military and economic power to bully and dominate the rest of the world. You don’t get to tell anyone who lives on this planet that US politics are none of their business.



It’s wild when you realize that nobody can actually articulate a reason why Israel should be supported that is both logically coherent and morally defensible. ......



The decay of western civilization is unfolding in real time right in front of our eyes.

Israel has ramped up its assault on the West Bank with an incursion the likes of which has not been seen since 2002, at the same time we learn that the Biden administration has been scrambling to increase its weapons shipments to Israel. Haaretz reports that August has been the second-busiest month for weapons shipments from the US to Israel’s Nevatim Airbase, second only to October 2023.

This is the same Biden administration that Americans have been assured is working “tirelessly” and “around the clock” for a ceasefire in Gaza. They’re committing genocide and lying about it while laughing and grinning and celebrating the “joy” of the Kamala Harris campaign.

Meanwhile in the UK the government is going insane arresting critics of Israel’s western-backed atrocities for speech crimes. .........

............. So what’s the good news? 

There is none. 

There is no good news to be found in the unfolding of dystopia and armageddon. Expecting otherwise would not be reasonable.

This doesn’t mean there’s nothing to be happy about, or that there’s no joy or beauty to be found in our world. Joy and beauty can be found everywhere you look. You’re just not going to be made happy by reading the real news stories about the times we are living in.

We live in an unfathomably beautiful world, and happiness is the default position of human consciousness underneath all the madness and egocentricity we’ve heaped on top of it. All it takes is a little inner work and inner clarity and you can experience as much happiness and beauty as you can stand in any moment of your waking life. 

There is stunning beauty to be found on the crest of the wave of the apocalypse. .........



.............. I have written thousands of essays and millions of words trying to wake people up to the tyranny of the US-centralized empire we live under, but I have never written anything more effective at radicalizing people against imperial status quo politics than the supposedly “left-wing” political party of the world’s most powerful government telling people it’s unreasonable to demand that it stop committing genocide. ............

We need a word that’s stronger than “dystopian” for this. Democrats finally learn that they need energy and enthusiasm in order to win elections, so they start squealing about “joy” and “fun” and making memes and flower power posters… but they do it during an active genocide that’s being perpetrated by the same administration they’re feigning all this “joy” about. ..........

Lunatics. Bunch of deranged fucking lunatics.

❖

Trump isn’t evil because he’s another Hitler, he’s evil because he’s another Obama. So much emphasis gets placed on how different Trump is from other US presidents, when all the evidence of his actual presidency showed the most evil thing about him is how similar he is to them. ........

The United States is the single most tyrannical and murderous government on earth, by an extremely massive margin. Trump is evil because he spent his administration going along with all that tyranny and murderousness just like those who came before him and after him, not because of who he is as an individual. If you think Trump is some freakish aberration in an otherwise acceptable status quo, it’s because you don’t appreciate how horrific the status quo is.

..............

❖

Trump and Harris are 99% identical in terms of the real policies they’ll promote. Trump supporters and Harris supporters hate each other because of that 1% difference; I hate them both because of that other 99%.


“If we lose, we’ll be tried as war criminals.” US General Curtis LeMay speaking of the US firebombing of Tokyo (and here) in WWII.
In addition to the war against Russia that the US launched with its coup in Ukraine of 2014, the next president of the US will have the US role in the genocide in Palestine to contend with. With respect to US relations abroad, it would be one thing if these conflicts had been forced on the US. But they weren’t. They were chosen by the Biden-Harris administration as part of its too-little, too-late, recognition that US-based capital, Wall Street acting in league with subsidized industries like Big Tech, has destroyed the US economy for most workers, meaning citizens.



Other Fare:

Canada’s health system reels as by one estimate 1,000 die weekly. Each infection carries risks. Where’s the prevention?


Or How Silicon Valley Started Breaking Bad

.............
(1) Instead of pursuing truth, new technologies aim to replace it with mimicry and fantasy.
...
(2) This has empowered shamming, scamming & spamming at unprecedented levels.
....
(3) Users are not the real customers—so billions of people must suffer to advance the interests of a tiny group of stakeholders.
...
(4) Real people become inputs in a profit-maximization scheme which requires that they are constantly controlled and manipulated.
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(5) In this environment, everything gets viewed as a resource or input and the natural world (including us) is ruthlessly exploited.
...
(6) The groundwork for this was laid by theorists who replaced truth with power.
...
(7) In the past, governments controlled huge technologies (nuclear power, spaceships, etc.) so they were somewhat accountable to citizens, but now the most powerful new tech is in private hands, and the public good is no longer even considered.
...
(8) So much wealth is concentrated in the hands of the winners in these processes, that they literally become more powerful than nation states.
...
(9) With this shift in power, even the most independent politicians turn into controlled agents working for the technocracy — making a mockery of democracy.
...
(10) If you oppose this command-and-control tech you can be theoretically (and often literally) erased, suspended, deplatformed, shadow-banned, surveilled, de-banked, digitally faked, etc. —so who will dare?
...


Study pinpoints two measures that predict effective managers

Good managers are hard to find. Most companies pick managers based on personality traits, age, or experience — and according to a recent National Bureau of Economic Research paper, they may be doing it wrong.

Co-authored by David Deming, Isabelle and Scott Black Professor of Political Economy at Harvard Kennedy School, the study concludes that companies are better off when they select managers based on two measures highly predictive of leadership skills.

The Gazette talked to Deming about the study’s findings. This interview has been edited for length and clarity.
What are the qualities that make a good manager, and why is it so hard to find them?

Being a good manager requires many different qualities that often don’t exist in the same person. First is the ability to relate well to others, to create what Amy Edmondson and others have called psychological safety, meaning the ability to make people feel stable and secure in their role so they are comfortable with critical feedback. That’s a key component of being a good manager. Communication skills are also essential. As a manager, you should know that there’s not one good way to deliver feedback to your workers because the words you use and the way you frame your statements also matter.

At the same time, you must also be analytically minded and open to different ways of doing things and be able to take a step back and reassess whether your team or organization is working as well as it could be. Overall, being a good manager requires both interpersonal skills and analytical skills. You also need to have a strategic vision — which is something that our study does not capture. Managers must have a sense of what their organization is trying to accomplish. Any one of those skills is hard to find. Having all three, and knowing when to use them, is even more difficult. .........


Fun Fare:


............... As of publishing time, the Weinberger family was also trying to get Immanuel Kant to return their lawn mower after the transcendentalist refused to acknowledge its material existence in his tool shed.



Pics of the Week:





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