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Sunday, October 20, 2024

2024-10-20

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


Economic and Market Fare:

Morgan: The coming shock
FACT, PERCEPTION AND A LOOMING CRISIS

..................... The key to effective investment and strategy isn’t entirely, or even mainly, the ability to predict factual outcomes, but to anticipate how sentiment – the markets’ equivalent of popular perception – will evolve over time. The secret of effective government lies in steering the collective perception in ways that conform to your objectives.

The contemporary term for the collective of perception is the narrative. Investments will succeed where the investor correctly anticipates the narrative. Governments will retain public support where the public shares the established narrative.

Ultimately, of course, any narrative is either validated or invalidated by results, and this is the point at which perceptions and material outcomes intersect. The art of prediction lies in the ability to connect accurately-projected outcomes with the evolution of perception.

Most of the World has long accepted a carefully crafted narrative, one which we’ll discuss in a moment. But material outcomes are refusing to conform to this narrative, and this is driving a rapid change in perceptions. ...............


Bubble Fare:

When analyzing risks, it’s crucial to consider the underlying structure of the data. By partitioning it into meaningful subgroups, we reveal differing conditional probabilities that provide a more accurate picture of risk across various scenarios.
– David Spiegelhalter, The Art of Statistics
One of most dangerous habits of a speculative crowd is the tendency to use unconditional averages and unconditional probabilities regardless of how extreme market conditions have become. ......

The fact is that market outcomes differ based on varying market conditions. If one thinks of positive and negative market outcomes as being distributed across a “bell curve,” the position and shape of that bell can differ substantially depending on a wide range of factors, including the level of market valuations, the stance of monetary policy, the psychology of investors toward speculation or risk-aversion (which we infer based on the uniformity and divergence of thousands of individual stocks, sectors, industries and security-types), and shorter-term overextension and compression of market action. ............

On October 14, 2024, the U.S. equity market reached the most extreme level of valuation in history, based on the measures we find best-correlated with actual, subsequent 10-12 year returns across a century of market cycles. Below, MarketCap/GVA is the market capitalization of U.S. nonfinancial corporations divided by their gross value-added, including our estimate of foreign revenues. The recent level of 3.40 exceeds every previous extreme, including 1929, 2000 and 2022. 

The chart below shows our estimate of the 12-year “equity risk premium” of the S&P 500, defined as the expected 12-year average annual total return of the S&P 500 over and above Treasury bond returns. The current estimate is -9.9% annually.

I know you don’t believe that. The beautiful thing is that you don’t need to. ....

It’s critical to remember that the role of valuations is to inform our expectations about long-term market returns and full-cycle downside risk. Nothing in our investment discipline requires the market to collapse. Valuations provide essential information about where we are in the market cycle. But other conditions, particularly the status of market internals, dominate over shorter segments of the market cycle.

.............................  We don’t need a market collapse, we don’t fear Fed easing, and we don’t require a recession. In my view, what we need most is just discipline and time. Our market outlook will change as measurable, observable conditions change. The approach I’ve discussed above gives us an additional way to vary our investment stance even when valuations are extreme, market internals are unfavorable, and the S&P 500 is uncharacteristically advancing anyway.

Looking ahead, I have little doubt that the financial markets will give us an adequate amount of fluctuation to exercise our discipline over time, whether those fluctuations maintain a “permanently high plateau” in valuations that exceed 1929 and 2000, or whether they bring the market back to historical norms, or even the depths we observed in 1942, 1974, or 1982. I certainly believe that long-term return prospects are weak, and that full-cycle market risk is profound, but in practice, no forecasts or scenarios are required.

Since its previous high on July 16, the S&P 500 has outperformed Treasury bills by just 1.6%, but the fear-of-missing-out among investors seems nearly frantic. One can’t share any sort of historical evidence suggesting potential market risk without a barrage of replies ranging from disdain, to long-debunked arguments, to plain apathy – “nothing matters.” This is a sure sign that unconditional thinking and passive, price-insensitive investment dogma has taken hold of investors. I suspect that Graham & Dodd’s words will prove as accurate in this bubble as they have been in speculative bubbles across history – “the results of such a doctrine could not fail to be tragic.”

Amid the optimism, it’s worth noting that we’re again seeing a preponderance of various warning syndromes I’ve described over time. .......................



Quotes of the Week:

Darius Dale: "People who are talking about valuations and earnings need to get their nose away from the tree so they can see the forest, and that it's not about valuations and earnings, it's about the fact the Fed has an asymmetrically dovish reaction function to capitalize the US govt in a Fourth Turning. That is the most important dynamic going on right now in global financial markets... and it's not just happening here in the US, it's happening all around the world."



MMT Fare:


In a New York Times editorial, David Leonhardt recounts Aesop’s apocryphal story about the boy and the wolf, warning that while deficit hawks have so far been wrong, the growing government debt will eventually bite. He reports the economic plans of both presidential candidates would add to the debt that will soon exceed GDP and grow to 130 percent of annual output under a President Harris, or 140 percent with a Trump presidency.

The story of the boy and the wolf was a fable, although it was within the realm of possibility. The fable of the debt wolf is not. While there are real world wolves—Leonhardt mentions climate catastrophe and autocratic leaders, and the authors would add rising inequality and the concentration of economic and political power in the hands of billionaires—authors Yeva Nersisyan and L. Randall Wray assert, federal debt is not one of them.



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(not just) for the ESG crowd:


..................... My goal herein and at COP16 (including the panel I’m on) is to explicate and reiterate the overlooked, fundamental conflict between economic growth and biodiversity conservation. If the Global Biodiversity Framework is to have any chance of success, conferees must harbor no illusions of “green growth.” They must firmly grasp the reality that all the biodiversity conferencing in the world will amount to an exercise in futility as long as the overriding goal of the parties is GDP growth. .....................................


A dramatic spending surge is needed to course correct, the International Renewable Energy Agency warned.

Reaching the landmark renewable energy targets agreed at last year’s global climate summit will remain a distant dream unless the world invests more than $30 trillion over the next six years...............


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

......... Which brings us back to energy—specifically oil, the cornerstone of productivity in modern society. Modern economic growth has always depended on cheap, abundant fossil fuels. This high energy yield has driven expansion, allowing credit and debt markets to flourish. Cut back on oil, and if we can’t replace it with equally productive energy sources, overall productivity takes a hit, and with it, economic growth.

Slower growth means trouble for credit markets. As growth declines, so does our ability to service debt, setting the stage for a contraction in credit availability. .............



Geopolitical Fare:


You’re not crazy. They are crazy. The ones who are going around acting like everything’s fine. The ones dismissing the Gaza genocide as a “single issue”. The ones who don’t like it when you talk about this stuff because it bums them out. They are the crazy ones.

I say this because living in the west during a western-backed genocide can make you feel like you’re going insane. .............

History is rife with examples of horrific mass atrocities to which the majority of the population did not respond with the appropriate revulsion and urgency at the time. Slavery. The Holocaust. The systematic extermination of other indigenous populations in other settler-colonialist projects. Most of the people who now look back and judge those evils correctly in hindsight are sleepwalking right through their present-day reiteration in Palestine. .......................


The Ghosts of Israel's Future, Part IV

In 1982, the Palestinian poet Mahmoud Darwish was in Beirut when the city was besieged by the Israelis. As part of his book "Memory for Forgetfulness" (ذاكرة النسيان) Darwish mentioned an acquaintance of his who could not believe that a siege was underway "unless it was written in Hebrew," and "since Israeli newspapers had not yet reached him, he wouldn't acknowledge that Beirut was under siege." 

"But this," Darwish writes, "is not a madness I suffer from."1

We are now over a year into Netanyahu's genocide in Gaza. As I write these words, his einsatzgruppen death squads have unleashed hell on a hospital and tents in northern Gaza as part of his ongoing plan to "liquidate" that section of the Palestinian ghetto.2 As Netanyahu expands his extermination campaign to my country, Lebanon, we bear witness to this world we live in, a world in which Israel's Milošević can confidently broadcast his crimes against humanity. He can speak of turning Lebanon into Gaza because he knows that we know what this means. 

And yet, large swaths of the Western media, its politicians and its think tanks are scarcely different than the Israeli researcher that Darwish knew. They reject the reality broadcasted live to the same smartphones we all have.

They suffer from the same madness. ................





................................................ I ask you, which of us sitting in this hall would willingly submit to the indignity that Palestinians in Gaza and the West Bank have been subjected to for decades? What peaceful means have the Palestinian people not tried? What compromise have they not accepted—other than the one that requires them to crawl on their knees and eat dirt?

Israel is not fighting a war of self-defence. It is fighting a war of aggression. A war to occupy more territory, to strengthen its Apartheid apparatus and tighten its control on Palestinian people and the region. 

Since October 7th 2023, apart from the tens of thousands of people it has killed, Israel has displaced the majority of Gaza’s population, many times over. It has bombed hospitals. It has deliberately targeted and killed doctors, aid workers and journalists. A whole population is being starved – their history is sought to be erased. All this is supported both morally and materially by the wealthiest, most powerful governments in the world. And their media. ................................




How a Region of Peace Became an American Frontline

.............................................................. Scandinavia was a region of peace as it attempted to mitigate the security competition after the Second World War. As Scandinavia surrenders its sovereignty to the US for protection against an imaginary threat, the region will be converted into a frontline that will set the stage for a Great Northern War 2.0. The only certainty is that when Russia reacts to these provocations, we will all chant “unprovoked” in unison and make some obscure reference to democracy. 



Politico has a long article on it, and it’s hilarious. A border wall longer than Trump and Biden’s. “Return centers” in other countries, because they’re too gutless to say deportation, and so on. Complaining about Russia and Belarus’s immigration warfare (letting refugees thru Russia to get to Europe. Including, er, Afghan refugees.)

Let’s cut thru the bullshit.

The EU is in economic decline and can no longer afford refugees they can’t monetize.

Europe is also responsible for much of the refugee crisis, having enabled the destruction of Afghanistan and Iraq (Poland, one biggest criers, was part of the “coalition of the willing.”) Europe, with some honorable exceptions like Ireland and Spain, is behind the Israelis, who are about to institute a flood of Lebanese refugees. Europe, thru the world bank, IMF and various post-colonial policies has worked hard to keep third world nations in poverty, increasing refugee flows.

They have helped destroy or impoverish entire nations, then whine about how migrants come to them begging for safety or a decent life. 

In humanitarian terms, and international law terms, what the EU is doing is wrong, but the simple truth is that they can’t afford immigration any more, and that mass immigration has exacerbated the right wing turn. Not that it had to, but if you have large numbers of immigrants into a bad economy, who are competing for jobs and housing and social welfare with the desperate, they will naturally blame the immigrants instead of purging the incompetent and corrupt elites who are managing the economy with eye only to benefit themselves. ............

Europe’s decline will continue until they decide to take responsibility for themselves and to overthrow an ideology which prioritizes the rich and financial games over the entire population and the real economy.

Immigration is meaningless in comparison.




The military, the elite, and the Mexican left

...................................................... AMLO has cast his career and his government as a mythical struggle between the poor and the rich. The truth is that he has governed not just with the oligarchy, but through the oligarchy, and for the oligarchy. And they have paid in kind. 

............................. The Morena government’s most characteristic features have been its unflinching loyalty to the Mexican state. With tax reform discarded, the government’s narrow budget made it vulnerable to military influence. Upholding the ideological legitimacy of the state builds on longstanding nationalist and progressive traditions. But in a country ravaged by violence and inequality, loyalty to the Mexican state meant complying with its repressive legacy. 



U.S. B.S.:

The joy is over, the media blitz failed, so...Trump's a fascist...again!

....... If you’d only been following American politics since July 2024, then Kamala Harris’ campaign might have struck you as a breath of fresh air. Sure, it was light on policy, but there were promises of moderate policies, calls for unity, and messages of forward-looking optimism and hopeful patriotism…it’s almost enough to make one forget four years of unpopular governance by the Biden-Harris administration!

But there’s one little problem…it was a lie.



................................. Kamala’s just another mediocre member of the elite. The system worked for her, so she figures it’s basically a good system. She doesn’t have the empathy or intellectual honesty to see that it isn’t good for many, many other people and that she needs some of those people’s support.

This was her election to lose, just as Clinton should have won in 2016. All she had to do was show some genuine concern, some empathy and offer some significant change, even if she was lying.  (This was Obama and Bill Clinton’s strategy, and it worked well. Bill was very empathic as he screwed over the working class and poor.) .....................



Sci Fare:

Pediatric long COVID is more common than many thought, and we keep letting kids be reinfected with new variants



I’ve written before about how we’re seeing signs of widespread brain damage in children. I don’t really like reporting on these things much. I would rather just post about more pleasant stuff. But the whole world now insists on pretending that none of this is going on, so I feel obliged to point out the problem to people who notice something’s wrong. .........

The evidence is just clear: Something went wrong and it’s gradually getting worse. That’s why we see growing numbers of two year olds who can’t talk, growing numbers of kids who go to kindergarten with developmental impairment and growing numbers of children with long COVID. If the situation was stable I would move on to other stuff, but you’re dealing with a problem that’s steadily getting worse. 

I’m going to point out again, that this is all a consequence of mass vaccination. ...........

We know why these vaccinated people constantly keep getting reinfected: They’re now stuck with a poor immune response against this virus. .......

If the problem was gone, if excess mortality returned to normal, the children stopped showing brain damage, there was no growth in long COVID cases, there were no waves of this virus in the middle of summer, there was no evidence of steadily growing virulence, we didn’t have an increase in strokes in young adults anymore and we didn’t see a bunch of new glycans emerge in the NTD, I would accept that I’m wrong and shut up about it.

But that’s not happening. How am I supposed to shut up about a problem everyone ignores, that’s killing 300 people every week, just in my country alone? If they died because they ate cheeseburgers, if they died because they didn’t wear a seatbelt, I would ignore it. But they die because they’re being deceived. And it’s a canary in the coalmine, for what is to come. 

I’ve spent so much effort, explaining and demonstrating how the immune response has been impoverished. ............

The underlying problem of course, is that vaccination resulted in abnormally high concentrations of antibodies, fifty times higher than after a natural infection after just two shots. That’s what broke everything. These antibodies will interfere in the ability of the innate immune system to properly perform its job and improve its performance over time (training of innate immunity). They interfere in the ability of NK cells to learn to recognize the virus through their natural cytotoxicity receptors, interfere in plasmacytoid dendritic cells detecting the virus and interfere in monocytes migrating into different tissues, where they can mature into macrophages or dendritic cells. ............

This is not a problem that just solves itself over time, rather, it’s a problem that grows worse over time, as the antibody response gradually broadens to target less immunogenic epitopes. If you don’t solve this, the virus will solve it in its own way.



There are a number of reasons why I correctly anticipated back in march 2020 that SARS2 would prove to be less deadly than people expected. To start with, I anticipated that the number of people already infected would be underestimated, because a lot would have such a mild infection, they never developed any antibodies passing the threshold at which we can measure them. That turned out to be correct, about half of people with a clear T-cell response did not have an accompanying antibody response.

In addition, I anticipated that the people who were first to be infected, would in general be in worse health on average than those who did not immediately get infected. This was also correct. It’s now clear that obese people are more likely to be infected. ......

What I did not anticipate at the time, is that people would practice mass vaccination against this virus. ............

Well, vaccination against this virus, is another sort of intervention that ends up causing massive trouble after a while, because viruses evolve. This was immediately obvious to me at the time. We have immune systems that are very complex and we started intervening in what they do, without understanding what the consequences could be.

Increasing the antibody concentrations with vaccines to fifty times normal levels seen after a natural infection, doesn’t mean you end up with superior protection, at least not in the long run. Rather, it just means that your immune system gets “stuck” on a particular type of response, that will eventually start causing problems once the virus starts to mutate. Reckless interventions in complex systems tends to result in destructive outcomes.

With an immune system stuck on Wuhan, any novel variant of SARS2 that evolves far away from the original Wuhan spike can infect people, without the antibodies against the RBD shifting to versions that can keep that novel version from returning. ..............

There is only one proper explanation for this: We broke something. When you realize we broke something, all the puzzle pieces start to fall into place. .................


In “The Burning Earth,” historian Sunil Amrith chronicles civilization’s fraught relationship with the natural world.

Humanity’s dependence and impact on nature have never been more clear than today, in a world enveloped by climate-driven storms and wildfires, air pollution, and dwindling natural resources. But the relationships societies and empires have had with the environment, especially exploitative ones, go back a millennium, and that tumultuous history has shaped the rapidly warming planet we live on now.

Sunil Amrith, a history and environmental professor at Yale University, chronicles these global changes in his wide-ranging new account, “The Burning Earth: A History.”  ...............


Astrobiology is rewiring our understanding of the intimate connection between life and planets as they appear in the universe

Across 15,000 generations, human beings have looked out at the sentinel stars and felt the pressing weight of myriad existential questions: Are we alone? Are there other planets also orbiting distant suns? If so, have any of these other worlds also birthed life, or is the drama of our Earth a singular cosmic accident? And what about other minds and civilizations? Have others in the universe, through their success as tool-builders and world-makers, also brought themselves to the brink of collapse?

Remarkably, the first answers to these questions are beginning to arrive. Just as Copernicus reimagined the architecture of our solar system five centuries ago, we are once again in a revolution that pivots on planets. A new science called astrobiology has changed the night sky.

It already shows us that nearly every star in the galaxy hosts a family of worlds. Using powerful new instruments and theoretical methods, we’re also learning how to search these distant worlds for alien biospheres. In this way, across the next few decades, we might finally gain answers to the ancient question of our place among life, planets and the cosmos.

Equally remarkable, this timescale will also be pivotal to answering a different set of questions about life and our planet. After so many generations as mere passengers on Earth, humanity has now fundamentally altered the world and its function. Our project of civilization has pushed the planet into the Anthropocene — a human-dominated epoch of dangerous unintended consequences and vast inequalities. As the planet’s evolutionary trajectory has changed, our collective project of living together on it is changing as well. The future of our project is up for grabs.

The simultaneous rise of the Anthropocene and astrobiology is, however, no accident. Both are manifestations of humanity’s first encounter with the true connection between planets and life. The urgency of the Anthropocene and the promise of astrobiology reveal that planets and life — the Earth and its biosphere — are always co-evolving. Anywhere it occurs, life and its host planet must be seen as a dynamic, inseparable whole.

From that perspective, something fundamentally new is rising, offering an alternative to our current stumbling toward disaster. A different kind of human future is now possible, driven by a new kind of human self-conception and self-organization. It’s called “the planetary.”

The planetary is a new “cosmology” — emerging as an alternative to the social, cultural and political-economic orders of global modernity. The planetary is a radically new worldview and paradigm grounded in revolutionary scientific advances about biospheres and the planets that support them. It also yields insights into the fate of world-spanning “technospheres” like the one we’ve already assembled that’s driving the Anthropocene. Using this science as a frame, the planetary promises a new design for our future in a climate-changing world.

Given its potential, the planetary deserves our attention and understanding so that we might also understand how to nurture the long path to its fruition. But the broad reach of that potential also requires a journey across wide and wild landscapes, including the discovery of exoplanets, the recognition of Gaia theory and the intricacies of Complexity Science as a new theory of life. Together, these give us the purchase to see the most important of all possibilities: a renewed form of “planetary intelligence,” where human cultures and the biosphere thrive together long into the future.. ................


Awareness of the cognitive biases we all hold will help in the search for solutions to global environmental problems.

Picture a New Yorker-style cartoon of a caveman with a briefcase and fedora. According to evolutionary psychology, we moderns are walking Paleolithic hominins. The cognitive skills that helped us live on the savannah still exist in our brain’s survival kit.

Unfortunately, those adaptations have helped create the current polycrisis — the set of intertwined, existential threats facing Earth, including environmental ones — and now present psychological barriers to solving pertinent issues in a timely manner. Intelligent, aware people persist in flying, eating meat, and driving cars just as often as (or more than) they did before, despite knowing the harmful effect of these actions on climate change and biodiversity loss. It is easy for environmental advocates to dismiss such people as selfish or irresponsible. While that may be true in part, the reluctance to break a number of bad habits actually lies deep in our cells, and in our past as a species. ..................



Nobel Fare:


When I first encountered the ideas central to the winners of this year’s three Nobel Prize in Economics[2] around two and a half decades ago I was startled. The excessive economy of their framework for understanding a complex global reality combined with a set of premises that looked starkly ideological. Despite the time that has passed, the reams that have been written, and the imprimatur these ideas have now received, these charges remain pertinent.

The point of view of the authors remains narrowly focused – even fixated – on property rights, seeing them as defining inclusive economic institutions[3] and as underpinning inclusive political institutions[4], the coupled concepts at the center of their understanding of Why Nations Fail, the sizable volume in which two of the authors elaborated and extended their view.[5] It is understandable that this perspective enjoys a resonance among property holders and enthusiasts, both in the economic discipline and more broadly in society, as it is reflection of a common sense that prevails in such quarters, but it provides an inadequate guide to understanding either democracy or development. This is because property rights play more diverse and ambivalent roles in both phenomena than they acknowledge. Their view is ahistorical. It misses essential aspects of the colonial experience (such as the impact of ethnic and racial prejudices and solidarities based on the global color line) and its resulting legacies. It also misunderstands the sources of success of rising nations in the contemporary world, such as the role of developmental states. ...............................................

The definition and protection of private property rights within an Anglo-Saxon framework of law[25] seems to have been neither necessary nor sufficient for sustained economic growth. The most outstanding examples of countries that have escaped the economic periphery and moved toward the core of the world economy in recent years are the East Asian late developing economies. In the successful East Asian countries and elsewhere, high levels of investment were not primarily driven by private property rights protections but by a variety of other factors that led to unprecedentedly high levels of savings and which concentrated and directed these savings.[26] In many of instances, property rights, while often respected, were also maintained as ill-defined in order to be strategically manipulable by a developmental state (this is as much true of China today[27] as it was of South Korea and Japan earlier)[28]. Even in the Anglo-Saxon derived countries, it has long and widely been understood that private property may at times become an obstacle to economic growth and other public aims – for which reason it is accepted that a state may use eminent domain to construct vital infrastructure such as roads or dams. The locking up of ideas in the form of ‘intellectual property rights’ enforced by patents, copyrights and other means have also rightly come in for much criticism in recent years, and it is well understood even by mainstream economics that these generate sizable costs to society, by making useful goods and services unavailable to those who could benefit from them, and by damaging further innovation that builds upon the existing stock of idea ...............................

Why does a hypothesis phrased in a simplistic way enjoy such influence?  There are many explanations. Under-complicated framings (e.g. geography matters vs. institutions matter) derive from the scientistic[36] atmosphere of mainstream economics.  The fact that the prevailing, and indeed the most appealing, hypotheses, may be the products of intellectual or cultural prejudices and blinders do not come in for much self-inspection. The ideas gain influence because they are produced by insiders, who are legitimated by their place in apex institutions, giving them a bullhorn, helping to disseminate the ideas widely[37], and garnering for them a presumption of authority and legitimacy. ..............

It is good form to credit the winners of an award with an achievement. But the problem is that the Nobel Prize in Economics generates an implied hierarchy of knowledge, and rewards particular ways of thinking.[39] This in turn has great consequence for what ideas are spread and adopted, within the discipline and in the world at large – a world needing answers. For this reason, it is too important to ignore.



Other Fare:


What do Donald Trump, Jair Bolsonaro, the burning of the Amazon rainforest, FEMA’s crisis in North Carolina, the plight of the Palestinans, and the Rohingya genocide all have in common?
Mark Zuckerberg.

Of course it is unfair to place all the blame on poor Zuck. Still, he should at least shoulder some because he was practically the inventor of using social media to accrue personal wealth instead of bettering humanity or the planetary ecosystem upon which we all depend.

He could have as easily designed his Facebook and Instagram algorithms to optimize for planetary wellness. Instead, he chose to optimize for engagement, not fully appreciating (at least, we hope not) the implications of that choice. When you optimize for engagement you quickly discover that there is no comparison between engagement in heady discussions that activate the human cerebral cortex to cooperate and collaborate on wide boundary problem solving and the engagement response for cute kitten videos, frights and outrages that activate the limbic brain stem—our primitive reptilian brain. Those latter enticements drive engagement off the charts. ...............



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