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Sunday, December 8, 2024

2024-12-08

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


Economic and Market Fare:

One can reasonably debate whether the stock market has risen exponentially but there is no arguing that the surge in the S&P 500 these past two years has been nothing short of extraordinary. And it has clearly gone much further than I thought it would, especially in these past twelve months, and so at this point, it is worth the time and effort to discuss and interpret the message from the market. 

Rethinking the “Bubble” Thesis
It’s high time for me to stop pontificating on all the reasons why the U.S. stock market is crazily overvalued and all the reasons to be bearish based on all the variables I have relied on in the past — from valuation, to sentiment, to overcrowded positioning. So, what I am going to start doing is assessing what it is the market is saying, because the market can certainly move to excesses in both directions and make faulty assumptions, but the market is not stupid.

What is the market telling us, in other words? Especially since this bull phase has now lasted long enough that those of us who have been on the wrong side of the trade need to take a different tack. This is not about throwing in the towel as much as trying to get a grip on what is going on beyond just calling this a “bubble” every single day. ...................




................. Indeed, there is plenty of evidence that the AI boom could really just be a bubble – a huge rise in what Marx called fictitious capital, ie investment in the stocks of AI-related companies and the US dollar that is way out of line with the reality of AI-realised profits and productive investment. ...........

And this bubble is very narrowly supported. US stock market drives world markets and just seven stocks drive US stock market: the so-called Magnificent Seven. For the vast majority of US companies, those outside the burgeoning energy sector, social media and tech, things are not so great. S&P 500 free cash flow per share hasn’t grown at all in three years (see the red line below). Forecasts of profit growth are wildly out of line with what is being realised.


Are American pathologies the necessary price of economic dynamism?




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“Value investing is at its core the marriage of a contrarian streak and a calculator.”
S. Klarman

“The first principle is that you must not fool yourself, and you are the easier person to fool.”
R. Feynman

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In this analysis, we aim to objectively examine the current discrepancy between the intrinsic value and the market price of the S&P 500.

Our conclusion is that the S&P 500 is unlikely to have a positive nominal total return in the next 10 years and a ‘miracle’ would be needed to achieve positive real total returns. ...........................


CONSILIENT OBSERVER
Introduction

The Consilient Research team spends a lot of time on, well, research. The reports we publish reflect this effort. But there are times when we study a topic and either do not write about it, or a subject gets limited attention because it plays a small role in explaining something larger.
 
As a change of pace, we have decided to publish some of our favorite charts that went unused or got lost in the shuffle. Most of these exhibits explain themselves, but we add a little commentary in each section to set the tone. We have placed the pictures in five (loose) categories: overall valuation, empirical regularities, capital intensity of “big energy” versus “big technology,” corporate performance, and investment management. 



Quotes of the Week:

Paul Tudor Jones: I was watching this Vince McMahon [prior owner of the WWE] documentary and in it… there was a term I never heard of called “kayfabe.” And in wrestling in particular parlance that represents the unspoken, unwritten agreement between the wrestlers and the fans about the elusion that’s going on in the ring. The suspension of disbelief that [is] going on in the ring is actually [scripted]. We know it’s scripted and we know it’s a performance but the ask us to think it’s genuine and real… we’re in an economic “kayfabe” right now and it’s not just the US. After this election, the question is, will we have a Minsky Moment… in US debt markets, where there’s a point of recognition that what’s going to happen… is fiscally impossible, financially impossible… I’m clearly not going to own any fixed income.




Charts:
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(not just) for the ESG crowd:




Yves here. An acceleration of growth of data centers, driven by AI demand, is set to make the already existential climate change threat even worse. Yet there’s collective complacency, as opposed to calls for AI to be severely curbed or heavily taxed due to its energy cost. Perhaps I have missed it, but I have yet to see either AI or data center players targeted in a meaningful way by climate activists.

For those late to this story or who want convincing evidence to present to skeptics, a recent report by the International Energy Agency chronicled the rise in energy demand by data centers and AI players, and how their demand for electricity is set to increase even faster, outpacing the ability of clean energy sources to meet it .............



.... As far as global environmental concerns go, the US has an irretrievably split personality. Far from organising the world, it will be the world that has to adjust to the disorganising impact of America’s polarised and depressingly unintelligent democracy. 

....... The inescapable conclusion of the past 35 years is that it is foolish to treat the US as a reliable partner in global climate policy.



U.S. B.S.

Given Joe Biden’s apparently intimate involvement in Hunter’s dealings, it follows that his intent in pardoning his son is effectively to secure a pardon for himself.  



That a ruler or priest can be both a hypocrite and moralizer has been true throughout human history.  

Thus has Joe Biden embraced his inner Chaucerian Pardoner in issuing his son Hunter a full pardon for any crime he may or may not have committed in the past decade. No matter that Hunter was never charged in direct co connection with his work for a gas company in Ukraine. where his then-vice president daddy was de facto viceroy ..............

As Chaucer's Pardoner protested back in that 14th century chronicle: "What? Think you that because I'm good at preaching / And win me gold and silver by my teaching / I'll live of my own free will in poverty? / No, no that's never been my policy!"



Geopolitical Fare:


I have learned a few things in my time on this earth. Not many, but a few.

I have learned that western regime change interventionism is reliably disastrous, and that men like John Bolton and Bill Kristol are always on the wrong side of history when it comes to such matters.

I have learned that organizing human civilization around the pursuit of profit has had devastating consequences for our ecosystem, our health, our hearts, and our happiness.

I have learned that there is an entirely unacceptable amount of human suffering in developing nations, and that it is largely caused by the western power structures we live under and the way our civilization behaves. 

I have learned that rich and powerful people pour tremendous amounts of resources into psychologically manipulating the public using all forms of media, and that their efforts to indoctrinate the masses have proven very successful. ..........



...... This is one of those things that looks more evil the longer you stare at it. They’re pushing for teenagers to be thrown into the fires of an unwinnable war like it’s nothing — like a corporation saying they need to hire more staff to accommodate their growing business. And why? To tie up Russia so that Syria can be turned into a smoking crater and allow the US war machine to focus its crosshairs on Iran and China, with the end goal of total planetary domination. All because some swamp monsters decided after the fall of the Soviet Union that the US must maintain unipolar global hegemony no matter the cost.

Ukraine barely even has anyone in the country from ages 18 to 25 for various reasons (many of which predate this war), but the managers of the US-centralized empire are pushing to scrape out the few they do have and toss them into the landmines and artillery fire just to keep this unwinnable war going for a few more months. Whether they succeed or not, the fact that they even tried is so profoundly psychopathic



If you have not spent the past 14 months watching all the footage of dead and mutilated children coming out of Gaza, then you have no business trying to defend Israel and its actions. If you are avoiding looking at the facts, then you have no business talking about them.

Everyone who has spent these past 14 months bringing their attention to the concrete realities of the nightmare in Gaza has been living in an entirely different world than everyone who has not. A darker world. An uglier world. A world where living monsters prowl the earth.

Their dreams are worse. Their insides feel different. They experience the day to day moments of life in a whole other way.

The opinions of such a person about what is happening in Gaza do not have the same value as the opinions of someone who has avoided looking at these things. ............


Syria is just the latest case of U.S. meddling and the timing could not be more suspicious

The Biden administration has triggered another proxy war for Donald Trump to deal with when he becomes president next month. The U.S. deep state is fighting a proxy war in Syria, which appears to be waged with the intention of further destabilizing the Middle East and stirring up another front in World War III. ..........



Sci Fare:




Other Fare:



A vivid account of the evolution of minds will fill readers with wonder — and challenge how they think about their moral responsibility to protect the planet.



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