Attention Economy


Tuesday, October 31, 2023

US Home Price Remain Elevated

History Lesson: America's Gilded Age


State of CRE Market

The Money Has Stopped Flowing in Commercial Real Estate
https://www.wsj.com/real-estate/commercial/the-money-has-stopped-flowing-in-commercial-real-estate-43c003d3
The decline in construction loans has been particularly severe as lenders continue to cut back. 

Related:
A rising wave of property defaults threatens hundreds of US banks
https://www.telegraph.co.uk/business/2023/10/27/rising-wave-property-defaults-threatens-us-banks/
Vulnerable lenders are being squeezed on all sides as a debt-laden real estate sector succumbs to hybrid working

Are Money Market Funds Becoming Too Popular?

How This Year’s Hottest Investment Could End Up Costing You
https://www.wsj.com/finance/investing/how-this-years-hottest-investment-could-end-up-costing-you-a4717f20
Money-market funds are seeing record interest, but advisers say cash is no substitute for stocks and bonds 

Related:

Monday, October 30, 2023

China's BRI

Has China's Belt and Road Initiative been a success?


China Invested $1 Trillion to Gain Global Influence. Can That Go On?
https://www.nytimes.com/2023/10/16/business/chinas-belt-and-road-initiative-bri.html
Xi Jinping enhanced China’s sway in the world by lending money for infrastructure. Now he’s collecting debts and rethinking his signature aid initiative.
 
China Got a Big Contract. Nepal Got Debt and a Pricey Airport.
https://www.nytimes.com/2023/10/16/business/nepal-pokhara-airport-china.html
China called the project a “signature” of its cooperation with Nepal. Insiders and documents reveal the pitfalls of China’s infrastructure-at-any-cost model.
 
In Global Slowdown, China Holds Sway Over Countries’ Fates
https://www.nytimes.com/2022/10/06/business/china-debt-economy-global-slowdown.html
The lender of choice for many nations over the past decade, Beijing now has the power to cut them off, lend more or forgive some of their debts. 

BRI is only first step in China's strategy for a new world order

https://asia.nikkei.com/Opinion/BRI-is-only-first-step-in-China-s-strategy-for-a-new-world-order


Italy's Belt and Road blues highlight hopes for India-Europe corridor
https://asia.nikkei.com/Spotlight/Asia-Insight/Italy-s-Belt-and-Road-blues-highlight-hopes-for-India-Europe-corridor
New route runs into questions over China's port footholds and Middle East war

What Happened to Turkey?

Turkey is celebrating 100 years as a republic. But today’s nation is a long way from 1923’s secular state
https://www.cnn.com/2023/10/30/middleeast/turkey-100-year-anniversary/index.html 

Will China Invade Taiwan?

Rights of Women in Islamic Countries

Afghan women died in earthquake as they feared Taliban punishment for not wearing hijab
https://www.telegraph.co.uk/world-news/2023/10/30/women-died-earthquake-afghanistan-fear-taliban-hijab/
Strict laws forbidding men from mixing with women who are strangers led to a larger female death toll.
 
Iran arrests lawyer at funeral of girl who died after metro incident
https://www.theguardian.com/world/2023/oct/30/iran-arrests-top-rights-lawyer-at-funeral-of-teenage-girl-who-died-after-metro-incident
Nasrin Sotoudeh arrested at funeral of Armita Garavand, who died after alleged encounter with morality police, amid reports of police beatings and arrests at cemetery 

The West Is Kidding Itself About Women’s Freedom in Saudi Arabia
https://www.nytimes.com/2022/08/19/opinion/saudi-arabia-women-rights.html
 
Women, girls struggle for basic rights in Afghanistan one year after the Taliban takeover
https://www.pbs.org/newshour/show/women-girls-struggle-for-basic-rights-in-afghanistan-one-year-after-the-taliban-takeover

Pay and Effort


Uniquely American Epidemic

Tracking mass gun violence in the U.S.
https://www.washingtonpost.com/nation/interactive/mass-shootings/
There have been 450 mass killings with guns since 2006 

China Needs a New Growth Model

How China Can Save the World – and Itself
https://www.project-syndicate.org/commentary/china-growth-emissions-tied-to-bad-investment-model-by-gernot-wagner-and-conor-walsh-2-2023-10
With China’s economic growth slowing at the same time that its emissions continue to rise, it is clear that its carbon-intensive investment model has run its course. Chinese leaders urgently need to follow advanced economies in shifting toward greater domestic consumption and reduced energy demand.
 
How China Creates Its Own Market
https://www.project-syndicate.org/commentary/china-development-strategy-shift-from-export-to-import-promotion-by-zhang-jun-2023-10
China’s export-driven economic model, which fueled its rapid GDP growth over the past three decades, has been yielding diminishing returns. But as the Chinese economy shifts toward a new strategy based on boosting household consumption, the development of its domestic market has been slower than anticipated. 

Should Europe Reconsider its Immigration Policies?

Controversial Views:
Gaza and the End of Germany’s Willkommenskultur
https://www.project-syndicate.org/commentary/hamas-attack-changed-german-public-opinion-immigration-by-michael-broning-2023-10
Concerns over migration were already on the rise in Germany, owing to a dramatic increase in asylum seekers, a looming recession, and strained resources. But Hamas’s attack on Israel, the resulting war, and a surge in anti-Semitism across the country have hardened German sentiment on immigration policy. 

British society will pay a terrible price for indulging extremism
https://www.telegraph.co.uk/news/2023/10/29/british-society-will-pay-a-terrible-price-for-indulging-ext/
Nick Timothy notes:
Meanwhile Islamist radicals, and organisations often set up and supported by foreign governments, have learned to exploit the absurdities of our modern politics. They operate the mechanics of our identity corporatism and competitive victimhood with skill. The Crown Prosecution Service, which helped to decide not to prosecute those chanting “jihad” last week, is advised on hate crime by the chair of Finsbury Park Mosque, who has praised Hamas as “martyrs of the resistance”. From the military to the prison service, the public sector is full of such examples.
This extremism, and the radical diversity of our society, with its ethnic tensions and imported hatreds, means the assumptions that informed traditional British policy – pragmatic, informal, light-touch – no longer hold. The diminished commitment to shared norms and our weaker common identity means there is less social trust to sustain our freedoms in the conventional way. The sooner we realise this, the less painful will be the changes we face.

Janet Daley asks:
https://www.telegraph.co.uk/news/2023/10/28/isnt-hubristic-to-think-western-civilisation-can-be-saved/
We are facing a challenge now, from a (very small) faction within our own society, for which liberalism and tolerance cannot be an answer because liberalism and tolerance are themselves the enemy. How do nations whose political and social systems are based on the principle of inclusion and equality deal with a minority which explicitly rejects those principles?
This is the liberal dilemma: because we advocate tolerance, must we also tolerate openly professed intolerance? And if we do tolerate it, do we permit it to prevail only within its own community, or should it be allowed to influence the attitudes and language of the nation (and its public media) at large?

Civilisational conflict defines our age. It mustn’t play out on our streets
https://www.telegraph.co.uk/news/2023/10/15/civilisational-conflict-defines-our-age/

Cracks in the Melting Pot? Religiosity and Assimilation among the Diverse Muslim Population in France
https://www.journals.uchicago.edu/doi/10.1086/712804
Abstract
The maintenance of high religiosity levels among Muslim youths in Western Europe constitutes a puzzle in need of an explanation. Focusing on France and using a new empirical strategy for the quantitative study of cultural differences between heterogeneous populations, this study first demonstrates that French Muslims form a diverse group yet one with a consistent and sizable “religiosity differential” resisting intergenerational assimilation to native levels. It then formulates and tests five hypotheses to explain the second generation’s delayed religious assimilation. Material insecurity, the perception and self-report of discrimination, parental religious socialization, transnational ties with the origin country, and neighborhood ethnic segregation are all influential but with an uneven impact across subgroups within native and Muslim populations. Together, results suggest that the religiosity differential stems from a mixture of cultural transmission from the context of origin and blocked acculturation due to stratification and social closure in the context of destination. 

Inflation and Economic Slack

Does Strong Growth Fuel Inflation? Fed Debates Whether Old Model Still Applies
https://www.wsj.com/economy/central-banking/does-strong-growth-fuel-inflation-fed-debates-whether-old-model-still-applies-a9e3cdbc
WSJ’s Nick Timiraos on output gap:
The workhorse models that Fed and private-sector economists use to forecast inflation compare total demand for goods and services with the total supply, called “potential output.” When demand is below potential, the resulting output gap places downward pressure on inflation. When demand is above potential, that negative output gap puts upward pressure on inflation. 
Most economists believe the output gap is currently close to zero, if not negative”.
 
---
Timiraos has output gap backwards. In fact, t
he output gap is currently positive. When aggregate demand or actual real GDP is above potential, you get a positive output gap. 

As the IMF notes:

“The output gap is an economic measure of the difference between the actual output of an economy and its potential output. Potential output is the maximum amount of goods and services an economy can turn out when it is most efficient—that is, at full capacity. Often, potential output is referred to as the production capacity of the economy.
Just as GDP can rise or fall, the output gap can go in two directions: positive and negative. Neither is ideal. A positive output gap occurs when actual output is more than full-capacity output. This happens when demand is very high and, to meet that demand, factories and workers operate far above their most efficient capacity. A negative output gap occurs when actual output is less than what an economy could produce at full capacity. A negative gap means that there is spare capacity, or slack, in the economy due to weak demand”.

 
--- 
Typically, economists measure output gap as noted below.


---

DATA ISSUES:
We cannot use FRED database to check output gap right now because the Real GDP has been updated to constant 2017 dollars while CBO's Potential GDP estimate is reported in constant 2012 dollars. You cannot directly compare the two.




Sunday, October 29, 2023

Gen X – The Forgotten Generation

My Generation: Anthem for a forgotten cohort
https://harpers.org/archive/2023/09/my-generation/
Justin E. H. Smith:
It seems, now, that the historical meaning of Gen X’s famous aversion to selling out cannot really be understood without considering the world that was being actively created by our parents in the years of our generation’s formative experiences. We were, it seems to me now, doing our best to preserve postwar youth culture (and even interwar youth culture, as we’ve seen) against the rising force that would, soon enough, cast us into whatever came next: the world whose most important narratives are shaped by algorithms, and in which the horror of selling out no longer has any purchase at all, since the ideal of authenticity has been switched out for the hope of virality. We tried, and we failed, to save the world from our parents—that is, to reverse or at least slow down the degeneration of the hopes that they themselves had once cherished. And because we failed, we have been written out of history. 

Saving Capitalism

Western capitalism is crumbling – but it can be saved
https://www.telegraph.co.uk/news/2023/10/29/western-capitalism-is-crumbling-but-it-can-be-saved/
HELENA MORRISSEY & PAUL MARSHALL:
We must recognise two fundamental points. First, we cannot lose sight of the importance of free markets and exchange as the primary driver of prosperity over the past 200 years. Scientific innovation and free markets came together to create the Industrial Revolution. In the past 75 years, extreme poverty across the world has fallen from 90 per cent to 10 per cent. It has halved in the past 20 years alone. Our best hope of finding solutions to today’s challenges still lies in human ingenuity, which can be unleashed through the market economy.
Second, and just as importantly, we must not deny that free enterprise without good governance leads to corruption and ultimately injustice. The way in which goods and services are exchanged mirrors human nature. For this reason, we need a return to character. Free markets only thrive in societies where there is a widespread acceptance of virtue – where people are respectful of each other and mindful of the common good.
 
Related:
https://www.imf.org/en/Publications/fandd/issues/2023/06/POV-riskless-capitalism-rajan-zingales 

The FTX Soap Opera

Inside Sam Bankman-Fried’s Family Bubble
https://www.newyorker.com/magazine/2023/10/02/inside-sam-bankman-frieds-family-bubble
At Stanford Law School, Joseph Bankman and Barbara Fried specialized in ethics and social fairness. Now that their son stands accused of one of the largest financial frauds in U.S. history, they’re scrambling for legal escape routes. 

Modern Finance - Entertaining and Informative Reads

Finance:
In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest
https://www.amazon.com/Pursuit-Perfect-Portfolio-Insights-Pioneers/dp/0691215200/
Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance
https://www.amazon.com/Trillions-Renegades-Invented-Changed-Finance/dp/0593087682/
Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street
https://www.amazon.com/Black-Edge-Inside-Information-Wanted/dp/0812995805
The Bond King: How One Man Made a Market, Built an Empire, and Lost It All
https://www.amazon.com/Bond-King-Market-Built-Empire/dp/1250120845/
The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution
https://www.amazon.com/Man-Who-Solved-Market-Revolution/dp/073521798X/
The World for Sale: Money, Power, and the Traders Who Barter the Earth's Resources
https://www.amazon.com/World-Sale-Traders-Barter-Resources/dp/0197651534/
Boomerang: Travels in the New Third World
https://www.amazon.com/Boomerang-Travels-New-Third-World/dp/0393343448/
When Genius Failed: The Rise and Fall of Long-Term Capital Management
https://www.amazon.com/When-Genius-Failed-Long-Term-Management/dp/0375758259/ 
Against the Gods: The Remarkable Story of Risk

Monetary History:
The Price of Time: The Real Story of Interest
https://www.amazon.com/Price-Time-Real-Story-Interest/dp/0802160069/
The Lords of Easy Money: How the Federal Reserve Broke the American Economy 
https://www.amazon.com/Lords-Easy-Money-Federal-American/dp/1982166649/
Lords of Finance: The Bankers Who Broke the World 
https://www.amazon.com/Lords-Finance-Bankers-Broke-World/dp/0143116800/
The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order
https://www.amazon.com/Battle-Bretton-Woods-Relations-University/dp/0691162379/

IMF's Gita Gopinath on Fiscal Sustainability

The temptation to finance all spending through debt must be resisted
https://www.ft.com/content/26f17a3f-2f64-45df-aff2-d0476dd53d42
Fiscal policy in many countries is on an unsustainable path 

Western Media's Coverage of Israel and India

The BBC has become a global laughing stock, but the joke isn’t funny
https://www.telegraph.co.uk/news/2023/10/29/the-bbc-has-become-a-laughing-stock-but-the-joke-isnt-funny/

Elite disinformation is a far greater problem than fake news on Twitter
https://www.telegraph.co.uk/news/2023/10/22/gaza-war-israel-hamas-disinformation-twitter-social-media/

 
The BBC’s deep-rooted prejudice is fuelling the poison of anti-Semitism
https://www.telegraph.co.uk/news/2023/10/21/bbcs-deep-rooted-prejudice-fuelling-poison-of-anti-semitism/
 
Western Media's Bias Against India Exposed

Understanding Modern India – The Single Best Recent Article:
India’s Governance Deficit: A Contrarian View
https://americanaffairsjournal.org/2023/08/indias-governance-deficit-a-contrarian-view/

Max Corden - A Brilliant International Economist

Trade theory and trade policy: The work of Max Corden, 1927-2023
https://cepr.org/voxeu/columns/trade-theory-and-trade-policy-work-max-corden-1927-2023 

The Mass Protests of 2010s

The mass protest decade: why did the street movements of the 2010s fail?
https://www.theguardian.com/world/2023/oct/10/the-mass-protest-decade-why-did-the-street-movements-of-the-2010s-fail
From Brazil to Egypt, Turkey to Hong Kong, the 2010s saw a series of huge public uprisings. Yet many of them led to the opposite of what they asked for. I spoke to more than 200 participants across 12 countries to find out why 

Stocks versus Bonds - What do the Pros Think?

What Makes This Market Correction So Confusing
https://www.wsj.com/finance/investing/what-makes-this-market-correction-so-confusing-bd504e79
The stock-market correction has plenty of possible explanations—from high interest rates to impending recession—but none are satisfactory on their own.


Decoding the (Almost) 5% 10-Year Treasury Yield
https://www.wsj.com/finance/investing/decoding-the-almost-5-10-year-treasury-yield-9cb86b27
Surging Treasury yields have driven up U.S. borrowing costs. Here are factors behind their climb and why some investors think they have peaked.

Big Money Pros Are Split on the Outlook for Stocks. But They Are Fans of Bonds.
https://www.barrons.com/articles/big-money-poll-stock-market-bonds-economy-outlook-375aebae 

Are Stocks a Better Buy or Bonds with Treasuries at 5%?
https://www.bloomberg.com/opinion/articles/2023-10-30/are-stocks-a-better-buy-or-bonds-with-treasuries-at-5
History suggests long-term, good-quality corporate debt or mortgage securities are a good bet.

Related:

The Surprising Resiliency of the American Consumer

Five Ways Americans Keep Proving Economists Wrong
https://www.wsj.com/economy/consumers/5-things-us-economy-8a588781
A mix of job security, high savings and skepticism about the future are keeping U.S. consumers’ wallets open 

Related:
Consumer Retreat Starts in Boats and Motorcycles
https://www.bloomberg.com/opinion/articles/2023-10-27/industrial-strength-boats-motorcycles-aren-t-selling-like-they-used-to-lo8wkbpg
Big-ticket discretionary expenses are the first to get cut when the economic mood shifts.
 
Slump in Big Purchases Clashes with Government’s Strong Consumer Data
https://www.bloomberg.com/news/articles/2023-10-27/slump-in-big-purchases-clashes-with-macro-data-s-strong-consumer

Economic Performance – Comparing EU and USA

The European Union’s remarkable growth performance relative to the United States
https://www.bruegel.org/analysis/european-unions-remarkable-growth-performance-relative-united-states
The EU has outperformed the US on per-capita output growth; in terms of output per hour worked, some EU countries are as productive as the US 

Downside of Mixing Business with Politics

The War That Broke Social Media
https://www.bloomberg.com/news/articles/2023-10-26/israel-hamas-war-shows-how-broken-social-media-has-become
The platforms that found popularity by helping disseminate trustworthy, real-time information now seem to showcase anger, chaos and infighting.
 
Corporate America is a new battlefield in US politics, and Matt Oczkowski's insights have become key to navigating the culture wars.
https://www.bloomberg.com/news/features/2023-10-25/bud-light-target-boycotts-show-how-culture-wars-came-to-retail-after-2020 

Reaction to Hamas Attack Leaves Some Jews in Hollywood Feeling Unmoored
https://www.nytimes.com/2023/10/29/business/hamas-attack-hollywood-jews.html 

Rethinking Globalization and Free Trade


U.S. eyes 5-year timeline for China chip decoupling
https://asia.nikkei.com/Business/Tech/Semiconductors/U.S.-eyes-5-year-timeline-for-China-chip-decoupling
Extended export waivers for Samsung, TSMC and more indicate shift in Washington 


Has the Political Right Given Up on Free Trade?
Republicans and Isolationism
Why Trump Is Right About Tariffs
https://www.wsj.com/economy/trade/why-trump-is-right-about-tariffs-3cad4097
Taxing imported goods is unpopular with economists, but it could help the U.S. lower the trade deficit, strengthen its industrial base and safeguard national security.
Critiques:
https://www.cato.org/publications/reality-american-deindustrialization
https://www.cato.org/blog/tariffs-rescue-domestic-manufacturing-are-bad-solution-non-existent-problem

Xi's Blunders and China's Growing Economic Risks

China’s Great Leap Backward
https://www.project-syndicate.org/commentary/china-undoing-crucial-economic-reforms-by-jeffrey-frankel-2023-10
China’s ongoing economic slowdown is partly the result of its failure to implement crucial structural reforms that would have enabled it to escape the middle-income trap. While previous Chinese leaders saw economic prosperity as the key to maintaining popular support, Xi Jinping has prioritized political control over growth. 

China’s Age of Malaise
https://www.newyorker.com/magazine/2023/10/30/chinas-age-of-malaise
Party officials are vanishing, young workers are “lying flat,” and entrepreneurs are fleeing the country. What does China’s inner turmoil mean for the world?
 
Politics poses the biggest threat to economic growth in China
https://www.ft.com/content/5c88b523-9312-4057-948b-0f0ac625725d 

Related:

Out-of-the-Box Thinking

Guaranteed income? 14th grade? Before AI, tech fears drove bold ideas.
https://www.washingtonpost.com/history/2023/10/29/automation-technology-fear-artificial-intelligence/
 

How Trudeau Made a Mess of Canada's Immigration System

The Liberals broke the immigration system. But better is always possible
https://www.theglobeandmail.com/business/commentary/article-the-liberals-broke-the-immigration-system-but-better-is-always/
The key principle is that immigration should be designed to benefit Canada economically. The main goal should be choosing immigrants who offer the greatest benefit to Canada, by being mostly more educated and more skilled than the average Canadian, and thus likely to be more productive and earn higher wages. The right method for selecting these economic immigrants is the points system.
A government that wanted maximum benefits for Canada would have taken the above and doubled down. Instead, the Liberals have spent the past eight years watering it down.
In so doing, the Liberals have undermined the country’s long-standing pro-immigration consensus. Recent polls suggest that somewhere between a plurality and a majority of Canadians want lower levels of immigration.


How Ottawa ignored its own warning and made Canada’s refugee crisis even worse
https://www.theglobeandmail.com/opinion/editorials/article-how-ottawa-ignored-its-own-warning-and-made-canadas-refugee-crisis/
 
The Liberals’ immigration blueprint is unsound, and will hinder the economy it seeks to help
https://www.theglobeandmail.com/opinion/article-the-liberals-immigration-blueprint-is-unsound-and-will-hinder-the/ 

Canada’s Double Standards on Extremism

 

Saturday, October 28, 2023

Patent and Biopiracy: Appropriation of Indigenous Knowledge by Western Firms

How one man fought a patent war over turmeric
https://www.npr.org/2023/09/01/1197321273/turmeric-india-biopiracy-patent-tkdl
Back in the 1990s, Dr. Raghunath Mashelkar was in his office in New Delhi when he came across a puzzling story in the newspaper. Some university scientists in the U.S. had apparently filed a patent for using turmeric to help heal wounds. Mashelkar was shocked, because he knew that using turmeric that way was a well known remedy in traditional Indian medicine. And he knew that patents are for brand new inventions. So, he decided to do something about it – to go to battle against the turmeric patent.
But as he would soon discover, turmeric wasn't the only piece of traditional or indigenous knowledge that had been claimed in Western patent offices. The practice even had its own menacing nickname - biopiracy.

Determinism versus Free Will

How Can Determinists Believe in Free Will?
https://www.newyorker.com/magazine/2023/11/13/determined-a-science-of-life-without-free-will-robert-sapolsky-book-review
Some people think that we can’t be held responsible for what we do, given that our actions are the inevitable consequence of the laws of nature. They’re only half right.


Robert Sapolsky on Determinism, Free Will, and Responsibility

The behavioral scientist engagingly lays out the reasons why our every action is predetermined – and why we shouldn’t despair about it
https://www.theguardian.com/books/2023/oct/24/determined-life-without-free-will-by-robert-sapolsky-review-the-hard-science-of-decisions

Africa and Global Population Trends

Africa has the fastest growing, youngest population of any continent. By 2050, one in four people on the planet will be African.
https://www.nytimes.com/interactive/2023/10/28/world/africa/africa-youth-population.html
 
One Year in the Infuriating and Humiliating Search for a Job in South Africa
https://www.nytimes.com/2023/11/11/world/africa/job-search-unemployment-south-africa.html


Two Ways of Looking at the West’s Population Dilemma
https://www.nytimes.com/2023/11/03/opinion/israel-gaza-mass-migration.html

Related:

Friday, October 27, 2023

Sticky Inflation?

Inflation Trends Keep Fed Rate Hikes on Pause
https://www.wsj.com/economy/central-banking/inflation-trends-likely-to-keep-fed-rate-hike-pause-on-track-7e0b4425
Underlying price gains picked up in September, but not enough to prompt the central bank to raise interest rates next week 



The Modern Day Job Search Process

Job Seeker's 500 Applications Reveal Frustration in Labor Market
https://www.bloomberg.com/news/articles/2023-10-27/how-many-jobs-should-i-apply-to-candidates-aim-for-500-in-cooling-labor-market
More people seeking employment are leveraging technology to mass apply to open positions and many applicants struggle to find work. 

Foreign Policy Challenges

CRE and Regional Banks

A rising wave of property defaults threatens hundreds of US banks
https://www.telegraph.co.uk/business/2023/10/27/rising-wave-property-defaults-threatens-us-banks/
Vulnerable lenders are being squeezed on all sides as a debt-laden real estate sector succumbs to hybrid working

Big banks had a strong Q3. What about regional banks?

https://www.cnn.com/2023/10/24/business/regional-banks-q3-earnings/index.html

Thursday, October 26, 2023

2023Q3 GDP Growth Spurt: The Taylor Swift/Barbie Effect

U.S. Economy’s Summer Surge May Not Last
https://www.wsj.com/economy/central-banking/us-gdp-economy-third-quarter-f247fa45
Gross domestic product grew at a 4.9% annual rate in the third quarter, much stronger than economists were anticipating just a few months ago. But there are warning signs underlying the eye-popping numbers

Why No Recession Yet? Thank the US Consumer

https://www.bloomberg.com/opinion/articles/2023-10-27/why-no-recession-yet-thank-the-american-consumer

The question isn’t whether Americans will eventually cut back on their spending, but whether they’ll cause a recession when they do.

 

Consumers keep driving the economy even as business investment lags.

https://www.wsj.com/articles/third-quarter-growth-gdp-consumer-spending-business-investment-economy-fb6b0e26

 
Related:

Wednesday, October 25, 2023

Fiscal Policy versus Monetary Policy


Rising Interest Rates Mean Deficits Finally Matter
https://www.wsj.com/economy/central-banking/rising-interest-rates-mean-deficits-finally-matter-74249719
Investors ignored deficits when inflation was low. Now they are paying attention and getting worried.

Tackling International Tax Evasion


Time to Reconsider the 60-40 Investment Strategy?

Your ‘Set It and Forget It’ 401(k) Made You Rich. No More.
https://www.wsj.com/finance/investing/your-set-it-and-forget-it-401-k-made-you-rich-no-more-c06552c
Stock-and-bond portfolios that worked for the past 40 years aren’t ready for what’s coming
 
The 60-40 Strategy Just Had Its Worst Year in Generations
https://www.wsj.com/finance/investing/investing-stocks-bonds-strategy-changing-91b7589d
Higher interest rates and inflation are upending millions of Americans’ retirement planning. The classic 60-40 stock-to-bond ratio isn’t cutting it anymore. 

Tuesday, October 24, 2023

Revisiting a Masterpiece

The Second Coming by W.B. Yeats (1919):

https://www.poetryfoundation.org/poems/43290/the-second-coming

 

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: a waste of desert sand;
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Wind shadows of the indignant desert birds.
The darkness drops again but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born? 


McKinsey and the Consulting Racket



Consultants and the Crisis of Capitalism

https://www.project-syndicate.org/commentary/consultants-bring-more-problems-than-benefits-by-mariana-mazzucato-and-rosie-collington-2023-03




Pay scale at Top Consulting Firms:
https://www.ft.com/content/9e3da189-90d9-45e7-ad91-40cca03bc3d9
McKinsey pays a base salary of $192,000 for a new recruit from business school, according to Management Consulted, a company that coaches students through consulting firms’ interview process and tracks pay via offer letters. The base salary for a candidate with an undergraduate degree is $112,000.
Bain & Co offers the same, and BCG pays $2,000 less, according to Management Consulted. Signing and performance bonuses can swell year-one pay to $267,000 or more for MBAs and $140,000 or more for undergraduate hires, it found. The firms do not publicly disclose their pay.

Ottawa paid nearly $670,000 for KPMG’s advice on cutting consultant costs
https://www.theglobeandmail.com/politics/article-federal-government-kpmg-consulting/

Uncertainty Clouds Investment Outlook

Money Managers With $100 Trillion Confront End of the Bull Market
https://www.bloomberg.com/news/features/2023-10-22/active-vs-passive-investing-money-managers-confront-end-of-bull-market
Active asset managers have been bleeding cash, and strategies to stem the outflows haven't had much effect. Many may not survive a bear market.
 
A Major Driver of US Equities in the Past Decade Is Fading Fast
https://www.bloomberg.com/news/articles/2023-10-24/a-major-driver-of-us-equities-in-the-past-decade-is-fading-fast
Corporate America’s spending on share buybacks, a driver of the US stock market rally for over a decade, is slowing in the face of higher-for-longer interest rates and an uncertain economic backdrop.
 
US IPO Market Teetering on Edge After Fall Class Disappoints
https://www.bloomberg.com/news/articles/2023-10-24/us-ipo-market-teetering-on-edge-after-fall-class-disappoints 

How the Highest Bond Yields in 16 Years Could Chill the Hot U.S. Economy
https://www.wsj.com/economy/how-the-highest-bond-yields-in-16-years-could-chill-the-hot-u-s-economy-41a11ec6



Jamie Dimon Calls Central Banks ‘100% Dead Wrong’ on Forecasts


The New Normal is the Old Normal

New Normal or No Normal? How Economists Got It Wrong for 3 Years.
https://www.nytimes.com/2023/10/24/business/economy/economy-interest-rates-inflation.html
Economists first underestimated inflation, then underestimated consumers and the labor market. The key question is why.

The Price of Money Is Going Up, and It’s Not Because of the Fed
https://www.bloomberg.com/news/articles/2023-10-19/why-the-price-of-money-is-going-to-stay-high-for-decades
A model devised by Bloomberg Economics that looks as far out as 2050 shows Treasury yields may stay as high as 6%.


MY TAKE: 
Traditional recession indicators have misfired — are we in for a sneaky recession?
Will the ‘Great Moderation’ Give Way to the ‘Great Volatility’? By VIVEKANAND JAYAKUMAR
https://www.ut.edu/uploadedFiles/Academics/Business/TBESpring2023_Final.pdf 

Monday, October 23, 2023

Age and Politics

Wrong Assumptions and Shifting Paradigms

War Has Smashed Assumptions About Israeli-Palestinian Conflict
https://www.nytimes.com/2023/10/23/world/europe/israeli-hamas-middle-east-implications.html
Some paradigms taken for granted about Israel and the Palestinians, both in Gaza and the West Bank, have been broken. So has the idea that Washington can ignore the Middle East. 

Getting Used to the New Interest Rate Era

How High Interest Rates Sting Bakers, Farmers and Consumers
https://www.nytimes.com/2023/10/23/business/economy/interest-rates-economy.html
Everyone who relies on credit in America is confronting a new reality: Money will cost more for a good long while.

The Downside of Helicopter Parenting

America Is No Longer Raising a Nation of Risk-Takers
https://www.washingtonpost.com/business/2023/10/23/is-america-still-a-nation-of-risk-takers-too-many-parents-say-no/9f0cabfa-7197-11ee-936d-7a16ee667359_story.html
Allison Schrager:
Like many people my age, I look back fondly on my free-range childhood. Now many of my generation have become neurotic helicopter parents — and their children are paying the price.
Over the last 60 years, in nearly every wealthy country (except France), the amount of time parents spend with their kids has steadily increased. And while parental engagement is better than parental neglect, this hyperattention may be harming children.
A recent paper in the Journal of Pediatrics speculates that the increased anxiety and worsening mental health of children is correlated with more time spent with parents and less in unstructured, non-supervised play. Historically, free play and time away from parents was an important part of childhood: It helped children develop independence, learn to handle conflict and disappointment, and feel a sense of control over their environment. 

The Scourge of Grade Inflation

If Everyone Gets an A, No One Gets an A
https://www.nytimes.com/2023/10/23/opinion/grade-inflation-high-school.html
Tim Donahue:
Also, it’s just so much easier to give good grades!
But when so many adolescent egos rest upon this collective, timorous deflection, it doesn’t do an awful lot of good. Passing off the average as exceptional with bromides like “wonderful” and “impressive” soothes the soul, but if there’s nothing there to modify these adjectives, teachers do little service to their colleagues who receive these students the next year…
It’s so easy to see grades as sheer commodities that we all but overlook their actual purpose — so far as I know — of providing feedback.
 
AWOL from Academics
https://www.harvardmagazine.com/2024/03/university-people-the-undergraduate-balance
In stark contrast, English professor James Engell told me that when he was a Harvard student, “there was a sense…that the primary reason for your being in the College was to take courses, and to spend a lot of time on them”—a belief which, in his eyes, has “eroded some.” Indeed, data from the Crimson’s senior survey indicates that students devote nearly as much time collectively to extracurriculars, athletics, and employment as to their classes…
HALF OF THE BLAME can be assigned to grade inflation, which has fundamentally changed students’ incentives during the past several decades. Rising grades permit mediocre work to be scored highly, and students have reacted by scaling back academic effort. I can’t count the number of times I’ve guiltily turned in work far below my best, betting that the assignment will nonetheless receive high marks.
 
 
Teachers Can’t Hold Students Accountable. It’s Making the Job Miserable.
https://www.nytimes.com/2023/10/04/opinion/teachers-grades-students-parents.html

Nearly Everyone Gets A’s at Yale. Does That Cheapen the Grade?
https://www.nytimes.com/2023/12/05/nyregion/yale-grade-inflation.html
A report found that close to 80 percent of grades were in the A range last academic year. A pandemic-era bump has stuck.
 
YALE - Grade Report 2022-23:
https://static01.nyt.com/newsgraphics/documenttools/9a0c325a00990358/6c01cc82-full.pdf