"The Ruin and Revival of the City that Built America"

From Messy Nessy Chic, February 8, 2023:

Some American companies are such a part of our everyday lives, they’re taken for granted, the likes of Apple, Microsoft and Google for example. But there is another company that although it can be seen everywhere, no-one notices. Even more mysteriously, the company no longer exists. But walk through any American city, or picture its greatest manmade landmarks and the chances are it was made with Bethlehem Steel. For over a century, the star of Bethlehem Steel burned bright, becoming one of the world’s largest producers of steel. Based in a small city in Pennsylvania, the company built the backbone of America; from the Chrysler Building to the Empire State Building, the Hoover Dam, Madison Square Garden, Rockefeller Centre, the Golden Gate Bridge, even the prison island of Alcatraz were just some of the iconic structures made with Bethlehem Steel.

By 1940, a staggering 80% of New York’s famous skyline was built with Bethlehem Steel. But by the 1990s, the unthinkable happened, and this titan of American industry went bankrupt. The blast furnaces closed, taking most of the city of Bethlehem’s fortunes with it. One winter’s day we went to visit the haunting ruins of the city that built America....

....MUCH MORE, some of the pictures have to be seen to be believed.

Because we take a more prosaic view of things, here's one of the illustrations we used on the moneymaking opportunities of war:

....the "War Brides", companies that would profit from WW I. GM fit into both categories. One of the big movers of the 1914-1918 bull market was Bethlehem Steel whose stock traded through 1913 with a desultory $30-handle and went to $600 in 1915:

"Wall Street has purchased hundreds of thousands of single-family homes since the Great Recession...."

 From CNBC, February 21/22:

• Corporations backed by private equity groups such as Blackstone and Pretium Partners bought tens of thousands of homes across the U.S. Sun Belt.
• Prices for detached homes have increased faster in key Sun Belt states than the national average.
• Institutional investors do not yet control a large market share in housing, but analysts writing at MetLife Investment Management suggest they could by 2030.

 Institutional investors may control 40% of U.S. single-family rental homes by 2030, according to MetLife Investment Management. And a group of Washington, D.C., lawmakers say Wall Street needs to back away from the market.

“What we’re saying is don’t have private equity buying up single-family homes,” said Rep. Ro Khanna, a Democrat representing California’s 17th Congressional District. Khanna is the lead author of the Stop Wall Street Landlords Act of 2022. “What’s outrageous is your tax dollars are helping Wall Street buy up single-family homes,” he said in an interview with CNBC.

The single-family rental industry got its start with government backing in the fallout after the 2008 financial crisis. “It was that rare opportunity that attracted the institutions to build a portfolio out of these foreclosed properties,” said Steven Xiao, an assistant professor of finance and managerial economics at the University of Texas at Dallas....

....MUCH MORE

We'll be coming back to this because, as the article implies, the party is only getting started.

Previously:
"What Happens When Investment Firms Acquire Trailer Parks"
Housing: Blackstone's Adventures In Denmark (BX)
In Case You Missed It: "Blackstone Puts Finishing Touches on Record Real-Estate Vehicle" (BX)
Opportunistic, thy name is Blackstone.

....And just to hammer home Blackstone's apparent strategy:
Blackstone Unloads 304 Units in SoCal for $204M

• Blackstone's Landlord Subsidiary (Home Partners of America) To Stop Purchasing Homes In 38 Cities Tomorrow
• "The housing recession will continue and eventually flatten house prices, Goldman Sachs economist says"

As the old traders used to say about entering into a position: "Well bought is half sold." 

"Housing Bubble Getting Ready to Pop: The Big Boys Leave, Waiting for Reset"

...Got it? Pull back from the market which a) avoids top-ticking and b) accelerates the downward trend already in place.

Wait.

Deploy cash offers when retail buyers have to contend with comparatively sky-high mortgage rates.

"The World Speculation Made"

From the introduction to a 2021 link to the Boston Review: 

"Neoliberalism’s Bailout Problem"

We used to link to the Boston Review with some regularity until last December when they published and we linked to "To Save the Climate, Give Up the Demand for Constant Electricity" which not only dismissed one of the most attractive features of current {!} electrical systems and grids: being available when you want it, but was also a bit boring in its lack of creativity in addressing the intermittency problem with renewable sources o'leccy.

However

The article before us raises the very interesting point that the Western economies could use a whole lot more of Schumpeter's creative destruction and a whole lot less of the politico-corporatism exemplified by the first inductee into the Climateer Hall of Fame:

The 26th Secretary of War, the Democrat and Republican (!) Senator from Pennsylvania, Simon Cameron

 Our Hero

"The honest politician is one who 
when he is bought, will stay bought."

So, although we disagree with the ultimate policy recommendation, the authors have Minsky doing a drive-by and it's hard to go too far wrong with the good Professor and expositor of stability/fragility/speculation and crisis making the arguments.

From The Boston Review, June 24:
Mainstream economics ignores the massive government interventions that “free market” capitalism requires.....

Because here at Climateer Investing we recycle, we'll reuse that into for today's link.

From the Boston Review, February 15, 2023:

Contemporary life has been deeply molded by financialization. But the speculative imagination can also be a tool for building a more just world.

The cautious merchant and the keen manufacturer were equally unable to resist the speculation. It spread among them like a leprosy. It ruined alike the innocent and the guilty. It periled many a humble home; it agitated many a princely dwelling. Men hastened to be rich and they were ruined. They bought largely; they subscribed eagerly; they forsook their counting-houses or companies; if successful they continued on their course, and if the reverse they too often added to the misery of the homes they had already desolated, by destroying themselves.

—John Francis on the 1846 Railway Mania

The only thing that makes life possible is permanent, intolerable uncertainty: not knowing what comes next.

—Ursula K. Le Guin

Whether in markets or philosophy, speculation tosses the coin of uncertainty in the hope of seeing through a haze-draped future. A mirror (speculum) and a watchtower (specula), it animates a certain vision. From the leaps of scientific revolutions and technological futures to the pursuit of dreams and mystical theologies, speculators have always sought to capture what lies ahead.

At the dawn of finance capitalism, markets vied fervently for control over the power of speculation.

Speculation encompasses a duality at the core of all financial activity. When pushed to its outermost limit, it can unleash formidable destructive forces and lead to the burst of market bubbles, such as seventeenth-century Amsterdam’s notorious tulip craze, the Victorian era’s railway manias, last century’s Great Depression, or the more recent 2008 global financial crisis. During these periods, market “passions” take hold: traders venerate ethereal values with no material referents or links to “fundamentals.” Yet speculation is also the market’s indispensable lubricant. All speculative trades calibrate risks to generate yields and prevent markets from “overheating.” Here’s the definition of “speculation” provided by the Oxford Dictionary of Finance and Banking:

The purchase or sale of something for the sole purpose of making a capital gain. For professional speculators the security, commodity, and foreign exchange markets are natural venues as they cater for speculation as well as investment and trading. Indeed, speculators help to make a viable market and thus smooth out price fluctuations. This is particularly true of commodity futures and option markets.

Speculation’s greatest gift to markets is stability, not crisis: absorbing volatility by “smooth[ing] out price fluctuations” and generating liquidity. For those in the business of trading, speculation means betting on possible future movements of asset prices, but it also involves dealing in risky assets (including derivatives and futures) with the goal of providing insurance against price movements. Speculators, in other words, both “short” and “hedge” uncertainty. Throughout capitalism’s history, defenders and opponents of speculation have foregrounded one function over the other to mark it as a virtue or as a vice.

---

Iconic anarchist thinker Pierre-Joseph Proudhon, in his 1857 Stock Exchange Speculator’s Manual, famously distinguished between the greedy financiers of the Paris stock market—whom he lamented as “pure, corrupt, and unproductive gamblers”—and what he saw as more productive forms of speculation. When sought for its own sake, speculation is circular, autotelic, and parasitic on the real economy. When put to “productive use,” however, it can also be generative, exciting, and imaginative: a source of the “the genius of discovery . . . that invents, innovates . . . [and] creates something from nothing.”

As markets in the global centers of capitalism sought to expand their insatiable financial activities over the course of the nineteenth century, they vied fervently for control over the power of speculation. Just as Proudhon was writing his Manual, a new kind of speculative market was being established some four thousand miles west of the Paris Bourse. In 1848 the Chicago Board of Trade (CBOT) was founded. In the coming decades, it would become the world’s first organized exchange for futures contracts: standardized agreements to buy or sell an “underlying asset” (predominantly grains such as wheat from the city’s hinterland), at a guaranteed price for delivery at a specified future time. Trading futures ostensibly served the hedging side of speculation’s coin, functioning as insurance against volatility for farmers whose harvest was exposed to radical and incalculable weather uncertainties.

Speculators stepped in to take on the unwanted risk at a discount (thus performing a social function), while farmers received security and the market remained liquid. Yet no bushels of grain were being moved because of these trades, and actual contracts never exchanged hands in the CBOT. Soon after the launch of the future contract, the circulation of “phantom wheat” in the pit vastly overtook that of the real grain produced in farms; futures traders engaged in “fictitious dealings” that were entirely unmoored from the corporeal economy. Was this kind of speculation ethical? Was it different from ordinary gambling? Advocates of futures contracts and the CBOT’s influential allies believed so. State courts enshrined the legal right of futures traders to short sell for their alleged positive effect on setting off prices in the real economy, and successive governments sanctioned the promise of even the most fictitious of trades “to financially stabilize an inherently unstable capitalism.” Importantly, speculative bets made in the pit were painstakingly distinguished from the wagers placed outside of incorporated commodities, which were systematically slated. In the mushrooming bucket shops (informal establishments open to anyone who wanted to wager small sums on the price movements of stocks in formal exchanges) strewing U.S. cities of the fin de siècle, speculation was becoming a game for the many....

....MUCH MORE

"If the middle class can’t afford electric cars, what about everyone else?"

From London's CityAM, February 23:

Green innovation always had one big problem to grapple with: affordability. Healthy, organic food is great, but not as long as it’s affordable only for the privileged few clients of Planet Organic. A pair of sustainable socks can cost you up to £30. This is not to say that those who can afford to make those choices shouldn’t; every small step counts, but the price makes the whole system inherently unfair. In very simple terms, it doesn’t work until it works for everyone.

This conundrum is now plaguing the electric cars industry too. Lauded as the revolution in transport, EVs were meant to revolutionise the way we travel around. Many jumped on the bandwagon and got one as soon as they could. But now, as the cost of power skyrockets, people are considering whether the trade-offs of going electric are worth it.

Less than a fifth of car buyers are considering buying an electric vehicle this year, compared with one in four a year ago, new research from AA shows. As inflation pushes general car prices up, and the energy crisis pushes power prices even higher, electric cars risk becoming another item for the few. The chief executive of Stellantis has warned middle classes can’t afford them anymore....

....MUCH MORE

 

If interested see also "Stellantis warns of car market collapse if EVs don't get cheaper" and the links embedded therein.

"Organized Crime in Ukraine and Russia Split Since the Invasion"

From the Organized Crime and Corruption Reporting Project, February 24:

Though they once boasted one of the world’s most robust environments for organized crime since the fall of the Berlin Wall, the criminal ecosystem in Russia and Ukraine has fractured since Russian president Vladimir Putin’s launched his invasion one year ago, according to a new report by the Global Initiative Against Transnational Organized Crime (GI-TOC).

Ukrainian crime figures have now adopted a more patriotic stance on their trade; although that is not to say they still aren’t driven by power and profit.

Before the war, GI-TOC said, the two countries “controlled a lucrative transnational smuggling highway” that brought luxury goods and drugs into Western Europe. Corrupt officials and crime bosses siphoned off millions of dollars that came from Ukraine’s status as a transit country for Russian gas into the West.

Now, however, the year-long invasion has made collaboration between Russian and Ukrainian organized crime groups all but impossible and longstanding business ties are now no longer viable, GI-TOC said, at least for the present.

At the outbreak of the war, Ukrainian intelligence reportedly solicited the services of local crime groups to detect Russian criminals and saboteurs sent to destabilize Ukraine from within.

In the span of a few months, “most Russian criminal actors had been apprehended or ejected from the country,” GI-TOC reported.

The story behind this partnership draws parallels to Operation Underworld during the Second World War, in which U.S. naval intelligence contracted local Italian and Jewish organized crime groups to protect the country’s northeastern seaports from German spies and saboteurs.

Historical crime figures such as Meyer Lansky and Charles “Lucky” Luciano were similarly called upon to reign in black-marketeers who might’ve otherwise pilfered vital war supplies and equipment destined for the European theatre.

In exchange for his cooperation, Luciano’s prison sentence was commuted, though he was deported to Italy after the war and remained there until his death in 1962.

While some in Ukraine’s criminal underworld might similarly see the call to defend their homeland as a chance to wipe the slate clean, others could see it as an opportunity to claim a seat at the table previously controlled by their Russian counterparts....

....MUCH MORE

And from Politico.eu, January 26:

Reporting corruption in a time of war: The Ukrainian journalists’ dilemma
We face a continual tension between holding the government to account, and not wanting the enemy to undermine us by exploiting bad news.

In the first six months of the invasion, Ukrainian journalists and watchdogs decided to put their public criticism of the government on pause | Sergei Supinsky/AFP via Getty Images 

When a major corruption scandal broke in Ukraine last weekend, reporters faced an excruciating dilemma between professional duty and patriotism. The first thought that came to my mind was: “Should I write about this for foreigners? Will it make them stop supporting us?”

There was no doubting the severity of the cases that were erupting into the public sphere. They cut to the heart of the war economy. In one instance, investigators were examining whether the deputy infrastructure minister had profited from a deal to supply electrical generators at an inflated price, while the defense ministry was being probed over an overpriced contract to supply food and catering services to the troops.

Huge stories, but in a sign of our life-or-death times in Ukraine, even my colleague Yuriy Nikolov, who got the scoop on the inflated military contract, admitted he had done everything he could not to publish his investigation. He took his findings to public officials hoping that they might be able to resolve the matter, before he finally felt compelled to run it on the ZN.UA website.

Getting a scoop that shocks your country, forces your government to start investigations and reform military procurement, and triggers the resignation of top officials is ordinarily something that makes other journalists jealous. But I fully understand how Nikolov feels about wanting to hold back when your nation is at war. Russia (and Ukraine’s other critics abroad) are, after all, looking to leap upon any opportunity to undermine trust in our authorities.  

A journalist is meant to stay a little distant from the situation he or she covers. It helps to stay impartial and to stick to the facts, not emotions. But what if staying impartial is impossible as you have to cover the invasion of your own country? Naturally, you have to keep holding your government to account, but you are also painfully aware that the enemy is out there looking to exploit any opportunity to erode faith in the leadership and undermine national security....

....MUCH MORE

I Thought It Was BULLS That Climbed The Wall Of Worry

A repost from 2014.

From the "You don't see that every day" file:

HT: The Awl's "Awesomeness Of Rock-Climbing Bear Difficult To Overstate"

BASF Announces Plant Closures In Its German Hometown

 From Bloomberg's Javiar Blas:

This line from BASF release is brutal:

“BASF’s European customers will continue to be reliably supplied with TDI [a chemical product] from BASF’s global production network with plants in Geismar, **Louisiana**; Yeosu, **South Korea**; and Shanghai, **China**”

(My **empahsis**)

— Javier Blas (@JavierBlas) February 24, 2023

Incipient Drought In France

From Ventusky's Twitter:

France recorded 32 consecutive days without rain (precipitation totals did not exceed 1 mm). It is the longest series since 1959. 😳 This map shows the expected precipitation anomaly in Europe this February: https://t.co/GY3xBJPeir pic.twitter.com/5GerxT1RSm

— Ventusky (@Ventuskycom) February 23, 2023

The giant map of weather at ventusky.com

"Leading scientists agree that cultured meat products won’t give you cancer...."

 From Bloomberg Businessweek, February 7:

Lab-Grown Meat Has a Bigger Problem Than the Lab

Leading scientists agree that cultured meat products won’t give you cancer, but the industry doesn’t have the decades of data to prove it—so it’s trying to avoid the question instead.

If you avoid meat to cut down on animal cruelty, carbon emissions or both, your options are a lot better than they were a decade ago, which is to say they’re … fine. For people who can afford to pay a premium, veggie burgers and nuggets from the likes of Beyond Meat Inc. and Impossible Foods Inc. are a much tastier option than the average imitation-meat entrees of the past. What they aren’t, though, is meat—and many such products are so packed with salt and saturated fat that they probably shouldn’t be a staple of most diets. There is, however, another option on the way for those in search of better guilt-free protein: growing meat from cells in a lab, without raising any living animals for slaughter. Yes, really.

Thank the biotech revolution. Under the right conditions, animal cells can be grown in a petri dish, or even at scale in factories full of stainless-steel drums. For decades, companies such as Pfizer Inc. and Johnson & Johnson have cultured large volumes of cells to produce vaccines, monoclonal antibodies and other biotherapeutics. Now the idea is that we might as well eat these cells, too.

The Big Three startups in the field—Believer Meats, Eat Just and Upside Foods—have raised more than $1.2 billion in combined venture funding to bring products to grocery shelves. From the Bay Area to the Middle East, their research facilities and pilot plants are producing small amounts of chicken that, by most accounts, you’d be hard-pressed to tell didn’t come from a slaughterhouse. Late last year, Upside became the first to receive the US Food and Drug Administration’s informal blessing to bring its products to market. All three companies have announced their first partnerships with restaurants in anticipation of a fuller regulatory thumbs-up.

Some of the companies call their products cultured meat, or cultivated meat, or cell-cultured meat. All of them stress the M-word. “This is meat,” Upside Foods Inc. Chief Executive Officer Uma Valeti said at an industry conference a little more than a year ago. “Calling it anything else, I think, is going to be misleading.” On a cellular level, alternative protein advocates say, it’s no different. And that’s 99.9% true. 

The big honking asterisk is that normal meat cells don’t just keep dividing forever. To get the cell cultures to grow at rates big enough to power a business, several companies, including the Big Three, are quietly using what are called immortalized cells, something most people have never eaten intentionally. Immortalized cells are a staple of medical research, but they are, technically speaking, precancerous and can be, in some cases, fully cancerous.

Don’t worry: Prominent cancer researchers tell Bloomberg Businessweek that because the cells aren’t human, it’s essentially impossible for people who eat them to get cancer from them, or for the precancerous or cancerous cells to replicate inside people at all. You’d be better off worrying about the nitrates (linked with cancer) or fecal matter (a source of deadly infections) found in farm-raised meat. And cow tumors sometimes wind up in store-bought ground chuck, too. Of course, the facts might not matter much if ranchers or other players in the traditional meat industry felt threatened enough to declare a public-relations war. It’s all too easy to imagine misleading Fox News chyrons about chicken tumors and cancer burgers...

...MUCH MORE

Huh, sort of like the anti-muckraker version of Upton Sinclair's The Jungle.

"Poland sends first batch of Leopard 2 tanks to Ukraine"

From The Hill, February 24, 2023:

Poland has delivered its first batch of Leopard 2 tanks to Ukraine, Polish Prime Minister Mateusz Morawiecki announced during a visit to Kyiv on Friday.

“I came here not only with a word of support. Poland, as the first European country, symbolically hands over to you, [Ukrainian President Volodymyr Zelensky], the first four Polish Leopard tanks,” Morawiecki said, per his official Twitter account. “We will deliver more and urge our EU and NATO partners to do the same.”

Warsaw, which has pledged to provide Ukraine with 14 Leopard 2 tanks, was a key figure in the pressure campaign on Berlin last month to allow for the transfer of the German-made tanks to Ukraine....

....MUCH MORE

The Russian commenters are talking about the Battle of Kursk and how good it will be to see Russian tanks destroying german tanks once again. That's not the way it's going to happen. As was shown in Syria, the Leopard 2 is very good tank vs tank. A serious problem for Leopard 2 crews arises if the turret is attacked from above or if the rear of the tank is attacked.

"Stocks slide after hotter-than-expected key inflation print"

 First up, Yahoo Finance with an overview:

U.S. stocks tumbled Friday as the Federal Reserve's most closely watched inflation measure came in stronger than expected, in another sign that price pressures have become sticky into 2023.

The S&P 500 (^GSPC) sank 1.3%, while the Dow Jones Industrial Average (^DJI) plopped nearly 400 points, or 1.2%. The technology-heavy Nasdaq Composite (^IXIC) tanked 1.6%.

U.S. Treasury yields scrambled higher following the reading. The 2-year note surged 10 basis points to 4.8% while the 10-year note gained 7 basis points to 4.86%.

The Personal Consumption Expenditures (PCE) price index — the Fed's preferred assessment of how quickly prices are rising across the economy — rose 0.6% in January and 5.4% from last year. On a "core" basis, which strips out volatile food and energy components, prices rose 0.6% for the month and 4.7% from last year.

The report from the Commerce Department also showed that consumer spending rose 1.8% last month from December after falling the previous month.

The numbers support recent indications inflation is not falling at the pace and extent investors have been hoping for, even as prices have stabilized from the peaks of the current inflation cycle.

“First December CPI was revised higher, and now each reading for January surprised to the upside. Inflation’s like an old boyfriend or girlfriend that keeps showing up when you don’t want to see them," David Russell, Vice President of Market Intelligence at TradeStation said in a note....

....MORE

The cash Dollar Index (DXY) is up 0.61 at 105.20 after having traded at 101.04 on February 1st.

And from ZeroHedge, a deeper dive into rates and expectations: 

Stocks & Bonds Slammed After Hot Inflation Print, Rate-Hike Odds Soar

A much hotter than expected Core PCE print has sparked a dramatic hawkish response across markets.

Expectations for The Fed's terminal rate has spiked to 5.39% and H2 2023 rate-cut expectations have dwindled to single-digits (just 9bps priced in)...

Source: Bloomberg

The market is now fully pricing in 3 x 25bps rate-hikes at the next three FOMC meetings...

With the odds of a 50bps hike in March now up at around 25% (and a 25bps hike fully priced-in....

....MUCH MORE (chart mania) 

Hey! Where are the arrows for the directionally challenged?

(they're coming right up, further into chart mania)

Facile Liars In The Media: Politics and Economics Edition

First up, the Editor-in-Chief of the Atlantic Magazine (and one of the people who lied us into the Iraq War), Jeffrey Goldberg:

"Fetterman has basically been forced to contend with the effects of a severe brain trauma while working an absurdly demanding job in one of the most polarized and toxic political climates the country has ever known." -- @JenSeniorNY:https://t.co/57sey4ucfi

— Jeffrey Goldberg (@JeffreyGoldberg) February 18, 2023

By publishing that "been forced to contend" in the magazine, and then highlighting it on his Twitter feed Goldberg is telling an enormous fib. Senator Fetterman, his wife, and his political handlers knew exactly his physical and mental condition and decided to make the Senate run anyway. 

There is no forcing. and if things are as bad as portrayed, resigning from the Senate is a sensible option. But for Mr. Goldberg, slipping into Decept Mode seems effortless.

Slightly more sophisticated and thus more egregious is the New York Times' Paul Krugman who seems to have embraced Voltaire's dictum as an operating principle:

"Ils ne se servent de la pensée que pour autoriser leurs injustices,
et emploient les paroles que pour déguiser leurs pensées"

—François-Marie Arouet--'Voltaire', Dialogue xiv. Le Chapon et la Poularde (1766).

"Men use thought only to justify their wrong doings, and employ speech only to conceal their thoughts"

Now, with no further ado, JustTheFactsDaily administers what used to be known as a proper Fisking to the Laureate/blogger, February 17:

Krugman’s Accounting of the National Debt is Jailworthy

The national debt has risen at a blistering pace over recent decades and is now higher than any era of the nation’s history—even when adjusted for inflation, population growth, and economic growth (GDP).

Denying this reality, Nobel Prize-winning economist Paul Krugman recently wrote two columns for the New York Times in which he claimed that the debt is an “overhyped issue” and “isn’t all that unusual” from a historical perspective. His attempts to support these assertions employ the kind of fraudulent accounting that could land a corporate executive in jail.

Projections v. Realities

Krugman insists that taming the “federal debt should be well down the list” of government “priorities” after “climate change” and “child poverty” because debt projections have become “much less dire” over the past decade or so. In reality, the debt is far higher than projected, and Krugman’s own words prove it.

In 2009, when the Democrat-controlled Congress and President Obama began racking up debt and projecting $9 trillion in deficits over the coming decade, Krugman wrote that “even if we do run these deficits,” federal debt would be 90% of GDP in 2019, or “substantially less than it was at the end of World War II.”

The debt in 2019 turned out to be 109% of GDP, which is 21% higher than Krugman projected and just 8% below the debt from World War II.

That was one year before government reactions to the Covid-19 pandemic drove the debt/GDP ratio to unprecedented heights. This was mainly caused by state government lockdowns that crushed the GDP as the federal government spent liberally on “Covid relief.”

Even though GDP rebounded as lockdowns were lifted, and the worst inflation in 40+ years has temporarily reduced the debt/GDP ratio, it is still higher than any other period of U.S. history, clocking in at 123% of GDP at the end of 2022:

Worse yet, the national debt is on a trajectory that makes the current debt look small by comparison. Under CBO’s decade-old projections, which have thus far undershot reality, the U.S. debt/GDP ratio is on track to eclipse Britain’s after it was intensely firebombed during World War II.

Because the debt from WW II was the highest in U.S. history, Krugman and other scholars used to argue that the modern debt situation isn’t awful by comparison. What they failed to mention is that the war debt was a passing anomaly caused by the deadliest and most widespread conflict in world history, while the modern debt is a systemic, escalating problem driven by ongoing federal policies.

If left on autopilot, the debt is on track to double WWII levels in the coming three decades and grow thereafter to about nine times the peak of WWII.

Current Law v. Current Policy

Beyond ignoring his own debt projection, Krugman spins a yarn that is diametrically opposed to reality by exploiting his readers’ ignorance about differing types of debt estimates published by the Congressional Budget Office (CBO).

At various times, CBO has calculated two major types of projections for the national debt. The first reflects current law and is called the “extended baseline,” while the other is based on current policy and is called the “extended alternative fiscal scenario.” There are often major differences between these projections, as shown by this chart on the cover page of a 2011 CBO report:

The main reason for these differences is that federal laws are commonly rife with accounting gimmicks and other provisions that understate future debt.

A prime example is the 2010 Affordable Care Act, informally known as Obamacare. This legislation was enacted with a CBO analysis showing it would “produce a net reduction in federal deficits of $143 billion” over the coming decade. In reality, most of the deficit-reducing provisions of the bill weren’t implemented, while nearly all of deficit-increasing ones were.

The chasm between what the Affordable Care Act specified and what actually occurred is so great that its true costs are still unknown. Congress’ Joint Committee on Taxation wrote that it hasn’t calculated the realized budgetary impact of Obamacare “because of the many modifications to that law,” and CBO says it “cannot readily provide a retrospective analysis” of the law.

The bottom line is that the current law scenario made the Affordable Care Act seem like it would lower the debt, but the actual outcome was so different that federal budget agencies don’t know the real number.

Bait and Switch

With those facts in mind, watch how Krugman craftily jumps between current law and current policy projections.

In another of his columns about debt that proved to be dead wrong, Krugman declared in 2013 that “budget office projections show the nation’s debt position more or less stable over the next decade.” Emphasizing that point, he wrote, “So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.”

Krugman’s basis for that claim was CBO’s current law projections, which showed the publicly-held debt/GDP barely changing from 76.3% in 2013 to 77.0% in 2023, a rise of only 1%. What Krugman neglected to reveal is that the current policy projection showed the debt growing by 14% in the same period. And for the record, it has actually grown by about 28%, or 28 times the current law projection cited by Krugman.

Fast forward to 2023, and Krugman is arguing that CBO’s latest debt projections have become “much less dire” since 2011. To support this claim, he compares current policy projections from CBO in 2011 to current law projections from CBO in 2022. He then compares those projections for 2035, thereby avoiding a comparison with actual outcomes....

....MUCH MORE

Computer Simulations Reveal Benefits of Random Investment Strategies Over Traditional Ones

First, the obligatory disclaimers, this version is from 2012, there are many, many others:

Modelling vs. Science

A subject near and dear to our jaded hearts, some links below.
If an experiment is not reproducible it is not science.
If an hypothesis is not falsifiable it is not science.

Finally, our two guiding principles regarding models:

"The map is not the territory"

-Alfred Korzybski

"A Non-Aristotelian System and its Necessity for Rigour in Mathematics and Physics" 

presented before the American Mathematical Society December 28, 1931

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

"All models are wrong, but some are useful"

-George E.P. Box

Section heading, page 2 of Box's paper, "Robustness in the Strategy of Scientific Model Building"

(May 1979)

And the headliner:

This is a repost from March 2013.

The Joy of Randomness: Central Bank Strategy, Management Technique and Stock Selection
From Technology Review's Physics arXive blog:

Computer Simulations Reveal Benefits of Random Investment Strategies Over Traditional Ones
Central Banks could use random investment strategies to make markets more stable, say econophysicists   

Back in 2001, a British psychologist carried out an unusual experiment in which he asked three people to invest a virtual £5000 in the UK stock market. The three people were a professional trader, an astrologer and a 4 year old girl called Tia.

The results were something of an eye-opener. At the end of the year, the trader had lost 46.2 per cent of the original investment and the astrologer 6.2 per cent. Tia, on the other hand, had made 5.8 per cent. Others have carried out similar experiments with similar results in which investments were chosen by a chimpanzee or by throwing darts.

The implication in these experiments is that random investment strategies are as good as, or even better than, traditional ways of making investments. 

Today, Alessio Biondo from the University of Catania in italy and a few pals test this idea for themselves. These guys have simulated the performance of four traditional strategies using 10 years of historical data from the UK, German and US stock markets. They then compare the results with those from an entirely random strategy.

The traditional approaches are all based on the past performance of the market and include, for example, the “momentum strategy” which measures how fast the price of something has changed in the recent past and then uses this to predict how much it will change in the near future. Another approach is called the “up down strategy” in which the prediction for tomorrow’s market behaviour is exactly the opposite of today’s....MORE  

We've looked at the phenomena  in a couple other contexts:
Random Stock Selection Again Beats Index; 99.9% of High Priced Managers

There may be a problem or two with the sample size, replication, error bars, pretty much the whole statistical schmear, but if I put that in the headline would you have read this far?
From Joe Meth (Stock Chartist)...

And:

Okay, Enough With Politics: Attention Managers, You Can Improve Corporate Efficiency by Randomly Promoting Employees
That last piece of research was awarded Harvard's own Ig Nobel prize in 2010.
Ya see, ya got your complex systems and ya got your chaotic systems and then ya got your complex-chaotic systems like weather or the economy or the stock market and when you endeavor at those levels of sophistication you realize:

"Nobody knows anything"

-William Goldman

Completely off-topic sidebar:
If you're interested, Mr. Goldman will show you how to write a movie script.

"Anchovies and Sardines Are a Climate Solution in a Can"

From Bloomberg via GetPocket, October 23, 2022

Tinned fish are among the lowest-carbon animal protein available, with potential to curb the world’s enormous emissions from food.

Andrés Albonigamayor stares down at the red deck of his fishing boat as the last albacore are unloaded. It’s two hours before sunrise on the wharf of Bermeo, a town in Spain’s Basque Country, and his crew of six Senegalese men work in silence as wind whistles through the metal walls of an empty warehouse nearby. There was a time when the wharf buzzed with activity before the 7 a.m. auction, but the port hasn’t been crammed with boats in years.

The 68-year-old captain shows no emotion as the fish go in auction for a decent price. He’s the last of a long dynasty of Bermean fishermen, and all he cares about is the next catch. “I want to go out tomorrow again,” he says, marking the words with the distinct pronunciation of native Basque speakers, a language so old no one’s figured out when it originated. “I might not even go home this time. I might just take a quick nap on the boat.”

Albonigamayor doesn’t know it, but he’s crucial in the fight against climate change. Every time he goes out to sea, he brings back the lowest-carbon animal protein available anywhere. Preserved in oil and put in cans and jars in factories just a mile away, his catch of longfin tuna becomes an unsung fix for a warming planet—a meal that’s cheap, requires no energy for refrigeration, almost never spoils, and, with some effort, can be harvested sustainably.

The way we eat is a major source of the greenhouse gas emissions that are pushing global temperatures to new extremes. To address this problem, investors are funding the development of animal proteins that can be cultured   in a laboratory rather than raised on a farm, while food companies are marketing (with significant difficulty to indifferent shoppers) meat substitutes  made from plants. It’s all part of the drive to break the connection between the unstoppable human appetite for meat, poultry, and fish and the parallel rise in planet-warming emissions.

But sitting on the supermarket shelf, ready to eat without research and development or consumer shifts, is an almost perfectly low-carbon protein that’s existed for two centuries: tinned fish.

“Wild fish give you the highest amount of protein with the lowest carbon footprint,” says Gumersindo Feijóo, a chemical engineer at the Universidade de Santiago de Compostela in Spain’s northern region of Galicia. He’s studied the environmental and carbon impact of the tinned fish industry since the 1980s. “Put it in a can and it gets even more interesting, because it keeps the flavor and the nutritional value and it doesn’t need refrigeration or cooking.”

Tinned fish—known as conservas in Spain and Portugal, where they’ve never gone out of style—are making a comeback in foodie culture, with chefs touting the ingredient on menus and gourmet shops using the colorful retro designs on the tins to lure customers. “It has such a long shelf life that the actual food waste is almost zero,” says Henry Rich, owner of Rhodora, a wine bar in the trendy Fort Greene neighborhood of Brooklyn, that aims to send nothing to landfills. His menu is built around pickled vegetables, hard cheeses, and tinned fish, all items that minimize spoilage. “And the aluminum in the tin can be recycled and reused.”....

....MUCH MORE

Sounds good so far but hold on:

"Fed Working Paper: "Are Millennials Different?" (and why 'news for millenials' plays never panned out)":
Yes they are different.
They apparently don't have can openers.
More after the jump....

***

 ...Now, about those can openers, from the Wall Street Journal, Dec. 2, 2018:

The Trouble With Tuna: ‘A Lot of Millennials Don’t Even Own Can Openers’
StarKist, Bumble Bee and Chicken of the Sea deal with slumping market amid competition from fresher options

"Biden selects ex-Mastercard CEO Ajay Banga to lead World Bank after Trump-appointed president resigns over climate row"

From The Independent via Yahoo Entertainment, February 23:

President Joe Biden on Thursday said he would put forward Ajay Banga, the former CEO of Mastercard, to be confirmed as the next president of the World Bank after Donald Trump appointee David Malpass resigned amid an outcry over comments which appeared to deny the existence of human-caused climate change.

In a statement announcing Mr Banga’s nomination, the White House described him as a “business leader with extensive experience leading successful organizations in developing countries and forging public-private partnerships to address financial inclusion and climate change”.

Mr Biden said Mr Banga is “uniquely equipped” to lead the international financial institution — of which the US is the largest shareholder — at a “critical moment in history”.

“He has spent more than three decades building and managing successful, global companies that create jobs and bring investment to developing economies, and guiding organizations through periods of fundamental change. He has a proven track record managing people and systems, and partnering with global leaders around the world to deliver results,” Mr Biden said.

By tradition, the leader of the World Bank has always been a US citizen and is nominated by the president of the United States, though that nomination is subject to approval by the bank’s board of executive directors. If confirmed, Mr Banga would serve a renewable, five-year term.

Although Mr Banga is a US citizen, he was born in India and educated in Indian schools and universities. The ex-Mastercard chief executive has also served on corporate boards of the American Red Cross, Kraft Foods and Dow Inc, and was a co-chair of the Partnership for Central America — a role in which he worked closely with Vice President Kamala Harris.

In a statement, Ms Harris said he would be a “transformative World Bank President as the institution works to deliver on its core development goals and address pressing global challenges, including climate change”....

....MUCH MORE

Are you not entertained?

If you are on the receiving end of World Bank "Development" loans and grants be sure to check for new covenants.

"First Nobel sustainability awards presented in Sweden"

By making a Chinese government official one of the awardees this seems as political/aspirational as President Barack Obama's Nobel Peace Prize, announced when he had been in office for eight months.

From Asia Times, February 23: 

Xie Zhenhua, Collin O’Mara and Bruno Wu awarded for their green leadership and vision 

The Nobel Sustainability Trust (NST) has honored Xie Zhenhua, Special Envoy for Climate Change at China’s Ministry of Ecology and Environment, Collin O’Mara, CEO of American conservation organization National Wildlife Federation and Chinese-American entrepreneur and Asia Times’ shareholder Dr Bruno Wu for their outstanding contributions to sustainability.

NST, a Swiss-based foundation founded in 2007 by members of the Nobel family, works independently of the Nobel Foundation which manages the traditional Nobel Prize awards. The Sustainability Awards recognize leadership by a deliberate approach to accelerating the global adoption of sustainability and sustainable solutions.

This year’s awards were bestowed at a February 22 ceremony in Stockholm, Sweden....

....MUCH MORE

Speaking of  politicized Peace Prizes, beyond even the awarding two old terrorists, Menachem Begin (jointly with Anwar Sadat) and Yasser Arafat (jointly with Yitzhak Rabin and Shimon Peres) the 2007 prize to Al Gore (jointly to the IPCC as an organization, though Michael Mann and others used to claim they were Nobel Prize winners), that 2007 prize to Gore was a travesty and for many diminished the importance of the Peace Prize to the level of Gore's Oscar and Grammy awards.

Among the Nominees that Gore beat, in addition to the Buddhist monks protesting the military government of Myanmar, was this woman:

Irena Sendler.

She saved 2500 Jewish kids, sneaking them out of the Warsaw ghetto in 1's and 2's, sometimes more if she could. When the Gestapo caught her they tortured her to get the names of anyone she was working with. She resisted, they broke her legs, arms and feet, she kept the names of the 2500 kids in a jar, written in code and buried so they could be reunited with their families.

Of course they weren't reunited, their families went up the smokestacks of Treblinka and Auschwitz but she kept the secrets.

We have a dozen or so posts on Madame Sendlerowa, here's one of them:

In Memoriam: Irena Sendler
Madame Sendlerowa died May 12, 2008 in Warsaw, Poland.
She was a tough broad.

We noted her passing twelve years ago:
Irena Sendler, Nobel Peace Prize Candidate, Has Died
after tracking her nomination for the 2007 Nobel Peace Prize.

The betting markets had her as second choice behind Al Gore. There were also some Burmese Buddhist monks and a couple dozen other nominees.

Mr. Gore of course won. Well he and the UN's IPCC who had delivered the AR4 Climate Change 2007: Synthesis Report in February and who were looking forward to the 13th Conference of the Parties in Bali that December.

There was no way the woman in the photo was going to win in 2007, no matter how many kids she saved from certain death and no matter how many of her bones the Gestapo broke.
She might have won in 2008 but she died. And the Nobel folks don't award posthumous prizes.

And from that October day in 2007:

Al Gore Beats Buddhist Monks
Al Gore, backed by his new band, Consensus, proved that superior showmanship wins out over amateur enthusiasm every time.

With James E. Hansen, PhD. on lead vocals, the monks didn't have a prayer....

...MUCH MORE

 Sorry about the ramble, I'm trying to break the habit.

When You Have Many, Many (many) Things To Hide

Thanks to a friend.

The 19thC Writing Desk of King Carlo Alberto of Sardinia.

Impressive. Bonkers. pic.twitter.com/y1ZlDTk4xD

— Michael Warburton (@MichaelWarbur17) February 23, 2023

Nvidia Reports, Analysts React (NVDA)

Despite the wider markets turning negative NVDA seems to be in a universe of its own.

Up $28.09 (+13.53%) at $235.63

From Barron's, Updated Feb. 23, 2023 8:24 am ET:

....Piper Sandler analysts also raised their price target to $275 from $225, and said Nvidia seemed to be through the bottoming process in its gaming segment. They also noted that AI opportunities will drive new growth.

“In our view, Nvidia is the only legitimate way to play generative model training and inference today. Management highlighted several ways in which it is looking to monetize this opportunity,” they said.

Citi analysts reiterated their Buy rating and said they viewed the stock as “the best pure play on generative AI adoption.” They hiked their price target to $245 from $210....

....MUCH MORE 

..."best pure play...". Always has been.

Earlier: "NVIDIA Reports, Talks About Artificial Intelligence, Stock Jumps (NVDA)"

NVIDIA Reports, Talks About Artificial Intelligence, Stock Jumps (NVDA)

The stock is up $28.60 (+13.78%) at $236.14, pushing the company's market cap back toward $600 billion i.e. it's a big move. 

One thing to keep in mind, NVDA has been in AI for years and the hype occasioned by ChatGPT is actually old news. Some links* below

First up, from Reuters, February 23, 1:00 pm UTC:

Nvidia results show its growing lead in AI chip race

As the artificial intelligence boom takes off, Nvidia Corp (NVDA.O) is expected to emerge as the biggest - though not the only - winner among chipmakers after years of focusing on the technology has made it a go-to supplier for tech firms.

AI has emerged as a bright spot for investments in the tech industry, whose slowing growth has led to widespread layoffs and a cutback on experimental bets.

The surge in interest helped Nvidia report better-than-expected quarterly earnings on Wednesday and forecast sales above beat Wall Street expectations, in stark contrast to a projected loss and dividend cut from rival Intel Corp (INTC.O).

Nvidia shares rose nearly 8% in trading before the bell on Thursday. They have jumped more than 40% since the turn of the year, nearly three times the gain in the Philadelphia Semiconductor Index (.SOX).

It now has a market value of more than $500 billion, about five times that of Intel, and is the seventh-largest publicly traded U.S. firm. The key to the company's success is that it controls about 80% of the market for graphic processing units (GPUs), which are specialized chips that provide the kind of computing power required for services such as Microsoft-backed (MSFT.O) OpenAI's wildly popular ChatGPT chatbot.

SPECIALIZED CHIPS

Graphics processing units are designed to handle the specific kind of math involved in AI computing very efficiently, while generic central processing units (CPUs) from Intel can handle a broader range of computing tasks with less efficiency.

AI is taking over the tech industry and, according to research firm Gartner, the share of specialized chips such as GPUs that are used in data centers is expected to rise to more than 15% by 2026 from less than 3% in 2020....

....MUCH MORE

From the company: 

NVIDIA Announces Financial Results for Fourth Quarter and Fiscal 2023

Wednesday, February 22, 2023

• Quarterly revenue of $6.05 billion, down 21% from a year ago
• Fiscal-year revenue of $27.0 billion, flat from a year ago
• Quarterly and annual return to shareholders of $1.15 billion and $10.44 billion, respectively

NVIDIA (NASDAQ: NVDA) today reported revenue for the fourth quarter ended January 29, 2023, of $6.05 billion, down 21% from a year ago and up 2% from the previous quarter.

GAAP earnings per diluted share for the quarter were $0.57, down 52% from a year ago and up 111% from the previous quarter. Non-GAAP earnings per diluted share were $0.88, down 33% from a year ago and up 52% from the previous quarter.

For fiscal 2023, revenue was $26.97 billion, flat from a year ago. GAAP earnings per diluted share were $1.74, down 55% from a year ago. Non-GAAP earnings per diluted share were $3.34, down 25% from a year ago.

"AI is at an inflection point, setting up for broad adoption reaching into every industry,” said Jensen Huang, founder and CEO of NVIDIA. “From startups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI....

....MUCH MORE

And via Motley Fool, February 22:
Nvidia (NVDA) Q4 2023 Earnings Call Transcript
*A couple of our posts from 2020:

"AI chips in 2020: Nvidia and the challengers"

Investor's Business Daily on Artificial Intelligence Stocks
There is a definitional problem with the term "AI stocks [or companies]" in that AI is a tool. Much as the (over) hyped nanotechnology revolution didn't produce "nanotech stocks" but instead became incorporated into processes and procedures that give companies employing same an incremental edge rather than epochal shifts.*

However, if there is an AI "company" Nvidia would deserve the moniker as much as anyone.

And 2019:
Watch Out NVIDIA: "Amazon, Huawei efforts show move to AI-centric chips continues"

This move toward specialized chips is something the cognoscenti have been talking about for a few years, see after the jump if interested.
Tiernan Ray, formerly the head scribe at Barron's Tech Trader Daily goes deep.

And 2018:

Nvidia debuts cloud server platform to unify AI and HPC (NVDA)

This is a pretty big deal.
High Performance Computing has been a separate and distinct class of machines since the University of Manchester's Atlas computer went online in 1962.
And now NVIDIA is blurring the line in a few different ways.

And a hundred more. I mean the blog is a damn primer on AI and NVDA:

• Machine Learning: JP Morgan Compares Google's New Chip With NVIDIA's (GOOG; NVDA)
• AI VC: "We Are Here To Create"
• Intel and Facebook Are Collaborating on Artificial Intelligence Technology (INTC; FB; NVDA)
• Competition For NVIDIA: The Nervana Systems Chip That Will Let Intel Advance Its Deep Learning (INTC; NVDA)
• Artificial Intelligence: What Could Derail NVIDIA? A Lab in Shenzhen; A Basement in Moscow; An Office in Bristol (NVDA)
• NVIDIA Partner Tesla Reportedly Developing Chip With AMD (TSLA; NVDA; AMD)
• "The Natural Evolution of Artificial Intelligence"
• Watch Out NVIDIA: "Google Details Tensor Chip Powers" (GOOG; NVDA)
• Ahead of Today's NVIDIA Earnings: A Look at One of the Competitors (GOOG; NVDA)
• NVIDIA Partner Tesla Reportedly Developing Chip With AMD (TSLA; NVDA; AMD)
• Tesla says it’s dumping Nvidia chips for a homebrew alternative" (TSLA)
• "Nvidia CEO is 'more than happy to help' if Tesla's A.I. chip doesn't pan out" (NVDA; TSLA)

I mean, back in 2013-14 it was all about training the AI (and it still is, hence NVDA chips):

"Why Is Machine Learning (CS 229) The Most Popular Course At Stanford?"
Deep Learning is VC Worthy

Capital Markets: "Fed Tightening Seen Extending into Q3"

From Marc to Market:

Overview: The prospect that the Federal Reserve tightening cycle continues into early Q3 is underpinning the greenback today against most of the G10 currencies. The dollar bloc is the notable exception, and they are posting minor gains, perhaps encouraged by the firmer equity markets. The minutes of this month’s FOMC meeting appear to show wide support for quarter point hikes going forward and there did not seem to be much discussion of the conditions that would allow for the central bank to pause, which the market had expected around by the end of Q2. The euro has been sold below $1.06, while the greenback is holding just below JPY135 ahead of a big day tomorrow in Tokyo, which seen national inflation figures and BOJ Governor nominee Ueda questioned in the Japanese parliament. A hawkish hold by the Bank of Korea, signaling the risk that the pause is short lived, is helping the South Korean won lead the emerging market currencies today, but the Mexican peso continues its dramatic advance and is trading at new five-year highs today. 

Asia Pacific equities were mostly lower following yesterday’s losses in the US. However, Taiwan and South Korea bucked the trend. Europe’s Stoxx 600 is holding on to minor gains. US equity futures are firmer, and the S&P 500 is looking to snap a four-day skid. Benchmark 10-year yields are mostly a little higher. The 10-year US Treasury yield is up a couple basis points near 3.94%, while European rates are 1-2 bp points higher. Italy’s 10-year yield is slightly softer. UK Gilts are under the most pressure as the 10-year yield rise four basis points. Gold recorded an outside down day yesterday and is consolidating little changed near $1827 in the European morning. April WTI fell to a two-week low yesterday near $73.80 and is also consolidating today. API reportedly saw another large build of US crude stocks for the ninth consecutive week. If confirmed by the EIA later today, it would point to US crude inventory near a 21-month high. Natgas is pinned near its lows....

....MUCH MORE