Saturday 30 Nov 2024
"According to a preliminary decision posted on the U.S. Commerce Department's website on Friday, the agency calculated dumping duties of between 21.31% and 271.2%, depending on the company, on solar cells from Cambodia, Malaysia, Thailand and Vietnam" - X was Twitter). The price of solar panels varies enormously. I looks like the US price starts at $0.5 per Watt, and goes beyond $1 per Watt. Outside the US it is advertised as low as $0.15/W. Americans are already paying a lot more.
Three beekeepers turned this job down! - Youtube.
Did France make a mistake in how Notre Dame has been restored? DW News - Youtube.
"The city of New York pays $220 million to rent the entire Roosevelt Hotel in Manhattan to house illegal migrants" - X was Twitter.
Friday 29 Nov 2024
Elon Musk’s X is stepping into the legal fight over Alex Jones’ Infowars. Experts say it’s unprecedented - CNN.
Cutting US federal government spending will be a battle: 21% social security, 18% national defense, 15% health, 14% net interest, 13% medicare, 8% income security, 5% veterans, 4% education, 2% transporation, and 1% agriculture (Treasury). Items less than 1% won't make a difference. Spending in October was +24% higher than a year ago.
Federal spending has increased 8.4% per year since 2019. That is the present trajectory. Government spending usually goes up with rising costs. If that is the inflation rate experienced by government, then interest rates are too low.
Federal government spending per household (red) equals the average annual wage (blue). Households directly or indirectly (included in the price of goods) pay for all government spending. This means in a two income household, the income of one person is needed just to pay for the government.
Thursday 28 Nov 2024
"US stocks currently account for 73% of the MSCI World Index, the highest single-country weighting ever recorded in its history" - X was Twitter.
"Per the @FT: "Christine Lagarde has urged Europe’s political leaders to co-operate with Donald Trump over tariffs and buy more products made in the US, warning that an acrimonious trade war risks wiping out global economic growth." - X was Twitter.
US imports from the Euro Area (blue) is much higher than exports (red). The main reason could capital flow from the Euro Area due to the unattractive return in the Euro Area. For Europeans to buy more US goods won't do a thing.
Australia approves law banning social media for under 16s - Techcrunch. "The ban is expected to take affect in November 2025, per Reuters. At that point social media platforms in the market will need to be able to demonstrate they’re taking “reasonable steps” to ensure age verification is in place to stop minors accessing their services. Otherwise they could face fines of up to around $32 million". This why a constitution is required to protect minority groups from the majority. Australia's Constitution: "The Constitution has no Bill of Rights, such as that found in the United States Constitution, which prevents a legislature from passing laws that infringe basic human rights, such as freedom of speech".
The border between Mexico and Guatemala is 871km long, which is much shorter than the 3145km long US-Mexico border, but includes three rivers, which is difficult to control. "In 2014, Mexico's border with Guatemala and Belize had 11 formal crossings (10 with Guatemala and 1 with Belize) and more than 370 informal crossings", " Instead of building a wall and preventing people from crossing the border, Mexico relies on interior enforcement via layers of checkpoints" - Wikipedia.
US goods exports to Mexico (red) is 64% of imports (blue). There is probably an interdependence. Mexico uses the income and foreign exchange to buy from the US. If imports from Mexico decline, exports will likely too. Import duties like any other tax is inflationary, because the government takes money out of the economy, and hands it out as benefit without production, thus lowering economic output.
U.S. Imports of Goods from Mexico is 15.4% of all Imports of Goods:
Wednesday 27 Nov 2024
"Two unnamed Nissan executives said the company has "12 to 14 months to survive," per Motor1" - X was Twitter.
"Ford is sitting with 400,000 cars on dealer lots" - X was Twitter.
The 15 to 64 year employment rate for the UK at 74.8% (red), Poland at 72.4% (purple), France at 69.2% (turquoise), Greece 63.9% (green) and Italy at 62.07% (blue):
Tuesday 26 Nov 2024
"Donald Trump said he would impose additional 10% tariffs on goods from China and 25% tariffs on all products from Mexico and Canada" - X was Twitter. He will have to pull out of the USMCA (United States Mexico Canada Agreement) which he himself introduced as president 1 July 2020. Generally governments are not allowed to prevent people leaving the country. It is up to the destination country to limit entry.
Japan's 15 to 64 year employment rate at 79.6% (green) beats Germany at 77.4% (red) and the US at 71.7% (blue):
Monday 25 Nov 2024
Looking at US economic output or gross domestic product (blue) and total debt (red), in how much trouble is the US really? As Dr Johnny Fever said in WKRP on Cincinnati: "Give it to me straight doctor, I can take it". Increasing the debt increases money supply which appears to do wondrous things for the economy, but mostly just creates inflation.
The ratio of debt to GDP (blue) was flat from 1960 to about 1980 when interest rates rose, and after 2008 when interest rates reached a bottom. Every extra dollar of debt has resulted in a proportionate increase in economic output, which seems good on the face of it. If it only created inflation then the physical output of the economy has not actually increased, and real debt remained the same. The velocity of money flow stayed the same. The same products could be traded at the same rate, only at a higher price. It would be the most logical reason why GDP en debt stay together.
In between, from 1980 and 2008 there was a massive unproductive increase in debt, as interest rates came down. Before 1980 the ratio was near 1.5x, and now it is near 3.5x. It has resulted in a wealth gap between the owners of assets and the rest. Obviously the ratio can only come down if economic output grows faster than debt (money supply), which would be real economic growth (not the type reported by government statisticians), like a more efficient factory that manufactures more goods with the same capital. There is no clear sign of real economic growth, as a decline on this chart, except after the big jump in debt in 2009 and 2020.
Japan's government debt to GDP (red) and total debt to GDP (green) are still rising. They can no longer afford high interest rate. Bond holders lose the value of their money compared to the actual inflation rate. The same thing happens in all countries with big debt.
US total debt to total wages is at 2.8x compared to around 0.65x before 1982. Workers have to generate the economic output to pay back the debt. Their share of GDP has declined, but most taxes are passed on as higher prices, and paid by the low income group.
What Is a Debt Trap? - Experian: "A debt trap can occur when you are forced to take out new loans to repay your existing debt obligations, creating a cycle of compounding debt".
The annual increase in US government debt (blue) exceeds the interest payment on that debt (red). The US government is in a debt trap. It should go for debt counselling. Since 2008 the debt increase far exceeded the interest payments.
Friday 22 Nov 2024
Rivian CEO On Dealer Laws: 'As Close As You Can Get To Corruption' - InsideEVs. "RJ Scaringe says that dealers essentially paid for laws that protect their business".
"JUST IN - Judge delays Trump's hush money case indefinitely" - X was Twitter.
Global semiconductor sales increased 3.1x since 2004 (SIA), but relative to US total debt as nominal inflation it is only up 1.2x or 0.8% per year. People are deceived by inflation.
"Windows 11's latest update stumbles: Users face installation hurdles and post-update glitches." - X was Twitter. How does a software company upgrade to a product with more problems? An upgrade is supposed to be an improvement.
Thursday 21 Nov 2024
"The world refined #copper market was in a surplus of 359,000 tonnes in Jan-Sep, based on Chinese apparent usage (excluding changes in bonded/unreported stocks), ICSG says. Adjusted for estimated changes in Chinese bonded stocks, the surplus grows to 402,000 tonnes." - X was Twitter. Other metals already point to a weaker world economy.
"JUST IN - Brazilian authorities have indicted Jair Bolsonaro over alleged knowledge of a coup plot to kill his leftist successor, Lula da Silva" - X was Twitter.
Some-one should have testified to the US senate UFO subcommittee made up like an alien.
"JUST IN - ICC issues arrest warrants for Israel's Netanyahu and Gallant" - X was Twitter. "There are 124 member countries, but dozens of governments are not ICC parties, including China, India, Israel, Russia, and the United States" - Council of Foreign Affairs. South Africa refused to arrest Sudanese President Omar al-Bashir in 2015, as if an ex-terrorist organization such as the ANC has any respect for the law or human rights. (ISS).
India's population has grown to 1.43B, up 3.2x since 1960 (blue). Economic output in US$ relative to US total debt as nominal inflation rate (red) increased since 2000, but is stil down relative to the period before 1980. Output per capita is far worse.
India's debt in US$ (red) has shot up since 2011. Economic output in US$ (red) has increased with the debt, but not proportionally. The ratio of economic output to debt is declining, because it is unproductive debt. It contributes to economic output once.
Wednesday 20 Nov 2024
"Milton Friedman was the best" - Elon Musk, X was Twitter.
"JUST IN - United States vetoed a UNSC resolution for a ceasefire in Gaza, which received 14 votes in favor and one against" - X was Twitter. Countries ruled by dictators should not be allowed to vote at the UN. The vote cast represents the opinion of one dictator, and not the population.
US import duties would only affect categories of Personal Consumption Expenditure which can be imported (Major Type of Product). The imports of goods (red) compared to goods and services (blue):
The ratio of US imports to Personal Consumption Expenditure (PCE) on goods appears to be 55% (below), but not al imports are part of PCE.
.... Walmart says: "... two-thirds of merchandise sold in Walmart U.S. and 93% of merchandise sold in Walmart Mexico .... are made, grown or assembled domestically" - Walmart.
Tuesday 19 Nov 2024
"BREAKING: DOJ antitrust officials have decided to ask a judge to force Google, $GOOGL, to sell off its Chrome browser" - X was Twitter.
Monday 18 Nov 2024
"A global decline in wine consumption is creating problems for vineyards: there are too many grapes, and there’s too much wine," per Axios - X was Twitter.
The big companies with big profit margins have limited competition: Most Profitable Companies in the World for Nov 2024 - Finance Charts.
Why are US medicine so expensive? One breakdown of medicine pricing from June 2017: Production cost 17%, other manufacturing costs 41%, wholesale 2%, pharmacies 18%, PBM 7%, insurers 22% – The Flow of Money Through the Pharmaceutical Distribution System - USC Schaeffer.
....The revenue of pharmaceutical companies like Merck $60B, Pfizer R59B, AstraZeneca $46B is similar to all health coverage insurers like United Health $94B, CVS Health $89B, The Cigna Group $49B. People are paying a lot for extra admin. When patients do not pay for medicine directly, but just claim from insurance there is less pressure on pricing. Members like to get benefits comparable to the cost of insurance. They do not try to save on medical expenses.
....From 3 June 2024: International Prescription Drug Price Comparisons: Estimates Using 2022 Data - NIH. "... prices in other countries were 36 percent—or a little more than one-third—of those in the United States".
.... From 17 Jan 2024: Six Reasons Drug Prices Are So High in the U.S - New York Times.
.... US drug sales make up 56% of the top 10 pharmaceutical markets together: US Pharmaceutical Pricing: An Overview - Axene Health Partners.
Sunday 17 Nov 2024
"There has been a nearly unprecedented rush into stocks since the U.S. presidential election" - X was Twitter. For every buyer there is a seller withdrawing from the stock market. Money can only flow into the stock market if new shares are issued.
Trump, Musk and new cabinet nominees celebrate at UFC - BBC. Why don't they go to the ballet?
Saturday 16 Nov 2024
Donald Trump and Megan Mullally singing the "Green Acres" theme song at the 2005 Emmy Awards - Youtube.
100 Year Old Self-Playing Violin - "The Eighth Wonder Of the World" - Youtube.
Friday 15 Nov 2024
"A recent clinical study shows that collagen supplementation can significantly improve skin health" - X was Twitter.
During his first presidential term Trump demanded that China buy more from the US. The gap has narrowed. From Jan 2017 to Jan 2021, US exports of goods to China (blue) improved slightly in the first year, then dropped, before recovering during the last year of his term, due to the money created during Covid isolation. US imports of goods from China (red) improved during his first two year, then fell sharply towards a 2020 recession, before recovering.
The European Union (EU) has been a disaster in terms of creating more bureaucracy, growing government debt with uncontrolled spending (cepr.org), and lack of border controls.
Greece joined the EU in Jan 1981 when government debt to GDP was 23%. Government debt to GDP was 169% in 2023 (blue). The apparent interest on the debt rose to 5.5% of GDP in 2023 (red).
Thursday 14 Nov 2024
"I’m really struck by how big the presence from China is here at APEC" - X was Twitter. "Asia-Pacific Economic Cooperation (APEC) is an inter-governmental forum for 21 member economies in the Pacific Rim that promotes free trade throughout the Asia-Pacific region" - Wikipedia. The US and China in a free trade forum. The conference is not far from the famous Lake Titicaca.
US student loan debt is $1.6 trillion. Crypto currency Bitcoin has a market cap of $1.8 trillion. Students should have bought Bitcoin. The computer science students could have created their own crypto currency scam.
"El Salvador is now sitting on Bitcoin $BTC profits of more than $140 million! Remember when the IMF warned them about the risks in 2023? 😂 😂 😂" - X was Twitter.
The Dogecoin that Elon Musk promoted has shot up to $0.4 from about $0.1 a few months ago. Elon Musk who heads the new Department of Government Efficiency (DOGE) is also Tesla CEO, a potential conflict of interests. Electric vehicles cost twice as much, and the higher cost must be recouped over years by the saving in fuel, which involves a lot of driving.
Japan's employed population (green) at 54% is surprisingly high for low population growth. It is not like they have a large retired population being supported by a small workforce. Fewer children would increase the percentage of workers. US employees (blue) was 30% of the population in 1962, and now 47%. Germany (red) went from 46% to 51%.
Wednesday 13 Nov 2024
Eva Longoria Reveals She Moved Her Family Out of “Dystopian” United States: “I’m Privileged” - The Hollywood. Property in Valencia, Spain must be cheap now.
"Department of Government Efficiency" - Donald Trump, X was Twitter.
"So … what would you say you do here? Department of Government Efficiency" - Elon Musk, X was Twitter. (1) Every citizen should get a monthly itemised bill of government expenses, so that they can see what each service costs them. Initially the bill will not be payable until a new party is created, because the present career politicians will not change the system. (2) Government should not be the sole provider for any service. Government services could be contracted out to two or more private suppliers operating in competition.
US customs duties did shoot up in 2018 from 1.3% to 2.8% of imports of goods and services during the reign of President Trump, but was still only 2.0% of imports of goods and services in Q3 (chart below). If president elect Trump wants to replace income tax with 76% duties on all imports, he will first have to deal with the World Tade Organization, all treaties the US has with other countries, and retaliation by other countries. Then importers will try to avoid the duties, source more expensive products without paying import duties, and people will still have to pay income tax.
Tuesday 12 Nov 2024
"LG's new display stretches from 12 to 18 inches" - X was Twitter.
If president elect Donald Trump follows through with his campaign promise of lower taxes, government debt will likely increase. US presidential candidate George H. W. Bush famously said: "Read my lips: no new taxes". During his term from 20 Jan 1989 to 20 Jan 1993 tax receipts (blue) increase 17% and government debt (red) increased 54%:
"Voters worldwide are FED UP with the elites. Every major incumbent party has been CRUSHED at the polls. This is a global revolt against the ruling elites." - X was Twitter.
When a population is young and ambitious the demand for credit could exceed the savings, and interest rates can be raises to control the supply and demand for credit. If an aging population wants to save more than borrow, you have a problem. Interest rates fall, causing asset appreciation, and young people without assets are impoverished. Most investments are held by the wealthiest 10%, who don't need to spend it. The demand for credit could be low because the poor majority have insufficient income for a home loan, and the dominance of big businesses limit the demand for credit by small businesses.
To avoid inflation, debt should grow the economy. Business debt is the best. Government debt is the worst. US nonfinancial corporate and business debt, as ratio of total debt peaked at 57% in 1974, and is now 35%.
Monday 11 Nov 2024
"Nvidia's total value, $3.65 trillion, is within a trillion dollars of the total value of Japan's Nikkei 225 Index, which itself is valued at $4.65tn. This is no small feat, as Japan is the second-largest stock market in the MSCI All Country World Index (ACWI)." - X was Twitter.
It takes about 20 years to see a change in the top 20 S&P 500 companies – Finhacker.cz. Top ten 20 years ago: Microsoft (now 2), Exxon Mobil (now 15), Pfizer, Citigroup, General Electric, Walmart (now 14), Intel, Cisco Systems, Johnson & Johnson (now 17), IBM.
.... People have been waiting for a better computer operating system (OS) for decades. Artificial Intelligence (AI) should be able to write an OS in the future. AI could make an end to big corporations by creating alternative services.
Japan's stock market in dollars (blue) outperformed US corporate equities (red) from 1971 to 2000. It took 32 years for Japan's stock market to return to the previous peak, ignoring the loss of dollar value.
The US corporate equity (red) is either an enormous bubble, or workers (blue) will become permanently impoverished. From 1951 to 1991 the two stayed together. What happened after 1991? The first stock market rise was the 2000 dotcom bubble. Then there was the stock market and housing bubble of 2008. The government failed to address the underlying problem in these bubbles, so now they have a third even bigger bubble.
Workers will be impoverished by a weaker dollar. We don't have an absolute reference for inflation. Other countries devalue their currencies faster than the US dollar, so they provide no reference. Relative to total US debt as a measure of the money in circulation and thus nominal inflation, wages (red) have declined from 38% in 1951 to 12.5% now, a decline of -1.5% per year. If the corporate equities to total debt (blue) was a horizontal line, it would mean corporate equities represent nominal inflation. The last 72 years it increased by 2.0x or 0.95% per year.
The decline in wages (red) is slow when corporate equities (blue) rise. Then the corporate equities fall, and wages decline faster. If this pattern repeats, corporate equities and wages could see another decline.
Sunday 10 Nov 2024
Exclusive: US ordered TSMC to halt shipments to China of chips used in AI applications - Reuters. Under what authority is the US ordering a business domiciled in Taiwan? This must be highly irritating to China, who sees Taiwan as a province. China is being pushed to take over the world's semiconductor manufacture.
"Housing prices in the EU rose by 48% on average in less than 10 years, creating difficulties for many Europeans" - X was Twitter.
"Any Republican Senator seeking the coveted LEADERSHIP position in the United States Senate must agree to Recess Appointments (in the Senate!), without which we will not be able to get people confirmed in a timely manner. Sometimes the votes can take two years, or more. This is what they did four years ago, and we cannot let it happen again. We need positions filled IMMEDIATELY! Additionally, no Judges should be approved during this period of time because the Democrats are looking to ram through their Judges as the Republicans fight over Leadership. THIS IS NOT ACCEPTABLE. THANK YOU!" - X was Twitter.
Saturday 9 Nov 2024
Semiconductors market cap weightings - X was Twitter.
Record Number of EVs Sold in September - Rhomotion.
The price of lithium carbonate shot up to CNY 600,000 per ton in 2022, and then tanked to level off at CNY 71,500 now (Trading Economics).
RNA therapy an effective alternative to lifelong, painful eye injections - New Atlas.
Friday 8 Nov 2024
Speech-captioning glasses show deaf wearers what other people are saying - New Atlas.
Full List of Celebrities Moving Abroad After Donald Trump's Win - Newsweek.
Microsoft added AI to software it has barely touched since 1985. The results are astonishing - CNN. "The latest Windows (11) update will give Paint new features like generative fill, a tool that will enable users to add AI-generated graphics to their artwork by typing what they want to see"
The long delay between the election of the US president, and him taking over, leaves the encumbent time to wreak havoc. 7 Major Events That Happened During Lame Duck Sessions - History. Grounding the Lame Duck: The President, the Final Three Months, and Emergency Powers - The Georgetown Law Journal: "Sometime after the sitting President loses the election and as the President elect prepares to take power, the Department of Justice, under the outgoing President, launches a criminal probe of the incoming President". Biden did a preemptive strike.
The US stock market is at an appropriate level for the present profit and growth, but as we know from history nothing lasts forever. The way the stock market keeps climbing gives the impression of excess savings that has to be invested somewhere. Unless new shares are issued, money can only enter the stock market if existing shareholders sell. If existing shareholders don't want to sell due to the upward momentum, it can lead to bubbles. There is also nothing preventing stocks from opening down -50% tomorrow. Unlike the housing market, where construction costs set a lower limit, company valuations are mainly determined by profits. They do have a book value, which theoretically is the shareholder equity value (assets – liability), but when companies go broke, they usually end up worthless.
The wealthiest 10% holds 87% of corporate equities and mutual fund shares (blue), whilst the bottom 50% holds 1% (red).
France's economic output to money in circulation as nominal inflation rate (blue) has declined -58% since 1985, as interest rates (green) came down. The Euro money in circulation is for the whole Euro zone. Lower interest rates lead to higher assets prices, creating wealth without production. People without assets are impoverished.
Thursday 7 Nov 2024
"California is ready to fight. I just called an emergency special session to help bolster our legal resources and protect our state against any unlawful actions by the incoming Trump Administration." - X was Twitter.
Television and main stream media appear to be full of liberals. The one good thing about Trump winning is that it shuts up these people. It is shame Kamala Harris conceded so easily. A riot would have been more entertaining.
The main reason for the Great Depression could be the multiplier effect going into reverse, rather than product prices declining. When asset prices rise, sellers make more money, banks receive more deposits, which they lend out to increase debt. When asset prices fall, you can have a chain of debt defaults, like dominos falling.
Household owners' equity in real estate (blue) is far from negative. It is about half of the estimated value of all housing (red).
The neverending inflation consumers have to deal with raises the question: Can you have zero inflation? In a cash economy without any debt, if the government doesn't print money, inflation should in principle be zero. In most of these underdeveloped countries the government prints money rather than collect taxes, which is why they have high inflation, and weak currencies. An economy in which people save for the future, and borrow from the future to enjoy the money now, savings and (unproductive) debt need to remain at a constant level for inflation to be zero. Inflation and interest rates tend to move together. If inflation is zero, then depositors would get close to zero interest.
.... It so happens that US just had a period with the Federal Funds Effective Rate (blue) at zero from Dec 2008 to Nov 2015. Total US debt (red) grew between -1% and 4% per year, the nominal inflation rate. During this period the government printed money in the form of Federal Reserve Bank loans (QE) which added 7% to total debt (green).
FRED has a chart of UK M4 money supply from 1881 to 2017. There was period up to 1913 were nominal inflation stayed between 0 and 5% per year. Since then inflation has run amok.
Wednesday 6 Nov 2024
Microchip 3QCY24: The CEO's quote sums it up. ''This down cycle we're in has been the most prolonged and challenging down cycle, I can recall during my 43 years in the industry.'' - X was Twitter.
"This is fascinating. Any hot takes on why Gen X decided the election?'' - X was Twitter. This might be the Republican Party's last opportunity to change the direction of the country. Younger voters mostly support the Democratic Party. Last train to Clarksville (The Monkees).
"Last-minute surge in people googling “Who is Trump” and “Who is Kamala” today. Undecided voters who have been living in a cave for the last decade." - X was Twitter. Government should be so small that it is irrelevant. US federal government receipts was 3.0% of economic output in 1900 (Tax Foundation). US government spending was 11.4% of GDP in 1924 (Trading Economics).
How expensive is the US stock market, being a combination of a high price/earning ratio, and higher profit margins after 2000. The ratio of corporate equities market value to US gross domestic product is now 2.95x, compared to around 0.5x at it lowest level. It is now 6x more expensive. A fall of -80% is required to return to the 1980 profit margins and valuations, when interest rates were at their highest.
The high profit margins is a sign of limited competition. Government has allowed businesses to growth until they dominated their sector. The high price/earnings is a result of low interest rates. Interest rates are low because of a low demand for credit. It could be due to an aging population, a shift of manufacturing to other countries, or bigger government.
From 1952 to 1973, 1985 to 1994, and 2009 to 2012 the price/earnings of the US corporate equities was around 13. The chart below shows profits x 13 (red) compared to market value (blue). In the lastest Q2 the price/earnings was 25.
The stock market is positive about a Trump presidency. If he implements the campaign promise, of replacing income tax with import tax, it will be disastrous for the economy. It is unlikely to happen. During his term in office, from the start of 2017 to the start of 2020, taxes (blue) did remain flat, whilst expenses (red) grew slowly. Then Covid isolation hit, and for the last year of his term taxes went up, whilst spending (red) almost doubled in one quarter. The next president Biden increased spending (red) and taxes (blue) further.
Tuesday 5 Nov 2024
Berkshire Hathaway (BRK.A, BRK.B) had cash of $32,287M on 30 Sep, which is 2.8% of total assets, compared to $25,573M a year ago. Investments in equity securities declined from $318,621M to $271,650M. Short-term investments in U.S. Treasury Bills increased from $126,401 to $288,031M. The investments in U.S. Treasury Bills now exceed equity securities.
Nintendo cuts its operating profit forecast as sales plunge - Nkkei. Toys have done badly for decades, perhaps because children are more interested in watching a screen.
Most of the time the estimated total value of US housing (blue) was worth much more than all corporate equities (red). Today corporate equities (red) is worth more than housing (blue). But does it make any sense (as Dr Falken said in Wargames 1983)?
If houses were rented out at the mortgage interest rate (blue) the income would have been much higher than corporate profits (red) until the Great Recession of 2009, and at present after it shot up in 2022. It usually takes a while for home rent to increase after interest rates have increased. If there were no fixed mortgage rates, like in some countries, home owners would be forced to increase the rent in order to cover the higher mortgage cost.
Now that interest rates have normalized, the stock market is expensive. If corporate profits are mostly made on wealthy customers, and home rentals are dependent on poor people then it makes sense.
Comparing the apparent monthly rent of pimary residence in US cities (blue) with the monthly mortage payment on a 100 % loan on the average house price (red).
Monday 4 Nov 2024
"In a study of more than 8,000 adults in China, researchers found that the DASH diet - originally developed to reduce high blood pressure - was the most effective at slowing biological aging" - X was Twitter.
Over 60 years, the estimated value of all US housing (blue) has performed similarly to corporate profits (red), which would be the value of the stock market at constant price/earnings ratio. The value of housing for the whole population, not the average house, is compared with all corporate profits. If the number of shareholders increase over time with population growth, the return of each shareholder is diluted one way or another.
There was a period between 1980 and 2005 when housing (blue) outperformed the stock market (red). Lower interest rates increased asset prices without increased economic production. Since then the stock market has done better. A number of technology monopolies developed after the 2000 dotcom bubble.
The comparison is complex: (1) A house can require constant maintenance, including damage done by tenants. It must be a low maintenance house. (2) House prices are usually much more stable than the stock market. A stock market investor is painfully aware of every change in value due to speculators pushing prices up and down, whilst a home owner lives in blissful ignorance. (3) In the US, the first $250,000 of profit on a primary residence is excluded from capital gains tax, or $500,000 for couples filing jointly. (4) A house can be bought with a small down payment, if the purchaser has enough income to qualify for a loan. Shares can also be leveraged with CFDs (Contract for Difference) outside the US, or single stock futures, or leveraged ETF (Exchange Traded Funds) which trade at multiples of the underlying asset, which are all extremely risky. (5) Real estate investment is highly dependent on location.
Sunday 3 Nov 2024
"Banks To Report All Transactions Over $600 to IRS Under Biden Plan" - X was Twitter. What happened to basic human rights, like the right to privacy. The same reason your house cannot be searched without a search warrant must apply to a bank account.
Saturday 2 Nov 2024
Animal tests show promise for restoring heart to more youthful condition, even after heart attack - Futurism.
For how long can the US be the biggest oil producer? With gold and other mining we have seen a frenzy of activity, until the easily extractable minerals are exhausted.
.... "The U.S. Energy Information Administration (EIA) estimates that in 2023, about 3.04 billion barrels (or about 8.32 million barrels per day) of crude oil were produced directly from tight-oil resources in the United States." - EIA. "Crude oil production in the United States, including condensate, averaged 12.9 million barrels per day (b/d) in 2023" - EIA. Thus most of the oil came from difficult to extract shale oil.
.... From 1 Oct: Shale project economics still reign supreme as cost of new oil production rises further - RystadEnergy: "Conversely, oil sands production breakevens average $57 per barrel, but can go as high as about $75."
.... From 9 Mar 2023: The average cost per barrel of oil produced by Exxon is questionable, unacceptable - Kaieteur News. "The Bank of Guyana 2021 Annual Report (page 21) confirms that the average price (P) for a barrel of oil is $40.00 in 2020; and the price increased in 2021 to an average of $70.48 per barrel (Table 1)".
Friday 1 Nov 2024
"The (S&P 500) blended revenue growth rate for the third quarter is 5.2% today" .... "The blended earnings growth rate for the third quarter is 5.1% today" - Factset.
"Trump announces he is considering raising taxes on imported goods to “400 percent”: “I don’t give a damn” " - Twitter. Big US companies like Apple and Amazon are dependent on cheap imports for their high profit margins.
.... "June 17, 1930 - Hoover signs the Smoot-Hawley tariff bill into law, decisively throwing the U.S. economy into the Great Depression." - Twitter.
.... chart of US tariff rates (1821 - 2016) - Wikipedia. In 1930 the tariff rates on total imports (blue) only went up to 20%.
Spain floods: Before and after images show devastation - BBC.
- The Guardian. "In Chiva, Valencia, over 400 litres of rainfall per sq metre fell in just eight hours".
Innovation is often initiated by military demand. The humanoid robots could be employed in the Ukraine war.
By "soft landing" in the US economy what people actually mean is that nominal inflation as indicated by total debt (red) continue to grow at what was 5.7% in Q2, and that nominal GDP approaches it for zero real economic economic growth relative to 2019, before Covid. Wages (green) are recovering as well. Seemingly a smooth recovery back to the 2019 economy. What could possibly go wrong? One problem is that government 10 year bonds (benchmark) pay interest of 3.72% whilst debt is growing at 5.7%. The money of the lenders are still being diluted by 2% per year.
Also government debt (red) has increased relative to GDP (blue), which postpones the problem for the future.
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