July 27
Brookings acknowledges truth. Universal basic income is a terrible idea.
Unconditional cash transfers reduce labor supply and increase leisure time
Eva Vivalt of the University of Toronto and co-authors use a randomized controlled trial to examine the effects of unconditional cash transfers. The trial distributed $1,000 each month to 1,000 low-income individuals and $50 each month to a control group of 2,000 over a 3-year period. They find that, excluding the transfer, total household income fell by $2,500 per year for the treated population relative to the control group, reflecting a reduction in labor supply among transfer recipients and other adult members of their households. Transfer recipients primarily used their additional time for leisure, transportation, and household finances, and not for caregiving, self-improvement, or job searching. The authors find that the cash transfers did not lead to improvements in job quality or significant human capital investments such as education. The authors conclude that unconditional cash transfers reduce labor supply without producing a corresponding increase in other productive activities.
Markets and Stocks
The economy is slowing but it remains reasonably strong with real final sales to private domestic purchasers up 2.6%. Real final sales strips out government, trade and inventories.
@NickTimiraos Real GDP increased at an annual rate of 2.8% in the second quarter A broad measure of U.S. economic demand—real final sales to private domestic purchasers, which excludes trade, inventories and government spending—increased at a 2.6% rate, the same as in the prior quarter
The June PCE inflation numbers were in line with expectations. The Fed will cut in September.
See CNBC ‘Fed’s key inflation gauge rose 2.5% in June from a year ago, easing path to rate cut’
Alphabet will spend $50 billion on AI this year. The company will spend more next year. Its competitors, Amazon, Meta and Microsoft will spend similar amounts this year and next. Sovereign nations are all in on AI. Companies in Europe and Asia are investing heavily in AI. Nvidia, Micron, AVGO-Broadcom are semiconductor companies that are surfing the AI wave. The server companies like Dell, HPE and Super Micro will benefit. And the AI data center names are worth looking at. Vertiv, an Abacus name is a good investment.
Micron is the global leader in high bandwidth memory and its solutions use 30% less energy.
https://www.micron.com/products/memory/hbm/hbm3e
I am doubling down on AI.
I am an AI proselytizer.
AI productivity boom could increase divergence between US and the G7
U.S. investment in artificial intelligence (AI) has surged relative to that of other advanced economies. Using macroeconomic data (including productivity, investment, and stock prices) from 1973 to 2023 for the U.S. and the other six Group of 7 (G7) advanced economies, Danilo Cascaldi-Garcia and Hyunseung Oh of the Federal Reserve argue that the U.S. economy may be on the verge of a productivity boom, unlike the other economies, noting that recent shocks to expected productivity growth appear similar to those that occurred during the dot.com boom. The authors forecast that an AI-driven productivity boom in the U.S. would raise U.S. stock prices, investment, and GDP, and would further strengthen the dollar. Cascaldi-Garcia and Oh also argue that such a boom would cause divergence between U.S. and the other six countries’ growth paths as productivity spillovers between the U.S. and other countries are unlikely to occur. See also Brookings.
Nvidia Partner SMC Raising $950 Million to Tap AI Server Boom - Bloomberg
Singapore data center upstart Sustainable Metal Cloud is raising about $950 million in fresh funds, seeking to tap the global artificial intelligence boom to spur its growth.
SMC is among data center companies targeting Asia as global tech conglomerates and AI startups seek computing capacity for their services. It offers companies use of advanced Nvidia Corp. chips, crucial for developing and running AI applications.
The company says it has more than 1,200 of Nvidia’s high-end H100 AI chips operational in Singapore currently, and aims to increase that to 5,000 by the end of the year. Demand for that model is so great that some customers are having to wait as long as six months to receive it.
The Asia-Pacific region will be the fastest-growing market for data centers over the next five years, Moody’s Ratings said in a report this week. Companies are set to invest about $564 billion in the region’s data centers through 2028, as their capacity is projected to grow at a compound annual average rate of almost 20% over that span, it said.
https://www.bloomberg.com/news/articles/2024-07-25/nvidia-partner-smc-raising-950-million-to-tap-ai-server-boom
And that is not all.
In what were once wild jungle and palm oil plantations in southern Malaysia, the likes of TikTok, Nvidia and Microsoft are racing to install the building blocks of the digital economy: data centres.
Billions of dollars are being invested in the state of Johor, just a few kilometres from Singapore, by companies taking advantage of cheaper land and more abundant energy for computer infrastructure while staying close to south-east Asia’s biggest financial centre.
Johor’s fortunes may soon be more closely tied to those of its wealthy neighbour. Malaysia’s king, the motorbike-riding billionaire Sultan of Johor, is championing an effort to bind his state closer to Singapore in a single economic zone, expected to include tax breaks and smoother cross-border trade.
There is a model in China, where Shenzhen’s transformation from fishing village to tech megapolis started after it became a special economic zone (SEZ) on the doorstep of Hong Kong. Malaysia hopes that Johor can be as integral to the regional digital economy as Shenzhen has been to China’s manufacturing growth. “Johor could become the Shenzhen of south-east Asia,” said Tengku Zafrul Aziz, Malaysia’s investment, trade and industry minister.
“The data centre industry can form the backbone of a broader transformation of the state into a high-tech manufacturing powerhouse.” The boom in Johor gathered pace after Singapore, which has limited energy resources, placed a three-year moratorium on construction of power-hungry data centres in 2019. Johor spurred investment by cutting approval times from more than three months to as little as seven days.
https://www.ft.com/content/4d8ab5e8-a7a6-4850-a631-5e9e2a4c13bb
Disney is on its way back. The company is returning to basics.
Disney and Marvel’s “Deadpool and Wolverine,” the third standalone feature starring Ryan Reynolds as the regenerating degenerate, is expected to tally between $160 million and $180 million at the domestic box office during its debut.
As of Thursday’s close:
Defense stocks
A day after Chinese and Russian bombers got too close to Alaska, forcing the U.S. to scramble jets, defense stocks shot up. Corporate reports may have been a bigger catalyst then the joint Russian/Chinese exercise, but here’s the defense list.
RTX closed 8% higher today on solid quarterly earnings. The stock hit a new high before pulling back 2% from that level.
Northrop Grumman also reported today, and the stock was up 6.4%. It is 5.3% from the October high.
Howmet Aerospace jumped 3.4%. The stock is 3.7% from the May high.
Huntington Ingalls was up 3.2% today. It is 8.5% from the 52-week high.
General Dynamics was up 2.2%. The stock is 4% from the June high.
Elbit was up 1.5% today. The stock is 17% from the March high.
Textron and Leidos were both up 1.3% today. Textron is 6% from the 52-week high, and Leidos is 2.2% from the high it hit earlier this week.
New York Community Bank fell sharply on much worse than expected loan losses. Bloomberg commented: NYCB fell as much as 17% after reporting provisions for loan losses higher than every analyst’s estimate.
The second-quarter loan provision was $390 million, well above the average estimate of $193 million. The figure reflects an increase in charge-offs, primarily office loans, and the continuing impact of higher interest rates and inflation on the bank’s multifamily portfolio.
I have a small position in the stock. I will stick with it. NYCB is a long term workout situation. It is high risk.
Economics
NBER working paper 32727 concludes that charter schools raise college enrollment and graduation rates.
The charter school movement encompasses many school models.
In Massachusetts in the 2010's, the site of our study, urban charter schools primarily used "No Excuses" practices, whereas nonurban charters had greater model variety.
Using randomized admissions lotteries, we estimate the impact of charter schools by locality on college preparation, enrollment, and graduation.
Urban charter schools boost all of these outcomes.
Nonurban charter schools raise college enrollment and graduation despite reducing state test scores and AP enrollment. Our results suggest that there is more than one path to a college degree and that test score impacts may not predict college outcomes.
https://www.nber.org/papers/w32727
Why do progressives oppose charter schools? Why is Kamala Harris seeking support from K-12 teachers unions?
Science
@EricTopol The multitude of ways to rev up the immune system vs cancer with combinations now being pursued.
Sociology
@robkhenderson "Lonely people apparently have as many interpersonal interactions as non-lonely people, but they fail to find them satisfying. People who have good social relationships and a strong sense of belonging tend to feel happier in life than people who do not." https://t.co/9L5up12bZY https://x.com/robkhenderson/status/1546907299842871302?s=66&t=hi3LjJ8kVbN50WgSIEfnAg