June 14
My gut says Trump will win. I won’t vote for him but many voters believe Biden is too old and a progressive, out of touch with America sensibilities.
The University of Virginia Political Center says they are making a half-dozen changes to their Electoral College ratings, all of them benefiting the Republicans. These moves don’t significantly change our overall outlook, which is that we don’t really see a clear favorite in the presidential race, but they do better align our ratings with that overall outlook.
Markets and Stocks
Both the PPI and jobless claims information provided positive news from the perspective of the financial markets. Treasury yields were lower on the reports.
Initial jobless claims and continuing claims were higher than expected. The labor market is showing clear signs of slowing.
The PPI data feeds directly into the PCE price index which will be reported on June 28. Expectations for core PCE will be right around 0.13%. That is consistent with 2% inflation annualized. But it is only one month. Still, economists believe that the June PCE which will be out the week of July 28 will also be a print of around 0.15% which also is consistent with 2% inflation.
The take away is a powerful Treasury rally which will support continued higher equity prices.
On the economic data from yesterday, CNBC says:
The producer price index declined 0.2% for the month against expectations for a 0.1% increase.
PPI was held back by a 0.8% decrease in final demand goods prices, which was the largest decline since October 2023.
Initial claims for unemployment insurance jumped to 242,000 for the week ended June 8. That’s the highest level since August 2023.
I like big technology, the banks, industrials and a few small caps. I still like the uranium trade.
NickTimiraos posted: To translate this: Four Fed officials see no rate cuts this year, up from two officials in the March projections Seven see one cut, while eight see two cuts.
This means a narrow majority sees no more than one cut this year as a base-case.
Broadcom reported a strong quarter and announced a 10-1 stock split. AVGO continues to look fantastic.
By 2035, real Full Self Driving, FSD, vehicles should be common place. Tesla is the front runner for FSD. 85% of vehicle accidents are caused by driver error. Increasingly, accidents are caused by texting while driving.
Tesla is gaining valuable knowledge regarding FSD with its autonomous testing in China.
I continue to like uranium. Bloomberg says: the price of uranium has climbed 233% the past five years — more than triple the gains in gold and copper. A big part of the allure is the sense that supply and demand are out of whack. Consumption of the metal in China, India, Japan, the US and Europe is rising much faster than miners can pull it out of the ground. Today, there are 61 nuclear power plants under construction globally, with another 90 or so in planning stages and more than 300 proposed.
Economics
I am a broken record but short term taxes must go up. Ideally Congress would pass a consumption tax. But that won’t happen. Politicians want to be re-elected. So, regardless of how the elections turn out, in 2025, Congress will continue the individual tax cuts of the 2017 TCJA and pay for that with a modest increase in corporate taxes. I will not be happy about that. But politicians want power. They pander to the median voter who is not well versed on tax policy.
Every American in the long run will be worse off when the corporate tax is increased. Moreover , the stock market will not react well. About 60% of households own stocks.
The federal budget deficit was $1.2 trillion in the first eight months of fiscal year 2024, the Congressional Budget Office estimates—$38 billion more than the deficit recorded during the same period last fiscal year. Revenues were $294 billion (or 10 percent) higher and outlays were $332 billion (or 8 percent) higher from October through May than during the same period in fiscal year 2023.
https://www.cbo.gov/publication/60280
On the spending side, year-to-date outlays for interest paid on public debt reached $728 billion, a 37% increase over last year.
The U.S. net federal debt to GDP ratio is about 98%.
The U.S. is right at home with the poorer nations of Europe.
Productivity drives increases in the standard of living.
Immigration reform and expanding immigration, especially for high-skilled workers. "Allowing in more immigrants, including stapling a green card to all STEM degrees, would make a big contribution." - Jason Furman
Investing in education, skills training, and human capital development. "So policies that promote the development of talent—for example, by ensuring broad access to advanced STEM education for those that cannot afford it—should form the basis for any long-run productivity-enhancing effort." - Stephen G. Cecchetti and Kermit L. Schoenholtz
Increasing government funding for research and development, especially basic research. "Ultimately the laws of physics may impose diminishing returns on the quest for revolutionary new technologies. But the quest must continue, because in the long run a rising standard of living depends almost entirely on technology-driven productivity growth." - Michael Lind
Providing the right incentives and environment for business investment, such as favorable tax policies, regulatory reform, and macroeconomic stability. "Taxes that increase the after-tax costs of capital and deter business investment—either in the form of new taxes or expiration of existing cuts—should be avoided." - Mickey D. Levy
Fostering competition, dynamism and openness in the economy, including reducing trade barriers. "The force of competition remains a fundamental driver of efficiency. Instead, the next president appears destined to rely on mish-mash industrial policies and silent prayers for an artificial intelligence miracle." -
Politics
The Washington Post reports: Mr. Schumer wants to codify nonbinding guidance released this spring by the Judicial Conference that would ensure the random assignment, within a district, of any lawsuit seeking to bar or mandate a state or federal policy.
Mr. McConnell, who told judges around the country they could ignore the Judicial Conference’s regulation, goes after the nationwide injunction instead — by preventing district court rulings from binding anyone but the parties in the case and similar parties within the district.
I think McConnell is correct.
The Committee for a Responsible Federal Budget reports:
More than half of the nation’s hospitals are designated as “charitable” nonprofit institutions by the Internal Revenue Service (IRS), exempting them from most federal, state, and local taxes and making donations to them eligible for a tax deduction.
Linked to this status is the requirement that nonprofit hospitals will deliver benefits to the communities they serve. Such benefits can encompass a broad range of activities like charity care and financial assistance programs, local health improvement programs, and health professional education. However, there is insufficient enforcement of existing requirements and no unambiguous federal statutory or regulatory definition of “community benefits.”
Research consistently shows that nonprofit hospitals are failing to meet community benefit obligations under all but the broadest (many argue, overly expansive) definitions.1 Investigative reports highlight instances where such hospitals prioritize financial gains over community welfare, often neglecting those in need of financial assistance. Furthermore, evidence suggests nonprofit hospitals offer fewer community benefits compared to for-profit hospitals.
The “charitable ” status costs the federal government $260 billion over a decade.
https://www.crfb.org/papers/federal-tax-benefits-nonprofit-hospitals
Sociology
Michael Strong is right: I’m at the point at which I see the threat of relativism, hedonism, and nihilism as greater than the threat of religion. Young people need to be raised among adults who have some kind of moral sensibility, some sense of moral conviction and direction, some shared belief in ideals, the heroic, and the sacred. Without it they are prone to mindless political activism in part because that is the closest to something meaningful most have been exposed to. They suffer from social media and gaming addictions because they have no sense of purpose. Those who are ambitious develop self control in order to achieve their ambitions. The rest are lost unless they are raised in a particularly strong home or subculture.
See “In My Tribe.”
And see https://www.cato-unbound.org/contributors/michael-strong
Arnold Kling at his blog “In My Tribe” writes: And a hostage rescue mission is called a “massacre.” I would say that it is reasonable to blame every civilian death—every single one—on Hamas. It embeds its weapons and fighters within the civilian population. It started this war. And yet its supporters buy its “massacre” narrative.
I agree.
Many reject religion. That is fine. To me religions are based on myths. But the Judaeo Christian ethos provides a positive moral framework. So, if people don’t have that moral foundation what do they have to guide them through life?