October 1
Defense spending is at levels last seen in the 1930s. When Japan attacked Pearl Harbor, the United States was woefully unprepared for a global war. Today, our leaders, Democrats and Republicans, are leaving the nation state vulnerable to military and national humiliation.
Robert M. Gates (U.S. Secretary of Defense from 2006 to 2011) writes at Foreign Affairs - The United States now confronts graver threats to its security than it has in decades, perhaps ever. Never before has it faced four allied antagonists at the same time—Russia, China, North Korea, and Iran—whose collective nuclear arsenal could within a few years be nearly double the size of its own. Not since the Korean War has the United States had to contend with powerful military rivals in both Europe and Asia. And no one alive can remember a time when an adversary had as much economic, scientific, technological, and military power as China does today.
Markets and Stocks
I like the market but stocks are not cheap. Invest in high quality companies. Don’t trade or speculate. Diversify your portfolio.
The economy is growing at a sustainable pace. Inflation is at or nearing its 2% target. Earnings are accelerating and the Fed is cutting rates. The market should grind higher.
Market breadth is outstanding
Hedge funds are cautious on technology. But that makes me laugh because over time, hedge funds underperform and they tend invest in a herd. They will rotate back to tech.
China is surging as the government embarks on a large stimulus program. But the structural weaknesses of an Inadequate social safety net, excessive interference in the private sector and a demographic black hole are not addressed. Japan plunges on worries about tighter monetary policy. I doubt that Japan will suddenly change course on its ultra loose monetary policy. European autos tank on lackluster demand in China and in Europe.
I don’t like Chinese equities. I like the Japanese market and selected European stocks are great investments: Rolls Royce, ARM and ASML to highlight three.
Silver is interesting.
I am doing work on high risk Coeur Mining, the world’s 9th largest producer of silver. CDE is trading at just under $7 a share.
The Journal says: One investment that might have plenty of room to run: silver. Its price is being supported both by economic anxiety and silver's usefulness as an industrial metal. But supply isn't rising to meet a multi-year deficit, writes Heard on the Street columnist Jinjoo Lee.
Inflation continues to fall.
The economy continues to surprise to the upside
Gold is attracting retail buyers
Economics
An open border is bad for economic growth. But a wide open legal immigration policy for high skill workers is fantastic policy.
The Journal reports: Among the benefits economists often say immigration brings to aging Western countries is a healthier public purse. Having more immigrants expands the supply of young, productive workers to pay the taxes that finance the pensions and healthcare of the elderly, the argument goes.
New research shows the fiscal impact of immigration is not that simple. The fiscal benefits are clear for high-skilled immigrants, but less so, and possibly even negative, for the lower skilled, according to some studies.
To be sure, fiscal effects aren’t the only consideration in the current debate over immigration; other factors include the role of immigrants in relieving labor shortages, countering population decline or altering the existing character of the communities where they settle.
Nonetheless, the fiscal effects have drawn more attention as migration reaches record levels in the U.S. and Europe. A plurality of U.S. voters, or 44%, believe immigrants make the tax situation worse, while 18% believe they make it better, according to a Gallup poll last year.
What people, regardless of background, pay in taxes and consume in government services varies over their lifetimes. Before adulthood they benefit from education and health services, but aren’t yet working and paying taxes. Once people enter the workforce, they start contributing more in taxes than they consume in state services. As they retire, they stop earning, draw on government benefits and consume more healthcare and social welfare.
The Office for Budget Responsibility, the U.K.’s spending watchdog, in a studypublished this month found the average migrant worker made a net contribution of £225,000 ($300,000) to the public purse by age 85, in contrast to the net negative £146,000 contribution of the representative U.K. resident.
But among migrants, the contribution varied widely. The average high-wage migrant contributed a net £684,000, while the average low-wage migrant’s contribution was a net negative £578,000.
A second recent study, for the University of Amsterdam—using detailed, anonymized data for all 17 million Dutch residents—found non-Western immigrants with at most primary education cost the Dutch Treasury a net €360,000, or about $400,000, over their whole lives. In contrast, non-Western immigrants with a master’s degree made a positive net life contribution of €130,000.
Each asylum seeker costs the Dutch state €475,000 ($530,000) over their lifetime on average, including the cost for the second generation. That partly reflects low levels of educational attainment, which tends to correspond to skill and wage level, said Jan van de Beek, an independent researcher who co-wrote the study.
In the U.S., the National Academy of Sciences in 2017 published detailed estimates of the fiscal costs of various migrant groups. They suggest that the average migrant with less than a high-school diploma will receive $109,000 more in benefits from all levels of government than they pay in taxes over their lifetimes. The figures are expressed in 2012 dollars.
BUT Professor Michael Clemens at George Mason University estimates that for every dollar of labor income, there are roughly 80 cents of capital income. Adding that factor to the National Academy of Sciences’ calculations, he finds a migrant in the U.S. with less than a high-school education actually contributes a net $128,000 over his or her lifetime to the U.S. Treasury, rather than subtracting $109,000.
Another omission: some low-skilled workers might complement high-skilled ones. Cleaners make possible the work of a surgeon, for example. Access to child care might allow an engineer to work longer hours.
These ripple effects on wages and labor supply add up to between $700 to $2,100 a year in additional fiscal benefits to what the National Academy of Sciences found for each low-skilled immigrant, meaning that this group weighs less on U.S. public finances or even bolsters them over their lifetimes, according to a 2020 paper by Dominik Sachs, now at the University of St. Gallen in Switzerland, and Mark Colas of the University of Oregon.
It is a complex issue worthy of a serious debate. But the two presidential candidates polarize the issue and make appropriate policy next to impossible.
Great Britain
Almost all of Britain’s growth in the past five years has been driven by just two superstar sectors, laying bare the task facing Prime Minister Keir Starmer to revive swathes of the economy.
Bloomberg analysis of official data shows an outsized contribution from technology and science-based industries is concealing a two-speed recovery, where sectors from hospitality to manufacturing are struggling to expand.
A third of sectors accounting for almost 20% of gross value added are still below their 2019 levels of output almost five years after Covid struck, with others including real estate and construction barely higher. Instead, Britain has relied on two — information & communication and professional, scientific & technical activities — to power its patchy performance on the back of a wave of innovation.
@EdConwaySky There is at least ONE area where the UK is world-beating: the cost of our power. Acc to new figs, UK has highest industrial power prices in the developed world. A key part of the explanation for why we deindustrialised faster than anyone (another thing we're world-beating at)
Sociology
Men are the weaker sex when it comes to lifetime achievement and health.
Presented with a more-equal playing field, young women are seizing the opportunities in front of them, while young men are floundering. The phenomenon has developed over the past decade, but was supercharged by the pandemic, which derailed careers, schooling and isolated friends and families. The result has big implications for the economy.
More women ages 25 to 34 have entered the workforce in recent years than ever. The share of young men in the labor market, meanwhile, hasn’t grown in a decade.
As of August, 89% of this cohort of men were employed or looking for work, more than 700,000 fewer than if the current labor-force participation rate was at 2004 levels, according to an analysis of Bureau of Labor Statistics data by Aspen Economic Strategy Group policy director Luke Pardue. Women’s participation is up 6 percentage points in just the past 10 years, to 79%. A fifth of men in this same age range still lived with their parents as of 2023, according to the Census, compared with 12% of women.
Among noncaregivers who aren’t disabled, men are more likely to be neither employed, in school nor in workforce training, what economists refer to as NEET. Around 260,000 more 16- to 29-year-old men than women fell into this category as of the first half of 2024, according to think tank the Center for Economic and Policy Research, representing 8.6% of young men and 7.8% of young women. Rates are up for both groups since 2019, but down from a Covid high.
Until the past decade or so, “there was an assumption that men just needed to show up for their life and they’ll get a job and have a family and be provided for, because they’re men,” says University of Maryland masculinity researcher Kevin M. Roy.
https://www.wsj.com/lifestyle/careers/young-american-men-lost-c1d799f7