July 5
Trump’s BBB, BS, Reconciliation bill is now law. It will add $4 trillion to the deficit over the next decade. Interest rates will be higher, capital investment will be lower and mortgage rates will remain elevated. Productive private investment will be crowded out. Home ownership will be only a dream for too many.
https://www.crfb.org/press-releases/dark-day-our-fiscal-future
The economy is settling into a long term trend GDP growth rate of 2% or so. Administration claims that the economy can grow for several years at 3% are nonsense. With AI, maybe productivity growth can increase from the current trend of 1% to 1.5%, but workforce growth will be stuck at 0,5% because of Trump’s immigration policies. Ultimately, GDP growth is determined by increases in labor supply and productivity.
By the way, tariffs lower long run productivity growth because tariffs distort the market in terms of allocation of capital. Capital flows to less productive sectors. More productive sectors are starved of capital. By the way, capital is scarce by definition.
jasonfurman (@Jason Furman) posted: P.S. that first chart (repeated here) shows the longer-term trend of slowing job growth. It is not a sign of weakness--the economy is stabilizing around the natural rate and the huge immigrant influx is behind us. https://x.com/jasonfurman/status/1940758485563855276?s=66
Amazon now employs almost as many robots as humans leading to huge productivity improvements. From the second graph, “end-to-end” packages handled by Amazon rose from 175 in 2015 to nearly 4000 in 2025. Incredible. Excellent piece in the WSJ.
Yet, the Left hyperventilates about Jeff Bezos’s wedding. According to a Nobel laureate, Bezos extracted about 2.2% of the value of Amazon.
We want more of what Bezos and other entrepreneurial geniuses do. So, lower taxes on such individuals and institute a national consumption tax for me and the other 329 million non geniuses in the United States. See research by James Mirrlees on Optimal Taxation.
To stop over reach by Trump, there are effective alternatives to nation wide injunctions. Individuals harmed by Trump’s extra legal actions can join a “class” and institute a class action lawsuit. Or, complainants can argue that Trump’s executive orders violate the Administrative Procedure Act of 1946.
https://www.politico.com/news/2025/07/03/supreme-court-nationwide-injunctions-rulings-00439335
Markets and Stocks
The S&P 500 is trading at an all time high, 6,279. It is very near my year end target.
Stocks are not cheap, but momentum is positive. Record highs lead to additional all time highs. But invest with a one year or longer time horizon. Please don’t speculate or trade.
dailychartbook (@Daily Chartbook) posted: "When the most important stocks in the market are breaking out as a group, that’s a powerful message."
@granthawkridge https://x.com/dailychartbook/status/1941104710083400003?s=66
dailychartbook (@Daily Chartbook) posted: High-beta stocks (SPHB) are at all-time highs relative to their low-volatility counterparts (SPLV), indicating a “risk-on” environment.
via @KoyfinCharts https://x.com/dailychartbook/status/1941089611297742920?s=66
I remain all in on the AI trade.
I mention CoreWeave below because the Nvidia GB300 NVL72 rack will raise margins for Nvidia.
CoreWeave said it has received the market’s first artificial intelligence server system based on the newest, high-end Nvidia Corp. chip, a sign of its rising stature in the competitive AI cloud-computing space.
This first GB300 NVL72 rack of servers will be put together and deployed in the US, and CoreWeave plans to bring others online throughout the year, according to a statement from Dell Technologies Inc., which made the system. CoreWeave, whose customers include OpenAI, said the new system will let its clients “develop and deploy larger, more complex AI models that are exponentially faster than ever before.”
The initial deployment to CoreWeave, which counts Nvidia as an investor, underscores CoreWeave’s increasing focus on renting cloud computing power to companies that need access to powerful Nvidia chips to train and run AI software. Dell has also been reviving its fortunes by focusing on selling AI servers to firms that include Elon Musk’s xAI.
Robin Hood has created “tokens” on private companies such as OpenAI. Such tokens carry very subjective valuations and are high risk. But they are another profit opportunity for HOOD, which remains a great investment.
Nvidia, Meta and Alphabet Google are my top picks among the hyper scalers.
Google is trading at around 18 times 2026 earnings. The stock is at $180 and earnings next year should be slightly north of $10.
The market is trading at 21 times 2026 earnings. With its earnings growth of around 10%, strong margins and assets such as search, Gemini AI, YouTube and Waymo, I believe Google should be trading above $200.
Economics
The risk of a recession is low.
@Nick Timiraos The index of aggregate weekly payrolls is a good monthly proxy for nominal income growth and correlates well with nominal GDP growth. It was up 4.5% on the year in June, down from 4.9% in May, as hours worked slowed and hourly earnings growth cooled. The 12-month rate has been in a tight range between 4.5% and 5.3% over the past year, close to the pre-pandemic norm. The three-month annualized rate (which has been bouncing around of late) slipped to 3% in June, the lowest of the post-pandemic expansion.
When nominal income growth exceeds inflation, households have consumption fire power. Right now the spread is a healthy 2% or so.
Global Warming and Crime
Violent crime is a major problem in the United States.
Heat related deaths are a major problem in Western Europe.
cremieuxrecueil (@Crémieux) posted: I've seen people mentioning that Europe's heat-related death issue is larger than American gun violence—true!
But people neglect saying how many heat-related deaths America has.
Approximately 1% of what Europe does even though America is hotter and Americans are less healthy! https://x.com/cremieuxrecueil/status/1940509690729058360?s=66
Sociology
Affirmative Action damages the nation state and our society.
Incentives explain behaviors.
Affirmative Action should be abolished so people aren’t incentivized to lie about their race for college admissions. https://x.com/therabbithole84/status/1941007779264872535?s=66