June 10

I have stated my opinion on Trump many times. He should be in prison for attempting to overthrow the government and shred the Constitution. But I am skeptical of the grand jury system. 

Through the first 8 months of the current fiscal year which began October 1, the federal government ran a deficit of $1.2 trillion or over 4% of GDP. As a percentage of GDP the deficit will climb to about 6% of GDP over the balance of the fiscal year. 

Revenues are running near historical averages. Spending is growing above historical averages. Entitlements are the problem. Fix entitlements or raise taxes. 

In Allen v Milligan the Supreme Court upheld Section 2 of the Voting Rights Act of 1965. Section 2 outlaws any election or voting practice that denies minority voters an equal voice at the polls. 

In the Allen case,  black  voters challenged Alabama’s drawing of Congressional voting districts. Blacks make up 26% of Alabama’s voters. The Republican controlled state legislature had drawn a redistricting map that crammed most black voters into one district in order to ensure that blacks could only elect one member of the Alabama’s 7 member delegation to the House of Representatives. 

The Supreme Court agreed in a 5-4 decision that Alabama’s Congressional map deprived blacks of an equal voice at the polls. 

The effect of the decision will ensure that blacks elect 2 of Alabama’s 7 House members. 

Equally important, experts say that other states will have to redraw House districts, the net result  will be that blacks across the nation elect an additional 5 House members. In plain language, Democrats will pick up 5 seats in 2024.

Republicans have a problem. Maybe they should move toward the middle on political matters, or perhaps they just enjoy losing. 

Markets and Stocks 

The S&P 500 is up 20% from its lows. That 20% move signals a new bull market. I am positive on equities. On the market the New York Times says: 

The bear market lasted 248 trading days, the longest such run since 1948. Since its October low, the S&P 500 has gained 20.04 percent, just enough to tip into a bull market. 

I say “in the long run 248 trading days is nothing. Invest and be patient. If investing were easy everyone would be a millionaire.”

Barron’s says: Nvidia stock could trade at just over $530 by the end of 2024, about 39% above the current $381; that’s assuming shares continue to trade at the current 45 times earnings, and that 2025 earnings-per-share estimates of $11.84 remains in place. The current multiple seems justified, given that it’s not even 1 time the annualized 50% earnings-per-share growth analysts expect over roughly the next three years. 

To be sure, AI stocks may need to take a breather. They’re already moderating near their recent peaks. They may even see a small decline in the near term, but that might be mere drops in the bucket relative to the larger uptrends these stocks are in—and buying dips could prove prescient. 

I agree. I like big technology including ASML,  TSMC. AMD and ADI. 

I like Deere and Caterpillar.

The WSJ says: Companies including Deere, Caterpillar and CNH Industrial are expanding or upgrading their models as building and infrastructure projects drive historic demand for the earth-moving machines. Sales of excavators in North America last year rose 23% over 2021 to 41,320 machines, the second-straight year of record sales, said Off-Highway Research. The consulting firm projects sales will rise another 5% this year, boosted by federal spending on battery plants for electric vehicles, road and bridge repairs and other nonresidential construction. 

Wages remain elevated. The Atlanta Fed wage tracker shows composition adjusted wage growth for the three months ended May was up 6.0% from the year ago period, down from 6.1% in April and 6.4% in March—slowing but at levels well above what would be consistent with 2% inflation  @NickTimiraos

The Fed will raise rates one more time.

The labor market is slowing. 

Gasoline prices have been stable  over the past 10 years. 

Household net worth is at record levels. To a modest degree, increases in net worth support consumption. People will spend a bit more when they feel wealthier.

Politics 

The Biden Administration is proposing major changes to the cost benefit analysis that regulators use in writing regulations. Cost benefit analysis is important. Administrative agencies should show their work in determining costs and benefits. Shine a bright light on new regulations. 

The House Ways and Means Committee will work on tax legislation next week. The Committee will propose to expense-write off immediately-research and development spending, interest expenses and purchases of short-term assets like equipment and machinery. The Committee will propose to roll back some clean energy tax credits which will total over $1 trillion and have no material effect on global climate. 

That would be good policy.

Sociology 

I am conservative on economics and the power of government. I am liberal on social matters. I believe in the golden rule and respect for all. 

Few Americans share my views on the triangulation of economics, government and social matters. See NYT https://www.nytimes.com/2023/05/25/briefing/ron-desantis.html

Rob Henderson, Yale and Cambridge University, England, writes:

The currency of evolution is reproduction. Every one of your ancestors managed to reproduce. They form an unbroken chain dating back billions of years. The drive to reproduce is fundamental. And for humans, status is a core concern because it has reproductive relevance.

…So what did status get our human ancestors? Resources, allies, territory, mates, and, most importantly, offspring. The idea is that humans who cared a lot about status were more likely to win romantic partners and thus had children who also cared a lot about status.

He talked about the differences between dominance and prestige.

People (and animals) confer status to dominant individuals because of what the individuals can do to them. Inflict costs, pain, humiliation, injuries, disfigurement, violence, reputation destruction, and so on.

We confer status to prestigious individuals because of what these individuals can do for us. Provide benefits, teach useful things, grant access to resources, bolster our own status by being associated with them, and so on.

Concerning hierarchy, egalitarianism among hunter-gatherers in a diverse array of societies has existed primarily among adult males. Women and children have been relegated to a subordinate role.

…Men who attempted to assert unwanted dominance were the targets of organized attacks by their hunter-gatherer peers.

He cited Richard Wrangham.

Humans organized egalitarian societies, and any male that violated this too much was subsequently the victim of a targeted killing. Slowly humans eliminated overt aggression and hostility, and we shaped ourselves into being relatively calm, docile, cooperative, and so on, relative to other great apes.

See Arnold Kling at My Tribe. Kling’s stuff is worth reading.