May 17
Yes, Bidenomics are inflationary and increase the deficit but the long term deficit is driven by Social Security, Medicare and interest on the debt. Undoing Bidennomics will not solve the long term deficit issue.
https://www.wsj.com/articles/cancel-bidens-spending-to-pay-for-tax-cuts-bf6a9eea
The above linked commentary in the Wall Street Journal is disingenuous and unhelpful in solving the budget crisis. People must be told that in order to solve the budget crisis, some combination of higher taxes and entitlement reform is necessary. There is no other solution. Demographics and accumulated debt drive the deficit.
Can someone tell me how a two state solution is the answer when one state, the Palestinian state which would be controlled by Hamas wants to eradicate the other state and its people? History teaches that a violent ruthless minority can cow the majority. See the history of the Bolshevik revolution in 1917 and how Mao took power in 1947. In both cases a violent nihilistic minority seized power.
Who is Slovakia’s Robert Fico ?
He built a following by combining far-left social policy with nationalism and conservative positions more associated with the radical right. He has called adoption by same-sex couples a “perversion”. He escaped an assassination attempt ‘by a hair’.
Markets and Stocks
New highs are bullish. Typically, new all time highs are followed by more all time highs, up 10%. See Nick Glydon at Redburn Atlantic.
But valuations are stretched so be prudent, not overly aggressive.
I like the banks. Lower interest rates are good for the banks. Lower rates alleviate deposit flight fear and moderate commercial real estate, CRE, risk.
I like NYCB, a bet on Mnuchin, former Treasury Secretary, BAC, FITB and WAL.
Walmart reported good results and gave positive guidance. Walmart is a fantastic long term investment.
(Walmart outside of the Cloud is now a formidable competitor to Amazon, which means that Amazon is not a monopoly.)
Deere reported good numbers but gave cautious guidance. Grain prices are rising. I would aggressively buy Deere below $400 for a trade to $460.
May 22 mark that date, Nvidia reports.
Barron’s reports: Nvidia needs to close above $950.02 to beat the record closing high it reached in late March.
The marketwide rally sparked by April’s inflation data on Wednesday lifted Nvidia shares along with a raft of upbeat analyst estimates ahead of the company’s first-quarter results on May 22. Those have generally pointed to Nvidia reporting revenue of $26 billion, beating current consensus forecasts of $24.5 billion, based on a FactSet poll of analysts’ estimates.
The biggest debate over the stock is whether sales will slow down ahead of the shipment of Nvidia’s new Blackwell range of chips which is expected to begin in mid-December, according to UBS analyst Timothy Arcuri.
Arcuri said Nvidia could deliver April-quarter revenue as high as $26 billion and offer an outlook for this quarter that’s possibly in the $27 billion to $28 billion range.
Arcuri kept a Buy rating and $1,150 target price on Nvidia stock.
https://www.barrons.com/articles/nvidia-stock-price-buy-sell-d2cfb721
We shall see.
Utilities are attractive. The Journal reports: Power-hungry artificial intelligence’s effect on future electricity demand is starting to feel a lot closer to reality for power-plant owners.
Forward power prices in fast-growing data-center hubs such as Texas and the mid-Atlantic region are already starting to reflect tighter future grid conditions. Around-the-clock forward power prices for 2026 in the northern part of Texas, for example, have risen some 13% since November, Vistra VST 5.95%increase; green up pointing triangle said on its earnings call last week. Vistra primarily owns natural-gas, coal and nuclear-power plants in Texas and the mid-Atlantic.
Based on those higher prices, Vistra said it projects adjusted Ebitda could exceed $6 billion in 2026, some 24% higher than what analysts polled by FactSet were expecting before the call. That implies a compound annual growth rate of roughly 13% since last year, quite an acceleration from the 3.8% pace in the three-year period leading up to 2023.
https://www.wsj.com/finance/stocks/ai-is-electrifying-these-power-producers-shares-6b877d07
@NickTimiraos The April core PCE index probably rose between 0.20% and 0.26%, according to the forecasters who map the CPI and PPI into the PCE
(This could change with tomorrow's import price data)
That would either hold the 12-month rate at 2.8% or lower it to 2.7%
Shelter, the largest spending category for the average household, is by far the biggest component of the “core” CPI. Annual housing inflation declined to 5.5% in April from 5.7% in March.
It is all about shelter.
@carlquintanilla Still printing sub 2% when you put in real time shelter."
HPE is a bet that demand for AI servers will remain strong for several years. I like the wager. The company reports earnings on June 4.
https://www.barrons.com/articles/hp-enterprise-stock-price-ai-servers-5b29349d
Dell reports on May 30.
The semiconductor capital equipment industry is very attractive. KLA Corp, KLAC, is a very attractive investment.
KLA designs and sells "metrology and inspection" equipment, which plays a crucial role in yield enhancement for semiconductor manufacturing.
KLA reported higher than expected EPS and revenue for Q3 2024.
KLA holds a dominant market position in the metrology/inspection sector with a greater than 55% share.
KLA is expected to benefit from increasing demand for advanced process control solutions for sub-5nm node chip production.
I still like ASML a lot.
AMAT and LRCX are also very attractive.
The U.S. will embrace nuclear power.
The evolution in nuclear power, decades in the making, has received billions of dollars in federal development funds. Nevertheless, in the United States, next-generation reactors remain in the design stage.
One American company, TerraPower, which was founded by Bill Gates, has had to delay the opening of what could be the United States’ first new-age nuclear plant in Wyoming by at least two years, in part because it has pledged to not use Russian enriched uranium.
https://www.nytimes.com/2024/05/14/climate/russia-nuclear-uranium-import-ban.html
I like the uranium trade.
Economics
The Journal reported: The FTC sued private-equity manager Welsh, Carson, Anderson & Stowe and U.S. Anesthesia Partners last year for allegedly consolidating and monopolizing the anesthesiology market in Texas. This enabled them “to raise prices for anesthesia services—raking in tens of millions of extra dollars for these executives at the expense of Texas patients and businesses,” Ms. Khan alleged.
Federal Judge Kenneth Hoyt on Monday rejected the case against Welsh Carson, which holds a 23% stake in the anesthesiology group. The agency didn’t “cite any authority for the proposition that receiving profits from an entity that may be violating antitrust laws is itself a violation of antitrust laws,” he noted.
The FTC said Welsh Carson “masterminded” a plan to buy competing anesthesiology practices in Texas and “remained deeply involved in crafting and executing that plan.” But even if the group violated antitrust laws, the judge held that the private-equity firm couldn’t be held legally responsible merely because it had profited as a result.
The agency “has not cited a case in which a minority, noncontrolling investor—however hands-on—is liable . . . because the company it partially owned made anticompetitive acquisitions,” Judge Hoyt wrote. Under Ms. Khan’s inventive theory, any asset manager could be sued for a company’s alleged anti-competitive conduct if it holds shares.
At NBER working paper 32438 researchers conclude that liberalization of trade with China did harm workers exposed to the trade-workers in certain manufactured goods sectors-but overall, trade with China benefited the consumer as well as many businesses which used Chinese production inputs through lower prices and lower interest rates.
We examine US workers' employment and earnings before and after trade liberalization with China. Among workers initially employed in manufacturing, we find substantial and persistent declines in both outcomes, with indirect exposure via input-output linkages exacerbating the negative effects of direct exposure.
For workers initially employed outside manufacturing, however, we find that the positive impact of greater upstream exposure via inputs more than offsets the adverse impacts of own- and downstream exposure, inducing relative earnings gains.
We also find that spatial exposure is more influential than industry exposure.
https://www.nber.org/papers/w32438
Free trade works.
Politics
Seven months into the war, Hamas is far from defeated, stoking fears in Israel that it is walking into a forever war.
The U.S.-designated terrorist group is using its network of tunnels, small cells of fighters and broad social influence to not only survive but to harry Israeli forces. Hamas is attacking more aggressively, firing more antitank weapons at soldiers sheltering in houses and at Israeli military vehicles daily, said an Israeli reservist from the 98th commando division fighting in Jabalia.
Hamas’s resilience poses a strategic problem for Israeli Prime Minister Benjamin Netanyahu, who repeated Wednesday that the destruction of the Palestinian Islamist group has to come before any political solution to the war. Concerns have grown within Israel, including in the security establishment, that Israel has no credible plan for replacing Hamas, and whatever achievements the military has won will be diminished.
https://www.wsj.com/world/middle-east/hamas-strategy-israel-war-0292d40c
My words: it will be a never ending war. Hamas poses an existential threat to Israel and to Jews worldwide including in the United States. Hamas is a deadly virus that cannot be eradicated but can be contained.
Russia launched a research spacecraft for anti satellite nuclear weapon. U.S. officials say it is linked to a Russian nuclear anti satellite program that has been a growing worry for the Biden administration, Congress and experts outside the government. The weapon, if deployed, would give Moscow the ability to destroy hundreds of satellites in low-Earth orbit with a nuclear blast. See WSJ.
Sociology
@Michael Yeh posted: “At an initial encounter between two people—which could be a job interview or a date—each person’s brain assesses the other person by answering at least three questions: Are you a threat? Can you be trusted? Are you competent? Within seconds, before either of you is even conscious of the fact, you might be ruled out as an employee or as a potential mate.”
@Scientific_Bird Criminal recidivism rates are generally high. But an obvious correlate is age, which contributes to the crime reduction effect of incapacitation. Rate of recidivism (convicted within 2 years of prison release) in Denmark are shown by age and sex below.
@TheShmanuel It is insane that 45% of young men are convicted of a new crime within 2 years of leaving prison. This really should call into question the efficacy of prison on all levels.
@Charles Murray posted: No, it should call into question the decision to release them.
40% of released inmates commit another felony within two years. 80% go back within 10 years.