9 to go
Mother's Day Musing 5.9.26- views from dauber island
Nine more Knicks wins until they raise that championship banner in MSG, ‘the world’s most famous arena’. Starting to get excited.
My dad passed away when I was nine, so I owe much of who and what I am to my mom. She passed away during COVID in 2020 at 3, so she had a good run. Thank you, ma ( she was always ‘ma’, never ‘mom’, oddly enough), and I miss you.
I don’t know what to make of this new hantavirus but it’s definitely not comforting. ‘Experts wonder ‘Where is the CDC?’ as a hantavirus outbreak unfolds on a cruise ship’
Lots to talk about today, so I’m going to go bullet point to make it easier.
One of the things that’s emerging is the potential for different presidential candidates. This is certainly not a lock for J.D. Vance as the sitting Vice President. In fact it appears that his star is waning while that of Marco Rubio is rising. Trump seems to be marginalizing Vance, perhaps because of his negative polling, perhaps because of his opposition to the Iran war, and to support for Israel. Marco seems to have the support of some neocons as well as being a rising star in the MAGA world.
Full Disclosure: I was a Marco fan when he ran in 2016. However, I do have doubts based on his performance so far in this administration.
Not to be ignored is Donald Trump Jr., who is a MAGA darling and would certainly fit into the apparently dynastic mabitins of DJT.
Illiberalism on both sides. Honestly the whataboutism that seems to plague us and the failure for each side to look at its extremists is disappointing and troubling. If you don’t like Nick Fuentes, you can’t like Hasan Piker. It’s that simple. And the growing popularity of these types of characters is emblematic of the severe societal issues that are growing in this country.
On that note, populism is on the rise. Again, there’s a growing belief, not at all unfounded, that the current system and the current Republican and Democratic parties are both unable or unwilling to face the major issues in this country, including:
bifurcation of society
the growing difficulty for a vast plurality of citizens to live better than paycheck to paycheck
and the feeling by many that upward mobility is severely limited in this country
I think if leadership in both countries doesn’t understand and accept this movement, they will both be overrun by populists and socialists/fascists as an alternative for many who see democracy and capitalism as failing them.
I do sometimes worry if some thought of civil war is coming in this country.
The markets right now are as confusing as I can ever remember them. There are a couple of different threads that I’ll mention without going too deep down the rabbit hole.
First off, the growth of passive, ETF, and quant investment, which, by definition, ignores many of the macro variables and just follows the way the markets are moving. It tends to act almost as a negative gamma and exacerbate any moves, especially in the case of passive, there’s a self-fulfilling component to it. I think in a confusing macro world where fundamental investors are confused and have lowered their investment profiles or are waiting and seeing, those strategies are running the market.
There’s growing belief in a school of thought that the global paradigm is changing. That we’re going from a mostly unipolar to a bipolar or multipolar world. That soft power is less important than hard power. That spheres of influence with hierarchies of policy and control within each sphere are the new reality. In this scenario, policies have to be created to ensure the self-sufficiency of each of the major players, with less focus on the implications or even allies within each sphere. In this paradigm, what the United States is doing has a broader, more meta characteristic, and steps like the confrontation with Iran have to be viewed as a way to increase U.S. influence and counter Chinese influence; if this is the case, then the approximate and local impacts don’t matter as much as how the Great Power balance changes.
CAPEX is definitely the story of the markets right now, as are earnings growth estimates. The worry with CAPEX is that it is heavily weighted towards AI and technology, and one has to wonder whether all that will actually get used and what it means for the rest of the US economy if the focus is really on data centers Power for the data centers will continue to be a problem with no obvious solutions. Additionally, some of the excitement about the semiconductor sector, which has obviously gone parabolic, seems to ignore the two facts:
There is some front-loading of orders because of concerns about supply chain disruptions of raw materials coming out of the Middle East.
They are just dependent on continued revenues and funding, which is not clear in many cases.
There’s an interesting situation in commodity futures, which, as I’ve learned in the last few months, seems to stem from a misunderstanding of the commodities world vs the equities and credit (in other words, the purely paper worlds). Commodity futures are also often driven by producers who are locking in future prices to help solidify their production and scheduling issues. Consequently, future prices are not necessarily reflective of “market expectations” for where prices will be, but rather a more pedestrian pursuit of certainty about future sales and pricing metrics, rather than any kind of deep-dive analysis of what prices will be at that time. This seems to have resulted in some confusion in the equities world, with these futures being interpreted as market consensus, thereby minimising the extent and duration of the current disruptions. As a result, it seems like the other markets are remarkably benign about the dislocations and disruptions in the ‘physical’ world.
With all the focus on energy, let’s not forget the secondary effects. Note that the impact on consumers will be delayed (with the greatest lag in the U.S.), but we are already hearing about food and crop shortages.
‘The 2026 Middle East Conflict: Nuclear Degradation, Maritime Blockades, and Global Economic Shock’
‘‘Plastic shock’ hits Asia as Iran oil crisis strangles supplies’ (ft)
Energy cost increases are a regressive tax, since they represent a greater share of low-income spending; this is emblematic of the bifurcation in today’s society.
One would expect this to result in a meaningful reversion.
This cannot continue!
Irrational exuberance, anyone?
