World’s Fastest-Growing Economies – October 2019

We have updated the GDP growth rates for the 2019 and the 2020 forecasts and ranked the world’s fastest-growing economies in the ginormous table below.  The data are from the October 2019 IMF’s World Economic Outlook.

Note, even though India tops G20 growth in 2019 the economy is expected to accelerate in 2020.  India has been and will remain our favorite emerging market

Africa dominates with the most rapidly growing economies in the world tables.

 

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Why The Tide Is Turning Against Big Tech – FT

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Priorities, Priorities, Priorities

Thank goodness POTUS gets it.  The Republic depends on it. Are we embarrassed yet?

 

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Jamie Dimon On 60 Minutes

Great 60 Minutes interview with JP Morgan CEO, Jamie Dimon, last night.

This is a must view, folks.  Take 15 minutes to watch as it will be a very high return on your time investment.

Jamie is very impressive and his leadership skills shine in the short talk with Leslie Stahl. JP Mo’s private-public partnership in helping to rebuild Detroit is a blueprint for rebuilding the rustbelt, in our opinion.

Here is Dimon on JP Mo’s 2008 government-subsidized bailout/purchase of Bear Sterns.

Jamie Dimon: The CEO of Bear Stearns called me up and said, “Can you lend me $29 billion before the night’s out? Because if I don’t get it, I’m gonna go bankrupt?” And I said– I said, “Even– even I can’t get (LAUGH) $29 billion.”

But then the treasury secretary, Hank Paulson leaned on him to buy Bear Stearns.

Jamie Dimon: And Hank Paulson said, “You gotta buy it, you gotta buy it, you gotta buy it. And I said, “If I can responsibly do it.” I said can’t jeopardize my own company, we’ll do it.

Three days later he did it. He bought Bear Stearns for $1.2 billion.

Jamie Dimon: We thought we saved the system. You know, we thought that that would’ve been the domino that would’ve caused the whole system to go down. And it was because JPMorgan was strong that we could do it.

Lesley Stahl: Did they–

Jamie Dimon: As I pointed out in Congress, it wasn’t like buying a house. That was buying a house on fire.

Still, it was JP Mo that almost stuffed investors with the WeWork toxic waste IPO in September.  WeWork has lost over $40 billion of value along with its CEO in the past few months.   Hey, nobody’s perfect but this is exactly why Wall Street needs regulation and watchdogs as we know from past experience unfettered capitalism can burn down more than just the house.

Jamie Dimon

Click here for the full interview. 

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Beam me up, Scotty, it’s getting too real!

This is stunning.

I never was even close to a Treky but now starting to rethink.  The Starship Enterprise is getting too real.

Jeff Bezos certainly is and betcha was thinking of the mother ship in designing his new delivery system.

The “Star Trek” cameo was Bezos’ idea, all the way. He’s been a fan since childhood, and has told interviewers that Amazon’s Alexa AI assistant was inspired by the patient, know-it-all computer on the Starship Enterprise. A movie-prop Enterprise holds a prominent place at the Kent headquarters for Bezos’ Blue Origin space venture.  – GeekWire

Amazon is building another Disruption city.

Trucking jobs are the most common jobs in 29 out of 50 states in the U.S., and there are millions of people working for the trucking industry in non-driving positions.  – Doft

Truckers must begin their retraining and start their Python Courses, ASAP!

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China Still Looking For A Rollback

We posted our,  Roll back: The Verb China Is Looking For,  two months ago and China is still looking for a rollback on some of the tariffs that have already been implemented.

We wondered out loud if President Trump is about to cave and cut another meaningless trade deal — Phase 1, Phase 2, Phase 7, whatever  — which has already caused enormous pain with almost no gain,

So, after all the American economic carnage caused by Trump’s trade war, is the administration about to, or willing to cave on what they said were the most important issues:  1) intellectual property protection, 2) industrial policy reform?

Will Trump cut another meaningless Potemkin Trade Deal?

Markets salivate at the prospect of the end of trade conflict no matter who is the perceived winner.  However,  from a game-theoretic perspective, it is hard to imagine President Trump caving on tariffs unless the Chinese make major concessions on some of the structural issues, such as economic restructuring, lest he looks weak going into the 2020 election.

President Trump is not a rational actor, has no strategy,  and his negotiating team is divided, in our opinion, so who knows what will happen.  It’s clear to us, President Xi has the upper hand and the administration is grappling behind the scenes.

It is widely expected that, as part of a phase one deal, the U.S. and China will roll back part of the tariffs levied during the year-long trade dispute. 

But Peter Navarro, assistant to the president and director of the Office of Trade and Manufacturing Policy, argued forcefully against and even shook his head no at the suggestion of tariff relief in an interview with Yahoo Finance’s The Final Round on Friday, casting a shadow over the much-anticipated deal signing. 

“There’s no rollback at all,” Navarro said. “So we need the tariffs there, but the tariffs are really our best insurance policy as well to make sure that the Chinese are negotiating in good faith.”  – Yahoo Finance

China says no deal without a rollback.  Peter Navarro says no rollback.  It sounds like we are at Walmart.

We may or may not know more as President Trump delivers his speech at the Economic Club of New York on Tuesday.

Must View

By the way,  we highly recommend you watch the latest Frontline documentary (here) about the global struggle for AI supremacy to gain some perspective on what is really going on underneath the surface of these trade negotiations.

Roll back: The Verb China Is Looking For

Roll back is the verb China is looking for.

Mr. Market is all lathered up this morning on the following report,

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Source: @FerroTV

Not so fast.

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A senior White House official said the U.S. is “absolutely not” considering an interim trade deal with China.

Bloomberg News reported earlier Thursday the Trump administration discussed putting together a limited trade deal that would delay and remove some China tariffs, citing five people familiar with the matter. The news had driven stocks to session highs. — CNBC

Major Cave 

From our cheap seats in the peanut gallery, we can’t help but notice for the past month the Chinese have been sending signals and tossing the Trump negotiating team a few bones to walk back the new tariffs that went into effect on September 1st with more to come.   No bite from Trump as the September 1st tariffs went live.  Ditto for China’s retaliatory tariffs.

Then we heard China is willing to buy American ag products to jump-start negotiations.

ChinaTrade_Ag

The source said China could also offer more market access, better protection for intellectual property and to cut excess industrial capacity, but would be more reluctant to compromise on subsidies, industrial policy and reform of state-owned enterprises.  – SCMP

 

That would be short-term positive for the farmers but, come on, man,  central planning in trade?  Remove the price distortions and let the market forces rip and do their thing.

We also wonder if Trump’s negotiators understand the concept of hysteresis,

Hysteresis in the field of economics refers to an event in the economy that persists into the future, even after the factors that led to that event have been removed.  – Investopedia

Even if tariffs are completely rolled back, it may take a long time for U.S. farmers to restore their export markets, if ever.

Deal Or No Deal?

So, after all the American economic carnage caused by Trump’s trade war, is the administration about to, or willing to cave on what they said were the most important issues:  1) intellectual property protection, 2) industrial policy reform?

Will Trump cut another meaningless Potemkin Trade Deal?

We don’t know.  These clowns are so unstable and divided, losing the support of the American electorate, and seem to be in panic mode as Trump’s polling numbers continue to drop like the Hard Rock Cafe in Atlantic City!

The polls du jour show President Donald Trump trailing basically every Democrat in the 2020 general election, both nationally and in individual states — even in Texas.

…Their [polls] message is pretty simple: Trump looks weak. The president is lagging in the low 40s in head-to-head polls, consistent with his stubbornly low approval ratings. A lot of Americans seem to be fully committed to or are actively considering voting for somebody else. That’s not where the incumbent, after three years in office, should be if they want a second term. – Vox, Sep 12th

China Will Never Cave On The Big Issues

We are fairly certain Trump will never force the Chinese to speak English as their primary language…err…change the structure of their economy.

A Potemkin trade deal?

It is looking more likely but a big political risk for President Trump as his right flank will begin to turn on him as looking weak.   The left will bring out massive firepower and label the deal a “No gainer, but massive pain.”

Deals Galore? 

We also wonder if the Administration is on the verge of a “deals galore” flurry with, say, China, North Korea, Iran, and the Taliban (“the Fab Four”) before the election?  We are perplexed by, and the way John Bolton exited the White House yesterday,

And as impulsive and unpredictable as the president’s actions may be, firing Mr. Bolton reveals a certain consistency in Mr. Trump’s worldview: Though attracted to never-been-done theatrics like bringing the Taliban to Camp David or meeting with Mr. Kim, the president is also moored by suspicion of military adventures and has a huge appetite for deals.

What Mr. Trump really wants from his foreign policy is a diplomatic victory as he heads into his 2020 re-election campaign. — NY Times, Sept 10th

Why do we have that sinking feeling the “Fab Four” are licking their chops and looking at each other, thinking

Time to feast! 

Place your bets, folks.

P.S…. We have given up on any short-term calls on the market as it already difficult enough fighting against the algos and trading ‘bots, much less the central planners who now manipulate the markets almost hourly with their twitter accounts and the dropping of tape bombs.  Pretty fracking disgusting.

SEC where the f&*k are you?   That’s right, we forget, a sitting president cannot be indicted.

Nevertheless, we are sellers at 3025-3100 on the S&P and feel pretty confident the market can be bought at much lower prices sometime during the next 18 months.  We do reserve the right to be wrong and to remain solvent, thus our stop at 3125.

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Highest Paid Public-Sector Employee In Each State

Though the following map doesn’t surprise us, it is a bit disheartening to see where our priorities lie.  Panem et circenses (bread and circuses), baby, even at the public Academy!

If the data are true, there are only nine states in the nation where the highest-paid public-sector employee is not a coach.  No doubt, however, a highly paid coach at a public university operates under different incentives than, say, a third-grade school teacher, where universities are constantly reassessing their return on investment in the football coach.

Does Nevada surprise you?  The new Silicon Valley?

Is your highest-paid state employee the teacher who spends every day of the school year with your children? Nah. It’s most often the football coach.

Football coaches at public universities make, on average, more than $1 million per year. 

Only 11 states have non-jock employees earning the most coin. Top-paid employees include university presidents, deans and superintendents, with salaries ranging from $231,210 to $876,442.  — farandwide.com

States

 

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In The Age Of AI – Frontline

This is an absolute must view, folks.

If you want to understand what’s coming and the secular trends over the next fifty years, take two hours and watch Frontline’s, In The Age Of AI.   Huge return on your time.  It originally aired on November 5th.

FRONTLINE investigates the promise and perils of artificial intelligence, from fears about work and privacy to rivalry between the U.S. and China. The documentary traces a new industrial revolution that will reshape and disrupt our lives, our jobs and our world, and allow the emergence of the surveillance society.  – Frontline

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Click here to view In the Age Of AI. 

Here is the 30-second promo to spark your interest.

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Unit Labor Costs Hit 5-year High

Back in the day, before the Great Flood [of Liquidity] and the “world went mad,” the productivity and unit labor cost release could really move the stock market.  I mean, really move the market.  The connection is through expected margins and profits.

Nothing seems to matter anymore, x/ the Fed, at least for now.   The increase in unit labor costs puts further pressure on profits and probably makes Jay Powell squirm a little bit more as it looks like the move is a trend higher.

The monthly annualized unit labor cost came in way above the 2.2 percent expectation,  which included a decline in productivity.  Note, the FRED chart below is the monthly year-on-year change.

Mr. Market

Yes, ma’am, the market can climb higher on silly Tweets but not based on valuations or the fundamentals and will do so without any of our long-term money.

Unit labor costs in the nonfarm business sector increased 3.6 percent in the third quarter of 2019, reflecting a 3.3-percent increase in compensation per hour and a 0.3-percent decline in productivity.  Unit labor costs increased 3.1 percent over the last four quarters. BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs, and increases in output per hour tend to reduce them.  – BLS

Someday, the fundies and valuations will matter.

Unit labor costs

FRED_Unit labor costs

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Bid Adieu To The Ownership Economy – Auto Subscriptions?

Wow, now this!   Car subscriptions?  The end of auto dealerships?

Recurring revenue is the new gold.   Microsoft was a wet dawg for years until it moved Windows Office to a monthly subscription basis, which locks in users to a monthly nut rather than relying on a sale and upgrade of the software for, say, once every five years.   The development of the cloud also helped.

Recurring Revenue

The market also tends to value the predictability of recurring revenue with a heftier multiple rather than companies with revenue dependent on transactional sales.

Not surprised then to read that even Tim Cook is not ruling out moving Apple’s iPhone to a subscription basis, probably driven out by the reality consumers just are not upgrading and buying the iPhone as they once did.

Under the argument for an iPhone subscription, which some people call Apple Prime after the Amazon program of the same name, Apple would bundle hardware upgrades with services such as iCloud storage or Apple TV+ content and hardware for a single monthly fee. This would let it switch iPhone sales from a transactional model to a subscription model, potentially driving the stock price up without having to increase product sales or prices dramatically.

During Wednesday’s earnings call, when analyst Toni Sacconaghi asked about the idea of a prime subscription, Apple CEO Tim Cook did not shoot down the idea. In fact, he suggested that something like it was already in effect. – CNBC

 

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