Global markets correlated as theory would predict: interest rates higher, the dollar stronger, and stocks and commodities lower.
Ten-year yields were up across the globe as the U.S. Treasury note yield approaches 4 percent on sticky inflation data. Consequently, world stocks fell across the board, with the S&P 500 down 2.7 percent on the week and the Dow now down 1 percent, YTD. Biotech, real estate, and retail were hammered.
The dollar index strengthened about 1 percent with big moves lower in the Chilean Peso (copper related) and the Russian Ruble.
Copper fell below $4.00 though natural gas put in an impressive rebound but the vapor is still down yuuge on the year.
We are baffled that the markets are baffled that disinflation may have bottomed. We see the issue as the myopic memory of the massive stock of central bank injections into the global economy coupled with too much focus on the price rather than the quantity of money, which is still at flood stage levels.
…(COTI), which starts from a simple premise: Americans must prioritize five sets of goods when providing for their family. That includes food, housing, health care, transportation and higher education. Those who can pay for those needs without worry can enjoy some luxuries without risking their children’s future.
COTI is an attempt to measure how the median American family is doing in obtaining that goal. It looks at the cost of those five items in 1985 and today and compares them with the median wage for a man 25 years or older working full-time. It then calculates the number of weeks it would take for that person to pay for the five items. – Washington Post
Back in 1985, for example, it took 39.7 weeks of work to pay for COTI basket versus 62.1 weeks of work today to cover the same expenses.
My dissertation research (unfinished) was on the “Dusenberry effect,” where consumers try to maintain their standard of living by, say, moving from one income earner in the household to two. The data show exactly that. It now takes two incomes in the median household to maintain the standard of living that one income earner could provide in the mid-1980s.
The data also help explain why the country’s political and economic mood is so dour.
In our opinion, the economy’s unexpected mojo and sticky inflation can be explained in two simple macro charts. M2 as a percent of GDP remains freakishly high, though we don’t put much stock in the old monetary aggregates, and Household Wealth as a percent of GDP remains off the historical charts.
Not that the new generative AI chatbots are without sin….
Mistakes are inevitable, because large language models don’t have any inherent sense of truth. ChatGPT has a tendency, when confronted with a question it can’t answer, to simply make up something. These “hallucinations,” as AI experts call them, can be extremely convincing. Last year, Meta Platforms Inc. pulled down a large language model known as Galactica, which was supposed to be “a curated corpus of humanity’s scientific knowledge,” after critics pointed out it had a tendency to invent science behind queries such as “the benefits of eating crushed glass.” – Bloomberg BW Daily
DALL-E 2 – An Andy Warhol painting of Luddites smashing a computer
Fresh off my DALL-E 2 easel: “An expressive oil painting of an economist getting it wrong.”
Hot off my Chat GPT press: Who will win the AI race?
Chat GPT:
It’s difficult to predict who will “win” the race in the development and deployment of Artificial Intelligence (AI), as the term “winning” is subjective and can mean different things to different people.
From a technological perspective, AI is a rapidly evolving field and many countries and corporations are making significant investments in research and development. As a result, there are likely to be multiple leaders in different areas of AI, such as natural language processing, computer vision, and machine learning.
From a geopolitical perspective, some countries, such as the United States, China, and Europe, are investing heavily in AI and positioning themselves as global leaders in the field. However, the competition in this area is complex and dynamic, and it is possible that new players could emerge and have a significant impact on the development and deployment of AI.
Ultimately, the “winner” of the AI race will depend on a wide range of factors, including the quality and impact of research and development, the availability of talent and resources, the strength of innovation ecosystems, and the level of investment and support from governments, corporations, and other stakeholders.
It’s also worth noting that the concept of “winning” the AI race may not be the most useful or appropriate way to think about the development and deployment of AI. Instead of focusing on who is “winning” or “losing,” it may be more productive to consider how AI can be developed and deployed in a way that benefits humanity as a whole and addresses the challenges and opportunities posed by this rapidly evolving technology.
Prepare to get nonlinear, folks. This going to be an exciting race Don’t miss out.
Global Macro Monitor 