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AI Summary. The US dollar shows no long-term downward trend and sits above its long-term average in both nominal and real terms, though the reading depends on which dollar index is used.
Core argument: The US dollar shows no long-term downward trend, and across dollar indexes it trades above its long-term average in both nominal and real terms.
There is no long-term trend of USD decline. It always depends on which dollar index you look at. But regardless of the index, you will find that the USD is above its long-term average, in nominal and real terms currency, despite all the Dollar Hatred.AI Summary. State Farm, California's largest homeowner insurer, stopped accepting applications for most new home insurance policies statewide, citing rapidly growing catastrophe exposure. Florida faced a similar retreat by national carriers after Hurricane Andrew and responded with a market of small insurers backed by a state-mandated company providing windstorm coverage to homeowners who cannot obtain private insurance.
Core argument: State Farm, which insures more homeowners in California than any other company, will stop accepting applications for most new insurance policies statewide — not only in wildfire zones — citing "rapidly growing catastrophe exposure.".
The largest homeowner insurance company in California, State Farm, announced that it would stop selling coverage to homeowners. That’s not just in wildfire zones, but everywhere in the state. State Farm, which insures more homeowners in California than any other company, said it would stop accepting applications for most types of new insurance policies in the state because of “rapidly growing catastrophe exposure.” California’s woes resemble a slow-motion version of what Florida experienced after Hurricane Andrew devastated Miami in 1992. The losses bankrupted some insurers and caused most national carriers to pull out of the state. In response, Florida established a complicated system: a market based on small insurance companies, backed up by Citizens Property Insurance Corporation, a state-mandated company that would provide windstorm coverage for homeowners who couldn’t find private insurance.AI Summary. Entrepreneurship is lower in countries with older populations: a one-standard-deviation rise in median age, about 3.5 years, is associated with a 2.5 percentage point decline in the share of adults starting businesses, against a global entrepreneurship rate near 6.1%. Japan once led patent output in 35 major global industries but now leads in three.
Core argument: James Liang finds that a one standard deviation rise in a country's median age, about 3.5 years, is associated with a 2.5 percentage point decline in the entrepreneurship rate, against a global rate of roughly 6.1% in 2010.
James Liang, a Chinese economist and demographer, notes that entrepreneurship is markedly lower in older countries: an increase of one standard deviation in the median age in a country, equivalent to about 3.5 years, leads to a decrease of 2.5 percentage points in the entrepreneurship rate (the proportion of adults who start their own business). That is a huge effect, considering the global entrepreneurship rate was around 6.1% in 2010. As recently as 2010, Japanese inventors were the leading producers of patents in 35 big global industries according to the World Intellectual Property Organisation, an agency of the un. As of 2021, Japan is the leader in just three. The country has fallen behind not only China, which now occupies most of the top spots, but America too.AI Summary. Building a billion-user platform now requires tens of billions in investment and decades before losses end and returns arrive, a barrier few firms can clear. Apple, Microsoft, Alphabet, and Amazon together account for 21% of the S&P index, with Google Cloud's roughly $35bn cost aided by its existing consumer and enterprise ecosystem.
Core argument: Apple, Microsoft, Alphabet, and Amazon together account for 21% of the S&P, with Apple and Microsoft alone large enough to constitute the index's second-largest sector behind the rest of big tech and ahead of energy and healthcare.
More than ever, our economy runs on ecosystems. Not just broad partnerships, large commercial deals, or expansive networks, but ecosystems. It’s to our collective interest that there’s maximum competition at the foundational platform layer and every application and service layer, too. But the cost of competition is now in the tens of billions, if not more. In a weird way, Google Cloud is cheap at $35B, but most can’t spend that much, let alone wait fifteen years for losses to end and another decade or more to generate a net return. In fact, it’s likely Google couldn’t have invested as heavily were it not for near-zero interest rates over the past decade. And that the investment wouldn’t have worked at all were it not for Google’s own ecosystem, including the consumer-facing (and Android-integrated) Google Photos, Gmail, and Drive, as well as its enterprise offerings such as Workspace. The prohibitive cost of entry has led to phenomenal profits. Apple, Microsoft, Alphabet, and Amazon are now 21% of the S&P (Apple and Microsoft are so large that alone, they would be the second largest sector of the S&P, behind the rest of big tech, and ahead of energy and healthcare).AI Summary. Census survey data show 45.1% of recent US high school graduates enrolled in four-year colleges in 2022, above the 44.4% rate in 2019 and the second-highest level in the series. The overall enrollment decline reflects falling two-year college enrollment, down about 12 percentage points from its 2012 peak.
Core argument: 45.1% of recent U.S. high school graduates were enrolled in four-year colleges and universities in 2022, above 2019's 44.4% and the second-highest level in the CPS data, behind only 2016's 46%.
Are young people really skipping traditional four-year colleges for other opportunities? The answer is a big fat No. And we can even use the same data the WSJ used (from the CPS) to prove it, but slice it more finely. The percent of recent high school graduates enrolled in 4-year colleges and universities in 2022 was 45.1%. That’s slightly higher than 2019 (44.4%) and is, in fact, the second highest level ever in this data, with only 2016 being higher at 46%. So what gives? The decline that the WSJ is reporting is entirely driven by a decline in enrollment at 2-year colleges, though you would never get a hint of that in the article. You might even think it was the opposite: perhaps young people are forgoing 4-year colleges in favor of trade schools! Nope. Here’s the data. Notice that this is in fact the exact same data as the WSJ is using. If you add the two figures for 2022, it’s the same 62% in the WSJ article. But 4-year college enrollment is up slightly since 2019, while 2-year enrollment is down about 5 percentage points. Also, it doesn’t really seem like a pandemic-induced change: this is a long-run decline in 2-year college enrollment of about 12 percentage points since the peak in 2012.AI Summary. US households have been large buyers of US Treasury securities, while foreign demand has been more limited because of higher currency-hedging costs, with foreigners instead adding $3tn of equities during the pandemic. With a 5% budget deficit, the Federal Reserve shrinking its balance sheet, and the Treasury rebuilding its cash balance, attention will turn to who buys US government debt.
Core argument: US households have been large buyers of US Treasuries as the Federal Reserve has raised rates, while foreign demand for Treasuries has been more limited because of higher hedging costs.
As the Fed has been raising rates, US households have been big buyers of US Treasuries. The appetite for Treasuries from foreigners has been more limited because of higher hedging costs. Foreigners have instead increased their holdings of equities by $3 trillion during the pandemic. With a 5% budget deficit combined with QT and the Treasury’s need to replenish cash in the Treasury General Account, markets will soon begin to focus on who will be buyers of US government debt.AI Summary. Major crime on New York's subways is on track to run 13.4% below 2019 levels, but ridership remains down about a third, so crime per rider is much higher this year than from 2006 through 2019. Property crime has not risen; violent incidents account for the increase.
Core argument: Major New York subway crime is on track to run 13.4% below 2019 levels this year, lower than in all but a few years of the past quarter century.
Major subway crime is on track to be 13.4% lower this year than in 2019 and lower than in all but a few years during the past quarter century. Then again, subway ridership is still down about a third from 2019 levels. Adjust for that, as one should, and the picture changes. Measured this way, subway crime rose 86% in the first year of the pandemic. It has fallen since but is still running much higher this year than from 2006 through 2019. It’s not exactly what you’d call out of control, though, just settling back toward normal after a once-in-a-century shock. My less-than-scientific take is that there are more troubled people on New York’s subways than before the pandemic, and less-crowded stations and cars have made it easier for them to make trouble. For-profit subway crime hasn’t risen; senseless acting-out has.AI Summary. The authors estimate that corporate tax cuts boost overall investment and employment, with goods-producing firms such as manufacturers raising capital expenditure and wage bills without changing dividends, and a 1% cut in the marginal tax rate lifting their capital spending by as much as 8%. Service-sector firms instead direct most of the windfall to dividends.
Core argument: A 1% cut in the marginal corporate tax rate raises capital expenditure for goods-producing firms by a peak of 8% in year two, while an increase in the investment tax credit produces a 5% peak rise.
Our main finding is that corporate tax cuts generate a significant boost in investment and employment for the economy overall, but the benefits are spread unevenly across sectors and groups. In particular, goods producing companies —such as manufacturing firms— expand both capital expenditure and wage bills following a cut in corporate taxes, but do not alter dividend payments. The left column [of Figure 1] shows that a 1% cut in the marginal tax rate stimulates an increase in capital expenditure for goods producing firms peaking at 8% and 5% in year two following a cut in the marginal tax rate and an increase in the investment tax credit. In contrast, firms in the service sector—which are far less capital-intensive—do not increase investment or employment at all but use most of their windfall to pay dividends. In short, we find important differences in the effect on workers vs. shareholders across sectors of the economy.AI Summary. An analysis of North American private equity- and venture-backed companies with public stock or debt finds they trade at 22.4x adjusted earnings, in line with small-cap growth stocks, but at 33.4x on standard accounting measures with net debt of 8.8x earnings. The authors describe the group as heavily leveraged and mostly cash-flow negative.
Core argument: PE/VC-owned North American companies that IPOed since 2018 and remain 30%+ sponsor-owned trade at 22.4x pro-forma EBITDA, roughly in line with the Russell 2000 Growth median of 20.7x.
We took a look at all PE/VC-owned public companies, or companies with public debt, that were 30%+ sponsor-owned, had IPOed since 2018, had a recognizable sponsor as the largest holder, and were headquartered in North America. Today, the entire sample trades at 22.4x pro-forma EBITDA, which is roughly in line with the Russell 2000 Growth, where the median company trades at 20.7x EBITDA. However, for companies in our sample that reported both pro-forma and GAAP EBITDA, this includes 500bps of adjustments. On a GAAP basis, these companies trade at 33.4x EBITDA with 8.8x net debt/EBITDA. The sample of companies we looked at is nearly unprofitable on an EBITDA basis, mostly cash flow negative, and extraordinarily leveraged (mostly with floating-rate debt that is now costing nearly 12%). These companies trade at a dramatic premium to public markets on a GAAP basis, only reaching comparability after massive amounts of pro-forma adjustments. And these are the companies that most likely reflect the better outcomes in private equity.AI Summary. About 3.66m babies were born in the U.S. in 2022, essentially unchanged from 2021 and 15% below the 2007 peak, with birthrates falling 3% among teens aged 15–19 and 2% among women aged 20–24. Increases were concentrated among women aged 35 to 44.
Core argument: About 3.66 million babies were born in the U.S. in 2022, essentially unchanged from 2021 and 15% below the peak reached in 2007.
About 3.66 million babies were born in the U.S. in 2022, essentially unchanged from 2021 and 15% below the peak hit in 2007. The trend of decreasing birthrates among younger women continued in 2022. For teens ages 15 to 19, the birthrate fell 3%, and for ages 20 to 24 it was down 2%. The rate for the next oldest group, 25 to 29, edged up only slightly. Increases were mainly seen among women 35 to 44. If trends continue, the birthrate for women ages 35 to 39 might soon eclipse the rate for ages 20 to 24.AI Summary. Labor cost growth does not appear to fuel inflation through higher demand, and estimates indicate labor costs affect non-housing services inflation more than goods or housing services inflation. A 1 percentage point rise in the employment cost index is estimated to add 0.15pp to non-housing services' contribution to core inflation over four years.
Core argument: A 1pp increase in the employment cost index raises the contribution of nonhousing services inflation to core PCE inflation by 0.15pp over four years, about 0.04pp per year.
Labor cost growth does not appear to fuel inflation through higher demand. The light blue bars in Figure 3 show the cumulative impact of a 1pp increase in the employment cost index (ECI) on the contribution of goods, housing services, and nonhousing services (NHS) inflation to core PCE inflation over a four-year time horizon. The estimates confirm that labor costs have a stronger impact on NHS inflation than either goods or housing services inflation. The impact of the ECI on NHS inflation is statistically significant, but the magnitude is quite small. A 1pp increase in the ECI increases the contribution of NHS inflation to core PCE inflation by 0.15pp over four years—an effect of 0.04pp per year.AI Summary. Millennials have shifted toward the Republican party, with the move largest among the oldest millennials, who came of age in a different political era. The issues that drew young voters to Democrats, such as the Iraq War and same-sex marriage, may no longer be live issues.
Core argument: Millennials have shifted to the right, with the millennial cohort of 2016 differing from that of 2008 rather than forming a permanent Democratic exception.
The millennials of 2008 are not the same as those of 2016. For instance: six additional years of even more heavily Democratic millennials became eligible to vote after the 2008 election, canceling out the slight Republican shift among older millennials. The shift to the right appears largest among the oldest “young” voters — the older millennials who came of age in a very different political era from today. Many of the issues that drew young voters to the Democrats in 2004 or 2008 — like the Iraq War or same-sex marriage — may no longer be issues at all.