Edward Conard

Top Ten New York Times Bestselling Author

  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, December 20, 2024

AI Summary. US counties with higher Republican presidential vote shares have higher fertility rates: counties where Trump won under 25% of the vote had a median total fertility rate of 1.31 births per woman, versus 1.84 in counties where he won over 75%. The authors estimate this geographic relationship has strengthened by 85% over 12 years.

Grant Bailey and Lyman Stone Institute for Family Studies
Date Posted:

In 2012, a 10% increase in a county’s GOP vote share was associated with a 0.05 increase in its total fertility rate, compared to 0.09 in 2024. The 20% most GOP counties in 2024 have a fertility rate of 1.76, the most Democratic 1.37. @lymanstoneky

Do more Republican-voting counties have higher fertility rates?

Core argument: Counties where Trump won more than 75% of the 2024 vote had a median total fertility rate of 1.84, versus 1.31 in counties where he won less than 25%, such as D.C.

Counties that voted for Trump tended to have much higher fertility rates than those that did not. This relationship is quite strong. For every 10% increase in votes for Trump in 2024, there is an expected increase of 0.09 babies in a woman’s lifetime. While 0.09 babies does not sound like much, the effect of this Republican advantage shows most prominently at the tail ends of county votes. Counties that had less than 25% of their vote share for Trump, such as D.C., had a median total fertility rate of 1.31. In contrast, counties that had more than 75% of their vote share for Trump had a median total fertility rate of 1.84. This relationship between voting Republican and having more babies is growing stronger over time. In 2012, a 10% increase in votes for Romney within a county saw an expected increase of 0.05 in the total fertility rate, compared to 0.09 in 2024. In the past 12 years, the geographic relationship between voting Republican and having more babies has grown by 85%.

Takeaways by Macro Roundup® AI

  1. Counties where Trump won more than 75% of the 2024 vote had a median total fertility rate of 1.84, versus 1.31 in counties where he won less than 25%, such as D.C.
  2. Every 10% increase in a county's 2024 Trump vote share is associated with an expected increase of 0.09 births in a woman's lifetime.
  3. The geographic relationship between voting Republican and higher fertility has grown 85% over 12 years, rising from an expected 0.05 increase in total fertility rate per 10% Romney vote share in 2012 to 0.09 in 2024.

Related Articles:

  • The Age of Depopulation: Surviving a World Gone Gray — The United States remains the main outlier among developed countries resisting depopulation, with fertility of just over 1.6 births per woman — high for a rich country but below the 2.1 replacement threshold — plus steady immigration. The Census Bureau projects the U.S. population will peak around 2080 and decline continuously thereafter.
  • The Geography of Fertility—Where Are the Babies? — The gap in the absolute number of births between states voting Democratic and those voting Republican has narrowed by 38%, from about 475,000 to roughly 294,000 births. The author argues that the economies and family-friendly cultures of Republican-voting states give them a fertility-rate advantage that, if current trends hold, could produce more total births within 15 years.
  • More Crowding, Fewer Babies: The Effects of Housing Density on Fertility — Longitudinal data show that more years spent living with parents is associated with having fewer children, with four extra years of coresidence implying roughly 0.15 to 0.3 fewer children regardless of local housing density. The association persists when comparing individuals with similar lifetime income, early test scores, desired family size, and marital histories.

AI Summary. Video-first platforms like TikTok and Instagram reward charisma, energy and delivery over being first with news, a shift that favors political outsiders and upstart media outlets less tied to establishment politicians and freer to publish what mainstream outlets would not. Research finds the newest class of news influencers lean slightly right, and even those with other politics are anti-establishment.

John Burn-Murdoch Financial Times
Date Posted:

30% of American and British adults consume no conventional news media. @jburnmurdoch argues social media, and its further “pivot to video” vs. text, is “unfavourable to an educated centrist establishment, but a boon to populists and radicals.”

Does video-first social media favor political outsiders over establishment media?

Core argument: Text-based social media favored mainstream journalism because pithy writing helped and chronological feeds rewarded news, while the pivot to video shifts the balance toward charisma, energy and delivery over being first.

These platforms are fundamentally different. Text-based social media still favoured mainstream journalism, partly because pithy writing helps — and the chronological feed rewarded news. With the pivot to video, the balance tilts the other way. On TikTok and Instagram, the currency is charisma, energy and delivery: being first is less important than being hyper-engaging. This is another thumb on the scale for political outsiders. The upstart media is by definition less cosy with establishment politicians, and independence from big legacy brands also means it is free to host and publish what mainstream media would not. Research shows the most recent class of news influencers lean slightly right in terms of their politics, but even those with different politics are anti-establishment.

Takeaways by Macro Roundup® AI

  1. Text-based social media favored mainstream journalism because pithy writing helped and chronological feeds rewarded news, while the pivot to video shifts the balance toward charisma, energy and delivery over being first.
  2. Video platforms such as TikTok and Instagram put a thumb on the scale for political outsiders, since upstart media is less cozy with establishment politicians and free to publish what mainstream outlets would not.
  3. Research indicates the most recent class of news influencers leans slightly right politically, and even those with different politics are anti-establishment.

Related Articles:

  • The Distribution of Social Capital Across Individuals and its Relationship to Income — Classifying 129 inherently social activities, the authors find social capital rises with post-tax, post-transfer income but at a diminishing rate, with the association strongest for black individuals and weakest for Hispanic individuals. Individuals receiving a greater share of income from government sources tend to have lower social capital, even after accounting for demographics.
  • Will Trumpism Outlast Trump? — The rise of the populist right is not specific to the US, with Brexit preceding Trump and radical right parties in or near power across much of Europe. The left has measurably become the party of the upper echelons, leaving the right free to appeal to the lower-status majority.
  • How The Ivy League Broke America — Americans without a four-year college degree earn about $1m less over their lifetimes and live about eight years less than college graduates, and they have higher rates of obesity, divorce, out-of-wedlock births, and opioid deaths. Nearly a quarter report having no close friends, compared with 10% of college graduates.

AI Summary. The authors estimate that country pairs whose maritime routes were shortened by the Suez Canal saw lower shipping costs and times and significantly faster trade growth than unaffected pairs, with the gains persistent and taking about five years to fully materialize. They argue the canal functioned as a global public good associated with pure trade creation rather than trade diversion.

David Jacks, Christopher Meissner, and Nikolaus Wolf National Bureau of Economic Research
Date Posted:

.@cmicmeissner et al find that the opening of the Suez Canal led to a 72% increase in bilateral trade for affected country pairs relative to unaffected pairs. The boost to steam shipping spilled over to reduced shipping costs on non-Suez routes as well.

How much do shorter shipping routes boost trade growth?

Core argument: Country pairs affected by the Suez Canal, such as British India and the United Kingdom, saw lower shipping costs and times and significantly faster trade growth from 1865 to 1900 than unaffected pairs like the United Kingdom and the United States.

Using multiple sources of data on bilateral trade, we find that country pairs that were affected by the Suez Canal (e.g., British India and the United Kingdom) experienced lowershipping costs/times and significantly faster growth in trade from 1865 to 1900 relative to pairs that were unaffected by the opening of the canal (e.g., the United Kingdom and the United States). We do so by running an event study on the canal’s opening in the context of a structural gravity equation [which relates the volume of trade to the inverse square of distance], ruling out the role of pre-trends and finding that the rise in trade for affected country pairs was persistent over time but took roughly five years to fully come into play. Across different sub-samples, time horizons, and sources of data, we find quantitatively similar results. We additionally document how the Suez Canal differentially affected trade on the basis of the proportional changes in maritime distances it induced and how the Suez Canal was effectively a global public good. [We argue that rather than trade diversion,] the canal was associated with pure trade creation .

Takeaways by Macro Roundup® AI

  1. Country pairs affected by the Suez Canal, such as British India and the United Kingdom, saw lower shipping costs and times and significantly faster trade growth from 1865 to 1900 than unaffected pairs like the United Kingdom and the United States.
  2. An event study of the canal's opening within a structural gravity equation rules out pre-trends and finds the trade increase for affected pairs was persistent, taking roughly five years to fully materialize.
  3. The Suez Canal's effect on trade varied with the proportional changes in maritime distances it induced, and the authors argue it functioned as a global public good associated with pure trade creation rather than trade diversion.

Related Articles:

  • Economic Perspectives on Infrastructure Investment — US infrastructure projects cost more than international counterparts, averaging $1,601m per mile versus a global average of $478m, with a median of $965m per mile compared with $299m outside the US. Contributing factors include complex project designs, regulatory delays, elevated labor costs, and procurement and project management inefficiencies, while land costs are a minor component.
  • The Economics of Public Investment Crowding in Private Investment — Goods with strong positive externalities—such as lower carbon emissions, supply chain resilience, and national security—can be underprovided by markets because private producers do not capture all the social benefits. Government support that lowers firms' production costs can correct this shortfall, de-risk new technologies, and make domestic manufacturing cost-competitive.
  • Investment in Infrastructure and Trade: The Case of Ports — Modeling US ports with queueing theory and demand estimation, the authors estimate that port infrastructure investment yields substantial trade and welfare gains only if well targeted—net of costs, returns are positive at a minority of US ports. They also find sizable spillovers, as upgrading one port decongests others, and that macroeconomic volatility can substantially alter returns and their geography.

AI Summary. China's one-year government bond yield fell to 0.92%, its lowest level since 2009, while the 10-year yield declined to 1.74% after falling below 2%.

Arjun Neil Alim, Cheng Leng and William Sandlund Financial Times
Date Posted:

The yield on the Chinese 1-year government bond fell below 1% for the first time since 2009, and the 10-year dropped to 1.74%, down from 2.84% at the start of the year.

Are China's bond yields falling to multi-year lows?

Core argument: China's one-year government bond yield fell to 0.92%, its lowest level since 2009 and its first drop below 1% since that year.

The yield on one-year bonds fell to 0.92%, marking its lowest level since 2009, while 10-year yields dropped 0.03 percentage points to 1.74% after breaching 2% at the start of the month. The 10-year note yielded 2.56% at the start of the year, while the 30-year note yielded 2.84%.

Takeaways by Macro Roundup® AI

  1. China's one-year government bond yield fell to 0.92%, its lowest level since 2009 and its first drop below 1% since that year.
  2. China's 10-year bond yield fell 0.03 percentage points to 1.74%, after breaching 2% at the start of the month and yielding 2.56% at the start of the year.
  3. China's 30-year bond yielded 2.84% at the start of the year, above the 2.56% start-of-year yield on the 10-year note.

Related Articles:

  • Prices Won’t Stop Falling in China, and Beijing Is Grasping for Solutions — Prices for goods leaving Chinese factories have fallen year-over-year for 26 consecutive months, and China's gross domestic product deflator, a broad gauge of economy-wide prices, has been negative for six straight quarters, the longest stretch since the late 1990s. As falling prices sap profitability, companies could delay investment or cut jobs, and buyers could postpone purchases expecting further declines.
  • Chinese Bond Market Grapples With ‘Japanification’ — Yields on 30-year Chinese government bonds have fallen from 4% in late 2020 to 2.21% as China cuts interest rates and investors move into safe assets, while Japan's long-term yields have risen above China's to 2.27%. Chinese core inflation, excluding fuel and food, was 0.2% annually versus 2.3% in Japan.
  • The Wealth of Working Nations — Because of population aging, growth in GDP per capita and GDP per working-age adult have diverged across advanced economies; from 1998 to 2019 Japan's accumulated growth per working-age adult was 31.9% versus 29.5% in the US. The authors find a standard neoclassical growth model calibrated to each country's working-age population tracks output per working-age adult in most economies.

AI Summary. Cows at 645 California dairies have tested positive for the H5N1 bird flu virus over roughly four months. Milk from infected cows contains very high levels of the virus, and experts believe contaminated vehicles, equipment, and workers help spread it from farm to farm; the Food and Drug Administration says pasteurized milk and eggs are safe to consume.

Soumya Karlamangla, Orlando Mayorquín and Jesus Jiménez New York Times
Date Posted:

645 dairies in California have tested positive for H5N1; the virus has spread so quickly in 4 mouths that dairy farmers are calling it “Covid for cows.”

How is bird flu spreading rapidly through dairy herds?

Core argument: Cows at 645 California dairies have tested positive for H5N1 avian flu in about four months, a pace of spread that has led dairy farmers to call the outbreak "Covid for cows.".

In just about four months, cows in 645 dairies in California have tested positive for H5N1. The virus is spreading so quickly that dairy farmers are calling it “Covid for cows.” Consuming eggs and pasteurized milk won’t make people sick, according to the Food and Drug Administration. (Raw milk from infected cows, however, has been deemed unsafe, and California recently recalled raw milk products after the virus was detected in samples.) Milk from infected cows has very high levels of the virus, and experts believe that contaminated vehicles, equipment and workers play a role in spreading the virus from farm to farm. Those who milk cows can face high risks because the virus is highly concentrated in infected milk, which can splash into workers’ eyes, said Michael Payne, a veterinary medicine expert at the University of California, Davis.

Takeaways by Macro Roundup® AI

  1. Cows at 645 California dairies have tested positive for H5N1 avian flu in about four months, a pace of spread that has led dairy farmers to call the outbreak "Covid for cows.".
  2. The Food and Drug Administration says eating eggs and drinking pasteurized milk will not make people sick, while raw milk from infected cows has been deemed unsafe, and California recalled raw milk products after the virus was detected in samples.
  3. Milk from infected cows carries very high levels of H5N1, and Michael Payne, a veterinary medicine expert at the University of California, Davis, said workers who milk cows face high risks because infected milk can splash into their eyes.

Related Articles:

Monday, December 23, 2024

AI Summary. The authors model artificial intelligence in the knowledge economy and find that non-autonomous AI acting only as a co-pilot tends to benefit the least knowledgeable workers most, while autonomous AI that can also act as a co-worker primarily benefits the most knowledgeable. Job-posting evidence shows declines in low-knowledge white-collar postings alongside increases in high-knowledge roles.

Enrique Ide and Eduard Talamàs Arxiv
Date Posted:

Enrique Ide and Eduard Talamàs model the transition of AI from a “co-pilot” giving helpful advice to an autonomous “co-worker” generating useful output, and argue that autonomous AI will primarily benefit the most knowledgeable individuals.

Does AI autonomy determine which workers gain from it?

Core argument: Non-autonomous AI, limited to acting as a co-pilot advising workers, benefits the least knowledgeable individuals the most, while autonomous AI, which can also function as a co-worker, primarily benefits the most knowledgeable.

The impact of AI on labor outcomes critically depends on its autonomy. Autonomous AI can function both as a co-worker and as [a co-pilot advising workers] while non-autonomous AI is limited to acting exclusively as a co-pilot. Our main finding is that non-autonomous AI tends to benefit the least knowledgeable individuals the most, in contrast to autonomous AI, which primarily benefits the most knowledgeable individuals. In fact, non-experimental evidence suggests that firms perceive current iterations of generative AI more as a basic co-worker than as a co-pilot. For instance, using high-frequency job posting data from LinkUp, Berger et al. document a marked decline in job postings for white-collar roles requiring low levels of knowledge, such as low-level office jobs, following the introduction of ChatGPT in November 2022. At the same time, job postings for high-knowledge roles, such as executive positions, increased. This trend indicates that firms view generative AI as a technology that complements high-skilled knowledge workers while substituting for their low-skilled counterparts.

Takeaways by Macro Roundup® AI

  1. Non-autonomous AI, limited to acting as a co-pilot advising workers, benefits the least knowledgeable individuals the most, while autonomous AI, which can also function as a co-worker, primarily benefits the most knowledgeable.
  2. Using high-frequency LinkUp job posting data, Berger et al. document a marked decline in postings for low-knowledge white-collar roles such as low-level office jobs following ChatGPT's introduction in November 2022, alongside increased postings for executive positions.
  3. Non-experimental evidence suggests firms perceive current iterations of generative AI more as a basic co-worker than a co-pilot, complementing high-skilled knowledge workers while substituting for low-skilled ones.

Related Articles:

  • Centaurs and Cyborgs on the Jagged Frontier — In a pre-registered experiment at Boston Consulting Group covering 18 realistic consulting tasks, consultants using ChatGPT-4 completed 12.2% more tasks, worked 25.1% faster, and produced 40% higher quality results than those without it. The tool acted as a skill leveler: the lowest-scoring consultants improved 43%, while top performers gained less.
  • Generative AI at Work — A study of 5,179 customer support agents finds that access to a generative AI conversational assistant raised issues resolved per hour by 14% on average, with the largest gains for novice and low-skilled workers and minimal effect on experienced, highly skilled ones. The authors also find AI assistance improved customer sentiment, reduced requests for managerial intervention, and improved employee retention.
  • The Short-Term Effects of Generative Artificial Intelligence on Employment: Evidence from an Online Labor Market — Freelancers in occupations most exposed to generative AI saw employment and earnings decline, with the authors estimating a 2% drop in jobs and a 5.2% drop in monthly earnings on an online labor platform. Offering high-quality service did not mitigate the effect, and top-rated freelancers appear disproportionately hurt.

AI Summary. J.P. Morgan Chase analysts estimate global non-bank investors hold 49% of their portfolios in equities, just below the 2007 peak, with cash allocations at a record low. The cyclically adjusted price-earnings yield on the S&P 500 is 2.6%, a level from which the index has never delivered a positive 10-year return since 1900.

Economist Staff The Economist
Date Posted:

J.P. Morgan estimates the aggregate equity allocation of the world’s non-bank investors is 49%, while cash allocation is at an all-time low. “Those looking for willing buyers with the cash to keep bidding prices up will need to hunt hard.”

How stretched are equity allocations and valuations in America's stockmarket?

Core argument: J.P. Morgan Chase analysts estimate the aggregate equity allocation of the world's non-bank investors at 49%, just below the 2007 peak that had itself been surpassed only during the dotcom bubble, while cash allocation sits at an all-time low.

Analysts at J.P. Morgan Chase estimate that the aggregate equity allocation of the world’s non-bank investors stands at 49%. That is only a shade below a previous peak reached in 2007, which itself was only surpassed during the dotcom bubble. Investors’ cash allocation, meanwhile, is at an all-time low. Those looking for willing buyers with the cash to keep bidding prices up will need to hunt hard. The CAPE ratio for America’s stockmarket is higher than it has been for 98% of the time since 1900. Historically, since 1900, the lower the CAPE yield has been, the worse returns have been over the subsequent decade. At present, the CAPE yield for the S&P 500 is 2.6%. From starting points where the yield was at this level or lower (which it has only been during the late 1990s and early 2000s), the index has never had a positive return over the following ten years. When the CAPE yield has been between 2% and 3%, the average annualised return has been -1.5% in nominal terms, and -4% in real terms.

Takeaways by Macro Roundup® AI

  1. J.P. Morgan Chase analysts estimate the aggregate equity allocation of the world's non-bank investors at 49%, just below the 2007 peak that had itself been surpassed only during the dotcom bubble, while cash allocation sits at an all-time low.
  2. The CAPE ratio for America's stockmarket is higher than it has been for 98% of the time since 1900, with the S&P 500's CAPE yield at 2.6%.
  3. From starting points where the CAPE yield was 2.6% or lower — seen only in the late 1990s and early 2000s — the S&P 500 has never delivered a positive ten-year return, and yields of 2–3% have averaged -1.5% nominal and -4% real annualised.

Related Articles:

  • US Exceptionalism: Drivers of Equity Outperformance and What’s Needed for a Repeat — US companies need about 7% earnings-per-share growth to deliver a normal 4% equity risk premium above the risk-free rate, versus about 3% for other developed markets, with the highest expectations embedded in technology and the largest US tech firms. Chinese companies could generate a 4% risk premium over Chinese bonds with no earnings growth.
  • Updating Our Long-Term Return Forecast For US Equities to Incorporate the Current High Level of Market Concentration — The authors estimate the S&P 500 will deliver an annualized nominal total return of 3% over the next 10 years, roughly 1% in real terms, modeling long-term returns as a function of starting valuation, market concentration, frequency of economic contractions, corporate profitability, and interest rates. The index returned 13% annualized over the past decade, above its 11% long-term average.
  • Stock Market Concentration — Over 2014–2023 the 10 largest U.S. stocks averaged 19% of market capitalization while generating 47% of total economic profit, and by 2023 they were 27% of market capitalization and 69% of economic profit. The S&P 500 returned above its average when concentration was rising and below it when concentration was falling.

AI Summary. Global bond funds attracted more than $600bn of inflows, topping the previous high of nearly $500bn, as investors bet that slowing inflation would prompt major central banks toward easier monetary policy. The flows came despite a broad global index of sovereign and corporate debt falling 1.7% over the year.

Ian Smith and George Steer Financial Times
Date Posted:

Bond funds have attracted more than $600B in inflows so far in 2024 as investors have rotated into fixed income.

Are record bond fund inflows arriving despite negative bond returns?

Core argument: Global bond funds attracted more than $600bn in inflows so far this year, according to EPFR, topping the previous record of almost $500bn in 2021, as investors bet major central banks would shift toward easier monetary policy.

Investors poured record amounts into global bond funds this year as they bet on a shift towards easier monetary policy by major central banks. Bond funds attracted more than $600bn in inflows so far this year, according to data provider EPFR, topping the previous high of almost $500bn in 2021, as investors sensed that slowing inflation would be a turning point for global fixed income. The record flows came despite a patchy year for bonds, which rallied over the summer before giving up their gains by the end of the year on rising concerns that the pace of global rate cuts will be slower than previously expected. The Bloomberg global aggregate bond index — a broad benchmark of sovereign and corporate debt — surged in the third quarter of the year but has slumped over the past three months, leaving it down 1.7% for the year.

Takeaways by Macro Roundup® AI

  1. Global bond funds attracted more than $600bn in inflows so far this year, according to EPFR, topping the previous record of almost $500bn in 2021, as investors bet major central banks would shift toward easier monetary policy.
  2. The Bloomberg global aggregate bond index, a broad benchmark of sovereign and corporate debt, surged in the third quarter but slumped over the past three months, leaving it down 1.7% for the year.
  3. Record bond fund inflows came despite a patchy year for bonds, which rallied over the summer before surrendering those gains amid rising concerns that global rate cuts will proceed more slowly than previously expected.

Related Articles:

  • Our Thoughts on Large US Deficits and Their Impact on Bond Yields — Total borrowing in the US is about average despite high government deficits, as high public borrowing has contributed to the need for higher interest rates that have depressed private sector borrowing. Risk premiums on long-dated debt look about average, with no market signs that economic or debt limits are currently being hit.
  • Fiscal Policy Under Trump II: The Role of Scott Bessent and Basic Budget Math — US federal debt has risen from 105% to 123% of GDP, the budget deficit has doubled from 3.1% to more than 6%, and government interest expense has grown from 1.3% to about 3.1% of GDP. The author argues this makes expansive fiscal policy harder to pursue than in the past.
  • Debt Risks That Lured Bessent to US Treasury Now Loom Large — Ten-year US Treasury yields are around 4.4%, and the weighted average interest rate on outstanding federal debt is about 3.3% — a 15-year high, yet still below the over-4% yields the Treasury now pays on new debt across all maturities. Bloomberg Economics projects the fiscal deficit widening to 7% of GDP.

AI Summary. Evidence suggests gambling — including sports betting, stock trading, and crypto — has become a national epidemic in the United States, with apps making it steadily easier to gamble. One investor argues social media can coordinate crowds rather than keep them independent, undermining market wisdom.

Paul Krugman Krugman Wonks Out
Date Posted:

.@paulkrugman argues gambling has become a national epidemic, and cites @CliffordAsness, “Has there ever been a better vehicle for turning a wise, independent crowd into a coordinated clueless, even dangerous, mob than social media?”

Has gambling on sports, stocks, and crypto become a national epidemic?

Core argument: Evidence suggests gambling in the U.S. — spanning sports betting, stock trading, and crypto — has become a national epidemic, possibly as serious in its own way as the opioid epidemic.

There’s a lot of evidence that gambling — not just traditional forms like sports betting, but gambling on stocks and, yes, crypto — has become a national epidemic, possibly as serious in its own way as the opioid epidemic. About those apps: if it has become ever harder to be a smoker, it has become ever easier to be a gambler. The veteran investor Cliff Asness has a paper on how social media are degrading markets: "But what if the crowd isn’t independent, but acts in unison? Well, this has the potential not just to destroy the magical crowd wisdom but to turn it into a negative. So, has there ever been a better vehicle for turning a wise, independent crowd into a coordinated clueless, even dangerous, mob than social media?" How much damage will the national gambling epidemic do? We won’t know the full extent of the damage until those natural Ponzi schemes collapse, which they will.

Takeaways by Macro Roundup® AI

  1. Evidence suggests gambling in the U.S. — spanning sports betting, stock trading, and crypto — has become a national epidemic, possibly as serious in its own way as the opioid epidemic.
  2. Gambling apps have made it ever easier to be a gambler, even as it has become ever harder to be a smoker.
  3. Investor Cliff Asness argues in a paper that social media degrade markets by turning a wise, independent crowd into a coordinated, clueless, even dangerous mob.

Related Articles:

  • The Less-Efficient Market Hypothesis — Markets are never perfectly efficient because betting against other investors' errors carries risk, and the author argues social media, investor overconfidence, and gamified 24/7 trading have made markets meaningfully less efficient, with indexing and very low interest rates a smaller contributor. The recommended response is to adopt the longest possible investment time horizon.
  • More Men Are Addicted to the ‘Crack Cocaine’ of the Stock Market — Trading in options contracts that expire the same day has risen to more than half of all trades in the market for S&P 500 index options, according to data from SpotGamma. These contracts are the riskiest type, able to surge or fall to zero within minutes as traders speculate on intraday moves.
  • It’s Time to Talk About America’s Disorder Problem — A meta-analysis of 56 studies found that disorder policing consistently reduces crime, but that indiscriminate "aggressive order maintenance" arrests did not significantly reduce crime while problem-oriented strategies targeting specific sources of disorder often had sizable effects without spillovers. The authors note that a large share of disorder comes from a small number of people and places.

AI Summary. Trading in options contracts that expire the same day has risen to more than half of all trades in the market for S&P 500 index options, according to data from SpotGamma. These contracts are the riskiest type, able to surge or fall to zero within minutes as traders speculate on intraday moves.

Gunjan Banerji Wall Street Journal
Date Posted:

Options trading hit a new record, with trading in contracts that expire the same day making up more than half of all trades in the S&P 500 options market.

Are same-day options now more than half of index options trading?

Core argument: Contracts expiring the same day, the riskiest options, have risen to make up more than half of all trades in the S&P 500 index options market this year, according to SpotGamma figures.

Activity in options is on track to smash another record this year. Trading in contracts expiring the same day, which are the riskiest, has soared to make up more than half of all trades in the market for S&P 500 index options this year, according to figures from SpotGamma. These trades are more electric than traditional stocks, with the potential to rocket higher or plunge to zero within minutes. Similar to wagering on how many points Mavericks point guard Luka Dončić will score in the first quarter of an NBA game, traders are increasingly using options to speculate how stocks will fare during the trading session, rather than at the closing bell.

Takeaways by Macro Roundup® AI

  1. Contracts expiring the same day, the riskiest options, have risen to make up more than half of all trades in the S&P 500 index options market this year, according to SpotGamma figures.
  2. Overall options activity is on track to set another record this year, with same-day contracts able to rocket higher or plunge to zero within minutes.
  3. Traders are increasingly using options to speculate on how stocks will move during the trading session rather than at the closing bell, akin to wagering on how many points Luka Dončić scores in an NBA game's first quarter.

Related Articles:

  • It’s Time to Talk About America’s Disorder Problem — A meta-analysis of 56 studies found that disorder policing consistently reduces crime, but that indiscriminate "aggressive order maintenance" arrests did not significantly reduce crime while problem-oriented strategies targeting specific sources of disorder often had sizable effects without spillovers. The authors note that a large share of disorder comes from a small number of people and places.
  • Young Men Are Gaming More. Are They Working Less? — US Bureau of Labor Statistics time-use data show time young American men spent playing games rose by nearly three-quarters of an hour from 2019 to 2022, exceeding the increase over the prior 16 years, with most of the added gaming time coming from work and sports, exercise and recreation.

AI Summary. Economists warn that annual home insurance policies cannot always be reconciled with 30-year mortgages, noting that reinsurance costs rose more than 100% from 2017 to 2023 and insurers passed those costs to homeowners. The Insurance Information Institute reports insurers paid $1.11 in claims per dollar of premiums in 2023, with a fifth straight year of underwriting losses expected.

Polly Mosendz and Eric Roston Bloomberg
Date Posted:

Structural changes in flood risk imply that annual insurance policies “cannot always be reconciled with 30-year loans.” In 2023, insurers paid out $1.11 in claims for every $ they made in premiums in the US.

Can annual home insurance policies be reconciled with 30-year mortgages?

Core argument: Reinsurance costs rose more than 100% from 2017 to 2023, a "reinsurance shock" that forced insurers to pass their own costs on to homeowner policyholders.

Economists are beginning to sound warnings, urging the mortgage industry and insurers to face the risky reality that annual insurance policies cannot always be reconciled with 30-year loans Reinsurance costs rose more than 100% from 2017 to 2023. This “reinsurance shock,” as they call it, forced insurers to pass their own costs to homeowner policyholders. The insurance industry is just not making money, according to the Insurance Information Institute. In 2023, insurers paid out $1.11 in claims for every dollar they made in premiums. This year is expected to be the fifth year in a row with underwriting losses, the institute determined.

Takeaways by Macro Roundup® AI

  1. Reinsurance costs rose more than 100% from 2017 to 2023, a "reinsurance shock" that forced insurers to pass their own costs on to homeowner policyholders.
  2. Insurers paid out $1.11 in claims for every dollar earned in premiums in 2023, and the Insurance Information Institute expects this year to be the fifth consecutive year of underwriting losses.
  3. Economists are urging the mortgage industry and insurers to confront the reality that annual insurance policies cannot always be reconciled with 30-year loans.

Related Articles:

  • Growing Costs of Natural Disasters are Stressing Property Insurance Markets — U.S. home insurers posted $15.2bn in net underwriting losses, their worst performance since at least 2000, and are responding by raising premiums and withdrawing coverage. State "last-resort" public insurance plans, backed by a state's policyholders or taxpayers, reached a record of just over $1.3tn in exposure, signaling growing unavailability of private coverage.
  • As Insurers Around the U.S. Bleed Cash From Climate Shocks, Homeowners Lose — Insurers lost money on homeowners coverage in 18 states, up from 12 states five years earlier and eight a decade earlier, according to a New York Times analysis of financial data. In response, insurers are raising premiums by as much as 50% or more, cutting coverage, or exiting entire states.
  • The Great Florida Migration Is Coming Undone — Florida's housing market is cooling amid excess inventory and weaker buyer demand, with analysts warning some cities could see a price correction. Home insurance premiums in parts of the state are up as much as 400% over five years, pricing out some homeowners and prompting institutional investors to sell properties.

AI Summary. Palantir and Anduril are in talks with about a dozen technology companies — including SpaceX, OpenAI, autonomous-ship builder Saronic, and Scale AI — to form a consortium that would jointly bid for US government work in an effort to disrupt the oligopoly of established "prime" defense contractors.

Tabby Kinder and George Hammond Financial Times
Date Posted:

Palantir and Anduril are forming a consortium to compete better with more established, “prime” defense contractors such as Lockheed Martin, Raytheon, and Boeing as they chase a greater share of the $850B defense budget.

Can a tech consortium break the defense prime contractor oligopoly?

Core argument: Palantir and Anduril are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country's oligopoly of "prime" contractors.

Palantir and Anduril, two of the largest US defence technology companies, are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country’s oligopoly of “prime” contractors. The consortium is planning to announce as early as January that it has reached agreements with a number of tech groups. Companies in talks to join include Elon Musk’s SpaceX, ChatGPT maker OpenAI, autonomous-ship builder Saronic, and artificial intelligence data group Scale AI. Palantir’s share price has skyrocketed by 300% in the past year, giving the company a market capitalisation of $169B — larger than Lockheed Martin. The data intelligence group was co-founded by tech investor Peter Thiel, who also provided the initial backing for Anduril, which launched in 2017 and was this year valued at $14B. Meanwhile, SpaceX was valued at $350B this month, making it the world’s largest private start-up, and OpenAI has soared to a valuation of $157B since it was founded in 2015.

Takeaways by Macro Roundup® AI

  1. Palantir and Anduril are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country's oligopoly of "prime" contractors.
  2. Palantir's share price has risen 300% over the past year, lifting its market capitalisation to $169bn, larger than Lockheed Martin's, while Anduril, launched in 2017, was valued at $14bn this year.
  3. Companies in talks to join the consortium include SpaceX, valued at $350bn and the world's largest private start-up, OpenAI at $157bn, autonomous-ship builder Saronic, and Scale AI, with an announcement planned as early as January.

Related Articles:

  • The Crumbling Foundation of America’s Military — A U.S. Army Science Board report warned that the American industrial base may be incapable of meeting the munitions demand created by a potential future conflict with a peer adversary. Much of the reduction in U.S. arms-manufacturing capacity was deliberate, following the collapse of the Soviet Union and the end of the Cold War.
  • The Hidden Threat to National Security Is Not Enough Workers — At Newport News Shipbuilding, half of welders now have less than four years' experience, down from an average of 20 years three decades ago, and inexperience reduces productivity and adds delays. Shipbuilding wages starting at $17 an hour no longer carry a premium over local retail and warehouse jobs paying up to $24.
  • Global Defence Groups Hiring At Fastest Rate In Decades Amid Record Orders — A survey of 20 large and medium-sized US and European defence and aerospace companies found they plan to recruit tens of thousands of workers, with 10 of them seeking to add almost 37,000 positions, or nearly 10% of their combined workforce. Demand spans apprentices to executives, including engineers, software developers, cyber security analysts, welders, and mechanics.