Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…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
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, March 16, 2026

AI Summary. The authors argue that India's 2015 GDP methodology used inappropriate deflators and indicators, breaking the historical link between reported GDP and exports, credit, taxes, electricity use, and industrial production. They estimate the economy grew 4–4½% on average from 2011 to 2023 rather than the reported 6%.

Abhishek Anand, Josh Felman and Arvind Subramanian Peterson Institute for International Economics
Date Posted:
Is Database:
Database

Cumulating the growth rates from India’s National Account Statistics over the 2004-2025 period leads to the conclusion that the levels of real GDP and consumption are overstated by 22 and 31%, respectively, according to Arvind Subramanian.

Has India overstated its economic growth since 2011?

Core argument: The authors estimate India's economy grew 4–4½% on average from 2011 to 2023 rather than the 6% officially reported, with growth overestimated by about 1½–2 percentage points under the 2015 GDP methodology.

This paper examines the GDP methodology introduced in January 2015, initially to the post 2011–12 numbers and later to the historical series. After the 2015 methodology was introduced, correlations between GDP and key indicators that span sectors—exports, credit, taxes, electricity consumption, sales, and the index of industrial production— broke down or weakened. The main problem with the 2015 series was not the absence of double deflation, as is often alleged, but rather the use of inappropriate deflators and indicators. These methodological problems caused growth over the past two decades to be misestimated in both directions (table 1). Broadly, they caused growth for 2005–11 to be underestimated by about 1–1½ percentage points in the backcasting exercise; and caused subsequent growth to be overestimated by about 1½–2 percentage points. We estimate that from 2011 to 2023, the economy actually grew at 4–4½% on average instead of the 6% reported. Consequently, we find that instead of steady growth over the past two decades, there was a boom followed by slower but still robust growth the last two decades that is at variance with general perception and most indicators. The macro indicators surged from the 1990s to the early 2000s but then decelerated sharply, falling below pre‐2005 levels. Yet official GDP growth figures portray a picture of stable growth over the entire period.

Takeaways by Macro Roundup® AI

  1. The authors estimate India's economy grew 4–4½% on average from 2011 to 2023 rather than the 6% officially reported, with growth overestimated by about 1½–2 percentage points under the 2015 GDP methodology.
  2. The 2015 methodology's backcasting underestimated India's 2005–11 growth by about 1–1½ percentage points, implying a boom followed by slower but still robust growth rather than the steady two-decade expansion official figures portray.
  3. After the January 2015 methodology took effect, correlations between India's GDP and exports, credit, taxes, electricity consumption, sales, and the index of industrial production broke down or weakened, which the authors attribute to inappropriate deflators and indicators rather than the absence of double deflation.

Related Articles:

  • Building Long-Term Returns: Our 10-Year Forecasts — Analysts forecast an average annual total return of 6.5% for the S&P 500 stock index over the next 10 years, within a range of 3% to 10%, which would rank in the 27th percentile of 10-year returns since 1900. The base case combines 6% annual earnings-per-share growth, a 1% annual decline in valuations, and a 1.4% average dividend yield.
  • Data Update 4 for 2026: A Risk Journey Around The World! — Measured in dollar market capitalization terms, India was the worst-performing sub-region globally, rising only 3.31% as the Sensex gained 8.55% in local currency and the rupee depreciated against the dollar. US equities accounted for 47% of global market capitalization but only 38% of the year's change, with Europe and China contributing larger shares.

AI Summary. Crude oil from Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the UAE equaled about 20% of global supply and over 40% of crude exports, and much is now unavailable with Strait of Hormuz traffic near zero, yet Brent futures trade near $103/barrel. Past smaller disruptions required larger, slower price adjustments.

Matt Klein The Overshoot
Date Posted:

Klein suggests the modest rise in oil prices may be too small to equilibrate the oil market following the nearly unprecedented reduction in the flow supply of oil. Futures markets may turn out to be underestimating the persistence of the supply shock.

Are oil prices low relative to the size of the supply disruption?

Core argument: Crude oil exported from Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the UAE equaled about 20% of global supply and more than 40% of all crude exports before the war with Iran, and much of it is now unavailable.

The striking thing about oil prices, given what is going on in the world, is how low they are. Crude oil exported from Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the UAE was equivalent to about 20% of global supply before the recent war with Iran, or more than 40% of all crude oil exports. Much of this supply is now unavailable, with traffic through the Strait of Hormuz still stuck around zero as ships avoid Iranian drones, missiles, and mines. Yet as of this writing, front-month Brent crude futures are trading at just $103/barrel. Comparing the current crisis with previous notable oil disruptions, both in terms of price and volume impact, is helpful for getting some perspective. There are three big takeaways: The current threat to supply is unprecedented. Prior changes in prices required to reduce demand and/or increase supply were far larger than what we have seen so far, and the adjustment periods also took longer, even though the changes in volumes were also far smaller than what is currently happening. The U.S. is still extremely sensitive to disruptions of crude oil imports despite being a net exporter of petroleum products, at least when it comes to inflation.

Takeaways by Macro Roundup® AI

  1. Crude oil exported from Iran, Iraq, Kuwait, Saudi Arabia, Qatar, and the UAE equaled about 20% of global supply and more than 40% of all crude exports before the war with Iran, and much of it is now unavailable.
  2. Traffic through the Strait of Hormuz remains around zero as ships avoid Iranian drones, missiles, and mines, yet front-month Brent crude futures trade at just $103/barrel.
  3. Previous oil disruptions involved far larger price changes and longer adjustment periods despite much smaller volume losses, and the U.S. remains highly sensitive to crude import disruptions for inflation despite being a net exporter of petroleum products.

Related Articles:

  • Iran and the US Economy — Commodity strategists project Brent crude to average $98 over two months—40% above the prior year's average—before falling to $71 by late 2026, with a 60-day disruption of oil flows through the Strait of Hormuz pushing prices to $145. On these forecasts, headline inflation is projected at 2.9%, growth at 2.2%, and peak unemployment at 4.6%.
  • Oil Market Report – March 2026 — Conflict in the Middle East has cut crude and oil product flows through the Strait of Hormuz from about 20 mb/d to a trickle, prompting Gulf countries to cut oil production by at least 10 mb/d. Global oil supply is projected to fall by 8 mb/d in a single month.
  • Fighting Words: The Energy Transition in 2026 — Estimates based on primary energy overstate how much electricity is needed to replace oil in passenger cars, since electric motors convert 80%-90% of electricity into motion versus about 18% for gasoline cars. Measuring useful final energy net of waste heat avoids this "primary energy fallacy": the US consumed 45 exajoules of useful final energy versus 95 exajoules of primary energy.

AI Summary. The Bureau of Economic Analysis revised quarterly US GDP growth down to 0.7% annualized, with the category capturing servers and computer chips contributing 0.66 percentage points and the rest of the economy about 0.04 points. Including data center structures and power buildout, AI-related capital spending may account for roughly 0.80 points, exceeding total growth.

Paul Kedrosky Notes on Complexity
Date Posted:
Is Database:
Database

After Friday’s downward revision of Q4 GDP to 0.7%, the AI buildout’s capex appears to account for essentially all of Q4 GDP growth. Exclusive of investment in servers, GPUs, and related equipment, the economy grew .04pp – “statistical noise.”

How much of US growth comes from AI capital spending?

Core argument: The BEA's second estimate cut Q4 2025 U.S. GDP growth to 0.7% annualized, half the advance estimate, with the line capturing servers and GPUs contributing +0.66 percentage points and the rest of the economy roughly +0.04 points.

[Last Friday] BEA second estimate revised Q4 2025 GDP growth down to 0.7% annualized, which is half the advance estimate. Buried in the detail: the BEA line that captures servers and GPUs and such contributed +0.66 percentage points to that growth. The rest of the U.S. economy contributed roughly +0.04 points — statistical noise. That's the direct figure. It almost certainly undercounts AI's role. Data center structures investment is a net positive contributor masked inside a broader nonresidential structures line that declined overall. Power infrastructure buildout driven by data center demand adds more. Construction wages more yet. A reasonable upper-bound estimate puts AI-related capex at around +0.80 percentage points — exceeding total Q4 GDP growth. The implication: Strip out the AI infrastructure buildout and the U.S. economy was flat in Q4, with government spending (-1.03pp) and weak exports doing the most damage. AI capex just ate the (weakening) U.S. economy.

Takeaways by Macro Roundup® AI

  1. The BEA's second estimate cut Q4 2025 U.S. GDP growth to 0.7% annualized, half the advance estimate, with the line capturing servers and GPUs contributing +0.66 percentage points and the rest of the economy roughly +0.04 points.
  2. Adding data center structures, power infrastructure buildout, and construction wages, an upper-bound estimate puts AI-related capex at about +0.80 percentage points in Q4 2025, exceeding total GDP growth for the quarter.
  3. Government spending subtracted 1.03 percentage points from Q4 2025 GDP growth, and alongside weak exports did the most damage to an economy that was flat once the AI infrastructure buildout is stripped out.

Related Articles:

  • Rough Notes, Feb 20, 2026: AI Capex in Q4 GDP, Anthropic Revenues, Agentic Domains, etc. — An early estimate puts the floor contribution of artificial intelligence capital spending to fourth-quarter US GDP growth at about 64%, and likely closer to 80% including externalities and multipliers, though the calculation is not adjusted for imports. The author also notes that token price deflation persists and that US-China token price differences are immense and growing.
  • The Macro Implications of the AI Capex Boom — Artificial intelligence capital spending is estimated to add roughly 1.4 percentage points to US growth in one year and about 1.5 points the next, comparable to business investment's contribution during the tech bubble. A material part of that estimate reflects profits at Nvidia and a few other chipmakers that are unlikely to be recycled back into the economy.
  • OECD Economic Outlook, Volume 2025 Issue 2: Resilient Growth but with Increasing Fragilities — U.S. real GDP grew at a 1.1% annualized rate over the first half of 2025, but excluding booming AI-related investment output contracted 0.1%, with non-AI investment weakening. The OECD identifies a correction in equity markets lifted by expectations of high AI returns as a key downside risk to its projections.

AI Summary. New US homeowners spent 26% of their income on housing in 2024 versus 20% for existing homeowners, a six-percentage-point gap that is the widest in nearly 40 years. Historically the two groups' costs moved together, with the gap holding at roughly two to four percentage points.

Jess Remington Agglomerations
Date Posted:
Is Database:
Database
Is Important:
Important

As of 2024, American homeowners who bought a house within the last year were spending 26% of their income on housing, relative to 20% for existing homeowners – the largest gap in almost 40 years.

How wide is the housing cost gap between new and existing homeowners?

Core argument: New homeowners spent 26% of their income on housing in 2024 versus 20% for existing homeowners, a six-percentage-point gap, the largest in nearly 40 years.

Historically, monthly housing costs for new and existing homeowners have tended to move in tandem. From 1990 through the aftermath of the Great Recession, both groups saw costs rise during booms and fall during downturns, with the gap between them remaining relatively stable at two to four percentage points. That pattern briefly reversed during the Great Recession, when new buyers were able to purchase homes at depressed prices and consequently spent slightly less of their income on housing than existing owners. By 2017, the typical two-point gap had returned. The current divergence began in earnest in 2022. By 2024, new homeowners were spending 26% of their income on housing, compared to 20% for existing homeowners — a six-percentage-point gap, the largest in nearly 40 years. Although new homeowners spent a slightly larger share of their income on housing at the peak of the housing bubble in 2007 (28%), the gap with existing homeowners was smaller (four percentage points).

Takeaways by Macro Roundup® AI

  1. New homeowners spent 26% of their income on housing in 2024 versus 20% for existing homeowners, a six-percentage-point gap, the largest in nearly 40 years.
  2. From 1990 through the aftermath of the Great Recession, housing cost burdens for new and existing homeowners moved together, with the gap holding at two to four percentage points; the current divergence began in earnest in 2022.
  3. At the 2007 housing bubble peak, new homeowners spent a slightly larger 28% of income on housing, but the gap with existing homeowners was four percentage points.

Related Articles:

  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • NAR Says the Typical First-Time Homebuyer Age Was 40 This Year, Up from 33 in 2021—but Is This Accurate? — The National Association of Realtors' mail survey, with a 3.5% response rate, puts the typical first-time homebuyer at age 40, while New York Federal Reserve credit-report data for the same period show an average of 36.2 years and a median of 33. The survey underrepresents buyers under 35 by 17 percentage points.
  • Affordability, Part II — Home ownership functions as the modern marker of full participation in American society, and while most people's incomes have risen faster than the cost of a broad basket of consumer goods, housing has become substantially less affordable over the past generation. The author argues encouraging more housing construction is the most important element of a long-run affordability agenda.

AI Summary. New York City's unsheltered population rose 26% from 3,588 to 4,504, while spending on services for that population more than tripled from $102m to nearly $368m. That spending grew from just under 5% to nearly 9% of total Department of Homeless Services outlays.

Thomas DiNapoli New York State Comptroller
Date Posted:
Is Database:
Database

In 2025 New York City spent $81,705 per “street” homeless person, up 262% from 2019 whose numbers increased 26% during that period. This does not include spending on “sheltered” homeless, who are ~97% of the homeless population.

Has tripling spending on unsheltered services reduced the unsheltered population?

Core argument: New York City spending on services for the unsheltered rose 262%, from $102 million in FY 2019 to nearly $368 million in FY 2025, while the unsheltered population grew 26%, from 3,588 to 4,504.

New York City’s unsheltered population increased from 3,588 in FY 2019 to 4,504 in FY 2025 — a 26% increase from pre-pandemic levels. In that time, spending on services for this population has more than tripled, growing from $102 million in FY 2019 to nearly $368 million in FY 2025 (a 262% increase). Its share of spending has also increased, from just under 5% to nearly 9% of total Department of Homeless Services (DHS) spending.

Takeaways by Macro Roundup® AI

  1. New York City spending on services for the unsheltered rose 262%, from $102 million in FY 2019 to nearly $368 million in FY 2025, while the unsheltered population grew 26%, from 3,588 to 4,504.
  2. Services for the unsheltered climbed from just under 5% to nearly 9% of total New York City Department of Homeless Services spending between FY 2019 and FY 2025.

Related Articles:

  • As New Jobs In Finance Dry Up, New York City’s Fiscal Model Is Wilting — New York state's share of US taxpayers reporting over $1m in income fell from 12.7% in 2010 to 8.7% in 2022, and the Citizens Budget Commission estimates state and city income tax receipts from that group would have been $13bn higher had the share held. Job growth has concentrated in lower-paid health care and social assistance.
  • The Clock Now Ticks on Zohran Mamdani — New York City's share of the nation's millionaires has fallen 30% since 2010 and major banks have expanded in Dallas and Atlanta as finance's share of city employment shrank. The author argues a proposed city tax plan would leave remaining high earners paying 60% of taxes.
  • Supply and The Mam — New York City has the highest combined city-state personal tax rate in the US and the highest all-in corporate income tax rate at 17.4%, and the highest industrial, retail and multifamily property taxes per square foot among ten major cities. New York State ranks first in tax collections per capita.

Tuesday, March 17, 2026

AI Summary. Irish balance of payments data show foreign multinationals, almost all US-headquartered, reporting over $300bn in earnings in Ireland, generating roughly €35bn ($38-39bn) in Irish corporate tax revenue. Based on past patterns, a little under half likely comes from just three companies: Apple, Microsoft, and Eli Lilly.

Brad Setser Council on Foreign Relations
Date Posted:

American multinationals largely headquartered in the US booked $300B in profits in Ireland last year, generating $38–39B for the Irish Treasury, with ~ half coming from Apple, Microsoft and Eli Lilly. Happy Saint Patrick’s Day!

How much corporate tax revenue does Ireland collect from US multinationals?

Core argument: Irish balance of payments data show foreign multinationals, almost all American-headquartered, reporting over $300 billion in earnings in Ireland.

The Irish balance of payments data now shows that foreign multinationals (almost all American headquartered multinationals) report earning over $300 billion in Ireland—a remarkable sum. Those “Irish” profits generated close to 35 billion euros ($38-39 billion) or so in Irish corporate tax revenue in 2025—with a little under half likely coming from just three companies (Apple, Microsoft and Eli Lilly, which replaced Pfizer in the top 3 a couple of years back) judging from past patterns. The lost tax revenue from Eli Lilly, Apple, and Microsoft [$17-18 billion] would buy roughly four nuclear attack subs a year.

Takeaways by Macro Roundup® AI

  1. Irish balance of payments data show foreign multinationals, almost all American-headquartered, reporting over $300 billion in earnings in Ireland.
  2. Profits booked in Ireland generated close to €35 billion ($38–39 billion) in Irish corporate tax revenue in 2025, with a little under half likely coming from Apple, Microsoft and Eli Lilly, judging from past patterns.
  3. The $17–18 billion in tax revenue lost to Eli Lilly, Apple and Microsoft would buy roughly four nuclear attack submarines a year.

Related Articles:

  • This Loophole Buried in Trump’s Bill Is Anything but Beautiful — U.S. tax law taxes global profits from intellectual property moved offshore at 10.5%, versus 21% on domestic profits, and American companies report roughly $350bn in annual profits in major corporate tax havens such as Ireland, Luxembourg and Singapore. Pharmaceutical companies shifted patents and manufacturing abroad, reporting nearly all income overseas and largely ceasing to pay domestic corporate tax.
  • American Pharmaceutical Companies Still Aren’t Paying Tax in the U.S. — The six largest U.S. pharmaceutical companies by revenue reported a combined U.S. corporate income tax provision of zero or less for their profits, with only Eli Lilly setting aside a significant sum of roughly $1bn. The author attributes this to holding intellectual property offshore, producing patent-protected drugs offshore, and booking profits on U.S. sales offshore.

AI Summary. Japan's public debt is large enough that the country cannot afford higher interest rates, so the Bank of Japan intervenes to hold yields artificially low. These yield caps shift fiscal risk from the bond market to the currency, and the trade-weighted yen has fallen to its lowest level against other advanced-economy currencies in many years.

Robin Brooks Robin Brooks Substack
Date Posted:

The trade-weighted Yen has fallen by ~32% against G10 currencies since the start of 2020, and is now 1 percent under its previous low in July 2024.

Does capping bond yields shift fiscal risk onto the currency?

Core argument: The trade-weighted Yen against G10 advanced-economy currencies has fallen to its lowest level in many years, according to the author's index.

Japan’s public debt is so large that it can’t afford higher interest rates, so the Bank of Japan (BoJ) must intervene to keep them artificially low. These yield caps transfer fiscal risk from the bond market to the Yen, which depreciates as a result. This is what’s happened since war broke out in the Persian Gulf. The Yen has fallen to its lowest level in many years. The chart shows my index for the trade-weighted Yen versus the currencies of other advanced economies, a group of countries that’s often called the G10.

Takeaways by Macro Roundup® AI

  1. The trade-weighted Yen against G10 advanced-economy currencies has fallen to its lowest level in many years, according to the author's index.
  2. The author argues Japan's public debt is so large that the country cannot afford higher interest rates, requiring the Bank of Japan to intervene to hold yields artificially low.
  3. Those yield caps transfer fiscal risk from Japan's bond market to the Yen, which depreciates as a result, a shift the author dates to the outbreak of war in the Persian Gulf.

Related Articles:

  • 2026 Japan Economic Outlook: Steady Fundamentals, Policy Risks Ahead — Japan's government debt-to-GDP ratio has continued to decline despite an ongoing primary deficit, because the government's interest payment rate (0.8%) is far below nominal GDP growth (3.9%), a gap the authors call the widest since 1980 and worth roughly -7 percentage points a year.
  • Is Japan “Normal” Again? — Yields on long-term Japanese government debt have risen to their highest since the 1990s while the yen remains cheap relative to its history. One benign reading is that Japan has exited post-bubble stagnation, with modest inflation and faster wage and income growth aligning with higher interest rates.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.

AI Summary. An author's estimate of the forward-looking equity risk premium implied by stock prices and expected cash flows rose only modestly, from 4.37% to 4.51%, even as oil topped $100 a barrel and US stocks fell. Over the same stretch the 10-year US Treasury yield jumped from 3.97% to 4.28%, which the author reads as inflation fears outweighing other market concerns.

Aswath Damodaran Musings on Markets
Date Posted:

From March 1–15, the equity premium rose from 4.37% to 4.51% as oil rose to $100 per barrel. But a surge in the 10-year Treasury, from 3.97% on February 27 to 4.28% on March 13, suggested “inflation fears are trumping other market concerns right now.”

How much has the equity risk premium risen as oil prices surged?

Core argument: The implied equity risk premium for the S&P 500 rose only from 4.37% at the start of March to 4.51% by March 13, which Damodaran reads as a market not behaving as if in crisis mode despite falling stocks and oil above $100 per barrel.

[I estimate] forward-looking equity risk premiums by backing out from stock prices and expected cash flows, the expected return (internal rate of returns) that markets were pricing into stocks. My conclusion, at the start of 2026, was that while stocks were richly priced using almost every conventional metric (high PE ratios, low dividend yields), the implied equity risk premium was in line with what US stocks have generated over the last 65 years []. Two weeks ago, bombs started falling in the Middle East, and US equities and bonds have been struggling to price in the effects of higher oil prices. In keeping with my practice of estimating equity risk daily, during troubled times, I did compute the implied ERP for the S&P 500 every day, during the last two weeks (Feb 27- March 13) [see above]. Oil is up to over $100 per barrel and the S&P 500 is down, but so far, the market is not behaving as if it is in crisis mode. The equity risk premium, which started March at 4.37% has risen, but only to 4.51%, over the two weeks. In fact, it is the ten-year US treasury bond that has had the bigger surge, up from 3.97% at close of trading, on February 27, to 4.28% at close of trading, on March 13, indicating inflation fears are trumping other market concerns right now.

Takeaways by Macro Roundup® AI

  1. The implied equity risk premium for the S&P 500 rose only from 4.37% at the start of March to 4.51% by March 13, which Damodaran reads as a market not behaving as if in crisis mode despite falling stocks and oil above $100 per barrel.
  2. The ten-year US Treasury yield rose from 3.97% on February 27 to 4.28% on March 13, a larger move than the equity risk premium, which Damodaran reads as inflation fears trumping other market concerns.
  3. At the start of 2026, Damodaran judged US stocks richly priced on almost every conventional metric, including high PE ratios and low dividend yields, yet found the implied equity risk premium in line with what US stocks have generated over the last 65 years.

Related Articles:

  • Margin Debt at Record Highs — Margin debt has reached a record high of about $1.3tn. Analysts argue this leverage could amplify any stock market downturn, as leveraged investors are forced to sell into falling markets.
  • Data Update 2 for 2026: A Testing Year (2025) for US Equities — An implied equity risk premium computed from the US stock index level and expected cash flows from dividends, buybacks and earnings growth yields an expected stock return of 8.41%, or 4.23% above the 10-year Treasury yield of 4.18%. That premium sits in the middle of its historical range, unlike the 2.05% low reached at the end of 1999.
  • Stocks Near Highest Valuations Since 1880 — The cyclically adjusted price-earnings ratio, which divides stock prices by the average of the past 10 years of inflation-adjusted earnings to smooth business-cycle swings, stands near its highest level since 1880. Because it uses a decade of earnings rather than one year, it is a gauge of sustainable earnings power.

AI Summary. Analysts argue Nvidia's gross margins, 73% in the most recent quarter, will have to compress as AI shifts toward inference computing, which prizes efficiency and low cost. Competition has grown as more chip companies offer inference chips that are cheaper to buy and operate.

Robbie Whelan Wall Street Journal
Date Posted:
Is Database:
Database

The research firm Gartner estimates that in 2025, capex spending on AI training and inference were approximately at par. Gartner forecasts that by 2029, inference capex spending will be nearly 2x that of training.

Will the shift toward inference computing compress leading chipmakers' margins?

Core argument: Paul Kedrosky argues Nvidia's gross margins, which stood at 73% in the most recent quarter, will by necessity compress as inference computing shifts demand toward efficiency and cheaper hardware.

“Nvidia is in a weird moment,” said Paul Kedrosky. “For a long time, Jensen was saying, ‘We don’t need to have dedicated, stand-alone inference chips, you can just throw a Blackwell at it.’ But that ship has sailed, and there’s a host of new competitors.” Kedrosky argued that Nvidia’s gross margins, which stood at 73% in the most recent quarter, will by necessity have to compress, for two reasons. First, the business model around inference computing puts a premium on efficiency and reducing the cost of producing the final product, which for consumers means AI tools. The hardware behind it can’t be too pricey or the companies selling it, directly or as middlemen, won’t make money. Second, there is more competition to supply customers with inference computing because more chip companies have figured out ways to provide it with chips that are cheaper to buy and operate. Nvidia became the first $4 trillion company by selling the silicon equivalent of fast, powerful and expensive Ferrari sports cars, but now the world wants Priuses and Model Ys.

Takeaways by Macro Roundup® AI

  1. Paul Kedrosky argues Nvidia's gross margins, which stood at 73% in the most recent quarter, will by necessity compress as inference computing shifts demand toward efficiency and cheaper hardware.
  2. Kedrosky says Jensen Huang long maintained that dedicated stand-alone inference chips were unnecessary because customers could "just throw a Blackwell at it," but that position has been overtaken by a host of new competitors.
  3. Nvidia became the first $4 trillion company selling the silicon equivalent of fast, powerful and expensive Ferraris, while more chip companies now supply inference computing with chips that are cheaper to buy and operate.

Related Articles:

  • Commoditization, Orchestration, and the New AI Stack — The author argues that as incremental gains from larger AI training runs shrink, the return on additional computing power falls, weakening the case for the training spending that dominates data center demand. Survivors of model commoditization will be those owning the orchestration layer or the applications where outcomes are priced.
  • Chart of the Day: AI Capex, From Bonanza to Burden — Stock price reactions to large artificial intelligence capital spending announcements have shifted from rewarding to penalizing companies, with the valuation multiple markets assign to such spending collapsing and likely turning negative. Technology companies once valued for low debt and low capital intensity are now among the leaders in both.

AI Summary. Germany has earmarked an initial €600bn ($687bn) for its military, and streamlined procurement is helping defense producers secure record orders for goods ranging from artillery shells to attack drones, with banks lending more readily. UBS estimates defense will add 0.5 percentage points to German growth by 2028.

Alexander Weber and Kamil Kowalcze Bloomberg
Date Posted:

The surge in German defense spending will contribute .5pp annually to German GDP growth by 2028, according to a UBS analysis. German remilitarization is also being supported by Middle Eastern armament demand.

Is Germany's defense spending surge becoming meaningful economic stimulus?

Core argument: German Chancellor Friedrich Merz has earmarked an initial €600 billion ($687 billion) for the military, with streamlined procurement helping producers secure record orders for everything from artillery shells to attack drones.

Chancellor Friedrich Merz has earmarked an initial €600 billion ($687 billion) for Germany’s military. What began as geopolitical necessity, however, is becoming meaningful economic stimulus as streamlined procurement helps producers secure record orders for everything from artillery shells to attack drones. Banks are also making loans more readily available. UBS analyst Felix Huefner reckons defense will contribute 0.5 percentage points to growth by 2028. The Ifo institute said last week the rapid defense rollout is supporting the outlook for growth this year, even as the Iran conflict creates new headwinds. Even the latest war in the Middle East is stoking demand for German hardware to help Gulf nations shoot down Iranian missiles.

Takeaways by Macro Roundup® AI

  1. German Chancellor Friedrich Merz has earmarked an initial €600 billion ($687 billion) for the military, with streamlined procurement helping producers secure record orders for everything from artillery shells to attack drones.
  2. UBS analyst Felix Huefner reckons defense will contribute 0.5 percentage points to German growth by 2028, and banks are making loans more readily available.
  3. The Ifo institute said Germany's rapid defense rollout is supporting the growth outlook for this year, even as the Iran conflict creates new headwinds and stokes Gulf demand for German hardware to shoot down Iranian missiles.

Related Articles:

  • Waking the Sleeping European Giant — Europe, at roughly 500m people and a $26tn economy with world-class aerospace, shipbuilding, pharmaceutical, vehicle and weapons manufacturers, has the material basis to be a military superpower. National militaries' preference for home-country suppliers has left subscale defense firms, and common procurement could raise output and lower unit costs.
  • The Big Bet on European Defense Stocks Is Getting Expensive — U.S. weapons manufacturers delivered stronger stock returns after the Cold War than during it, even as U.S. military spending fell from around 7% of the economy to about 3.7%, with the "guns" sector posting the third-best total return among 49 U.S. sectors, behind software and microchips.
  • The Intellectual Spoils of War? Defense RD, Productivity and International Spillovers — The authors estimate that a 10% increase in government-financed R&D, largely defense, is associated with a 4.3% rise in privately funded R&D across OECD countries, indicating "crowding in" rather than "crowding out." They also find international spillovers raise private R&D abroad, though the overall effect on US productivity growth is modest.