“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“…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 represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“A full-throated defense of economic dynamism.” - The Wall Street Journal
“…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
“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
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers

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The Seven Samurai: Big Tech to the Rescue!

Aswath Damodaran Musings on Markets

Date Posted:: February 9, 2024

In 2012 the Magnificent 7 made up 8% of the market capitalization of all US public firms; by the end of 2023 they made up 24%. Their $12T market cap is worth more than all Chinese public equities. @AswathDamodaran

Let's look at the performance of the Mag 7 [AAPL, MSFT, GOOGL, AMZN, NVDA, META, TSLA] in 2023 when their collective market capitalization increased by a staggering $5.1T. Nvidia and Meta were the best performers, with the former more than and the latter almost tripling in value over the period. In terms of dollar value added, Microsoft and Apple each added a trillion dollars to their market capitalizations. These seven companies accounted for more than 50% of the increase in market capitalization of the entire US equity market. With them, US equities had price appreciation of 23.25% for the year, but without them, the year would have been an average one, with returns on 12.6%. Over the eleven-year period, the cumulative market capitalization of the seven companies has risen from $1.1 trillion in 2012 to $12 trillion in 2023. To put these numbers in perspective, the Mag Seven companies now have a market capitalization larger than that of all listed stocks in China.

Takeaways by Macro Roundup^® AI

The Magnificent Seven — Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla — added $5.1 trillion in combined market capitalization in 2023, accounting for more than 50% of the increase in the entire US equity market's value.
US equities appreciated 23.25% in 2023 with the Magnificent Seven included, versus 12.6% without them, as Nvidia more than tripled and Meta almost tripled in value and Microsoft and Apple each added $1 trillion.
The Magnificent Seven's cumulative market capitalization rose from $1.1 trillion in 2012 to $12 trillion in 2023, exceeding the market capitalization of all listed stocks in China.

Earnings Will Be Spectacular. It May Not Be Enough

John Authers Bloomberg

Date Posted:: October 8, 2026
Is Database:: Database

Since 2000, post-tax corporate profits as a share of GDP have trended upward across cyclical setbacks and are now near an all time high, above their 1929 level.

Throughout the 20th century, profit margins were regarded as one of the purest mean-reverting series in the economy. So far this century, however, margins have done nothing but rise. Measured with the National Income and Product Accounts, part of the GDP calculation, profits are currently taking a bigger share of the economy even than on the eve of the Great Crash in 1929. The series comes with a lag, so we can assume the profit share on this basis is comfortably at a record by now.

Takeaways by Macro Roundup^® AI

Corporate profits measured in the National Income and Product Accounts take a larger share of the U.S. economy than on the eve of the 1929 Great Crash.
Profit margins were regarded throughout the 20th century as one of the purest mean-reverting series in the economy, yet so far this century they have done nothing but rise.
The National Income and Product Accounts profits series comes with a lag, so the profit share on this basis can be assumed to be comfortably at a record.

The Bond Market Reckoning Has Only Begun

John Authers Bloomberg

Date Posted:: September 30, 2026
Is Database:: Database

The spread between 10-year French OATs and German Bunds has widened at a pace seen only during the eurozone sovereign-debt crisis. John Authers warns that France “satisfies all the classic conditions for a major debt crisis.”

Only in the worst days of the euro zone’s sovereign debt crisis, in 2011 and 2012, has the [spread of 10-Year French OATS over German Bunds] risen so fast. Talk of a second euro-zone crisis, this time with an epicenter in Paris, is growing, and it’s easy to see why. Why is this more of a problem for France and the UK? Beyond their deficits, they also shoulder much higher tax burdens than the US. Tax revenues are 25.2% of GDP in the US, the lowest of the major developed economies - but 35.3% in the UK and 43.9% in France. It’s hard to imagine after decades of tax-cutting, but a US politician could deal with the deficit fairly easily with a tax hike. It’s not clear that option is open to French lawmakers, even if they could somehow persuade voters to go along with them. The populist politicians of left and right, who currently look well placed in next year’s presidential elections, are in any case unlikely to try.

Takeaways by Macro Roundup^® AI

The spread of 10-year French OATs over German Bunds has risen at a pace matched only during the worst days of the euro-zone sovereign debt crisis in 2011 and 2012, fueling talk of a second crisis centered in Paris.
Tax revenues equal 25.2% of GDP in the US, the lowest among major developed economies, versus 35.3% in the UK and 43.9% in France, leaving American politicians more room to close the deficit with a tax hike.
Populist politicians of left and right, currently well placed for France’s presidential election, are unlikely to attempt tax increases to address the deficit.

Foreign Capital Flows Into US Stocks Hit Record As Appetite For Debt Fades

Michael Taffe and George Steer Financial Times

Date Posted:: September 28, 2026
Is Database:: Database

Foreign investors bought a record net $426B of US equities and fund shares in Q2, up 62% y/y, part of a record $942B in the 12 months through July. Overseas investors bought a net $188B of US debt securities in Q2, down from $314B in Q1.

Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, accelerating a shift in overseas investment towards American stocks and away from debt. The flows represented the highest rolling 12-month total in Treasury data going back to 1985. Net purchases of US equities and investment fund shares by foreign investors jumped to $426bn in the second quarter, up 62% from the same period in 2025, and surpassing the previous quarterly record of $299bn in 2022, according to the Bureau of Economic Analysis. Foreign demand for US debt moved in the opposite direction. Overseas investors bought a net $188bn of US debt securities in the second quarter, down from $314bn in the first.

Takeaways by Macro Roundup^® AI

Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, the highest rolling 12-month total in Treasury data going back to 1985.
Net foreign purchases of US equities and investment fund shares reached $426bn in the second quarter, up 62% from the same period in 2025 and above the prior quarterly record of $299bn in 2022, according to the Bureau of Economic Analysis.
Overseas investors bought a net $188bn of US debt securities in the second quarter, down from $314bn in the first.

De-reservification, Not De-dollarization

Brad Setser and Alex Etra Council on Foreign Relations

Date Posted:: September 16, 2026
Is Database:: Database

The stock of global dollar reserves has been roughly stable over the past decade. The world is not moving away from the dollar: dollar assets are shifting from official holdings of Treasurys towards private and quasi-sovereign holdings of risk assets.

Most of the current flow into the US from the “official” sector is coming from investors who are not classic reserve managers. Those flows remain heavily tilted toward the dollar, at least for now. Any real de-dollarization would likely occur first among these investors. Put differently, the dollar’s global role is increasingly as a source of returns, not a source of safety. The foreign bid, private and public, is for risk, not for Treasuries. It is currently fashionable in some circles to point to the diminution of the “convenience yield” on Treasuries even while the U.S. dollar continues to enjoy such a privilege. But the shift in the global investor base and their apparent portfolio preference for U.S. risk assets in lieu of Treasuries may help explain the divergence between the convenience yield on Treasuries and the convenience yield on the USD.

Takeaways by Macro Roundup^® AI

Most official-sector inflows into the U.S. come from investors who are not classic reserve managers, and those flows remain heavily tilted toward the dollar, so any real de-dollarization would likely begin among these investors.
The dollar’s global role is increasingly as a source of returns rather than safety, with the foreign bid, private and public, directed at risk assets rather than Treasuries.
The shift in the global investor base toward U.S. risk assets in lieu of Treasuries may help explain the divergence between the convenience yield on Treasuries and that on the dollar, and suggests the “profit dollar” is likely trading at a historical premium.

Foreign Investors Prefer US Stocks To Treasuries As Debt Worries Grow

Emily Herbert and Ian Smith Financial Times

Date Posted:: September 15, 2026
Is Database:: Database

International net flows into US equities reached 2.8% of GDP in the year through June, exceeding net inflows into Treasuries of 2% of GDP. Outside brief episodes during the pandemic and the aftermath of the GFC, this is the first time this century that equity inflows have surpassed Treasury inflows.

International flows into US stocks reached 2.8% of US GDP on average in the year to June, overtaking Treasuries — at 2% of GDP — for the first time this century outside brief episodes in the Covid-19 pandemic and the aftermath of the global financial crisis, according to analysis of US Treasury data by Deutsche Bank. The change reflects the ever-growing lure of the US stock market, with the S&P 500 on track for a fourth straight year of double-digit gains. Powering the rally has been vast AI investment, which is driving profit margins to new highs, according to FactSet data stretching back to 2009.

Takeaways by Macro Roundup^® AI

Foreign inflows into US stocks averaged 2.8% of US GDP in the year to June, overtaking Treasuries at 2% of GDP, according to Deutsche Bank analysis of US Treasury data.
Deutsche Bank’s analysis marks the first time this century that foreign equity flows have exceeded Treasury flows, outside brief episodes during the Covid-19 pandemic and the aftermath of the global financial crisis.
The S&P 500 is on track for a fourth straight year of double-digit gains, powered by vast AI investment that is driving profit margins to new highs, according to FactSet data stretching back to 2009.

Interest Rates and Stock Prices: An Old Debate Resurfaces!

Aswath Damodaran Musing on Markets

Date Posted:: September 14, 2026
Is Database:: Database

Damodaran’s “intrinsic” 10-year Treasury rate—calculated as US real GDP growth plus inflation—has broadly tracked the nominal 10-year Treasury yield since 1962. As of early September 2026, the 10-year yield of ~5% was 41bp below his 5.41% intrinsic-rate estimate.

[The graph shows] the actual inflation rates and real GDP growth rates for the US, going back to 1962, and [the implied] intrinsic 10-year treasury rate (the cumulative column) and actual 10-year treasury rate each year. When inflation surged in 2022, interest rates went up, but since the rates that I am tracking are long term rates, the intrinsic risk free rate vastly exceeded the actual rate that year, but the difference has narrowed over time, and almost dissipated by September 2026 (when the US 10-year treasury bond rate was [5%] and and the intrinsic ten-year rates yielded 5.41%).

Takeaways by Macro Roundup^® AI

As of September 2026, the US 10-year Treasury rate stood at 4.75% while the intrinsic 10-year rate was 5.41%, a gap of 66 basis points.
When inflation surged in 2022, the intrinsic risk-free rate vastly exceeded the actual 10-year Treasury rate, and that difference has narrowed since.
The intrinsic 10-year Treasury rate is built from actual US inflation and real GDP growth rates going back to 1962 and compared against the actual 10-year Treasury rate each year.

In 2012 the Magnificent 7 made up 8% of the market capitalization of all US public firms; by the end of 2023 they made up 24%. Their $12T market cap is worth more than all Chinese public equities. @AswathDamodaran

How much of US equity market gains came from seven tech giants?

Takeaways by Macro Roundup® AI

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Since 2000, post-tax corporate profits as a share of GDP have trended upward across cyclical setbacks and are now near an all time high, above their 1929 level.

Have corporate profit margins stopped reverting to the mean?

Takeaways by Macro Roundup® AI

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The spread between 10-year French OATs and German Bunds has widened at a pace seen only during the eurozone sovereign-debt crisis. John Authers warns that France “satisfies all the classic conditions for a major debt crisis.”

Do high tax burdens limit France and the UK's deficit options?

Takeaways by Macro Roundup® AI

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Foreign investors bought a record net $426B of US equities and fund shares in Q2, up 62% y/y, part of a record $942B in the 12 months through July. Overseas investors bought a net $188B of US debt securities in Q2, down from $314B in Q1.

Are foreign investors shifting from US debt into US stocks?

Takeaways by Macro Roundup® AI

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The stock of global dollar reserves has been roughly stable over the past decade. The world is not moving away from the dollar: dollar assets are shifting from official holdings of Treasurys towards private and quasi-sovereign holdings of risk assets.

Why do Treasuries trade at a discount while the dollar keeps premium?

Takeaways by Macro Roundup® AI

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Are foreign investors now buying more US stocks than Treasuries?

Takeaways by Macro Roundup® AI

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Damodaran’s “intrinsic” 10-year Treasury rate—calculated as US real GDP growth plus inflation—has broadly tracked the nominal 10-year Treasury yield since 1962. As of early September 2026, the 10-year yield of ~5% was 41bp below his 5.41% intrinsic-rate estimate.

Do long-term Treasury rates line up with inflation and growth fundamentals?

Takeaways by Macro Roundup® AI

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