Deflation and Recession Are Nigh

Welcome to This Week’s Leyendecker View

Passion is the enemy of analysis.
– Robert Kaplan

THOUGHTS FROM DOUG

How much time each day are you NOT staring at an electronic screen?  

The whole reshoring and friendshoring effort is certainly going to cause costs to rise for goods producers. We had forty years of ever more productive supply chains. Rearranging those supply chains away from China, Russia and others will not come without a cost increase.

Just a couple months ago, it was widely reported that climate change and a population boom were going to dry up the Great Salt Lake. Well, it turns out that just the opposite is happening.

This past December, the news media reported that the drying up of a large California lake was a catastrophe. Now the news media is reporting the lake’s resurgence is a catastrophe. 

A new study suggests that climate change is responsible for an increase in major league baseball home runs. And now we learn that dogs need to lower their carbon footprint. Yep, someone paid for this “research.” Why? 

I’m struggling with a conundrum. Inflation is at its lowest point in almost two years, and the producer price index is falling, yet both employment and consumption remain strong. Now why did the Fed have to raise interest rates? Has the lag effect on rising interest rates not yet spilled into the mainstream economy?

If investment banking revenue remains poor for a couple more years, will banks start spinning off these high-cost centers?

To reduce the monthly payments of those who default on their mortgages, the Fed is allowing these mortgages to be extended to 40 years. In effect, the Fed is backstopping housing values. Mend and extend has made its way to the residential housing market.

What goodwill does China have around the world?

THE ECONOMIC VIEW

US manufacturing continues to contract
When will employment start to stumble?
While new plant construction soars
Reshoring is underway.
We need more construction workers

Chart: Commercial banks’ consumer debt
What the heck happened in 2010?

Small businesses are not optimistic
And haven’t been for 15 months.
Bankruptcy filings are on the rise
Is it still early in this trend?

A BANKING CRISIS???

US bank lending slumps
Worst on record.
Loan demand chart

Even the big banks lose deposits
For higher money market returns. 

The big banking crisis winners
Were hedge funds

THE INFLATION BOGEYMAN

Gold price almost at a record
Is inflation here to stay?

Inflation eases some in March
But maybe not enough for the Fed

Deflation and recession are coming
Follow the money supply.

THE LABOR VIEW

Married women are close to wage parity
How soon until they out-earn men?

Think sales jobs are immune to AI?
Maybe not

More jobs headed overseas
More call reps we can’t understand.

MEANWHILE IN EUROPE

Macron stumbles with Ukraine and Taiwan
While French protests escalate
Does Macron speak for Europe?
At least he’s thin and handsome.

Use English in official Italian communications?
You may have to pay a big fine

Dutch bureaucrats want less air travel.
Dutch court rules against them

GLOBAL

India is the next China
Apple leads the way.

Japan to continue easy money policy
Says the Bank of Japan’s new chief.

EU-South America trade deal at risk
Europe wants South America to be more European.

PLAYING WITH FIRE

Could Russia become a Chinese colony?
Who else can they turn to after Ukraine?

Is Ukraine grain export deal in peril?
Russia has its demands

Estonia supports Ukraine
Moldova wants closer ties with Europe
Russia’s influence continues to crater. 

THE NEW COLD WAR

How Putin saved NATO
History will likely view him as a putz.

Brazil wants to de-dollarize
They have a trade surplus with China

Has China put a spy post in Myanmar?
India thinks so.

THE FINANCE WORLD

JPM’s profits soar
Banks can still make money.

PE is buying portfolio company debt
As banks unload at a discount.

There’s about $1.4T in US leverage loans
What happens when interest costs rise?
Default rates keeps rising

The good ole days for venture capital
Are behind us
New venture funding down 55%
Cash dries up for VC startups

REAL ESTATE

Stressed mortgage payers
Can now extend mortgages to 40 years

Higher rates are hitting real estate owners.
Houston multifamily assets hit foreclosure

Tear down commercial office buildings
Suggests this GFC investment winner.

Cracks are starting to show
In European commercial real estate.

TECHNOLOGY

Is institutionalized thinking in Big Tech
Holding back innovation?
Microsoft tries to wall off rivals

Analog computing
Is still an essential today.

Sick of technology?
How to log off

THE CHAT ON AI

Slow down the race to God-like AI
Urges this AI investor.

China releases a chatbot
Here comes the global AI race.

AI could lead to nuclear-level catastrophe
According to a third of surveyed scientists.

THE NEXT NORMAL

NYC police to deploy robot dogs
Has anyone seen the movie I, Robot?

Pew says Americans don’t trust crypto
Good luck getting it to Main Street.

US life expectancy chart
Houston, we have a problem.
The life expectancy gap across the US

THE WAR ON CARBON

Toyota and Exxon create a new fuel
That could reduce carbon emissions by 75%.

Are German greens losing relevance?
Energy reality starts to set in.
The Dutch are also losing interest
The Japanese are not all in

High energy bills strain New England
Get them some solar panels.
Except they don’t work when covered in snow
Not much wind up there either

THE NEW ENERGY TRANSITION

Tesla announces new battery factory in China
Trying to save their China market?

If oil goes back to $100 a barrel
These countries get hit hardest

Texas doesn’t want any more blackouts
It’ll cost almost $20B to avoid them.

THE EV DREAM

Forget expensive EVs.
Golf carts are the future of transportation

China puts the squeeze on critical materials
EV costs are going up.

Walmart to roll out EV charging stations
Can Walmart customers afford EVs?

THE CHINA SYNDROME

American discontent with China grows
Finds a new Pew poll.

China seeks to rewrite its Covid history
Yet more gaslighting…

China’s tech catching up to US
How long before they don’t need us?

THE WASHING-TONE

Biden considers AI rules
Is the genie already out of the bottle?

Biden to expand health care to Dreamers
Integrating illegal immigrant children.

EPA back-doors in the demise of ICE vehicles
Bureaucrats taking over your life.

MAKING A BETTER YOU

Secret lessons for sleepless nights
For those insomniacs.

Got regrets?
Here’s how to have fewer

Why write?
To make sure you aren’t stinkin’ thinkin’

HOW ABOUT A BREAK

Your yard weeds may not be all bad.
Sometimes they’re beautiful

Elon’s update on Twitter
Felt he just had to buy it.

Micheal Jordan’s $250MM a year in royalties
Make him Air Jordan royalty!!!

SONG OF THE WEEK

“There’d Better Be a Mirrorball”
From Arctic Monkeys.
Lyrics are poetry, you know.

Bonus Arctic Monkeys song…
“R U Mine?”
From their younger days.
Lyrics, more poetry.

CASTING AROUND THE PODS

Luck and Resilience in Finance
Barry Ritholtz interviews Dominique Mielle.

VIDEOS OF THE WEEK

Alberto Cartuccia Cingolani plays Mozart
A new 5-year-old genius.

The Windshield Wiper
Surreal vignettes on the meditations of love.

Size comparison of creatures that fly
Pretty cool view.

FROM THE HEADHUNTER’S KITCHEN

How to cook asparagus
So it always turns out tasty.

There is rampant greenwashing
In the food sector

The little-known history of Champagne
We thought you’d like to know.

IN CASE YOU MISSED IT

300MM Job Losses Coming
April 7, 2023

The Fed Is Losing Money
March 31, 2023