Is a Soft Landing for Real?

Welcome to This Week’s Leyendecker View

Electronic communities build nothing. You wind up with nothing. We’re dancing animals. How beautiful it is to get up and go do something.
– Kurt Vonnegut

A BIG THINK

We’ll just have to see, but it seems that an inflation “cycle” may naturally have at least two distinct periods. 

Period one is what caused the inflation.  

In our current period one, we can thank the Covid lockdowns that led to supply chain “kinks,” combined with massive government fiscal and monetary stimulus.

Period two happens after labor demands higher wages in response to period one.  

After companies increase wages to satiate labor’s demands, they often have to increase prices to keep up margins, profits and valuations.

If, after period two, a central bank does not induce an employment contraction to preclude labor’s need to ask for additional wage increases, then we get either hyperinflation (similar to that of the Weimar Republic and Zimbabwe) or a wage-price spiral. 

If my two-period inflation cycle concept is correct, then we still may have a recession coming this decade.

As an afterthought, it seems the Fed’s job is to keep workers from getting higher wages. Higher wages lead to more spending and higher consumer goods and services prices.

THE ECONOMIC VIEW

Soft landing talk is everywhere.
Just as it’s been before previous recessions
Vanguard’s economists aren’t buying it

The Rolex recession is here
Has luxury everything peaked?

You know US construction is strong
When Caterpillar sales are surging

The pandemic small business boom
May be the engine of today’s economy

THE INFLATION BOGEYMAN

Wage growth and inflation are easing
What’s the Fed’s next move?

Charging more while protecting less
The world of home insurance.

Saudi Arabia is open to more oil production cuts
Energy inflation may return.

THE LABOR VIEW

UAW wants a 40% pay hike
Will automakers give in?
LA hotel workers want more pay, too

US job openings fall hard
Productivity is up, hours worked is down

A tepid July employment report
Will this satisfy the Fed?

Return-to-office mandates
Are not working
Yet remote workers are less productive

MEANWHILE IN EUROPE

Europe’s economy grows again
But not by much.
European IPOs fall to 2009 levels

Germany digs deep
Could geothermal be good for them?

Austria has a problem.
It needs Russian gas

GLOBAL

IMF loans Argentina $10.8B
Is it an asset-based loan?

Coups consuming Africa from east to west
It’s a giant mess.

Can India become an economic superpower?
It’s woefully underinvested in human capital
Yet money is leaving China for India

PLAYING WITH FIRE

Europe wants Russia to rebuild Ukraine
Japan concurs
Good luck with that.
Ukraine’s damage worth about $1T and growing

The Ghosts of Bakhmut
Ukraine’s ploy to retake the city.
Ukraine also attacks a Russian Black Sea port

Is Putin looking for a bigger war?
And what if he is?

GEOPOLITICS IN FLUX

The tech cold war.
South Korea pivots from China to the US

China avoids the dollar
It wants to trade in yuan.

China sabotages G20 climate talks
Don’t tell us what to do!

FINANCE

Apple and Goldman launch a savings account.
$10B is deposited in short order

Is the SEC about to regulate alternative assets?
Stay tuned.

Alternative assets no longer shine
Pension funds are experiencing losses.
Private equity is in the doldrums

No, private equity is in retreat
Says Apollo’s CEO.
Creative ways PE is raising cash

REAL ESTATE

Warehouse demand goes down while rents rise
Huh?

Stuck in a death spiral
The shopping mall is dead.

Turning office buildings into apartments
Ain’t easy

TECHNOLOGY

Apple makes almost $20B last quarter
How about a windfall profits tax on them?

Starlink is global infrastructure.
And one man, Elon Musk, controls it
China to build its own Starlink rival

Some metals can heal themselves
What the heck does that mean?

THE CHAT ON AI

Chatbots have safety controls.
And researchers easily poke holes in them

Who needs movie stars anymore?
AI can recycle the old dead ones

How does AI compare
To past innovations?

THE NEXT NORMAL

Confidence in US military is way low
Confidence in retirement is at all-time low
We’re on the wrong track, say 71% of Americans
Only 51% say they like their jobs
More Americans feel lonely

Global sperm counts are falling.
This scientist has a theory

Ashes to ashes, Disney to dust
Is Disney past its prime?

THE WAR ON CARBON

Climate change isn’t burning the world
Forest fires have trended down since 2001.

Big institutional investors have a plan.
Buy O&G operations and make them green

Coal use is booming.
Setting another usage record

THE NEW ENERGY TRANSITION

First Solar hit the subsidy jackpot
Will they survive?
Warren Buffett prefers oil & gas

Georgia has a new nuclear plant
Nuclear interest at a decade high
According to a Gallup poll.

Can science beat air conditioning?
Looking for new ways to keep cool

THE EV DREAM

Guess who wants to be a big lithium supplier?
Exxon Mobil
The Middle East also digs mining

Brazil is not adopting EVs fast enough.
They love their sugar-cane cars

A Manhattan Institute policy paper
Says EVs may increase carbon emissions.

THE CHINA SYNDROME

China’s recovery loses steam
Deflation is at its door

Their golden age may be over.
Is autocracy killing their economy?
Can the US capture this opportunity?
White House urged to curb US investment in China

China has upped spying
Say the Germans.

Taiwan puts the pedal to the metal
To develop military drones

THE WASHING-TONE

Fitch downgrades US debt
Does it signal a fiscal time bomb?
Top economists call it “bizarre and inept”
Buffett still likes US Treasurys

Fuel economy standards will rise
According to the Biden administration.

They lied to us about Covid
Yep, they really did.

MAKING A BETTER YOU

Why screen time makes you unhappy
It ain’t the real real.

What is resourcefulness?
It makes you and everything better.

Reading books isn’t just a pleasure.
It also helps our minds heal

HOW ABOUT A BREAK

9 most beautiful lakes in the world
Stunning for sure!

America’s drunkest city
Why is it so?

Mass hysterias are not uncommon.
Here are the seven top ones

IT’S VACATION TIME

Satchmo’s Wonderful World
Go visit the new Louis Armstrong museum.

The art of being a Flâneur
Let the world you find lead you.

You’re not imagining it.
Tons of Americans are in Europe right now

SONG OF THE WEEK

“Dancing Barefoot”
From Patti Smith.
Lyrics are poetry, you know.

CASTING AROUND THE PODS

How rising temperatures will save lives
UnHerd gets the scoop from Bjørn Lomborg.

VIDEOS OF THE WEEK

The Holdovers trailer.
Alexander Payne works his magic.

Tesla solar roof, was it worth it?
This user tells why it may have been.

Why I travel the world alone
This dude did some WOW!

FROM THE HEADHUNTER’S KITCHEN

Are you a pasta lover?
Here’s one recipe for every week of the year

Cheesy mashed potato cakes
Oh me, oh my!  

The most popular ice cream flavors in the US.
Here’s where each originated

THE RANDOMS

Forty years ago, private equity was a tiny “industry.” Today, it has $8T of operating company investments under management. Forty years ago, interest rates were in the mid teens. As interest rates fell, investments in private equity grew. But interest rates may have reached their bottom two years ago. If so, are private equity’s better days behind it?

For a good stretch, this newsletter had a section dedicated to cryptocurrency. We deleted it a few months ago. Why? Well, what sovereign nation would give up control over its currency for a currency it could not control? 

It would seem that in order for crypto to be “real,” we need to get rid of sovereign nations.

And if the internet went down, well then how do you access your crypto account? “The Internet will never go down,” you say? So is the internet as reliable and sustainable as the sun?

On average, people across the globe presently spend 44% of their waking hours in front of screens, and this rate is rising, of course. Is the electronic world now the “real” world? Will any future generations ever live most of their lives in the actual real world, or is that possibility done for good?

In the wake of SCOTUS striking down his first student loan forgiveness gambit, Biden has launched a new program. The government bureaucrats have sliced and diced this program to include as many people as possible. Am I the only person who realizes this is a program to buy votes? 

I’m not an advocate of this idea, although maybe I will be one day. But let me throw this out there for readers to bash me over the head with: What if we let student loan debt be forgiven via personal bankruptcy? What are the implications of such a policy? Well…looks like presidential hopeful Ron DeSantis likes this very same idea.

Is this how modern democracy works: “Vote for me, and I’ll give you free stuff”? Maybe this is how democracy has always worked. And maybe that’s why autocracies dominate world history. Someone has to eventually say “no” to free stuff.

The more free stuff you give out, the more freeloaders seem to surface. Hmmm…

IN CASE YOU MISSED IT

What Has Saved Our Economy?
July 28, 2023

Recession, Postponed
July 21, 2023