Breathing Causes Climate Change

Welcome to This Week’s Leyendecker View

There is only one law of history. And that is the law of unintended consequences.
– Historian Niall Ferguson

A BIG THINK

The Unlikely Inflation Hero

The US inflation rate hit its peak at 9.1% in June of 2022. It now sits at 3.1%. Hurrah hurrah hurrah! The Fed’s monetary tightening (higher interest rates) has helped the US beat inflation! Or has it?

The much higher interest rates did not change American’s consumption habits. And since consumer spending represents 70% of our GDP, it does not appear that increasing rates tamed the animal spirits of consumers.

2022 GDP was around $25.46T, while 2023 GDP looks to keep growing another 2.4%.

Wait a minute! US consumption and GDP continue to grow even after the Fed’s massive interest rate increase?

How did inflation decline while consumer spending and GDP kept growing? If it wasn’t higher interest rates, what has caused inflation to fall? Who is our unlikely hero bringing inflation down and keeping consumption and our economy growing?

Our hero is the US domestic oil and gas industry. Domestic oil and gas companies have produced a tsunami of oil and gas, causing energy prices to decline.

Energy is an input into every product produced and service provided.

When the price of energy goes up, the cost to make a product and deliver a service goes up, which compels goods producers and service providers to increase their prices. When the price of energy declines, the cost to goods producers and service providers declines, which allows them to slow price increases and/or lower prices.

The price of oil peaked in June 2022 (the same month inflation peaked) at around $119 a barrel. Today, it’s about $74 a barrel.

The price of natural gas peaked in August 2022 at around $9.26 an mcf. Today it is about $2.37.

Current US oil and gas production are at record levels. This record supply has caused prices to decline, which goes a long way toward reducing inflation. And these price declines put more money into consumer pockets by reducing their transportation and heating and cooling costs.

The US and the world should be thanking not their central banks for causing inflation to decline but instead the US domestic oil and gas industry.

One should wonder, now that we have a renewed perspective on how energy prices influence inflation, did the Western economies really need to increase interest rates?

THE ECONOMIC VIEW

The hot new Christmas trend
Is falling prices.
Especially toy prices
Nike says spending is slowing

Bankruptcies are soaring
Higher rates and the end of Covid aid.
Is the Fed afraid of over-tightening?

Nippon Steel to buy US Steel
Will this deal actually close?
Is it a trade policy mess?

THE INFLATION BOGEYMAN

Cardboard prices are rising again
This doesn’t make sense.

Gasoline is cheap again
But for how long?

The pricing power of corporate America
Can they keep up their fat margins?

THE LABOR VIEW

Some bank workers unionize
We’re early in the new unionization trend.

The American worker is changing.
Maybe more than ever before

WFH breakdown by industry
Finance and professional services lead the way.

Top 10 countries for remote work
Time to move to Denmark.

MEANWHILE IN EUROPE

The other “I” word troubling Western voters
Macron caves on immigration
EU agrees to historic migration deal
Conservative preferences spreading in Europe.

The EU gets tough on government debt
Well then where will stimulus come from?

Europe’s got a fertility problem.
By the numbers

THE GLOBAL GAME

Argentina’s Milei initiates shock therapy
Issues sweeping decree to deregulate
Will bureaucracies survive the change?
Goldman Sachs touts Argentine bonds

India’s prime minister is exuberant
Says their economy is set for take-off.

A map of countries with drinkable water
Most of the world lacks it.

THE UKRAINE FIRE

The Western boycott
Has led to a Russian bonanza
EU comes out with 12th round of sanctions

Russian drone attack TARGETS CIVILIANS
Does the world understand the word “evil”?

Ukraine front-line soldiers get older
Can they reach Expendables-level performance?

THE GAZA FIRE

Israel open to a truce for hostages
Hamas rejects giving up leverage
Is Israel using AI to choose airstrike targets?

Gazans are starting to blame Hamas
Could Israel become their savior?

Shipping giants avoid Red Sea
Do they fear naval battles?
US Navy shoots down 14-drone wave
US to protect Suez Canal traffic
Gulf states’ split hinders action
Houthi rebels are not backing down

THE NEW COLD WAR

Xi seeks stronger ties with Russia
And he praises Nicaragua
A growing alliance of dictators.

2023 global trade contracts 5%
How many more years will this continue?
Trade partners are aligning geopolitically
Climate regulations are hampering trade

Iran makes nuclear weapon progress
So says the UK, France and Germany.

FINANCE

U Michigan endowment cuts private investing
Is this the start of a trend?

Investors abandon “higher for longer” outlook
Let the good times roll!

Buy now, pay later is booming.
What’s this telling us?
While credit agencies are in the dark

REAL ESTATE

Everyone now expects lower interest rates.
So homebuilding stocks soar
New homebuilding surges

2023 was tough on the office market
2024 could be worse.

The American warehouse building boom
Looks like it may be over
But now retail is getting more attention

TECHNOLOGY

A phone that lasts a decade
Come on, quit teasing me.

We’re headed toward a data center crisis
AI demand will only make it worse.
AI is ravenous for energy

Your phone is not secure.
Companies can listen in on you

THE CHAT ON AI

Sommelier jobs may be gone soon.
AI may be better at wine selection

How to use ChatGPT
As a regular person.

AI startup funding doubles in 2023
The new gold rush is on!

THE NEXT NORMAL

US middle class’ top concerns
Politics, social issues and climate barely register.

Shhh…be quiet…I’m reading
It’s the new cool thing to do.

Migrant surge overwhelms border agents
It’s causing cross-border shipping problems
Texas decides to arrest and deport illegals

THE WAR ON CARBON

Human breathing contributes to climate change.

No joke! This study says so!

Coal financing is booming
Led by China.

OPEC oil market control shrinks
Thank booming US shale production

THE NEW ENERGY TRANSITION

Nuclear fusion breakthrough looks promising
Where are the small nuclear reactors we were promised?
Nuclear energy has funding challenges
Are we wasting money on solar and wind?

Problems at a Russian nuclear plant?
Just what the nuclear industry doesn’t need.

The green energy revolution
Needs 96,000 miles of new pipelines

THE EV DREAM

Audi puts EVs on the back burner
So they won’t need a government bailout.

EV tax credits to decline
Tougher sourcing rules coming.

Pickup trucks dominate US auto sales
But will people really buy one of these?
Tesla’s Cybertruck is a production nightmare

THE CHINA SYNDROME

Beijing house prices are falling
The start of a global trend?

China’s iPhone ban accelerates
Say bye bye to China, Apple.

Should Western firms leave China now?
Better to be proactive than reactive?

THE WASHING-TONE

The Senate goes home for the holidays.
And kicks the can down the road

$230,000 a year in income.
The salary at which we’d give up democracy

The 26 bills that became law in 2023
Only 26…maybe a good thing.

MAKING A BETTER YOU

Go ahead and waste your time
It’s that time of year, and it’s good for you.

The underestimated value of a compliment.
Here’s how to give them

10 Japanese life improvement concepts
Learn from a very old culture.

HOW ABOUT A BREAK

Michelangelo had a secret drawing room
That you can now visit.

Striking findings in 2023
By Pew Research polls.

1970s California drought
Triggered global skateboard craze

SONG OF THE WEEK

“Fairytale of New York”
Shane MacGowan, RIP and The Pogues.
Some lyrics are poetry, ya know.
Happy Christmas to all!

CASTING AROUND THE PODS

Who is Ron DeSantis?
Jordan Peterson tries to find out.

VIDEOS OF THE WEEK

What Christmas Is All About
Charlie Brown lets us know.

Rebel Moon trailer.
Are we sure this isn’t a video game?

Love and Monsters trailer.
Another video game?

FROM THE HEADHUNTER’S KITCHEN

Let’s pretend we’re tired of holiday eating…

The best steak cuts for salad
Oh yeah!

Perfect pot roast
Bring it!

Nacho cheese flavored booze
You can’t wait to get some, right?

THE RANDOMS

How can you tell when government bureaucracy has reached a point of diminishing returns? How about when the Department of Labor replaces a two-page 1937 law with a new 776-page one?

Japan’s Nippon Steel is supposedly going to acquire US Steel for $14.1B. Should it be shocking that a supposedly much needed American infrastructure company is worth $14.1 billion while Apple is worth over $3 trillion?

When Xi met with Biden, he suggested “reunification” with Taiwan was going to happen. He’d prefer to do it peacefully, but…

“Prices of some goods and services are coming down, but overall, in the aggregate, the price level is not going to. So people are still living with high prices, and that’s not—that is something that people don’t like.” That’s Fed Chair Jerome Powell implying that wages have not kept up with inflation.

“More Americans Own Stocks Than Ever Before,” reports the Wall Street Journal. Is this a canary in the coal mine for a reversion to the mean?

Bob Farrell’s Market Rule #5: The public buys most at the top and the least at the bottom.

It’s amazing that so many people around the world want a ceasefire in Gaza. I guess they are indifferent to people being raped or beheaded by zealots committed to the extinction of their family, ethnicity or country.

Should we be noticing that the Russian economy, which is based on natural resources, is looking pretty resilient, while the EU economy, based on luxury goods and social programs, seems on shaky ground?

Is climate change going to break the insurance industry? Or will massive coastal development and soaring construction costs do it?

How can Western auto makers find profit in cheap EV vehicles when they make most of their money from luxury vehicles and trucks?

Will the cost of energy rise in 2024 after falling in 2023?

IN CASE YOU MISSED IT

Going Along to Get Along
December 15, 2023

Elon Musk’s F-Bombs
December 8, 2023