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Incredible markets

Thanks to a subscriber for this thought-provoking article by Charles Gave. Here is an English translation:

What are these risks?

There is one and only one: that the dividends paid by the companies that make up the S&P 500 index do not collapse, as happened from 1929 to 1934.

And so, for those who think that capitalism is finally going to experience its great final crisis, it is better to have gold.

But in the event that this dear system of exploitation of man by man were to survive as it has always done throughout history, well, I could live to be two hundred years old without any problem, my capital remaining mine.

Which is not nothing.

But the value of my capital can vary very greatly, which I don't care about as only the dividend payments matter to me.

Today, transforming my gold into shares is almost indifferent to me.

Let's imagine that in the coming months, the stock market falls by 50%, that gold stays where it is, that the yield therefore increases from 1.7% to 3.4% and that the ratio goes from 1 to 1.5.

At that point, I can sell half of my gold and buy the equivalent in shares, which allows me to double my annual income.

If the ratio passes, after a fall in gold from 1 to 0.5, on the other hand, I must sell my shares to buy gold.

And this is undoubtedly why the ratio has oscillated between 1.5 and 0.5 for a century and a half.



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The equal pay scandal that drove Birmingham Council to the edge of bankruptcy

This article from ITV may be of interest. Here is a section:

GMB Organiser, Michelle McCrossen, said: “Today’s announcement is a humiliating admission of failure on the part of Birmingham City Council’s officials and leadership.

“Not only are they responsible for creating this crisis through years of discriminating against their own staff, but even they no longer believe themselves capable of fixing it.

“For decades the Council has stolen wages from its low-paid women workers, running up a huge equal pay liability that has brought Birmingham to the brink." 

They said today's news will be worrying for staff and residents. 

Equal pay cases are happening across retail as well.  

We revealed leaked documents that show a boost for the 55,000 claimants taking on Asda - where male dominated distribution centres have higher wages than the shop floor.



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Summers Says Job Report Is a Step Down Road to US Soft Landing

This article may be of interest to subscribers. Here is a section: 

Summers also reiterated his concern about the widening US fiscal deficit, and the need for Washington to wrestle with raising the government’s revenue over time. One reason why the economy has been so strong in the face of high interest rates has been a fiscal swing of “perhaps 3%” of gross domestic product this year compared with 2022, he said.

Shutdown Warning

“It would be helpful if we could get to more realistic views about the fact that we’re going to need more revenues,” he said. He also warned lawmakers against failing to enact annual appropriations bills that are needed to keep the federal government funded after the start of the new fiscal year on Oct. 1.

A shutdown caused by an impasse over spending bills “doesn’t save any money, and further serves to disillusion people with Washington,” he said.



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Stuck in neutral: A call for partnership working on river quality and water quantity

This article from Local.gov.uk may be of interest. Here is a section:

Around 20,000 new homes a year have been put on hold as a result legal protections to clean and protect our precious water ways. This report explores the challenges that councils and other stakeholders are facing and sets out recommendations for action.



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Startup extinction season is going to kick into high gear - and there's likely going to be a bloodbath soon for some of the 50,000 VC-backed startups

This article from Business Insider may be of interest. Here is a section:

Venture capital funding was overly abundant in the latter half of 2020 and all of 2021. There were nearly 19,000 deals done that year, according to PitchBook, until things started to taper off in 2022.

Stanford points out that the average time between funding rounds is now around 1.5 years. – basically what it was before the pandemic boom times. So, hypothetically, if a company last raised capital in the first quarter of 2022 (one of the most active in terms of deal count, PitchBook data shows), many startups will be on the hunt for new capital in the fourth quarter of 2023.

Every company's situation is a little different based on their operating expenses and whether they've gotten fresh funding already. Though, unless you're an AI startup, the chance of a VC check has been slim to none. So what are their options? Likely a sale or shutting down.

But it's not just VCs who are being stingy. All those crossover firms that wanted to get in on the action like Tiger Global (which by the way, did 335 deals in 2021, according to Crunchbase) and Coatue, aren't doing the kind of deals that they used to. Participation has dropped from more than 550 deals and a quarterly peak of nearly $50 billion in 2021 to fewer than 200 deals and a quarterly peak of around $15 billion in 2023, Stanford wrote.

"We believe that a large portion of the supply-side deficit is derived from the crossover and other nontraditional investors that have pulled back from VC to more traditional strategies," he wrote.



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Powell Remarks Friday at Jackson Hole Full Text

This speech by Jay Powell may be of interest to subscribers. Here is the conclusion:

As is often the case, we are navigating by the stars under cloudy skies. In such circumstances, risk-management considerations are critical. At upcoming meetings, we will assess our progress based on the totality of the data and the evolving outlook and risks. Based on this assessment, we will proceed carefully as we decide whether to tighten further or, instead, to hold the policy rate constant and await further data.

Restoring price stability is essential to achieving both sides of our dual mandate. We will need price stability to achieve a sustained period of strong labor market conditions that benefit all.



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Americans Have Almost Depleted Excess Savings, SF Fed Study Says

This article may be of interest. Here is a section:

“Our updated estimates suggest that households held less than $190 billion of aggregate excess savings by June,” San Francisco Fed researchers Hamza Abdelrahman and Luiz Oliveira said in a blog post published Wednesday on the bank’s website.

“There is considerable uncertainty in the outlook, but we estimate that these excess savings are likely to be depleted during the third quarter of 2023.”



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Whatever Happened To The Liquidity Hole?

This podcast from Bridgewater discusses the way in which the US Treasury has been issuing debt.



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UK Shock Wage Surge Puts to Rest Talk of BOE Pause

This article from Bloomberg may be of interest. Here is a section:  

Whole-economy regular wage growth accelerated to 7.8% in the three months to June, from 7.5% previously. That was well above our estimate for 7.5% and consensus expectations for 7.4%. The surprise, relative to our forecasts, was almost fully accounted for by revisions to the data rather than news about the monthly pace of growth in June.

Whole-economy wage gains including bonuses ticked up faster, to 8.2% in June from 7.2% previously, largely due to one-off payments made to National Health Service workers on that month.

More important for the BOE is regular pay growth in the private sector, which climbed to 8.2% in the three months to June, from 7.9% in May. We expected it to rise to 7.8%, while the BOE was projecting it to come in at 7.6% in its August forecast. One thing to note is that the reading is still affected by April’s near-10% rise in the national minimum wage.



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US Retail Sales Top Forecasts, Showcasing Consumer Resilience

This article from Bloomberg may be of interest. Here is a section:

The latest data illustrate how American households — supported by a strong labor market and rising wages — are so far buttressing the economy against recession in the face of high interest rates. Too much strength, however, could force the Federal Reserve to pursue more aggressive policy should inflationary pressures prove sticky. 

“This will boost optimism that because of the resilience of the consumer we can achieve that soft landing,” Lindsey Piegza, chief economist at Stifel Financial Corp., said on Bloomberg Television. At the same time, “this simply means the Fed will have to be more aggressive raising rates higher and keeping rates higher for longer,” she said.



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