I remember a client who was a physicist who had worked on the H bomb with E. Teller and then went teach at Cal. He had some great stories. I asked him if the SV “tech” industry had lured away some of the best minds that would otherwise gone into physics and chemistry. His answer was an emphatic “yes”. He then proceeded to tell me that CRISPR technology would have gone far slower if not for the physicists of his generation helping to design and engineer the scientific equipment to do gene splicing. Now we have a generation of the brightest minds in tech looking at things like the power grid with no embedded institutional/industry/bureaucratic bias and saying “good god, this can be done better”. Manufacturing transformers, building ships, etc. not great businesses to be in per se, but now AI / national security considerations are forcing the best minds to look at these things for the first time, backed by MASSIVE amounts of capital. We ain’t seen nothing yet when it comes to productivity.
My concern is that those best and brightest studied business, finance and economics rather than math, materials and engineering, so while I agree in principle (and obviously am very optimistic), I worry about a skills gap that requires a lot of retraining to achieve many of the things younger Boomers and Gen X inherited from my parents generation and older Boomers. Even those Gen X that did study physics did useless “beautiful math” like String Theory.
The bond market isn't missing productivity. It's pricing the lag between headline TFP and what actually flows to margins after buybacks and reinvestment. Equity duration just got longer.
I agree and disagree. Fundamental pressures on bonds have been for higher real rates for a decade, but too many in bond markets don’t want to “fight the (dead wrong) Fed.” Hence why they lost so much money in 2022 and will again in the next year. Even if markets priced higher tax revenues (without more spending) and a credible Fed into term premia (which they shouldn’t since the Fed is not credible nor is fiscal responsibility), 10y TIPS should price 2.5-3% real yields today.
Hard to tell from my seat! But, yes, easier revenue gains, in aggregate, are part of the trend of higher spending and earning. That said, innovation creates both winners and losers (just more of the former). Digital cameras created vast new business opportunities, but destroyed Kodak.
I remember a client who was a physicist who had worked on the H bomb with E. Teller and then went teach at Cal. He had some great stories. I asked him if the SV “tech” industry had lured away some of the best minds that would otherwise gone into physics and chemistry. His answer was an emphatic “yes”. He then proceeded to tell me that CRISPR technology would have gone far slower if not for the physicists of his generation helping to design and engineer the scientific equipment to do gene splicing. Now we have a generation of the brightest minds in tech looking at things like the power grid with no embedded institutional/industry/bureaucratic bias and saying “good god, this can be done better”. Manufacturing transformers, building ships, etc. not great businesses to be in per se, but now AI / national security considerations are forcing the best minds to look at these things for the first time, backed by MASSIVE amounts of capital. We ain’t seen nothing yet when it comes to productivity.
My concern is that those best and brightest studied business, finance and economics rather than math, materials and engineering, so while I agree in principle (and obviously am very optimistic), I worry about a skills gap that requires a lot of retraining to achieve many of the things younger Boomers and Gen X inherited from my parents generation and older Boomers. Even those Gen X that did study physics did useless “beautiful math” like String Theory.
Video killed the Radio Star :) 1979 Inflation expectations
Dire Straits ~ Money for Nothing ~ https://youtu.be/wTP2RUD_cL0?si=xtZGUviDc1pJMqFl
https://share.google/gwAxEovMmOUvvNyfV
I just finished listening to this, it may be of interest to you and your subscribers.
https://substack.com/@natehagens/note/p-200453109?r=futzy
Thank you!
The bond market isn't missing productivity. It's pricing the lag between headline TFP and what actually flows to margins after buybacks and reinvestment. Equity duration just got longer.
I agree and disagree. Fundamental pressures on bonds have been for higher real rates for a decade, but too many in bond markets don’t want to “fight the (dead wrong) Fed.” Hence why they lost so much money in 2022 and will again in the next year. Even if markets priced higher tax revenues (without more spending) and a credible Fed into term premia (which they shouldn’t since the Fed is not credible nor is fiscal responsibility), 10y TIPS should price 2.5-3% real yields today.
The company I work for met our midwest sales goals again last month. Is that a trend? We will see after a few months and quarters.
Hard to tell from my seat! But, yes, easier revenue gains, in aggregate, are part of the trend of higher spending and earning. That said, innovation creates both winners and losers (just more of the former). Digital cameras created vast new business opportunities, but destroyed Kodak.
We deal in feeder stocks for manufacturing. I would like to think we are nearly the beginning of the processes.
Very well said, Marvin.
Thank you, @David Dredge. Very much inline with your excellent assessments of the macro environment.