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Marxist political theory update

After my comments a few days ago about Marxist theory of political power, I thought I’d better educate myself. This article explains the theory quite well, I think. Marx and Weber/Pareto seem to differ. Marx thought that political leaders automatically followed the (maybe implicit) wishes of the elites. Weber and co with their power elite model argued that there was more flexibility and that the abilities of politicians had a role in determining the seat of power. I am not a political theorist, but I prefer the Marx vision.

It’s not a bubble: asset prices are modest compared to funds available to buy stocks

Well, that’s what Michael Howell says, here. It’s basically the Dot Com bubble argument that old world valuation metrics like P/E ratios are simply not applicable any more. I am not dismissing this: liquidity, and the search for real assets that have a ‘track record’ of showing real returns hold a strong attraction for many investors, and when these investors are very liquid it’s perfectly rational for them to invest in FAANGMAN. Graham and Dodd really did miss something.

It’s the TINA argument: you may now feel wild about buying the NDX at a dividend yield of under 1.4% annually, but it might have some growth, and the yield might go up, both of which are clearly not going to happen if you buy 10Y treasuries.

Nordea on the Fed Presser

I’m very impressed by Steno Larson at Nordea on fixed income and FX. Read his report on the Fed press conference. His conclusion is that the Fed will struggle to hold down yields and the dollar will start to rise.

Alex Manzar on the Fed Presser

Worth reading, as always.

Other

The Atlanta Fed’s GDP Now estimate is 5.7%, vs 5.9% previously, read it here. It’s really hard to see how inflation can be kept near 2% (even with a little overshooting) with nominal growth like this.

How high do 10Y yields need to be for an equity correction?

Two percent, is the most commonly held view.

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Education makes you live longer

Says the Economist. Well, actually Anne Case and Angus Deaton of Princeton University. This is the latest of many statistics that shows that the more educated live longer, healthier and more rewarding lives. Clearly, we need to give those who are not good at taking exams honorary degrees.

A life on the ocean wave?

Not exactly, but on water anyhow.

Wrap

A day after the Fed Presser, rising yields seem finally to have spooked US equity markets. Today we had:

• NDX down 3% or more,
• SPX down 1.3%,
• Huge spike down in crude: WTI down 7%!
• Essentially all commodities down,
• UST 10Y now yields 1.71%,
• DXY at 91.8: it was last at this level in Nov. 2020.

There didn’t seem any major economic news that could explain this.

Thoughts

I’m reading The General Semantics of Wall Street by John Magee. It’s an interesting book, now available cheaply in a Kindle edition. Hard copy editions sell for ~$50. It spends a lot of time developing the idea that as concepts become more abstract, our ability to communicate using the names of them alone becomes increasingly difficult. Well, I’m about half way through, and that’s the main idea I’ve picked up. It certainly doesn’t rush into technical discussions.