18 Oct

Theranos 2.0

Yes, Liz Holmes idea rises again! Well, Marx said that history repeats itself, first as tragedy, the second as farce.

US Housing Market due for a correction

Bill McBride cites Ivy Zelman’s view that house prices are close to a turning point. Housing, is the biggest asset class on the planet. When it falls, other asset classes are caught in the downdraft. People who need homes to live in, on the other hand, are better off. All asset price movements have distributional effects. Housing probably has the largest. For every over-extended householder who loses his home, someone who could not previously afford to buy is presented with an opportunity.

MaxLinear – looking like it’s going down exponentially

Jehoshaphat Research published on MaxLinear (NYSE: MXL — $3.70 billion), a California-based communications hardware company. Jehoshaphat called MaxLinear a “$4bn rollup of melting ice cubes.” Jehoshaphat alleged the company got a one-time COVID boost and that the company’s organic growth is actually flat. In addition, the company’s CEO has sold more stock in the past 12 months than in the preceding six years combined. Jehoshaphat wrote,

“We’ve dissected MXL’s acquisition history and found a consistent template: acquire declining asset, exceed short-term expectations with sudden, short-lived surges of growth from said asset, and then suffer the predictable evaporation of that growth.”

– via The Bear Cave

ED Curve taking a beating

Alex Manzara’s weekly comment is worth reading. He flags up that the ED futures market is pricing in some actual interest rate ‘hikes’ in the next year or so. I have read a half a dozen email newsletters this morning all talking about how inflation is actually not transitory, and that it’s becoming embedded. I really think that now absolutely everyone is talking about price increases for basically everything that we are no longer turning Japanese.

Deficit Myths

There is a battle royal going on in Washington DC over the Biden Build Back Better Bill. I don’t follow politics that closely, but I have noticed how the USA tends to set the agenda for the UK in terms of policies. It’s almost as if UK politicians can’t read French or German and therefore focus on the foreign policy news which is easiest for them to digest, but I digress. The point is that more and more activists are saying that this spend can be afforded. There are a lot of angles along which this attack can be lined up. Robert Reich’s latest substack focusses on the Trump tax cuts and tax avoidance practiced by the ultra wealthy. Others focus on the effectiveness of pandemic spending, and the absence of bad side effects. The hidden support, I think, is MMT. Reich must certainly be aware of it, but probably thinks it’s too heretical to use an argument. The right has never been afraid of deficits: Reagan’s success was built on deficit spending. Dick Cheney said “Reagan proved that deficits don’t matter.” I think he was talking about electoral success, but maybe he was talking about the health of the economy but most politicians think the two are interchangeable anyway.

Will this attitude leak into UK politics? I think so. Boris Johnson knows that if deficits do matter, they matter to the next administration. Rishi Sunak probably thinks that he has a good shot at being the next administration, so is more focussed on jam tomorrow. But Johnson has the whip hand, and has no reason to sacrifice his approval ratings in order to boost Sunak’s, so I think that by hook or by crook the autumn budget will be light on taxes and heavy on spending which, just to be clear, I would love to see.

Wrap

Industrial production was held down in September by shortages of everything, but still showed a positive quarter on quarter growth, for the fifth successive quarter. Commodities were pretty flat. Bonds were down a tiny bit, reflecting an increased conviction that rate rises are coming. There was a massive short squeeze on $THG:LSE, up over 20%. $BTC has had a fantastic run, at over $61K, showing that sentiment is still positive. Eurodollar futures were down earlier on, but recovered later. Uranium had a good day. Several governments seem to have realized that fission is the only practical solution for base-load electricity. My personal view is that high-level waste could be encased in lead and used as a long-term heat source.