Making Widgets
January 10, 2022
–Tim Cook pulled down $100 million dollars last year. There’s a cute story on the NY Fed’s blog Liberty Economics on “The Effect of Monetary and Fiscal Policy on Equality.”
–From FT: ECB’s Isabel Schnabel says low-carbon economy ‘poses measurable upside risks’ to inflation projections over medium term.
–In the last couple of days I have seen articles about shortages of energy, tires, potatoes, and the one below, on ammunition.
–“Capitalism is on our side” according to Alan Blinder. “…competitors should enter the market and invest in new factories, or existing firms should expand existing capacity to seize market share, eventually leading to reduced prices.” [However, we know that massive rounds of QE went into share buybacks and consolidation. Also wouldn’t new competitors imply demand for capital?]
This reminds me of the ‘Back to School’ economics class clip with Rodney Dangerfield. (below)
Profits, said Priyadarshi, have gone to share repurchases and paying down debt.
There are several reasons for this, but the main ones are consolidation and high barriers to entry in the industry. Ammunition is difficult to produce, as it requires careful manufacturing processes to safely handle explosive materials. Vista recently bought its competitor Remington out of bankruptcy, lowering the number of firms in the industry that could even build a factory and distribute ammunition effectively. And the limits on capacity were explicit. https://mattstoller.substack.com/p/concentrated-firepower-what-high
–German bund yield has almost crossed into the world of the living with a positive yield. Now around -3 bps. On Friday the US ten-year broke out above last year’s high of 1.742%, ending at 1.766%. Seems like a fairly high yield…until you compare it with the expected yoy 7% CPI expected on Wednesday.
–EDH2/EDH3 one-year calendar spread hit a new high of 98.5 bps on Friday, nearing 100, which would imply four hikes a year. Bob, the remote intern working for Goldman, mentioned it to his three roommates who seemed duly impressed, so he relayed the intel to his boss, who promptly put out a forecast that Goldman Sachs research now expects four rate hikes in the next year. Bloomberg is leading with the story on its website this morning.
https://www.bloomberg.com/news/articles/2022-01-10/goldman-now-expects-four-fed-hikes-sees-faster-runoff-in-2022?srnd=premium
–I learned a lot about Kazakhstan this weekend, but still don’t know what the “h” is doing in there. Anyway, most of it is starkly depressing, but the Russian ties and installations in the country make it likely that some sort of order will be rapidly restored. Then there’s this from Fortune:
The “hash rate,” the random codes that win fresh awards of Bitcoin, collapses. A few hours into the outage, Larry Cermak of the crypto news and research site The Block tweeted that a full 12% of Bitcoin’s worldwide computational power had vanished. His data showed sharp declines for a number of producers with operations in Kazakhstan. The hash rates for AntPool, Poolin and Binance Pool all fell between 12% and 16%.
