The Sunday Drive - 03/24/2024 Edition [#103]

Musings and Meanderings of a Financial Provocateur

A Sunday Drive Around the Internet

👋🏼 Hello friends,

Let's enjoy a leisurely Sunday Drive around the internet. 

🎶 Vibin'

I’m technically a Baby Boomer (1946-1964), but I was born in 1964, making me actually the Last Boomer.

However, I’m very much Gen X at heart. Or as my kids like to say, I’m a young soul.

This week, I’m vibin’ to the theme song from the 1985 movie, St. Elmo’s Fire. I have long been a fan of this movie and its ensemble cast. It’s amazing to see the success that many of them went on to enjoy after they came together for this film. It was a real team effort.

I’ll be talking quite a lot about teamwork next week. But for now, please enjoy John Parr’s St. Elmo’s Fire (Man in Motion).

💭  Quote of the Week‌

“The world hates change, yet it is the only thing that has brought progress.”
– Charles Kettering

📈  Chart of the Week

The year is 2014.

“Psst. Got a hot investment tip for you. Sell all your bonds and put it in cash yielding about 0%. Wait a decade and you’ll earn about the same as bonds but with no volatility.” — said absolutely NO ONE at the time, I’m quite sure!

Yet here we are…

I believe that the current, very aged inverted yield curve may steepen over the course of 2024. I think this will happen because the Fed is likely to lower short term interest rates, partly because it’s an election year (cynical of me, I know) but also because the interest payments on U.S. federal debt will start to crowd out other government spending if rates don’t come down meaningfully, and soon.

I also believe that the long end of the yield curve will rise as the Fed lowers interest rates in an economy with essentially full employment and massive fiscal deficits. Long rates will rise as the bond market prices in renewed inflationary forces, further steepening the yield curve.

If this actually comes to pass, we may need to rethink our stance on favoring small cap stocks over megacaps.

🎩 H/T to Christopher Lange, my friend and colleague at Cache Financials for surfacing this week’s Chart.

🚙 Interesting Drive-By's

This week we have articles on the economy, nuclear power, AI, and generosity:

😒 America Has a “Trapped in Place” Economy - from Business Insider

If you like your situation right now — your job, your house, your car — you can keep it. If you aren't so satisfied, well, tough luck, because you might have to keep it anyway. Making a major life change, especially an upgrade, is going to come at a cost — one that many Americans would rather avoid, if they can manage it. Welcome to the "trapped in place" economy.

"If you are trying to move, buy a car, whatnot, then you have all these bad buying conditions on top of everyday high prices, so it's a double whammy," Joanne Hsu, the director of consumer surveys at the University of Michigan, told me.

The past four years have been filled with upheaval, though economic news has recently been on the upswing. Still, while there's been improvement on a macro level, on a micro, day-to-day level, there's a real sense of stasis. Inflation is falling, but prices are still much higher than they were before the pandemic. Interest rates are elevated. The labor market has cooled off somewhat, making it less advantageous to hunt for a new job. Everything seems stuck, and if you're looking to switch it up, it's going to cost you. [Read More…]

💡 Microsoft Eyes Nuclear Energy Power Its AI Ambitions - from Energy Central News

“Nuclear energy, if we do it right, will help us solve our climate goals,” Gates told ABC Newsearlier this year. “That is, get rid of the greenhouse gas emissions without making the electricity system far more expensive or less reliable.” And Gates is not just a mouthpiece for nuclear – he’s been busy putting his words to action over the last few years.

First, Gates teamed with fellow billionaire Warren Buffet — the two men have estimated net worths of $140 billion and $103 billion – to initiate a nuclear venture called TerraPower in 2021. The nuclear power company is determined to kickstart a new wave of safer, more sustainable nuclear energy production. TerraPower plants will be cooled with liquid sodium instead of water, making the model much safer, more efficient, and more cost-effective than a traditional nuclear plant. What’s more, they are also planning to recycle their own spent nuclear fuel within their very own ‘molten salt’ cooling systems. Crucially, this would cut down on the total output of radioactive waste, which represents one of the biggest – and most expensive – pitfalls associated with nuclear energy production.

And now, Gates is planning to revolutionize his own company, Microsoft, by adopting nuclear in order to provide a green source of energy for its current operations as well as its substantial AI ambitions (AI was the predominant conversation topic at Microsoft’s Surface event last week). The insights into Microsoft’s nuclear ambitions come from a corporate job posting, which seeks someone to “lead project initiatives for all aspects of nuclear energy infrastructure for global growth.” [Read More…]

🤔 Nvidia’s Surge Hints at AI’s Transformative Potential - from Faster Please

One of my favorite economics papers is “Are We Approaching an Economic Singularity? Information Technology and the Future of Economic Growth” by Nobel laureate William Nordhaus. Among other things, Nordhaus suggests six supply-side tests to determine if we are approaching an economic “Singularity,” a hypothetical future point where superintelligent machines cause explosive economic growth.

1. Is it getting easier to replace human labor with machines? (Nordhaus: There is some evidence this may be happening, but it's not conclusive.)

2. Is productivity growth accelerating? (Nordhaus: No, productivity growth has actually slowed down in recent decades.)

3. Is the share of income going to capital (vs. labor) increasing? (Nordhaus: Yes, the capital share has been increasing, but slowly. At the current rate, it would take over a century to reach Singularity levels.)

4. Is the ratio of capital to output growing faster and faster? (Nordhaus: No, the capital-output ratio has been stable or falling.)

5. Is information technology becoming a rapidly increasing share of total capital? (Nordhaus: Yes, but it's still a small share, and projecting current trends, it would take over a century for it to dominate the capital stock.)

6. Is productivity growth higher than it appears due to mismeasurement, especially of IT? (Nordhaus: Examining data on different industries, any mismeasurement of IT appears small and isn't leading to accelerating productivity growth across the economy.)

Nordhaus’ conclusion, at least as of 2021: “The Singularity is not near.”
[Read More…]

💯 College Football Player Gives His Scholarship To His Teammate - from International Business Times

Brian Dooley, a college football player at Eastern Michigan University (EMU), US, gave his scholarship to his teammate after realising he was struggling financially.

Zack Conti, Dooley's teammate who also plays on the offensive line, was paying his college fees by juggling multiple jobs and donating plasma.

While donating plasma can support trauma patients and those enduring plasma-based therapies, medical researchers have found that donating plasma can also positively affect the donor's body - reducing the chances of a stroke, heart attacks, high cholesterol, blood clots and other heart diseases.

On average, plasma donors also get paid around 50 to 100 dollars per session.

In August, Head Coach Chris Creighton shared his concerns for Conti in a meeting with the EMU football team.

"Zack Conti has had to pay his way to school for four years. And in the fall, the guy was selling his plasma to be able to pay the bills," he said, in a bid to persuade the team to hand out one more scholarship. [Read More…]

👋🏼 Parting Thought

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If you have any cool articles or ideas that might be interesting for future Sunday Drive-by's, please send them along or tweet 'em (X ‘em?) at me.

Please note that the content in The Sunday Drive is intended for informational purposes only, and is in no way intended to be financial, legal, tax, marital, or even cooking advice. Consult your own professionals as needed.

‌I hope you have a relaxing weekend and a great week ahead. See you next Sunday...

Your faithful financial provocateur,

-Mike‌

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