Home Investment November 13th, 2023: The Irregular Update

November 13th, 2023: The Irregular Update

November 13th, 2023: The Irregular Update

We begin today’s Weekly Roundup with US exceptionalism. US exceptionalism again John Authers’ Halloween newsletter reminded us that in 2007 the market peaked at Halloween. Sixteen years later, markets outside the US remain below that peak. US stocks are triple what they were. Valuations are a big driver. Halloween 2007 was the smallest gap between US and world valuations, but now we’re back at dot com levels. The other reason is earnings. US earnings per share have more than doubled over the last 16 years. For the rest of the world, they’re barely changed. A big internal market and low corporate taxes help, but US firms outperform those in nominally faster-growing economies. Virtually all the narratives that might explain this are discomfiting. They fall into the left-wing school — that holds that US companies have been allowed to merge, jack up margins and exploit workers — and the libertarian or Austrian school, which would hold that endemic interference with markets hasled to malinvestment, moral hazard, and a bubble that must soon blow up. There’s also the tech basis of the US and the Magnificent Seven. More to the point, what comes next? Are we looking at a repeat of the dot com collapse? Surely a regime of treats for Americans and tricks for everyone else can’t endure much longer.

Zero-sum Hat tip to Davis Stephenson, who pointed me at an article from Ian Leslie on Zero-sum thinking – a topic we looked at a few weeks ago. Dividing a cake is a zero sum game; if you get a bigger slice, mine will be smaller. A non-zero sum game is one in which the cake magically grows as you’re dividing it. Science is a non-zero-sum game – everyone in the field gains when knowledge is advanced. I should declare an interest here – I’m a very competitive person, and I have a preference for zero-sum forms of conflict resolution, where I win and the other person loses. I make an exception for service contexts (music, restaurants, medicine), and even I know that zero-sum doesn’t work in some situations. But the fundamental basis of economics is handling scarcity – there isn’t enough of the good stuff that people want to provide for everyone. And there usually isn’t a magic wand to provide more stuff, so we need to work out the best way of allocating it. Price is the best way, and intervention in free markets is usually counter-productive. Back to Ian. In the Malthusian mindset, there was no point trying to make the poor better-off, because then more of them would survive and fewer deaths inevitably meant lower living standards for everyone else. Poor is an emotive term, but if you replace it with non-productive, the argument becomes a lot more nuanced. Done right, economic growth means that the better off others become, the better off we are. “Done right” is doing a lot of work here, and there will always be exceptions inside the “others” group.


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