And speaking of the Olympics ... is this as important as the medal count?
2/5
Japan is under a "state of emergency" and as Apple mobility shows, they are severely restricting their movements (the Olympics started July 23).
(Apple aggregates location data services for various areas)
3/5
Google also aggregates movement of their phones and they similarly show Tokyo businesses have essentially closed, mass transit is empty and even walks in the park are down since the opening ceremonies (July 23).
4/5
What did Tokyo get from the Olympics?
* $Billions spent on sports facilities that will rarely get used again
* massive disruption life and business, lost income
* no tourism
* A spike in delta variant cases that will last a while
The blowback will be big and profound.
5/5
Worth noting that former Prime Minister Abe was strutting around like a Peacock in front of the world at the closing ceremonies of the Rio games in 2016 celebrating that the next games would be in Tokyo.
He did not even attend the opening ceremonies last week.
nuff said
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Yesterday, AI-related stocks hit a high as a percentage of the S&P 500.
The AI influence on the stock market has never been larger.
🧵
2/5
What are the AI-Stocks?
I use the list that J.P. Morgan's Michael Cemblast made last fall.
Here is a table with its details.
3/5
Note that the list above does NOT include SpaceX (which has Xai, or Grok), Anthropic, and OpenAI. SpaceX's IPO is expected around June 12.
So, when will they be included in the S&P 500, allowing AI to account for over 50% of the S&P 500?
Last week, S&P proposed changing its rules so that mega-cap IPOs could become eligible for S&P 500 inclusion after six months, rather than the usual one-year seasoning period.
The proposal would also relax some standard hurdles for these companies, including minimum public float and profitability requirements.
But S&P emphasized that eligibility does not mean automatic inclusion—the Index Committee would still make the final decision.
The immediate pushback is familiar: this “supply shock” will hurt real growth, so the Fed should cut rates.
This well-known economist has been making exactly that argument.
3/4
That is only half the equation. A supply shock hurts growth, but it also raises inflation, so the real question is which side dominates.
In 2022, inflation rose more than real growth fell: the blue CPI line and arrow moved sharply higher while the green real-GDP bars and arrow moved modestly lower. The bottom panel shows the Fed’s answer: hikes, not cuts, as the federal funds rate moved from near zero in early 2022 to above 4% by year-end 2022.
Why? When inflation rises faster than growth falls, nominal growth (real GDP plus inflation) rises. If today’s oil shock does the same thing as 2022, the correct takeaway is not automatic cuts. It is possible that the Fed may have to stand pat or even consider hiking.
Ten seafarers have now been killed in 13 attacks on merchant vessels since the Iran conflict erupted on February 28 — more than the 7 U.S. servicemen killed in the war.
The focal point is shifting: can the Strait of Hormuz be reopened? Is the Administration pivoting to that mission?
Every day without a visible path to reopening, the market will price in more risk.
A 10% increase in energy prices that persists for a year would push global inflation up by 40 basis points and slow economic growth by 0.1-0.2%, International Monetary Fund Managing Director Kristalina Georgieva said.
So, what price measures "persists for a year?"
🧵
2/5
As the table below shows, crude oil futures prices for delivery into 2027 are trading in extreme backwardation.
3/5
Below is the calendar spread between the first contract (now April) and the 6th contract (now September).
As the bottom panel shows, this spread is -25%, a record since the mid-1990s when the contract specifications were last changed.