● The Corporation in the Twenty-First Century: Why (Almost) Everything We Are Told About Business Is Wrong
John Kay
Review via Financial Times
When capital-intensive plant and machinery were the means of production, the capitalist elite had permanent power over the workers. But now control resides with professional managers who derive power not from ownership of the physical means of production or accumulated wealth but from their transient role in the business. Thus “the workers are the means of production” — and Kay’s italics are important.
Building on this, the importance of capital needs downgrading and redefining, argues Kay, a former FT columnist. In a suggestion that will jar with those actually running businesses or trying to start them up, the capital requirement of modern business is relatively modest. But it is difficult to argue with the observation that the modern IPO is more a means of enabling founders to extract capital than to raise it.
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Introducing The US 5-Year Yield Opportunity Index
Inflation risk is topical again, as I’ve been discussing this week. As a result, the bond market is demanding a higher yield premium to compensate for the possibility that inflation will be higher than recent expected. The question for investors: Does the runup in Treasury yields to date suffice, given the current inflation expectations? In the first of a series of new indexes to help shed light on an answer, here’s a look at CapitalSpectator.com’s US 5-Year Yield Opportunity Index (YOI).
Macro Briefing: 10 January 2025
In an effort to combat deflation, China’s central bank temporarily stopped buying the country’s government bonds. The Peoples Bank Of China “may be attempting to signal to all market participants that rates have come down too low and too fast,” says Peter Alexander, founder of Shanghai-based consulting firm Z-Ben Advisors.
Monitoring US Reflation Risk In Five Charts
Inflation is relatively low compared with the post-pandemic surge, when the year-over-year change for the Consumer Price Index (CPI) peaked at 9.0% in June 2022. The current 2.7% pace through through this past November is tame by comparison. The concern is that inflation has turned sticky lately, just ahead of expectations for a Trump 2.0 regime shift in government policies that some economists predict could lift pricing pressure. The bond market, as a result, is increasingly demanding a higher risk premium via higher yields.
Macro Briefing: 9 January 2025
US jobless claims fell to 201,000 last week, lowest level in nearly a year. The historically low layoffs suggests a healthy labor market for the near-term outlook. “The Fed says rate cuts from here on out will be gradual,” says Carl Weinberg, chief economist at High Frequency Economics. “Today’s claims data say that they need not be in a rush to ease monetary conditions. Fed policy is aimed at supporting the economy and the job market before a recession shapes up.”
Are Treasury Yields Flashing A Warning Sign For Inflation?
The risk of reflation has been bubbling for several months and yesterday’s economic news on prices in the services sector fueled new concerns. The bond market is paying attention, or so the renewed rise in the US 10-year Treasury yield suggests.
Macro Briefing: 8 January 2025
Business activity in the US services sector accelerated in December, according to the survey-based ISM Services Index. The index rose to 54.1, rising further above the neutral 50 mark, indicating a solid pace of expansion. A possible warning sign for inflation in the report is the strength in the prices index for services. “There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments,” says Steve Miller, chair of ISM’s Business Survey Committee.
US Q4 GDP Growth Still On Track To Slow After Strong Q3 Rise
US economic activity looks set to post softer growth in the government’s upcoming fourth-quarter GDP report. Based on the median nowcast from several sources, output appears set to downshift to the slowest increase since 2024’s first quarter.
Macro Briefing: 7 January 2025
US factory orders fell more than expected in November. New orders for manufactured goods dropped 0.4% compared with October, marking the fourth monthly decline in the past four. For the year-over-year trend, factory orders have slumped 1.9% in November, remaining in a tight range around zero change that’s prevailed over the past 18 months.
Risk-On Sentiment Prevails For 2025’s Debut, Fueled By US Stocks
There are many reasons to question a bullish outlook at the start of the year, but the gravity-defying trend remains intact overall, based on a set of ETF pairs that track global asset allocation strategies through Friday’s close (Jan. 3). The analysis turns mixed, however, when analyzing markets on a more granular level.