China Just Won
The Day DeepSeek Turned Tech and Wall Street Upside Down – WSJ.
And worse? DeepSeek may not be alone: Chinese AI DeepSeek rattled the industry. We would not be surprised, for example, if China’s already got government cloaked models working out long-range policy guidance to assure CCP world dominance.
Could an A.I.-generated low risk play be aimed at NATO? Sweden Captures Ship Suspected of ‘Sabotage’ in Undersea Fiber Optic Cable Rupture. All gets pretty damn interesting to model!
So, what did Ure mean “China’s Won”? Didn’t you see?? Exclusive-Images Show China Building Huge Fusion Research Facility, Analysts Say. And their fusion program has now sustained fusion for more than 16-minutes…. Thanks Dems for making the U.S, #2…
Fresh Data: Durable Goods Numbers
Just out: DECEMBER 2024 $276.1 billion -2.2%
Now What?
America is in the middle of a policy nightmare – not Donald Trump’s creation. Democrats own most of this. It’s a simple (not unexpected) “bipolar result.”
There are two parts to this. We’ll have A.I. assemble it for us. First, Trump is orchestrating ICE raids to root out illegal immigrants. Good. We’ve got laws and we’re rediscovering we have borders.
But, any overshoot (i.e. deportations of honest working people) has impacts. Yet, at the same time (and as any Developer mindset drives), Trump wants interest rates to remain low.
Using A.I. to Sort Out Policy
“Explain in detail what the deportation of illegal immigrants to the U.S. will do to long-term inflation prospects for the U.S. Then, estimate the amount and direction of the FOMC decision Wednesday.”
ChatGPT said:
The deportation of illegal immigrants could have nuanced implications for long-term U.S. inflation prospects, depending on its scale and how the economy responds. Here’s an in-depth breakdown:
1. Effects on Labor Supply and Wages
Labor Market Tightening: Deporting a significant portion of illegal immigrants would likely reduce the labor pool, especially in industries that depend heavily on undocumented workers (e.g., agriculture, construction, hospitality). A smaller labor force could lead to upward wage pressures as businesses compete for a shrinking supply of workers.
Sectoral Wage Inflation: Industries with high reliance on undocumented workers may face acute labor shortages, forcing companies to pay more competitive wages or automate operations. This could raise costs and ultimately push up consumer prices in those sectors.
Broader Wage Impacts: While wage increases in some industries could be absorbed by productivity gains, persistent shortages may lead to broader wage inflation, especially if employers pass higher costs onto consumers.
2. Productivity and Economic Output
Decline in Productivity: Undocumented workers often take on labor-intensive jobs that citizens may not fill. Deportation could lead to operational inefficiencies and lower output, particularly in industries with razor-thin margins like farming or food processing.
Potential for Price Increases: Reduced productivity and supply-chain bottlenecks could lead to higher prices for goods and services in affected industries.
3. Government Spending and Fiscal Policy
Enforcement and Deportation Costs: Large-scale deportation campaigns are expensive, potentially increasing federal spending. These costs may strain budgets and lead to higher deficits unless offset by cuts elsewhere or increased revenue.
Reduced Tax Revenues: Many undocumented workers pay taxes (via payroll deductions or sales tax), despite being ineligible for most government benefits. Their removal could lead to a decline in tax revenue, exacerbating fiscal imbalances and limiting the government’s ability to manage inflation.
4. Housing Market Impacts
Lower Demand for Housing: Deportations could reduce demand for rental units, particularly in areas with large immigrant populations. This might dampen rent inflation in certain regions, though this effect is unlikely to be significant enough to impact national inflation trends.
5. Demand-Side Effects
Consumer Spending Decline: Undocumented workers contribute to consumer spending, especially in local economies. Their removal could reduce overall demand, partially offsetting inflationary pressures from labor market tightening.
Sectoral Demand Effects: Industries catering to immigrant communities, such as ethnic grocery stores or remittance services, may see declines, potentially leading to localized deflationary effects.
Net Impact on Long-Term Inflation
The overall effect depends on the balance between supply-side inflationary pressures (from labor shortages and higher wages) and demand-side deflationary pressures (from reduced consumption and lower housing demand). However, given the U.S. economy’s heavy reliance on immigrant labor in key sectors, deportations are more likely to exert upward pressure on inflation in the long term.
Federal Open Market Committee (FOMC) Decision
The FOMC’s decision on Wednesday will hinge on several factors, including recent inflation trends, labor market data, and global economic conditions. Here’s a projection:
Current Inflation Trends: Core inflation has remained relatively sticky, and wage growth remains elevated. The Fed may interpret this as requiring further vigilance.
Labor Market Strength: Persistent tightness in the labor market could push the Fed to maintain restrictive monetary policy.
Growth Risks: Slowing global growth and domestic demand might argue for caution, particularly if the Fed believes previous hikes are still filtering through the economy.
Projection: (Ure adds underlining)
Rate Decision: A pause in rate hikes seems the most probable outcome, given signs of slowing inflation and the lagged effects of prior rate increases. However, the tone is likely to remain hawkish, emphasizing readiness for future hikes if inflation reaccelerates.
Market Reaction: The Fed’s decision to pause could lead to a slight decline in bond yields and provide a boost to equity markets, but a hawkish tone might temper investor enthusiasm.”
America’s Spending Hangover
There are two ways to look at the supporting inflation data – both are academically rewarding. Because in the the St. Louis Fed chart, we can see quite clearly the change in financial regimen (slope of the inflation rate changed) in 2020. But what gets credit for the change in slope?
Candidates include free-spending Bidenistas, the COVID money dump, the end of Trump (1), or a market decision to acknowledge an uptick in long-term inflation prospects due to the bottom earlier of interest rates? From there, compounding took off. Partisans, physicians, and principals raise your hands…
There’s actual data behind this chart, too:
Sadly, the FOMC tomorrow will not have in-hand the absolute current all Items (less food and energy). We the (wee) peeps won’t get that until February 12th.
What we can do is study Market data and look for additional inferences as to what’s going on.
Darts: The Tuesday Toss
As our Ebbinghaus-Ure Correlation showed, the correlation between the stock decline pattern and the memory retention pattern (Ebbinghaus) is 0.985, indicating a very strong positive relationship between the two. What was most surprising, however, was that the correlation was strongest for the NASDAQ – which is an unexpected result.
Remember that
o DJIA: r=0.982r = 0.982r=0.982
o S&P 500: r=0.983r = 0.983r=0.983
o NASDAQ: r=0.987r = 0.987r=0.987
o The NASDAQ Composite has the strongest correlation with the Ebbinghaus forgetting curve, suggesting its behavior most closely mirroring memory decay patterns.
From all this, we can make an “educated guess” at what the market COULD look like for the balance of time to the Fed announcement tomorrow. Zoomed out, just left of center, we see the December 16th high in the NASDAQ. Five regular waves down from there until January 23rd. There is some (growing) probability that this was an intermediate Wave 2 peak. Which sets up intermediate Wave 3 down…so that’s what we COULD be in now. Though, I don’t offer financial advice, right? Higher close today possible to likely…
If it is, the opening rally today could be a minor 2 up (of the larger 3’s I down, kicked off by DeepSeek). In which case – a hard down Thursday and/or into Friday/the weekend with a bounce early next week (which would be the minor 4 after the big nasty intermediate 3 of 3 is finished. A wave 5 down, prior to February options (the 21st) could also be imagined.
Or, we could just look at this:
If you really squint, you should be able to see we’re just about half way down from the (like top of the 2 up rally) on our way to below our long-term short/long demarcation, the 85-day moving average. We’d expect to be there by, oh, Monday or so.
The minor rally from this morning should (depending on how “regular” anything is, anymore) be up, a mid-term decline, and then the last of the fools coming in long ahead of the Fed. Which, with the nudge from A.I. hints are no change and disappointment spreading like an oil slick Thursday-Friday. At which point, the “widows and orphans money” could step into the lifeboats that they should be wandering toward now.
You Know the Top Is In When…
Son G2 called me from work Tuesday. It was a conference call and a buddy of his was on the line with us. “Mr Ure, (senior), you should buy MicroStrategy right away. It’s going to the moon…” or words to that effect.
Um. No, thanks, pass. MSTR hit its (so far) high just before Thanksgiving. ($473). They are investing in Bitcoin and most of the “old hands” around here see a good chance that BTCs will be “called” (confiscated) by the government when things get really rough for the economy. It will be used to keep government solvent – again, echoes of 1929.
I’m not saying it couldn’t go on up, but the old and wizened observer remembers that shoe shine boys were anxious to pass around their stock tips at the peak of the 1929 Bubble. I got a stock tip!!!
This one ain’t much different, seems.
In case you don’t read this site (fount of all wisdom, usually) you may have missed a lot of Big Picture Puzzle Pieces over the years. Depressions are a regularly occurring economic fact of life. And except for who’s in which “musical chair” they all work out very much the same.
Trump’s Reaction is Clear
The headlines spell out what any (financially competent) exec would do: Staunch the flow of red ink. So…
White House pauses federal grant, loan other assistance programs.
And roll spending into creating military-related jobs: Trump signs executive order to build American Iron Dome.
Democrats, meantime, are struggling with personal honesty as The Democrats’ RFK Dilemma outs crooked-thinking on the Hill. As the Babylon Bee satires: Democrats Once Again Concerned About Who Will Pick Their Crops, we catch the headline Wall Street Journal opposes nomination of RFK Jr. to be HHS Secretary.
Say,, you don’t suppose a billionaire would put a ton of money into Big Pharma do you? But COULD such a long term wealth strategy explain BUSTED: Fake Signatures Expose Anti-RFK Jr. Petition, Brought To You By Bill Gates?
In the long-term, Trump is also base-building to transition America into something like a “sales tax” to9 replace the income tax. Because the way to avoid tariffs is to buy local products.. Art Of The Deal: Trading The Income Tax For Tariffs.
At the Ranch: Writing Trance Time
Tuesday is take out the trash day…so off for a walk in the woods to cool the brain down.
And then back into a “writing trance” ahead of Peoplenomics tomorrow…
Back with the Case Shiller numbers at 8:10 AM Central…so click back…
Write when you get rich,
George@Ure.net
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