random-ish thoughts while waiting for the turn

–one of my former classmates, an incredible artist, made her thesis film about several of twenty-something contemporaries who had left Italy permanently. Someone pointed out that she’d given no motivation for the moves. She was shocked, because she thought the situation was obvious. Italy has had no economic growth in the past quarter-century, she said, so why would anyone with a choice stay?

Recently, worries about the solvency of weaker euro members like Italy have popped up again, evidenced by the premium buyers of their euro-denominated sovereign bonds are demanding. One consequence of this, I think, is increasing interest in US Treasuries, which offer not only higher nominal yields but the chance of a currency gain. If that’s correct, the Fed will likely have less trouble than might be anticipated in paring down the massive Treasury hoard it has amassed through quantitative easing.

This despite Europeans being appalled at US gun violence, auto deaths, drug addiction, science denial and the echoes (intensely worrying to people who lived through the real thing) of the rise of 1930s Fascism in today’s Republican party apparatus. Btw, despite being in a flatlining economy, Italians live on average five years longer than Americans–mostly because of fewer violent deaths

–I read a brokerage strategy report the other day saying that the valuation differences between large cap stocks (expensive) and small caps (cheap) in the US have reached extreme levels. I don’t know the author’s methodology (I just read the headline) but I’ve felt this way for a while. For me, it’s more cash or cash-like assets rather than eps or current eps growth. It’s also the way the market cycle works: in up markets, investors are willing to swing for the fences; in bad markets they look for a walk.

–the Fed made it clear at Jackson Hole that the 10-year Treasury note is headed for 4% and that its ultimate inflation target is 2%. I think the real, meaning achievable, inflation target is 3%, but for now I think that’s just a quibble. Rates barely moved on the news, meaning these figures are already in every professional’s plans. If so, most of the pain of higher rates should be already baked into today’s price. Most doesn’t mean all, so it will be important to observe the market reaction to further hikes in the Fed Funds rate. This will presumably tell us how close to all we actually are.

–a half-century ago I was a soldier. I spent my first two years+ in the infantry and then reverted to the military intelligence branch, where I ran a counterintelligence office before resigning to return to school (a whole boring story in itself). Anyway, with this latter perspective, I was floored when I read the kind of classified material that Trump had taken from the White House and had lying around unsecured in his Florida golf club. If the press accounts are right, the documents found, included: reports from highly placed officials in foreign governments who are (or maybe now were) revealing secrets to the US; and communication intercepts by the NSA.

The content of the former would presumably either reveal the identity of the spy or narrow the source of the leak to only a few. The latter could show that communications a foreign government thought were secure actually aren’t. Potentially very damaging; in the first case, possibly lethal.

This could end up being a lot messier than it seems now.

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