Month: September 2024

By Bas van Geffen, Senior Macro Strategist at Rabobank

A fresh coat of paint

After widespread speculation on social media, a Chinese zoo has finally admitted that their “panda bears” are actually “panda dogs”. Or, well, just some regular dogs with painted furs. In similar fashion, the Chinese government now seems to admit that the economy is in a worse state than hoped.

Yesterday, the central bank had already announced a 10bp cut to its 14-day repo rate. More importantly, the PBOC announced a rare press conference for today’s session – sparking market speculation that further measures were forthcoming. Indeed, today Governor Pan Gongsheng unveiled a substantially bigger stimulus package than earlier attempts to stem the bleeding in the property sector:

• First of all, the PBOC lowered the amount of reserves banks have to hold by 0.5 percentage points, and Pan added that –depending on conditions– the reserve requirement may be reduced by another 25 to 50 basis points before the end of the year. This should –theoretically– unlock CNY 1 trillion in additional liquidity.

• Whether this liquidity will be drawn depends on demand. To encourage borrowing, the PBOC cut the 7 day reverse repurchase rate from 1.7% to 1.5%, and Pan stated that the medium-term lending facility rate is expected to be cut by 0.3%. The loan prime rate and deposit rates will probably fall by some 20 to 25 basis points.

• Crucially, these lower rates will not only apply to new borrowers, but also to outstanding loans. Homeowners will be allowed to renegotiate mortgage terms with their current lender, and the central bank is looking into allowing people to switch between banks.

• Prior easing measures mostly helped new buyers, and not existing homeowners. That led to a flood of early repayments, weighing on China’s banking sector. Of course, the refinancing plan could still affect banks’ balance sheets and profitability, but Pan expects this to be less impactful as financing rates will fall in tandem. The PBOC governor expects that this should lower interest rates on existing mortgages by some 0.5% on average.

• The central bank calculated that this should lower the mortgage burden for some 150 million people, cutting the annual interest payments by CNY 150 billion. However it is unclear whether only mortgages for first homes may be refinanced (as was the case last year), or if this is also applicable to mortgages for second homes. Since these second-home mortgages come with significantly higher rates, that may partially determine how effectively this proposal will stem early repayments.

• Additionally, the central bank is clearly looking to revive demand for property. First, the minimum downpayment on second homes will be cut to just 15% of the purchase amount, from an already-low 25%. And secondly, the PBOC will double down on its re-lending programme for state-owned enterprises that buy up unsold property. The central bank will now provide liquidity equal to 100% of the value of the bank loans used for this purpose, up from the previous cap of 60%.

And on top of the support measures aimed at the real estate sector, China is also propping up equity markets:

• The PBOC will set up a swap facility that gives securities firms, funds, and insurers access to central bank liquidity for the purchase of equities;

• The central bank is also exploring a re-lending facility that provides listed companies and major shareholders with liquidity to buy back shares.

Traders certainly welcomed the comprehensive set of measures. China’s equity indices gained 4% on the day, if this was not simply the result of the stimulus that directly targets China’s stock markets. But, despite this exuberance, are the plans really more than a fresh coat of paint to make things look new and shiny again?

We doubt that the PBOC has done enough to revive the real estate sector, kick-start the domestic economy, and to effectively mitigate the risks of deflation. Mortgage rates and borrowing restrictions may have been lowered, but will households really start purchasing (second) homes again if economic uncertainty is still this high? Broader fiscal measures may be needed to revive consumer confidence, bolster the real estate sector, and to kick-start the domestic economy in order to achieve the government’s growth target.

Whereas the PBOC pleasantly surprised markets today, the Australian central bank stuck to its script. The RBA left the cash rate on hold at 4.35% today, as expected by virtually everyone. The Board’s statement was little changed from August. Policymakers continue to emphasise that inflation remains too high, aggregate demand remains above aggregate supply, and that the labour market is operating beyond estimates of the NAIRU.

In the press conference Governor Bullock mentioned that the RBA did not explicitly consider a rate rise at this meeting. That’s a change from previous meetings where a rate rise was explicitly considered. Our Australia strategist believes this to mean that the hawkish bias of the RBA is all but gone. Recent forward indicators (PMIs) suggest that output prices are rising at a slower pace even as input price gains remain elevated. This suggests that the demand/supply imbalance is no longer so great that firms have pricing power to fully pass on higher supply chain costs. Our house view has been for a first RBA rate cut in May, but today’s meeting clearly skews the balance of risks towards an earlier cut, rather than later.

A supply chain storm is brewing for major US East and Gulf Coast ports, with the International Longshoremen’s Association threatening to strike on Oct. 1. This could disrupt nearly half of all US imports while Boeing strikes paralyze commercial jet plants and rising concerns about United Auto Workers hitting Stellantis with a labor action. 

D-Day is just one week away, and 45,000 workers are set to walk off major container ports along the East Coast. This would be the first work stoppage at these ports since 1977.

Late last week, the CEO of Flexport – one of the largest US supply-chain logistics operators – warned, “The biggest wild card in the presidential election that nobody’s talking about? The looming port strike that could shut down all East and Gulf Coast ports just 36 days before the election.”

At this point, a strike seems almost inevitable when the labor contract expires next Tuesday. ILA has demanded a massive 77% wage increase over six years, making the West Coast Workers’ demand of 32% seem insignificant.  

“Talks are not going well. In fact, they’re not going at all. As of late last week, the union and the United States Maritime Alliance, the group that represents East Coast port companies, weren’t even meeting at the bargaining table,” Bloomberg Ian Kullgren and Chris Marr noted on Monday, adding, “ILA rejected the port operators’ wage offer, saying in a Sept. 17 statement that the employers had “taken advantage of low-entry wage and a tiered progression system for thirty years.”

If the work stoppage materializes next week, significant supply chain snarls could erupt across New Jersey, Baltimore, Virginia, Georgia, and Texas container ports. 

“Even a two-week strike could disrupt supply chains until 2025,” Grace Zwemmer, associate US economist with Oxford, warned in a new report. 

Goldman’s Jordan Alliger and Andrzej Tomczyk provided clients at the start of this week with the understanding US congestion at ports is only 2 out of 10 ahead of potential strikes next week. 

“While the ongoing potential for East/Gulf Coast port strikes looms and presents supply chain related uncertainty/risk (ILA longshoreman contract expiration coming up at the end of September), we generally think that today’s more fluid supply chain environment puts retailers/shippers in a relatively safer place versus the 2022’s West Coast longshore contract negotiating environment (at least from a backlog throughput/rebound efficiency perspective), when congestion was near all-time highs and consumer goods’ demand was still above normal versus services demand (versus today’s more balanced consumer demand environment),” the analysts wrote. 

Current container ship backlogs at East and West Coast ports are much lower than at the start of Covid supply chain snarls a couple of years ago. This may indicate that if any work stoppage occurs, there is excess capacity at other US ports to handle the influx. Plus, this time around, momentum in the economy is trending down. And the feds aren’t dumping helicopter money on consumers in the form of ‘stimmy’ checks.

In a separate note, Peter Sand, a chief shipping analyst at Xeneta, warned any labor action at the ports would have “severe consequences,” adding that these container ships are already carrying “billions of dollars of cargo” on the sea heading towards the US and can’t just turn around. 

The work stoppage could send container rates even higher. Rates jumped earlier this year due to the Red Sea disruptions. 

What a mess this could become next week that would only feed the inflation storm. 

Authored by Mike Shedlock via MishTalk.com,

Mike McDonnell deflates the GOP hope for a Nebraska electoral college winner-take-all scenario. This could be extremely important…

Image courtesy of the Silver Bulletin, anecdotes mine.

The Blue Wall Plus the Blue Dot

If Harris were to win the three Blue Wall States of Pennsylvania, Michigan, and Wisconsin, and Trump were to win the states he is ahead in, plus Nevada, there would be a 269-269 electoral college tie, IF Nebraska was a winner-take-all take.

Based on House tiebreaker rules Trump would then win. Effectively, this would mean Harris needs 270 to win but Trump only 269.

Democrats Will Hold the Blue Dot

The Nebraska Examiner reports State Sen. Mike McDonnell deflates GOP hopes for Nebraska winner-take-all in 2024.

The Republican push to change how Nebraska awards its Electoral College votes and boost former President Donald Trump ran into political reality Monday as a key lawmaker, State Sen. Mike McDonnell, announced he won’t support the change.

McDonnell, of Omaha, said he had heard from people passionate about the issue who live in the Omaha-based 2nd Congressional District. But he said he did not hear enough to move him off his original position against the switch.

“Elections should be an opportunity for all voters to be heard, no matter who they are, where they live, or what party they support,” McDonnell said in a statement. “I have taken time to listen carefully to Nebraskans and national leaders on both sides of the issue. After deep consideration, it is clear to me that right now, 43 days from Election Day, is not the moment to make this change.”

McDonnell said he told Gov. Jim Pillen his stance and suggested that the Legislature put winner-take-all to a vote of the people, as a proposed constitutional amendment, so people can decide the issue “once and for all.”

Nebraska and Maine are the only states that award a single Electoral College vote to the winner in each congressional district, plus two votes to the statewide winner of the presidential popular vote. Nebraska has split off votes twice in four presidential elections.

Pillen had pledged to call a special session if he could secure the 33 votes needed to overcome a filibuster to change to winner-take-all. All five of Nebraska’s GOP congressional delegates wrote a letter urging state lawmakers to pass such a move. 

Political Calculus

For McDonnell, the calculus could be partly political. He has openly flirted with running for mayor of Omaha as early as 2025. His likely opponent, Republican incumbent Jean Stothert, has said she supports the switch to winner-take-all.

McDonnell was a Democrat, turned Republican. I suspect he will now run for Mayor of Omaha.

Maine has run out of time to eliminate the Red Dot. Nebraska Governor Jim Pillen ran into a filibuster.

Nate Silver has Trump’s odds of winning NE-2 at 18 percent.

With that, it is very hard to get a 269-269 tie.

Mathematical Odds

I discussed the odds of a tie in The Odds of an Electoral College Tie Are About to Soar, Who Would Win?

I arrived at 2-3 percent currently. But if the Blue Wall broke hard for Harris, and Nevada for hard for Trump (not that unlikely), the odds of a tie could have gotten to the low double digits.

It’s still possible to concoct a tie, but none of the possibilities make any sense.

If Harris wins the Blue Wall plus the normal Blue states, she would win 270 to 268.

A Blue Dot turned Red would have made that outcome 269 to 269 and rules are such that right now, Trump would win ties.

Take Heart Republicans, Mark Zandi Says Harris Will Win

Yesterday, I commented Take Heart Republicans, Mark Zandi Says Harris Will Win

Mark Zandi is the near-perfect contrarian indicator. I am wondering if anyone is better.

Last week we introduced readers to “…the best new tool in the financial space to see options flows,” enabling us to see below the surface of the market’s melt-up for signs of weakness (and strength).

Today at 11:00 AM Eastern SpotGamma will celebrate the launch of TRACE, which promises to provide a all new ways to unveil support, resistance, and volatility like NEVER before in the S&P 500.

This morning’s market TRACE…

Here’s how TRACE worked yesterday…

We released TRACE a day early today, and so we’ll dive into these new tools. As an overarching reminder, the delta and charm lenses are about measured directional influence and the gamma lens is about projected price speed.

Starting with the early morning view of gamma, a glance at the [0DTE] Live GEX shows a distinct cluster of positive gamma bars from 5700 to 5740, showing that this is stickiest area on the map for the price. We can also see a path to a pin start to form on the heatmap. 

As the day progressed, the path to this pin lit up in continual confirmation and increasing precision. You can also see how the positive gamma cluster progressed and a more pointed pin evolved.

Moving onto the directional lenses, at Only 1/2 hour into the cash session, the Delta Lens indicated 5720 was the most likely pin. We know that because this is where an object would most likely end up with buying pressure underneath and selling pressure above, as pictured.

Graduating to second-order directional influence, that same logic can be applied here—with the price most likely being stuck above buying pressure and below selling pressure. Charm, however, tends to produce the most pinning candidates, but one will start to light up more than the others as the day reaches a conclusion, showing itself to be the highest probability target.

Returning in conclusion to the Delta lens ten minutes before the close, we can see that this pinning range only became brighter and clearer.

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Authored by Aldgra Fredly via The Epoch Times (emphasis ours),

The Portage County Board of Elections in Ohio has voted to remove the sheriff’s office from its election security plan after the sheriff made a controversial post about people who display Vice President Kamala Harris yard signs.

Portage County Sheriff Bruce Zuchowski came under fire after posting on his personal Facebook account a screenshot of a Fox News segment that criticized the Biden–Harris administration for the border crisis.

In the Sept. 13 post, Zuchowski suggested to “write down all the addresses of the people who had [Harris] signs in their yards” so they will know where to send illegal immigrants, who he referred to as “human locust.”

The post no longer appears to be visible on his Facebook account as of Monday. Zuchowski said in a Sept. 17 post that his comments “may have been a little misinterpreted.”

Randi Clites, member of the Portage County Board of Elections, said on Facebook on Sept. 20 the board voted 3–1 in favor of her motion to remove the sheriff’s department from providing security during in-person absentee voting.

Clites said the move was necessary to ensure “a safe and secure election process,” noting that recent public comments indicated that “there is perceived intimidation by our Sheriff against certain voters.”

“While it is not my responsibility to weigh in on the Sheriffs comments directly, I feel strongly it is in my responsibility to make sure I do what is in my authority to make sure every voter in Portage County feels safe casting their ballot for any candidate they choose.

“I believe walking into a voting location where a Sheriff Deputy can be seen may discourage voters from entering,” she said in a statement that was shared by the Portage County Democrats.

In the Sept. 17 post, Zuchowski said that as “the elected sheriff” of the county, he also had the First Amendment right to express his own views.

The sheriff said he believes that those who vote for “individuals with liberal policies … have to accept responsibility for their actions.”

“If the citizens of Portage County want to elect an individual who has supported open borders (which I’ve personally visited Twice!) and neglected to enforce the laws of our Country … then that is their prerogative,” he stated.

Ohio Gov. Mike DeWine told WKYC Channel 3 on Sept. 19 that Zuchowski has the right “to say what he wants to” on social media, but he thinks the sheriff’s comments were “unfortunate” and “not helpful.”

The American Civil Liberties Union (ACLU) of Ohio had earlier urged the sheriff to retract his statement, saying that it posed “an impermissible” threat against residents who wish to engage in protected First Amendment activity.

“Many have reasonably understood his posts to be a threat of governmental action to punish them for their expressed political beliefs and have been coerced to take down or refrain from putting up a yard sign,” Freda Levenson, legal director at the ACLU of Ohio, said in a statement.

Thanks to a plunge in ‘Present Situation’, The Conference Board’s Consumer Confidence index tumbled back near the lows of the last three years.

• Present situation confidence fell to 124.3 vs. 134.6 last month

• Consumer confidence expectations fell to 81.7 vs. 86.3 last month

Source: Bloomberg

That snapped the headline print down to 98.7 from 105.6 – the biggest MoM drop since Aug 2021…

Source: Bloomberg

That headline print was below the lowest estimate.

“The deterioration across the Index’s main components likely reflected consumers concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings — even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages,” Dana Peterson, chief economist at the Conference Board, said in a statement.

The Present Situation languishing near COVID lockdown lows is perhaps explained by the fact that the overall trend in the labor market indicator remains weaker…

Source: Bloomberg

Of course, all this soft sirvey data was taken before The Fed slashed rates by 50bps last week.

 

 

World leaders will gather in New York City on Tuesday for the U.N. General Assembly, where President Joe Biden is set to deliver his keynote address, which will also serve as his farewell speech to the international stage as U.S. president.

The annual meeting comes at a challenging time for the Biden administration, as wars in Ukraine and Gaza remain unresolved.

Additionally, the recent escalation of tensions between Hezbollah and Israel this week is likely to overshadow his final message to world leaders.

Watch live here (due to start at 1000ET)…

Biden’s approval ratings have suffered over the past three years, partly due to his handling of international conflicts.

The Epoch Times’ Emel Akan reports that as Biden embarks on a busy week of diplomacy, many view this as a key moment for Biden to define the legacy of his presidency to Americans and the world.

“When President Biden came to office nearly four years ago, he pledged to restore American leadership on the world stage,” a senior administration official told reporters during a call on Monday.

“And given that this is the President’s last General Assembly, it’s a chance for him to talk about how this approach has produced results.”

In his final four months in office, Biden seeks to highlight his achievements and leave a positive legacy in areas such as the economy and foreign policy.

He has directed his cabinet to “get as much work done as possible,” according to a recent memo from his senior advisor Ben LaBolt titled “President Biden’s ‘Sprint to the Finish.’”

The memo details the president’s plan for the coming weeks, including his final address before the U.N. body and meetings with world leaders.

During his speech, Biden will advocate for a stronger and more effective United Nations, as well as a reformed and expanded U.N. Security Council, the official told reporters.

The president will deliver his final speech in an environment that starkly contrasts last year’s address, which occurred before the Oct. 7 terror attack on Israel by Hamas that claimed over 1,200 lives.

“The world has changed, and the world’s gotten more difficult in many ways,” the official said.

That’s why, he noted, the president will defend his foreign policy approach before the U.N. body, urging member countries to unite in addressing these big challenges, including the need to end the wars in Gaza, Ukraine, and Sudan.

Former President Donald Trump, the Republican presidential nominee, has repeatedly criticized Biden’s foreign approach and claimed that none of the tensions would have devolved into physical conflicts under his presidency.

The chaotic withdrawal of U.S. troops from Afghanistan in the summer of 2021 marked a turning point in Biden’s presidency, marked by a fall in his approval ratings. He also faced public criticism for his handling of the wars in Ukraine and Gaza.

Tensions in the Middle East

The White House earlier stated that it is working “diligently” to secure a ceasefire agreement between Israel and Hamas, one of the president’s primary goals before the end of his term.

However, many speculate that a peace deal may now be out of reach for Biden following the recent escalation of tensions with Iran-backed Hezbollah, which has been attacking Israel almost daily since Oct. 8, 2023, from across Israel’s northern border.

On Sept. 23, Israel carried out a series of airstrikes that, according to the Lebanese government, killed hundreds of people. The strikes were a response to Hezbollah’s attack on northern Israel with nearly 150 rockets, missiles, and drones, most of which were intercepted by Israel’s Iron Dome and other aerial defense systems.

Tensions rose after recent pager and walkie-talkie explosions in Lebanon that killed dozens Hezbollah members and injured thousands more. Hezbollah blamed Tel Aviv for the explosions. However, Israeli President Isaac Herzog said in an interview with Sky News on Sept. 22 that Israel “was not involved” in the attacks.

Biden said on Monday that he had received a briefing on the situation in Lebanon and Israel.

“My team has been in constant contact with their counterparts, and we’re working to deescalate in a way that allows people to return to their home safely,” Biden told reporters during a bilateral meeting with UAE President Sheikh Mohamed bin Zayed Al Nahyan at the White House.

US-China Relations

During his speech at the United Nations, the president will also highlight how he has responsibly managed U.S. competition with China, the senior administration official said.

On Saturday, Biden told leaders of Australia, India, and Japan that communist China is “testing us” with its aggression in the Indo-Pacific, a remark that was caught on a hot mic at a summit of the Quad alliance.

Biden hosted this year’s summit near his hometown of Wilmington, Delaware.

“China continues to behave aggressively, testing us all across the region, and it’s true in the South China Sea, the East China Sea, South China, South Asia, and the Taiwan Straits,” Biden said.

The joint declaration from the Quad leaders did not specifically mention China or Chinese Communist Party (CCP) leader Xi Jinping by name. However, it read, “We are seriously concerned about the situation in the East and South China Sea.”

In recent weeks, the Philippines, a key U.S. ally, has condemned Beijing over the ramming attacks on its boats by Chinese vessels. China’s Coast Guard vessels blasted Philippines ships with water cannons, and fired flares at Filipino aircraft, with most of the incidents occurring around the disputed Sabina Shoal in the South China Sea.

In addition, the CCP, which claims Taiwan as a part of its territory, has been targeting the self-rules island with military provocations and gray-zone tactics, including cyberattacks.

It’s unclear how Biden will address the CCP’s increasingly aggressive actions during his meetings with world leaders.

On Tuesday afternoon, the president will host a summit to address synthetic drug threats, a U.S.-led initiative to mobilize support among countries to disrupt the global supply chain for illicit fentanyl, according to the White House—much of which stems from China.

Following that, Biden will give a speech about the urgent need to address ways to avoid the predicted challenges of climate change, in which he will highlight “his climate, conservation, clean energy, and environmental justice agenda,” the White House said in a fact sheet.

After his meetings in New York, Biden will return to the White House for another critical meeting on Sept. 26.

“I’m looking forward to hosting my friend President Zelenskyy of Ukraine next week at the White House,” Biden said on X on Sept. 19.

“During his visit, I’ll reaffirm America’s commitment to supporting Ukraine as it defends its freedom and independence.”

On Tuesday White House national security spokesman John Kirby urged that all Americans should leave Lebanon immediately while there are still flights. Two days of heavy Israeli airstrikes targeting especially Hezbollah strongholds of the south have killed at least 558 people and left 1,835 injured, according to the latest Lebanese Healthy Ministry figures. The situation is growing more urgent as the war comes to Beirut.

“We want to make sure that there are still commercial options available for Americans to leave, and they should be leaving now while those options are available,” Kirby told ABC News. The US Embassy in Beirut has since October a year ago issued several alerts and warnings telling Americans to leave the country.

The US has warships in the Mediterranean in the scenario that direct emergency evacuations of stranded US citizens are needed.

Lebanese government sources say that among the over 500 dead are 50 children. Official figures have not distinguished the rest of the fatalities between militants and civilians.

Also on Tuesday Israel launched a third airstrike on the Lebanese capital, again targeting a southern neighborhood in what’s possibly another attempt to take out Hezbollah commanders. Israel’s military says it has attacked over 1,300 Hezbollah targets over the prior 24 hours.

Since yesterday and throughout the night, tens of thousands of civilians have made their way on clogged freeways from the south to north. Many poured into Beirut while others went all the way north to Tripoli.

The below video shows a fresh strike on the Lebanese capital Tuesday:

غارة إسرائيلية على منطقة الغبيري في الضاحية الجنوبية لبيروت #lebanon24 pic.twitter.com/dkYJ9SXmZw

— Lebanon 24 (@Lebanon24) September 24, 2024

Historically Hezbollah has long presented itself as the protecting force to the residents of the south, so the fact that it is struggling to provide this now is widely seen as a significant negative blow to its reputation.

As Westerners and Lebanese alike look for a way out, options to get out of the country are fast dwindling. Already most major American and European carriers had halted service to Beirut, but regional carriers are joining them as Israel expands aerial operations to Beirut:

Gulf airlines, including Emirates and Qatar Airways, temporarily suspended flights to Beirut as tensions soared between Israel and Hezbollah.

“The safety of our crew and customers is of utmost importance and will not be compromised,” Emirates said in a statement, announcing the suspension of flights on Tuesday and Wednesday. Etihad Airways and flydubai also joined several international carriers in suspending Beirut services.

The latest airstrike on Beirut appears to have hit a single residential building, with Lebanon’s National News Agency (NNA) reporting several casualties. Initial reports from the region say there are at least three fatalities. 

It happened in the southern neighborhood of Ghobeiri, and emergency responders are seeking to access people reportedly trapped among three severely damaged or collapsed floors.

Israeli media is meanwhile reporting that “the target of the Israeli airstrike in the Lebanese capital of Beirut is the head of Hezbollah’s missile unit, defense sources tell Israeli media.” However at this early point his fate is unknown.

Hezbollah meanwhile has fired over 100 rockets on northern Israel in the past several hours, and aerial alarms have been frequently sounding in the port city of Haifa – as it’s come under attack in the past days.

An Israeli official has described the current IDF mission in Lebanon as seeking “to change the balance of power in the north by destroying thousands of rockets, by destroying [Hezbollah’s] capabilities, and through other means.” It began with “various explosions of beepers and other devices across Lebanon” (despite Israel now strangely officially denying it was behind the pager attacks). 

⚡️From the strike on Beirut moments ago pic.twitter.com/esVPoAtCgQ

— War Monitor (@WarMonitors) September 24, 2024

“It continued with the assassination of Ibrahim Aqil and the Radwan leadership,” the official described to Times of Israel. “And it has continued over the past two days with the expansion of massive fire with the aim of hitting Hezbollah hard.”

Fires in the aftermath of Hezbollah rockets raining down on northern Israeli towns and settlements:

⚡️Fire breaks out as missiles fall in northern occupied Palestine pic.twitter.com/3Uyo9d7Lg2

— War Monitor (@WarMonitors) September 24, 2024

The United Nations is calling for urgent de-escalation, saying that diplomacy is still possible, but on the ground it’s looking like that ship has sailed.

Authored by Tristan Greene via CoinTelegraph.com,

Sam Altman, co-founder and CEO of artificial intelligence firm OpenAI, published a cryptic blog post on Sept. 23, apparently celebrating that “deep learning worked” and claiming that humanity was on the precipice of an era of unimaginable prosperity.

The CEO also boasted that his company’s technology would be capable of creating more powerful versions of itself within a matter of decades that will accelerate humanity’s scientific progress “across the board.” 

Altman announces the dawn of the “Intelligence Age”. Source: Sam Altman

Deep learning worked

Altman’s premise appears to be based on the recent debut of the company’s “o1” AI model, which is purportedly capable of reasoning through problems that its previous models struggled to solve. 

Many of the company’s detractors have claimed that deep learning, the specific type of AI that powers models such as ChatGPT and Google’s Gemini, can’t be scaled to create human-level artificial intelligence. 

In his latest blog post, however, Altman skewers that idea outright: 

“In 15 words: deep learning worked, got predictably better with scale, and we dedicated increasing resources to it.”

Per Altman, this appears to mean humanity is on the brink of an area of a new “Intelligence Age” where AI systems will begin to solve Earth’s biggest problems.

“Although it will happen incrementally,” he writes, “astounding triumphs – fixing the climate, establishing a space colony, and the discovery of all of physics – will eventually become commonplace.”

Unimaginable prosperity

There’s no specific timeline for these changes to occur, and Altman mentions several times that they will happen incrementally and over time.

However, the post itself begins with the statement that “in the next couple of decades, we will be able to do things that would have seemed like magic to our grandparents.”

It’s unclear if Altman’s post is setting the stage for the launch of a new consumer-facing product or major announcement or if he’s simply predicting the onset of the “Intelligence Age” as an exercise in exposition.

Ultimately, Altman appears optimistic about this new age, whether it’s about to begin or already has. He writes that “a defining characteristic of the Intelligence Age will be massive prosperity.” 

For the fourth month in a row, US home price annual appreciation slowed in July (according to the latest data from S&P CoreLogic’s Case-Shiller indices).

The 20-City Composite index rose 0.27% MoM (less than the +0.4% expected), which left the YoY price change at +5.92% – its lowest since November…

Source: Bloomberg

US Home prices are at record highs (a great time to cut rates)…

Source: Bloomberg

All 20 cities in the composite index continue to see annual home price appreciation…

The home price appreciation continues to track bank reserves at The Fed (lower on a lag)…

Source: Bloomberg

Of course, the funniest thing is that as price appreciation actually begins to slow (a good thing for affordability at the margin), The Fed has slashed interest-rates (which one would expect will juice home prices once again?).

Mortgage rates are already leading lower…

Will The Fed ignite another houosing bubble and re-heat CPI in an Arthur-Burns-esque 1970s redux?