Objects in Motion – Fat Tail Daily | Australian Markets

For years, philosophers have questioned: ‘which came first, the chicken or the egg?’, now now we have our reply:

Useless birds don’t lay eggs.

When chook flu decimates the chicken population, the eggs disappear.

Having solved the chicken/egg conundrum, we transfer on to a different breakthrough.

However first…now we have to keep up with the dot-flow…making sense of the headlines as they seem. This from Related Press:

‘Defense Secretary Pete Hegseth has directed the military services to identify $50 billion in programs that could be cut next year in order to redirect those savings to fund President Donald Trump’s priorities.’

Different stories inform us that the ‘defence’ price range can be cut by 8% per 12 months for 5 years = 40%.

Actually. That’s what they are saying. Will that occur?

Not going. Widespread Desires:

‘In a statement issued Wednesday as headlines in major media outlets characterized Hegseth’s memo as a placing call for “cuts,” Performing Deputy Protection Secretary Robert Salesses described the proposal as a push for “offsets” that could possibly be used to fund different military-related efforts favored by President Donald Trump, together with an “Iron Dome for America” that consultants have ridiculed as a wasteful “fantasy.”

‘CNN noted Wednesday that “Hegseth himself called for an increase to the defense budget one week ago.”

‘“While visiting Stuttgart, Germany,” the outlet reported, “Hegseth said, ‘I think the U.S. needs to spend more than the Biden administration was willing to, who historically underinvested in the capabilities of our military.”’

And this from Dave DeCamp:

‘Pentagon Says Hegseth’s Order Will Redirect Spending, Not Make Precise Cuts

‘The Pentagon wants to shift spending to Trump’s plan for an “Iron Dome for America,” which can have a large price tag and sure begin a new arms race.’

The entire ‘defence’ Institution is set up to get greater budgets, not smaller ones. And it’s superb at what it does — getting more money. That oughtn’t change anytime quickly…

So, let’s let that dot metastasize whereas we resume our story, exploring why chickens (producers), eggs (output), and the people who buy them, ought to by no means lose sight of one another.

Additionally within the news this week is that this from Charlie Bilello:

‘S&P 500 operating earnings are on pace to hit another record high (TTM), up 10% over the last year.’

At present, we’re within the ‘shoulds’ and the ‘oughts’. Readers are forewarned: shoulds and oughts usually are not good methods to invest, a minimum of not within the short-term. You would possibly go broke whereas ready for one thing that ought to occur to really occur. However shoulds and oughts are important to understanding which manner issues are probably to go, ultimately.

A giant $850 billion object in movement (the ‘defence’ Institution) ought to stay in movement till it’s stopped by a more imposing object (akin to chapter or defeat in war).

Yesterday, we reported that company earnings are rising far quicker than GDP. However company earnings oughtn’t go up quicker than GDP…or not for long. To ensure that earnings to go up, gross sales should increase and/or prices should go down. So, we ask: from whom do these gross sales come? And from whom are these expense gadgets cut?

The world of oughts is a powerful place. It’s a place the place you’ll be able to’t have an egg with out a chicken. And you need to feed the chicken or it gained’t offer you any eggs. Should you don’t, in a matter of time, you gained’t have any chickens both.

As now we have seen, most people are getting poorer. How then are they capable of spend more money? Firms should pay workers. And so they should buy their ‘inputs’ from different companies. Staff are an expense merchandise — the most important one for many companies.

However workers are additionally the consumers of US output. How then is it potential to increase gross sales with out additionally growing wage bills? You gotta feed the chickens. And how are you able to cut bills with out additionally reducing into different companies’ gross sales and income?

Income, gross sales, wages, GDP — this stuff oughta be self-regulating; they need to by no means get too far out of whack, one with one other. And if one goes too high, or too low, it’s a good guess that it’s going to quickly get back into line with the others.

Our source, Charlie Bilello, additionally tells us the chickens are flying high:

‘Everything is up! Stocks, bonds, Reits, High yield, Low yield, big companies, little companies …cryptos, schmyptos…and…there are now nine US companies with a market cap above $1 trillion: Apple, Nvidia, Microsoft, Amazon, Google, Meta, Tesla, Broadcom, and Berkshire. Seven years ago there were none.’

However in the actual world of stuff…there may be solely a lot time…a lot capital…so many purchasers and solely so many eggs, flats and cars.

If ‘everything’ is up…the place does the ‘up’ come from? Who has much less in order that the house owners of ‘everything’ (belongings) can have more?

To be continued…

Regards,

Invoice Bonner,
For Fats Tail Each day

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