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| Economy | |
| Meandering Through Narratives | |
| 2025-09-29 | |
By Peter Tchir of Academy Securities
THE I-SHAPED ECONOMY We had some interesting discussions around last weekend’s What Shape is the Economy? There seems to be agreement that “little i” represents the fact that a small segment of the population is doing extremely well, which isn’t reflected in either the K or k-shaped economy that so many people like to use. There is more debate on how “the stick” in the i is doing. We argued that basically it is okay, but got some pushback that those outside of the elite circle are struggling. Concern about jobs (not actual job losses, but concern about job losses) came up frequently as did indications that the consumer, at all levels, is stretched (delinquencies for lower income consumers, and “trading down” for even higher income consumers). The arguments against the vast majority doing well were reasonably compelling, but for now, I’m still in the “most people are okay to good with a few doing extremely well” camp. Ra-Ra-RasPUTIN Academy’s Geopolitical Intelligence Group weighed in on Russia’s Air Space Incursions, in a SITREP and in the podcast mentioned earlier in this report. The President urged for NATO members to take a tough stance on such incursions during the United Nations General Assembly. This certainly adds a new dimension to the war in Europe, but what I am most interested in, is that “suddenly” everyone is discussing the possibility of Europe taking Russia’s frozen reserves, and using the money to fund the war effort and their military spending. We advocated for this possibility two weeks ago in Ra-Ra-RasPUTIN and believe that this is the most important development in the war. More important even than Russia’s air space violations. Why? Because Russia is expecting these reserves to be returned (presumably, some may be spoken for by those countries that supply Russia with military equipment or components that Russia is using), so not getting them will hurt. At the same time, using that money to buy weapons (primarily from American suppliers) for the Ukrainians puts pressure on Putin in the battlefield. PEACE THROUGH STRENGTH A flurry of stories hit the tape on Thursday that the Secretary of War was calling a large number of senior flag officers (1-star and above Generals and Admirals, from the Army, Air Force, Navy, and Marine Corps) to Virginia for some meetings. There is little (or no) information on what is going to be discussed. General Spider Marks gave his thoughts to the nation on CNN yesterday. There has been some reporting that this is preparing the military for some personnel changes, in the event of a Government Shutdown. THE “MYTHICAL” NEUTRAL RATE I was somewhat surprised, pleasantly, that new Fed board member used his first public speaking opportunity to argue that the so-called “neutral rate” is lower than the Fed previously thought, warranting significant rate cuts even in a stable economy. My “enjoyment” from this topic was primarily due to watching any number of people defend Fed policy, by arguing that no one really knows what the neutral rate is, and that it changes anyways. FROM MOLECULES TO ELECTRONS Mike Rodriguez, our head of Sustainable Finance, came to my rescue this week. I’ve been stuck on trying to get people to change the equation from Energy = Oil to Energy = Electricity. He pointed out how old that made me sound, and converted me to discussing the shift from molecules (fuel) to electrons (electricity). Electricity inflation may be the single most important component of inflation we have ever faced. CIRCULARITY IN AI The one narrative that seems to be “circulating” in the data center/AI story is some signs of “circularity.” On one hand there is a virtuous circle. Companies are interconnected, where the growth in one, drives growth in another, which in turn, winds up helping the first company in the chain. We have seen the entire industry grow rapidly, with at least some evidence of a virtuous circle. For the first time, I’m hearing (even from strong supporters of the space and valuations) concerns that the leaders are too intertwined and the space is susceptible to a pullback. Bottom Line No shortage of narratives impacting markets and the economy. Not just domestically, but also globally. We head into this week:
It should be another interesting week, as we have month and quarter end Tuesday | |
| Posted by:Skidmark |