What we’re reading (1/25)
“Rates, Risk And Relative Value” (Standard & Poor’s). “Coupled with rising yields and continuous record highs for the stock market, Exhibit 1 shows that the S&P 500® equity risk premium, measured here as the difference between the S&P 500 trailing 12-month earnings yield versus the 10-year U.S. Treasury yield, has plummeted over the past year, most recently entering negative territory. The last time the equity risk premium was below zero was following the burst of the Tech bubble during the early 2000s.”
“CIA Now Says Covid-19 Is More Likely To Have Originated From A Lab Leak” (Politico). ”The Central Intelligence Agency said Saturday that it’s more likely a lab leak caused the Covid-19 pandemic than an infected animal that spread the virus to people, changing the agency’s yearslong stance that it couldn’t conclude with certainty where the pandemic started.”
“Airlines Are Charging Higher Fares And Are Confident You’ll Pay Up” (Wall Street Journal). “U.S. airlines are charging higher fares and signaling that business and leisure travel demand should remain strong this year. It is the latest sign of how companies are expecting consumers to pay more for services and items deemed desirable.”
“Why Is Homeowners Insurance Getting So Expensive?” (Construction Physics). “[h]omeowners insurance costs have risen steadily and substantially since the 1970s. Construction cost inflation and increasing home size can probably only explain a small portion of the increase. Insurers’ profits don’t seem to be a driver, and neither does state-level population shifts: the cost increases are across the board, in essentially every state. Increasingly destructive weather events and climate-related disasters are probably part of the explanation, with the cost in risky regions being spread over the rest of the country, but it’s hard to tell how much this is occurring. Looking at data from types of claims filed, the increasing frequency and severity of wind and hail damage is responsible for around half the increase in insurance losses over the past two decades, despite the fact that loss ratios in most wind and hurricane-prone states seem to be down. Fire risk is a relatively small portion of the increase. And another major source of increase isn’t anything related to climate at all, but due to the increasing frequency and severity of water damage.”
“How America Claimed A Breathtaking Fortune At The Bottom Of The Ocean” (The Atlantic). “You’d be forgiven for thinking that America’s continental shelf couldn’t get any bigger. It is, after all, mostly rock, the submerged landmass linking shore and abyss. But in late 2023, after a long and expensive mapping project, the State Department announced that the continental shelf had grown by 1 million square kilometers—more than two Californias. The United States had ample motive to decide that the continental shelf extends farther than it had previously realized. A larger shelf means legal access to more of the ocean floor’s riches: animals, hydrocarbons, and, perhaps most important, minerals to power electric-vehicle batteries. America has no immediate plans to excavate its new seabed, which includes chunks of the Arctic Ocean, Bering Sea, and Atlantic, as well as several small pockets of the Gulf of Mexico and the Pacific. But, according to the State Department, the combined area could be worth trillions of dollars.”
