What we’re reading (11/11)
“Real Consumption Must At Some Point Fall” (Marginal Revolution). “The biggest messenger for consumption losses is the rate of consumer price inflation, which measured at 6.2% on last reading. Not so many Americans expect to get an offsetting raise…in return, and above-average inflation is likely to continue for a year or two, some would say for longer. So real wages for many millions of Americans will be noticeably lower for the near future, too. That will translate into lower levels of consumption, with the timing of those losses depending on the spending and borrowing plans of individual households.”
“US Government Debt Sells Off Sharply On Inflation Surge” (Financial Times). “US government bonds sold off sharply on Wednesday after the labour department reported consumer prices soared last month, intensifying concerns the Federal Reserve will need to act more decisively to slow inflation. Yields on two-year Treasury notes, which are highly sensitive to interest rate expectations, rose by the most since the market turbulence triggered by the coronavirus outbreak in March 2020. The yield increased 0.09 percentage points to 0.52 per cent, signalling a significant fall in price. The biggest move was in the five-year note, which rose 0.14 percentage points to 1.22 per cent.”
“Inflation Pushes Income Tax Brackets Higher For 2022” (CNBC). “The IRS announced higher federal income tax brackets and standard deductions for 2022 amid rising inflation…The IRS also made other inflation adjustments, such as changes to the alternative minimum tax, a parallel system for higher earners, and an increased estate tax exemption. Moreover, there’s a boost for the earned income tax credit, a write-off for low- to moderate-income families, and higher flexible spending account limits, among other changes. Workers may also save more to 401(k) plans in 2022, according to last week’s announcement. But there won’t be a higher limit for individual retirement accounts.”
“The 'Big Short' Investor Michael Burry Says Tesla Stock Could Plunge 90% - And Notes Elon Musk Said It Was Overpriced At $160 Last Year” (Insider). “Michael Burry suggested Tesla stock could plummet 90% in a now-deleted tweet on Tuesday. The investor of ‘The Big Short’ fame drew a parallel to Amazon shares plunging when the dot-com bubble burst and only soaring years later once the e-commerce giant had transformed its business…[t]he Scion Asset Management boss noted that Elon Musk himself said Tesla was overvalued last year, when the company's stock was trading at less than a sixth of its current price (adjusted for Tesla's five-for-one stock split in August 2020).”
“GE Breakup Bets On Flying Revival” (Wall Street Journal). “The three-way split announced Tuesday will leave a slimmer GE centered on the conglomerate’s current aviation unit, its largest remaining division by revenue after years of asset sales. The jet-engine-making business is also GE’s most profitable, generating cash that the company as a stand-alone could direct toward other deals in commercial aerospace, defense and space, analysts said. GE and its partners are the largest makers of engines for commercial jetliners and thousands of military aircraft.”
