More Great News! I survived the week! And I’m not just speaking about our most recent topic – my rendezvous with vaccination destiny (wink wink).
We lost David Swenson, which is a helluva shame (and under-reported). But as for me, I have emerged from April 30th closure of my home turf’s largest nuclear power plant, not (visibly) worse for the wear.
The joint operated for nearly two generations, under the handle of The Indian Point Energy Center, having lifted its nomenclature from an amusement park which had operated, in presumed serenity, on the same banks of the Hudson, for many decades prior. Then, in 1954, Consolidated Edison acquired the land and started cranking out the nukes.
It took about a decade to rev them up, but from that point until a week ago Friday, the facility provided >10% of the power consumed across a 50-mile radius that extended, southward, into Mid-Town Manhattan. However, like George said: “all things must pass”, so, I say, so long, ya crazy nuke factory.
But as survivors of the closing, a couple of clean up matters devolve to us. The first of which is, obviously, to posthumously rebrand the facility – in a manner more consistent with current socio-political mores. The compound was certainly named after the designation that geographically confused war criminal Christopher Columbus assigned to the indigenous population in the late 15th Century. These appellations are, of course, no longer acceptable, so, even in its present, zombified state, it falls to our lot to refer, henceforth, to the facility as Native American Point.
Secondly, please, Cuomo, dismantle this eyesore (if you do, you’ll score some points with me, nursing home incidents, wandering hands, and most recently, tax hikes, notwithstanding):
This photo unquestionably rates poorly on the Ansel Adams scale, but it actually fails to capture the visual violence suffered when, as passing by, one observes (in the midst of perhaps the loveliest river setting this side of the Danube) this big honking cement plant degrading the forest-lined setting on the banks of the magnificent estuary.
But in some ways, I hate to see the IPEC (strike that NAPEC) go. We is in the midst of an all-out assault on fossil fuels, and nuclear energy is indeed the latter, but not the former. It burns clean. It lights up over a quarter of the entire European Continent, including 100% of our city, the city of light. Which tells you something. And, if we’re going to shut down all exploration, drilling and refinery, kill all our cows, and retrofit all our consumer and commercial dwellings, without nukes, we must try to keep the lights on with solar, wind and water power, alone. I’m not sure we’re up to the task.
But nukes don’t fit the current narrative, which, as we have discussed privately, most people will go to great lengths to preserve. Narrative preservation abides everywhere, and, in this case, it renders us willing to endure the darkness of night, to forsake power entirely. And connectivity. And (therefore) ways to convey to the world our ethically impeccable critiques of own attitudes and actions.
Beyond this, published reports project that the closure will cost the town of Buchanan, NY, more than a thousand jobs, which is a pretty big hit, for a jurisdiction that is the home to a mere 2,300 souls, to take. Many of them folks is said to be none to pleased with these developments. Nor should they be.
And, neither, for that matter, should we. Particularly after the heartbreak of an April Jobs report that drizzled out only 266K new gigs during that famously showery month. And this against a big, fat, round gully wash of an estimate of 1M.
Any way you shake it, the number was a disappointment, as were, perhaps, both the >100K downward revisions to the February/March tallies and the jump in the Base Unemployment Rate to 6.1%.
All of which seems like kind of a shame, particularly insofar as our friends at the Bureau of Labor Statistics (run, as indicated below, by our old friend FRED) report surging growth in job availability.
I know the chart is small, but there’s only so much space that a boring guy like FRED commands. Right now, there are 7.4 Million open gigs, and trending higher. Moreover, the redoubtable National Federation of Independent Businesses recently announced that fully 42% of the companies in its survey are attempting – unsuccessfully—to hire new employees. A connection of the dots suggests that many out there prefer to remain on the government dole, and, given what the government is offering, why not?
What all of this means is of course, dependent upon the narrative onto which one holds on for dear life (we all do this, you know). The cats in Washington are divided between those who believe the numbers urgently reinforce the urgent need to provide incremental aid and comfort to the masses, and those who, with equal urgency, suggest that the sluggishness offers further proof of the inefficacy of redistributed government largesse. Both can’t be right, any more so than nuclear power is both clean, efficient and environmentally sound, as well as an evil menacing threat to our very existence.
However, irrespective of what position one chooses to take on these issues, the data trend in such a way as to be pleasing to Madam X, who rewarded us by dropping her yields to a positively fetching 1.577%. This is notable, because various winds that should be blowing up her rate skirt are approaching gale-like velocity. Wheat, Corn, Copper, Iron Ore – all at or near all-time historical highs and still climbing. Lumber prices (much discussed of late) are more than 4 times the highest point at which they have traded over the last 25 years. Shipping? Don’t ask.
But somehow, our Lady at the Longer End of the Treasury Curve holds her ground or climbs higher. Even as one of her most stalwart admirers, I wonder how long she can hold out. If we revert to previously referenced inflation data (as measured by the wonky but elegant GDP Deflator), we were already, at the end of Q1, above 4%, and price rises seem to have accelerated since then.
A bit of pointy headed economics, though, suggests with inflation conservatively struck at 4%, and our 10-Year Note yielding, say, 1.6%, real interest rates (essentially the difference between the two) approach negative 2.5%. Which means that every dollar one holds is deteriorating in value by that amount. Every year. Which means that you gotta swap out them dollars. For anything you can get in return. Which means that prices are bound to continue to rise.
It also suggests that anyone not going on a borrowing binge is acting irrationally, at a point when global and domestic debt levels are approaching double what they were in 2007.
Quite a conundrum, no? It’s no wonder that risk assets continue to soar. But what, again, about Madame X? The above-supplied Econ 101 example suggests that outside of our fantasies, and in the real world, she’s taking 2.5% of our blood and treasure every year we continue to cling to her.
But continue to cling to her we (nonetheless) do. Sorta like I do to you.
For how long, though? Who can say? I do worry that as the days fly past, we will lose our grasp. And if we lose hold of Madame X, she will show her menacing wrath across our portfolios. It won’t be pretty.
So, here’s where the market’s atom smashing/particle colliding rubber hits the road. Prices are soaring, and, again, odds are it’s just the beginning of this cycle. Meanwhile, real interest rates are at unambiguously negative levels. Rationally, economic agents should be buying anything and everything they can, and borrowing as much as they are able, to do so. Negative real rates simply don’t jibe with the other components of the scenario. They gotta rise. But (for many reasons) cannot.
I thus can’t imagine a situation, at least somewhere down the road, where the atoms don’t split and their nuclei don’t fuse, setting off the kind of market-based chain reaction first encountered in the world of subatomic particles, underneath Amos Alonzo Stagg Field at the University of Chicago, all those years ago.
But maybe, baby, that’s a discussion for another time.
In the meanwhile, so long as the lights remain on and rates remain low, our path is clear. Buy ‘em once, and then have a go at Sloppy Seconds.
It’s all so surreal to me, though. Particularly living, as we do, in a country whose birth rates (a favorite leading indicator among us pointy-headed economists) have hit an all-time low. Where our leaders are unilaterally giving away our Intellectual Property – perhaps our greatest economic treasure – to other nations that either won’t benefit from it — or will achieve a windfall – to our everlasting disadvantage.
Meantime, I’m not sure what they’re going to do with that beautiful, radioactive stretch of land on the banks of the Hudson. Restoring the amusement park that once stood there isn’t the worst idea – provided, of course, that it is named in such a way as to avoid offense to our sensitive ears.
And, on balance, I wouldn’t lose much time missing the nuclear energy which, till so recently, issued forth, in such abundance, from that heavenly spot. More likely than not, we’ll get all the nuclear action in the markets that we could possibly wish for, and thensome, before much more time passes.
So, keep those lamps trimmed and burning.
TIMSHEL