NON-SUBNSCRIBER NOTE: My latest book “Test-Fiutting Apes: How economics goes bananas” is now available on Kindle.
In the Peoplenomics report yesterday, I was anticipating that we would have one more up next week, before the gates of hell open and we descend into the depths of Depression.
You may find this difficult to believe but Ure is guilty of misplaced optimism – and worse, a small mathematical calculation error.
I simply forget that the Ballistics of Money are also influenced by the thickness of Hot Air.
Problem? Meet Reader…
I’ve always considered myself good at making “introductions” though not at the Trump (or Epstein) level. My hobby is collapse spotting and one of the surest signs it’s time to “move to the lifeboats” is the 85-day moving average. Which with a hard down day again, has firmed up its eventual topping.
We MIGHT drop to that line – and bounce – which would leave the end of Act 2 (of the “Great Downside Play”) time for an intermission because Act 3 “Collapse: It’s what’s for Thanksgiving.”
Greasy Market Stuff
The source of market angst is Brent crude. When the early futures go higher on Brent crude, we naturally anticipate any good Aggregate Index ought to fall to – as Yoda instructs – maintain balance in Universe.
So I asked one of those (lesser liars) paid AIs – the ones who have been to software rehab – asked them to “run the inverse correlation between that “greasy kid’s stuff” and marvelous green stuff.
It did so. Reluctantly.
“Over the long haul the relationship is sloppy: ten-year Brent vs SPY correlation sits around +0.22, which is the statistical equivalent of two drunks sharing a cab and insisting they are going the same direction. One-year numbers flip the sign. Recent rolling windows (40-day) have been living in the ?0.3 to ?0.7 neighborhood ever since oil stopped being a demand signal and became a supply-shock tax.
That is the regime we are in.
Brent spent last week trying to remember how to trade below $100, then remembered geopolitics and jumped roughly 4 percent on Wednesday (settlement near $103). Thursday morning it is still hanging around the $100–105 band depending on which screen you trust.
When that happens in the overnight session, the equity futures do the polite thing and lean the other way. Not a crash. A correction of posture. The Universe balancing the books.”
The mechanism is not mysterious. Higher front-month Brent feeds higher diesel, higher jet, higher feedstock, higher 10-year yields, and a Fed that suddenly looks less “data-dependent” and more “hostage-to-Hormuz.” Equities discount the second-order squeeze before the first-order CPI print arrives. Energy stocks get a bid; everything that uses energy gets a haircut. The aggregate index — the thing the talking heads treat as a single organism — therefore sags while the internals rotate.
That is why the inverse still works in the short windows even when the long-run scatterplot looks like modern art.
The lesser liar’s output was useful for one sentence: “When early Brent futures gap higher, expect the green stuff to give some of it back before the cash open.”
After that it started hedging like a compliance officer. I stopped reading. I stopped asking. And – the biggy – I stopped caring. Because as I read market history, we are at the brink (or close enough we can see it from here) so we have already been working on our Depression Skills.
One of which was discovering TDS 1040 hydroponic water was the (poor pun here…) root cause of only a handful of tomatoes this year.
In fact, that whole line of inquiry was so damn interesting that I linked up two AIs, wrote a story outline, and before cocktails last night. I’d written a 28,000 word novella which will be on Peoplenomics one of these weeks.
The novella title? “The Brine Line” and it’s a salty saga in that strategic fiction category where my mind seems to drift when I give up on reducing complex Python to long-form AI taskers…
The AI Gulf Deepens
Oh yeah – the anti-AI hate may be the next Great America Divide Monetization. By now, all observers might agree that we have run out of racial minorities, sexual minorities, and it’s too early in “hate cycle” theory to roll out the “commie plot” stuff.
BTW: I have a whole book on AI impacts (“Thinking: On the Gallows”) which will be up soon on the Peoplenomics subscriber site.
So let’s divide over AI. And this is where it gets interesting. Let’s begin up in Illinois: JB Pritzker – It’s time to rein in AI. I signed an… | Facebook.
But, let’s also remember many strong religionists are already calling AI the anti-Christ.
And here’s the (long-term, big zoom-out) weird thought: Is AI the “issue” that will reunite the democrats with the religious right? Oh, this is so interesting, I can hardly wait to move on. How about we do just that?
Turn on the News Compressor
What changed overnight is not a new war. It is talk stacked on top of still-live pipes. Yesterday’s tape bounced Brent ~4% to $103 settle after Pezeshkian’s “never surrender” line. This morning the diplomatic layer is a bit thicker and Brent was up to $104.90 when I looked.
Middle East / greasy stuff: Shuttle talks are the first useful U.S.–Iran contact in months. Neither side moved a written position. Iran still conditions Hormuz reopen on blockade lift, asset unfreeze, and “end the war on all fronts.”
China: Xi is in Washington. Red carpet, flyover, state-visit optics. Agenda is tariffs, rare earths, AI guardrails, and — whether anyone puts it in the communiqué — Hormuz and Iranian oil that used to go east. Odds of happy-talk language today: high. Odds of a real Hormuz clause: low.
Russia/Ukraine: Rubio floated a limited grain/energy ceasefire after seeing Lavrov. Overnight reality: Russian strikes on Kyiv and the northeast, maternity clinic damaged, eight dead. Odds of a real energy ceasefire this week: 35%.
Fed box (background, not overnight blink): Warsh already hiked 25 bp to 3.75–4.00. Trump is back to “cut to 1%.” I used to keep VideGrips handy for stuff like that.
Drought Monitor still has roughly half the Lower 48 in D1–D4; D0+ is the rest of the breadbasket dehydrator.
What Comes Next (besides more coffee)
- Trump–Xi photos. Spare me.
- 24–48 hours: Watch whether “energy truce” language survives the next Russian or Ukrainian infra strike. But diesel is up another penny $6.5141.
- Another tanker, pipeline, or Riyadh-class event puts the fear back into crude and freight. Odds: 60%.
BlinkLab signal this morning: modern conflict attacks the systems behind the battlefield, then holds a press conference about balance.
Greasy kid’s stuff still leads; marvelous green stuff still second.
At the Ranch: Failure of Shock-Talk?
You may notice a bit fewer posts in our Comments section for a week or three. Because I was deadly serious about stronger moderation. Profanity used to hijack eyeballs isn’t going to fly as easily. And, calling me (or my work product) names is also a quick way to be shown the door.
However, in general, I can almost convince myself that “there is a tide in human affairs” and it may have finally run its course.
In the longwave econ world, events, complexities, and cycles – coupled with the unmerciful impact of compounding interest – are all teaming up to do America some major hurt. Yeah – sure – we don’t need more human suffering, but there may be an upside. In economics depressions people can actually “clean up their acts.”
The Great Depression offers a hard version of that lesson. Consumer installment credit outstanding fell from $3.15 billion at the end of 1929 to $1.38 billion in March 1933 — a 56 percent drop. A lot fewer purchases could be put on tomorrow’s paycheck. But don’t mistake all of that for voluntary thrift: output fell roughly 30 percent, unemployment reached about 25 percent, and deflation made old debts harder to pay. People cut back because they had to; many lost everything anyway.
The more durable cleanup was in the rules. Roughly 9,000 banks suspended operations from 1930 through 1933. Congress created federal deposit insurance, which began in 1934; only nine banks failed that year. Hard times can force a reckoning, but suffering alone fixes nothing. The upside comes when people and institutions remember what broke and change how they operate.
That’s just the money side. Let’s talk interpersonal relations and violent crime.
Looking 66 large cities from 1931 through the first half of 1939, the FBI found a general downward trend in both robbery and auto thefts, as well as in reported criminal homicide.
But none of it came quickly. The best mental model of it I can think of is tempering of metal on a hot forge in the shop. Metal loses temper and then regains it. In social history, this “tempering” process takes on the order of years.
The (homicide) death-record rate took time though. It rose from 8.4 per 100,000 in 1929 to 9.7 in 1933, then fell to 6.4 by 1939. The worst economic years did not bring an immediate improvement.
One More Rhyme Time Crime Note
The Nancy Guthrie case has the ingredients that made the Lindbergh kidnapping national news back in ’32: a familiar family, an abduction from home, ransom claims, and a country watching for an answer. But the cases stand at different points. Lindbergh’s 20-month-old son was taken in March 1932; his body was found nearby that May. Guthrie, 84, disappeared from her Arizona home at the end of January, and nearly eight months later investigators still have no public resolution. The comparison is the reach of the story, not a verdict on how hers ends.
That’s all background, but social change takes years and seldom moves in one direction. Maybe those who live through the next hard stretch will come out a bit more polite. I’d settle for breakfast without the name-calling.
Between now and then? “Comments” that begin “Fried Chicken and Buttwiper ?” and are aimed at another reader – and not of general interest to people in the middle of breakfast – will be flushed.
Write when you get rich, or at least polite (or housebroken),
George@Ure.net