1. Simon Kuper and John Burn-Murdoch explore who among Messi and Ronaldo is the greatest. Couple of graphics stood out. Messi appears to be a greater creator than Ronaldo's poacher.
2. China tech stocks fact of the day
Since the start of the pandemic, China’s 10 largest tech groups have collectively lost $300bn in market value, while their largest US peers have added almost $5tn, according to S&P Capital IQ.
And this
China’s largest tech companies have lost $300bn in market value since start of pandemic while US peers have added $5tn.
3. NYT oped draws the parallels between Silvio Berlusconi and Donald Trump.
4. Overcoming stiff public resistance, Denmark scraps a public holiday to pay for extra defence spending!
5. The less discussed but more important Great Stagnation is that of developing country income catch up with developed countries. Martin Wolf writes,
By the end of 2024, economic activity in these economies is expected to be about 5 per cent below levels projected on the eve of the pandemic.” Worse, in more than one-third of the poorest countries, incomes per head will be below 2019 levels in 2024... The report indicates that, without China, incomes per head of emerging and developing countries have stagnated relative to those in high-income countries since the middle of the last decade. The relative incomes per head of the low-income countries have stagnated for even longer. In brief, the reduction in global inequality seems to have stalled.
This is an extraordinary graphic that shows the steep rise in sovereign spread for C-rated countries by 14.4 percentage points since February 2022.
Such steep rise in borrowing costs is also driving the low income countries into the lap of China.
Today, remarkably, bilateral debt owed by low-income countries to the high-income members of the Paris Club has become less than half that owed to non-Paris Club countries, mainly China.
6. Fascinating article on the halo effect, that points to good looking people benefiting from better treatment by others.
A study published in January in the Journal of Economics and Business found that good-looking banking CEOs take in over $1 million more in total compensation, on average, than their lesser-looking peers. “Good looks pay off,” the authors write. New research from Shanghai Advanced Institute of Finance similarly finds that comely managers of mutual funds lure more investments and enjoy more promotions than their homelier counterparts, even though their funds don’t perform as well. The researchers suggest this performance gap may be because handsome managers approach risk with hubristic levels of confidence... attractive people are less likely to be arrested or convicted, even after controlling for criminal involvement, according to a 2019 study of nationally representative data published in the journal Psychiatry, Psychology and Law... physically attractive people often cultivate self-serving beliefs. A 2014 paper in the journal Organizational Behavior and Human Decision Processes, for example, found that those who saw themselves as good-looking sensed they had more power and higher status than their plainer peers. They were also more likely to attribute growing economic inequality in the U.S. to the hard work and talent of those at the top...Essentially, lucky people tend to believe that life is fair and fate rewards merit, whereas unlucky people are often more alert to systemic bugs and more supportive of efforts to correct for them. A 2016 study in the Journal of Public Economics, for example, found that people who were randomly assigned hard counting tasks in a lab were more inclined to blame their poor performance on circumstantial factors, such as the clarity of the instructions, and more likely to share tokens in a subsequent game. Those who enjoyed an easier counting task not only ascribed their success to personal effort but also were considerably stingier with the tokens... Andrea Fazio, an economist at Tor Vergata University of Rome, analyzed a nationally representative survey of Germans who rated how much they agreed with statements about money and fairness, such as “Income and wealth should be redistributed towards ordinary people.” The results, which he reported last year in the journal Economics & Human Biology, showed that the respondents who were seen as physically attractive by interviewers were also more likely to say that efforts to redistribute wealth were wrongheaded because everyone gets what they deserve.
7. Valuation concentration in US S&P 500 index
The performance of the S&P 500 index is now the most concentrated it has been since the 1970s. Seven of the biggest constituents — Apple, Microsoft, Google owner Alphabet, Amazon, Nvidia, Tesla and Meta — have ripped higher, gaining between 40 per cent and 180 per cent this year. The remaining 493 companies are, in aggregate, flat. Big tech companies dominate the index to an unprecedented degree. Just five of those seven stocks represent nearly a quarter of the market capitalisation of the entire index. At $2.9tn, Apple alone is worth more than the UK’s top 100 listed companies put together... The chipmaker Nvidia... has gained $640bn in market capitalisation just this year. That is almost as much as the combined market worth of JPMorgan and Bank of America, the two biggest banks in the US.
Apple is worth more than the entire Russell 2000 of smaller US companies.
The article points to two self-reinforcing trends that favour Big Tech
As their market capitalisations grew, they constituted an ever-larger proportion of the S&P 500, which like most stock indices weights its constituents according to their market value. Two wider market trends compounded this. One was an accelerating wave of so-called passive investment, where funds simply seek to replicate the performance of an index by mirroring its composition. This meant that as these stocks went up, so too did their index weights, forcing funds to buy more of them. The other was so-called ESG investment, a style that focuses on environmental, social and governance as well as financial factors. Growing interest in ESG has pushed investment dollars into tech at the expense of carbon-heavy sectors such as oil and gas. Active investors, passive investors, momentum chasers and ESG funds are often all chasing the same targets.
8. Simon Kuper points to the impressive transformation in student recruitments by Oxford and Cambridge,
Pressure from the government helped embarrass Oxford and Cambridge into overhauling admissions... Oxbridge colleges now aim for “contextual admissions”, including the use of algorithms to gauge how much disadvantage candidates have surmounted to reach their academic level. For instance: was your school private or state? What proportion of pupils got free school meals? Did your parents go to university? Admissions tutors compare candidates’ performance in GCSEs — British exams taken aged 16 — to that of their schoolmates. Getting seven As at a school where the average is four counts for more than getting seven at a school that averages 10. The brightest kid at an underprivileged school is probably smarter than the 50th-best Etonian... Oxbridge hosts endless summer schools and open days for underprivileged children... The message to the kids is: “You belong here.”It’s working. State schools last year provided a record 72.5 per cent of Cambridge’s British undergraduate admissions. From 2018 to 2022, more than one in seven UK-domiciled Oxford undergraduates came from “socio-economically disadvantaged areas”. Twenty-eight per cent of Oxford students identified as “black and minority ethnic”; slightly more undergraduates now are women than men. Academics told me that less privileged students are more likely to experience social or mental-health problems, but usually get good degrees. These universities haven’t relaxed their standards. On the contrary, by widening the talent pool, they are finding more talent.
9. Alan Beatie argues that the long period of low inflation perhaps had less to do with globalisation than being widely imagined. He points to studies which show that changes in monetary policy, lowers anchored inflation expectations, and reduced uprating of wages in line with prices may have had greater effects.
For one, the periods don’t quite match. The “hyperglobalisation” period when world trade and global value networks grew most rapidly ran from the late 1990s until shortly before the global financial crisis began in 2008. By that point the fall in inflation in the rich world had largely already happened.
Second, given that goods are much more highly traded than services, you’d have expected rising inflation differentials between the two. In fact, the gap remained constant until after the financial crisis, when services inflation actually fell while goods inflation rose. As a rough sense check of the impact of cheaper imports, those goods subject to low-cost Chinese competition like clothing, shoes and electronics make up quite small parts of the consumer price basket. In the eurozone, apparel and footwear are about 5 per cent of the total, compared with 15 per cent for housing and utilities (and that’s using a narrow measure of housing costs) and 10 per cent for restaurants and hotels.
Nor does the integration of the big middle-income countries automatically push inflation down. It means increases in demand as well as supply. During the global food crisis of 2007-08, one very common story was that wealthier households in countries like China were increasing commodity prices by eating more resource-intensive fare, particularly meat.
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