Thursday Night Links

• “Months of inventory” can go up by either the number of houses for sale going up OR the number of monthly sales going down. In other words, the number of houses for sale can stay the same while the pace of sales slows as fewer people can qualify to buy them. Then the question becomes who blinks first. With an illiquid asset like real estate, typically there are always more forced sellers than forced buyers. An excess of buyers is usually speculation-driven like we saw in 2021, but few of those paying above the asking price truly needed to buy; they were just afraid of missing out. But sellers often must sell for economic reasons. [The Tom File] 
• The market is telegraphing that what the Fed is planning to do is potentially destructive to the economy. Why does the Fed still think the only way to lower inflation is to undermine the economy? That's Phillips Curve thinking, and it has been debunked countless times. Growth doesn't cause inflation. Too much money is the culprit (i.e., money that exceeds the demand for it). What the Fed needs to do in cases like today's is to 1) bolster the demand for money by raising interest rates (they have accomplished that goal already!), and 2) reduce the unwanted supply of money (something that is well underway since the M2 money supply stopped growing long ago). If the Fed were to follow the market's script, we could see real problems develop. The US economy could weaken dramatically, creating a double whammy for the working class: rising unemployment on top of already-declining real wages. This is totally unnecessary. I have to believe they won't follow through on their hiking hysteria. And that should prove very positive for the economy and the market. [Scott Grannis] 
• It is a fact that EIA's weekly oil demand figures have been way off year-to-date. This is not a conspiracy theory, it has been validated by the monthly demand data. As a result, it is very likely that when EIA reports July's oil demand figures next week, it will show an upward revision to the weekly implied oil demand data. The conclusion you should reach is that the weekly demand figure is far from perfect, and because of the persistent underestimation, demand is actually better than what's being reported. But is demand doing great? No, but it is nowhere near 2020. Why is this important for the oil market? The perception of bad oil demand is weighing on prices and sentiment. Until the market sees more proof that the weekly data is indeed useless when used to gauge demand (likely more monthly data to prove the point), the market will keep using the weekly figures to guide its thinking. For knowledgable readers, you can use this edge to take advantage of the market being overly pessimistic. In addition, with OECD demand likely better than reported, implied oil balances toward the end of the year are skewed to the upside. [HFI Research]
• Originally Brent Crude was produced from the Brent Oilfield. The name "Brent" comes from the naming policy of Shell UK Exploration and Production, operating on behalf of ExxonMobil and Royal Dutch Shell, which originally named all of its fields after birds (in this case the brent goose). But it is also a backronym or mnemonic for the formation layers of the oil field: Broom, Rannoch, Etive, Ness and Tarbert. [Wikipedia]
  
• Paine and the machine behind him stand for an older form of politics based on patronage. Historically, this form of politics has been described by various disparaging terms such as “political machine,” “racket,” or “mafia,” but patronage is simply a formal way of describing informal networks of relationships centered on powerful individuals: loyalty flows up, favors flow down. It is both natural and good for the powerful to exert themselves for the benefit of those who look to them. This is noblesse oblige, not corruption! It was only under the WASP ascendancy that “looting the federal treasury” was regarded as a bad thing, a state of affairs upon which we may look back with fondness but which must be recognized as a brief and anomalous period in history. They were perhaps the only ruling class in history who saw the telos of politics as “to secure the blessings of Liberty” rather than “to look after our own.” [Gaston Nerval]
  
• In the past three millennia, therapeutic phlebotomy has been applied, with generally grim and adverse outcomes, to conditions as varied as fever, apoplexy, pneumonia, cholera, and gonorrhea. More recently, principles of evidence-based medicine have defined two disorders for which phlebotomy is an established primary therapy: genetic hemochromatosis associated with homozygosity for the HFE p.C282Y allele, and polycythemia vera associated with the JAK2 p.V617F mutation. [NLM]
• Despite New England’s goal of limiting carbon emissions, more than half of its electric power still comes from natural gas that comes into the region in pipelines and, exclusively unlike anywhere else in the United States, imported in liquefied form from overseas. The region’s squeeze between a fossil-fuel-reliant present and renewable-energy future always tightens when demand for home heating rises, but this year, the pressure could be significantly higher, as conflict with Russia has increased the cost of natural gas around the globe. [link]
• "Any nation that works its women is damned," once wrote Woods Hutchinson. The nation that works its children, one is tempted to add, is committing suicide. Loud-mouthed defenders of American democracy pay no attention to the strange fact that, although "the average education among all American adults is only the sixth grade," every one of these adults has an equal power at the polls. The American nation, with all its worship of efficiency and thrift, complacently forgets that "every child defective in body, education or character is a charge upon the community," as Herbert Hoover declared in an address before the American Child Hygiene Association (October, 1920): "The nation as a whole," he added, "has the obligation of such measures toward its children... as will yield to them an equal opportunity at their start in life. If we could grapple with the whole child situation for one generation, our public health, our economic efficiency, the moral character, sanity and stability of our people would advance three generations in one." The great irrefutable fact that is ignored or neglected is that the American nation officially places a low value upon the lives of its children. The brutal truth is that CHILDREN ARE CHEAP. When over-production in this field is curtailed by voluntary restriction, when the birth rate among the working classes takes a sharp decline, the value of children will rise. Then only will the infant mortality rate decline, and child labor vanish. Investigations of child labor emphasize its evils by pointing out that these children are kept out of school, and that they miss the advantages of American public school education. They express the current confidence in compulsory education and the magical benefits to be derived from the public school. But we need to qualify our faith in education, and particularly our faith in the American public school. Educators are just beginning to wake up to the dangers inherent in the attempt to teach the brightest child and the mentally defective child at the same time. They are beginning to test the possibilities of a "vertical" classification as well as a "horizontal" one. That is, each class must be divided into what are termed Gifted, Bright, Average, Dull, Normal, and Defective. In the past the helter-skelter crowding and over-crowding together of all classes of children of approximately the same age, produced only a dull leveling to mediocrity. [Margaret Sanger]
• After the Minsky moment, whatever is used to settle debts (i.e. cash) becomes extremely scarce. This is why the panics are worth waiting for. Note that most of these bargains are not being sold "voluntarily". Owners of insolvent enterprises always want to extend and pretend. They talk about the "option value" of their far, far out of the money equity claims. The forced selling happens via lender foreclosure, but also via open-ended investment vehicles like mutual funds, where redemptions force the managers to sell the investments indiscriminately. The scarcity of cash results in lots and lots of political conflict over the value of money, which is part of a broader political conflict between creditors and debtors. Creditors need to be careful about thinking they have debtors cornered. Debtors outnumber creditors, so the rules can be changed. Drawing out the foreclosure process buys debtors time for reflation to rescue their claims. Another rule change is devaluation, which first was by going off the gold standard and then was through money printing. The post-2009 restructuring (no public auctions, quantitative easing) seemed to be designed to make sure that only the elites could get the benefit of the reflation. They weren't going to allow more Beals. [CBS]