On the economics of climate change, the end of the housing ATM and the scalability of human intervention in tech

So I reckon I’ve got the politics out of the way now since I don’t have a lot to add on the election in Brazil. So here’s my daily post without the politics.

Climate change

I saw a great piece in Axios about climate change that I wanted to highlight. Here are the big takeaways:

Climate change is reshaping aspects of our environment that many of us thought were static — from where deserts begin and end, to what we can grow in backyard or community gardens.

Why it matters: These changes portend bigger shifts to come that may reshape the global food system and lead to insecurity, with major agricultural countries facing more challenges from pests, heat waves, droughts, floods and other threats that could affect crop productivity.

My take on this is that it will drive volatility. And that means disruption economically, socially and politically. The places where we grow our food will change. And many places that were once considered hospitable for living will come to be considered more precarious. That means economic volatility and migration, which also means political volatility.

If you look at the migrant caravan as an example, imagine if the chief cause of the migration was climatic in nature. You would probably have even more migrants. And the political reaction would be more extreme. This is what climate change will mean.

And note, when I talk about climate change, I’m not talking about who or what is to blame and whether it is man-made. I’m talking about likely outcomes.

Fossil fuels and Norway

If you want to talk about blame and fossil fuels, Norway is an interesting example. The tack they have taken is that they want to wean themselves from a dependence on fossil fuels. And that’s largely because they believe climate change will make that dependence untenable in the future. And remember, it’s not about whether fossil fuels caused climate change. It’s about outcomes: whether reducing fossil fuel dependence will slow or mitigate the effects of climate change, irrespective of why that change has happened.

This is another one from Axios:


  • The Norwegian government will decide this autumn whether its sovereign wealth fund will divest from oil and natural gas stocks. If it does, it would boost efforts around the world to urge investors to drop fossil-fuel investments as concerns grow about climate change.
  • Norway is also set to decide in the coming years whether to fund what would be one of the world’s most ambitious initiatives to capture and store underground carbon dioxide emissions. The technology is technically possible, but prohibitively expensive in most instances.
  • If Norway follows through here, it would be a pivotal step toward showing the financial commitment many experts say is needed to address climate change in our fossil-fuel driven world, including commitments laid out in the 2015 Paris climate accord.

My view: Fossil fuels are big business. In the US, we are talking about trillions of dollars in revenue and millions of jobs. There’s no way the US is going to move in this direction with a special interest lobby that big threatened by those moves. So I don’t see the US replicating this. Moreover, all indications are that China is the biggest risk to climate change. And so, globally, we won’t have a solution without China. Likely, we won’t get one until it’s too late.

To me that means the scenario of economic, political and social volatility I mentioned above will occur before any shifts in strategy occur. What Norway is doing does show you that countries are capable of monumental shifts. I just think it will take time. And the impetus for most of us will be catastrophic events due to climate change.


Shares have turned down again today, but only marginally on the Dow and the Nasdaq, with the S&P 500 still in positive territory as I write this. Bond yields are up slightly, showing the flight to liquidity has died down somewhat. My biggest concern is not markets but the real economy, particularly the property sector.

A mortgage broker who I hold in high regard sent me an email this morning containing the following headline: “This year alone nearly 50% of all refinances were for cash out purposes”

You remember the housing ATM? That was where house prices increased so much in the noughties that people took cash out refinance mortgages to bolster spending. It seems that this is happening again. But, with the Fed raising rates, the housing market is rolling over. And so I suspect the housing ATM days are nearly over. You are now forewarned.

Note that real personal spending growth is running at over 3% while GDP growth came in at 3.5% on Friday. Those numbers are going to be lower going forward with the housing ATM switched off.

Now, having said that my biggest concern is the real economy, I would like to mention this chart:

WeWork 2025 bond.png

I’ve been mentioning WeWork as a bubble company whose fortunes are inextricably linked to the buoyant commercial property market. They seem to be running into problems. We should follow this issue closely.

Apple News

Let’s change theme for the last piece in the daily back to politics in a way. I noticed the New York Times story showing that voter suppression has already been a big factor helping the Republicans. They say it could also swing the midterms too. I think it’s an important piece to read.

But another thing that supposedly sways voters minds is fake news. And the NY Times has some good news on that front regarding Apple:

In a quiet corner of the third floor, Apple is building a newsroom of sorts. About a dozen former journalists have filled a few nondescript offices to do what many other tech companies have for years left to software: selecting the news that tens of millions of people will read.

One morning in late August, Apple News’s editor in chief, Lauren Kern, huddled with a deputy to discuss the five stories to feature atop the company’s three-year-old news app, which comes preinstalled on every iPhone in the United States, Britain and Australia…

“We put so much care and thought into our curation,” said Ms. Kern, 43, a former executive editor of New York Magazine. “It’s seen by a lot of people and we take that responsibility really seriously.”

Apple has waded into the messy world of news with a service that is read regularly by roughly 90 million people. But while Google, Facebook and Twitter have come under intense scrutiny for their disproportionate — and sometimes harmful — influence over the spread of information, Apple has so far avoided controversy. One big reason is that while its Silicon Valley peers rely on machines and algorithms to pick headlines, Apple uses humans like Ms. Kern.

My take: This is the curation strategy that lost Yahoo the Internet wars to Google. I was there. So I remember. The reason Facebook, Google and the likes don’t use humans is because it’s not scalable. And their business model is dependent on scalability.

I have no idea whether this initiative by Apple is sustainable in a world in which scalability is king in tech. But I like it. We have proven ourselves incapable of deciphering propaganda from real news. And so when the propagandists manipulate search in their favor and put themselves at the top, we get sucked in to their message. That’s what the last several years tell us. Apple is working against that. Let’s hope they succeed.

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