About the Phillips Curve

Posted on October 4, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

[By staff reporters]

An important concept in macroeconomics

When Federal Reserve officials meet to decide whether to raise interest rates again, one question will be front and center according to Neil Irwin?

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[Rate of Change of Wages against Unemployment

United Kingdom 1913–1948 from Phillips (1958)]

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Question: How much faith should be placed in a line on a graph first drawn by a New Zealand economist nearly six decades ago, based on data on wages and employment in Britain dating to the 1860s?

The 57-Year-Old Chart That Is Dividing the Fed

More:

Assessment

So, if you believe in the traditional Phillips curve, as some at the Fed do, inflation should be taking off any day now?

Conclusion

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J CURVE: The Economics Paradox

Posted on October 4, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

IN PRIVATE EQUITY AND MEDICINE

By Staff Reporters

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PRIVATE EQUITY

In private equity, the J curve is used to illustrate the historical tendency of private equity funds to deliver negative returns in early years and investment gains in the outlying years as the portfolios of companies mature.

And, according to Wikipedia, in the early years of the fund, a number of factors contribute to negative returns including management fees, investment costs and under-performing investments that are identified early and written down. Over time the fund will begin to experience unrealized gains followed eventually by events in which gains are realized (e.g., IPOs, mergers and acquisitions, leveraged recapitalizations).

Historically, the J curve effect has been more pronounced in the US, where private equity firms tend to carry their investments at the lower of market value or investment cost and have been more aggressive in writing down investments than in writing up investments. As a result, the carrying value of any investment that is under performing will be written down but the carrying value of investments that are performing well tend to be recognized only when there is some kind of event that forces the PE to mark up the investment.

The steeper the positive part of the J curve, the quicker cash is returned to investors. A private equity firm that can make quick returns to investors provides investors with the opportunity to reinvest that cash elsewhere. Of course, with a tightening of credit markets, private equity firms have found it harder to sell businesses they previously invested in. Proceeds to investors have reduced. J curves have flattened dramatically. This leaves investors with less cash flow to invest elsewhere, such as in other private equity firms. The implications for private equity could well be severe. Being unable to sell businesses to generate proceeds and fees means some in the industry have predicted consolidation among private equity firms.

MEDICINE

In medicine, the “J curve” refers to a graph in which the x-axis measures either of two treatable symptoms (blood pressure or blood cholesterol level) while the y-axis measures the chance that a patient will develop cardiovascular disease (CVD). It is well known that high blood pressure or high cholesterol levels increase a patient’s risk.

Paradoxically, what is less well known is that plots of large populations against CVD mortality often take the shape of a J curve which indicates that patients with very low blood pressure and/or low cholesterol levels are also at increased risk.

CITE: https://www.r2library.com/Resource

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PODCAST: The Economic “KUZNETS” Curve

Posted on October 4, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

The “KUZNETS” Curve

Courtesy: www.CertifiedMedicalPlanner.org

In economics, a Kuznets curve (/ˈkʌznɛts/) graphs the hypothesis that as an economy develops, market forces first increase and then decrease economic inequality.

CITE: https://www.r2library.com/Resource

The hypothesis was first advanced by economist Simon Kuznets in the 1950s and 1960s.

PODCAST: https://www.bing.com/videos/search?q=Kuznets+Curve&view=detail&mid=A5D7EFB417EC37F3CDFEA5D7EFB417EC37F3CDFE&FORM=VIRE

Assessment: Your thoughts are appreciated.

BUSINESS, FINANCE AND INSURANCE TEXTS FOR DOCTORS:1

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DAILY UPDATE: Costco Gold, US Dock Workers & OpenAI Funding as Stocks Close Lower

Posted on October 4, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

MEDICAL EXECUTIVE-POST – TODAY’S NEWSLETTER BRIEFING

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Costco, which found success selling gold bars, will now sell platinum ones, too.

US dock workers agreed to return to work after port operators sweetened their contract offer, ending a three-day strike that threatened to disrupt the American economy. The breakthrough Thursday came after port employers offered a 62% increase in wages over six years, according to people familiar with the matter.

CITE: https://www.r2library.com/Resource

Stocks up

  • Nvidia gained 3.32% after CEO Jensen Huang said in an interview that demand for the company’s new Blackwell chips is “insane.”
  • EVgo soared 60.81% after the EV charging company received both a $1.05 billion loan from the Department of Energy and an upgrade from JP Morgan analysts.
  • Utility stocks soared in the third quarter thanks to higher electricity demand for AI, and it isn’t stopping anytime soon. Both Vistra Corp. and Constellation Energy surged 5.62% and 4.52%, respectively, on comments from Google CEO Sundar Pichai that the tech titan may utilize nuclear energy in the coming years.

Stocks down

  • Levi Strauss sank 7.69% after releasing subpar earnings, cutting its full-year sales forecast , and announcing it may sell its Dockers brand.
  • Tesla fell 3.35% after announcing a recall of over 27,000 Cybertrucks due to issues with their rearview camera.
  • Hims & Hers Health dropped 9.60% on the announcement that Eli Lilly’s weight-loss drugs are no longer on the FDA’s shortage list.
  • Joby Aviation tumbled 8.63%, giving up a portion of yesterday’s gains after the aviation startup received $500 million in additional funding from Toyota.
  • Stellantis, makers of Jeep, Dodge, and Chrysler vehicles, sank 4.11% to a new 52-week low today as a combination of terrible sales forecasts and a downgrade from Barclays analysts kicked the automaker while it’s already down.
  • Constellation Brands had strong beer sales but terrible wine and spirits sales last quarter, leading to a mixed earnings report that has shareholders worried about what the future holds. Shares sank 4.70%.

CITE: https://tinyurl.com/2h47urt5

Here’s where the major stock benchmarks ended:

  • The S&P 500® index (SPX)fell 10 points (–0.17%) to 5,699.96; the Dow Jones Industrial Average ($DJI) dropped 185 points (–0.44%) to 42,011.59; the  NASDAQ Composite® ($COMP) shed 7 points (–0.04%) to 17,918.48.
  • The 10-year Treasury note yield (TNX) added 7 basis points to 3.85%. 
  • The CBOE Volatility Index® (VIX) rose 1.7 points to 20.59.

CITE: https://tinyurl.com/tj8smmes

Microsoft, NVIDIA, and Apple were rumored to be among the investors to participate in OpenAI’s latest funding round, pushing its market cap well beyond $150 billion. However, Apple dropped out of the exercise at the eleventh hour for unclear reasons as OpenAI was about to close the funding round.

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