The Peruvian government has officially categorized transgender and intersex people as “mentally ill,” which the health ministry says is the only way that Peru’s public health services could guarantee “guarantee full coverage of medical attention for mental health,” The Telegraph reports.

Conditions now recognized as mental health disorders include transsexualism, dual role transvestism, gender identity disorder in childhood, other gender identity disorders, fetish transvestism, and egodystonic sexual orientation.”

The classification aligns closely with the the Diagnostic and Statistical Manual of Mental Disorders (DSM-5), which classifies “gender dysphoria” as a mental disorder.

Peru’s decree follows the release of the 10th edition of the International Classification of Diseases (ICD) by the World Health Organization.

“From the review of the ICD-10 diagnoses included in the Essential Health Insurance Plan, related to the condition, person with a mental health problem, the omission of seven (07) ICD-10 diagnoses has been identified,” officials wrote (translated). “In this sense, it is necessary to modify the Essential Health Insurance Plan incorporating seven (07) ICD-10 diagnoses.”

The Health Ministry (MINSA) later released a statement saying that these individuals should not necessarily undergo “reconversion therapies.”

Transgender influencer Dylan Mulvaney, who notably killed Bud Light’s brand, fled to Peru “to feel safe” in the wake of a national boycot of the brew. He’s thus far been silent on the matter.

Authored by Alan Dershowitz via The Gatestone Institute,

If you were flipping between CNN and Fox News following the cross-examination of Stormy Daniels in the New York criminal case against former President Donald Trump, you would have had the impression that the CNN commentator, who professed to be reporting what happened in the courtroom, described a completely different event from what the Fox News reporter, who was also in the courtroom, described. It was as if they had seen two different witnesses and two different lawyers.

The CNN commentator reported that Daniels had done a great job holding up against the incompetent cross-examination of Trump’s lawyer. The Fox News commentator reported that the extraordinarily effective Trump lawyer had totally destroyed Daniels’ credibility. Who were you to believe? The CNN commentator was an experienced lawyer who was purporting to describe accurately what had happened without bias or subjectivity. The Fox News commentator was a former judge and prosecutor with vast experience, who also claimed to be describing the cross-examination without bias. Neither of the commentators even pretended to paint a gray picture. One was starkly black, the other unambiguously white. No nuance in either account.

If the trial had been televised, the dominant color would have been gray. Perry Mason cross-examinations rarely occur in real life, and witnesses like Daniels rarely emerge unscathed from cross-examinations even by mediocre lawyers.

We, the American public, however, have been denied the right to judge for ourselves how the case against the once and possibly future president is going. We cannot judge the credibility of witnesses, the fairness of the judge or the effectiveness of the lawyers. We must depend on the subjective and generally biased accounts of often partisan “reporters.”

Polls following the OJ Simpson case suggested that those who personally watched the trial on TV were less surprised by the not guilty verdict than those who only read about it in the media, which generally described it as an open and shut case and predicted a guilty verdict. They downplayed or omitted the gaps in the prosecution case and the mistakes made by prosecutors that may have led jurors to find reasonable doubt.

The same may be true of the Trump case, except that everyone is seeing the case through the prism of the reporters, rather than with their own eyes. Those who get their “news” from anti-Trump sources will be surprised and outraged if there is an acquittal or hung jury in this “strong” case. Those who get their “news” from pro-Trump sources will be surprised and outraged by a conviction in this “weak” case.

The result of making us rely on partisan secondary sources rather than our own direct observations is inevitable distrust in the justice system. If “Sunlight is the best disinfectant,” lack of visibility is a major source of distrust.

Every important trial involving public figures should be televised. Now the trial of Senator Robert Menendez is starting. It, too, should be publicized so that the public can see how the judiciary deals with an important case involving a member of the legislative branch. Even the Supreme Court now permits live audio broadcasts of important appellate cases. Hopefully, they will soon allow telecasting since there is little difference between listening and seeing the justices and the lawyers.

The framers of the Constitution intended all judicial proceedings to be public – no secret trials. At the time of the framing, public meant open to print journalists. Today, public means audio and video publication.

The New York trial of Trump is a national scandal. There is no real crime. The judge has allowed testimony that is highly prejudicial and irrelevant. He has made numerous unfair rulings, of which the prosecution has taken advantage. The public has the right to see this abuse with their own eyes, so that we all can judge for ourselves and not allow possibly biased reporters to judge for us.

Now the government’s star witness is testifying. Michael Cohen’s credibility promises to be a key factor in the jury’s deliberation. Every citizen should have a right to make his or her own assessment of his credibility or lack thereof.

There is no good argument for allowing CNN to tell us whether he is believable, when we might come to a different conclusion based on direct observation with our own eyes.

Trump-hating Utah Republican Sen. Mitt Romney says President Joe Biden should have “immediately” pardoned former President Donald Trump as a power play to look like “the big guy.”

“[Biden] should have fought like crazy to keep this prosecution from going forward,” Romney told MSNBC. “It was a win-win for Donald Trump.”

“You may disagree with this, but had I been President Biden when the Justice Department brought on indictments, I would have immediately pardoned him. I’d have pardoned President Trump,” he added. “Why? Well, because it makes me, President Biden, the big guy and the person I pardoned a little guy.“

According to Romney, President Lyndon B. Johnson set the precedent for such a move, and that Biden could have urged New York prosecutors in the hush money case to drop the charges.

“I have been around for a while. If LBJ had been president and he didn’t want something like this to happen, he’d have been all over that prosecutor, saying, ‘You better not bring that forward or I’m gonna drive you out of office,’” said the Utah Republican.

Romney also slammed Republican Trump loyalists for showing up to the courthouse to show support for the former president.

“I think it’s a terrible fault for our country to see people attacking our legal system — that’s an enormous mistake,” Romney continued. “I think it’s also demeaning for people to quite apparently try and run for vice president by donning a red tie and standing outside the courthouse. It’s just — I’d have felt awkward.”

Of note, House Speaker Mike Johnson (R-LA), Rep. Byron Donalds (R-FL) and Sen. J.D. Vance (R-OH) have all attended court this week. Trump VP hopefuls Doug Burgum and Vivek Ramaswamy have also shown up.

On Thursday, Rep. Matt Gaetz (R-FL) joined the action.

Trump has more Republican lackeys, including Gaetz, dressed in Trump costumes behind him in court today pic.twitter.com/PHETnzAZsA

— Aaron Rupar (@atrupar) May 16, 2024

Standing back and standing by, Mr. President. pic.twitter.com/gGPeTLtWmv

— Matt Gaetz (@mattgaetz) May 16, 2024

By Michael Every of Rabobank

Stocks up, Stonks up, bonds up, gold up, crypto up, and copper up to a new record high. Almost everything rocketed after US CPI came a slither lower than expected —and 30 minutes earlier than scheduled on the BLS website, which markets looking only at Bloomberg didn’t notice(!)– but with no decline in crucial core services from near 5% y-o-y, even as retail sales came in much weaker. So, more stagflation overall really, but that’s markets in the free world now, as traders priced in the Fed cuts in September and December which our Philip Marey was already calling.

Meanwhile, US Secretary of State Blinken played ‘Keep on Rockin’ in the Free World’ in Kyiv as Russia rocketed Ukraine and took even more territory from it: the situation there officially remains “worrying.” That’s after humiliating US retreats from Afghanistan and Niger, ally Colombia moving out of the US orbit, Venezuela moving armed forces to the border of Guyana’s oil-rich region of Essequibo; White House calls of a calm Middle East pre-October 7, as war there now goes on, with US forces regularly struck by pro-Iran militias; Iran cooperating with North Korea more; and Filipino (with a US defence treaty) and Chinese flotillas in another tense stand-off in the South China Sea. Realpolitik is saying, “OK, boomer” to those who cover Neil Young.  

In the EU, there was an attempted assassination of Slovakia’s pro-Russia Prime Minister Fico, who is still in critical condition: the alleged culprit is a liberal, pro-EU poet. In the Netherlands, the far-right Party for Freedom (PVV) of Geert Wilders announced a coalition government with the centre-right People’s Party for Freedom and Democracy (VVD), the New Social Contract party (NSC), and the Farmer-Citizen Movement (BBB), though Wilders will not be PM, just éminence grise. Near the EU, Moldova signed an agreement with it on cooperation in security and defence: but the EU almost certainly won’t defend it from Russia. The ‘free world’ keeps rocking.

In the US, we are promised Biden-Trump debates on 27 June and 10 September in a new format with no studio audience or third-party candidates: cynics will say markets must therefore stay bid until July at least. Regardless, both men at the debate mean huge fiscal deficits ahead, and the latest tariffs show markets will get ‘Triden’ or ‘Brump’. The ‘free markets world’ keeps rocking too.

More so as China suggested it may institute what I always said was the inevitable endgame for its housing market: using state funds to buy up millions of unwanted homes, and turning them into social housing, effectively nationalizing it. A flurry of related questions remain, including the staggering price tag, but the overall plan is clear: houses are for living in, not speculation, and Chinese capital will be freed up from mortgage lending to focus on (military) industrial production.

And what has the free world got to offer by contrast? In Australia, a housing auctioneer bewails the barista who serves him his coffee has to work for 45 years just to get a deposit. Even the Prime Minister is kicking a tenant out of his rental property because he can cash in on higher house prices. In short, housing is for speculation and not for living in; and western capital is tied up in mortgage lending instead of focusing on (military) industrial production.

This underlines how radically Western policy needs to change. After all, Russia is now spending 8.7% of GDP on defence: economists who pooh-poohed war in early 2022 might note that’s FIVE ‘Italys’, with far higher purchasing power parity. President Putin is talking ‘guns or butter’ choices and appointed an economist as defence minister to make the war economy run more efficiently. The West can’t work out just guns, butter, or housing, let alone ‘guns or butter or housing’.

Linking this all up, the brilliant and needling ‘Keep on Rockin’ in the Free World’ was an attack on the worst side of free-market America that was a global hyperpower that didn’t look after its own poor well, not a way to praise it. Just read the lyrics or watch the video:

“There’s colors on the street; Red, white, and blue

People shuffling their feet; People sleeping in their shoes

There’s a warning sign on the road ahead; There’s a lot of people saying we’d be better off dead

Don’t feel like Satan, but I am to them; So I try to forget it any way I can

Keep on rockin’ in the free world (x4)

I see a woman in the night; With a baby in her hand

There’s an old street light; Near a garbage can

Now she put the kid away and she’s gone to get a hit; She hates her life and what she’s done to it

There’s one more kid that’ll never go to school; Never get to fall in love, never get to be cool

Keep on rockin’ in the free world (x4)

We got a thousand points of light; For the homeless man; We got a kinder, gentler machine gun hand

We’ve got department stores and toilet paper; Got styrofoam boxes for the ozone layer

Got a man of the people says keep hope alive; Got fuel to burn, got roads to drive

Keep on rockin’ in the free world (x4)”

If Neil Young were to update the lyrics today, he might add something about Stonks and crypto perhaps, but an awful lot of it still stings as it is: even more so as America is no longer a hyperpower, and others keep on rocketing the free world.

Shares of AST SpaceMobile are surging following AT&T’s announcement on Wednesday evening that it is partnering with the satellite provider to offer customers wireless service from space.

“AT&T* and AST SpaceMobile have entered a definitive commercial agreement to provide a space-based broadband network direct to everyday cell phones. This agreement extends until 2030,” AT&T wrote in a statement. 

https://t.co/z2HG2bULXY

— AST SpaceMobile (@AST_SpaceMobile) May 15, 2024

Bloomberg journalists were ecstatic to hear that Elon Musk’s dominance in space-based communications now has a competitor. But how strong of a competitor is AT&T? Well, meh, their foray into space with its DirectTV partnership has been a disaster. 

Meanwhile, Musk’s SpaceX has been working with mobile carrier T-Mobile to unleash space-based service for mobile phone users via Starlink’s massive satellite contestation in low-Earth orbit. This service could come online later this year. 

The agreement between AT&T and AST will run through 2030. What’s amusing is that AT&T and AST, soon-to-be Musk’s new competitors, have to use the billionaire’s SpaceX rockets to blast satellites into low-Earth orbit. The five satellites will be loaded on SpaceX rockets in Cape Canaveral, Florida, by mid/late summer, with launches shortly after. 

“Space-based direct-to-mobile technology is designed to provide customers connectivity by complementing and integrating with our existing mobile network,” Jeff McElfresh, AT&T’s chief operating officer, said in a statement.

McElfresh continued, “This agreement is the next step in our industry leadership to use emerging satellite technologies to provide services to consumers and in locations where connectivity was not previously feasible.”

Shares of AST jumped 41% in the early US cash session. 

What’s evident is that Musk dominates space-based communication via Starlink and rocket launches into space via SpaceX. 

As we’ve said before, Musk is becoming an uncancellable billionaire, and Democrats, with their dark money-funded non-governmental organizations, are trying everything in their power to crush him. Good luck with that one. 

Has anyone heard if Jeff Bezos can still get his rocket up?

By Tsvetana Paraskova of OilPrice.com

A continuously fading war risk premium and signs that regional oil markets look well supplied prompted traders to slash last week their bullish bets on crude oil at the fastest pace in over a year.

The net long position—the difference between bullish and bearish bets—dropped to a three-month low as money managers liquidated longs, also prompting technical selling that pushed Brent Crude prices to the low $80s and the U.S. benchmark, WTI Crude, to below $80 per barrel so far in May.

Portfolio managers were net sellers of crude and fuel futures and contracts in the latest reporting week to May 7, with the equivalent of 143 million barrels sold in the six most important futures and options contracts, according to data from exchanges compiled by Reuters columnist John Kemp.   

Brent and WTI saw the biggest drop in bullish positions, but there was selling in U.S. gasoline and European gas oil derivative contracts, too.

The sentiment among hedge funds and other money managers flipped from moderately to highly bullish in early April—amid flare-ups in the Middle East—to more bearish in early May, as the Iran-Israel tensions subsided and oil stock movements and inventories started to point to a looser market than previously thought.

In early April, hedge funds and other portfolio managers began to include a higher risk premium in their oil price trades as tensions in the Middle East spiked.

A month ago, the crude oil net long in WTI and Brent reached a six-month high in the week to April 9, driven by Brent—the international contract most exposed to geopolitical events. Brent Crude saw the net long position triple since early December, just before the Houthi attacks on commercial vessels in the Red Sea started adding higher geopolitical risk to oil prices.

In early April, analysts were not ruling out a run to $100 oil, but they noted that it would take further escalation in the Middle East with a direct threat to oil supply from the region for oil prices to spike to triple digits.

A month later, $100 oil looks like a long way off amid a waning war risk premium in prices. At the end of April, hedge funds and other money managers started dumping long positions in the most important petroleum contracts after Israel and Iran chose not to escalate the standoff in early April.

In addition, commercial crude and fuel inventories in the most transparent market, the U.S., built at the end of April and early May, prompting traders to dump more of their bullish bets as stockpiles across the markets worldwide looked more bearish than expected.   

As a result, long positions on crude oil—bets that prices will rise—were cut in the week to May 7 at the fastest weekly pace since March 2023, Ole Hansen, Head of Commodity Strategy at Saxo Bank, wrote this week in an analysis on the latest positioning in commodities.

Due to the liquidation of longs, the energy sector saw continued selling, which led to technical selling of the crude and fuel contracts. In all commodities, selling was concentrated in crude oil, gas oil, and RBOB gasoline, Hansen added.  

The combined net position in Brent and WTI slumped to 378,000 lots, the lowest in three months. 

“Speculators reduced their net long in ICE Brent significantly over the last reporting week. Speculators sold 60,125 lots to leave them with a net long of 260,648 lots as of last Tuesday, a move which was predominantly driven by longs liquidating,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note this week.

“NYMEX WTI also saw a large amount of selling. Speculators cut their net long by 55,038 lots to 117,651 lots, the smallest position held since February,” they added.

European gasoil also saw a large amount of speculative selling over the week to May 7 as the market became more bearish towards middle distillates, the strategists say.

After the DOJ stonewalled over surrendering an audio recording of Special Counsel Robert Hur’s interview with President Joe Biden over his handling of classified documents, the White House has invoked executive privilege to block House Republicans from obtaining it.

On Wednesday, Attorney General Merrick Garland requested that Biden assert executive privilege over the recordings following a subpoena from the House Judiciary and Oversight committees.

“Because of the President’s longstanding commitment to protecting the integrity, effectiveness, and independence of the Department of Justice and its law enforcement investigations, he has decided to assert executive privilege over the recordings,” said White House counsel Ed Siskel in a letter obtained by The Hill.

The Feb. 27 subpoena requested copies of notes, audio files, video and transcripts related to Hur’s probe, and had a deadline of March 7.

“Americans expect equal justice under the law and DOJ is allowing the Bidens to operate above it,”  House Oversight Committee Chairman James Comer (R-KY) said in an April statement. “Special Counsel Hur’s report outlined that classified documents Joe Biden stashed for years relate to countries where his family cashed in on the Biden brand.”

In response to a request for audio of what author Mark Zwonitzer recorded while interviewing Biden, whose two memoirs he wrote, Assistant AG Carlos Felipe Uriarte said there is no need for the department to hand it over because the committees also have transcripts of the interviews.

“To go further by producing the audio files would compound the likelihood that future prosecutors will be unable to secure this level of cooperation,” Uriarte wrote.

“They might have a harder time obtaining consent to an interview at all. It is clearly not in the public interest to render such cooperation with prosecutors and investigators less likely in the future.”

Uriarte then reiterated that the DOJ has provided ample evidence to the committees.

Hur’s 345-page report concluded that no charges should be brought against Biden due to cognitive decline.

“We have also considered that, at trial, Mr. Biden would likely present himself to a jury, as he did during our interview of him, as a sympathetic, well-meaning, elderly man with a poor memory,” Hur wrote.

Hur cited 2017 conversations between Biden and Zwontizer, which Hur described as “painfully slow, with Mr. Biden struggling to remember events and straining at times to read and relay his own notebook entries.”

To story is not what Republicans are going to say. The story is everyone from the Press Secretary, to admin officials, to military generals and MSNBC pundits like Jen Psaki said behind closed doors he’s “sharp and engaged.”

Here is Biden’s chance to prove how sharp and engaged… https://t.co/29G7BA07wZ

— Stephen L. Miller (@redsteeze) May 16, 2024

Russian President Vladimir Putin is in Beijing visiting his Chinese counterpart Xi Jinping on the occasion of the 75th anniversary of the establishment of diplomatic relations between the two countries.

On the first day of the two-day state visit, which includes top Russian defense and security officials, Putin referenced Russia being “brothers forever” with China and Xi. He quoted from a 1940s song, saying “The event is dedicated to the 75th anniversary of the establishment of diplomatic relations. There is a famous song from that time, it was created 75 years ago, but is often sung today: there is a quite famous line in it: ‘Russian and Chinese are brothers forever‘.

“I am sure that we will continue to strengthen the fraternal spirit of the harmonious Russian-Chinese partnership,” he emphasized. Xi in response hit upon the ‘old friend’ theme, and was quoted in Xinhua as saying, “China is ready to work with Russia to stay each other’s good neighbor, good friend and good partner.”

As expected, the two presented the Russia-China relationship as a stabilizing force for the region in the world. Speaking a their joint press conference Thursday, Xi said, “China is willing to … jointly achieve the development and rejuvenation of our respective countries, and work together to uphold fairness and justice in the world.”

While not naming the United States directly, Xi said that the two countries will grow closer and press on in the face of rising hegemony. XI also said they do no seek to target any third party, and expressed hope that the war in Ukraine would be solved peacefully.

One interesting area of clear agreement was the rejection of foreign military blocs in the region. Putin condemned what he called “closed alliances in the region” – which appeared a reference to to the AUKUS pact of Australia, the United Kingdom and the United States.

90% of all Russia-China trade are now conducted in Ruble and Yuan.

De-dollarization is not only possible but a strategic imperative. It saves money and protects sovereignty.

President Putin and President Xi Jinping in Beijing today. pic.twitter.com/Y5t1zP6LhC

— S.L. Kanthan (@Kanthan2030) May 16, 2024

Xi agreed, telling a press conference that “In today’s world, Cold War mentality is still raging. Unilateral hegemony, bloc confrontation, and power politics pose a direct threat to the entire world and the security of all countries.”

The Chinese leader urged an “immediate” end to Israeli-Palestinian conflict based on a two-state solution and also addressed Ukraine: “China hopes for the swift restoration of peace on the European continent and is ready to continue its constructive role.”

He said this can come about through a “new, balanced, effective and stable security architecture.” Relatedly, the two leaders issued a fresh joint statement which blasts Western imposed restrictions that “obstruct the development of free trade, negatively affect global chains of production and retail.”

On US-led sanctions, the statement said: “The sides condemn the shameless actions, undertaken in circumvention of the UN Security Council, which violate the UN Charter and international law, which obstruct the access to justice, as well as measures that contradict the WTO rules.” It underscored, “Russia and China decisively oppose this.”

Putin arrives in Beijing to meet with Xi.

You’ll notice both Xi and Putin have trailing officials carrying their nation’s respective nuclear footballs.

Simply a matter of protocol? Or an intentional display of strength and unity? pic.twitter.com/cUuqzLFidf

— Clandestine (@WarClandestine) May 16, 2024

The two leaders again upheld the Russia-China relationship as fundamentally “based on the multipolar realities and international law” in a swipe at the West which both Putin and Xi have long deemed hegemonic.

At one point Putin also praised efforts of the two at bypassing the US dollar, saying “A powerful impetus to expand our trade flows was given by our timely joint decision to ensure that transactions are conducted in national currencies. As of today, 90% of all payments are made in rubles and yuan.”

* * *

Remember, Blinken was just in Beijing earlier this month, and of course with comparatively very little red carpet fanfare. While there he strongly warned against China’s backing Russia’s defense industrial sector, immediately after which new US sanctions were unveiled…

Three weeks after Tony Blinken flew to Beijing and tried to browbeat China for providing materials to support Russia’s military-industrial production pic.twitter.com/yjIJKTVVjF

— Michael Tracey (@mtracey) May 16, 2024

By Vassilis Karamanis, Bloomberg Markets live reporter and strategist

Demand for long exposure in the dollar through options at the back-end of the curve suggests position rebalancing is the main driver of latest spot price action.

Investors were long the greenback in the spot market and at the front-end of the curve until a week ago; BBDXY is now trading at its lowest in more than a month but remains above the April lows

One-month risk reversals stand at 23 basis points, half as much as on April 30; one-year riskies, however, are in consolidation mode and, at 85 basis points, match the average for the past year.

By Dhaval Joshi of BCA Research

The Superstar Economy

• The stellar performance of the S&P 500 superstars is not representative of the profits of wider corporate America.
• For the direction of the US jobs market, we should closely monitor the profits of the 6.4 million non-superstar US companies that account for 85 percent of US jobs. These profits have been softening.
• The US stock market’s record 50 percent valuation premium versus the non-US stock market is pricing generative AI to do through the next decade what the Web 2.0 network effect did through the last decade.
• But it will be very difficult for the Web 2.0 superstar companies to become generative AI superstar companies, all assuming there are indeed any lasting generative AI superstar companies.
• Hence, the long-term message is to underweight the US stock market versus the non-US stock market, and the preferred non-US stock market is Europe.

Through the past decade, almost all the growth in world stock market profits has come from the US stock market, where profits have doubled. Profits in  the non-US stock market have barely grown at all

Given the stellar performance of US stock market profits, you might think that the profits of the average American corporation have performed well. But you would be wrong.

There are 6.4 million corporations in the US, so the 500 corporations in the S&P 500 constitute the top 0.01 percent. The superstars. While the  superstars’ profits have doubled, the apples-for-apples growth in economy-wide corporate profits is 50 percent. Not bad, you might think. But excluding the contribution from the S&P 500 superstars, non-S&P 500 corporate profits have increased by just 20 percent on an apples-for-apples basis.

The profits of the top 0.01 percent of US companies have spectacularly outshone the other 6.4 million. Of course, we would expect the superstars to shine, but for many decades S&P 500 profits only mildly outshone those from wider corporate America. For the superstars, the past decade has been a truly stellar period

As The Superstars Shone, The Rest Dwindled

Below the 6.4 million American companies lies an even bigger layer of 28 million sole proprietors. These are the plumbers, builders, piano teachers, and other self-employed individuals whose income is defined as proprietors’ income.

Through the 2010s, the number of sole proprietors4 increased by almost a quarter, yet proprietors’ income as a share of national income has been falling. Meaning that the incomes of the independent contractors, freelancers, gig economy workers and other self-employed have underperformed.

Meanwhile, the wage share of national income has trended modestly higher, albeit from a multi-decade low at the start of the 2010s.

For completeness, Federal government tax receipts as a share of national income has trended broadly sideways. Hence, through the past decade, the incomes of the self-employed, and the profits of non-superstar corporate America have underperformed, while wage earners’ share of national income has recovered from a secular low. But the real winners are the top 0.01 percent of US companies – the superstars – whose profits have soared.

Web 2.0 Birthed The Superstars

In the first two essays of this series, BCA Research – The Superstar Economy and BCA Research – The Superstar Economy: Part 2, I explained that  what birthed the superstars in the 2010s was the Web 2.0 revolution. As the proliferation and power of the internet increased dramatically with smartphones and user-generated data and content, so too did the earnings growth rate and the longevity of the superstars versus the rest. This  exaggerated the skew in the Pareto distribution of incomes.

But more important for the US stock market, Web 2.0 was all about networks. Once you get networks, you get the network effect – the value of a network increases as the number of users of the network increases. Meaning that in a competition of networks, ‘the winner takes all.’ Thereby, the winning networks became natural monopolies with global reach: Amazon for shopping, Google for searching, Facebook for socialising. Plus, the associated ecosystem monopolies: Apple for the hardware, Microsoft for the software.

The Web 2.0 monopolies started generating stellar profits growth in the 2010s by harvesting and monetising the vast quantities of data and content that Web 2.0 users produced. But this growth model has run its course, given the consumer backlash against privacy infringements and the resulting much tighter regulation of data and content harvesting.

Now, expectations for Web 2.0 monopolies’ profit growth are premised on a new hope – generative AI. Yet there is no obvious way for the Web 2.0 monopolies to monetize generative AI and to put a ‘moat’ around any such profits – as the network effect did through the 2010s. Making the market pricing for profit growth to continue outperforming by 10 percent a year through the next decade a huge ask.

Fading Superstars

There are two important messages from the stellar performance of the S&P 500 superstars, one for the short term, one for the longer term.

First, the stellar performance of S&P 500 profits is not representative of the profits of wider corporate America. This is crucial because while the evolution of S&P 500 companies’ profits drive their hiring and firing plans, S&P 500 companies account for no more than 15 percent of the 158 million jobs in the US.

For the US jobs market, much more important than S&P 500 companies is wider corporate America that accounts for at least 85 percent of all jobs.

The short-term message is that to pre-empt the direction of the US jobs market, we should closely monitor the evolution of profits at the 6.4 million non-superstar US companies.  These profits have been softening.

Second, even though almost all the last decade’s growth in world stock market profits has come from the US stock market, relative valuations are pricing last decade’s superstar profit outperformance to persist through the next decade. The US stock market is trading at a more than 50 percent premium to the non-US stock market – well above the early 2000s high, and now in uncharted territory.

For the superstars, the market is pricing generative AI to do through the next decade what the Web 2.0 network effect did through the last decade. But it will be very difficult for the Web 2.0 superstar companies to become generative AI superstar companies, all assuming there are indeed any lasting generative AI superstar companies.

Hence, the long-term message is to underweight the US stock market versus the non-US stock market, and my preferred non-US stock market is Europe.

Superstars At A Structural Turning-Point

Our proprietary analysis of the complexity of price trends, and their collapse, usually focuses on relatively short trends: 65 days (a quarter), 130 days (6 months), and 260 days (a year). But the approach, and its power to presage the end of trends, applies equally to long-term trends: for example, 120 months (10 years).

Therefore, it is significant that the complexity of US tech’s 10-year outperformance has collapsed to the point that presaged the structural reversal through 2000-08, as well as the reversal through 2020-22 .

This analysis of longer-term complexity, combined with the record-high valuation premium that makes a huge ask of the superstars’ profits growth, supports the long-term message: that investors should underweight US tech and the US stock market.