Post 223

A snapshot of what’s going on in the world’s economy.  Financial Ructions and book reviews can be a bit more technical so feel free to skip them.  See disclaimer at the end of this note.

I hope you all had a great holiday season.  Diet time for me.


  • Not a lot of companies reporting results, but that will change soon.
  • More evidence that industry is slowing.
  • More layoff announcements: this time from Xerox.
  • The boom in electric vehicles might be slowing with prices coming down.
  • However, the boom in government hiring continues.
    • This is really bad for the economy.
  • China continues to slow.
  • Meanwhile, prices in Europe seem to be rising again.
  • A very brief review of F.A. Hayek’s Road To Serfdom from my 2012 Ivy quarterly report.
    • It’s interesting for me to see my writing style from 11 years ago as well as my development in terms of economic philosophy.
  • In Financial Ructions, with most commercial property loans structured as interest only, interest payments for many will soar as they renew this year i.e. none of the loan has been paid down, but rates are significantly higher.


Top movies of 2023: Box Office Mojo

  1. Barbie: $1.4 billion
  2. Super Mario Brothers Movie: $1.4 billion
  3. Oppenheimer: $952 million
  4. Guardians of the Galaxy Vol. 3: $846 million
  5. Fast X: $705 million
  6. Spider-Man: Across the Spider-Verse: $691 million
    • Is it just me or is that a stupid title?
  7. The Little Mermaid: $570 million
  8. Mission: Impossible – Dead Reckoning Part One: $568 million
  9. Elemental: $496 million
  10. Ant-Man and the Wasp: Quantumania: $476 million

Down at the bottom of the list at #200: Les petites victoires: $7 million

  • With emphasis on the “petite” it would seem.

Oh Deere

Deere is a global leader in agricultural, forestry and construction equipment.  A little history:

  • 1837: Founded when blacksmith John Deere moved from Vermont to Illinois.
    • Apparently, typical plows did not work as well in the prairies because the soil was not as sandy.
    • He used a broken steel saw and reshaped it to work more effectively in the sticky prairie soil.
      • He saw an opportunity.
  • 1849: Producing 2,000 plows a year.
  • 1918: Starts building tractors
  • 1935: Builds tractors for industrial use.

Quarterly sales for Deere:

 AgricultureSmall Ag & TurfConstruction and ForestryTotal

Forecast for 2024:

  • US and Canada:
    • Large agricultural equipment: Down 10-15%
    • Small agricultural and turf equipment: Down 5-10%
    • Construction equipment: Down 5-10%
    • Compact construction equipment: Flat to Down 5%

Copy That

Xerox launched the first automatic plane paper copier in 1959.

Their most recent three-month results:

  • Adjusted sales were down 7.4%

They recently announced a new organizational structure and are offering “Congratulations to our new executive leadership team…” And high-fives all around, I’m sure.

  • Later they let you know that they’re laying off 15% of their workforce.
  • With a total of 20,500 employees that is just over 3,000 people being let go.

Tesla – Sales Still Strong But Slowing

Production since COVID:  Up over 370%.

However, production growth is slowing.

  • 4Q-2023: 495,000 vehicles

Annual growth in production by quarter:

  • 2Q-2023: +83%
  • 3Q-2023: +27%
  • 4Q-2023: +13%

Note that production growth is slowing despite significant price cuts this year.

My post from August:

From The Twittersphere: Now X

CarDealershipGuy: Tesla On Sale

Prices of Tesla Model S and X Prices

DateModel SModel X
Start of the year$104,990$120,990
January 12$94,990$109,990
March 5$89,990$99,990
April 6$84,990$94,990
April 20$87,490$97,490
May 11$88,490$98,490
August 14$78,490$88,490
Sep 1$74,990$79,990
Percent change from start of yearDown 29%Down 34%

Government Booming

The Globe and Mail reports on the growth of the Canadian government:

  • Number of employees (Public Service Commission of Canada):
    • 2022/2023: 274,219
      • Up 40.4% over eight years.
  • According to the Treasury Board of Canada Secretariat:
    • The number of public servants:
      • 357,247
        • Up 10% from last year
        • Up 39% from 2014/2015
    • PM: These are an outrageous numbers.
      • As a reminder, the government is not a productive entity with the vast majority of its spending geared toward consumption rather than investment.
      • More resources are being siphoned off from the productive side of the economy to the non-productive side and we are seeing that with steadily declining GDP per capita.

China Slowing

China’s manufacturing purchasing managers’ index (PMI): a reading of below 50 means contraction and vice versa:

  • October: 49.5
  • November: 49.4
  • December: 49.0

The non-manufacturing PMI:

  • October: 50.6
  • November:  50.2
  • December: 50.4

Services PMI:

  • November: 49.3
  • December: 49.3

Germany: Prices Rising


  • October: 3.8%
  • November: 3.2%
  • December: 3.7%
    • Services: 3.2%
    • Goods: 4.1%
      • Food: 4.5%

Core inflation excluding food and energy:

  • December: 3.5%

Note that the inflation number from December of 2022 was lower due to energy relief packages that had been in place at that time.

France: Prices Rising


  • November: 3.5%
  • December: 3.7%
    • Food: 7.1%
    • Services: 3.1%
    • Manufactured products: 1.4%

Ivy Quarterly, December 2012

Continuing with the same quarterly report I quoted from in my last post, here is my brief book review of F.A. Hayek’s The Road To Serfdom (I highly recommend this book; it’s not a difficult read).

The Road to Serfdom, F.A. Hayek, 

University of Chicago, 1944 (original publication).

The Road to Serfdom by F.A. Hayek cautions against the roles and efforts of central planners, of those who feel they know best what GDP levels should be, what prices should be and how and where people should allocate their capital. It is not a libertarian philosophy: “Nor is the preservation of competition incompatible with an extensive system of social services.” Even Keynes praised it.

In a letter from Keynes to Hayek he called it “a grand book” and that “morally and philosophically I find myself in agreement with virtually the whole of it; and not only in agreement with it, but in a deeply moved agreement”[1] (of course he didn’t agree with all of it).

Hayek argues that rules need to be put in place and adhered to, that certain functions must be provided by government, yet in terms of the economy and markets, individuals must be left to their own devices. He likens it to the government that builds highways and lays down the rules of the road. Their responsibility is to ensure that roads are safe and in good repair and that the rules of the road are obeyed.

The role of government is not to tell people where to drive and when. In our view, it seems that more recently, policy makers have encouraged Wall Street to drive faster and faster on our roads through debt accumulation and other means. People seemed to be getting to their destinations faster and everything seemed more efficient.

Authorities were turning a blind eye to drivers breaking the speed limit assuming that drivers would know when it was appropriate to slow down. However, as banks continued to drive faster and faster without incurring any accidents they became increasingly confident about their driving skills. And as no one was handing them any speeding tickets they became increasingly convinced that they were subject to a different set of traffic rules from that of the general population.

Ultimately this led to a massive car pileup with many innocent drivers ensnared in the wreckage. The government then stepped in, but rather than throw the book at those who caused the accident, they replaced all of the bankers’ cars at no cost and not only that, the vehicles were installed with more powerful engines so that they could drive even faster the next time.

Policymakers did however come down hard (through financial repression) on all of those who had previously been obeying the rules. Now those innocent bystanders are forced to drive even slower while they watch the bankers speed by them in Fed-funded supercharged hot-rods.

The Road To Serfdom: Introduction by Bruce Caldwell, pages 23,24 (from Letters, John Maynard Keynes to Hayek, June 28, 1944).

Financial Ructions

Commercial Property Creaking

The FT reports that over $100 billion of US office property debt is up for renewal in 2024 (Mortgage Bankers Association).

  • Commercial mortgages are almost always structured as interest only payments i.e. the loan is never paid down.
  • With interest rates now significantly higher than when the loans were originated, many property owners could be in trouble with more of them handing the keys back to the lenders.
    • Approximately two thirds of maturing office property loans are owned by banks.

Yields Off Their Highs

Junk Debt Yields (ICE BofA Fred)

  • Pre-COVID: 5.04%
  • July 2021: 3.92%
  • Oct 2023: 9.45%
  • Dec 2023: 7.39%

The FT reports that convertible debt issuance has risen as corporations attempt to deal with higher interest rates.

  • Interest rates on convertible debt are much lower.
  • An example they give is UBER which issued a convertible loan in November at less than 1%.

Disclaimer: Note that Paulitical Economy™ should not be considered as investment advice, and I have not verified all of the sources of information.  It is meant for general interest purposes only.  Please consult an advisor if you plan on putting any of your hard-earned capital to work during these turbulent times.

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