Stocks, Onwards And Upwards? PIMCO Warns.

 Baltic Dry Index. 1091 -21              Brent Crude 75.47

Spot Gold 1920                   US 2 Year Yield 4.87  unch.

By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland?

Adam Smith, The Wealth Of Nations, 1776.

It is a holiday affected week in the US stock casinos, where following a strong H1 23, more of the same is expected in H2 23.

Well maybe, but the US Fed, the BOE and ECB are all threatening more interest rate hikes to come in H2 23.

If that happens, on top of all the interest rate hikes already made in 2022-2023, I think H2 23 will not be a repeat of H1 23, but will trigger recessions in the USA, Canada, the UK and Euroland led by Germany, already in recession.

Our stock casinos will then give back most, if not all of the gains of H2 23.

Asia markets rise as investors digest private surveys on factory activity

UPDATED SUN, JUL 2 2023 11:17 PM EDT

Asia-Pacific markets rose as investors digested a slew of manufacturing activity reports that showed slowing output in the region.

China’s Caixin manufacturing purchasing managers index for June came in at 50.5, slightly higher than expectations of 50.2 by a Reuters poll. China’s official government PMI readings posted a third straight month of contraction.

Mainland China markets were higher: The Shanghai Composite gained 0.72% and the Shenzhen Component rose 0.18%. Hong Kong’s Hang Seng index rose 1.29% and the Hang Seng Tech index rose over 2%.

Japan’s Nikkei 225 led gains in the region and popped 1.46% higher, with the Topix also up by 1.11%. South Korea’s Kospi climbed 1.39% and the Kosdaq rose 1.81%. Private surveys for South Korea and Japan also showed factory activity slowed for the month.

In Australia, the S&P/ASX 200 gained 0.27%, as investors wait for the Reserve Bank of Australia’s rate decision on Tuesday. Economists polled by Reuters expect the central bank to hike its cash rate by another 25 basis points to 4.35%.

The S&P Global ASEAN Manufacturing purchasing managers’ index saw conditions for the manufacturing sector improve mildly in June, posting a 51 reading, lower than 51.1 seen a month ago.

On Friday in the U.S., all three major indexes made gains, led by technology stocks. The Nasdaq Composite advanced 1.45%, while the S&P 500 climbed 1.23% and the Dow Jones Industrial Average gained 0.84%,

Factory output in Southeast Asia mixed amid global uncertainties

Private surveys for factory activity in ASEAN countries showed an mixed picture in Southeast Asian markets.

The S&P Global ASEAN Manufacturing purchasing managers’ index saw conditions for the manufacturing sector improve mildly in June, posting a 51 reading, lower than 51.1 seen a month ago.

“The region continues to fair well despite the post-COVID boom subsiding,” Maryam Baluch, Economist at S&P Global Market Intelligence said, adding that lingering global economic uncertainty and rate hikes “worldwide map a challenging road ahead.”

Indonesia’s manufacturing PMI expanded to 52.5 in June from 50.3 in May.

Thailand’s manufacturing output also remained in expansion territory, with its PMI reading at 53.2 in June — a slowed growth from a reading of 58.2 a month ago.

Meanwhile in Vietnam, its factory activity remained in contraction territory for the fourth straight month at 46.2, the private survey showed, slightly up from 45.3 in the previous month.

In the Philippines, manufacturing firms saw a fractional rise in output amid softer expansion in new orders, marking the weakest output growth in 10 months.

Its PMI reading came in at 50.9 in June, lower than the previous reading of 52.2.

Asia markets rise as investors digest private surveys on factory activity (cnbc.com)

Asia's factory output slumps as weak China demand weighs

July 3, 20234:38 AM GMT+1

TOKYO, July 3 (Reuters) - Asia's factory activity slumped in June, business surveys showed on Monday, as sluggish demand in China and advanced nations clouded the outlook for the region's exporters.

While manufacturing activity expanded marginally in China, it contracted in powerhouses Japan and South Korea as Asia's fragile economic recovery struggled to maintain momentum.

The surveys underscore the toll China's weaker-than-expected rebound from COVID lockdowns is inflicting on Asia, where manufacturers are also bracing for the fallout from aggressive U.S. and European interest rate hikes.

"The worst may have passed for Asian factories but activity lacks momentum because of diminishing prospects for a strong recovery in China's economy," said Toru Nishihama, chief emerging market economist at Dai-ichi Life Research Institute.

"China is dragging its feet in delivering stimulus. The U.S. economy will likely feel the pain from big rate hikes. These factors all make Asian manufacturers gloomy about the outlook."

China's Caixin/S&P Global manufacturing purchasing managers' index (PMI) eased to 50.5 in June from 50.9 in May, the private survey showed on Monday, staying above the 50-point index mark that separates growth from contraction.

The figure, combined with Friday's official survey that showed factory activity extending declines, adds to evidence the world's No. 2 economy lost steam in the second quarter.

The impact is being felt in Japan where the final au Jibun Bank PMI fell to 49.8 in June, returning to a contraction after expanding in May for the first time in seven months.

New orders from overseas customers decreased in June at the fastest rate in four months reflecting feeble demand from China, the Japan PMI survey showed.

South Korea's PMI fell to 47.8 in June, from 48.4 in May, extending its downturn to a record 12th consecutive month on weak demand in Asia and Europe.

Factory activity also contracted in Taiwan, Vietnam and Malaysia, the PMI surveys showed.

Asia's economy is heavily reliant on the strength of China's economy, which saw growth rebound in the first quarter but subsequently fell short of expectations.

More

Asia's factory output slumps as weak China demand weighs | Reuters

Wall Street Breakfast: The Week Ahead

Jul. 02, 2023 7:18 AM ET

Economic releases covering construction spending, factory orders, and initial jobless claims will be sandwiched around the 4th of July holiday before the June jobs report lands on the laps of investors on July 7. Economists forecast 213K jobs were added during the month and for the unemployment rate to dip to 3.6% from 3.7%. Average hourly earnings are forecast to be 0.3% month-over-month and 4.2% year-over-year.

Major banks will also be watched closely next week after the group passed the Federal Reserve's stress tests that simulated a severe recession. Analysts expect dividends to be increased by most large banks, but share repurchases are expected to be relatively subdued in the near term until the direction of the economy becomes more clear.

Bank of New York Mellon (BK), JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), Goldman Sachs (GS), Morgan Stanley (MS), Truist Financial (TFC), Citigroup (C), and State Street (STT) are some of the banks in the spotlight for capital allocation developments. Seeking Alpha analyst Logan Kane thinks that while large banks are likely to weather the storm, dozens of smaller banks may fail over the next 12-18 months due to risky real estate loans and falling deposits.

More

Wall Street Breakfast: The Week Ahead | Seeking Alpha

Finally, a “harder landing” warning from bonds giant PIMCO. What do they know that we don’t?

 

PIMCO CIO says preparing for 'harder landing' for global economy - FT

July 2, 2023

(Reuters) - Pacific Investment Management Co (PIMCO) is preparing for a "harder landing" while top central bank chiefs prepare to continue their campaign of interest rate rises, Daniel Ivascyn, chief investment officer at the U.S. bond giant, told the Financial Times in an interview published on Sunday.

"The more tightening that people feel motivated to do, the more uncertainty around these lags and the greater risk to more extreme economic outlooks," Ivascyn told the FT, noting that when rates have risen in the past, a lag of five or six quarters for the impact to be felt has been "the norm".

The market is "too confident in the quality of central bank decisions", he told the FT.

PIMCO CIO says preparing for 'harder landing' for global economy - FT (msn.com)

Global Inflation/Stagflation/Recession Watch.

Given our Magic Money Tree central banksters and our spendthrift politicians, inflation now needs an entire section of its own.

Bank of England ‘must stop creating money out of thin air’

Sat, 1 July 2023 at 3:01 pm BST

The Bank of England must stop “creating new money out of thin air” and focus on helping savers, a coalition of City figures, economists and think-tank leaders has warned.

In a letter sent to Jeremy Hunt, the group called on the Government to overhaul monetary policy by changing the Bank’s remit to focus solely on maintaining the value of the pound “by whatever means necessary”.

The signatories are launching a new “Honest Money” initiative to campaign for their reforms.

The Bank and Andrew Bailey, its governor, have endured heavy criticism in recent weeks, with inflation remaining at 8.7 per cent last month, while the base rate rose to five per cent in an attempt to control it.

Mr Bailey has been accused of acting too slowly to tackle inflation, insisting it was “transitory” for much of 2021.

Meanwhile, prominent figures such as Lord King of Lothbury, one of the Bank’s former governors, have accused it of fuelling price rises with excessive quantitative easing.

Now a group of economic thinkers – including Geoff Blanning, a former investment manager at Schroders, Dr Eamonn Butler, the director of the Adam Smith Institute, and Mark Littlewood, the director general of the Institute of Economic Affairs – has written to the Chancellor demanding a shake-up of the Bank.

In their letter, the coalition said: “We are living through an overwhelming cost of living squeeze, and millennials are likely to be the first generation since before the Industrial Revolution to be poorer than their parents.

“This is in large part because since the financial crash of 2008, the Bank of England has been creating new money out of thin air to fund the Government’s promises.

“Since March 2009, the money supply has surged by over 50 per cent from the Bank’s actions alone, and half of this – £400 billion – took place in 2020-21 to fund lockdowns.”

The letter accused the Government and the Bank of being “jointly complicit” in a “debt explosion”.

“More money in the system, without more goods and services being produced, leads to rising prices which hurts those on low incomes the most – especially young people and pensioners,” it said.

“It erodes people’s savings, reduces real terms wages and makes houses increasingly unaffordable for first-time buyers. Meanwhile, inequality increases as those with the most assets – especially financial assets – enjoy undeserved gains.”

More

Bank of England ‘must stop creating money out of thin air’ (yahoo.com)

Key Fed inflation measure shows prices rose just 0.3% in May

PUBLISHED FRI, JUN 30 2023 8:42 AM EDTUPDATED FRI, JUN 30 2023 11:14 AM EDT

Inflation pressures eased slightly in May as consumer spending slowed considerably, according to a Commerce Department report released Friday.

The personal consumption expenditures price index, a number closely watched by the Federal Reserve, increased 0.3% for the month when excluding food and energy, a number that was in line with the Dow Jones estimate. So-called core PCE increased 4.6% from a year ago, 0.1 percentage point less than expected.

In April, the index rose 0.4% for the month and 4.7% from a year ago.

When including the volatile food and energy components, inflation was considerably softer — up just 0.1% on the month and 3.8% from a year ago. Those were down respectively from the 0.4% and 4.3% increases reported for April. The headline year-over-year number was the lowest since April 2021 while the core was the lowest since October 2021.

While inflation pulled back a bit, spending rose just 0.1% for the month, below the 0.2% estimate and a sharp drop from the 0.6% increase in April. That deceleration came even though personal income accelerated 0.4%, ahead of the 0.3% estimate.

“The spending splurge is likely nearing the end as consumers released most of the pent-up demand for spending,” said Jeffrey Roach, chief economist at LPL Financial.

Though Friday’s data showed inflation moving gradually in the right direction, it is still well above the Fed’s 2% longer-term target. Central bank Chairman Jerome Powell said this week that level isn’t likely to be achieved for a few years yet.

More

PCE inflation May 2023: Key Fed measure shows prices rose just 0.3% in May (cnbc.com)

Covid-19 Corner

This section will continue until it becomes unneeded.

No Covid update today. Today, how Artificial Intelligence may one day greatly assist in medicine. Just not today.

 

ChatGPT Fails to Make the Grade

Artificial intelligence-powered chatbot may spread medical misinformation

Jul 1 2023

 

AI’s best-known “chatbot” (a nickname for AI that produces language), ChatGPT, is making waves in many industries, including health care. However, it has not yet mastered the art of test-taking—at least not in ophthalmology, gastroenterology, or urology.

 

ChatGPT Passed Medical Licensing Exam

In an early 2023 study, ChatGPT (just barely) passed the United States Medical Licensing Exam, a mandatory medical licensure requirement. The USMLE consists of three tests, with the first being administered to second-year medical students who usually dedicate 300 to 400 hours to exam preparation. Fourth-year medical school students take the second test, and practicing physicians who have typically completed one-half to one year of postgraduate studies take the third test. Passing all three grants license to practice medicine in the United States without supervision.

 

ChatGPT was given no special preparation for the exam.

“ChatGPT performed at >50 percent accuracy across all examinations, exceeding 60 percent in some analyses,” according to the study. The pass threshold varies yearly but is usually near 60 percent.

ChatGPT’s scores improved as new chatbot versions were tested, and the researchers even suggested that, in the future, the chatbot may help create the USMLE.

However, later, it failed three medical education exams.

 

ChatGPT Fails an Ophthalmology Test—Twice

Researchers at St. Michael’s Hospital in Toronto, Canada, measured ChatGPT’s test-taking skills in the field of ophthalmology. On a widely used practice exam for ophthalmology board certification, the chatbot answered only 46 percent of questions correctly on the first try. A month later, it increased its score to 58 percent correct answers.

 

It may be that ChatGPT exhibits the human trait of test-taking anxiety.

 

When given real-world ophthalmologic scenarios, however, the chatbot excelled. In one study, researchers gave ChatGPT 10 ophthalmology case studies to analyze. It provided the correct diagnosis for nine of the cases. Like the researchers in the USMLE tests, the authors assume that AI will only improve, stating: “Conversational AI models such as ChatGPT have potential value in the diagnosis of ophthalmic conditions, particularly for primary care providers.”

More

ChatGPT Fails to Make the Grade (theepochtimes.com)

 

Technology Update.

With events happening fast in the development of solar power and graphene, among other things, I’ve added this section. Updates as they get reported.

Chinese Researchers Used AI to Design RISC-V CPU in Under 5 Hours

June 30, 2023

A group of Chinese scientists has published (PDF) a paper titled "Pushing the Limits of Machine Design: Automated CPU Design with AI." The paper details the researchers' work in designing a new industrial-scale RISC-V CPU in under 5 hours. It is claimed this AI-automated feat was about 1000x faster than a human team could have finished a comparable CPU design. However, some may poke fun at the resulting AI-designed CPU performing approximately on par with an i486.

The goal of the Chinese research team was to answer the question of whether machines can design chips like humans. Earlier AI-crafted designs have been relatively small or limited in scope, reckons the team. Thus, to test the boundaries of AI design, the researchers thought they would try and get an AI to automatically design a RISC-V CPU.

Projects like this typically start with a period of machine learning. Training consisted of observing a series of CPU inputs and outputs. The scientists generated a Binary Speculation Diagram (BSD) from this I/O and leveraged principles of Monte Carlo-based expansion and Boolean functions to hone the accuracy and efficiency of the AI-based CPU design. Thus the CPU design was formed "from only external input-output observations instead of formal program code," explains the scientists. It also boasted an impressive 99.99999999999% accuracy.

Using the above-outlined process, an automated AI design of a CPU was created. The taped-out RISC-V32IA instruction set CPU was fabricated at 65nm and could run at up to 300 MHz. Running the Linux (kernel 5.15) operating system and SPEC CINT 2000 on the AI-generated CPU validated its functionality. In Drystone benchmarks, the AI-generated CPU performed on par with an i486. Interestingly, it appears to be a little bit faster than an Acorn Archimedes A3010 in the same test.­

Though some might be unimpressed by the performance of the AI-generated CPU, the scientists also seem quite proud that their generated BSD "discovered the von Neumann architecture from scratch."

The building a new RISC-V CPU from scratch using AI isn't just of academic interest, or of potential use for making new CPUs from the ground up. According to the researchers, AI could be used to significantly reduce the design and optimization cycles in the existing semiconductor industry. Moreover, in their conclusion, the scientists even ponder whether this research might be taken further to form the foundation of a self-evolving machine.

This is by no means our first story on AI being used to advance computer processor designs. In March, we reported on Nvidia using AI to optimize chip designs, particularly the floor-planning work. Also, in May, we reported on Synopsys boasting its DSO.ai software had been used in over 200 customer chip designs.

Chinese Researchers Used AI to Design RISC-V CPU in Under 5 Hours (msn.com)

It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy...What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom.

Adam Smith, The Wealth Of Nations, 1776.