Some Budgets in the worlds of Yupi

These days many criticisms have been made of the General State Budget Bill for 2022, but what is its greatest sin has usually been overlooked: that they are procyclical budgets. That is to say, some budgets that, although they are based on the government’s expectation of strong growth for 2022, insist on reinforcing this already very strong economic recovery with a large increase in public spending, until reaching 7%. Much of that 7% growth in GDP will just be increased government spending.

Economic policy measures that accentuate the prevailing trend at any given time are called “procyclical” and those that try to offset the prevailing trend are called “countercyclical”. When there is a recession, countercyclical policy consists of increasing public spending and lowering interest rates and, when there is a very strong recovery, the opposite is normally done (that is, raising interest rates and reducing public spending: with them the consumerist euphoria or real estate speculation is stopped).

It is the responsibility of governments and central banks to understand what is appropriate at all times, and just as it would have been suicidal (“austericidal”) to make procyclical budgets for the year and a half that the acute phase of the pandemic has lasted (what that in that case it would have meant having reduced spending instead of increasing it) it also does not seem very appropriate that, when the economies are in clear recovery, the government wants to show off with an even greater recovery increasing public spending.

We must insist on praising both the Spanish government and most other governments for adopting an “anti-cyclical” policy during the pandemic: during recessions, anti-cyclical policies are adopted precisely to fight against the calamities of the recessive cycle.

But now that things are much better, that consumption and real estate investment are bordering on euphoria in many countries: does it make sense to push the euphoria even further, which is what a procyclical policy will do? Would it not be better, if not openly countercyclical policies, that they were at least neutral?

Inflation rising

There are problems that can arise from these procyclical policies. The most obvious and traditional of all is the increase in inflation. But also the fact that this increase in demand that the budgets will promote will occur at a time when supply is falling, with which we will see the worst of all worlds: more demand and less supply, which will add another round of inflation to the already existing of an expansionary cycle.

Because the world is now suffering from what economists call a supply shock. sui generiswhich is being translated into fewer products on the market (whether semiconductors or motor vehicles; Christmas toys or fertilizers and even CO2, necessary for the preservation of some foods) and also shortage of some raw materials(fundamentally natural gas: European stocks are very low for this time of year, only two months away from winter) which is causing induced effects of an increase in the price of electricity and everything that needs gas or electricity to be produced or be preserved (food).

There are problems that can arise from these procyclical policies. The most obvious and traditional of all is the increase in inflation

Also, incidentally, it is forcing the partial “lockout” of industrial plants that make intensive use of electricity in order to reduce their costs (in Spain, Sidenor, ArcelorMittal and Fertiberia).

In short, budgets They aim to increase demand when there is a decrease in supply.. A complicated situation for which neither this nor any government is directly responsible (although they are partially so due to some of their improvident policies such as those of the so-called Green Agenda) and that comes as a consequence of having stopped the global economy to combat the pandemic, and the corresponding mess that has occurred in global trade flows, which are now strangely clogged.

Trade imbalance risk

Another problem with the fact that the Spanish economy grows much more than those of other countries (something that the Prime Minister usually drops with pride in his public appearances) is the increase in imports and the relative decrease in exports with what that an eventual deficit in the balance of payments on the current account is encouraged, which would have to be financed with savings from abroad. And more so in a case like that of Spain, which has to matter almost all fossil energy it consumes and many other raw materials, at very high prices, after being depressed for 13 years.

To make matters worse, all of this may be happening in an environment of slowing economies: from China, immersed in its real estate default crisis and plagued by power outages and industry stoppages to save energy, to that of the US, which, with the latest data, already seems to have grown last quarter at a rate of only 0.29% quarterly.

In the history of the European socialist parties there is an unforgettable example of such errors: the one committed by the President of the French Republic, Francois Mitterrand, in the first three years of his government, left the Union of the Left. While the whole world was in recession, in 1980-1981, Mitterrand insisted that the French economy grow and applied a program of expansion of public spending.

Exaggerating, it can be said that nobody bought French products, but they did sell to a France that increased the purchasing power of its citizens. The result was that it became unsustainable and caused several devaluations of the currency (the French franc, then) and finally the departure of the communists from the government accompanied by a radical change in economic policy.

euro depreciation

The situation of the European industry, so vulnerable at the moment due to the lack of components and the rise in energy prices (along with the threat of a trade war with the United Kingdom) makes an additional depreciation of the euro foreseeable, which will make the price of everything that is imported from countries outside the Eurozone.

Thus, to the 150% that the price of gas has risen so far this year (this was the case at the worst moment a few days ago) we must add a rise of almost 7% that has lowered the price of the euro against the dollar from Kings. This will further threaten the trade balance (the Spanish current account balance accumulates five months with a surplus: 4,600 million euros in the first seven months of the year).

Does the government believe its growth forecasts?

Thinking in a very twisted way, one could reach the conclusion that the government does not believe its forecasts of economic growth for the same reasons indicated above of deterioration of the global economy and that, by increasing public spending so strikingly, what it is doing are not procyclical policies but preventive countercyclical ones, but without telling anyone, just in case. A situation in which everything that grew in the Spanish GDP was due to the increase in public spending.

In this way, if the global economy stopped growing, the Spanish economy would have adequately covered itself to maintain a growth rate of 2% or 3%. And if, on the contrary, China, the US and Germany resume strong growth (in an ideal situation in which the global bottlenecks disappear and pre-pandemic normalcy is restored) the government will not care about the imbalances and will apply the long live the present fugitive! And the problems and imbalances… for the future.

This preventive approach (if it were the case, and if not, also) is only possible by the injection of money created out of thin air that the central banks are doing, directly or channeled through the Next Generation funds of the European Union.

Something that is causing a bipolar situation in which, for 18 months, consumers do not know if they are living in Mordor (due to the terror caused by the Covid-19 mortality and the subsequent economic recession) or in the worlds of Yupi where nothing happens to have an unsustainable public deficit and where you can continue living off the air. Or both at the same time. Waking up will not be very pleasant.

Fire in a pine forest in Galicia in 2020.

What if the price of natural gas had already reached its maximum of this cycle?

Anyone who had ever heard the minister of the branch (Teresa Ribera) on October 5 (or to the experts in the sector on TV around the same time) that gas prices would continue to rise until January 2022, the normal thing is that I would have thought that, if the price of natural gas that day was at 6 $.5 (per million British thermal units) for the month of January would be much higher.

With much more reason when the minister had assured, very seriously, that the forecast she had made is what some omniscient futures markets assured would happen.

Nevertheless, At the end of last week, the price of natural gas had not only not risenbut it was lower: at $5.28 (20% less).

Have the futures markets been wrong or was the minister confused in telling it? Neither things. What happens is that the futures markets on the price of natural gas (like those of other raw materials) do not tell us, as the minister seems to have been told, the future price of gas, but the price that must be pay today to have it delivered to us in the future. That is, the word “future” refers not so much to the price as to the delivery time of the merchandise.

They don’t buy the gas today to take it home today. They buy it today to have it delivered (for example) in the next month of January

And the thing is that there are such strange people… They don’t buy gas today to take it home today. They buy it today to have it delivered (for example) in the next month of January, and it is that price of a delivery deferred until January that turns out to be the most expensive at this time. More expensive than delivery in November and December.

This is applicable both for the prices that could be contracted on October 5 and for those of today. In both cases the price for delivery in January is higher than that for immediate delivery.

And why is that January delivery price higher? Because whoever sells you the gas today, but is going to deliver it to you in January, has financing and storage costs until then that, naturally, the buyer will want to pay: the poor little guy who sells it to you does enough to keep it bought and stored until the date the buyer wants it to be delivered…

Who bought on October 5 to have natural gas delivered in the same month paid 6.5 dollars, but if he wanted it for the month of January he paid 6.8

To make it clearer: whoever bought on October 5 to have natural gas delivered in the same month paid 6.5 dollars (per million British thermal units), but if he wanted it for the month of January, he paid 6.8.

On the other hand, whoever bought natural gas last Friday afternoon to have it delivered this week paid $5.28, while those who wanted it for January paid 28 cents more; i.e. 5.56.

You can see that those who made it last Friday have made a much better purchase, whether they wanted the immediate delivery of the gas or if they wanted it to be sent home in January (naturally these are wholesale markets and not they would send it home to no one but to the storage depots of some large industrial company).

This highlights that nobody knows what the price of gas for immediate delivery will be when the harsh winter arrives. What is known for certain (with the current structure of the futures market, which is called, by the way, contango) is that buying today for deferred delivery is more expensive than buying for immediate delivery.

And that is what seemed to be the inaccuracy or the inadequate way of telling the minister. Someone should explain to him that the highest price is not necessarily going to be paid in January (although it could be) but that what everyone wants is to have a guaranteed supply for that month.

Have we already seen the highest price of gas in this cycle of rising prices? It could be yes, although the probability is quite low

And hence the purchases for delivery within that period, which can lead the gas market agents to suspect something (another Philomena Storm?) about gas supply mismatches by then, which makes them pay a premium to have it insured at a known price. But by passing, passing, anything can happen. Even a relatively mild January would drive prices down by then.

Therefore, all that can be done is to speculate intellectually (in addition to being able to do so in the markets) about which month gas will be most expensive, and what the price level will be when that month arrives.

Normally, those cabals about prices are done in a well-reasoned manner, and with the best technical language, by those who work every day in the business of buying and selling natural gas, and not by those who watch the bulls from the sidelines, but that is no guarantee that they will do it with more success than these. And all due to the degree of randomness so high that it has everything related to the future prices of any commodity.

Well, we’re going to do a few of those guesses to try to guess the answer to the headline of the column: have we already seen the highest price of gas in this cycle of price increases? It could be that yes, although the probability is quite low: 15%.

There is something very striking and that is that oil prices are not rising this year at the same rate as natural gas

Or, at least, that is what the history of the last 27 years says. In them, November (in eight different years) and December (in another eight) were the months in which natural gas most frequently reached its maximum price of the year. In October that happened four times.

In the remaining seven years, the highest price peak has occurred irregularly, in January (three times), February (once), May (twice) and even July (once). Hence, probabilistically (frequently) speaking, the months of November and December seem the most plausible for the maximum price to occur: between the two they accumulate a frequency of almost 60%.

But there is something very striking and that is that oil prices are not rising this year at the same rate as natural gas, which means that the price of gas is well above where it was before the pandemic (150% more expensive). today, and at the beginning of October 188% more) while that of Brent oil is only 28% above the pre-pandemic level.

And that is a very extreme situation since the price of oil and the price of natural gas tend to court each other, in such a way that neither in annual nor biennial periods is there almost never (or never) such a large divergence.

This makes a significant correction in the price of natural gas very likely, although it cannot be ruled out that the convergence between the two could be caused by a sharp rise in the price of oil, but that it would occur with a stagnation in the price of gas so that it would be possible.

At this point it already seems that it is taken for granted that this coming winter we will be in the worst of all worlds in terms of gas and electricity supply

Which, in turn, except for serious problems in the Middle East or other producers, seems unlikely in an environment of slowdown in the world economy.

It gives the feeling that the panic of shortages is playing tricks, not because gas reserves are not very low, which they are, but because at this point it seems that it is taken for granted that this coming winter we will be in the worst of all worlds when it comes to gas and electricity supply.

And usually when that’s the case, there is usually a sudden change in trend. It would suffice for an agreement to be reached on the opening of the Nord Stream 2 gas pipeline; that Algeria resume or soften its relations with Morocco or that the world economy slow down faster than it is doing for this change in trend to materialize.

If he hasn’t already done so since October 5. What is a bizarre bet where they exist, but what, despite its low probability of 15% it can make sense. After all, the probability that Biden would win the presidency over Trump, despite the fact that all US presidents tend to repeat terms, was just as low…

Artist's impression of strontium emerging from a merger of neutron stars.

Bottlenecks and inflation

Whoever gets inflation right will hold the key to the winning asset pick.

Euro coins.

Everyone talks about bottlenecks, but no one explains why they have occurred, much less “bottlenecks” to say how long they can last.

But you have to get wet, because it is a fundamental question when it comes to predicting what the level of inflation may be in the medium term, which is the mother of all battles when it comes to investing now in the financial markets. Whoever gets inflation right will hold the key to the winning asset pick, which is what defines the result of a portfolio of funds. Much more than the selection of managers.

If inflation is going to remain high for a long time, certain assets will perform better. Some will even greatly benefit from your presence. If we go back to the pre-pandemic situation, others will work just fine. The difference can be abysmal.

I will explain bottlenecks with an example: imagine you have a business that has been closed during the lockdown. Of course, he does not have a warehouse full of products, since he does not know what the demand will be when the reopening takes place. And more when the majority of economists, analysts, tweeters and influencers they tell him that after the pandemic the real crisis will come (forgetting that we have indebted the next generations up to their eyebrows precisely to avoid it and that the central banks have watered the money system as an antidote).

In the case of a small business, it is easy to adapt if you see that people go out to the streets willing to spend and consume. But imagine when this happens in a mining operation in an emerging country -or directly underdeveloped- that has had to close due to Covid. And the vaccines haven’t even arrived yet. A mining operation is not started just like that. And less in those circumstances. The manufacturing rate of a large factory is not doubled, nor are ships chartered that have been stranded for months, etc., etc.

Whoever gets inflation right will have the key to finding the winning asset selection, which is what defines the result of a portfolio of funds

Also, it is a vicious circle. When merchants or large car manufacturers -or computers, or whatever- see that there are supply problems, they get nervous and buy anywhere and at any price. Not just anyone, but are willing to pay much more. They will see later if they pass it on to the client. The fact is that a certain panic is generated at not being able to meet the demand. And so we have the bottleneck and the inflation it generates.

Clarified this, let’s go with the predictions. The first is that just as the law of supply and demand works to increase prices, it also works to balance supply and demand. In a market economy, when someone wants something and is willing to pay for it, the offer ends up arising. Another thing is the price.

When will equilibrium occur? It is impossible to predict. It is necessary to follow the evolution of the prices of the different components and the advanced economic indicators that affect these products. For example, see how the traffic jams are going in the North American, Chinese or European ports. It is about monitoring the situation –and the prices– of the production and distribution chain in each of its links.

Although there will be a break-even point, current energy prices are the result of a structural decision that will take a long time and cost money

This goes for many things, not so much for energy prices. Although there will be a balance point, current energy prices are the result of a structural decision – the energy transition – that will take a long time and cost money.

What seems clear is that even if we solve the bottlenecks, inflation will be much higher than it was before the pandemic. Although the growth generated for the next two years is of somewhat artificial origin, the result of the mix of monetary and economic stimulus, it will be significant growth.

It does not have to imply high inflation, we will see, but wage pressure is more evident every day, which will be added to the cost of the energy transition. In addition, inflation has a lot to do with sociology: once it is inserted into the minds of consumers, it feeds back.

For investors the conclusion is easy: in the coming months the issue of inflation will continue to be the key to the evolution of the markets and we must know how to handle it. You have to know which assets and sectors benefit from each level of inflation. Because in this the nuances are important: little is not the same as a lot or a lot of inflation.

And in all inflationary scenarios – little, a lot or half a pensioner – you have to avoid bonds and medium- and long-term fixed-income funds like the plague. I said it on May 4 from these same pages, and you see. We call that strategy “The Great Rotation”. Now I insist on it, because the rotation has not ended. It’s probably just started.

*** Víctor Alvargonzález is an independent financial advisor and founding partner of Nextep Finance

Do you also abandon me? Calviño asked BBVA

First, it was the defection of the CEOE, which finally realized that the third vice president, Yolanda Diaz, manipulated them. It is no longer so easy for the communist to reach agreements on labor matters. Second, it was the INE, which lowered GDP growth to 1.1% in the second quarter when the Government boasted of 2.8%. Stab at the macroeconomic picture of the General State Budget project for 2022.

Third, the flight of Iberdrola and the electricity companies, resorting to the PNV to prevent benefits from being plundered by decree. The IMF recently substantially lowered the increase in GDP for 2021 forecast by the Government (6.5%). In addition, the governor of the Bank of Spain has become critical of the drift of the economic measures of the Government, which he accuses of being ideologized. Now it is the BBVA study service that is throwing the Government’s forecasts out of the water, leaving this year’s growth at 5.2%.

It is possible that Calvinoeconomic vice president, has addressed Charles Torrespresident of BBVA, and said the famous phrase of Jesus to his disciples when he explained the Passion that he had to suffer: do you also abandon me?

Because Calviño’s Passion has begun. Accounts of him are turning into tales. Stories that he has to explain to Brussels, where he still has prestige. Prestige that Sánchez, with his government partners and parliamentary allies, are going to undermine. Prestige that we Spaniards still need so that the supplies of the 140,000 million euros of the Next Generation or EU recovery funds are not cut off.

Calviño’s Passion has begun. The accounts of him are turning into tales

Little by little, those responsible for business decisions in Spain are abandoning the vice president. These echoes are reaching international markets. They have already arrived and hence, the least direct investment in Spain. In the end they will also reach Brussels and other community institutions, such as the ECB. Then the prestige of our economic leaders will be questioned.

But BBVA has not completely abandoned Vice President Calviño; she has been prudent in her forecasts. Readers remember that I have been insisting that I don’t think we will grow above 5%. That’s why I think your study service must have been moderated. After all, a company of its size should not get too wet against political power. Another thing is what they say internally.

For example, with regard to inflation, it seems to me that he has been prudent in stating that, although we will finish with the 4% increase in the CPI (Consumer Price Index) at the end of 2021, with an average of 2.8% in the year, this study service forecasts 1.8% for 2022.

In my opinion, if their forecasts come true in 2021, the unions of the big companies will have no choice but to request that wages be revised upwards in the first half of 2022. Yes, in addition, the Government complies with its desire to raise the Minimum Interprofessional Salary (SMI) to 1,000 euros at the beginning of 2022, that will also push the hierarchical salary scale. Above all, in sectoral agreements that do not take into account the characteristics of each company in particular.

Some SMEs are holding back on their price increases for fear that demand will drop. But if labor costs are added to the increase in energy costs and the lack of some supplies, in the end they will rise. That will fuel inflation in a country of services like ours, in which the weight of wages in the final product is high.

So the BBVA study service has not yet completely abandoned Calviño and his macroeconomic forecasts. Has been moderate and cautiousboth in the rise in GDP in 2021 (which will be lower), and in inflation in 2022 (which will be higher).

The end will be when the CIS, chaired by José Félix Tezanos, declares the PP the winner against the PSOE in one of its famous and made-up polls. Then, Sánchez will say what Cesar exclaimed in his murder: Bruto, you too, my son? Are you Tezanos too, my sociologist?

*** JR Pin is a professor at IESE.

Hisense, Photo: Hisense

The reinvention of the machine

It is an increasingly evident trend that is impossible to ignore: more and more consumer electronic devices – computers, smartphones, etc. – that have microprocessors or specific areas within their microprocessor intended for the development of operations related to the machine learninga discipline that many tend to call “artificial intelligence”.

I simply don’t like the term “artificial intelligence”. It may be because for years, talking about anything related to the possibility of machines developing functionalities that are remotely reminiscent of human intelligence, be it playing chess, Go or poker, automatically made your interlocutor visualize the threatening image of a robot Terminator, or because I believe that intelligence, as such, is something else.

I tend to prefer the term machine learningwhich leads me to better understand what the machine is actually doing: applying statistical procedures to derive rules from a suitably labeled data set.

In practice, we basically talk about that. For years, humans have considered a computer as a box full of programs or rules, generated by third parties or by ourselves if we knew how to program, to which we supplied data in order to obtain results.

The programs, as such, were “stable”: your word processor, your spreadsheet, your presentation program, etc. They didn’t change their way of doing things, their procedures, once you installed them. They simply received your data and processed it methodically. If you always did things a certain way, they weren’t particularly suited to your way of doing things or anything like that. The machine was predictable and rigid, the flexibility was provided by the users.

In machine learning, things change. Under this way of doing things, users supply the machine with data conveniently labeled with its results, and the machine is able to deduce the rules by which those data generated those results. This, continuously developed, allows the machine, in human terminology, to “learn” – in reality, it is just applying more or less complex statistical rules – and can, for example, adapt to changing patterns of use.

Under machine learning, users supply the machine with data labeled with its results

The best way to understand it is by imagining how the hell it gets our smartphone return to us, upon request, photos from our collection featuring a dog, or a sunset, or a specific person.

If we try to design a system to do something like this from the point of view of classical programming, it would be very complex: a dog can have many different aspects and very varied anatomical attributes, which would make the possibility of programming conditionals to identify them an endless task . A sunset? The variations are huge. A face of a person? How many angles, perspectives or gestural differences should be taken into account?

And yet our smartphone performs the task remarkably well, simply because we have trained some algorithms showing them a huge number of dogs – or sunsets, or faces – labeled as what they are. From that dataset, those algorithms are able, with relatively few errors, to recognize when an unlabeled image contains a dog, a sunset, or a certain face.

Increasingly, the inflexible, predictable and rigid machines we knew are becoming something else, and with it, equipping itself with potentially much more interesting functionalities.

In the evolution of consumer electronics, the incorporation of machine learning is becoming one of the most interesting trends with the greatest potential in history, and that does not mean that machines “become intelligent”, but that will be able to apply statistical procedures to act in different ways on different human behaviors, or on different sets of supplied data.

The incorporation of machine learning is becoming one of the most interesting trends with the greatest potential in history

The camera of our smartphone he no longer just takes photos: now he is able to understand what combination of lens, exposure, aperture, etc. it should be used to highlight, for example, a portrait, or to blur its background, or for many other features that the user finds interesting.

And like that, we will find more and more functionalities in which the machine, with a criterion based on the training of its algorithms, carried out by its manufacturer or by ourselves, will be able to optimize the way it has to assist us.

The devices we know are changing, they are learning new tricks… and there is nothing “sinister” about it, nor are we to think that they are going to turn into evil Terminators with an evil red gleam in their eyes. Fears, none. But we should understand that we are facing a dimensional changeand that those who do not understand it and do not know how to incorporate it, will be relegated to the past, surpassed by a new generation.


Bourbon makers could face a major problem

A glass of whiskey.

The state of Kentucky became famous throughout the world thanks to two things: Kentucky Fried Chicken and Bourbon. Interestingly, despite the coronavirus crisis, both fast food restaurant and corn whiskey makers have done well this year.

To be more precise, in the second quarter of this year, the company Yum! Brands, Inc. (YUM), which operates the brands KFC, Taco Bell and Pizza Hut, posted net income of $391 million, or $1.29 per share, compared with $206 million, or 67 cents per share, a year earlier. Same-store sales worldwide increased 23% in the quarter.

Along with that, Yum said it opened 603 net new locations during the quarter and plans to accelerate the pace of its expansion by resetting its long-term growth targets. Compared to the first half of 2020, sales at KFC are up 35%, Taco Bell is up 24%, and Pizza Hut is up 10%. Sales of the company’s digital products, on the other hand, grew 35% to more than $5 billion.

For Bourbon producers, for the first time in Kentucky history there are more than 10 million barrels of bourbon aging and distillers are setting records by filling nearly 2.5 million barrels in a single year. The problem is that, in a couple of months, the industry could face a significant increase in tariffs in Europe.

According to CNBC, Kentucky distilleries are expected to pay more than $33 million in taxes on barrel aged in 2021 alone. That figure is 140% higher than 10 years ago.

In addition to the aged barrel taxes, Kentucky distillers will be required to pay approximately $300 million in state and local taxes and another $1.8 billion in federal excise taxes on alcohol.

However, the main problem for distillers is not so much taxes as tariffs imposed by China, Mexico, Canada, the European Union, and the United Kingdom in 2018 in response to US taxes on steel and aluminum.

After imposing 25% tariffs on US whiskey, exports to the EU, the largest export market for spirits, fell 37% from $702 million in 2018 to $440 million in 2020, according to the Distilled Alcohol Council ( DISCUS). Bourbon exports to the UK, the fourth largest market for US whiskey, fell 53% from $150 million in 2018 to $71 million in 2020.

To make matters worse, European tariffs on US whiskey could double to 50% in December unless the Biden administration lifts tariffs on foreign steel imposed by former President Donald Trump. As a result, MGP Ingredients, Inc. (MGPI), Eastside Distilling, Inc. (EAST), Brown-Forman Corporation (BF-B) could be affected.

A glass of whiskey.

Google continues to eat the world despite everything

As much as the Mr. Wonderful mugs say, you don’t have to try to do everything right to be successful. Corporate malpractice may not make a dent in a company’s profits, as evidenced by the fact that Google’s parent company, Alphabetjust beat all your revenue and profit records.

In the last three months alone, the company has generated $65.1 billion in revenue and record profit of $18.9 billion for the fifth consecutive quarter. With this profit figure, if Alphabet were a country, the economy of its last three months would be positioned in the 118th place in annual world GDP rankingsthere is nothing.

Part of the blame for this ball is the pandemic. Although the coronavirus continues to reap deaths across the planet, it has also been responsible for the recent boom in electronic commerce, and with it, the Greater interest of brands to advertise on the internet. If we add to this that Google is the search engine par excellence, the result is a company whose profits are increasing much faster than its income.

Nobody doubts the enormous quality of some Alphabet products, such as Youtube and the search engine itself, whose qualities manage to keep intact the loyalty of its users and customers (I confess that I use them daily myself). What is shocking is that the company is growing faster and faster, despite the many scandals that surround it.

Of course, profits come from various different branches of companies, but it is advertising that achieves the most spectacular figures and also the one that monopolizes the most controversies. Google has been accused of manipulating the search results it returns for its own benefit and of imposing unfair exclusivity conditions on its advertisers.

In Europe, its abusive practices in the advertising business on-line they have already given him three fines worth almost 8,000 million euros total. Although, if you compare this figure with that of its annual net profits, you will notice that the European sanctions are small change for the giant.

Across the pond, last year the US Department of Justice sued the search engine for monopolizing the search market. Not to mention more serious issues, such as the fulminant dismissal of one of its ethics leaders last year for trying to uncover biases and other problems with its AI systems.

However, its internal controversies do not seem to permeate its legion of users (among which I include myself). And on the side of investors, whose sights are usually set on the short term, it seems that legal problems do not matter too much, given that the company will not set foot in US courts until 2023.

And it is not the only one. This week, the stock market value of Tesla surpassed $1 trillion for the first time, becoming the sixth American company to achieve this milestone (do you know what the others are? Of course, Apple, Microsoft, Amazon, Alphabet and Facebook, what things, right?). And, how could it be otherwise, the company is also dotted with its own scandals.

In addition to the list of fatal accidents in which its driving assistance system, Autopilot, has been involved, Tesla was accused in 2018 of omitting injuries to workers at its car factory in its mandatory reports. But what is most surprising about its spectacular valuation is that it has surpassed all of its automotive rivals, who actually sell many more cars.

For example, the second most valued car company is Toyota, whose market share and revenue far exceed that of Tesla, despite the fact that it is worth three times more on the stock market than the Japanese manufacturer. So what is the reason for this enthusiasm among investors?

According to experts, although Elon Musk’s company has a smaller market share and much lower revenue than the others, his company represents the future of mobility. And the scandals? Like those of Google, it seems that they do not matter. The only difference is that while Alphabet lives on its present successes, Tesla represents a long-term bet able to redefine transportation.

Of course, not all technological giants live oblivious to the impact of their bad practices. Faced with the unstoppable growth of these two companies, Facebook’s shares do not stop falling and its founder, Mark Zuckerberg, does not stop pulling ideas out of his sleeve and proposing name and image changes to get rid of his long list of controversies .

We’ll see what happens when it announces its newly announced Alphabet-like corporate umbrella. But, for now, it seems that it is the only one Big Tech whose behavior has begun to conform to the messages on the Mr. Wonderful mugs.

The General Manager of the South of Spain of the Barceló Hotel Group, Gaspar Sáez.

Díaz and the looting of the Government with wages

“Don’t wanna be your slave twenty-four hours a day.” Mick jagger.

Yolanda Diaz He has never created a company in his life, nor paid a payroll out of his pocket, but he happens to know exactly how much companies should charge and pay.

Costs skyrocketing? They demand that companies not raise prices and that they lose… but that they pay more taxes.

Do taxes shoot up work? They require you to pay more salaries even if they keep almost 35% of what you earn.

And on top of that, they blame you for paying few taxes.

For socialism, everyone has a margin except them.

If it’s a wage issue, why don’t you lower taxes on work? A salary of 1,000 euros is more than 1,800 gross.

If it’s a wage issue, why don’t you lower taxes on work?

Spain was the European country in which the tax pressure grew the most during the pandemic. How could this have happened with a million fewer people listed and 100,000 fewer listed companies? Exploding what’s left. The tax hack has been triggered in addition to charging taxes on the misnamed “aid”.

This is especially serious because tax collection has skyrocketed even though the tax base has worsened, that is, we have been suffocated with taxes that we have overcome the crisis while the government not only maintained, but increased, all political spending, duplicities and unnecessary.

Spain was also the European country with the highest deficit despite squeezing captive taxpayers like never before. The weight of spending on GDP increased 10 points in the midst of the pandemic, and not a tiny part of that increase was aid to executed companies.

Spain also closed 2020 with the lower level of aid to companies and the self-employedexecuted Really. Let’s not forget that announcements were made –such as the misnamed direct aid- that were never fulfilled. And let’s not forget that the ERTE is not an aid from the state to the companies but from the companies to the state, since it is much cheaper for the public coffers to have a person in an ERTE than an unemployed person.

The latest AIReF forecasts show a rebound of just 2.6% in the first nine months of 2021less than half of what the government expects for its fake budgets.

We already warned last week that the macro table for growth, oil prices and inflation were laughable, a completely invalid macro table and science fiction revenues that, despite everything, leave a structural deficit – the one generated whether we grow or not – that it will be the highest in the European Union in 2023 on your own estimates.

The fiscal and inflationary clamp to companies and citizens impoverishes everyone and it is intolerable.

The companies face a rise in the prices of their inputs –increase in costs- that exceeds 16%. For companies, energy has risen more than 31%, non-durable consumer goods 26% and average costs between 15 and 20%. A ruin in a country of SMEs and for the manufacturing sector that manufactures components.

Additionally, with the rise in the minimum wage, the cost of hiring and the minimum contribution bases have increased. For an average company, 66% of their costs – wages and energy – have ballooned far beyond what they can pass on to their customers. And Yolanda Díaz arrives and tells them in a soft voice to get annoyed and pay more salaries so that she steals even more in indirect and direct taxes.

The ‘hachazo’ to the self-employed is even more bloody because they have the shamelessness to say that nobody cares to pay 200 euros more a year. Tell it to the hundreds of thousands of self-employed who cannot make ends meet, to whom all taxes have been raised and on top of that the penalties for delay have been maintained, a real robbery.

The interventionist government plunders via tax and with the inflationary tax and then, in a mellifluous voice, he tells you that he is going to help you with your own money and that companies pay more and sell below the increase in costs.

Meanwhile, they continue to fatten the extractive and confiscatory machinery.

And they have the shamelessness to ask for “empathy”.

Movistar store in the Gran Vía shopping center in Hortaleza.

Take your pick: stagnation or inflation, but not both.

In the more than ten-year drought of financial misery, many analysts and advisers have grasped at inflation like straws.

Euro bills.

For ten years now, the way to attract attention in the markets is to announce some kind of financial misfortune. A crisis, a bursting bubble, or any other scary issue that generates followers or clients looking for protection. Although the funniest thing is that, in the end, it was neither a financial crisis nor a bursting bubble that caused Armageddon, but a virus from China.

So, with a more than ten-year drought of financial misery going on, many analysts and advisers have seized on the inflation like a burning nail, assuming, from the outset, that inflation is always bad for the economy or the stock market, when history shows that it depends on the level of inflation.

And then, taking advantage of the problem posed by the bottlenecks of the restart of activity, they have included in the “pack” the economic stagnation. Stagnation plus inflation: what can be scarier? If that doesn’t make all potential clients seek your protection, nothing will.

So, if you allow me to be politically incorrect, I will tell you that, at least on this occasion, it seems difficult to me that both horsemen of the apocalypse coincide. The one of stagnation is neither there nor is it expected. The one with inflation, yes, but he will probably stay as a rider for good, without reaching the level of horseman of the apocalypse.

Of course I agree that inflation is going to be higher than it was before the pandemic. I said it a long time ago: the closest thing to getting out of a pandemic and a global lockdown is getting out of a war. And the two world wars have come out with more inflation. If we add to this that never has so much money been injected into the system and that the stimulus plans make the Marshall Plan, it does not take a genius to realize that inflation will be higher. Probably quite higher.

The closest thing to getting out of a pandemic and a global lockdown is getting out of a war. And the two world wars have come out with more inflation

But those who trust that we will return to 70s or 80s-type inflation levels make the same mistake as when they spoke of the “Chinese Lehman”: they are making a comparison that is based more on desire than reality. Of course there are inflationary elements. And that we are going to have a serious problem with energy, since the cost of the energy transition has not been properly assessed. But the weight of energy in inflation today is not comparable to the 1970s. Then it was 9% and today it is 4% (US PCE)

But, above all, they forget that we are still in the middle of the industrial revolution, in this case the digital one. I don’t have space to explain why, but believe me: all industrial revolutions have been disinflationary. And this is no exception. The digital revolution will act as a buffer in the prices of services.

Of course there will be salary pressure, we are already seeing it. But precisely that helps to avoid the arrival of the other horseman of the apocalypse, the one of stagnation. People having money in their pockets is good for growth. And since we are talking about growth: although it will be artificial and the result of monetary and economic stimulus, there will be growth.

The predictions of organizations with a good predictive history – that is, I do not include the IMF – speak of global growth for the coming year of more than 5% and around 4% in 2023. But, even if it were 3% – that would already be wrong -: it cannot be called stagnation.

Those of us who advise investors and savers must prioritize objectivity and realism over the search for the “like” or the “retweet”

In the end reality spoils a good tweet. And the reality is that it seems difficult for the doomsayers to achieve the carom of stagnation plus high inflation.

Those of us who advise investors and savers must prioritize objectivity and realism over the search for the “like” or the “retweet”. And the first and fundamental thing when defining an investment strategy is precisely to be clear about the macroeconomic picture. And for that you have to be realistic.

Those who anticipate stagflation are telling investors the same thing they told them when they were told about crises and bubbles: avoid equities. But, given the record rise in stock markets in the last 10 years – and especially in the last 20 months – think twice before following that advice.

Remember that only high and persistent inflation is bad for equities. And for the record, as independent advisors, we do not charge more for recommending equity funds than for recommending funds that invest in gold or leave the money in a checking account. Right or wrong, our advice is totally free of conflict of interest.

*** Víctor Alvargonzález is an independent financial advisor and founding partner of Nextep Finance