MoneyWeek

When it comes to the continental welfare state, “from the cradle to the grave” is meant literally. The city of Vienna offers grieving families extraordinarily comprehensive administrative help. Your adviser will help you find a spot in the cemetery and choose a coffin (or an urn) and a wreath; they will even arrange professional musicians for your loved one’s ceremony (well, it is the city of music). You can also ask the city to erase the departed’s digital footprint. It is all very efficient and helpful, and it is not free. But it does give us a glimpse of the extent to which the Viennese expect the state to do things for them, and what the state feels it appropriate to provide. “An instinctive hostility to business can be the…

Michael Smith, a music producer from North Carolina, has been charged in the US with using artificial intelligence (AI) to defraud the music industry out of $10m in royalties, says Gene Maddus in Variety. In 2018, Smith allegedly teamed up with an AI music company and a promoter to generate hundreds of songs using AI. According to prosecutors, he had already set up thousands of “bot” accounts on music streaming platforms such as Spotify and Apple Music using “vast quantities” of email addresses, a computer program to play the songs continuously automatically, and VPN software to hide his whereabouts to avoid the platforms’ fraud detection systems. Up to 661,440 streams a day are said to have taken place. The Mechanical Licensing Collective (MLC), which distributes streaming royalties, became suspicious last…

Chinese markets are stuck in “limbo”, say Abhishek Vishnoi and Winnie Hsu on Bloomberg. Fund managers complain the shares lack both “the vigour of an emerging market and the stability of a developed one”. The benchmark CSI 300 index is down more than 6% this year, leaving it on course for a fourth successive annual loss. Since a 2021 peak, roughly “$6.5trn has been wiped out from... Chinese and Hong Kong” shares – the value of Japan’s entire stockmarket. While much of the world struggles with inflation, China has been battling the opposite problem, says Jacky Wong in The Wall Street Journal. On one measure, the GDP deflator (the gap between nominal and real GDP growth), the world’s second-largest economy has “already been in deflation for five straight quarters”. Falling…

America’s “most well-known recession indicator” has “stopped flashing red”, but that is not good news, says Elisabeth Buchwald for CNN. The two- to ten-year “yield curve” has been inverted since 2022, historically an indicator that America is heading for recession within the next two years. Ten-year bond yields are usually higher than two-year yields. But if markets anticipate a recession (and hence interest-rate cuts) ahead, then the curve can “invert”. At the start of the year, the US Treasury was thus paying 3.9% to borrow for a decade, less than the 4.3% it was paying to do so for two years. Last week the curve finally “uninverted”, with ten-year yields (3.64%) back above two-year ones (3.6%). Yet historically, such an uninversion “is the point of greatest danger when it comes…

Small caps are “cool again”, say Charlie Wells and Suzanne Woolley on Bloomberg. After a long run dominated by the big seven tech stocks, investment advisers are increasingly looking to the “polar opposite”. Smaller companies tend to have floating-rate debts, so falling US interest rates will give them a disproportionate boost. Small caps have lagged America’s corporate giants, says Lori Ioannou in The Wall Street Journal. Over the decade to 1 August this year, the Russell 2000 index of small caps returned an annual 8.91%, dwarfed by the 15% annual returns from the LargeCap S&P 500. Yet the “headwinds” of high debt costs and inflation that have “beset” small firms are finally fading away. On a forward price/earnings ratio of 16.9, the S&P SmallCap 600 also looks a much better…

Despite a “widening war” in the Middle East and the Opec cartel’s “best efforts” to cap supply, oil prices just keep on falling, says John Rapley for UnHerd. Brent crude recently touched a near-three-year low below $70 a barrel. It picked up slightly on renewed Middle East tensions this week, but, trading around $72 a barrel, oil remains down by more than a fifth over the past 12 months. Blame the stagnation on weakening demand from the “three big beasts” of the world economy – North America, Europe and China – which may “signal a looming recession”. There are also structural forces at work. China, in a quest for energy security, is pivoting away from oil at a quicker pace than expected. China’s rollout of liquefied natural gas (LNG) has…