US Venture Capital Exit Evolution From IPO To M&A: Chart

From Reason Foundation, "As regulators fight big tech mergers, startups often pay the price: Regulators deterred Amazon’s acquisition of iRobot. They may also have deterred innovation and future competition." by Max Gulker, Senior Policy Analyst:

The venture capital model has thereby played a critical role in democratizing entrepreneurship, and merger and acquisition (M&A) transactions are critical to the venture capital model. Around the turn of the 21st century, digital and online startups started outnumbering businesses that provide products and services mostly in the physical world. As the figure below shows, successful exits for venture capital investments in startups went from overwhelmingly IPOs to overwhelmingly M&A.

Source:Source: Merusacap Via Reason Foundation

Many of these ultimate M&A transactions represent a startup with a unique capability of innovating along certain lines. Large companies, who may be able to distribute the technology more efficiently or create incremental improvements, seek to acquire such startups after successful venture capital funding has lessened uncertainty.

Borrowing Costs (Mortgages, Etc) Not Included In Inflation Measures (CPI, Etc): Causing Depressed Consumer Sentiment Despite Lower Inflation And Lower Unemployment

From "The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly" by Marijn A. Bolhuis, Judd N. L. Cramer, Karl Oskar Schulz & Lawrence H. Summers, Working Paper 32163, Issue Date February 2024:

Abstract
Unemployment is low and inflation is falling, but consumer sentiment remains depressed. This has confounded economists, who historically rely on these two variables to gauge how consumers feel about the economy. We propose that borrowing costs, which have grown at rates they had not reached in decades, do much to explain this gap. The cost of money is not currently included in traditional price indexes, indicating a disconnect between the measures favored by economists and the effective costs borne by consumers. We show that the lows in US consumer sentiment that cannot be explained by unemployment and official inflation are strongly correlated with borrowing costs and consumer credit supply. Concerns over borrowing costs, which have historically tracked the cost of money, are at their highest levels since the Volcker-era. We then develop alternative measures of inflation that include borrowing costs and can account for almost three quarters of the gap in US consumer sentiment in 2023. Global evidence shows that consumer sentiment gaps across countries are also strongly correlated with changes in interest rates. Proposed U.S.-specific factors do not find much supportive evidence abroad.

From the paper [http://www.nber.org/papers/w32163]: These increases in the cost of living do not make it into economists’ measures of inflation, however. The CPI excludes interest payments and is up a relatively muted 20 percent since the end of 2019.5 This was not always the case. When [Arthur] Okun created his index, the measurement procedure for the CPI included measures of interest costs. This changed with the CPI redesign of 1983 (Bolhuis et al. 2022a, b). Before January of that year, homeownership variables, including housing prices and mortgage rates, entered directly into the CPI. The inclusion of these components made inflation increase mechanically at the beginning of a tightening cycle and decline once policy normalization began. It also led to a volatile series with disproportionate weight for a component—housing—that is both a consumption and an investment good. After years of research, the Bureau of Labor Statistics (BLS) moved to a system of owners’ equivalent rent, which has a stronger theoretical justification (Gillingham, 1983). Housing prices and financing costs were removed from the index. But it did not disappear from the effective costs borne by would-be home buyers or others reliant on financing due to liquidity constraints, including those borrowing to finance cars and other forms of consumption. This paper argues that this disconnect in inflation measurement, on the one hand, and actual increases in the cost of living due to higher financing costs faced by consumers, on the other, underpins the recent divergence between official inflation data and consumer sentiment. [Empahsis added.]

Lower Productivity Migrant Workers Lowers Per Capita GDP And US Prosperity: My Posted Comment To WSJ Article, "Immigration Wave Delivers Economic Windfall"

My posted comment to The Wall Street Journal article, "Immigration Wave Delivers Economic Windfall. But There’s a Catch. Recent migrants are expected to be lower paid and less productive than predecessors" by Paul Kiernan:

US prosperity is better measured by real GDP per capita than total real GDP. An influx of lower paid and lower productivity migrant workers will decrease output and US prosperity per person when compared to the workers and capital investment they are crowding out. US prosperity is lowered not increased.

[Blog title corrected to replace Capital with Capita.]

Earthquake Probabilities Across The United States: A New Map Shows The Risks

From ScienceNews, "Where are U.S. earthquakes most likely? A new map shows the hazard risks: The map shows the probability of damaging U.S. earthquakes over the next 100 years" by By Nikk Ogasa:

Some 230 million people in the United States face the potential of damaging earthquakes in 100 years, according to the latest U.S. National Seismic Hazard Model, or NSHM. That’s about 40 million more people than the NHSM previously suggested.

***

Source: ScienceNews

 

Harvard Professor Greg Mankiw Recommends Fed Stop Giving News Conferences

From Greg Mankiw's Blog, Thursday, February 01, 2024, "Memo to Fed: Stop the News Conferences":

In watching part of Jay Powell's news conference yesterday, I realized that what he is doing to just the opposite of good economics communication. When I write an article, give a lecture, or draft a textbook chapter, my goal is to convey maximum information in the fewest words possible. But when the Fed chair answers reporters' questions, he seems to be conveying the least possible information in the most words possible.***Here is my recommendation: Stop giving news conferences. The Fed's policy decision and statement should stand by themselves. The Supreme Court does not give news conferences after announcing decisions. They explain their judgment once in writing and then let that stand. The Fed should do the same.

US Demographic Outlook: 2024 to 2054: CBO Projections

From Congressional Budget Office, "The Demographic Outlook: 2024 to 2054" January 2024:

Projected changes in the size of the U.S. population, as well as its age and sex composition, significantly affect the outlook for the economy and the federal budget. For example, the number of people who are employed and paying taxes on their wages depends on the size of the population ages 25 to 54, and the number of beneficiaries of some federal programs (including Social Security and Medicare) depends on the size of the population age 65 or older. *** In CBO’s projections, the population increases from 342 million people in 2024 to 383 million people in 2054, growing by 0.4 percent per year, on average, or by less than one-half the pace experienced from 1974 to 2023 (0.9 percent per year). Over the next decade, immigration accounts for about 70 percent of the overall increase in the size of the population, and the greater number of births than deaths accounts for the remaining 30 percent. After 2034, net immigration increasingly drives population growth, accounting for all population growth beginning in 2040. (For a comparison of CBO’s population projections with those of other agencies, see Appendix A.)

CBO’s projections of the population over the 2024–2054 period are highly uncertain, especially in later years. If rates of fertility, mortality, or net immigration were higher or lower than in the agency’s projections, then the resulting population would differ from the amounts shown here. The effects would be larger in later years of the projection period than in the earlier years because differences in those rates compound in each year of the period.

Source: CBO, Graphic by R L Rebach 

Full CBO document available in PDF format here.

Young Black Americans Increasingly Investing In Stock Market

From The Wall Street Journal, Personal Finance, "Black Investors Are the Biggest New Group of Stock Buyers: Mobile apps, social media and word-of-mouth are reshaping the makeup of the market" by Oyin Adedoyin and Sanaa Rowser:

Young Black Americans are among the fastest-growing segments of stock-market investors.

Nearly 40% of Black Americans owned stocks in 2022, up from just under a third in 2016, according to the most recent Federal Reserve data. During that same period, the share of white households with stocks grew to nearly two-thirds, up from 61%. This was all before the stock market’s 2023 rally.

This growth seems to be driven in part by younger investors, surveys suggest. They embraced the market in a retail-investing boom fueled by mobile apps, commission-free trading, participation in 401(k)s, crypto, meme stocks and social media, researchers said. Nearly 70% of Black respondents under 40 years old were investing, compared with roughly 60% of white investors in the same age group in 2022, according to a survey by Ariel Investments and Charles Schwab. [Emphasis and Survey weblink added.]