2021年7月20日 星期二

Of Delta and the Dow

What, if anything, can we learn from a stock market swoon?
Carlo Allegri/Reuters
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By Paul Krugman

Opinion Columnist

On Oct. 19, 1987, stocks plunged: The Dow fell almost 23 percent in a single day. Over the next week the media attempted to link the plunge to various news items that had been reported over the days preceding that Black Monday.

But Robert Shiller of Yale University (a future Nobel laureate) was uniquely positioned to figure out what had actually happened. He had been conducting surveys of investor behavior and had a list of fax numbers that allowed him to ask a wide range of investors, just hours after the plunge, what had motivated them to sell. And he found essentially no evidence for any of the rationales offered after the fact. For the most part, investors attributed their decision to sell to the fact that … stock prices were falling. It was basically a self-reinforcing panic.

I bring up this old story as a caution against taking any efforts to explain yesterday's stock price decline too seriously. Most news reports are attributing the crash to fears about the Delta variant and a resurgence of Covid-19, and it's true that the epidemiological news has gotten worse lately, largely because so many people are refusing to get vaccinated. But was there substantially more reason for pessimism on Monday than there had already been the previous week? We really don't know what triggered the sell-off.

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That said, we have a pretty good idea what didn't cause the stock plunge: It clearly had nothing to do with the fears of inflation some economists and pundits have been trying to stir up.

How do we know this? If you want evidence about what investors think will happen to the economy, you don't want to look at just stock prices. You also want to look at long-term interest rates.

In fact, you mainly want to look at long-term interest rates, for a couple of reasons. One is that the bond market isn't as sexy as the stock market; it gets far less attention from the general public. As a result, there's probably less emotion-driven bond trading than stock trading — you hear about "meme stocks" like GameStop, but I've never heard anyone go on about meme bonds.

The other is that the effects of the economy on bonds are clearer than the effects on stocks. The prospect of a boom raises expected profits, which pushes stocks up — but it also raises expected future interest rates, which pushes stocks down. Stocks can therefore go either way; but interest rates on long-term bonds, which mainly reflect expected future short-term rates, give a clear indication about which way investors think it's going.

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So, about stagflation: Back in the spring a number of economists, most vocally Larry Summers, warned that President Biden's first major piece of legislation, the $1.9 trillion American Rescue Plan, was too big. Putting out that much money, they warned, would cause the economy to overheat and bring back something like 1970s-style inflation.

It's important to note that they weren't talking about the kind of inflation we've seen over the past four months, which is largely driven by what should be transitory factors as we emerge from the pandemic. A remarkably large share of recent inflation has been driven simply by a presumably temporary spike in the price of used cars.

No, what Summers and company were and are concerned about is something a bit longer-term: An unsustainable large boom in spending that, like the boom in the late 1960s, will lead to a rise in underlying inflation — and eventually force the Federal Reserve to push the economy into a recession to get prices back under control.

This isn't a crazy scenario. For a variety of reasons, I don't think it will happen, but that's not an argument I want to rehash right now. My point, instead, is that what we saw in the markets Monday wasn't at all what you'd expect to see if investors were suddenly starting to worry that Larry is right. Yes, fears of stagflation would send stock prices lower. But they would also send long-term interest rates higher. And what actually happened was the opposite: Bond yields plunged to their lowest level in five months.

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For what it's worth, Monday's market action was what you'd expect to see if investors suddenly became concerned that the Biden stimulus was too small, not that it was too big. What actually happened? I don't know; maybe it was the Delta variant. Although maybe somebody can still do a Shiller-type survey.

And let's also note that while it's always worth paying attention to what the markets are doing — unlike pundits, myself included, investors are putting real money on the line — the actual track record of markets at predicting future inflation, or, well, anything is quite poor.

Above all, remember the three key principles when thinking or writing about financial markets: 1) The stock market is not the economy. 2) The stock market is not the economy. 3) The stock market is not the economy.

Quick Hits

Stock prices move too much.

After that 1987 crash, economic growth … accelerated.

Markets aren't worried about inflation.

Unfortunately, their track record at predicting inflation is terrible.

Feedback If you're enjoying what you're reading, please consider recommending it to friends. They can sign up here. If you want to share your thoughts on an item in this week's newsletter or on the newsletter in general, please email me at krugman-newsletter@nytimes.com.

Facing the Music

Death Valley hit 130 degrees the other day.YouTube

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On Tech: Can Apple’s AirTags find lost pets?

We look at the pros and cons of using Apple's AirTag tracking device to find our missing dogs and cats.

Can Apple's AirTags find lost pets?

We look at the pros and cons of using Apple's AirTag tracking device to find our missing dogs and cats.

Jaedoo Lee

By Kaitlyn Wells

Today we'll hear from Kaitlyn Wells, a staff writer at Wirecutter, a product recommendation site owned by The New York Times.

The panic that sets in when a pet goes missing is something no dog or cat owner wants to experience. Should your best friend get loose, GPS (Global Positioning System) pet trackers that follow your pet in real time can help reunite you, but the devices can be expensive (they average about $200), and some also require a pricey annual subscription. So when Apple announced its AirTag tracking devices in April, you may have wondered what I did: Would the $29 coin-sized device work as a pet tracker?

How is the AirTag different from a Bluetooth or GPS pet tracker?

GPS pet trackers use satellite signals and cellular data information to communicate your pet's location to your phone, while Bluetooth-only trackers communicate its location only if it is within Bluetooth range of your phone — typically within 30 to 100 feet — or if someone else running on the same tracker ecosystem happens to wander past.

The AirTag uses both Bluetooth and a more precise positioning technology called ultrawideband (UWB) to pinpoint the tracker's location. Like a souped-up version of Bluetooth, UWB will point you in your AirTag's direction with compass-like accuracy if you're using an iPhone close to the missing AirTag. If you're farther away, Apple's Find My app network and Bluetooth from other iPhone users can help you find it instead.

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This difference — the near ubiquity of Apple devices anywhere you might be, helping to track your AirTag — is what makes Apple's tracker far more useful than a Bluetooth tracker such as the Tile Mate, which operates within a far smaller pool of users.

Both AirTags and Bluetooth trackers are reliant on other devices, though, whereas GPS trackers harness the power of satellites.

Does Apple approve of using AirTag for tracking pets?

Technically, no. Though it's small enough to affix to a dog's collar using Apple's own key rings or loops (my colleague Brian X. Chen made the hack work), Apple has stressed that the AirTag is meant for locating items, not people or pets. Still, the company does have a patent on its UWB technology and cites removable tags attached to a pet's collar or a kid's T-shirt as possible use scenarios in the filing.

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Don't be shocked if Apple launches pet-friendly trackers in the future, but right now, the AirTag as a pet tracker is considered an off-label use.

Is there any reason you wouldn't want to use AirTags for pets?

The AirTag is more limited than dedicated GPS pet trackers. Currently, the Find My app won't notify you immediately if you're separated from an AirTag, though this feature is being added in iOS 15. GPS pet trackers do this if your pet leaves a designated area.

AirTags can't be attached to a pet's collar on their own either, so you need to buy an Apple AirTag Loop (which costs as much as the AirTag itself) or a less-expensive third-party holder.

Other GPS pet trackers Wirecutter likes

We've tested over a dozen pet trackers over the years, and one always leads the pack: the Whistle Go Explore. It costs four times as much as the AirTag, but it'll immediately tell you if your pet escapes home, is more accurate than any other GPS tracker we tested and works with both Apple and Android phones.

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But like most pet trackers we have tested, its GPS accuracy can be finicky when cellular service is spotty, and you pay a $100 annual subscription to keep using it. The rechargeable battery also lasts only about three days in "lost pet mode" compared with AirTag's estimated monthslong battery life in that mode.

If you're a price-conscious Apple user, the AirTag is more accurate than a traditional Bluetooth tracker, but it won't be as responsive as a GPS pet tracker.

The AirTag is far better than nothing, but if you're willing to spend a bit more, I'd recommend the Whistle Go Explore because it remains the most reliable, accurate and fastest way to alert you if your pet goes missing.

No matter which device you choose, make sure that your pets are microchipped and that their ID tags are accurate. The more ways you have to be reunited with your lost pet, the better.

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Before we go …

  • Facebook's pandemic knowledge gap: The White House has been asking Facebook for data on the prevalence of misleading information about Covid-19 vaccines on the social network. But Sheera Frenkel reports that Facebook doesn't actually know many specifics about how misinformation about the coronavirus has spread.
  • How China became a more serious hacking threat: Nicole Perlroth writes that China became more sophisticated at digital espionage after Chinese authorities reorganized networks of cyberattackers and hoarded knowledge of software vulnerabilities that can be used to break into computer systems.Related from my colleague Max Fisher: "Government-linked hacking has become a widespread and perhaps long-lasting feature of the global order."
  • The Chinese mystery seeds might be weirder than we thought: There was a mini-freakout last year when many people got seed packets delivered seemingly at random from China and other countries. The Atlantic kept digging and found that the saga might have resulted from a collective panic over seeds that many people forgot they ordered.

Hugs to this

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