Climate science

Predicting the climatic future is riddled with uncertainty

But researchers are doing the best they can




THE WORLD’S climate scientists are charged with a difficult task: to create a crystal ball with which to skry a future that promises to be hotter than today. But exactly how much hotter depends on innumerable factors, both natural and human. Creating the crystal ball is thus a two-stage process. First, you have to build a simulacrum of how Earth’s climate works. Then, you try to perturb this simulacrum with plausible future human actions, to see what picture appears.

Modern magic being what it is, the crystal balls are actually supercomputers running programs with 1m or more lines of code. These programs are models that divide the planet’s atmosphere, ocean and land surface into grids of cells—many millions of them. Land cells are flat. Atmosphere and ocean cells are three-dimensional and are stacked in columns to account for the effects of altitude and depth. A model calculates what is going on, physically and chemically, inside each cell, and how this will affect that cell’s neighbours, both sideways and, if appropriate, above and below. Then it does it again. And again. And again. 
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That is a complicated process. A model’s code has to represent everything from the laws of thermodynamics to the intricacies of how air molecules interact with one another. Running it means performing quadrillions of mathematical operations a second—hence the need for supercomputers. And using it to make predictions means doing this thousands of times, with slightly different inputs on each run, to get a sense of which outcomes are likely, which unlikely but possible, and which implausible in the extreme.

Even so, such models are crude. Millions of grid cells might sound a lot, but it means that an individual cell’s area, seen from above, is about 10,000 square kilometres, while an air or ocean cell may have a volume of as much as 100,000km3. Treating these enormous areas and volumes as points misses much detail. Clouds, for instance, present a particular challenge to modellers.

Depending on how they form and where, they can either warm or cool the climate. But a cloud is far smaller than even the smallest grid-cells, so its individual effect cannot be captured. The same is true of regional effects caused by things like topographic features or islands.

Uncertainty principals

Building models is also made hard by lack of knowledge about the ways that carbon—the central atom in molecules of carbon dioxide and methane, the main heat-capturing greenhouse gases other than water vapour—moves through the environment. Understanding Earth’s carbon cycles is crucial to understanding climate change. But much of that element’s movement is facilitated by living organisms, and these are even more difficult to understand than physical processes.

Plants absorb carbon from the air during photosynthesis and then return it during respiration. Animals that eat those plants also respire. Bacteria and fungi similarly break down dead plants and animals to pillage materials and energy from them, releasing carbon dioxide and methane into the atmosphere as they do so. Some organic matter, nevertheless, gets buried rather than broken down, and is thus removed from climatic consideration.

But, over time, this buried material is transformed by heat and pressure into oil, gas and coal—substances pertinent to the climate in the context of one particular biological agent, Homo sapiens. This species uses them to power its civilisation, taking mere decades to fill the air with carbon that took hundreds of millions of years to accumulate underground.

Organic matter may also be trapped in ice: on land in areas of permafrost, and at the bottom of the sea in molecular structures called clathrates. On top of all this, the oceans themselves contain vast amounts of dissolved carbon dioxide, and many sea creatures draw on that reserve to build themselves shells and carapaces out of calcium carbonate. Not all of this material is recycled. Some ends up on the seabed and eventually turns into limestone.

Changes in temperature are also a consideration. The relationship between warmth and carbon-dioxide concentration in the atmosphere is a two-way street. Warm water holds less of the gas than cold water. During past ice ages, oceans therefore drew carbon dioxide out of the atmosphere as they cooled, amplifying the process of cooling. Today’s warmer oceans still act in aggregate as sinks for CO2. The warmer they get, however, the less that will continue to be true.

Sensitive information

A further problem in model building is that uncertainties about feedback loops like the one between ocean temperature and CO2 absorption also underpin uncertainties about a parameter called climate sensitivity, which is crucial to models’ predictions. This is a measure of how responsive the climate is to changes in CO2 concentrations in the atmosphere.

Basic physics suggests the air should warm by approximately 1°C for a doubling of CO2 levels relative to pre-industrial times. (So far, CO2 levels have risen by about 50%.) Add feedback loops and estimates of temperature increase range from 1.5°C to 4.5°C. There have, moreover, been suggestions that climate sensitivity may itself be subject to a feedback loop, causing the climate to become yet more sensitive to CO2 as it warms, thus promoting warming still further.

To test predictions such as these against reality and adjust models accordingly requires better data for, until recently, most parts of the globe lacked decent observations. Satellite records of the area covered by ice in the Arctic, for instance, stretch back only to 1979, and it was not until 2002 that researchers were able, courtesy of some new satellites, to estimate how the thickness of that ice varies over time and from place to place. Applied to land-covering ice sheets as well as the floating ice of the Arctic Ocean, this revealed that Greenland was losing more than 200 cubic kilometres of ice (though only 0.007% of its total volume) a year—three times previous estimates.

Other parts of the globe suffer from a similar lack of observations. The oceans, for example, are reckoned to absorb more than 90% of the heat trapped by man-made greenhouse-gas emissions. But serious collection of data on the marine processes that underpin this, using networks of autonomous buoys, began only in the early 2000s. Swathes of the Southern Ocean, which plays an important role in storing both heat and CO2, are still not monitored, and there are parts of the Arctic Ocean where no man has ever dipped a toe, nor machine a sensor.

Data from even inhabited parts of the world can be sparse, with unfortunate consequences. West Africa’s monsoon, the failure of which in the 1970s and 1980s led to drought and famine, is poorly simulated by models, leading to fuzzy predictions for how it will change as the world continues to warm. Parts of east Africa where models had predicted an increase in rainfall have instead experienced a decrease. And heatwaves are rarely recorded on that continent, even though they would be expected to occur there.

A further source of uncertainty is what scientists refer to as non-linear effects. These are big, rapid shifts that occur in response to small changes, and may be irreversible, at least in the short term. Many involve ice changing into liquid water.

The collapse of ice sheets on parts of Greenland and Antarctica could happen with mere decades of warming, but would take millennia of cooling to reverse. The melting of permafrost might be worse: not only irreversible, but releasing vast amounts of carbon dioxide and methane to boost temperatures further.

Ocean currents also look susceptible to non-linear effects. These currents are propelled by a phenomenon called thermohaline circulation that depends, as its name suggests, on the salinity and temperature of seawater, and thus its density. Cold or saline water sinks, while warm or fresher water rises, and large bodies of sinking or rising water provide the engine that drives currents around the world.

There are signs that the North Atlantic conveyor belt, which drives the circulation of water through the depths of the world’s oceans, is slowing down—probably as a result of melting ice from Greenland freshening the water. Since the ocean’s currents are all connected, this local slowdown could also have effects far from north-west Europe (an area it has long been known to warm), such as on the Intertropical Convergence Zone, a weather belt that brings rainfall to the tropics.



In spite of all this uncertainty, climate models have done a pretty good job of predicting what has happened so far. But they also have to cope with the biggest uncertainties of all: how rapidly, and in what ways, human beings respond to the threat they face (see chart).

The most important human uncertainty is how quickly and completely people will stop using fossil fuels, and thus stop transferring carbon from Earth’s crust to the air. This transition will be driven by a mixture of economics, politics and technological change. Already, some countries (such as Britain) have more or less abandoned using coal, the most carbon-intensive fuel, to generate electricity.

It helps that natural gas, which is less carbon-intensive, is also often cheaper. But zero-carbon power generation by wind and sun is competitive with coal, too, in a growing number of places.

Add electrically powered vehicles to the mix and an optimist might say, “problem solved”.

The human touch

Well, not exactly. Though profitable technological change can happen fast (in America, the shift from horse-drawn carts to engine-driven vehicles took place within a decade, between 1903 and 1913), it would be going some to convert all the world’s electricity production (which would mean scrapping vast amounts of installed capacity) by the deadline of 2050 that has been proposed, by the Intergovernmental Panel on Climate Change, for the elimination of man-made greenhouse-gas emissions. Other means will be needed as well.

Most routes to the goal of avoiding 1.5°C of warming, the target agreed at a UN climate-change meeting in Paris in 2015, involve some amount of “negative emissions”, whereby carbon dioxide is removed from the atmosphere. This can be as low-tech as reforesting land, or as high-tech as using chemical engineering to purge the air of undesirable substances. There are also ideas around to capture at source the CO2 released by processes such as cement-making, of which the gas is an inevitable chemical by-product, and then bury it somehow underground—a plan known as carbon capture and storage.
Both negative emissions and carbon capture and storage could work in principle. But, unlike alternative ways of generating electricity, which, once mastered, will be profitable, they offers little prospect of turning a profit without subsidy. Given the threat, asking for such subsidies is perfectly reasonable. Taxpayers are called on to pay for wars against human enemies, so might be expected to stump up for one against a less tangible foe. But predicting how rapidly and in what quantity cash for such a war will arrive is a mug’s game.


Other human-induced uncertainties could be even greater. Some, for instance, talk of solar geoengineering—intercepting a portion of the incoming energy from the sun and returning it to space before it has had a chance to warm the atmosphere. There are several ways this might be done, from deploying fine mists of particles in the stratosphere to building mirrors in space.

Such methods might conceivably stop warming within a few years, or even cool things down.

That might look attractive to some, if emissions are not drastically reduced soon.




As to the political will needed to jolly the process along, and arrange payment for those parts of the programme that will not pay for themselves, this can push both ways. America’s approach to climate policy and regulation has see-sawed from George W. Bush’s obstructionism to Barack Obama’s efforts to work with China and introduce domestic policy and regulations, and now Donald Trump’s roll-back from those positions.

Some countries, however, seem to have arrived at more of an internal consensus. Earlier this year, for example, Britain adopted what it says is a legally binding target to reach “net-zero” emissions by 2050 (though what “legally binding” actually amounts to is not exactly clear). Britain’s current contribution to greenhouse-gas emissions is about 1%, so this will, by itself, make little difference. But it may encourage the others.

France, a country with an economy about the same size as Britain’s, is also aiming for net-zero by the middle of the century, and it, too, says this target is legally binding. Denmark has joined in as well. Germany and Chile are considering doing so. And California and Sweden have pledged to outdo the others by reaching net zero by 2045.

How important all this is, is hard to guess, and almost impossible to model. Some game theorists are, nevertheless, trying to do so. Their games suggest that in international climate negotiations a small group of nations could create a “tipping set” that has the power, perhaps through financial sanctions, to induce other governments to join them on a path to net zero.

Ultimately, tackling climate change will require all of these pieces—the political, the economic, the technological and the social—to come together. But if they do, a solution may yet be possible. Earlier this year, Britain’s Committee on Climate Change published the results of its own crystal-ball gazing, a report on what a net-zero United Kingdom might look like.

Homes in this paradise would be heated by decarbonised electricity. Ships would be powered by ammonia. People would eat more vegetables and less meat. Parts of the country would once again be covered by forests. And there would be a new programme to capture and store CO2.

As an objective, this all sounds quite attractive—reminiscent, perhaps, of William Blake’s vision of a New Jerusalem taking over from a land of dark, satanic mills. But whether such promised lands will, in the end, be built remains the biggest uncertainty of all.

Organised labour has returned

Younger workers are behind the rise in trade union membership in the US

Rana Foroohar

US Labour Movement
© Matt Kenyon


Strikes at General Motors, an American corporate icon, are a big deal. Last week’s walkout by the United Auto Workers’ union, the first in 12 years, made global headlines and a big political statement about the resurgence of organised labour activity in America.

The recent strike by British Airways pilots might have resulted in fewer headlines in the US (though it arguably caused more customer pain, grounding 1,700 flights), but both disputes reflect a trend that global businesses had better start getting used to: the rebirth of labour as a political and economic force.

No prizes for guessing why this is happening now. In the US, organised labour, which had declined by both membership and activity over the past several decades, is back because large numbers of people are fed up with soaring inequality, retirement insecurity (fewer than half of employees have access to a company pension scheme), rising costs for healthcare that is relatively poor by global standards and a sense of economic vulnerability.

According to a 2018 Federal Reserve Board study, 40 per cent of Americans would have to borrow or sell something to cover a $400 emergency expense. One in five knows someone addicted to opioids or pain killers. No wonder the Fed is worried about an economic recovery predicated on the wellbeing of consumers.

Many will argue that well-paid airline pilots and unionised auto workers have little to complain about. Some might even see such actions as the last gasp of an old-style labour movement that has been mostly swept away by globalisation, financialisation and now the digital economy. But they would be wrong.

It’s not just old, white or more comfortable workers who are striking. Younger, multicultural, underemployed millennials have been behind the recent gains in union membership. The Fight for $15, a move to organise low-wage workers in areas like fast food and retail, began seven years ago in New York and has spread nationwide to become an important political force. The SEIU, one of the labour groups behind the movement, is calling on all Democratic 2020 candidates to get behind a “unions for all” platform that would make it easier to organise people in services industries and the gig economy.

Meanwhile, the Freelancers Union, which caters to white-collar professionals, like photographers, writers and graphic artists, has also gained membership and political clout. Interestingly, the movement has traction among younger conservatives as well as liberals; half of conservative millennials support unions, compared with about a quarter of older Republicans.

The economic woes of millennials, who live with their parents in record numbers because they can’t afford to pay down student debt and buy a home at the same time, are among the many reasons that support for trade unions recently climbed to a 15-year high in the US. Given current politics and demographics, this is a trend that will not subside any time soon.

What does this mean for business? In the short term, pressure on profits, particularly in the technology sector. In California, the recent passing of a law making “gig economy” workers such as ride-sharing drivers into full-time employees could increase costs for companies like Uber and Lyft by as much as 30 per cent.

They will fight the legislation, but it’s not a good look. In our “knowledge” economy, a huge chunk of corporate value is held in human capital. That means that worker satisfaction and wellbeing could become an issue that investors care about.

The CtW Investment Group, which works with union-sponsored pension funds that have more than $250bn in assets under management, began raising concerns late last year about the management of human capital at 30 companies, among them a number of Silicon Valley giants including Google and Uber.

Meanwhile, the market itself may do some of the work of resetting the power dynamic between capital and labour. One of the reasons I think we haven’t seen more strikes already — given that the labour share of the national pie has been declining in most G20 countries since the 1980s — is that asset prices have risen considerably in that time, offsetting stagnant wages for some.

Many Americans have based their retirement calculations on the high returns of the past. But I think we are at a major market inflection point, and that the S&P index funds where most of us have parked our life savings will have much lower returns in coming years than in the past.

An asset price collapse and a lasting period of low returns would bring a looming pensions crisis to the top of the political agenda. That would, in turn, force us finally to reckon with an economic model that has put the interests of capital before workers for far too long. Wealth creation and wealth distribution, after all, come in cycles. At some point, the pendulum must shift.

I would argue, given recent emergency liquidity action by the Fed, that we are due for a swing away from a financially orientated economy to one driven more by income growth. It is a shift that could make the US economy less volatile and more robust. That is something that both workers and management should cheer.

Will the US Become a Socialist Country?

by Jeff Thomas




Recently, many political hopefuls on the Left in the US have "come out" as socialists. Some may have been socialists all along, whilst others may merely be hoping to cash in on the popularity of avowed socialist Bernie Sanders in 2016.

Whatever the answer, those on the Right have gone into attack mode, fervently stating, "The US will never be a socialist country!"

This will unquestionably become the primary emotionally based issue until the 2020 election.

Of course, in the modern world, very few countries are entirely socialist, or entirely capitalist for that matter. Most are a combination. Certainly, no country is free from government sticking its fingers into free enterprise, even if it’s just as a regulator. It’s just a question of the degree of government meddling.

So, what will be the fate of the US in 2020? Will this be the death of capitalism there? Will it become a country in which goods and services fall under government control?

Well, let’s have a look.

Social Security is a most decidedly socialistic government programme, one that takes up (according to figures provided by the US Office of Management and Budget) 24% of US government spending.

Medicare, Medicaid, etc., also come under the heading of government-run management of goods and services, thereby defining them as socialist in nature. They’re responsible for 26% of government spending.

Add to that, Safety Net Programmes (9%), Benefits for Veterans and Federal Retirees (8%), Education (3%), Transportation Infrastructure (2%) and Science and Medical Research (2%) – all of which can be provided by the private sector – and the number rises to 74%. Another 4% of expenditure comes under the "miscellaneous" heading, but much of this, too, can be performed by the private sector.

In spite of this fact, government takes them all under its wing to the tune of $3.4 trillion annually.

The 1787 Constitution envisioned the government as being responsible for the Military (15%), Interest on Debt (7%) and International Affairs (1%) – presently, a total of 23%.

By the above tally, it’s safe to say that the government that runs the US is already over three-quarters socialist in its method of management.

But there may be those who discount some of the items that make up the 77%. They may say that it’s a good idea that, for example, roadbuilding or education be managed by government rather than the private sector.

So, even if we were to say that we’re happy to have government compete with the private sector in such areas, benefits alone still amount to 67% of spending.

That, in essence, means that the US is between two-thirds and three-quarters socialist now, depending upon your assessment of what a government should manage.

So, what does that mean? Is the US a socialist state already?

Well, like most states today, it’s a gumbo of mixed concepts. And to understand this, we should first look at one of the most misunderstood "isms": fascism.

Fascism’s creator, Benito Mussolini, said, "Fascism should more appropriately be called corporatism, because it is a merger of state and corporate power."

This takeover of power by corporatism in the US began, in earnest, about a hundred years ago and, at this point, is virtually complete. Today, the US is run jointly by Big Business and government agencies.

Collectively, they’re most commonly described as the "Deep State."

They’re not subject to election and tend to be relatively invisible to the public. Those who run for office receive the limelight and are assumed by the electorate to "run the show," although, they are, for the most part, bit players.

The actual management of the US is corporatist; however, the system by which it’s managed is an odd combination of (mostly) socialism and (to a lesser extent) capitalism.

It’s important to note that, whilst conservative political candidates tend to wrap themselves around the flag, vehemently asserting that they’ll not tolerate socialism, they do, in fact, vote in favour of increases in socialist programmes in every administration.

By contrast, liberal political candidates tend also to pretend that the US is still a capitalist state.

This serves their rhetoric well, as it allows them to claim that the "present capitalist system" is failing Americans.

The system is indeed failing; however, it is not a capitalist system. Truth be told, the great majority of failings emanate from existing unworkable socialist programmes and their enormous costs.

Whilst both conservative and liberal candidates are far from accurate in their claims, liberals almost always hire better public relations firms and produce more effective rhetoric, and the US has moved steadily to the left for the last ninety years.

All of the above suggests that the slow slide into socialism in the US will continue.

But this may not play out at the present rate, as we’ve seen a significant wrinkle on the horizon that may alter the slow progression into socialism.

In 1929, a stock market collapse occurred under the leadership of a conservative president – a wealthy businessman who had never before run for public office. This event was used by liberals to enable them to bring in a far-left president and, under him, to move the US into a semi-socialist state.

The markets are presently in a bubble of historic proportions. And the US once again has a conservative president – a wealthy businessman who had never before run for public office.

Should there be a crash prior to November 2020, the stage will be set to complete the transition to full socialism, using the same rhetoric as in 1929.

It’s important to remember that, after the 1929 crash, Americans were so enamoured of their incoming socialist president that they allowed him to be president for life. (He was elected to four terms and died in office.) If this were repeated in 2020, a full sixteen years would be available to make the transition to full socialism.

Add to this the fact that, in the 1930s, most people prided themselves on their self-reliance. Today, at least half of all Americans receive federal largesse, and rather than be ashamed, as they would have been in the 1930s, they often wear their government dependency as a badge of liberalism.

Considering all of the above, it’s safe to say that, whist full socialism in the US in the near future would depend upon as-yet-uncertain events, the US is nearly there already, and whatever happens, it will not be turning back.

George Friedman’s Thoughts: Enchantment and Disenchantment

By George Friedman



Let me begin by saying I was stunned by the enormous number of letters we received in response to last week’s piece urging me to continue with my philosophical mumblings. Also bear in mind that in philosophy, the one may well be wiser than the many. In any case, I will continue a bit more in this vein, discussing today a strange topic: enchantment.
I wrote my doctoral dissertation on the political philosophy of the Frankfurt School, a group of German philosophers. This was later published as a book. Dissertations are written by students who are still, in most cases, “children,” but it occurred to me that there might be something of value to be found in it. One of the philosophers I wrote about was Theodor Adorno. Adorno viewed antiquity as a place of enchantment, where the laws of nature were transcended by miracles, and where life itself could take on marvelous and terrible shapes.
For Adorno, the dividing line in the world was Odysseus, who fought with the Greeks at Troy, as chronicled in Homer’s “Iliad.” After the Trojan War he left on his odyssey, confronting the enchantment of the world. He met the Cyclops, whose vision was perfect but without depth. He met the Lotus-Eaters, who ate from a plant that caused them to forget everything they had been, giving them a life free from memory, happier but poorer for that. And, perhaps most marvelous of all, he met the Sirens. These were woman so seductive that merely on hearing their song, men would knowingly and eagerly serve them to their quick death.
The teaching of Homer was that the world that we prosaically call experience is a lie. It hides the uncanny beauty that is there in plain sight. The Siren and the Lotus draw you to death, but you are going there anyway. Let the death be beautiful, enfolded in the extraordinary improbability of the enchantment around us. According to Adorno, Odysseus encountered each of these enchanted truths and, in resisting their seductive power, destroyed them. Put another way by Adorno, Odysseus brought enlightenment to the world; he disenchanted it and, with that, abolished the uncanny and miraculous. And we were forever poorer for it, because with enlightenment, death became a tragedy rather than fulfillment.
The work I have been doing much of my life has been intended to disenchant the political life (and yes Senator, I know you knew Homer, and I know I am no Homer). Still, I live in the traditions of our past, and the method for understanding the politics of the world that I have labored on is on the distant and majestic tradition of “The Odyssey.” Whatever I touch, I make small. I take away both will and choice, and I declare the greatest of men to be mere bubbles trapped in the tides of history, their greatness crafted by illusions that make us think of them as enchanted. My task has been to tear away the enchantment and reveal the geopolitical machine screeching and clanking away behind the uncanny facade of genius, courage, generosity and evil. The splendid texture of humanity is pulled aside to reveal the tragedy of reality.
My discussion on the attack on Saudi oil facilities by the Iranians could have been a tale of beauty, courage, desperation and hope, a tale as ancient as the Bible being rewritten in the Arabian sands. I could call the drones dragons and their creators sorcerers. I could have turned it from what squalid affair human things are, to the marvelous things human things had been. I could have – but didn’t. Both visions are true in their way, but the truth I wanted to find was the mechanics that caused Iran to use the Houthis to attack the Saudis and the cold calculations that went into what was, in the end, simply the work of geopolitical necessity. I was like Odysseus, who was nothing if not clever, and by stripping the world of courage and gallantry, of sacrifice and triumph, I told a truth that was only part of the truth, and the less satisfying part.
The problem of geopolitics as I have pursued it is not that it is wrong, but that it is insufficient for the human soul. If that is all that there is, then what are we? I keep coming back to these lines from “Macbeth”:
Tomorrow, and tomorrow, and tomorrow,
Creeps in this petty pace from day to day,
To the last syllable of recorded time;
And all our yesterdays have lighted fools
The way to dusty death. Out, out, brief candle!
Life’s but a walking shadow, a poor player,
That struts and frets his hour upon the stage,
And then is heard no more. It is a tale
Told by an idiot, full of sound and fury,
Signifying nothing.

There is no promise of meaning in geopolitics. The only thing it tries to deliver is understanding. It tells us who we are. It leaves us little hope that something extraordinary might happen. Understanding why things happen is as important as Odysseus understanding the Sirens. What we know, we will protect ourselves from.
A scholar can live in this arid world. He is as doomed to live in this world because that is his nature, and that is his fate, just as any fabled creature from antiquity. But a scholar is also a human, or should be. As a human, he yearns for the uncanny, the miraculous, the unexpected – the heroic. As a scholar, he understands necessity alone and knows that there are no longer heroes.
And this is the deep weakness of geopolitics and the enlightenment. In all things, it can explain how, robbing it of its truth. Consider love – in my case, love of a woman. There are certainly biological forces. And as one study showed, love is based on accidental proximity and cyclical necessity. That is probably true, but I know that there is more. It is nothing I can write in a formula, but it is something that can be grasped by a few lines of beautiful language or a snatch of a song. It cannot be published, but it is real. So too is heroism. A man might come to the crucial moment by accident, but when he faces his enemy, his mind stages a battle between fear, duty and pride. That battle cannot be footnoted, but at that moment, man encounters the uncanny.
I am proud of what I have done in geopolitics, but it is insufficient, all the more so because of the vastness of its pretensions. It brushes aside love and bravery as incidental to the truth, and it is not wrong. But I remember in the movie “A Beautiful Mind” when the mathematician yells “insufficient, insufficient,” having discovered that there is more to economics than what economists think.
The problem of the enlightenment is that its ruthless destruction of the enchanted has failed. The enchanted cannot be banished so easily. It merely comes back in increasingly terrifying forms to a world that thinks it has been banished. For me, at this point in my life, it seems a reconciliation of enlightenment and enchantment is what our souls cry out for. Meaning, not in having one or the other, but in finding that they are opposite sides of the same thing.
For me and for geopolitics, there are two moments of enchantment on which we rest. The first is the love of a man and woman and the child that they bring to life, and the enchantment of the world that makes it so. This is the foundation of all community. The second is when a friend I once had stood his ground and went to his death because, I think, he understood the enchanted moment life had offered him and he took it. Geopolitics is about nations and war. It is about generations not yet born and the heroes they will make. This is the point where the inhumanity of geopolitics can find a grounding in the enchantment that was taken from us by Odysseus.

J.P. Morgan Warns on the State of the U.S. Consumer

By Al Root


Photograph by Becca McHaffie



J.P. Morgan is issuing warnings about the health of the U.S. consumer, which could be a bad sign for the stock market.

Consumers, after all, have been keeping the U.S. economy afloat—at least, that’s the conventional wisdom. Manufacturing is flagging, with the Institute of Supply Management purchasing manager index registering a reading of 47.8 for September, the worst reading since 2009. A level above 50 indicates growth. The U.S. and Chinese trade war is also hitting business confidence, causing management teams to pull back on spending. That leaves consumers to carry the economic water.

J.P. Morgan consumer-finance analyst Richard Shane sees bad news for the stocks he covers. On Tuesday morning, he cut his target prices on every single stock he covers—including names like American Express(ticker: AXP) and Capital One Financial(COF)—by an average of almost 10%. What’s more, he downgraded shares of auto lender Ally Financial(ALLY).

“While the sector should continue to enjoy solid fundamentals through year-end, our outlook headed into 2020 becomes more cautious,” Shane wrote in a research report. “Specifically, the prospects of a slowing economy, indications of pockets of labor weakness and heightened political uncertainty all may weigh on the group.”

That’s a lot of potential bad news in 2020. Investors, for the most part, are aware of the risks. Still, it’s a good idea to take stock of U.S. consumers, considering their importance to the overall economy.

Total household debt rose to $13.9 trillion in the second quarter, its 20th consecutive quarter of growth, according to Shane. Most consumer debt is housing-related, but borrowers also have $1.3 trillion in car loans. $0.8 trillion in credit-card debt, and $1.5 trillion in student debt.



Still, Shane doesn’t see the bottom falling out of the economy. Consumer debt loads are at record highs, but debt as a percentage of household wealth isn’t, he points out. Mortgage, credit-card, and auto-loan delinquencies are stable and at levels far lower than what lenders experienced during the financial crisis—the last major downturn experience in the U.S. What’s more, “unemployment remains benign at 3.5%,” says Shane. A strong labor market support U.S. consumer spending.

Shane calls OneMain Holdings(OMF), which makes unsecured personal loans, his “top pick,” believing the stock offers the sector’s best mix of value and stable fundamentals—as well as a potential special dividend or share repurchase in 2020. OneMain shares trade for about 5.2 times estimated 2020 earnings.

The rest of Wall Street seems to agree with Shane on that stock. About 85% of analysts covering the company rate it a Buy, far better than the average buy rating ratio for stocks in the Dow Jones Industrial Average.

OneMain shares are down 2% in midday trading, at $34.24, while Ally stock is off 2.9%, at $30.49. The Dow, by comparison, is down 0.87%.