Sunday links: we’re all a hodgepodge

Markets

• Five big things that are supposed happen but still haven't. (humbledollar.com)
• Keep an eye on small cap weakness. (disciplinedinvesting.blogspot.com)

Strategy

• Stop making 'purposeful mistakes.' (mrzepczynski.blogspot.com)
• Brett Steenbarger, "Trading problems occur when we pursue trading as a source of fun and stimulation rather than as a career that can provide fulfillment." (traderfeed.blogspot.com)

Support

• Stay up-to-date with all of our posts: sign-up for our daily e-mail. (abnormalreturns.com)
• Love Abnormal Returns? Then like (and follow) us on Facebook. (facebook.com)

Crypto

• Crypto is in the 'installation phase' where it is difficult to keep up with everything going on. (avc.com)

Companies

• Amazon ($AMZN) is no longer running at breakeven. (recode.net)
• Neil Cybart, "There is no evidence that Apple is growing frustrated or tired of the differences found between iPad and Mac." (aboveavalon.com)
• Some reasons to be bullish about our digital future. (blog.evergreengavekal.com)

Facebook

• How to fix Facebook ($FB). (ritholtz.com)
• Facebook ($FB) still controls the big three networks. (lefsetz.com)
• Should index investors worry about Facebook ($FB)? (portfoliocharts.com)

Funds

• There is still some innovation in the bond ETF space. (barrons.com)

Global

• The Groupon of China, Pinduoduo ($PDD), is now public. (fortune.com)

Economy

• James Hamilton, "Growth in consumption, nonresidential fixed investment, and net exports helped produce the strong numbers." (econbrowser.com)
• Conor Sen "The challenge for the economy is how much more room there is for it to grow without inflation accelerating."
  Email
  In this article
  CL1
  WTI Crude
  68.69
  USD/bbl.
  -0.92-1.32%
  
  Friday’s strong second-quarter gross domestic product report brings up the question of whether it can be sustained in a way it wasn’t the last time GDP growth was this robust four years ago.
  
  The economy in 2014 had some things going for it that the current economy lacks — a federal funds rate firmly anchored at zero and an economy still operating well below its potential, implying more room to grow without inflation being a concern. Yet an unexpected shock came in the form of the collapse of energy prices that dragged down growth during the next couple of years.
  
  The good news in 2018 is it’s hard to see a demand shock lurking out there that might derail things the way energy did four years ago. But the bad news is that with the economy now operating above its potential, we’re going to need some positive surprises if this pace of growth is to be sustained.
  
  The surge in economic growth in the second and third quarters of 2014 was due in large part to a boom in energy investment. In the 1990s, the share of GDP attributable to fixed investment in mining exploration, shafts and wells was 0.2 percent. That share began to increase in the mid-2000s as the rising price of oil incentivized companies to invest in more energy production. This really took off after the financial crisis as the technology improved, new sources of supply were identified and the price of oil remained high. That same share of GDP due to mining investment peaked at 1.1 percent in the fourth quarter of 2014.
  Boom Times, Bust Times
  
  Investment in mining and energy extraction as a share of gross domestic product
  
  Source: Federal Reserve Bank of St. Louis
  
  This might sound like a relatively small amount in the context of the vast U.S. economy. Of course, it’s not just the direct impact of that investment that mattered, but the multiplier effects. Industrial companies had to build equipment to support the industry. Trucking and rail companies had higher revenue as machinery and raw materials had to be shipped. In the West Texas shale patch, workers got paid more, which meant they could spend more on consumption. Tax revenue grew. Companies and countries around the world benefited.
  
  But the bust reversed all that and then some. This is because in a bust, investment falls faster than it rose in the boom; it only took six quarters for energy investment as a share of GDP to erase five years of growth. Knock-on effects dented both the supply chain for the industry and the global economy, as the dollar surged, emerging-market economies struggled and credit spreads for the whole economy widened as investors feared how extensive the damage would be. By the fourth quarter of 2015, GDP growth was down to 0.4 percent from 5.1 percent in the second quarter of the prior year.
  Can It Last This Time?
  
  U.S. quarterly gross domestic product growth
  
  Source: Bureau of Economic Analysis via Bloomberg
  
  The good news in 2018 is the energy bust already happened, so that shouldn’t be something that can undermine the economy today. Housing is always an industry people think about when talking about the risk of a downturn. Yet, while land, labor, raw materials and interest rates have all been rising, demand for housing remains robust, with millennials entering their family-forming years and low supply in the marketplace. Muddling through seems like the worst case scenario for housing for now.
  
  The challenge for the economy is how much more room there is for it to grow without inflation accelerating." (bloomberg.com)
• A succinct summary of the week's economic events. (ritholtz.com)
• The economic schedule for the coming week. (calculatedriskblog.com)

Earlier on Abnormal Returns

• Top clicks this week on the site. (abnormalreturns.com)
• Longform links: coastal vulnerability. (abnormalreturns.com)

Mixed media

• Why you should read outside your field. (collaborativefund.com)
• Why e-mail newsletters are often given up for dead, but aren't going anywhere. (medium.com)
• You're never going to be caught up at work: get over it. (hbr.org)