● The Book of Why:
The New Science of Cause and Effect
By Judea Pearl and Dana Mackenzie
Summary via publisher (Basic Books)
Correlation is not causation.” This mantra, chanted by scientists for more than a century, has led to a virtual prohibition on causal talk. Today, that taboo is dead. The causal revolution, instigated by Judea Pearl and his colleagues, has cut through a century of confusion and established causality–the study of cause and effect–on a firm scientific basis. His work explains how we can know easy things, like whether it was rain or a sprinkler that made a sidewalk wet; and how to answer hard questions, like whether a drug cured an illness. Pearl’s work enables us to know not just whether one thing causes another: it lets us explore the world that is and the worlds that could have been. It shows us the essence of human thought and key to artificial intelligence.
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The downshift in US economic output in the first quarter hasn’t raised business-cycle risk, based on the latest economic updates. A proprietary set of analytics developed by CapitalSpectator.com show that the probability remains virtually nil that a recession has started or is imminent.
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Add BlackRock’s CEO to the list of high-powered people in finance who are skeptical that a flattening yield curve reflects a threat that’s brewing for the US economy. Although a narrowing spread between short and long Treasury rates has been a warning sign in the past, this time is different, said Larry Fink, head of the world’s biggest money manager.
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N. Korea threatens to halt all talks unless its demands are met: Reuters
Trump offers “protections” to N. Korea if it gives up nukes: The Hill
China cast doubt on reports of trade deal with US: Bloomberg
Trump doubts that trade negotiations with China will succeed: CNBC
European leaders vow to blunt new US sanctions on Iran: NY Times
US Leading Index advances for sixth straight month in April: CNBC
Philly Fed mfg index posts sharp rise, far above expectations: MarketWatch
US initial jobless claims tick up, but still near 50-year low: MarketWatch

The small-cap equity market so far in 2018 is enjoying a reprieve from its previous underperformance vs. large caps. The Russell 2000 Index, a widely followed gauge of small companies, closed at a record high yesterday. Large caps (Russell 1000) also edged higher in Wednesday’s trading, although this slice of the stock market remains well below its peak and is trailing the Russell 2000 year to date.
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EU leaders take tougher line on Trump’s US policy for trade and Iran: Bloomberg
Second round of US-China trade negotiations begin in Washington on Thurs: CNBC
US housing starts eased in April as apt construction weakens: Bloomberg
Industrial production jumped 0.7% in April, 3rd straight monthly gain: MW
Business inflation expectations dipped to 2.0% in May: Atlanta Fed
Small-cap Russell 2000 Index closes at record high: Reuters
30-year Treasury yield rises to highest level since 2015: Bloomberg
Revised US GDP nowcast for Q2 ticks up to a strong 4.1% increase: Atlanta Fed

The benchmark 10-year Treasury yield edged up to 3.08% on Tuesday (May 15), marking a new seven-year high, based on daily data published by Treasury.gov. The implied inflation forecast via Treasuries continued to advance as well, signaling that the market is pricing in firmer pricing pressure in the months ahead.
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N. Korea cancels talks with Seoul, raising doubts about Trump meeting: Reuters
Deadly explosion at California medical facility may be intentional act: CNN
IEA cuts outlook for global oil demand in 2018: Bloomberg
US retail sales rose 0.3% in April, marking 2nd monthly gain: MarketWatch
US homebuilder confidence strengthens in May: MarketWatch
NY Fed manufacturing index posts stronger growth in May: 24/7 Wall St
No change in US business inventories in March: Reuters
Japan’s economy contracts in Q1, first decline in two years: Bloomberg
10-year Treasury yield rises to seven-year high: CNBC

US GDP growth in the second quarter is on track to accelerate, based on the median estimate of several forecasts compiled by The Capital Spectator. If accurate, economic output is set to strengthen to a real 3.6% increase (seasonally adjusted annual rate) in Q2, a solid improvement over the subdued 2.3% increase reported for Q1.
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Deadly clashes at Gaza border as US opens embassy in Jerusalem: NY Times
US lawmakers stunned by Trump’s decision to help Chinese company: The Hill
Fed officials have mixed views on flattening yield curve: Bloomberg
German GDP growth in Q1 slows to 0.3% from 0.6% in previous quarter: RTT
China’s economic data for April points to slower growth: Reuters
Turkey’s president plans to tighten grip on economy: Bloomberg
Rising oil futures vs physical markets sending conflicting signals: Reuters
MSCI to add 234 mainland Chinese firms to its emerging markets index: CNBC
Policy sensitive 2-year Treasury yield reaches 2.55%–highest since 2008: CNBC