Price Discovery in Subscription Research

If you are thinking about upgrading to a paid subscription, or are undecided about whether to renew, now is the time to lock in the current rate. Plus: a review of 2022 so far.

It’s been just over a year since I launched The Overshoot.

The past 13 months have not been easy, but they have been incredibly rewarding. I left a job at Barron’s that was well-compensated and secure to become an entrepreneur. I am grateful that I chose to take that risk. (Those of you who helped me make that decision know who you are, and I thank you for your guidance.)

I now sell my research and analysis directly to top investors, policymakers, and academics all over the world, as well as many other readers who want to be informed about what’s happening in the global economy. My work has been cited by my former colleagues at the Financial Times, in The Economist, and even in a front-page article in the New York Times. I wasn’t sure whether I could pull it off, but I am happy to report that I have a viable business providing essential insights to all of you who read and subscribe. Thank you.

Before The Overshoot went live, one of the biggest questions I had was figuring out the right price for my services. While I liked to think that I was offering something unique, this came with a disadvantage: there were no direct comparables. I knew what newspapers cost, I knew what high-priced investment research put out by teams of people could cost, I knew what individuals writing blogs about politics could charge, but I didn’t know what made sense for me. I settled on $18/month because 18*11 is very close to 200 and because I thought that $199/year (with one month free) would be affordable to people who had subscribed to Barron’s specifically to read my columns.

With the benefit of experience—both my own and those of other lean research shops—I am now convinced that my original price was too low. Moreover, while I am now generating enough revenues to cover the cost of my time, I am not yet making enough to cover all the expenses of a fully-operational research business. In particular, I would like to be able to:

• Pay for data feeds. Right now I exclusively use public data, mostly from government and central bank websites (sometimes with the help of Google translate). I have managed to make this work well enough so far, but relying on free data comes with a lot of limitations. I would prefer to have more options, if I had the budget to do so.

• Pay for outside contributions. I am grateful that I have been able to provide you with high-quality research on a consistent basis since inception. However, I know that there may be situations where, for whatever reason, my ability to maintain this schedule could become temporarily impaired. Being self-employed means that I don’t have access to sick days or family leave. That hasn’t been an issue yet, but I would be unwise not to prepare for the possibility. Being able to offer attractive compensation should ensure that I will be able to continue to provide you with premium analysis under a wide range of circumstances.

• Pay for events and travel. The written research notes are my main product, and will continue to be. But I would like to be able to travel to meet readers and clients, do on-site research, and host live talks in various cities.

Therefore, I will be raising the price for new subscriptions to $30/month ($330/year with one month free) starting on October 1, 2022. I will also be raising the price for new institutional subscriptions.

This will have no impact on existing subscribers—as long as you keep renewing. If you already pay to read my work, your price will not change. That means your subscription should continue to get cheaper relative to your income the longer you remain a subscriber.

Any existing subscriber who cancels between now and October 1 will have to pay the new, higher rate if you ever decide to come back. If you dropped off earlier and are thinking about returning, now is a good time to do so.

The coming price increase matters the most to the tens of thousands of you who have signed up for the free list and are deciding whether you want to upgrade to the paid plan. Subscribing now, rather than waiting past the end of September, will save you a lot of money. You will always have the option to cancel and get refunded. But if you decide that my work is worth the money, you will be glad that you locked in the lower rate when you had the chance.

If you do decide to subscribe, I hope you get a chance to go through the back catalog. My 2021 year-end review is a good place to start, as is this summary piece from May 26 that accompanied a podcast I did with my friend and former colleague Cardiff Garcia. What follows is a summary of what I’ve been up to so far in 2022, organized by theme.

The Russian War on Ukraine

Towards the very end of 2021, I was asked by someone at a D.C. foreign policy think-tank about what would happen if the U.S., potentially alongside EU allies, imposed financial sanctions on Russia, as well as whether the prospect of sanctions could be sufficient to dissuade the Russian government from doing anything rash. While I had covered some of the economic and financial issues associated with the 2014 Russian invasion of Ukraine, I confess that I was unprepared for the specific question because I hadn’t been paying attention to Putin’s threats and demands for “guarantees”. At the time, I was more interested in the prospect of changes to European fiscal policy and the mechanics of Turkey’s unorthodox approach to exchange rate management. Events compelled me to change my focus.

So far, I have looked at the Europeans’ reliance on Russian natural gas, the relative vulnerabilities of the Russian and allied financial systems, the impact of the war on global food supplies, the effects of the sanctions on Russia, and the longer-term implications of the conflict for domestic political economic and international statecraft. Below is the full list, in chronological order:

• Russia Was Prepared to Withstand Sanctions. Why Wasn't Europe Prepared to Impose Them? (February 22, 2022)

• Russia Was Already Cutting Off Europe's Gas Before Invading Ukraine. What Can Be Done? (February 24, 2022)

• Mapping Banks’ Russian and Ukrainian Exposures (March 1, 2022)

• The Implications of Unrestricted Financial Warfare (March 8, 2022)

• Russia’s Attack on the World's Food Supply (March 15, 2022)

• How to Dominate the Economic Battlefield with a “Freedom Fund” (March 24, 2022)

• The Sanctions Are Already Working (April 21, 2022)

• Korean Exports to Russia Have Collapsed (April 25, 2022)

• Russia Sanctions Update: Germany, Japan, Switzerland, Thailand, and Malaysia (April 28, 2022)

• Russia Is Losing Access to Imports (May 16, 2022)

• On the Russian Oil Sanctions (June 2, 2022)

• Russia Sanctions Update: April (comprehensive) and May (preliminary) (June 29, 2022)

I’ll be writing another update on the impact of the sanctions so far, but in the meantime, here is the comprehensive data on exports of goods to Russia from the major manufacturing countries through the end of May (latest available):

America’s “Excess” Savings and Other Puzzles in the U.S. National Accounts

Before the most recent invasion of Ukraine, I was vexed by the “statistical discrepancy” between two theoretically equivalent measures of economic activity. It all started with what I thought would be a straightforward analysis of the financial and product accounts. Somehow I ended up falling into rabbit holes of missing investment spending and different ways of counting motor vehicle production. Here’s what I wrote, in chronological order:

• Are America's “Excess” Savings Here to Stay? (January 10, 2022)

• Where Have the “Excess” Savings Gone? (January 12, 2022)

• U.S. “Excess” Household Savings and the Balance of Payments (January 25, 2022)

• What the New “New Vehicles” Price Index Tells Us (February 9, 2022)

• Last Looks at the Pre-War World (3): The Return of “Exorbitant Privilege”? (March 29, 2022)

• How Worrying is the Q1 GDP Decline? (May 5, 2022)

• U.S. Economic Data Aren’t Adding Up (May 27, 2022)

• Is the 2022H1 GDP Decline...Fake? (July 31, 2022)

One representation of some of the puzzles in the data right now:

Understanding Inflation and Policy Normalization Tightening

While things have changed a bit in the past month or so, the big picture so far this year is that real interest rates and the U.S. dollar are higher while stock prices are lower and credit spreads are wider. That’s happened as officials at the Federal Reserve and most other major central banks have declared that they will do whatever is necessary to bring inflation back into line, even at the cost of an economic downturn. (The Bank of Japan has been the notable exception.)

Initially, Fed officials appeared to believe that they could normalize financial conditions without any adverse impact on growth or employment. In fact, their projections of major economic variables “under appropriate monetary policy” consistently showed that they were willing to let inflation run faster than target for years in the expectation that it would come down more or less on its own. Borrowing costs might have to go up to prevent things from getting completely out of hand, but that would simply reflect the desirable withdrawal of pandemic-era emergency measures.

Attitudes seem to have changed more recently. Rightly or wrongly, officials at the Fed and many other major central banks have lost patience. The problem is that inflation has stubbornly refused to normalize. Some of this can be attributed to troubles with food, energy, and metals supplies attributable to Russia’s invasion of Ukraine, but there is clearly more going on. Normalization could still be coming—and there are several good reasons to think that many of the domestically-generated sources of inflation in the rich countries have already peaked. Until then, however, expect central banks to be relatively sanguine if jobs markets falter and business spending drops.

Given all of this, I spent a lot of time this year trying to assess this unusual cycle, as well as laying out a framework for how I think about inflation in general:

• Understanding Covid-flation (January 19, 2022)

• Rebalancing (Mostly) Got Back on Track in 2021Q4 (January 28, 2022)

• The U.S. Job Market Is Hot* (February 2, 2022)

• The Jobs Recovery Looks Different Now (February 4, 2022)

• Is U.S. Inflation Getting Worse? (February 10, 2022)

• How Should the Federal Reserve Tighten? (February 18, 2022)

• The Fed Is Still Waiting for Supply (March 16, 2022)

• Last Looks at the Pre-War World (1): America's Boom (March 23, 2022)

• Last Looks at the Pre-War World (4): U.S. Incomes Were Outpacing Inflation (April 7, 2022)

• Covid-flation Meets Putin-flation (April 13, 2022)

• U.S. Inflation is Getting Worse (and Better?) (May 12, 2022)

• U.S. Inflation in May: More Mixed News (June 10, 2022)

• What Should We Do About Inflation? (Part 1) (June 14, 2022)

• The Federal Reserve Brings the Pain (June 16, 2022)

• What Should We Do About Inflation? (Part 2) (June 22, 2022)

• Most Americans Are Doing Well. For Now. (July 1, 2022)

• “Quantitative Tightening” So Far (July 12, 2022)

• Inflation Isn't Getting Better. Yet. (July 14, 2022)

Depending on your point of view, the sharp acceleration and subsequent deceleration of wage growth across the economy could either be an encouraging sign that domestic sources of U.S. inflation are already on their way out, or an indicator that workers’ gains earlier in the recovery are about to evaporate.

China’s Divergent Path, Plus a Book Review

When one of the world’s largest economies ends up going in a completely different direction from everyone else because of its distinctive domestic policy choices, it’s important to pay attention. The Chinese government stood out in 2020 for refusing to help its consumers and workers during the economic downturn. In 2021, it began a severe crackdown on a range of private businesses in industries ranging from education to internet software to real estate development. Then in 2022 it imposed a new wave of lockdowns to suppress the more contagious covid variants, rather than relying on vaccines and other pharmaceutical treatments to manage the pandemic.

China’s domestic interest rates have gone from being unusually high relative to other major markets to relatively low, while the yuan has (modestly) depreciated from a position of relative strength. China’s internal troubles threatened to upend the global supply of manufactured goods, but so far the larger impact has been a sharp drop in domestic demand reflected in lower spending on imports and lower global prices for commodities. My coverage so far:

• Last Looks at the Pre-War World (2): China Bounces Off the Lows? (March 25, 2022)

• “Covid Zero” is Crushing China (May 20)

• China’s Unbalancing Is Going Into Overdrive (July 22)

Finally, I reviewed Helen Thompson’s Disorder: Hard Times in the 21st Century. I can’t say that I recommend reading the book, but it raised a lot of interesting questions for me to explore.

Looking ahead, I hope to spend more time focused on what’s happening in Europe and Japan, as well as a longer-term project to assess how the framework and ideas Michael Pettis and I laid out in Trade Wars Are Class Wars can explain the events since we finished the first edition. Thanks again for reading and subscribing!