Daily Economic Update: August 22, 2023

U.S. yields start the day down slightly with the 2Y at 4.99% and the 10Y at 4.31%, both still near multi-decade highs as speculation remains high that Powell might indicate r-star is higher.  Tech stocks, shrugging it off.  In labor news American Airlines pilots look to get a raise and UAW strike remains possible as they are set to vote on striking.  Speaking of labor yesterday's NY Fed Survey of Consumers on Labor conditions the lowest wage workers would be willing to accept for a new job rose to an all-time high of nearly $80K.  If you're interested in a summary of the latest debate on the Phillips Curve, I found this substack post by Marcus Nunes to be a good read.  On the day ahead we get sales of existing homes, speaking of which see this post

XTOD: Not only is the 10yr Treasury yield at a 15-year high today, but at 37 months it's also the longest correction of any since the early 80s bull market began.   No one active in the bond business today, including Fed officials, knows these uncharted waters

XTOD: "If global real interest rates returned tomorrow to their historical avg of roughly 2%, given the existing level of US govt debt & large continuing projected deficits, the US would likely experience an immediate fiscal dominance problem." -Charles Calomiris, 6/2/23

XTOD: ... an economy operating under conditions of fiscal dominance would have to make, how such a period could end (i.e., either through a prolonged phase of double-digit inflation or a full-blown debt crisis), and what role fintech, crypto, and other forms of decentralized ....finance will play in such an economy given the government’s need to fund itself without losing complete control over inflation.

XTOD: Which R-star to believe? The @RichmondFed  R* or the  @NewYorkFed  R*? ..And yes, I can already hear many of you muttering under your breath "I don't believe in any R-Star!"

XTOD: When inflation is below target, their solution is a higher inflation target. When inflation is above target, their solution is a higher inflation target.

XTOD: Just shows how downright dumb is the proposal for a higher inflation target when "higher inflation target" is good for all seasons!

XTOD: Billionaire Day Traders: 1._____2. ___ 3. ____ 4. ____ 5.____The second list isn't blank on accident.

XTOD: Some are surprised that 40% of U.S. women have tattoos. A major social class divide. Very few upper and upper middle class women have them. But just about every working class woman under age 40 I know has at least one tattoo. My guess is 70-80% of non-college grad women.