Daily Economic Update: September 28, 2023

Yields continued to rise and the curve continues to 'disinvert' as well as bear steepen.  Yesterday's stronger than expected durable goods order data seemed to further embolden the higher for longer view.  Oil continues to be high with crude over $93/bb on weak inventories. The 10Y is now over 4.60 at 4.63% and the 2Y down slightly, back to 4.13%.  The rapid rise in yields, continued rise in oil and the stronger dollar continues to pressure equities. Steven Ricchiuto of Mizuho Securities was great on Bloomberg Surveillance yesterday (see 2hr 5m mark) when he said in regards to the Fed's inflation fight: "this particular Chairman doesn't have this clout..you have a situation where the political economist vs. the academic economist are winning" and as it relates to rates: "the Fed is willing to play games..at least some of them are...with the 2% target....no one is going to believe 2%..so the reality is long term rates move higher..as long term rates move higher inflation expectations become unanchored..the Fed then has to address the situation..I think they'll take action to address the situation."

Today we'll get the final read of GDP as well as revisions to prior GDP measures as well as jobless claims and a 7Y auction.  At 4pm today Powell addresses teachers in a town hall style format and Goolsbee and Cook on the mic as well.  Across the pond there is inflation data with Spanish data already coming in over expectations.  We'll see if German inflation data comes in as weak as expected given the soft German state inflation readings.  In the meantime German 10Y yields are at new highs at 2.91%.  China Evergrande is suspended again, this time after its chairman was placed under police surveillance.

XTOD:  Amid concerns over cellphone addiction, China proposes limiting screen time to a maximum of two hours a day for children, enforcing a ban on use between 10 pm and 6 am

XTOD: Do you think our friends at the  @federalreserve  realize how close we are to another event a la December 2018? The flight of bank deposits from the outer branches of the depository tree is stunning. Double digit rates of change.

XTOD: Bank deposit rates are still lagging benchmark interest rates, via Barclays. 

If you haven't shopped around for higher savings rates, then you are not doing your part to improve the effective transmission of monetary policy and Pablo is judging you.

XTOD: A government shutdown could blindfold a "data dependent" Federal Reserve. 

Shutdowns in 1996 (21 days) and 2013 (16 days) delayed inflation and employment reports by two or more weeks.

XTOD: COSTCO CEO said "I've gotten a couple of calls that people have seen online that we've been selling gold - 1 ounce gold bars, yes, and when we load them on the site, they're typically gone within a few hours and we limit two per member."

XTOD: "Entropy is the law by which physical systems inevitably become more disordered over time. A similar sort of financial entropy has built up in our system, as fiat credit can only move in one direction (higher) without the whole highly leveraged system collapsing. Meanwhile, the system ... tends to incentivize politicians and voters to keep making promises that, once the numbers really begin to hit hard, aren’t maintainable as originally intended; the difference is just printed. The present has been persistently improved at the cost of the future."

XTOD: I went deep into the FTC’s massive antitrust complaint against Amazon, explaining how the retail giant imposes a vast economy-wide hidden tax using Amazon Prime and anti-discounting provisions. https://www.thebignewsletter.com/p/the-ftc-sues-to-break-up-amazon-over

XTOD: I hate to break it to everyone but this is the worst ERP in 22 years… you are guaranteed to lose money in equities over a medium term horizon. Risks are much higher than in any other point in the last 22 years with QT, high real rates, margin squeeze, inventory unwind, risk of fiscal retrenchment, etc…

But you are not compensated for these risks

XTOD: Yesterday, OFAC designated an Ethereum address linked to the Sinaloa cartel that dealt in both Tether and USDC stablecoins. Circle quickly blacklisted it. Crickets from Tether, though.

XTOD: Last year an investor purchased a Target in Portland for $16,000,000 and a 4.25% CAP. 

Yesterday it was announced that due to crime and theft they are closing this location down and 2 others in Portland.   What's the lesson here?  In my opinion the largest under-appreciated risk currently in the RE market has to do with the municipality and states that you invest in.

https://x.com/Reuters/status/1707107843227410808?s=20
https://x.com/rcwhalen/status/1707081022343635150?s=20
https://x.com/tracyalloway/status/1707115817949667571?s=20
https://x.com/NickTimiraos/status/1706653353017577800?s=20
https://x.com/pboockvar/status/1707024214765478294?s=20

https://x.com/NeckarValue/status/1707107700801200326?s=20 https://x.com/matthewstoller/status/1707106996506292705?s=20 https://x.com/INArteCarloDoss/status/1706977472347091292?s=20 https://x.com/jp_koning/status/1707084848869802192?s=20