After another day of rising, U.S. yields open the day a little lower with the 2Y right around 5% after crossing 5% yesterday following better than expected ISM services data. The 10Y is 4.27% also down slightly 2bps from yesterday's close. Yesterday's Fed Beige Book showed some signs of slowing in the job market and some squeeze in profit margins as businesses struggled to pass on higher input cost to consumers, perhaps another sign the consumer is rolling over and exhausting excess savings. Fedspeak continues to skew towards inaction at the upcoming FOMC meeting. Atlanta Fed GDPNow is still up at 5.6%. China data continues to show weak trade, oil continues to stay high (see airline profit warnings), Covid cases out there, and path of rates remain a question mark.
On the day ahead we have a decline in Apple in the pre-market due to reports that China looks to expand the ban on iPhone sales to state firms and agencies. On the day ahead: Jobless claims, Productivity and Cost, Fed Williams speaking 330pm, Bowman.
XTOD: Out of 28,114 publicly-listed U.S. companies analyzed over past century, 25 best stocks have created nearly 1/3 of all shareholder wealth; put another way, just 0.1% of stocks have added over $17.6 trillion to investors’ wallets; @VisualCap graphic from Henrik Bessembinder of @ASU shows best stocks of past century [Past performance is no guarantee of future results]
XTOD: Point 10 in Tom Sargent's 2007 Berkeley graduation speech: "When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation."
XTOD: Supply continues to do its thing: For the first time in many decades, apartment rents are rapidly flattening (and could soon go negative) at the same time demand remains healthy. Why? Apartment construction is at 40+ year highs-- shifting the balance of power to renters. YoY, effective asking rents for new leases (same-store) inched up just 0.28% and could turn negative by September. Compare 2023 to the last two times (excluding 2020 pandemic year): early 2000s and 2009. In those prior two periods, rents fell as recessions hit, jobs were lost, demand evaporated and vacancy hit 7-8%. By comparison, in 2023, vacancy has been fairly stable since January in the mid 5% range. Demand is solid, but operators are giving on price in order to compete and to protect occupancy / cashflow. That'll likely continue through 2024 as supply peaks, before 2025-26 as supply by then will be significantly less. The rent slowdown won't show up in CPI until early-ish 2024. But it'll happen. CPI rents won't go negative by then, but they'll look pedestrian at that point.
XTOD: AIR B&B to lead real estate market crash. If you want a new home your happy days are around the corner. Same for rental property. The best time to get rich is in a crash. Good luck.
XTOD: Here's the big story in childcare: There's been mass closures of "in home daycares" (the most affordable option) More than 97,000 have closed since the early 2000s, cutting the overall industry by ~half. As pandemic aid ends, expect even more closures. https://washingtonpost.com/business/2023/09/05/child-care-cliff-day-care/
XTOD: “being able to pass on an investment and then get in after it’s gone up 100% is a superpower”.
XTOD: Our US members' confidence in finding or holding a job (grey line) matched its highest level since March. Y/Y declines in this metric are moderating.
XTOD: What bear steepening? (This one) From August 1 pre QRA supply to today
XTOD: Want to handle pressure better? Learn to compete against “nameless, faceless opponents.” In other words, focus on competing against the game itself, which is what you have trained to do (personally and as a team).
https://twitter.com/LizAnnSonders/status/1699489777244860846?s=20
https://twitter.com/jayparsons/status/1699415072383103387?s=20
https://twitter.com/HannoLustig/status/1699428372630118747?s=20
https://twitter.com/byHeatherLong/status/1699101472577699897?s=20
https://twitter.com/StevenKelly49/status/1699581223692021998?s=20
https://twitter.com/EconBerger/status/1699466869261099035?s=20
https://twitter.com/dampedspring/status/1699460599204241442?s=20
https://twitter.com/CoachMongero/status/1699391527103889587?s=20
Yields bounced higher following lower than forecast jobless claims (people still can't get fired) and higher than expected unit labor cost. 2Y back over 5% and 10Y crossed 4.30%
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