Daily Economic Update: October 18, 2023

 

The beat in retail sales, including the revision higher of prior retail sales, sent yields to highs generally not seen since 2007, with the 10Y crossing 4.80% and the 2Y crossing 4.20%.   This morning yields are off those local highs with the 2Y down ~3bps to 5.18% and the 10Y down ~1bp to 4.83%.  Crude is looking at reclaiming $90 (WTI) on supply concerns. 

 Overnight, China's retail sales data beat expectations and this morning's UK inflation data beat expectations coming in at 6.7% YoY

The hospital bombing in Gaza further complicates Biden's trip to the region, which will now just be a meeting with the Israeli's as several Arab leaders all canceled their planned meetings with Biden. We still have no speaker of the house as we tick time away towards another government shutdown.  Despite all the negative, Atlanta Fed GDP Now is showing 5.4% for 3Q.

Yesterday's Fedspeak featured Barkin commenting something along the lines of, while the data is good, the vibes are bad and Kashkari saying inflation is too high.

On the day ahead it's housing starts, building permits, the 20Y auction, Fed Beige book and of course more Fedspeak. 

XTOD: Happy 1 year anniversary to the 100% chance of recession forecast that never happened

XTOD: Well as someone who runs true alts I wouldn’t go that far :)  But PE and private credit are not alts. Not close. They are full blown beta, often levered beta for PE, at massive fees with #volatilitylaundering.

XTOD: NEW: Private equity is making a huge new play in HVAC and energy services, buying up heat pump installers.   Part of an alarming trend: After big subsidies in IRA, enviros said prices of heat pumps would fall. Instead, they’re rising:

XTOD: ICYMI COLUMN: Exactly 50 years ago today, Arab nations weaponized oil against the US. 

Soon, America created a defensive shield: the Strategic Petroleum Reserve.  Now, the US needs to refill the SPR, which is at a dangerously low level. #OOTT  https://bloomberg.com/opinion/articles/2023-10-17/energy-policy-the-us-needs-to-refill-its-dangerously-low-oil-reserves?utm_source=website&utm_medium=share&utm_campaign=twitter | 

@Opinion

XTOD: The problem, Minsky argued, is systemic. When prices rise rapidly year after year, all you need is a normal distribution of risk-taking behavior among economic entities, in which case the overall system tends automatically towards leveraging up dangerously on property.

XTOD: What a scam!  UK private equity groups sell assets to themselves as exit routes dwindle 

Disposal of portfolio companies to ‘continuation’ funds becomes preferred strategy to return cash to investors  https://ft.com/content/042b1aa9-5f8f-4adb-9d93-83ddd2e83165 via @ft

XTOD: On CRE exposure:  $BAC Analyst: "...I just wanna make sure I heard correctly. Did you say you marked your exposure by 50% in CRE office?" 

$GS CFO: "Yes, to clarify, for our CRE in the office space, we've either marked or impaired that down by ~50%...that's quite significant"

XTOD: *SCHUMER SAYS `THE HOUSE IS SORT OF A MESS'  me to my husband

XTOD: BREAKING: The U.S. tightens the reins on Nvidia chip sales to China, a crucial move in controlling AI advancements. $NVDA is currently down close to 7% due to this news.  

The shocker? On July 27th, Nancy & Paul Pelosi swiftly offloaded their entire 25,000 Nvidia shares.

https://x.com/RampCapitalLLC/status/1714272550413611315?s=20

https://x.com/CliffordAsness/status/1714276243560968583?s=20
https://x.com/JavierBlas/status/1714235117751693559?s=20
https://x.com/leee_harris/status/1713910875550314767?s=20

https://x.com/michaelxpettis/status/1714218259338174674?s=20

https://x.com/Nouriel/status/1714239736468943119?s=20

https://x.com/TheTranscript_/status/1714293730663129364?s=20
https://x.com/kgreifeld/status/1714354962405224750?s=20
https://x.com/PelosiTracker_/status/1714279993382240283?s=20