Weird not posting a quote to start this...but we survived October despite stocks making it 3 straight months of losses. FOMC decision day is upon us. WWPD? Ahead of the 2pm FOMC decision, markets await the Treasury's announcement of the specific amounts and tenors of Treasuries to be issued in upcoming auctions and the anticipated Treasury buyback program. Long end yields are higher to start the day with the 10Y back over 4.90% (with 10Y real yield back above 2.50%), while the 2Y is unchanged at 5.07%. Equities are weaker, but at least stocks are the Yen yet. USD-JPY crosses 151 and approaches a 30 year weakness for the Yen. Elsewhere in Asia, Chinese manufacturing activity PMI's were below expectations and Biden will be meeting with Xi in San Francisco later this month. This Reuters article says that "important details need to be hammered out.." but I can't help but think that means the White House needs to figure out how to remove all the feces from the sidewalks. (you can google it)
On the day ahead we get ADP Employment, Treasury Announcement at 830am, ISM Manufacturing and JOLTS.
Check back this afternoon after Powell for my FOMC recap.
XTOD: My plea for adequate funding for the IRS: I think we all love our country, and if we all love our country, we need our government to be able to function. That means being able to collect taxes—as Justice Holmes famously said, they are the price we pay for civilized society.
XTOD: Just spent 5 days in NYC speaking to funds, lenders and other allocators who we place for. Quick takeaways: 1. I believe it’s earlier in the down cycle than I initially thought 2. There’s a lot of knife catching currently going on; little understanding that the first buyer is often not the last buyer in a downturn 3. There’s almost no real underwriting being done on the end users of the real estate 4. There’s a lot of distrust for the government and at the same time complete unequivocal belief in a bailout if needed. This is insane - you can’t have it both ways 5. “Traffic syndrome” is in full effect (people sit in traffic but can’t admit they’re part of said traffic) when it comes to employment. Everyone is outsourcing, automating and reducing and no one believes it’ll affect them 6. There’s a lot of fraud in the market and in a quarter I might say it’s more serious than last time because it affects higher-value assets much more than housing. Not ready to say this yet, but maybe soon 7. Slowly seeing predatory capital line up at the fringes of the markets. Not ready to enter yet, but sniffing for pray from the sidelines. This is not capital that regularly invests in real estate And while you might think this is grim, I believe that as long as the consumer remains strong there’ll be major reshuffling in commercial real estate (including housing) but not in residential (end-user) housing. However, if the job market breaks due to corporate debt loads, structural unemployment and seeking efficiencies, there simply won’t be consumer demand for a lot of the real estate that is currently occupied because man will not be able to afford it at any price.
XTOD: This is key -- it's really the first time in the age of mass communications that adversaries of the United States have had messaging supremacy within the United States proselytizing directly to American youth. It's a major coup and it happened without anyone noticing.
XTOD: A Missouri jury has found the National Association of Realtors (NAR) guilty of conspiracy to inflate commissions - NAR and defendants have been ordered to pay $1.78 billion in damages
XTOD: Cant overstate impact of ruling just out saying National Assoc of Realtors conspired to inflate commissions. NAR has beaten back every challenge to the realtor business model for decades. That may now change. Just one lawsuit but market whacking real estate related stocks. 2-3% total realtor commission on the way? Hundreds of thousands of families rely on that income
XTOD: Interesting. Nominal ECI wages are steady or slightly higher in Q3. This is ~1% higher than the job number's average hourly earnings, which is more between 3.5 and 4% now. Interesting. Nominal ECI wages are steady or slightly higher in Q3. This is ~1% higher than the job number's average hourly earnings, which is more between 3.5 and 4% now.
XTOD: The pace of wage growth is consistent with what you would expect with 3.2 to 3.7 percent inflation depending on which data series you're looking at.
XTOD: Did @Wealthfront's vanity risk parity project cost its clients $500 million (and counting)?Yet another cautionary tale from liquid alts land. Summary: Wealthfront is a pioneer in the robo advisory business. Good! Cheap and efficient access to model portfolios. Then they tried to build a hedge fund product to look cooler than other robos. Bad. Really bad. Here's the story....
XTOD: Looking back at this video of Chamath from 2 years ago is so amazing. " I want to be an instrument, like Berkshire, for the retail investors to help them close the inequality gap for themselves." Yes, you've helped them so much sir. $CLOV -91% $DM -91% $SPCE -85% $OPEN -81% $MILE Delisted SO PROUD OF YOU HAHAHAHAHAHAHAHAHA
XTOD: Another weird admission Sam made to me came up. At trial, Sam's basic position has been that he didn't know what was going on. But to me, he described a meeting at which he, Caroline, Nishad and Gary had decided to extend more credit to FTX. Prosecutor: "Do you recall telling Zeke Faux in December of 2022 that when Alameda repaid its third-party lenders, you understood that there was a risk to FTX?" Prosecutor: "I'm going to direct you to page 226-227. And I want to direct your attention to the middle of the page, where it starts, 'You were.' And just ask you to read those two sentences to yourself." Prosecutor: "Does that refresh your recollection about whether you told——whether Zeke Faux said to you, "You were all aware there was a chance this would not work?" And you said, "That's right, but I thought that the risk was substantially smaller"? SBF: "I don't recall that, no."
XTOD: If we assume the point of investing is ultimately to improve your quality of life and the quality of life of those you most care about, investments that consistently add stress over long periods of time probably don’t make sense. Money is traded for things or experiences that catalyze certain feelings. If your investments are generating the opposite spectrum of feelings, it might be time to reassess. It’s easy to miss the forest for the trees. Money is a means, not an end. And in the end, most things matter very, very little. Do what helps you sleep at night and wake up with a low heart rate. To me, those are the hallmarks of a world-class investor who gets the big picture.
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