FOMC week is upon us; statement, Dots, Powell presser. With March Madness upon us and the Fed definitely on hold this meeting, I'm not sure anyone actually cares about this meeting. At least for the week I'll venture that more predictive power will go towards completing NCAA Tournament Brackets than predicting Fed rate cuts. Perhaps this is a good thing (see my last FOMC recap here). Much like improbable upsets will bust many people's brackets, inevitably it will be some seemingly unpredictable event (war, pandemic, financial disaster), not the Fed, that will have the most potential to change the future economic path.
The conclusion to a speech by Ben Graham in 1963 may have summed up the challenge
"The investor must recognize that there are uncertain and hence speculative elements in any policy he follows — even an all-Government-bond program. He must deal with these uncertainties by a policy of continuous compromise between bonds and common stocks, and by adequate diversification. (Exception: He may put and keep most of his funds in shares of a promising business with which he is closely connected.) He must make a strong effort to have more money invested in common stocks at lower market levels (at least on the basis of cost) than at what he recognizes to be potentially high levels. Most important, he must maintain a philosophical attitude toward the inescapable variations in his financial position and the inevitable “mistakes” associated with these variations.According to an old Wall Street story, when a certain broker was asked by a client to recommend issues to buy, he always asked in return, “What is your preference? Do you want to eat well or to sleep well?” I am optimist enough to believe that by following sound policies almost any investor — even in this insecure world — should be able to eat well enough without having to lose any sleep.
Speaking of the Fed, nothing in the inflation data should inspire much confidence for the Fed's battle with inflation. Since the Fed loves anchored inflation expectations, the NY Fed Survey of Consumer Expectation showing consumers raising their expectations for future inflation at the three and five year horizons is probably concerning. Away from the hard data, out in the real world (the one where you pay for gas, airfare, lodging, food, insurance, etc.) there still seem to be some rising prices - at least it seems that way to me anecdotally.
Away from the Fed there will be plenty of other Central Bank activity with the BoJ, RBA, and BoE. The most exciting of which is likely the Bank of Japan where there is a decently high probability that they end their negative interest rate policy.
On the week ahead:
Monday: nothing major, work on your brackets, BoJ 11pm
Tuesday: Housing Starts & Building Permits
Wednesday: FOMC 2pm
Thursday:, BOE, March Madness begins (noon), Philly Fed, S&P PMI's
Friday: Powell speaks at a Fed Listens event, but everyone will be watching basketball
XTOD: When James Madison was penning the First Amendment, I wonder if he thought: "What we really need is a Constitution that protects the right of the Chinese government to spy on millions of Americans and control how they get information"
XTOD: The Atlanta Fed's gauge of sticky inflation has risen to about 5% on a 3-month annualized basis. Inflation is moving in the wrong direction for the Fed, so it's interesting that the market's base case is still that the Fed is going to cut rates by about 100bp by January 2025.
XTOD: My highest-conviction short is BX. I have a position.
XTOD: Day 3 of 20 on the road talking to financial advisors and family offices about bitcoin. Some initial take-aways:.....(skipping to #4) 4) One common theme in conversations (which is new compared to past trips) is a visceral concern about rising US debt levels. Many advisors have clients who are worried about the US fiscal situation, and are using bitcoin as a release valve for that concern. I think the elections may be a catalyst to bring this concern to the forefront of people's minds.
XTOD: Let me be blunt ... Why do people use wealth managers? Because they are rich! What is the wealth manager's main objective? NOT TO MAKE THEM POOR. Wealth managers and their customers do not stay awake at night thinking about how to make a killing. They already have. They stay awake at night, worried about losing it. Understand this mindset before you make up more takes about rich people via their wealth managers FOMO-ing into crypto. Yes, they will EVANTUALLY put 1% in crypto. But it will take many years and many cycles for this to become a reality. Right now, I believe we are seeing " weak hands" piling in, such as asset managers trading accounts, small retail wanting to get rich (so they can give it to a wealth manager!), algos, and high-frequency hedge funds.\
XTOD (condensing a long post): We need to talk about Upper Middle Class Families in America Or, what used to be Upper Middle Class....In most metros, a combined 100+ hours of work/week between the two of them affords them an even better *material* lifestyle than their parents had: nicer cars, bigger home, takeout meals, and better vacations (during which they check email constantly)
Essentially, this cohort is now *Upper Class* in material goods lifestyle but not in leisure time.... It requires over DOUBLE the amount of working hours per household to get to this materially better but quality-of-life worse place.....We either: 1. Work all the time, with a spouse who works all the time, to try and capture that elusive slight upward mobility OR 2. We pursue balance but fall behind into downward mobility The end result? We are collectively exhausted and feel a sense of aching nostalgia for the way things used to be And our communities and mental and physical health are worse off for it
XTOD: Overcommitment is the enemy of happiness. Embrace the art of doing less.
XTOD: 10/10 podcast episode with @ShaneAParrish and Tom Gayner of Markel. https://t.co/vKv9vO0d7b
https://x.com/superwuster/status/1767707594141970937?s=20
https://x.com/lisaabramowicz1/status/1767839607884796161?s=20
https://x.com/dailydirtnap/status/1767637117247615154?s=20
https://x.com/Matt_Hougan/status/1767886740641956244?s=20
https://x.com/biancoresearch/status/1769394057103515926?s=20
https://x.com/GregoryMcKeown/status/1766870128967254329?s=20
https://x.com/morganhousel/status/1767282232627204360?s=20
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