We start the week with the Nasdaq at fresh all-time highs over 5,100. Along with the Nasdaq strength, Bitcoin and altcoins have rallied solidly. Weaker than expected manufacturing PMI and construction spending data, coupled with more concerns over CRE portfolios at regional and community banks helped pull down Treasury yields to end the week. The 2Y starts the week at 4.53% and the 10Y at 4.18%.
The latest NY Fed r-star estimates continue to show a declining estimate for r-star. Arguably if the neutral rate of interest continues to fall and the nominal fed funds policy rate doesn't fall than Fed policy would become increasingly restrictive. Interestingly the Fed estimates of trend growth show growth rising. Back on August 23, 2023, I mentioned Knut Wicksell's theory that while you could not see the natural rate, you could see the impact of policies that kept rates above or below this rate by looking at trend growth rates. So it's interesting to see a directional divergence between the Fed's trend growth estimates and neutral rate estimates at the same time that monetary policy is unchanged. Admittedly I haven't dug into the data or the estimates, perhaps its a short-run vs. long-run difference, or perhaps r-star will follow trend growth higher. Both Atlanta Fed and NY Fed 1Q2024 GDP forecast continue to show a 2-handle. As readers of Scott Sumner might already know his opinion on the restrictiveness of Fed policy, which he stated again recently:
"At no time in the past few years has monetary policy been “tight”. Indeed it’s been generally expansionary, which is why NGDP growth remains excessive."
On the week ahead we get the man in the orange hat from the Grateful Dead concert, AKA Jerome Powell testifying to Congress in his semi-annual Humphrey Hawkins address. Powell's testimony will be to the House on Wednesday and Senate on Thursday. Ahead of the testimony, the Fed already released their report which provides no new information. We also get a JOBS Day Friday.
Today: No major data and only Harker on the Fed slate
Tue: Factory Orders, ISM Services
Wed: ADP, JOLTS, Fed Beige Book, Powell
Thur: Jobless Claims, moar Powell
Fri: JOBS Day in 'merica
XTOD: Cutting interest rates will not help $NYCB. Fade STIR! These guys paid the wrong price for Signature and then botched the booking of the loans either hiding their bad acquisition price or just being bad at booking/pricng stuff. The 10K delay stinks of an accounting firm unwilling to provide their audit letter to the 10K. This sort of thing doesn't get resolved in 15 days despite the extension announcement.
XTOD (talking about Liz Warren): Just when you think her economics can’t get worse. What percent was it last Thursday? Is 100% too much but 41% just right, or still too much? Maybe you should just set all prices? Please note that isn’t serious (though you’d like to I know). When do corporations, or in fact mom and pop businesses, not charge what the market will bear? Is that gouging? What is gouging btw except progressive babbling? You want a new iPhone you pay apple the price it asks or you don’t. I know this is complicated. Btw, you guys like to make fun of Trump’s populism, and I often share that opinion, but what you do all the time is utter populist nonsense. Just with a slightly more left wing spin (not that different actually as you both embody ends of the horseshoe).
XTOD: “You’re born…you take sht…” The best description about the difference between working and school I have ever heard…VP in my banking group: “99% is Dean’s list at your overpriced college…it might even be an academic scholarship…welcome to the real world where 99% is simply 1% wrong…” You want to complain about the hamster wheel…live in finance circles long enough and you meet people who make $2+ a year, have 1-2 kids and negative cash flow with a “middle class manhattan” lifestyle. How many people commute 3 hours a day and miss all their kid’s stuff? The socials have convinced everyone that it’s easy. One of the hedge fund founders I worked for took just 10 vacation days in the first 10+ years of the fund. The legend is that he was airborne when a major bankruptcy finally happened, landed and said to his spouse “this is why I can’t go on vacation…”
…the point being…not only is the world so competitive that “lesser people” than you can beat you by outworking you…the truly scary thing is when people “greater than you” are willing to pay a price you are not. Bill Gates’s dad ask him and Buffett to write down on a piece of paper what explained their success: “focus” they both responded. This life isn’t for everyone, and nor should it be… but the lie people tell themselves is that they can live in the “best” places and not pay the price…someone always has to pay…be if you, or the person you inherited your trust fund from. The “facts of life…” from Layer Cake
XTOD: There are a few things I re-read every year. One is “Self Reliance” by Emerson. Here’s what stood out to me this time:
There is a time in every man's education when he arrives at the conviction that envy is ignorance; that imitation is suicide; that he must take himself for better for worse as his portion; that though the wide universe is full of good, no kernel of nourishing corn can come to him but through his toil bestowed on that plot of ground which is given to him to till.
A man should learn to detect and watch that gleam of light which flashes across his mind from within, more than the lustre of the firmament of bards and sages. Yet he dismisses without notice his thought, because it is his. In every work of genius we recognize our own rejected thoughts; they come back to us with a certain alienated majesty. We lie in the lap of immense intelligence, which makes us receivers of its truth and organs of its activity. When we discern justice, when we discern truth, we do nothing of ourselves, but allow a passage to its beams.
I must be myself. I cannot break myself any longer for you, or you. If you can love me for what I am, we shall be the happier. If you cannot, I will still seek to deserve that you should.
Insist on yourself; never imitate. Your own gift you can present every moment with the cumulative force of a whole life's cultivation; but of the adopted talent of another you have only an extemporaneous half possession.
The force of character is cumulative.
XTOD: To attain knowledge, add things every day. To attain wisdom, subtract things every day. - Lao-tzu
https://x.com/dampedspring/status/1763520767554146357?s=20
https://x.com/CliffordAsness/status/1764015912141697053?s=20
https://x.com/CorneliaLake/status/1763985021398851709?s=20
https://x.com/patrick_oshag/status/1763957254007423417?s=20
https://x.com/joyofcompoundin/status/1764267661964222720?s=20
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