The start of 2Q2024, let's see if the gains of Q1 can continue. "Do not attempt to fly a blimp in the shape of Charles Barkley". I wonder if I'm the only person who saw this warning, which is in the fine print in a Capital One commercial. I found it somewhat bizarre, but funny, that this warning (had to be?) shown on the screen. Anyway, I guess flying a blimp shaped like Barkley might be challenging, kind of like trying to manage inflation and unemployment by moving an interest rate (generally in 25bp increments) every six weeks.
Economist Scott Sumner has a prediction: "PS. Here’s a prediction for 2024: Inflation will remain above the Fed’s target, disappointing those who expected a soft landing. The economics profession will fall all over itself making up phony “supply-side” excuses for the lack of progress against inflation (which has obviously been a mostly demand side problem, and will remain so in 2024.)"
Speaking of inflation, on Friday, the Fed's preferred inflation measure, PCE, was largely in line with expectations. The headline was 0.33% MoM v. 0.4% est and 2.45% YoY v. 2.5% est. The core was 0.26% v. 0.30% est and YoY 2.718% v. 2.8% est. Personal spending rose slightly more than anticipated (0.8% v. 0.5%) and income rose slightly less (0.3% vs. 0.4%). It doesn't seem like there was anything overtly evident in this data that screams a major slowdown or even that inflation has been firmly defeated.
Powell continued to stress the need to see more data before cuts but still seems confident that inflation is on it's way back to target.
Speaking of data, to me, the NCAA Tournament is a reminder that there are times we take data and analytics too far. As I watched some tournament games, you see the impact of the '3-point revolution' based on data that shows a higher expected value for 3-point shots relative to 2-point shots outside of shots in the paint. In short it's the idea that because 3-point shots are only made at a slightly lower rate than 2-point shots that teams are better off shooting 3-pointers.
In watching some of these games you just see teams relentlessly shooting 3's, which for some teams was clearly not working. Without getting into statistics at all, it just seems that there are times that the fact that sports are played by real people, who can have a million factors impacting their performance, seems to be lost on those wed to the data. At least that's what it looks like to an outside observer when they see a team that is clearly not shooting well from 3, appear to make no adjustments to account for that fact. Maybe a guy just might to step in a few feet to get his shot despite the fact the analytics might say it's better for him to shoot the 3. Setting all that aside there have been some all-time great scorers who had strong mid-range scoring games, see Michael Jordan.
I don't doubt that on average, over time, and across many teams, shooting 3's might be the best expected value strategy. Perhaps Taleb's quote is applicable here:
Never cross a river that is on average 4 feet deep
Which I believe is a reminder that averages alone (like the average shooting percentage on 3 pointers across a wide universe of players) tell you very little about the variation around that average, you wouldn't try to walk across a river that has a passage that is extremely deep despite the fact the average depth is only 4 feet. With 3 point shooting there seems to be some large variances and sometimes as a casual fan observing it just appears teams might be too wed to the data.
On the week ahead it looks like JOBS Day Friday, ISM reports, JOLTS and Fedspeak will make for an eventful week.
Monday: ISM Manufacturing
Tuesday: JOLTS, Factory Orders, Fedspeak
Wednesday: ISM Services, ADP, Powell and Williams
Thursday: Jobless Claims, Fedspeak
Friday: Jobs Day in 'merica
XTOD: Powell spoke today. Some headlines *POWELL: CAN HOLD RATES STEADY IF INFLATION DOESN'T COME DOWN *POWELL: DON'T THINK RATES WILL RETURN TO PRE-PANDEMIC LEVELS *POWELL: ECONOMY NOT SUFFERING FROM THIS LEVEL OF RATES *POWELL: NO REASON TO THINK ECONOMY IN OR ON EDGE OF RECESSION
-- Only one market is open today ... crypto/Bitcoin. It is sold off as Powell spoke, Views his talk as hawkish.
XTOD: As the market climbs, the implied ERP for the S&P 500 drops to 4.23%, its lowest value since 2008. As a forward-looking price of risk, the ERP drives everything in markets. I have a review that I do on ERP, and my fifteenth annual update is now available: https://bit.ly/49fSBU0
XTOD: BREAKING: Barry Sternlicht's Starwood Capital surrenders 3 buildings in Oakland just 5 yrs after acquiring them Starwood defaulted on $365M in loans (from Deutsche Bank) tied to the properties w/ a combined footprint of ~1M sq ft They acquired the buildings for $494M in 2019 and are expected to be sold at significantly lower prices Oakland faces a critical situation w/ office vacancy at a record 30%+ surging from 9% in 2019
XTOD: A surprising result from Jonathan Haidt's research is that religion seems linked to better mental health in young people. It's a rare chink of light in an otherwise bleak picture on the effects of smartphones on teenagers.
XTOD: When you know what's coming, prepare. When you don't know what's coming, position.
If you have a presentation on the calendar next week, you can rehearse. If you have an appointment, you can easily factor in travel time so you're not late. If you know the bill is due next year, you can save the money this year.
When the future is uncertain, you can position. No one knows what's going to happen with the economy, but you can position yourself against potential loss by spending less than you earn. You don't know what's going to happen to your health, but you can strengthen your position against disease by exercising. You don't know when you might need your friends, but you can be in a good position to ask for their help by being the kind of friend they can count on.
Being well-positioned enables anyone to come out ahead no matter what obstacles the unknown may present.
https://x.com/biancoresearch/status/1773778072958861555?s=20
https://x.com/AswathDamodaran/status/1774083871195230592?s=20
https://x.com/TripleNetInvest/status/1773696373864718813?s=20
https://x.com/FraserNelson/status/1773633782249107727?s=20
https://x.com/ShaneAParrish/status/1774453435657519211?s=20
No comments:
Post a Comment