If I've learned one thing from the tv series Shogun and from the Ohtani saga, it's that you shouldn't underestimate the importance of your interpreter.
Yesterday's PPI came in a little under expectations, providing a little reprieve for investors concerned about inflation, but not enough to reverse the recent move higher in yields. As for inflation, Economist Brad DeLong posits: "My current guesses? A 40% chance that things are simply delayed by the long and variable lags, a 30% chance that I am in for a big surprise as it turns out that that the era of “secular stagnation” & permanently low equilibrium rates that place chronic deflationary pressure on the economy, and a 30% chance the “unknown unknowns” rule everything around us…"
In Fedpseak, both Williams and Collins again indicated that nothing in the data indicates a need to start adjusting monetary policy to one of lower rates.
The 30Y Auction wasn't quite as bad as yesterday's 10Y, but still tailed and had weak foreign demand, making for a rough week for Treasury issuance.
Across the pond the ECB was on hold as expected: "The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.50%, 4.75% and 4.00% respectively." ECB remains ready to cut but is "data-dependent".
And in shocking news a financial institution is being investigated for doing a poor job with AML.
Today we survey consumers about gas prices and expect that and their political opinions to tell us something about the future of inflation.
XTOD: With the death of OJ, let's talk about how savage Norm McDonald was and risked his career at SNL when he would not let up on his OJ jokes.
XTOD: The current federal interest outlay is ~$1T per year, straight into financial portfolios. If you think that outlay is inflationary, imagine how inflationary it was last year when the U.S. stock market rose 30% from trough to peak. 30% is worth $12T to those SAME financial portfolios, ALL AT ONCE!
The people who are arguing that rate hikes exacerbate inflation via the "interest income" channel are obviously wrong, but even if they were right, the ZIRP alternative they compare things to is not an alternative where you get to just subtract interest payments from private wealth & spending power, and voilà, you're done. You have to also ADD the effects of the extreme asset market melt-up that the policy would induce (and all the follow-on reflexive effects--scary to even think about).
Just imagine how the system would respond right now if the Fed cut to zero amid the current inflation numbers! (or had held at zero all along, as the team transitory MMTers who traffic in this nonsense were demanding).
The whole angle is just incredibly stupid. It only serves to corroborate the criticism that MMT is a political ideology that will say anything to justify aggressively loose policy, as opposed to a serious economic framework. Stop with it already.
XTOD: So, let's start with what I believe everyone still needs to understand ... The COVID lockdown/restart of the economy was the biggest ECONOMIC event of our lifetime. Bigger than the financial crisis. It changed the economy in ways we see but do not want to accept.
XTOD: Two's at 5 ...10's at 4.60 Stocks at 250 Twelve month forward EPS and a 20.8 PE
This is just fantastic pricing for a recession island destination bet. I am still sailing the economic slowdown sea tied to the mast to avoid sailing to Soft Landing Island
XTOD: If you already live a comfortable life, then choosing to make more money but live a worse daily life is a bad trade.
And yet, we talk ourselves into it all the time. We take promotions that pay more, but swallow our free time. We already have a successful business, but we break ourselves trying to make it even more successful.
Too much focus on wealth, not enough focus on lifestyle.
https://x.com/DannyDeraney/status/1778454391479263388
https://x.com/Jesse_Livermore/status/1778216254362308965
https://x.com/biancoresearch/status/1778430137895178446
https://x.com/dampedspring/status/1778392536651804692
https://x.com/JamesClear/status/1778484723263672776
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