It was the most important Wednesday in history I believe. And I learned why I should be gravely concerned about electric boats and sharks, perhaps later than others, but educating myself nonetheless.
The cooler than expected CPI data lead to a double-digit move lower in yields and of course sent stocks to new highs. Both moves were mostly sustained through the FOMC despite the ‘hawkish’ dot plot.
The composition of the CPI report may not have been as promising as people think with most of the cooling coming from categories that might be considered less stable like a big reduction in airfare.
The FOMC held rates as expected, you’ve already read 100 recaps, but you haven’t read my recap here.
And speaking of questions, why does no one ask about FAIT? If we’re targeting average inflation, doesn’t that mean we need inflation to be below 2% after being above 2% to average 2%, because like math? Who knows. And why did no one ask Powell to weigh in on the risk of electric boats, it would have been entertaining: “Do I stay on top of the boat and get electrocuted, or do I jump over by the shark and not get electrocuted?” That seems like a good segue way into a discussion about the balance of risk.
I would tell you what’s on tap for Thursday, but how will it ever compare to Wednesday? But sure, PPI and 30y auction is exciting stuff.
XTOD: Perfect time to start cutting rates https://pbs.twimg.com/media/GP4QjJ7W4AAeqgR?format=png&name=900x900
XTOD: Hawkish dot plots. Only 1 cut, AND revising up neutral rate (still low IMO) and longer term unemployment rate.
XTOD: Powell's implication remains that Fed policy can control inflation or growth just because it's part of the Fed's dual mandate. In reality, the Fed can't control geopolitics, trade wars, international development strategies, commodity sourcing or distribution costs, rents, debt-based purchasing, skyrocketing rents, the price of gold, cocoa, or a host of variables that can and will influence any randomly set target inflation rate.
The Fed's policy hasn't kept the markets from booming either. However, it has fueled the distortion between financial assets and the real economy. #permanentdistortion
XTOD: Finally a pleasant surprise. Core CPI was 0.16% in May (2.0% annual rate). Headline was 0.01%. These are the best monthly readings since 8/21 & 7/22 respectively. Good news but caution: just 1 print & some fluky items. Core annual rate for 1/3/6/12 months: 2.0/3.3/3.7/3.4
XTOD: NEW: 2nd-grade teacher who was arrested for being drunk in class is no longer facing charges because "it is not illegal to teach drunk." I love America.
Wendy Munson was arrested after teaching her students at Nuestro Elementary School in California while drunk. Munson failed a sobriety test and was twice the legal limit two hours after she was initially arrested. District Attorney Jennifer Dupre announced that they didn't find any charges, noting that "it is not illegal to teach drunk." "While the District Attorney’s Office agrees that it is highly inappropriate to teach while intoxicated, it is, unfortunately, not illegal." "We couldn’t prove that her intoxication would endanger [the kids]." Munson is not listed as a teacher on the school's website, indicating she was fired.
XTOD: "There’s no way to create a long-term, enjoyable, sustainable life by having a series of short-term transactional relationships that you move your life through. That’s where you end up with these people who can buy anything, who’ve made hundreds of millions, if not billions, of dollars, who are miserable. I’ve met these people. They have their IRR (internal rate of return) etched on their tombstone. No one gives a shit. No one cares."
https://x.com/FedGuy12/status/1800952307640664449
https://x.com/nomiprins/status/1800985162060341436
https://x.com/jasonfurman/status/1800875044736016527
https://x.com/CollinRugg/status/1800951781117264048
https://x.com/ShaneAParrish/status/1800559162335911938
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