U.S. stocks ended lower and yields rose again. Yesterday's 10Y auction was considered to be quite poor, with one of the largest tails (over 3bps above where when-issued was trading) in years. Not quite what you might expect in a major flight to safety trade, so I guess debt and deficits matter to investors, even when they are trying to figure out how they are assessing the U.S. growth and inflation picture. We'll see how the 30Y Auction looks today. With the 2Y at 3.98% and the 10Y at 3.95%, the 2's10's inversion watch is getting real, sitting at just 3bps. Are you willing to play for further steepening of the yield curve? If you need a refresher look here.
I already have seen the talk of the "Fed Put" a few times this week. On a year when the S&P is up 15%.
Speaking of the "Fed Put", I thought John Cochrane highlighted an interesting observation in a recent blog post. To paraphrase, he basically alluded to the fact that some of the voices calling for the Fed to cut are making those calls solely being made on the basis of people wishing to see the stock market higher (certainly there are some concerned about the employment picture). It does make you wonder, if the Fed were to cut early or bigger than what's priced in, will it be a defacto bail out of some of the levered and short vol trades that the current narrative is blaming on the recent price action? In other words does it perpetuate moral hazard and further encourage investors to behave like Taleb's Turkey, picking up pennies in front of a steam roller.
Anyway, this week to date reminded me of "Febezzle"
Jobless claims, 30Y auction, Fed Barkin today and eyes on wars in Ukraine and Middle East.
XTOD: Taylor Swift’s shows in Vienna were canceled Wednesday after two men—one with alleged ties to ISIS—were arrested in connection to a terror plot targeting one of the events. What happened—and what's next for Swifties? Here's what we know: https://trib.al/h15tpaA
XTOD: ISIS just Pissed Off the one Group that you don’t want to Piss Off…Swifties.
XTOD: ""The US is not in a recession, despite the Sahm Rule indicator bearing my name saying that it is. That said, the risk of a recession is elevated, strengthening the case for the US Federal Reserve to cut interest rates."" https://bloomberg.com/opinion/articles/2024-08-07/the-sahm-rule-is-warning-of-recession-but-claudia-sahm-isn-t-sold?srnd=undefined&sref=YAR8Qcu4 my
@opinion
XTOD: Former New York Federal Reserve President Bill Dudley has a Bloomberg opinion piece out in the last half hour.
He is hyperventilating that the Fed needs to cut 150 to 200 bps as fast as possible.
* He dismisses the Sahm Rule pushback as being distorted by migration. He is taking it at face value, and it means the economy is in deep trouble.
* He argues that the neutral rate is 150 to 200 bps below the current funds rate of 5.25%.
Dudley's thinking is why I'm worried the result will be 4% to 5% inflation and not a rescue of an economy (that might not need it).
----
https://bloomberg.com/opinion/articles/2024-08-07/federal-reserve-markets-wild-ride-has-just-begun
Dudley ...Monetary policy is tight and becoming tighter as price and wage inflation moderate. It needs to get to neutral. Federal Open Market Committee members’ estimates of the neutral interest rate range between 2.4% and 3.8% (I’d put myself in the top half of that range). This means there’s a long way to go from the current effective fed funds rate of 5.3%. And if a recession materializes, the Fed will need to go into accommodative territory — to 3% or less.
An immediate rate cut is in order, but that’s very unlikely. It wouldn’t be consistent with Chair Powell’s deliberative manner, and the Fed rarely makes such moves outside of its regular policy-making meetings — only when a severe shock changes the economic outlook dramatically or threatens financial stability.
XTOD: I'm toying with starting a "Get on With Your Life" Investing Club.
Key principles:
+Get educated/make money doing something you enjoy
+Save and invest regularly in something reasonable (60/40, 80/20, whatever)
+Don't peek
+Go do other stuff
Who's in?
XTOD: If you refuse to maintain a proper diet, proper training, proper self-discipline, and an absolute focus on your long-term vision and goals, you are disrespecting yourself, and you are extremely arrogant to believe that you can achieve exceptional results without paying the price.
https://x.com/Forbes/status/1821294046494552147
https://x.com/Claudia_Sahm/status/1821293973870408049
https://x.com/biancoresearch/status/1821226208270369100
https://x.com/christine_benz/status/1821184255319228671
https://x.com/sentdefender/status/1821286579215986941
https://x.com/Jack_Raines/status/1820816335678415051
No comments:
Post a Comment