Daily Economic Update: October 10, 2024

This was written before Hurrican Milton made landfall, which will no doubt be devastating to many people, an apt reminder of what really matters.  But since this blog is focused on economics and markets, the recent hurricane activity will no doubt have ramifications for economic data going forward.

The FOMC Minutes seemed largely in line with Powell's post decision press conference and should the debate over exactly how restrictive monetary policy has been.  "Participants emphasized that it was important to communicate that the recalibration of the stance of policy at this meeting should not be interpreted as evidence of a less favorable economic outlook or as a signal that the pace of policy easing would be more rapid than participants' assessments of the appropriate path." The minutes also showed a lack of concern around the labor market as a source of inflation and an overall view that inflation was sustainably moving to target. Overall the minutes couple with the recent jobs report seem to support the idea of a 25bp cut at the next meeting, but we'll see what the CPI report shows today.

Not even the antitrust talk against Google could keep stocks from making new record highs for stocks. Bond yields continued to rise, oil continued to fall and for all the Bitcoin talk, it sold off on the day.   The 10Y Note auction tailed 0.4bps to where WI was trading, alloted at 4.066%, metrics didn't look great compared to the last auction which had a much lower yield and higher bid to cover.  How much of the backup in yields is tied to inflation concerns, election concerns or something else is tough to say.  Though we know that the MOVE index implies that yields will remain volatile through the election.  We ended the day with the 2Y at 4.03% and the 10Y at 4.07%.

Did you watch the Bitcoin documentary on HBO? I eventually did and personally didn't find it all that interesting and it didn't seem to change the world.  What I always find paradoxical in the crypto discussion is that they incessantly value their "currency" in terms of USD.  A basic thread of thinking is something like, think of how many dollars Satoshi must have if he has X million Bitcoin, imagine if he sells it all.  When the documentary speaks that way, to me it implies, that in order for his Bitcoin to be worth something he needs to trade it back into USD?  I'm sure I'm wrong in the intent of the framing, but I find it somewhat ironic nonetheless.

On the day ahead, CPI and jobless claims will be the all the rage and NY Fed President John Williams will speak at 11am.

XTOD: Proposed motto for a new social-media platform:  You don’t have to have an opinion on everything—and shouldn’t listen to those who do.  If only!

XTOD: Bond market worries of post-election panic... The #MOVE Index measures the Implied Volatility of a constant one-month bond option.  On Monday the election fell into this 30-day window. 

This jumped the MOVE from 100 to 124  The market is bracing for an 18bp rate change on the day(s) after the election.  Similar Equity options jumped by 20%, but have since given back most of that increase to only 9% higher.   As has been the case since mid-2022, financial risk is all concentrated in bonds, not stocks.

XTOD: the Credit Suisse group acquired by Apollo was not ready for the Apollo lifestyle: 

https://bloomberg.com/news/articles/2024-10-09/apollo-s-bet-to-take-on-banks-hit-snags-before-atlas-ceo-s-exit  https://pbs.twimg.com/media/GZdKUfWX0AAI7Bn?format=jpg&name=small

XTOD: The hallmark of expertise is no longer how much you know. It's how well you synthesize.

Information scarcity rewarded knowledge acquisition. Information abundance requires pattern recognition. It's not enough to collect facts. The future belongs to those who connect dots.

XTOD: Having good health isn’t everything, but not having it is.  Having money isn’t everything, but not having it is.  You don’t need 6-pack abs or a million dollars to be happy, but it is worth learning the fundamentals of fitness and finance.   They bring a margin of safety.

https://x.com/jasonzweigwsj/status/1844056735050268879

https://x.com/ConvexityMaven/status/1844062345389277634

https://x.com/sindap/status/1844024291257725205

https://x.com/AdamMGrant/status/1844022112379601184

https://x.com/JamesClear/status/1843756389212279271