Stocks again at fresh all time highs, that's like 40+ times this year that they've set new highs. Not bad. Mr. Market was more optimistic than the day prior.
I'm sure you were dieing to know who won the Nobel Prize in Economics well it was Daron Acemoglu, Simon Johnson, and James Robinson “for studies of how institutions are formed and affect prosperity.” There work has provided influential research into the critical role institutions have played in long-run economic growth and development. Their book "Why Nations Fail" contrasts extractive political and economic institutions, which impede growth, with inclusive institutions that support market economies and broadly shared prosperity. In full disclosure I haven't read their book, so I'm only reguritating what I've learned of it from other sources, nonetheless it certainly is worth thinking about the importance of institutions in fostering prosperity in an age where politics and the Fed are so divisive.
In Fed news, we had Gov. Waller with his Waller, speech here where the press keyed in on this line: "I view the totality of the data as saying monetary policy should proceed with more caution on the pace of rate cuts than was needed at the September meeting". The highlights:
- recent GDP/GDI revisions: These revisions suggest that the economy is much stronger than previously thought, with little indication of a major slowdown in economic activity.
- watch demand for goods: there is considerable pent-up demand for durable goods, home improvements, and other big-ticket items - couple that with lower interest rates and boom.
- labor market: moderation but not a deterioration.
- inflation: feels like a rollercoaster, too soon to know if the last print is a noise or signal
- Taylor rules: one set says to proceed gradually, the other agressively with cuts. But Taylor rules are subject to subjective estimates of the 'stars'.
- Wallers 3 Scenarios to inform future cuts:
- Strong economy, no major labor concerns --> slow and deliberate cuts (probably less 50's)
- Inflation falls below 2% for some time and labor deteriorates --> front load cuts
- Inflation escalates even if due to supply shocks with no material labor concerns --> no cuts
- In the longer run: less clear the final destination/terminal rate
Waller still "think(s) the larger message of the SEP is that there is a considerable extent of policy accommodation to remove, and if the economy continues in its current sweet spot, this will happen gradually."
He didn't sound like a guy looking to cut another 50bps quite yet.
In geopolitics we had the U.S. sending missile defense capabilities to Israel and Chinese war games around Taiwan. That usually inspires confidence, but nonetheless oil continues a little lower as reports emerge that Israel is not planning to strike oil related infrastructure, at least for now.
Empire Mfg and more Fed stuff on the day ahead.
XTOD: It’s called private credit, T. Earnings are made up but the doc is fuckin’ tight and get this…these weirdos let us mark it at whatever the fuck we want.
XTOD: btw watched roughly 60 hours baseball in the last week plus and I don’t even know what I’m supposed to be buying from Strauss
XTOD: American Airlines will operate 1,600+ flights to the destination cities throughout each weekend of the final stops of Taylor Swift’s Eras Tour.
• Nearly 75% of passengers on those flights are female (+33% from a year ago for the same dates and destinations). • Roughly 60% of passengers are Millennial or younger (+30%) • About 40% of passengers are traveling in groups of two or more.
XTOD: Channel 14 in Israel is reporting that the Israeli Retaliation against Iran will be Significant, not Moderate, and will likely cause Iran to Respond; with them further stating, “We need to prepare for a Significant Exchange of Blows, that might drag the Americans in, which Iran certainly would not want.”
XTOD: U.S. President Joe Biden has instructed his National Security Council to make it clear to Iran, that an Assassination Attempt against Former President Donald J. Trump would be seen as an Act of War.
XTOD: "If I make extreme changes, they are not sustainable. But moderate, incremental changes - they are sustainable." - Tom Gayner (quoted in Richer, Wiser, Happier by @WilliamGreen72)
https://x.com/junkbondinvest/status/1845906289521541182
https://x.com/Razzball/status/1845639897865949658
https://x.com/darrenrovell/status/1845824089526534413
https://x.com/sentdefender/status/1845874087685464240
https://x.com/joyofcompoundin/status/1845309678235873597
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