PMI and new home sales data were both better than expected. With PMI's it was services leading coupled with rising outlooks for the year ahead that did the trick. New home sales data looked robust with the average home price above $500K. Jobless claims seemed to continue to show that there is very little in the way of firings. Stocks held up well as earnings, including those of Tesla gave some reason for optimism. The 10Y ended around 4.21% and the 2Y at 4.09%.
I guess the theme of the week has been people talking about deficits.
As I mentioned back in Wednesday's post, the MMT crowd was likely going to want to have a word with all of those deficit hawks, and sure enough Stephanie Kelton was more than happy to X/tweet out a defense of deficits, which culminated with a link to a 2010 article by James K. Galbraith (son of famous economist John Kenneth Galbraith). That link is here. "To put things crudely, there are two ways to get the increase in total spending that we call "economic growth." One way is for government to spend. The other is for banks to lend. Leaving aside short-term adjustments like increased net exports or financial innovation, that’s basically all there is. Governments and banks are the two entities with the power to create something from nothing. If total spending power is to grow, one or the other of these two great financial motors–public deficits or private loans–has to be in action." You're welcome to make your own judgments on MMT, I've shared mine on this blog before.
Outside of MMT, but sounding MMT-ish, financial advisor, author, Cullen Roche wrote this piece titled "We Need to Have a Talk About “Bond Vigilantes”" in it he states: "government spending is 23% of GDP. That’s the same level it was at in 1982! And while it’s a large portion of aggregate spending we should remember that 77% of spending is coming from OTHER sources. In most cases, it’s much more efficient sources such as the most efficient corporate machine the human race has ever seen (corporate America). Again, don’t get me wrong. When government spending explodes to 45% of GDP like it did in 2021 then big inflation can come from this because the government becomes the primary (reckless) spender in the economy. But that’s not the case today. Government spending as a percentage of GDP is about the same as it’s been for most of the last 40 years. So it begs the question – in an economy like the USA does the government drive inflation or is the government driving a small amount of inflation that is not as important as other factors in the economy?" He goes onto posit major factors that drive the real economy.
Lest we absolve the Fed from any role in the economy, there was former Fed Governor, Kevin Warsh on CNBC with some choice words for the Fed and their fight against inflation and questioning their recent rate cuts. As I listened I was reminded of my favorite central bank quote:
“I define central bank independence in one sentence, it's the ability to raise interest rates when the Treasury doesn't want you to. And the Treasury almost never wants you to, because of the cost of the debt.” – Peter Stella
Anyway, I guess I'll conclude the week right we started, with the advice I shared on Monday. In no way am I saying not to be concerned about deficits, the election, stock valuations, or whatever the current narrative presents, but rather:
"The easiest way not to be overly influenced by what other people think is to not be aware of what they think" - Shelby Davis
and that the only way to beat the market (which I'm not saying you should even aim to do) is to diverge from the market:
"the willingness to be lonley, the willingness to take a position that others don't think is to bright. They have an inner conviction that a lot of other people do not have." - Michael Lipper describing Buffett, Soros and Templeton
and lastly that the four most dangerous words in the English language are:
"This time is different."
On the day ahead it's UofM and Durable Goods.
XTOD: This economy stinks I just paid $128 to have someone else get off their couch, pick up my caviar for me, drive it to my house and drop it off at my doorstep And they wanted a tip!?!?
How am I supposed to live?
XTOD: Former Fed governor Kevin Warsh: The 50-basis-point cut had no basis in the data available at the time of the Fed's meeting. "Maybe they're not data dependent. I do not want to be the person accusing them of politics ... but when you don't have a theory of the case and you don't follow it, it is easy to get that accusation and it is harder ... to defend them." https://cnbc.com/video/2024/10/24/former-fed-governor-kevin-warsh-the-fed-doesnt-seem-to-have-a-serious-theory-of-inflation.html
XTOD: You can either be judged because you created something or ignored because you left your greatness inside of you. Your call.
XTOD: John Steinbeck https://pbs.twimg.com/media/GaqrpvpXcAAO6yo?format=jpg&name=900x900
https://x.com/awealthofcs/status/1849465420744470720
https://x.com/NickTimiraos/status/1849478169968922885
https://x.com/JamesClear/status/1848789671418986801
https://x.com/InlibroV/status/1849479586871955692
No comments:
Post a Comment