Yields continued their march higher as markets reassess the stance of monetary policy and the outlook for growth and inflation. Oil also continues to climb due to concerns in the middle east, where prospects of an Israel attack on Iranian oil loom large. In equity land, ahead of the start of earnings season, NVIDIA helped keep indexes from experiencing larger losses than the 1% loss they experienced.
With corporate earnings and inflation data on the come as well as the backdrop of extreme weather and national and geopolitical politics, there will certainly be continued catalyst that could pose risks to whatever views are priced into markets over the coming weeks.
Nothing major came out of Fedspeak, so we'll look to the day ahead with very little data and more Fedspeak.
XTOD: Musalem says his baseline outlook is for continued economic expansion over the next several quarters, supported by a gradual easing of monetary policy and accommodative financial conditions
XTOD: Amos Yadlin, a Former Major General in the Israeli Air Force as well as the Former Head of the Israeli Military Intelligence Directorate, stated earlier today on CNN, “The Israeli Attack on Iran will be something that has never been seen in the Middle East.”
XTOD: With the confusion around Fed policy and the upcoming CPI release, I was thinking about Powell’s focus on Supercore inflation during the tightening cycle (and particularly in his November 2022 speech). It’s another example of how policymakers with a buffet of 100s or even 1000s of data points can pick and choose based on their prior taste for the direction of monetary policy. In November 2022, they were hiking, so they cared about Supercore. Now, they’re cutting, so they don’t talk about it anymore. We hang on every new indicator they claim is important. Then they just pick some new ones. It’s fun. https://pbs.twimg.com/media/GZULPuXWsAALRE6?format=png&name=small
XTOD: Real talk. Am i getting screwed on taxes? I pay 50% of everything I make to the Gov. Is Kamala saying teachers, nurses and firefighters pay more than 50%? I've asked my accountants for this super wealthy tax break and they cant seem to find it.
XTOD: The bond market is revolting against the Fed This morning, yields on the U.S. 10-year bond soared over 4%. This continues a non-stop rise in yields following the Fed’s 50 basis point rate cut on September 18. Normally, long term rates follow the path of interest rates in the overnight lending market, which the Fed controls. But this isn't a normal environment. Consider last Friday’s "blowout" jobs report, which was entirely driven by the biggest government hiring spree on record outside of COVID-19. Whoever believes our economy is strong, must think borrowing unsustainable amounts of money, printing money to pay for those loans, and then hiring people to do wasteful government jobs is the path to prosperity. It isn’t. The U.S. government is running deficits equal to 6% of GDP, and only generating 3% economic growth. In other words, if you remove government spending from the equation, America's economy is shrinking. We are on our way to a Soviet-like collapse in our economy as more and more of everything we do – including our jobs – are controlled by the government.
Mr. Market is starting to sniff this out. That’s why investors are dumping Treasuries and flooding into gold, stocks, and real estate at record high prices. Meanwhile, we’re witnessing an entire presidential election campaign without either major party bothering to address the single most important issue at stake in our country: America’s unsustainable debt burden and the coming insolvency of the federal government. It is only a matter of time now until, one day, the U.S. Treasury market suddenly realizes that no amount of printing will stop the collapse: there will be “no bid” for our country’s bonds.
And on that day, everything you think you knew about America will be completely gone.
XTOD: In the first and comprehensive analysis of the candidates’ plans, we find Vice President Harris would add $3.5 trillion to the debt ($0 to $8.1t) and President Trump would add $7.5 trillion to the debt ($1.4t to $15.2t). See https://crfb.org/papers/fiscal-impact-harris-and-trump-campaign-plans
XTOD: 'I had coffee with the head of a large family office today, and he said something really profound that I’d never quite put together. Paraphrasing: “Capital structure ripples through management and ultimately ripples through employee experience” If you work in a business run for cash flow, a PE-backed platform, a business run for growth or a business run for long term hold, your experience as an employee could not be more different.
The cash flow capital demands low overhead, fast ROI, had little patience for capacity building.
The growth capital spends aggressively to build the company of tomorrow, today. Nobody worries much about profitability.
The PE capital is all about the exit, and everyone is managed aggressively quarterly to maximizing strategic value and EBITDA at time of sale.
The long term hold capital worries about downside more than upside and tends to err on the side of conservatism. It’s a marathon, not a sprint.
No one right way, but it’s worth remembering that it’s the capital that ultimately designs the game that everyone else plays.' -Xavier Helgesen My own personal add: 'The same owner/ownership group can go thru multiple capital structures depending on ambition, goals, & just where they are personally.
Time frame being the easiest way to spot who's in what camp. And while you may not agree w/ their choices, understanding their time frame will at least give you understanding for why they are doing what their doing.'
https://x.com/stlouisfed/status/1843421094683799982
https://x.com/sentdefender/status/1843423008742113582
https://x.com/donnelly_brent/status/1843392255593505126
https://x.com/stoolpresidente/status/1843370957215543508
https://x.com/porterstansb/status/1843321952896712948
https://x.com/MarcGoldwein/status/1843276263794074024
https://x.com/TRUmav/status/1842588495488983454
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