Daily Economic Update: October 9, 2024

I wrote this before the airing of HBO's documentary "Money Electric: The Bitcoin Mystery" where rumors have been swirling that the real Satoshi Nakamoto will be unvieled which will reportedly send "shockwaves" through markets and the election.  I guess I'll take the under on the impact of this documentary and side with Charlie Munger's sentiment on the importance of Bitcoin, perhaps best summed up in his quote: "It's like somebody else is trading turds and you decide, ‘I can't be left out.’"

Chinese stimulus hopes fading for now. Oil prices fell despite uncertainty around the Mid-East turmoil, but for now mixed messaging around the possibility of an Israeli attack on Iranian oil, coupled with a lowered expectations for Chinese stimulus might be helping to slow the recent price spike.  Speaking of uncertainty we have Hurricane Milton and uncertainty of the path as well as the secondary and tiertiary knock on impacts that could arise from the storm.  Lastly, on uncertainty, yesterday's NFIB Small Business Optimism highlighted this quote:

"Small business owners are feeling more uncertain than ever,” said NFIB Chief Economist Bill Dunkelberg. “Uncertainty makes owners hesitant to invest in capital spending and inventory, especially as inflation and financing costs continue to put pressure on their bottom lines."

This reminded me of a quote by legendary economist Irving Fisher, which I referenced here:

 "Business is always injured by uncertainty. Uncertainty paralyzes effort, and uncertainty in the purchasing power of the dollar is the worst of all business uncertainties."

Perhaps a feeling that the Fed is willing to let the inflation rate run a little hotter in order to provide more certainty for the labor market will paradoxically create instability for the labor market by causing business uncertainty due to inflation.  

Speaking of the Fed, Jamie Dimon spoke on BBG noting he thought the Fed was right in beginning to cut rates, but he really focused on structural issues such as regulation, deficits and geopolitics.

Bond markets didn't love the 3Y Note Auction with a 0.7bp tail and a poors showing from indirect bidders (generally foreign demand).  The 2Y is 3.97% and the 10Y is 4.03%.   Nonetheless equity markets were up, because tech only goes up.  The latest Atlanta Fed GDP estimate for 3Q is 3.2%, a number I don't think many expected for a year that has had a 5 handle interest rate policy.

On the day ahead the highlights will be the FOMC Minutes and the 10Y Note Auction.

XTOD: IOW, NGDP growth > 5%. Aggregate demand growth remains robust. No slowdown in sight.

XTOD (long but good read by Michael Pettis, here's 1 of 11) : 1/11 Adam Tooze suggests that "If your aim is restoring the competitive position of US industry, a large dollar devaluation would do more than a sprinkling of industrial subsidies."

XTOD: "Microsoft has become more cautious about paying for ever-bigger server  clusters for OpenAI as the cloud giant aims to ensure it won’t take a  loss on costly data centers that may not generate consistent revenue in  the coming decades"

XTOD: NEW FROM US:Roblox—Inflated Key Metrics For Wall Street And A Pedophile Hellscape For Kids  https://hindenburgresearch.com/roblox/ $RBLX 

XTOD: Lou Simpson: “The essence [of investing] is simplicity.” https://pbs.twimg.com/media/GZXWSwSX0AAHoRM?format=jpg&name=900x900

XTOD: Simplification is the art of organizing your life around purpose.

https://x.com/DavidBeckworth/status/1843686232888664514

https://x.com/michaelxpettis/status/1843653182242861212

https://x.com/modestproposal1/status/1843648189200769428

https://x.com/HindenburgRes/status/1843633084421317019

https://x.com/kejca/status/1843615245807563181

https://x.com/GregoryMcKeown/status/1843737371763974398