Unless you got debanked during it and couldn't invest, November was the best month of the year for the major indexes. With December upon us, we enter yet another Jobs week, with the Employment Report on Friday. Trump's pick of Bessent as Treasury Secretary seemed to help calm treasury markets on the week. The 10Y yield is 4.17% after being up above 4.40% for a good part of November. The 2Y yield which is more sensitive to the Fed fell to 4.16%.
Helping bond yields was the fact that PCE was largely in line with estimates. The headline PCE is running 2.31% YoY while the Core is running at 2.80% YoY. Personal income and spending remain solid. The ATL Fed GDP estimate for 4Q remains a healthy 2.7%. The FOMC Minutes also didn't indicate anything to indicate the Fed is overly concerned with inflation, and overall offered little you haven't already heard from Fed officials, such as the idea that they'll continue to gradually move to a more neutral policy rate if the data comes in as they expect.
Away from markets, we had Buffett's philanthropic announcement where he announced he has designated 3 individuals as eventual successors to his 3 children in giving away his wealth. As usual his announcement came with a dose of his own wisdom:
- our belief that hugely wealthy parents should leave their children enough so they can do anything but not enough that they can do nothing
- I’ve never wished to create a dynasty or pursue any plan that extended beyond the children. I know the three well and trust them completely. Future generations are another matter.
- I have one further suggestion for all parents, whether they are of modest or staggering wealth. When your children are mature, have them read your will before you sign it.
- Charlie and I also witnessed a few cases where a wealthy parent’s will that was fully discussed before death helped the family become closer. What could be more satisfying?
- the real action from compounding takes place in the final twenty years of a lifetime. By not stepping on any banana peels, I now remain in circulation at 94 with huge sums in savings – call these units of deferred consumption – that can be passed along to others who were given a very short straw at birth.
- we shared a view that equal opportunity should begin at birth and extreme “look-atme” styles of living should be legal but not admirable. As a family, we have had everything we needed or simply liked, but we have not sought enjoyment from the fact that others craved what we had.
In politics and perhaps economices, we had Trump promising additional tarrifs on Mexico, Canada and China if they don't help stop drugs and people flowing into the U.S. Additionally he threatened BRICs nations with 100% tariffs if they ever decide to de-dollarize.
In geopolitics, Isreal and Hezbollah cease fire, while Syrian rebels take Aleppo.
On the week ahead the highlight is Jobs Day, but before we get there we get ISM, JOLTs and Fedspeak.
Monday: ISM Mfg, Waller and Williams
Tuesday: JOLTs, moar Fedspeak
Wednesday: ADP, ISM Services, Powell, Beige Book
Thursday: Jobless claims
Friday: Jobs Day, UofM, moar Fedspeak
XTOD: But the system is out to de-bank us ... Of course that’s your contention. You skimmed Breaking Banks once, so naturally, you think it’s a grand conspiracy—when really, it’s your port cos client lists being full of Balkan criminals failing AML 101. Next month, you’ll be shouting about how ‘Silicon Valley Bank was targeted,’ but the truth is if you’d read ALM by Farhvash, maybe you’d stop blaming the Fed for your bank buying 30-year MBS with 1-day deposits (which you pulled out). And by next year? You’ll be talking about, you know, how Basel III is a globalist scheme designed to choke innovation and crush the entrepreneurial spirit of the modern tech utopia. https://pbs.twimg.com/media/Gdt3GYVWoAAhiFW?format=jpg&name=900x900
XTOD: Trump's defense of the dollar's reserve currency status is disconsonant because it's a key reason for the structural trade deficit. Demand for dollar assets creates a capital account surplus that induces the U.S. to run a current account deficit. (Triffin dilemma, anyone?) Losing that status would reduce the dollar's value and the trade deficit. It would also mean higher interest rates.
XTOD: Great point. If BRICs are going to be penalized for not buying USD fiat why would the SBR be a thing. That's literally doing the same thing as the BRICs are doing.
XTOD: Third, and by far more importantly, China cannot simply sell US assets. It can only exchange them for other assets, but which assets? If it sold USD and bought RMB, the result would be an immense surge in the value of the RMB along with...a very disruptive contraction in the Chinese trade surplus. After all, the only reason China must buy foreign assets is to maintain its high trade surplus, and a refusal to do the former means the inability to do the latter.
XTOD: Jump. It’s not as wide as you think. https://pbs.twimg.com/media/GdVc7_8WMAA4UYl?format=jpg&name=360x360
https://x.com/Aureliusltd28/status/1863214180775366959
https://x.com/greg_ip/status/1863070403242926173
https://x.com/dampedspring/status/1862994439100084255
https://x.com/michaelxpettis/status/1863071942971965763
https://x.com/patrick_oshag/status/1861496211141730313
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