Jobless claims rise slightly to 219K, increasing the 4-week average to over 216K. The nonfarm productivity data was largely in-line with estimates, but showed some increases in per-hour compensation in Q4 relative to Q3, despite overall unit labor cost falling slightly below estimates.
Well, the Old Lady, the BoE, cut 25bp to 4.50%, though it wasn't unanimous as Mann and Dhingra wanted to go bigger with a 50bp cut. Seems like they're going to take it slow and steady with a "gradual and careful" approach to easing, but with some different views on the outlook, so who knows.
In markets the S&P 500 ended up at 6,080. The 2Y is 4.22% and the 10Y is 4.44% heading into Jobs day. After the bell Amazon’s earnings were considered solid, but the guidance was considered disappointing as they sided headwinds due to FX. Like other major tech companies they are planning to spend a ton on capex related to AI.
The start of the year reminds me of “How To Look For Bird Poop”. You don’t know how to look for bird poop?
How To Look For Bird Poop is the title of Chapter 11 of Nassim Taleb’s book “The Black Swan”, it is a chapter that criticizes rigid planning because it fails to capture that so much of the world is random, serendipitous and ruled by the impact of events that compound in unfathomable ways. Taleb would advocate in favor of flexibility and adaptability in order to navigate an uncertain world. Here is one of my favorite passages from that chapter:
“In the summer of 1998 I worked at a European-owned financial institution. It wanted to distinguish itself by being rigorous and farsighted. The unit involved in trading had five managers, all serious-looking (always in dark blue suits, even on dress-down Fridays), who had to meet throughout the summer in order “to formulate the five-year plan.” This was supposed to be a meaty document, a sort of user’s manual for the firm. A five-year plan? To a fellow deeply skeptical of the central planner, the notion was ludicrous; growth within the firm had been organic and unpredictable, bottom-up not top-down. It was well-known that the firm’s most lucrative department was the product of a chance call from a customer asking for a specific but strange financial transaction. The firm accidentally realized that they could build a unit to handle these transactions, since they were profitable, and it rapidly grew to dominate their activities.
The managers flew across the world in order to meet: Barcelona, Hong Kong, etc. A lot of miles and a lot of verbiage. Needless to say they were usually sleep-deprived. Being an executive does not require very developed frontal lobes, but rather a combination of charisma, a capacity to sustain boredom, and the ability to shallowly perform on harrying schedules. Add to these tasks the “duty” of attending opera performances.
The managers sat down to brainstorm during these meetings, about, of course, the medium-term future - they wanted to have “vision.” But then an event occurred that was not in the previous five-year plan: the Black Swan of the Russian financial default of 1998 and the accompanying meltdown of the values of Latin American debt markets. It had such an effect on the firm that, although the institution had a sticky employment policy of retaining managers, none of the five was still employed after the sketch of the 1998 five-year plan.
Yet I am confident that today their replacements are still meeting to work on the next “five-year plan.” We never learn.”
So why is the Chapter about bird poop? Well there is a story about Bell Labs and the discovery of cosmic microwave background radiation—essentially the afterglow of the Big Bang. Penzias and Wilson were working on a radio antenna at Bell Labs when they kept encountering an unexplained noise in their data. They initially thought it was interference caused by pigeon droppings (bird poop) on the antenna. After cleaning it multiple times and ruling out other sources, they eventually realized they had stumbled upon a major scientific discovery.
With so many pundits and strategists constantly talking about their predictions about Trump policies or about AI or other technology, it’s a good reminder that most predictions fail, most plans prove to be illusions. History shows that the outliers and unexpected tend to shape the world.
For your weekend homework, I would recommend you give Morgan Housel’s latest podcast episode “All The Different Ways Your Life Could Have Turned Out”. It’s a good reminder about the role of minor events in shaping the future and an appreciation of uncertainty.
XTOD: JUST IN: Over 40,000 federal employees have now accepted President Trump's buyout resignation offer - WaPo
XTOD: This chart from @Brian_Riedl really makes it clear that unless there is major fiscal reform, fiscal dominance is inevitable. Source:https://manhattan.institute/article/2024-chart-book-examines-spending-taxes-and-deficits
XTOD: Wow. Trump wants to eliminate tax breaks for "billionaire sports team owners" and close the carried interest tax deduction loophole for hedge fund managers.
XTOD: One of the best ways to spend money is to buy time.
XTOD: "The principle is this: that in everything worth having, even in every pleasure, there is a point of pain or tedium that must be survived, so that the pleasure may revive and endure. The joy of battle comes after the first fear of death; the joy of reading Virgil comes after the bore of learning him; the glow of the sea-bather comes after the icy shock of the sea bath; and the success of the marriage comes after the failure of the honeymoon. All human vows, laws, and contracts are so many ways of surviving with success this breaking point, this instant of potential surrender."
https://x.com/EricLDaugh/status/1887285900167856276
https://x.com/matthewstoller/status/1887570936494211199
https://x.com/DavidBeckworth/status/1887199488680607796
https://x.com/MoneyWisdom_/status/1887301637422637422
https://x.com/The_Kyle_Mann/status/1887581332701913092
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