I started last week with a call to action, share this blog! At that time I also provided ChatGPT’s unbiased review, which you can read here. It’s only fair that I let Grok provide its review to start this week, right? Here’s what Grok had to say: “Need a financial fix that doesn’t bore you to death? Where is Edward Quince? at edwardquince.blogspot.com is your spot. It’s got smart, humble takes on markets, Fed moves, and whatever’s hot—tariffs one day, AI the next—all wrapped in satire that hits like a well-timed punchline. Plus, his X Thoughts of the Day pull the wildest bits from the internet’s hive mind. Guy’s been at it since 2023, and it’s criminally underrated.”
Now that Meta is rolling out a new AI chatbot in the second quarter, I’ll have to get its take on the blog. After all, your opinions don’t matter, in the future AI is going to be doing all the reading anyway. You think I’m wrong, well “You’re in no position to dictate that. You’re in no position to dictate what we’re gonna feel”
I’m going to need this blog to get a lot bigger and have some advertising or something now that I have to deal with stagflation.
PCE, GDP and Stagflation?
Stagflation is lower real economic growth coupled with higher inflation and following last week’s PCE data and the latest Atlanta Fed GDPNow reading, the idea of stagflation might not be off the table.
With respect to the PCE report, the Bureau of Economic Analysis reported a very strong reading in personal income at 0.9%, above expectations, and led by a rise in social security income (thanks to COLA) coupled with solid dividend income. The personal spending component decreased 0.2%, which was worse than expected, with spending on goods, especially motor vehicles leading the decline. The price index, or PCE, showed a headline annualized year over year rate of 2.5% and a core YoY rate of 2.6%, both declining from the prior reading, but neither at 2.0%.
The Atlanta Fed GDPNow printed an estimate of -1.5%, with weak net exports and weak consumption driving their downward revisions. The net exports component is likely related to tariff concerns. The U.S. Census Bureau’s Advance International Trade Deficit in Goods was the highest goods deficit in history, which is thought to be importing ahead of tariffs. Beneath the headlines is data indicating that imports of Gold to the U.S. are a major factor in the widening deficit, the imports of Gold being driven by the chance that Gold could be subject to tariffs and physical Gold could be needed to settle futures contracts. Those economists who really study the data point to this Gold anomaly and note that net imports of Gold do not feed through to GDP as Gold imports are generally unrelated to U.S. production or consumption which is what is measured in the national accounts. I guess we’ll see. GDP estimates excluding this anomaly appear to be trending below 2%.
So if we have sticky inflation readings and lower GDP, that doesn’t sound good, it sounds like Stagflation.
It would seem the answer to all our problems is Productivity, a topic we’ve talked about a number of times on this blog, including at the end of January, but my favorite post on the productivity topic can be found here.
If the 1970s and 1980s are the analogy, maybe we need advice from that era. In a 1981, Financial Analyst Journal article authored by the NYSE’s then Chief Economist, William Freund, notes: “The key to licking inflation is productivity, and the key to improving productivity is capital investment.” and “Over the long run, real economic growth can come from only two sources - more worker hours and greater efficiency in output per hour.” and “Economic history demonstrates that modernization of plant and equipment, more efficient production processes and better management have accounted for most of the growth in productivity.”
So with that said we can queue the discussion on AI. Where is a lot of capex occurring? AI. Where is the expected increase in productive processes expected to come from? AI. What do you think, is AI the answer to stagflation risk?
Recapping February 2025: Stagflation, Tariffs, AI and The Best of XTOD thinking
Tariffs: The Gift That Keeps on Taking (From Your Wallet) Remember tariffs? Those things we thought were going away? Surprise! They're back, and this time they're "reciprocal," which apparently means they're just as annoying, but now with a fancy label. News of pausing tariffs on Mexico briefly made the market feel good, because nothing says "economic stability" like a temporary reprieve from added costs on everything you buy. It’s like finding out your root canal is only going to be delayed a week.
The Fed: Guardians of the Galaxy or Just Really Confused? The Federal Reserve, or as I like to call them, the Powell Rangers, continue to ponder the age-old question: to cut or not to cut? Will Trump's policies throw a wrench in their delicate dance of rate adjustments? And what about the "dots"? Are they still a thing? One thing is for sure: trying to predict the Fed's next move is like trying to herd cats while blindfolded. You’re better off reading tea leaves.
Economic Indicators: A Choose Your Own Adventure Novel: Jobless claims are up, but is it noise? The Conference Board’s Leading Economic Index (LEI) is flashing warning signs, but who trusts those guys anyway? The internals indicate a consumer base that is pessimistic. It is as if they are all realizing they have to pay back their credit card debt. CPI reports come and go, each one telling a different story depending on who's spinning it. It’s like trying to navigate using a map drawn by a toddler. Good luck with that soft landing!
AI: The Singularity is Near (or Maybe It's Just a Hype Machine): Ah, AI, the magical elixir that's either going to solve all our problems or turn us into paperclips. Are tech companies overvalued because of AI hype? Is Nvidia the next Pets.com? One thing is clear: everyone is talking about AI, but nobody really knows what it is or what it's going to do. But hey, at least it's not boring.
Market Performance & Valuations: This Time Is Totally Different (Until It Isn't): The S&P 500 is hitting record highs! Time to party like it's 1999! But wait, are we in a bubble? Are valuations too high? Is this sustainable? Don't worry, just keep buying the dip. After all, what could possibly go wrong?
And in our February of less than financial topics:
George Carlin Quote: Because He Always Tells It Like It Is: “Think of how stupid the average person is and then realize half of them are stupider than that.” Truer words have never been spoken. This explains so much about the stock market, politics, and most of what you see in public.
Dave Portnoy and $Greed: A Cautionary Tale of Crypto and Hubris: Dave Portnoy(@stoolpresidente) created $Greed and bought 357.92M $Greed (35.79% of the total supply). He sold all $357.92M $Greed in a single transaction, causing the price of $Greed to crash by 99%. And he made ~$258K from $Greed. Next, Dave Portnoy created $Greed2 and currently holds 268.25M $Greed2(26.8% of the total supply). Keep your funds safe and be aware of risks! Is anyone really surprised? In the wild west that is crypto, $Greed is actually an apt ticker.
Looking Back at 2025: A Glimpse into the Future (Maybe): Imagine it’s 2035 and you’re looking back at 2025. What do you think is going to be glaringly obvious by then that isn’t obvious to most people now? Will we laugh at our obsession with meme stocks? Will we marvel at the fact that we used to drive our own cars? Will we even be around to look back at all? Only time will tell.
Questions for Self-Reflection: Because Introspection Is Overrated (Just Kidding): What am I working on and why? Who am I spending time with and why? How well am I treating my body and why? Everything else is noise. Okay, okay, maybe there's something to this self-reflection thing after all. But let's be honest, most of us are too busy doomscrolling to actually answer these questions.
LinkedIn Observation: When Did LinkedIn Become OnlyFans? A comparison of LinkedIn to OnlyFans, noting the shift from professional networking to engagement-bait posts and self-promotion. Let's face it, LinkedIn is where professional aspirations go to die. It’s a constant stream of humblebrags, vapid motivational quotes, and people you went to high school with trying to sell you something.
So while we wait for AI to solve stagflation, the Fed to master soft landings, and LinkedIn to stop being weird, at least we can all agree on one thing—no one actually knows what’s going on, but that’s never stopped them from pretending
The Week Ahead:
After the S&P 500 sold off by 5% last week on a “growth scare” narrative, we’ll get the February Jobs report as the highlight of the week ahead.
Today: ISM Mfg, Construction Spending
Tue: Fed Williams
Wed: ISM Services, Factory Orders
Thur: ECB Decision, Jobless Claims, Fedspeak
Fri: Jobs Day and Powell at Chicago Booth
XTOD’s:
XTOD: CouplaBeers https://x.com/i/status/1896078157398098309
XTOD: A portion of your future tax dollars will go towards buying Cardano. Let that fucking sink in for a second.
XTOD: If only there was a guy who historically issued “toxic converts” who recently issued debt backed by this “store of value” while simultaneously goosing this very “store of value.”
Get the popcorn.
XTOD: Pure Independence https://t.co/60y4aRauRg
https://x.com/i/status/1896078157398098309
https://x.com/donnelly_brent/status/1896246604111528443
https://x.com/MarkNeuman18/status/1895439483308503531
https://x.com/morganhousel/status/1895469029453938845
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