I got a phone call from who I thought was the Editor In Chief at Bloomberg News, he said they were about to pick up my blog as a major feature column, similar to Matt Levine’s, but then at the end of the call they said I was going to have to wait a little longer. So I waited around and didn’t get a lot of writing done. Turns out it wasn’t the Editor at Bloomberg at all, too bad, my dreams of being the next Matt Levine, deferred.
Speaking Of Deferred Dreams
Seems like some other dreams remain deferred, like that of the trade war ending quickly and that of improving the U.S. fiscal deficit. Treasury Secretary Bessent has news on both. When it comes to China he said it’s up to them to de-escalate. When it comes to the deficit, his department just said they need more money than they thought. Now in fairness some of that is debt ceiling related.
Bullwhips
Remember during the pandemic there was a lot of talk about the “bullwhip effect” in supply chains? I’m a little surprised that I haven’t seen as much talk about this topic with the uncertainty surrounding tariffs.
What is the “bullwhip effect”, it’s the idea that fluctuations in demand at the retail level can get amplified as they move upstream (to the manufacturers) and can cause big impacts in inventories, production, logistics and prices. The real problem is one of distortion, that tariffs create artificial demand signals and supply chains that are engineered to work in synchrony all of a sudden become unsynchronized.
Have companies learned from Covid, or are these bullwhip effects happening at smaller scales and the effects will be magnified if or when tariffs fully take effect. Will we see hoarding, panic ordering, shortages followed by gluts? And if you think that doesn’t matter, remember: gluts and shortages are exactly what made inflation so painful post-Covid.
Dalio Doesn’t Care, It’s Too Late
According to Ray most companies who are impacted by tariffs say it’s too late to get to a resolution that will reverse permanent damage. And by damage he means a failure to deal with major structural imbalances in trade and capital between the U.S. and the rest of the world. Ray wants to see a coordinated approach to addressing the problems: “In my opinion, what would be best is calm, analytical, and coordinated engineering and implementation, with the imbalances and the needs for self-sufficiencies treated as shared challenges, to produce the “beautiful" deleveragings and rebalancings that need to take place.”
But You Have To Agree On The Problems
According to Andrew Grotto at a recent Hoover Institute tariff conference, there is a foreign policy aspect to all this and sometimes threatening tariffs is better than pushing for changes with aircraft carriers.
Blockchain And AI Haven’t Solved Politics
The S&P closed at 5,529, up slightly. The 10Y treasury ended at 4.21% and the 2Y at 3.70%. We’ll see what the data and earnings bring on the day ahead. Remember the themes of the week are earnings and labor markets.
XTOD’s:
XTOD: The PCE price index (due at 10 am on Wednesday) is expected to show core prices rose just 0.08% in March, according to forecasters who map the CPI, PPI and import prices into the PCE. Headline prices are anticipated to have been flat (-0.01%) in March
XTOD: Iberia power cut leaves people trapped in lifts and trains, or stocking up at supermarkets http://reut.rs/3GrHoXy
XTOD: We have no idea how good we had it. The only better 15-year eras were: Post-WW2 thru May 1957 ~18% annualized + tech boom in 1980-90s, 15 years peaking in April 1999 ~17% annualized. This current 15-year peak was through February 2024 at ~16%/yr.
XTOD: Robots will surpass good human surgeons within a few years and the best human surgeons within ~5 years. @Neuralink had to use a robot for the brain-computer electrode insertion, as it was impossible for a human to achieve the required speed and precision.
XTOD: You can literally just wake up and decide to be a completely different person.
https://x.com/NickTimiraos/status/1917023663976599778
https://x.com/Reuters/status/1917023569013285194
https://x.com/Ritholtz/status/1916963236194259164
https://x.com/elonmusk/status/1916573094367625556
https://x.com/Jayyanginspires/status/1916533672141848582
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