Daily Economic Update: May 30, 2025

Matt Levine’s Titled His Column: Tariffs Are Illegal

As you already read, yesterday started with the news that Federal courts blocked Trump’s tariffs. By the afternoon the Trump Administration appealed and the tariffs were reinstated. It seems likely this will end up in front of the Supreme Court, but as some analysts have pointed out, there are other avenues the administration can use to impose tariffs, though each seem to have some limitations. In the meantime some reports continue to state that the trade negotiations between some countries and the U.S. continue.

To state the obvious, the future of tariffs is uncertain and if there’s one thing markets hate, it’s uncertainty.

But What If You Need Uncertainty?

I’m sure you know that Fisher Black is famous for his work on option pricing and the famous Black-Scholes (and later Merton) model.  And you might remember my post where I mentioned the DIKW theory of knowledge, where the “I” stands for “information”, or data made useful, where we can make useful inferences.  So what does this have to do with Fisher Black, well back in 1986 in a paper titled Noise he made the point that uncertainty is a necessary condition of financial markets. 

Black defined information in markets as data that allows us to estimate true value and everything else as noise, simply data that appears informative, but really adds nothing to our ability to estimate true value. 

He argues that absent this uncertainty, in the form of noise, is essential because without it “there will be very little trading” in individual assets. Further providing, “Noise trading is trading on noise as if it were information. People who trade on noise are willing to trade even though from an objective point of view they would be better off not trading. Perhaps they think the noise they are trading on is information. Or perhaps they just like to trade. With a lot of noise traders in the market, it now pays for those with information to trade. It even pays for people to seek out costly information which they will then trade on.”

So the next time you hear someone complain about how much uncertainty topic XYZ creates, just remember without that uncertainty there would be no liquidity and markets lose meaning.

“Differences in opinion make a market” or as Dune put it: “to know the future absolutely! All of it! What fortunes could be made — and lost on such absolute knowledge, eh?” but “what a hellish gift that’d be. What utter boredom! Every living instant he’d be replaying what he knew absolutely … Ignorance has its advantages.”

Perhaps The Real Uncertainty Is The Limit Of Central Power

What do tariffs and “the whiskey rebellion" have in common, almost everything or maybe nothing.

Tariffs today and the whiskey tax of the 1790s may seem worlds apart, but they share a common thread: a federal government, burdened by debt, reaching for revenue in pursuit of what it defines as national interest.  Today, that national interest is domestic manufacturing and national security, specifically strategic sectors like steel and semiconductors. In the 1790s, the interest was the westward expansion and asserting control over the Northwest Territory. Today, the tariff actions imposed by the executive branch, which supposedly will be paid for by exporting countries, but in reality are paid by the importer (though who bears the actual tax incidence is debatable), are the actions that are justified in supporting the national interest.  Back then it was a Congress enacted tax on whiskey distillers, part of a plan to fund the war debt and build federal legitimacy in the west.  Both tariffs and the whiskey tax appeared to unevenly economically squeeze some groups more than others: back then western PA whiskey distillers bear a heavier burden than eastern counterparts, today it’s small and medium sized businesses feeling the tariff brunt.  

The policies of today and of yester-year were viewed by some as being too top-down, and solutions that ignored economic realities. Thankfully today’s resistance is judicial and procedural, as contrasted by those of the 1790s were resisted with rifles. The overarching parallel is one as old as this republic, which is one of the limitations of central power.  Whether it has been frontier stills or modern ports and factories, American history is filled with moments where citizens have questioned the reach of central power.  The song remains the same, who decides, who pays, and who pushes back.

Speaking Of Pushing Back On Central Power

Trump invited Powell to the White House to tell him to lower rates.  Powell reiterated (at least through the Fed statement) that the Fed will “make decisions based solely on careful, objective, and non-political analysis.”   For all the media hype around Trump and Powell’s relationship, it’s really not a new political story.  Paul Volcker has written about pressure from politicians on himself during his tenure in his memoir.  Nevertheless, I’ve written about this tension a few times and perhaps my favorite lens to view this falls under the concept of “fiscal r-star” which you can read about in this post from back in January.

Maybe We Need Information - But All We Get Is Data
In data, we got a slight improvement in GDP in the second estimate with 1Q estimated to be -0.2% vs. the previous estimate of -0.3%, but consumption was revised down. With all the “noise” and speculation of whether there was tariff front-loading, etc. in 1Q, it’s hard to know what to make of these estimates.  Over in jobless claim land, claims remained low.

And the treasury was able to sell the 7Y note at 4.194%, printing 2.3bps through where WI was trading with again signs of strong foreign demand.

We ended the day with the S&P 500 up slightly to 5,912.  The 2Y yield moved down to 3.95% and the 10Y yield down to 4.42%.

PCE hits this morning. Let’s see what new uncertainty it can gift us.

XTODs:

XTOD: "I encourage you to continue pushing the boundaries of our knowledge, to ask the difficult questions, & to pursue the answers with rigor & dedication. Your efforts today will shape the policies of tomorrow, influencing the economic well-being of millions." https://federalreserve.gov/newsevents/speech/kugler20250529a.htm

XTOD: If $WFC Asset Cap gets lifted that’s huge capacity to absorb Treasuries & Agencies… already they have started to buy CLO AAAs…

XTOD: The stock market isn't where you get rich. You get rich developing skills & using those skills to provide goods & services to other people for income which allows you to save. 

The stock market is where you allocate some of that savings to help protect & plan for future spending.   Index funds are a wonderful stock market savings vehicle as they're low cost, diversified and will likely beat 80%+ of higher fee strategies.

XTOD: When there is a lack of clarity, people waste time and energy on the trivial many.  When they have sufficient levels of clarity, they are capable of greater breakthroughs and innovations – greater than people even realise they ought to have – in those areas that are truly vital.

XTOD: Investor Rick Buhrman on the kindness of mastering your craft:

INTERVIEWER: What is the kindest thing that anyone's ever done for you?​

BUHRMAN: ... our oldest son, Theo, who just turned seven, spent the first six months of his life in several NICUs. He was eventually helicoptered to Indianapolis at Riley Hospital for Children. And while we were living in that NICU for almost a half a year we saw a lot of kids who passed away. Most of those kids were not as sick as Theo was.

I don’t know exactly why Theo survived, but I know that a major part of how he survived was because for several decades leading up to that moment, numerous nurses, nurse practitioners, respiratory therapists, doctors, surgeons had committed themselves wholeheartedly to mastering their craft. I can give you tons and tons of examples of these people. And I know that in the moment, it wasn’t necessarily viewed as kindness.

But maybe in some sense, the kindest thing that all of us can do is to pursue something radically that in some way is in service to others, because you just don't know how it's going to change the trajectory of human life. And so for all of those medical practitioners, none of whom I'm sure are listening to this, I owe everything to, because they gave me the gift of being Theo's dad.

https://x.com/DavidKotokGIC/status/1928163547520880992

https://x.com/gamesblazer06/status/1928160833852281106

https://x.com/cullenroche/status/1928102254336168440

https://x.com/GregoryMcKeown/status/1928164457848655978

https://x.com/ericvishria/status/1928191518294299156

 

Daily Economic Update: May 29, 2025

Fade the Jeans, Long the Chips?

Ahead of Nvidia earnings the S&P closed lower at 5,888. After the bell Nvidia had another “double beat”, beating on both the top and bottom lines while taking a smaller hit from the China ban than originally expected. I’m sure some analyst who covers Nvidia or books appearances on CNBC can give you the full rundown, but suffice for now to say Nvidia sees solid AI demand continuing.  While Nvidia looked like it was moving higher after hours, it can't hold a candle to the ~24% pop that Abercrombie & Fitch shares had after earnings yesterday.  I didn’t listen or read anything about the Abercrombie earnings, but I’m pretty sure if they put some Nvidia chips in a pair of jeans to power something AI they’d be cooking with fire.

Where Were The Vigilantes?

With all the talk of the end of the dollar, deficits, bond vigilantes and the like, yesterday’s 5Y Treasury auction seemed to go off without a hitch, including a record 78% indirect (foreign) bidder takedown. The 2Y yield ended at 3.99% and the 10Y at 4.47%.  We’ll see how the market digests the notoriously tricky 7Y tenor.

Powell Rangers - Uncertain As Usual

Away from the market, the minutes of the May 6-7 FOMC Minutes were released and if you had that members viewed uncertainty around the economic outlook as having increased on your bingo card, good for you. Nonetheless they were still describing economic activity and the labor market as 'solid', though they did wave a hand at those quirky net export numbers messing with the picture. Inflation, the perennial party crasher, remains 'somewhat elevated'. As we already had heard, with risks to both higher unemployment and higher inflation, the Fed has decided to wait for more clarity.  

FAIT Accompli

The minutes did reiterate that the fate of FAIT (Flexible Average Inflation Targeting) is most certainly that it will be retired when the Fed completes its policy framework review.  The minutes suggested participants see “flexible inflation targeting, under which policy seeks to return inflation to 2 percent without making up for previous deviations from target” as more robust.

Day Ahead

On the day ahead we’ll get some economic data including a read of GDP.  An intriguing narrative on the back of Tuesday’s Conference Board Consumer Sentiment data is that the previously weak “soft” data will catch up with the mostly positive hard data.  

Meanwhile, At Abercrombie HQ…

If they embed a GPU into a pair of cargo shorts, I’m going all in.

XTODs:

XTOD: In case there were any doubts that FAIT is being abandoned, we got this excerpt from the May FOMC minutes: (1/3) https://pbs.twimg.com/media/GsEJw-iXMAAGXVB?format=png&name=900x900

XTOD: New SF public school plan would 

- eliminate homework and weekly tests from counting toward semester grade

- allow students to take the final exam multiple times

- convert all B grades into As, and all Fs into Cs 

It’s hard to see the difference between this policy and what you’d get if a bunch of 10yos locked the teachers in a closet and rewrote the rules.

XTOD: How can I put this? "Expected utility maximizers don't maximize utility."

Why? Because utility is not usually an ergodic quantity in the mathematical models used by economists, and maximizing its expected value doesn't mean much in the real world.

XTOD: "The impediment to action advances action. What stands in the way becomes the way." — Marcus Aurelius

XTOD: don’t live an unconscious life https://x.com/i/status/1927485216702296386

https://x.com/DavidBeckworth/status/1927833429128729070

https://x.com/DKThomp/status/1927700160337117617

https://x.com/ole_b_peters/status/1927689244660642163

https://x.com/GregoryMcKeown/status/1927832275200397693

https://x.com/patrick_oshag/status/1927485216702296386

Daily Economic Update: May 28, 2025

I’m Not Unconfident

It was a good day for equities as we head into Nvidia earnings today. The combination of soaring consumer confidence and renewed tariff optimism seemed to do the trick. While I’m still not sure what to make of sentiment data these days, there is no denying that the Conference Board data was positive.  The index rose to 98, well above expectations and with solid internal metrics, including a slight decline in inflation expectations.  Consumers also reported that “compared to April, purchasing plans for homes and cars and vacation intentions increased notably, with some significant gains after May 12.” 

And if you think consumers and “retail” are a contra-indicator then this observation might give you pause: “With the stock market continuing to recover in May, consumers’ outlook on stock prices improved, with 44% expecting stock prices to increase over the next 12 months (up from 37.6% in April) and 37.7% expecting stock prices to decline (down from 47.2% in April). This was one of the survey questions with the strongest improvement after the May 12 trade deal.”

The S&P closed at 5,921.

I’ll Keep Spending Until Ricardo Is Correct

I’m old enough to remember when deficits caused consumers pause, now they seem to ramp assets. 

Economists used to have a tidy theory to explain how deficits might behave in practice.

Back in the early 1820’s economist David Ricardo posited what is now known as “Ricardian Equivalence” a theory that if governments resorted to issuing bonds rather than raising tax revenue, consumers would ultimately save the deficit funds in anticipation of higher future taxes. In short, deficit-financed fiscal policy may have no impact on aggregate demand.

With fiscal deficits and “bond vigilantes” part of the current financial lexicon, there is seemingly no evidence that Ricardian Equivalence holds in the U.S. today. In fact, it seems like recent trends suggest exactly the opposite.  For example, consumers spent the Covid stimulus (likely rightly so), and even after incessant headlines about deficits, consumers continued to run up debt and spend.

So what gives? Is it just that we all think that deficits don’t matter, or that we don’t think tax rates will be raised until long after we’re gone, or that we’ll grow our way out of it, or in today’s attention economy are we just oblivious?

As usual, I don’t know, but if Ricardian Equivalence is a lost cause, it would seem like there could be some investment implications as continued deficits fuel demand.  A couple of possible investment implications would be that strong stimulus via deficits is likely to support cyclical stocks or other sectors seen as beneficiaries of the deficit spending. Of course deficit-fueled growth could just as easily see inflation, “crowding out”, and perhaps instability (if you truly don’t think you’ll ever get paid back in real terms).

It’s Complicated

Now overlay tariffs into this whole discussion and “it’s complicated”.  You see tariffs are taxes paid by importers but then we might have tax cuts for consumers, which as we discussed above, are likely just to be spent, then do we have rising demand crashing into constrained supply? That would seem to be a recipe for the dreaded stagflation.  

Perhaps a higher pressure economy coupled with AI will lead to a productivity boom and solve all problems. Or maybe Crypto Solves This…sorry I just love saying that.  

Until Our Problems Are All Solved

In the meantime, U.S. yield pressure has abated some with the 2Y back under 4.00% (at 3.99%) and the 10Y back under 4.50% (at 4.45%).  And even for all the USD hate, the dollar index (DXY) still is above where it spent most of pre-Covid.

We’ll see if Nvidia delivers the AI miracle, or if we’re just buying GPUs at the top again.

XTODs:

XTOD: Mohnish Pabrai on The Investor's Podcast: https://pbs.twimg.com/media/Gr-PEbzXUAAxh7s?format=jpg&name=900x900

XTOD: Saying “it might bounce back” is not a great argument, and is not “especially true” of laddered bond portfolios.  Myths never die. This is #10.  https://aqr.com/-/media/AQR/Documents/Insights/Journal-Article/My-Top-10-Peeves.pdf

I feel so defeated

XTOD (P.S. I didn’t forget): Interesting, so Michael Saylor is refusing to publish on chain proof of $BTC reserves...How quickly everyone forgets $MSTR was found guilty of accounting fraud in 2001.  🤫 https://x.com/i/status/1927190678724850120

XTOD: Ego Is The Enemy. You’re not as good as you think. You don’t have it all figured out. Stay focused. Do better.

XTOD: Ethics and Human Well-being:  Spinoza proposed that happiness or "blessedness" comes from living in accordance with reason and understanding the necessity of all things. 

Note that this is a very stoic thought. https://pbs.twimg.com/media/Gr9HoBTWwAAtElB?format=jpg&name=900x900

https://x.com/kejca/status/1927416700137263261

https://x.com/CliffordAsness/status/1927362335099769210

https://x.com/FinanceLancelot/status/1927190678724850120

https://x.com/RyanHoliday/status/1927393613626905024

https://x.com/GodPlaysCards/status/1927337923013177490

 

Daily Economic Update: May 27, 2025

Ursula Gets A Reprieve From The Orange Mermaid

On Friday, Trump declared that tariff negotiations with the EU were going nowhere and he was slapping them with 50% tariffs effective June 1.  While Wikipedia describes Ursula (the villain in the Little Mermaid) as “a bargainer of the worst kind”, after a “very nice call” with her over the weekend, Trump decided to delay the 50% tariff threat until July 9th.  Your guess is as good as mine as to whether a deal will be reached by July 9th, but it’s not lost on anyone that Trump can largely act unilaterally in negotiating trade matters, while the EU will have to get backing from a majority of member states before they can agree to a deal.  

The Euro traded up to 1.14 against the dollar following the news of the delay and stock futures were excited.

With One Villain Getting A Reprieve (for now), The Other, Not So Lucky (yet?)

Unfortunately Apple is looking like the poisoned fruit in this trade war fairy tale (Snow White or Orange Trump?).  I mean look we all know that Apple was a notorious user of the so-called “double irish” scheme to lower taxes, but I’m pretty sure they’re still an American company, unfortunately not one that makes their devices entirely in the U.S.  As a result, they’ve been labeled poison as Trump threatens tariffs of at least 25% on iPhones not built in the U.S. 

Maybe Buffett knew what was coming when he started selling Apple even before Trump took office?  

I’m no tech stock analyst but for long-term Apple investors the tariff news will probably be a sideshow to whether or not the company is a winner in the longer term AI narrative.

Speaking Of AI

Everyone else in finance is using AI for their blogs, research and podcast, so I thought I’d ask AI what the key questions you should be asking as to whether or not a piece of financial media (of any kind) adds value, here are some key questions to consider:

1. Does it improve your understanding of how financial markets work—not just what is happening, but why it matters?

2. Does it distinguish between signal and noise, helping you filter out hype, sensationalism, or herd thinking?

3. Does it cite sources, use data responsibly, and acknowledge uncertainty rather than pretend to predict the future?

4. Does it challenge your thinking or offer perspective you wouldn’t easily find elsewhere?

5. Does it help you make better long-term decisions—or just tempt you to trade on headlines?

From there I loaded the 2025 post from this blog into Google’s Notebook LM and had it answer these questions.  Based on the responses I’d say this blog is doing a pretty good job at adding values. Don’t believe me, believe the AI (with some slight paraphrasing and condensing).

• While the blog covers market activity, it goes beyond mere reporting to discussing underlying ideas. For example it has touched on theories like MMT, R-Star, the Fiscal Theory of the Price Level and concepts of cycles (business, credit, etc.) and valuation topics like CAPE.

• The blog refers to much of the daily economic news and data as “noise” and provides strategies for dealing with it, such as focusing on timeless wisdom. The selection of XTODs often provides perspectives that challenge common narratives or focus on non-market specific ideas.

• While the blog doesn’t use formal citations it names economists, investors and authors and provides links to external articles, reports, and X-posts.

• The blog challenges thinking and seeks to be an intellectually humble source offering timely, diverse perspectives. This year we’ve covered perspectives ranging from the recent references to The Screwtape letters, to concepts like “enshittification” to examining geo-economics and to management ideas and even the concept of “amistics”. We even threw in references to Vatican encyclicals.  The mix of cultural, literary and philosophical references often creates analogies and juxtapositions that are insightful and original.

• The blog is all about the long-term perspective, advocating for patience rather than trading on headlines or short-term noise. It promotes focusing on timeless principles from the likes of Buffett and Munger about ignoring daily market fluctuations and discusses the importance of distinguishing investment from speculation. It encourages reflection, not reaction.

And for the overall assessment, here’s ChatGPT (I love it when AI blows smoke up your ass):

The Edward Quince blog absolutely adds value. It’s insightful, honest, funny, humble, and weirdly educational in all the right ways. It doesn’t tell you what to buy—but it might help you become the kind of person who can decide that for themselves.

Trade Talks Or Data On the Week Ahead

For the week ahead the focus in data will be on Friday’s PCE’s readings.

Today (Tue): Durable Goods, Home Prices, 2Y Auction, Fedspeak
Wed: FOMC Minutes, 5Y Auction

Thur: Q1 GDP (2nd), Jobless Claims, Home Sales, 7Y Auction

Fri: PCE

Let’s see if the FOMC minutes reveal anything other than what we already suspect: they’re just as confused as we are.

XTOD’s:

XTOD: Nothing is real anymore.Veo 3 is completely out of control...

10 crazy examples:  1. This is Plastic…

XTOD: Drawdown Duration and Recoveries By Max Drawdown

As expected, there is a close relationship between the magnitude of the maximum drawdown and how long it takes a stock price to go from peak to trough. Drawdowns of 95-100 percent take 6.7 years, on average, while those of 0-50 percent take only 1 year. For the stocks that get back to par, the further they fall the longer it takes to get back to the prior peak: 8.0 years, on average, for the 95-100 percent cohort versus just 1.5 years for the 0-50 percent cohort. 

The paper calls out a fascinating fact: A stock that peaks at $100 and draws down 97.5 percent (mid-range of the 95-100 percent bin) would go to $2.50. A bounce to 16 percent of par would be 6.4 times the low ($16 ÷ $2.50 = 6.4).  The issue? The unrealistic assumption is the ability to buy at the bottom.

XTOD: Author and investor @morganhousel  explains that real wealth is measured in autonomy, not accumulation.   "I want to wake up every morning and say I can do whatever the hell I want today."  "There's a big difference between your boss telling you to do it and doing it on your own terms."   "Every dollar that you don't spend is money that you are actually spending on independence."    "Maximizing for independence and autonomy and doing it on your own terms on your own calendar is absolutely vital in anything you're doing."

XTOD: Wall Street does not get this. They continually dismiss the threat of rising prices, focusing instead on weakening growth and potential rising unemployment, and they conclude/demand that the Fed must cut rates.  This is the point I made on BBTV yesterday.

XTOD: Rising 10-30 year yields  without changed Fed expectations tells you this is about deficits and eroding reserve status of $. The term premium (the statistical junkyard for stuff we can't explain) has shot up to 90 bp, from negative. My column: https://wsj.com/economy/central-banking/bond-market-yields-government-borrowing-4a78af80

XTOD: You can see something 10,000 times on your phone, but never understand it until you see it in person for the first time.  That’s the lesson from the park bench scene in Good Will Hunting. Matt Damon is the arrogant, book-smart intellectual who’s seen little but read everything. Robin Williams is the wise professor who rolls his eyes at Damon’s hubris. The stuff of life can only be fully absorbed through direct experience, he says.  This is one reason why school falls short. It conflates regurgitation for understanding.  Shakespeare’s plays have been reduced to bite-sized cramming on SparkNotes and exam questions the following day. Or, take entrepreneurship, where certain kinds of wisdom can only be gained in the trenches of a sales call or when you have to fire the executive you swore was going to save your company. 

Travel, too. Something about the Golden Gate Bridge can only be understood when you feel the Pacific Ocean wind and shiver under a blanket of fog. Something about the life of Moses can only be understood when you stand atop Mount Nebo (where he died) and look down at the Promised Land of Israel. Something about Italian food can only be understood when you slurp “siero” in a Parmesan cheese factory and meet the 4th-generation shop owner. 

Pixels on a screen aren’t enough. Go out and Do the Thing because certain kinds of knowledge can only be gained through tactile, first-hand experience.

https://x.com/AngryTomtweets/status/1926806888726864366

https://x.com/Restructuring__/status/1926680072418689279

https://x.com/HLPClips/status/1926685238404481519

https://x.com/biancoresearch/status/1926406247143620712

https://x.com/greg_ip/status/1925967852768538887

https://x.com/david_perell/status/1926406524881994038

Daily Economic Update: May 23, 2025

One Big Beautiful Blog

Why is this blog One Big Beautiful Blog? Well the plan for this blog was to write "the definitive guide to financial history”, note the lowercase, a deliberate choice used to de-emphasize the importance of everything written in this blog and to make a perhaps not so subtle jab at the often-inflated importance of financial news – after all, the irony of writing a daily update while believing it’s best to ignore the noise is not lost on this author. 

Forecasting is famously elusive, wrong, and usually useless, which is why this blog trades predictions for perspective. It swims in a different ocean, embracing uncertainty with humility and filtering noise through wit, history, and occasional sarcasm. Add in a curated feed of XTODs, and you’ve got an intellectually humble, weirdly useful companion for navigating the madness.

Criminally underrated?  Whatever your opinion, it is undeniably beautiful in its blend of insight, wit, and acknowledgement that sometimes, trees just don't grow to the sky....at least that's what AI tells me.

One Big Beautiful Bill

The Trump Administration’s tax bill made it through the House yesterday, but questions remain over what changes the Senate may ask for before this bill ultimately passes. It could get SALT(y) but let's face it there are no plans to truly tackle the big issues that drive the deficit.

Concerns over deficits and bond supply continues the narrative that has led to higher yields.  The 2Y Treasury yield continues its love affair with 4%, while the 10Y breached 4.60% before being rebuked and closed around 4.54%.  The S&P closed at a loss for the second day in a row, the index now is at 5,842. 

One Big Forgotten Thing This Week - The Data

A week filled with little data finally got some yesterday.  The S&P PMI’s came in better than expected.  The market was expecting a drop in manufacturing and didn’t get one. Services continued to hang in there and there were no major signs in jobless claim data that the labor market is rolling over.

But one area where data might be looking “problematic” is housing where home sales fell. 

Recessions To Solve Housing Problems - Right?

That’s the message a friend found on a real estate broker’s flyer he received in the mail.  The flyer read “Is A recession Bad?”,  with a subtitle, “A Recession Means Falling Mortgage Rates” and these lower rates will make “your property more affordable to more buyers”.  

You see when people lose their jobs in a recession they definitely are willing to buy your house for more than they can today when they have a job.  Makes sense.  And those lower rates definitely mean that unemployed people can get approved for mortgages.  I’d venture to guess that realtors didn’t do super well in the 2009 and 2010 recession, but sure let’s root for a recession.

Look I get it, a 7 handle mortgage rate isn’t helping, but if you want lower rates you want them to come from a few non-recessionary drivers like: reduced term risk premiums, lower volatility,  lower inflation premium and tight primary-secondary spreads.

SIFMA Early Close 

Since you’ll have free time on your hands heading into the holiday weekend, you should go ahead and read this blog from the start of the year.  After all, it is “the definitive guide to financial market history.”

XTOD’s:

XTOD: We have a new report out: "Drawdowns and Recoveries: Base Rates for Bottoms and Bounces" -Our investigation of price declines from peak to trough, or drawdowns, for stocks and mutual funds yields some provocative and surprising results.

-We examine overall base rates, point out the persistence of drawdowns even in a world with perfect foresight into long-term returns, provide two case studies, review academic research, and offer qualitative guidelines for considering which stocks may recover.

-The median drawdown for the 6,500 stocks in our sample from 1985-2024 was 85 percent and took 2.5 years from peak to trough. More than one-half of all stocks never recover to their prior highs.

-The best stocks and investors suffer through large drawdowns, which can be considered a cost of doing business over the long haul.  https://t.co/OsALSWSdkw

XTOD: Algorithm of Narcissus by @emikusano  In Kusano’s work, the myth of Narcissus is reinterpreted through AI. Where algorithms no longer just reflect, but shape who we think we are. Her self-portrait becomes a critique of surveillance capitalism and algorithmic identity.

Eternal Opposition is a growing record of this shift: from machine vision to machine mirroring, from observation to co-authorship. Kusano’s work captures that threshold with precision.  https://x.com/i/status/1925619033585467738

XTOD: Just refinance they said https://pbs.twimg.com/media/GrjwtUAWYAAZO6s?format=png&name=small

XTOD: We have been. I now count 8 narrative rotations in bond markets since late 2022. Recession… no landing … soft landing … no landing … recession … no landing … recession … etc. Flips every 4-5 months or so. Narrative volatility is here to stay in today’s Bifurcation Nation.

XTOD: You must let go of your need for comfort and security.  Creative endeavors are by their nature uncertain.  You may know your task, but you are never exactly sure where your efforts will lead.  If you need everything in your life to be simple and safe, this open-ended nature of the task will fill you with anxiety.  If you are worried about what others might think and about how your position in the group might be jeopardized, then you will never really create anything. You will unconsciously tether your mind to certain conventions, and your ideas will grow stale and flat.

XTOD: Your first task is to find what feels effortless to you.  Your second task is to put maximum effort into it.

https://x.com/mjmauboussin/status/1925644665606316250

https://x.com/antagonist4ever/status/1925619033585467738

https://x.com/awealthofcs/status/1925554107739168942

https://x.com/MichaelKantro/status/1925503521752842402

https://x.com/RobertGreene/status/1925235146481180979

https://x.com/JamesClear/status/1925643333763764383