Daily Economic Update: December 1, 2023

Hard to believe it's December.  It's been one of those years where certain months felt like years for markets.  Treasury yields moved higher by 6-8bps yesterday (in volatile trading), but have reversed some of that move and are down 2-3bps to start December.  The 2Y is yielding 4.68% and the 10Y is yielding 4.33%

Yesterday's PCE data came in largely in line with expectations, with headline PCE increasing ~3% year over year and flat month over month, the weakest print since mid-2022. The move higher in yields seemed somewhat driven by NY Fed Williams who said “I expect it will be appropriate to maintain a restrictive stance for quite some time to fully restore balance and to bring inflation back to our 2 percent longer-run goal on a sustained basis,” while noting the improving inflation situation.

We get 2x Powell today before the Fed begins their blackout period ahead of the next FOMC meeting. Will Powell push back on the easing of financial conditions.  If you recall Fed officials including Powell made a big deal about how tighter financial conditions were doing some of the work for them, especially if they were being driven by exogenous factors. We'll see if there is any push back on the recent easing of financial conditions.

Aside from Powell there is some manufacturing PMI data and construction spending data on the calendar. 

XTOD: Republican Lawmakers Call CDC Attention To "Suspicious" Virus Outbreak In China

XTOD: Russia’s Naval-Defense Dolphins May Have Escaped.

XTOD: Major League Pickleball asks players to take 40% pay cut on the back of rapid growth

XTOD: The 10-year Treasury yield will rebound to 5.5 percent, predicts market forecaster 

@biancoresearch  He argues that the current move is a head fake.

XTOD: You get recessions/sharp slowdowns when businesses/households get caught out over their skis & are forced to cut back quickly, and the speed triggers a self reinforcing dynamic. We've spent the last 18m in pre-cession. And you can't commit suicide jumping out the basement window

XTOD (Remember LIBOR transition, Remember ARRC?...good times): #ARRC, convened by the Fed, released its Closing Report & announced the group’s conclusion, following a successful transition from USD LIBOR. The report highlights forward-looking focus areas to maintain robust reference rates: https://nyfed.org/47Uri0Z

XTOD (If you don't know what PODS are in the Hedge Fund space you should google): BLOOMBERG ARTICLE ON SYSTEMIC RISK FROM PODS  Some interesting points in this Bloomberg article on multi-manager funds.   A couple points stood out to me, and there were a couple points I would add. What stood out:....

XTOD: Let me be clear to any corporation that hasn’t brought their prices back down even as inflation has come down: It’s time to stop the price gouging.  Give American consumers a break.

XTOD (Reply): Where to start?  A) Inflation is a change in the price level. Inflation slowing but still positive doesn’t bring down prices it brings them up less quickly. Math is hard.  I now actually believe JoeB may be writing his own tweets as a C- donor kid intern would’ve caught this.

B) Corporations try to maximize profits. It’s governments job to set conditions that lead to or away from inflation. Biden and others find this very confusing feeling if you they can only catch corporations maximizing profits it’s a smoking gun. Then sometimes they use the word “fiduciary” in other contexts and don’t notice the irony.

XTOD: A billionaire minimum tax of just 25% would raise $440 billion over the next 10 years.  Imagine what we could do if we just made billionaires pay their taxes like everyone else.

XTOD (Reply): The dude who just spent $6,130,000,000,000 this year is talking about collecting more taxes again like revenue is the problem. 

XTOD: Voluntary disregard for history's lessons has brought us crises and cul-de-sacs. We know how to contain inflation and restore containment when it fails. We know how to govern great cities. We know how to compete in the eternal contest between nations. But we decided to forget.

XTOD: Every day you face battles—that is the reality for all creatures in their struggle to survive.  

But the greatest battle of all is with yourself—your weaknesses, your emotions, your lack of resolution in seeing things through to the end.  ― Robert Greene, The 33 Strategies of War

XTOD: It was a useful phase, and I think that it’s important for most people to dedicate a chunk of time to learning the basics of productivity.  But you have to learn to let go of your task list or you will end up being shunted to the side of your own life.  If you’re not careful, you become so blinded by your obsession with work that you forget there is a world outside of it.  You literally forget the things that you used to love, and forget that you’ve forgotten them.  Your life becomes flattened down to the single dimension of your hustle.  You can learn to love the grind but it’s crucial that you don’t get parasitised by it.  Your work can crawl inside your skin and start to stare out through your eyes.  Then before you know it, even when you’re not working, you’re still working.

Daily Economic Update: November 30, 2023

The month of November is closing as the best month of the year for both stocks and bonds.  The S&P is up ~8.5% on the month, the 2Y yield is at 4.66% (it started the month at 5.07%), the 10Y yield is at 4.30% (it started the month at 4.90%).  Reportedly it was the best month for bonds since something like 1985.

Yields continued to move lower again yesterday.  The move lower in Treasury yields came despite of the higher than expected 2nd reading of 3Q GDP, which was 5.2%.  Lower inflation readings in Germany, the Governor Waller discussion the other day, Bill Ackman, some easing of geopolitical tensions  etc. all seem to have helped fuel bets on lower yields.  Yesterday's Fed's Beige Book showed some slowing in economic activity, easing in labor market conditions and moderating in inflation, seemingly also signaling "goldilocks".  Something to keep an eye on is the continuing chatter that the Fed may look to change their inflation target when they complete their next policy review over the course of 2024 and 2025.  Yesterday's comments from Richmond Fed Pres Barkin where he stated he's open to an inflation target range, importantly after we hit the 2% goal, is definitely making the rounds with some bond bears.

On the day ahead we get jobless claims and the Fed's preferred inflation measure with PCE.  The OPEC+ meeting and impact on oil will also be watched, reports so far this morning is that there is a preliminary agreement for an additional output cut of 1 million barrels per day.

If you recall much of the last two months have featured discussions around risk premiums and term premiums in bond yields.  We only have to go back to November 1st FOMC to recall Powell discussing how higher yields were helping do some of the Fed's work in tightening financial conditions and just yesterday Mester had reiterated this point. With yields now falling from their recent highs, it will be interesting to see if Powell or other's show any concern at the loosening of financial conditions. 

On the topic of risk premium,  I thought this description of the components of long term interest rates by Deutsche Bank's Matthew Raskin on MacroMusings was worth sharing (the full show transcript is here):

"so my framework for thinking about longer-term interest rates… I guess I would describe it as the expectations theory with time-varying risk premia. What I mean by that is, I think of term interest rates on default-free instruments. So, I'm thinking about US Treasuries as a function of two things: one is expectations for the path of short-term interest rates over the life of the bond, and two is a risk premia or term premia, which is an excess expected yield over and above that expected short-rate path, which is compensation that investors get for bearing interest rate risk in a longer-term bond....I actually think it's helpful to break that expectations piece down further into two pieces, one of which is expectations for the long-run neutral policy rate. That's the short-term interest rate that will prevail when the economy is in equilibrium. In a nominal space, I think of that as a function of expectations for R-star or the neutral real rate, and expectations for longer-run inflation, which should be a function of the Fed's inflation goal. Now, that real piece, that R-star-neutral real rate, is not something that's controlled by the Fed. I think that's a function of fundamentals like productivity growth, demographics, and other things that alter the balance between savings and investment. That's one piece of the expectations component. I think the other is expectations for interest rates over the cycle, so over the next few years, and the extent to which interest rates will deviate from that long-run neutral level. And so, I do think the Fed controls that, but with constraints that depend on its goals, but they decide how to trade off their inflation and unemployment objective...Those three things together, I think expectations for long-run neutral, expectations for the Fed policy cycle, and then term premia, for me, at least, are a useful framework in thinking about moves in longer-term interest rates, and I think I found them quite useful in applying to what we've seen over recent months in terms of the big moves in rates....." 

XTOD: We have entered the peak soft landing narrative zone!

XTOD: Nominal GDP grew at an annualized 9% rate last quarter! 

XTOD: To put this in perspective, this is higher than any quarter, except for one, during the entire 2007-2019 period.  Higher than the 'recovery' from the Great Recession, or during any of the prepandemic Trump years.

XTOD: Elon saying “Go fuck yourself” live on CNBC and them not expecting it, so there was no profanity delay, and therefore it violated FCC guidelines means CNBC gets fined. Hilarious  https://twitter.com/i/status/1730000411501687175

XTOD: Musk: “The only reason I am here, Jonathan, is because you are a friend.”   Andrew: “I am Andrew.”

XTOD: Henry Kissinger, the child refugee who rose to become US secretary of state and defined American foreign policy during the 1970s with his strategies to end the Vietnam War and contain communist countries, has died. He was 100.

XTOD: I've said this often  If you are doing the exact same things as people with better genetics than you, that work  just as hard as you do how on earth will you ever catch them? 

You won't unless you take a different, more contrarian route but you have to be comfortable in your own skin to do that

XTOD: There is nothing so pointless as delegating work that should not be done at all.

Daily Economic Update: November 29, 2023

All I want to know is where I’m going to die, so I’ll never go there

"The world is not driven by greed. It’s driven by envy."

“Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun. Why would you want to get on that trolley?”

As some readers know, I would consider myself a Charlie Munger fan. For example, once, at a company meeting, I read this entire discussion on a term Munger coined, "febezzle". (I may also be the only person in the world with a custom Febezzle hat). While Munger is not best known for this "febezzle" talk, I felt like it illustrates Charlie's perceptiveness and wit. Munger's multidisciplinary pursuit of worldly wisdom is inspirational.

U.S. yields start the day again lower, with yields down another 4bps (hitting lowest levels since September).  The 2Y is 4.70% and the 10Y is 4.28%.  The move lower this morning comes after yields fell solidly yesterday despite data showing home prices hitting new records. Waller and Bowman of the Fed offered differing opinions on the need for rate hikes, with Waller suggesting a Taylor type rule that would conclude cuts will be coming in 2024 and Bowman making the case that more rate hikes might be needed. We'll see if Powell adds anything new come Friday.  Of course Bill Ackman is now betting on rate cuts.  Besides that you can find the seamlessly endless debate on whether funds exiting the RRP are "stimulus" or not on X/Twitter.

On the day ahead it's inventories, 3QGDP data, Fed Beige Book, Barkin and Mester

X/Twitter Thoughts of the Day - Munger section

XTOD: Charlie Munger investment strategy:1. Get a little smarter every day. 2. Look at lots of deals. 3. Don't do almost all of them.

XTOD: My 25iQ blog posts on Charlie Munger are here: https://25iq.com/featured-individuals/ I didn't always agree with his conclusions, but learned a lot from understanding his methods. He would have been 100 years old on January 1.

XTOD: Munger  lived such an incredible life, mainly because he did whatever he wanted and said whatever he wanted without fear of others disagreeing.   "I did not intend to get rich. I just wanted to get independent."

XTOD: I was supposed to talk with Charlie today. That call never happened.  

For those who want to learn more about this remarkable person https://t.co/C278Oz8ZeA

XTOD: Some of the best of Charlie Munger:“Every time you hear EBITDA, just substitute it with bullshit”.  Absolute legend

XTOD: Top 10 Charlie Munger quotes: 

1. "Spend each day trying to be a little wiser than you were when you woke up."

2. "The best thing a human being can do is to help another human being know more."

3. "It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."

4. "In my whole life, I have known no wise people who didn't read all the time — none, zero."

5. "I never allow myself to have an opinion on anything that I don't know the other side's argument better than they do."

6. "The big money is not in the buying and selling, but in the waiting."

7. "You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time."

8. "The first rule is that you can't really know anything if you just remember isolated facts and try and bang 'em back."

9. "There are worse situations than drowning in cash and sitting, sitting, sitting."

10. "The game of life is the game of everlasting learning. At least it is if you want to win."

These quotes reflect Munger's emphasis on continuous learning, rational decision-making, and a long-term perspective in investing and life.R.I.P. king

Honorable mention to “Bitcoin is probably rat poison squared”

XTOD: https://jasonzweig.com/on-charlie-munger/

XTOD: A life well lived.

“I paid no attention to the territorial boundaries of academic disciplines and I just grabbed all the big ideas that I could.”

“If you skillfully follow the multidisciplinary path, you will never wish to come back. It would be like cutting off your hands.”

“Take a simple idea, and take it seriously.”

“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Systematically you get ahead, but not necessarily in fast spurts. Nevertheless, you build discipline by preparing for fast spurts. Slug it out one inch at a time, day by day. At the end of the day – if you live long enough – most people get what they deserve.”

“I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.”

– Charlie Munger

XTOD: CNBC just released more of Becky Quick's recent interview with Charlie Munger...

✨ "I've written my obituary [by] the way I've lived my life — and if you want to pay attention to it, that's alright with me. And if [you] want to ignore it, that's okay with me, too."

✨ "I basically believe in the 'soldier on' system. Lots of hardship will come and you've got to handle it well by soldiering through."

✨ "A few rare opportunities will come. You've got to learn how to recognize them when they come and not to make too minor of a trip to the pie counter when the opportunity is available."

XTOD: A Tribute to Charlie Munger  Compilation of all 53 Charlie Munger quotes mentioned in "The Joys of Compounding".  https://x.com/joyofcompoundin/status/1729816566617809054?s=20

X/Twitter Thoughts of the Day - rest of the world section

XTOD: "Something happened in the third quarter -- I don't know, lots of Taylor Swift concerts," Fed Governor Chris Waller says at AEI, referring to rapid GDP growth. "Something blew up the third quarter, and it's not likely to continue going forward."

XTOD: Fed governor Chris Waller on rate cuts:  "If you see this [lower] inflation continuing for several more months, I don't know how long that might be—3 months? 4 months? 5 months?—you could then start lowering the policy rate because inflation's lower."

XTOD: Michelle Bowman strikes a more cautious tone than Waller on Tuesday, saying it's still her baseline that the Fed will need to increase the funds rate further "to keep policy sufficiently restrictive to bring inflation down to our 2 per cent target in a timely way"

XTOD: Cybertruck deliveries start on Thursday

XTOD: WFH levels have become "flat as a pancake". The latest Census, SWAA and Kastle data all show the same thing. Levels of WFH were falling throughout 2020 to 2022, and office occupancy was rising. That trend ended in 2023, with both now pancake flat. Return to the Office is dead.

XTOD: How it started: CDU and FDP recommend Greece to sell islands to address their fiscal crises in 2010. How it’s going: Former Greek minister recommends Germany to sell islands to address their fiscal crisis in 2023.

XTOD: Leaving Shark Tank. Selling Mavs.  Readying for run at U.S. Presidency?

XTOD: Billionaire investor Bill Ackman is betting the Federal Reserve will begin cutting interest rates sooner than markets are predicting. 

Daily Economic Update: November 28, 2023

After falling ~10bps yesterday in the wake of weak residential home sales data and treasury auctions that were at a minimum decent, yields start the day up ~2bps with the 2Y at 4.88% and the 10Y at 4.40% .  Today we'll get more housing price data, consumer confidence data, a 7Y auction and Fedspeak. Headlines around Black Friday and Cyber Monday seem to indicate that the consumer is still healthy and if you traveled over the Thanksgiving holiday there were plenty of people out and about.

XTOD: Let me know how the ‘sticky’ inflation narrative is working out, when median new home prices in October sunk a record -18% YoY, taking out the worst point (-15%) we saw in the Great Recession.

XTOD: The retweet is the fintwit chart of the day.  It is NEW home sales, 18% of all home sales.  The other 82% is EXISTING home sales, and those prices are not falling (an earlier tweet).  How are the builders faring during this "crash?"  Up 51% YTD!   The market is not worried, why are you?

XTOD: "the presence of a Cheesecake Factory restaurant in a mall is an indicator of the mall's financial health... About 93% of loans backed by malls with a Cheesecake Factory are current on their payments; compare that to around 72% of those without..."

XTOD: Agreed.  Last week, I went to my local bodega for a Philly cheese steak sandwich. To my shock, Pablo, my absolute boy and sandwich maker extraordinaire, told me:  "No hay más Philly cheese steak, Señor Jack."  When I asked why, he started crying, and whispered, "big sandwich," pointing at the TV.  Sure enough, Roark Capital executives were on CNBC, gloating about how they would put every bodega in New York out of business by monopolizing the sandwich market.  Small business owners would no longer be able to compete, as hungry consumers would certainly flock from miles to Subway and Jimmy Johns for their higher quality food, kinder employees, and better restaurant ambience.  I imagine that prioritizing FTC resources must be tough.  Sure, Microsoft is choking the emerging AI industry with its land-grab OpenAI investment. And, yes, Apple holds Google at gunpoint, charging insane fees to include Chrome on iPhones. And, okay, fine, Amazon might actually be jeopardizing thousands of small businesses with their anti-competitive pricing practices.  But I applaud Elizabeth Warren for taking a stand against big sandwich. Being a senator is a thankless job, but I stand with you, Lizzy.

XTOD: Proptech graveyard 🪦/infirmary 🤒: Running list....https://x.com/hitsamty/status/1729212085689864341?s=20

XTOD: Office was the first commercial real estate asset class to enter distress this cycle. Class B & C Multifamily in the Sunbelt is the next shoe to drop. Too many of these properties were purchased between 2020-2022 at extremely low cap rates that buyers were able to make pencil…https://x.com/kylematthewsceo/status/1729160535285838041?s=20

XTOD: Financial death by a thousand $14.99 monthly subscriptions

XTOD: "Writing forces you to slow down, focus your attention, and think deeply. In a world where attention is fragmented in seconds, thinking becomes more reactive than reasoned. Only when we have time to play with a problem can we hope to think about it substantially. Writing requires sticking with something a little longer and developing a deeper understanding...https://t.co/yED07XYKEf

Daily Economic Update: November 27, 2023

I think I was going to take 2 weeks off from posting, or just lost track of the calendar...nonetheless, Cyber Monday starts with yields and equities down slightly and the VIX near all time lows.  The 2Y yield is 4.95% and the 10Y is down ~2bps to 4.47%.  

On the week ahead the big items are Treasury Auctions, Fed Beige Book, Fedspeak (including Powell on Friday) and PCE data.

Today:  New Home Sales, 2Y Note and 5Y Note

Tue: Home price data, Richmond Fed mfg index, Waller, Goolsbee, 7Y Note

Wed: Inventories, 3Q GDP (2nd), Fed Beige Book, Mester

Thur: Income & Spending, PCE, Jobless Claims

Fri: ISM Manufacturing, Powell speaks

I came across this question on LinkedIn:  "Can CRE have value without leverage?" "I ask because there seems to be a lot of people that seem to bifurcate “opportunities” for assets then in a separate breath say subject to debt penciling out.  Or can one claim to add any value to the asset beyond being a “core” type investment (hope to buy right then passively manage) if the debt penciling is a requirement? 

Or so we live in a world where a decade plus of zero rates just completely obfuscated the real economics of the CRE industry?"

There are obviously a few questions there, but I found the first question regarding the value of CRE of some interest.  I won't share my answer with you here (or on LinkedIn), but judging from the answers I saw from professionals on LinkedIn, I'd encourage my readers to reacquaint themselves with Modligliani-Miller's famous Proposition I on Capital Structure Irrelevance: "The market value of a company is not affected by the capital structure of the company."  "Consider why this might be true. The operating earnings of a business are available to the providers of its capital. In an all-equity company (that is, a company with no debt), all of the operating earnings are available to the equityholders and the value of the company is the present value of these operating earnings. If, on the other hand, a company is partially financed by debt, these operating earnings are split between the providers of capital: the equityholders and the debtholders. Under market equilibrium, the sum of the values of debt and equity in such a case should equal the value of the all-equity company. In other words, the value of a company is determined solely by its cash flows, not by the relative reliance on debt and equity capital.".....and yes, I know the assumptions that underlie that theory are likely not to hold in the real world and yes, I know the propositions around taxes, etc.  My point is simply that it's it worth revisiting MM from time to time.

XTOD: Idiot Lender Chronicles: Part Deux  I'd like to begin today's story with a message of hope for all the C students out there.  You may find yourself, on a gloomy fall afternoon, thinking, "I'm too dumb and lazy to run a large debt fund. Those jobs are for the smart people."  Well, cheer up my downwardly-moble friend. You don't need to pursue a career as a venture capitalist.  

With enough hubris, luck, and family connections, you too can run a debt fund. It turns out, much like VC and wealth management, intellect is not the limiting factor....The CEO (who lacks the requisite brain folds to walk my dog) told me, "we'll give you a bridge, and when rates drop in two years, you'll be in great shape."  When I suggested the deals needed to work with today's debt, he snorted a little meth and hit me with this gem.  "If you aren't underwriting a reduction in rates in two years, you have no business buying anything right now."  Assuming he was distracted and misspoke, I asked him to clarify. He doubled down.  So, you want me to definitely overpay today because rates might go down in the future?  Yes.  His suggestion was that if I wasn't underwriting a future rate reduction, I didn't understand capital markets. Which felt rich coming from a guy who's fucking portfolio is upside down. "Hell, all the forward curves are showing as much. That's how you should be evaluating our positions. 

Ahhh, yes. The forward curve, a beacon of historical accuracy.

XTOD: Count me as one who thinks the economy will continue to surprise to the upside. Say 5% to 6% nominal (GDP) growth ... keeping upward pressure on long-term yields.  Watch my discussion with Meb Faber two weeks ago for a detailed explanation. https://t.co/YsuSf5UrCh

XTOD: I, for one, can sleep a little easier now that the man who is trying to scan every retina in the world has been reinstated at his increasingly powerful artificial intelligence venture, and the people with concerns about the threat to humanity from this technology have been ousted

XTOD: If I buy a bond, the seller "owns" the stuff I offer in payment; I own the bond, a different financial asset. If I make a "deposit" at a bank, the bank owns the stuff I pay over to it; and I now own a claim against the bank, a different financial asset.   This shouldn't be hard.

XTOD: Pretty damning essay from a Googler, departing after 18 years   “I don't know anyone at Google who could explain what Google's vision is. Morale is at an all-time low”  “The clock is ticking. The deterioration of Google's culture will become irreversible”

XTOD: “The quality of your business is directly proportional to the quality of the people you hire which is directly proportional to your character and your ability to cast a clear vision and how they fit in it (not how they help you accomplish yours).”

XTOD: One of the best hacks in the investment field is learning to be happy doing nothing.

XTOD: "Here's the essence of risk management: Risk no more than you can afford to lose, and also risk enough so that a win is meaningful. If there is no such amount, don't play."   ~ Ed Seykota

XTOD: “Every investment price, every market valuation, is just a number from today multiplied by a story about tomorrow.”  Truth.   More in the image.  @morganhousel  ‘s latest book Same as Ever, has great nuggets filled to the brim. Highly recommend to read.

XTOD: For all of the most important things, the timing always sucks..The universe doesn’t conspire against you, but it doesn’t go out of its way to line up all the pins either. Conditions are never perfect. “Someday” is a disease that will take your dreams to the grave with you. Pro and con lists are just as bad. If it’s important to you and you want to do it “eventually,” just do it and correct course along the way.

Daily Economic Update: November 20, 2023

"If you consider not working a part of the work, you’re more likely to not work. This sentiment is common among the world’s best—and most lasting—musicians, athletes, artists, intellectuals, executives, and entrepreneurs. They all tend to consider rest an essential part of their jobs. They think about rest not as something passive (i.e., nothing is happening, you’re wasting time) but rather as something active (i.e., your brain—or, if you’re an athlete, your body—is growing and getting better), and thus they’re far more liable to respect it. Seen in this light, rest isn’t separate from the work—rest is an integral part of the work. Going all in on something doesn’t mean you shouldn’t rest. If anything, exerting passionate effort is all the more reason to rest. Remember that stress + rest = growth. And be sure to build in regular periods of rest and recovery to whatever you do." - excerpt from The Passion Paradox by Brad Stulberg and Steve Magness

Heeding this advice, check back on Monday, December 4th and in the meantime have a Happy Thanksgiving.

Daily Economic Update: November 17, 2023

Yields are down again to start the day, with the 2Y down 3bps to 4.81% and the 10Y down 5bps to 4.40%. This morning's retail sales data in UK also shows signs of a slowing economy.

U.S. yields fell solidly yesterday as jobless claims data was interpreted as showing a cooling in labor markets and oil prices hitting their lowest level since mid-July.  The move lower in yields was despite Cleveland Fed's Mester seeming to stress the longer part of "higher for longer" and Fed's Cook also acknowledging upside to inflation risk despite deeming the risk more two-sided at present.  But seriously why listen to a Fed official when Walmart's CEO predicted the possibility of deflation in some food and goods categories in the months to come.

Atlanta Fed GDP now is currently at 2.2% for 4Q2023 (a 2 handle GDP ordinarily would would be a number most people would be happy with, but clearly down from last quarter).  We'll get update on both GDPNow and the NY Fed's GDP nowcast today.  On the day ahead it's light on data with just housing starts, but we'll get more fedspeak to close out the week.

XTOD: In consecutive days Walmart and Home Depot say the worst of the inflation is behind us. Walmart CEO is actually talking about deflation in the months ahead!

XTOD: I don’t think we need to look to look for a smoking gun in distorted seasonal to explain the drift up in continuing claims imho, labor demand is cooling, hiring narrowing, unemployment spells lengthening & UR drifting higher—risks to the outlook are two sided

XTOD: Soft landing is absolutely the consensus view

XTOD: Update on the R-Star Wars: divergence, big time.  https://pbs.twimg.com/media/F_ESXzKXwAAmUhw?format=jpg&name=900x900

XTOD: It’s Economic Forces Day. Today, I think about how to describe what central banks do and why a recent speech by a Fed president seems to open the door to fiscal dominance, albeit unintentionally. https://t.co/yaN5MsCyLO

XTOD: NEW STORY: How far have prices for the F1 Las Vegas Grand Prix cratered? I booked a room at the Flamingo with a central location along the track for $18 on Wednesday before the race's opening ceremony. My dispatch from the most miscalculated event ever.

XTOD: TikTok is removing videos on its platform that promote Osama bin Laden’s letter justifying the September 11 attacks against the US

XTOD: There's an idea out there that physical currency is essential to anchor the money supply (bank deposits) & that if currency disappears, a CBDC will be needed to take its place. The 

@RiksbankRes  a major proponent of this view. This idea seems wrong to me.  First, even if physical cash disappears, banks will still use reserves (essentially, wholesale CBDC) to clear and settle interbank payments. These reserves would continue to trade at par with deposits. Second, bank deposits are insured (up to $250K). There's no point in running a bank in this case. (And if cash was not available, it would be even more pointless to run.) Third, banks could continue to transform deposits into cash on demand and at par even if the demand for cash in the economy falls to zero. What is the problem here?

XTOD: five narratives

1. RWAs

2. DePIN

3. web3 social

4. AI

5. zk-everything

XTOD: “If it won’t matter in 5 YEARS don’t give it more than 5 MINUTES attention.”

Daily Economic Update: November 16, 2023

Yesterday, Retail Sales come in better than expected with upwardly revised numbers, showing the consumer is still hanging in there (fairly obvious for anyone who leaves their house or office) and PPI showed mild disinflation. Yields rose ~10bps, but equities shrugged it off and made their current winning streak 4 days. In other news Biden said Xi is a dictator and people on Tik-Tok now believe Osama Bin Laden is a Saint.

Yields are down ~4bps to to start the day with the 2Y at 4.89% and the 10Y slipping under 4.50%.  Import Prices, Jobless Claims, Industrial Production, NAHB housing index, Walmart earnings and a bunch of Fed officials at a Treasury conference.

XTOD: Looked up the 1976 prospectus for the First Index Investment Trust (now Vanguard 500) to give some  context to concentration fears.  

When FIIT launched the top 5 companies accounted for over 21% of S&P 500, and top 10 were 28.3%. Not far off today's 23.5% and 32% respectively?

XTOD: “After several quarters of stagnant productivity, we have gotten productivity growth. If you have productivity growth, you can have faster wage and GDP growth without generating inflation.”

XTOD: The  @WSJ  chart on the cumulative change in the cost of three key items for US households— gasoline, food and houses — during the current inflation episode.

This chart goes beyond capturing the pressure and pain that the average household has felt due to high inflation. It is also a reminder of the distributional effects, including the vulnerability of poor households.

XTOD: I met a derivative dealer who emailed me to hire my students. My former student in his firm is only junior who knows about market making. As Finance, Money/Banking profs, we should cover topics like Industrial organizations & dealers. They are important, they pay off, they are cool.

XTOD: The head of Germany's drug regulator BfArM is considering an export ban on Novo Nordisk's diabetes drug Ozempic, which is in high demand for its weight-loss benefits, to prevent a further worsening of a supply shortage

XTOD: Im not going to invest in the stock market until 

1. I have clarity on economic data

2. The government is exactly like I want it

3.  There's no conflicts in the World

4. The market feels "safe"

5. The news is calm

6. I can better understand why the market is moving like it is. oh I forgot to add

7.  The market is cheap.

XTOD: i assume this is a masterful troll in which case well done

XTOD: Same day again in USA. Value holding in / doing well. Junk / Cathie wood soaring. It’s almost like the prospect of even slightly lower interest rates sends fools into buying crap from messianic hucksters. Almost.

XTOD: Reece Duca: "My goal is basically to wake up in the morning, love what I'm doing, love who I'm working with, be proud of what I'm doing, [and] help other people to be successful."

XTOD: Mike Tyson flew into Poland to buy one hundred pigeons from a breeder in the small village of Piątnica.  Once billed as “the most dangerous man on the planet”, Tyson has long been known for his love of pigeons.  He found solace in caring for pigeons during a traumatic childhood.