Daily Economic Update: April 17, 2024

To paraphrase the line from the movie The Usual Suspect, the greatest trick Team Transitory ever pulled was convincing the world inflation was, well, Transitory....or something like that, anyway, clearly Powell doesn't believe the data shows inflation is sustainably moving back to 2% and is now messaging H4L.  NY Fed President Williams said he believes U.S. growth potential is around 2% or higher, which makes some sense given the ATL GDPNow estimate is 2.9% as of yesterday.  If U.S. real growth is indeed that high then policy is likely less restrictive than the Fed has believed.

Stocks found a way to power through and avoid deeper losses despite ending lower as yields rose. The 2Y yield briefly topped 5% and the 10Y sits around 4.66%.  Gold again at record highs and what's a Japanese Yen?  154 and change...yikes.

I've provided a ton of links to articles and blogs this week and over the course of this blog and as you can likely see there is really no clear consensus on what the Fed should be doing with their interest rate target at present. If you want a noted economist to say the Fed needs to cut rates soon you can find one, if you want one who says the Fed still isn't restrictive enough you can find one, if you want one who says the White House needs to reduce deficits to combat inflation, you can find one.

I probably find one of each form of economist everyday without even trying (sometimes from multiple post from the same few).  For example, Scott Sumner said yesterday:

The future course of the economy always involves a bit of guesswork. But it seems to me that the following two claims are pretty likely to be true:

1. Over the past three years, monetary policy has been far too expansionary.

2. It is likely that monetary policy is still a bit too expansionary, although I have less confidence in that claim.

He goes onto to discuss how nominal economic growth is reaccelerating and TIPS spreads widening while counseling the Fed to remain more restrictive while also expressing his belief that the whole way of doing monetary policy is wrong.

This is the point where economists discuss “what the Fed should do”, by which they mean where should they set the fed funds target. In my view, interest rates are not the right way to think about monetary policy, so I won’t recommend a particular rate setting. Instead, I’ll recommend making the policy regime more effective......1...The Fed should adjust their fed funds target daily, to the closest basis point (say using the median vote of FOMC members.) The Fed funds target should look like other market prices, like a random walk. New information should not make people expect a different level of NGDP in 2025, rather new information should show up as the adjustment in the fed funds rate required to keep expected 2025 NGDP on target.....2....The Fed thinks in terms of growth rates, not levels. That radically increases uncertainty about the future path of NGDP, and largely explains the wild swings in the financial markets in response to seemingly trivial adjustments in Fed policy.

The Fed is not reacting to unexpected swings in aggregate demand, the Fed is creating unexpected swings in aggregate demand, through its clumsy interest rate targeting system and lack of level targeting.

But if you want a different view, just hop on over over to Claudia Sahm who argues that inflation has largely been a supply side phenomenon all along (to her credit she does mention pent up demand and Covid-stimulus as factors).

 Identifying shelter and motor vehicle insurance as two primary sources of inflation now is not meant to ‘explain away’ inflation. Inflation is too high; understanding why helps identify the best policy response. Herein lies a bigger problem.

We are down to a few enemies in the fight against inflation. Unfortunately, the Fed’s ‘weapons’ are unsuited to address supply-driven inflation. Sustainability requires getting the excess inflation out of all the spending components. The Fed holding rates or raising them further would eventually put the economy in a recession. That might reduce the demand for other types of spending and bring down their inflation further, achieving the topline inflation of 2%. However, that does not necessarily solve the current problem, and it creates new ones.

Inflation is narrowing down to a few challenging areas. That narrowing reflects several victories in the fight against inflation, but what’s left has a big lesson. It’s time for policymakers outside the Fed to accept responsibility for inflation and, most importantly, do something. The Fed is in the mix, but it can’t fix this alone.

It's unclear to me what policies she proposes to fix inflation in car insurance, as that inflation seems to be driven by the fact that (1) cars cost more due to both size and inflation, (2) cars are now computers which also are expensive - inflation in many components and (3) natural disasters have lead to rising claims.  I would assume lowering the cost of actual cars and their component parts would lead to lower car insurance, but maybe I'm wrong.  I'm not sure the policy that prevents bad weather events....I have so much left to learn.

With all this focus on the Fed and inflation, is it wrong to think that this will all be funny to look back on when some "shock" hits the real economy down the line?

On the day ahead:  Fed Beige Book, Fedspeak

XTOD: After a massive outperformance in a short time and due to Jay showing up on H4L island we have  reweighted back to DS Beta. Net sold gold, tips, commods and equities and bought nominal bonds for our long only beta portfolio

XTOD:"After several days of rising tensions in the Middle East, Treasury yields are higher, not lower. This is a potent sign the wind has changed, and we are firmly stuck in an inflationary regime."  

@LondonSW

XTOD: Yes I still think 3 cuts this year.

XTOD: I had kinda hoped that the crypto market would learn finance, and prices would move back to present discounted value of dividends. But some of what has happened is that the stock market has learned crypto-pricing and some stocks are temporarily over-priced by hype and attention.

Daily Economic Update: April 16, 2024

Down day for the major equity indexes as geopolitics and rising bond yields weigh on sentiment.  Retail Sales data showed a consumer that won't quit with headline sales and core sales both exceeding expectations.  The 10Y yield crossed 4.60% and the 2Y continues its march towards 5%, almost getting their intraday but ending at 4.93%.

Speaking of geopolitics,  a few days ago, economist Noah Smith had a blog post titled "Americans are still not worried enough about the risk of world war" in which he was discussing the parallels between the start of WW2 and what is occurring throughout the world at present, in it:

So if you were living at any point in 1931 through 1940, you would already be witnessing conflicts that would eventually turn into the bloodiest, most cataclysmic war that humanity has yet known — but you might not realize it. You would be standing in the foothills of the Second World War, but unless you were able to make far-sighted predictions, you wouldn’t know what horrors lurked in the near future.

In case the parallel isn’t blindingly obvious, we might be standing in the foothills of World War 3 right now. If WW3 happens, future bloggers might list the wars in Ukraine and Gaza in a timeline like the one I just gave.

Or we might not be in the foothills of WW3. I think there’s still a good chance that we can avert a wider, more cataclysmic war, and instead have a protracted standoff — Cold War 2 — instead. But I’m not going to lie — the outlook seems to be deteriorating. One big reason is that China appears to be ramping up its support for Russia.

As for investors, writer, Joakim Klement has pointed out here that most geopolitical events can barely be recognized on a chart of long-term equity market indexes.

In any case, Cassandras that deal in geopolitical risks have long been a bugbear of mine. So much so that I sat down and wrote an entire book about geopolitics for investors which you can download for free at the CFA Institute Research Foundation.

One of the key messages was that most of the time, geopolitical events do not matter for investors.

.... That is, of course, until they do.... This brings me to the second key message of my book. Learning how to identify which geopolitical events matter and which ones don’t is key to being successful as an investor.  And this is where Cassandras who predict geopolitical crises always fail.

 Even if a geopolitical event escalates, an investor must be able to correctly separate the major events from the ones that don’t escalate to major events as these events unfold in real-time.

And if it turns out to be a major geopolitical event, key drivers of asset return like inflation, risk-free rates, or future cash flows must be permanently and materially altered to make an impact on the portfolio.

We rarely fall off a cliff. And investing based on the assumption that we will fall off a cliff is going to lose you money.

I guess Klement's advice is to be an optimist, described in my post here .  It doesn't mean you should ignore some principals of having a margin of safety.

On the day ahead it's Housing Starts, Building Permits, Industrial Capacity, Durable Goods and Fedspeak

XTOD: it’s so humbling how happy a 72 degree makes me. I thought I was more complex than this

XTOD: Israel’s response to the Iranian attack may be "imminent," an Israeli official said Monday.

Speaking after Israel’s war Cabinet met for several hours, the official said Israeli decision-makers believe it's important for any response to closely follow the attack. via NBC News

XTOD: Away from the Middle East crisis, cocoa prices keep climbing with the most active contract in New York surging today to a fresh all-time high of ~$10,700 a metric ton. Over the last year, cocoa prices are up ~270% | 

Daily Economic Update: April 15, 2024

 

 

Tax Day in 'merica. "If you take a walk, I'll tax your feet".  You can check out Stevie Ray Vaughn's cover as well. 

The weekend retaliatory attack by Iran and subsequent missile exchanges by Hezbollah and Israel will keep the risk of a broadening conflict front and center.

On Friday, the UofM consumer sentiment index came in below expectations, but showed increases in the year ahead and five year ahead inflation expectations.

Speaking of inflation and what the Fed has accomplished to date, a few interesting blog post over the last few days.  Both of the following post hit on the puzzle of interest rates and r-star.

The first, courtesy of Stephen Williamson, titled "Do Central Bankers Know What They're Doing" which posits:

• Williamson is a known 'Fisherian' or an adherent of 'Neo-Fisherism'.  What's that?
• It's based on the Fisher Effect, coined for Irving Fisher, and the basic equation that a Nominal Rate = Real Rate + Inflation
• If you turn this equation on its head, you can posit that a high nominal interest rate will cause inflation to actually rise over time (in other words the causation runs counter to what you tend to think), why?
• Because economist believe that nominal interest rates are 'long-run' neutral and do not change the real rate
• Back to Williamson's blog, he argues:
• PCE inflation is essentially at target and inflation expectations measured by break-evens are well anchored at target
• "So, the state of the U.S. economy, by these measures, appears to be as close to perfect as the FOMC might want, given its dual mandate, including its 2% PCE inflation target. Then, given that the median FOMC member still thinks the long-run nominal interest rate should be about 2.5%, if I had been asleep for 20 years, just woke up, looked only at these charts, and knew the 2.5% long-run estimate, I would wonder why the overnight rate was not 2.5% instead of 5.3%."
• "My best guess, though, is that the FOMC isn’t so worried about the actual inflation numbers as the state of the real economy. That is, the idea that the inflation rate is controlled by controlling the unemployment rate persists at the Fed, as it does at most central banks in the world, despite plentiful evidence to the contrary....Inflation came down with essentially no upward movement in the unemployment rate. The Phillips curve narrative persists, as it somehow allows monetary policy committees to achieve consensus, and it’s easy to explain to the public - however wrong it may be. Unfortunately, if central bank officials speak Phillips curve language for long enough, they start to believe it, which produces bad monetary policy."
• He posits that if the Fed truly believes the long-run real interest rate is 0.5% then maintaining this level of nominal rates will set the Fed up for above target inflation.
• " That is, if the policy rate stayed at 5.3% forever, and the long-run real interest rate is 2%, then we would expect inflation to come in at 3.3%, which is better than 4.8% under the FOMC consensus."
• "The bad news is that the FOMC, along with other central bankers in the world, may be setting itself up for persistent overshooting, just as central banks tended to undershoot their inflation targets from 2010 to 2020. That’s all part of the same phenomenon, which is not recognizing long-run Fisher effects - and this may set in sooner than people seem to think. Basically, consistent with all mainstream macroeconomic theory, a persistent increase in the central bank’s nominal interest rate target produces a long-run increase in inflation, not a decrease. What allows a central bank to hit its inflation target is a widely-held belief that the central bank will always revert to a nominal interest rate target consistent with its inflation target and Irving Fisher. If that widely-held belief falters, the game’s up."

The second post comes from Scott Sumner, who is an avid supporter of Nominal GDP Targeting.  His post titled "Time to Add Epicycles" discusses what he describes as the absurdity of 'reasoning from a price change' when talking about interest rates causing changes in other macro variables. 

• "Interest rates can change for multiple reasons, and the effects of the rate change will depend on the underlying factors that caused them to change."
• He goes onto discuss the 'frustrations' with current economic models and excuses such as "long and variable lags".
• "If interest rates rise because of tight money, then aggregate demand may decline. If interest rates rise because of fiscal deficits or booming immigration or strong “animal spirits”, then aggregate demand may rise. It depends."
• "Doesn’t the Fed determine interest rates? Well, it has a target, which it moves up and down in response to what it perceives as changes in the equilibrium interest rate. But is it leading the market, or following?"
• "All I can say is that the proof is in the pudding—apparently we are still not able to model that “natural” rate with any degree of accuracy. As a result, we end up reasoning from a price change.
• "Monetary policy is not interest rates, it is the market forecast of future NGDP."

And just to complete the trifecta, we get a post from John Cochrane titled, "Inflation Confusion"

which discusses a recent WSJ article and how the current administration is struggling with basic economics.

• Cochrane starts off with some basics around how relative price changes are not inflation and that by jawboning about inflation has been tried and failed.
• He goes on to complain about the administration's lamentation that there isn't much they can do about it:
• "Nothing one can do? We have, now admittedly, a deficit fueled inflation. One could start by not pouring more gas on the fire. Such as cancelling billions of student loan debt, never mind the Supreme Court and the quaint idea that Congress votes spending. The CBO reports “The deficit totals $1.6 trillion in fiscal year 2024, grows to $1.8 trillion in 2025, …” with a 3.8% unemployment rate. Even in the simpleminded Keynesian economics that dominates left-of center Washington, there is no excuse for such stimulus."
• "There’s nothing we can do except the one thing that we all know would work. So we’ll rearrange the teacups on the side tables of the deck chairs of the Titanic instead. Which means nothing we want to do."
• "The quote here reflects the standard Keynesian view, deficit = aggregate demand = inflation with a lag. But we’re pretty clearly now in the situation that expected systemic deficits are the problem. Germany stopped a hyperinflation in a month. A credible announcement of spending, tax, and growth reforms that put the budget on a sustainable track would do the job. Scaling back the IRA, Chips, student debt river in recognition of inflation would help a lot more than complaining about how many potato chips are in a bag. Even just saying we recognize that’s needed would help."
• He concludes his piece with a complaint that politicians care too much about what 'resonates with voters' rather than taking the action they could take to lower inflation.

On the week ahead we'll get a lot of corporate earnings, retail sales and plenty of Fedspeak:

Monday: Empire St. Mfg, Retail Sales, Fedspeak

Tuesday: Housing Starts, Building Permits, Industrial Capacity, Durable Goods and Fedspeak including Powell at 1:15pm

Wednesday: Fed Beige Book, Fedspeak

Thursday:  Jobless Claims, Home Sales, Leading Indicators

Friday: Just one Fed speaker (Goolsbee)

XTOD: "You don't need to worry about progressing slowly. You need to worry about climbing the wrong mountain."    @JamesClear

XTOD: “Notice that, while lots of people are happy to tell you about Golden Ages, nobody ever seems to think one is happening right now. Maybe that’s because the only place a Golden Age can ever happen is in our memory.”   – Adam Mastroianni

XTOD: AUCTION ALERT:  -345k sq ft office building in Baltimore  -Starting bid of $1.5M or ~$4 per sq ft  -68% vacant  You can officially buy office towers for less than a small condo in many cities around the US

XTOD: Then, things go pear-shaped. The economy goes into recession. You lose your job and your source of income. Also, the value of your portfolio goes down 50%. Things were really good before, but they are really bad now....What if there was a way to avoid this?....I call this THE LIFE HEDGE.  

Here is the goal:  In good times, your portfolio is mostly flat.  In bad times, it explodes higher.  Thus, smoothing out the volatility in your life. How do you do this?  Well, gold plays a large role, and so does bonds.  Maybe you have some shorts to go with your longs. Maybe you have some insurance in the form of put options.  The Awesome Portfolio does this, with 40% of your portfolio being allocated to gold and bonds...This is the way I've invested my money since 2008, and I haven't given up anything in the way of returns.  In 2008, I was long my career, long a bunch of LEH stock, and long the stock market. Lost my job, my income, and almost 50% of my portfolio overnight.  NEVER AGAIN.

Daily Economic Update: April 12, 2024

If I've learned one thing from the tv series Shogun and from the Ohtani saga, it's that you shouldn't underestimate the importance of your interpreter.  

Yesterday's PPI came in a little under expectations, providing a little reprieve for investors concerned about inflation, but not enough to reverse the recent move higher in yields.  As for inflation, Economist Brad DeLong posits: "My current guesses? A 40% chance that things are simply delayed by the long and variable lags, a 30% chance that I am in for a big surprise as it turns out that that the era of “secular stagnation” & permanently low equilibrium rates that place chronic deflationary pressure on the economy, and a 30% chance the “unknown unknowns” rule everything around us…"

In Fedpseak, both Williams and Collins again indicated that nothing in the data indicates a need to start adjusting monetary policy to one of lower rates.

The 30Y Auction wasn't quite as bad as yesterday's 10Y, but still tailed and had weak foreign demand, making for a rough week for Treasury issuance. 

Across the pond the ECB was on hold as expected: "The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 4.50%, 4.75% and 4.00% respectively."   ECB remains ready to cut but is "data-dependent".

And in shocking news a financial institution is being investigated for doing a poor job with AML.

Today we survey consumers about gas prices and expect that and their political opinions to tell us something about the future of inflation.  

XTOD: With the death of OJ, let's talk about how savage Norm McDonald was and risked his career at SNL when he would not let up on his OJ jokes.

XTOD: The current federal interest outlay is ~$1T per year, straight into financial portfolios. If you think that outlay is inflationary, imagine how inflationary it was last year when the U.S. stock market rose 30% from trough to peak. 30% is worth $12T to those SAME financial portfolios, ALL AT ONCE!  

The people who are arguing that rate hikes exacerbate inflation via the "interest income" channel are obviously wrong, but even if they were right, the ZIRP alternative they compare things to is not an alternative where you get to just subtract interest payments from private wealth & spending power, and voilà, you're done. You have to also ADD the effects of the extreme asset market melt-up that the policy would induce (and all the follow-on reflexive effects--scary to even think about).  

Just imagine how the system would respond right now if the Fed cut to zero amid the current inflation numbers! (or had held at zero all along, as the team transitory MMTers who traffic in this nonsense were demanding). 

The whole angle is just incredibly stupid. It only serves to corroborate the criticism that MMT is a political ideology that will say anything to justify aggressively loose policy, as opposed to a serious economic framework. Stop with it already.

XTOD: So, let's start with what I believe everyone still needs to understand ... The COVID lockdown/restart of the economy was the biggest ECONOMIC event of our lifetime. Bigger than the financial crisis. It changed the economy in ways we see but do not want to accept.

XTOD: Two's at 5 ...10's at 4.60   Stocks at 250 Twelve month forward EPS and a 20.8 PE

This is just fantastic pricing for a recession island destination bet.  I am still sailing the economic slowdown sea tied to the mast to avoid sailing to Soft Landing Island

XTOD: If you already live a comfortable life, then choosing to make more money but live a worse daily life is a bad trade. 

And yet, we talk ourselves into it all the time. We take promotions that pay more, but swallow our free time. We already have a successful business, but we break ourselves trying to make it even more successful. 

Too much focus on wealth, not enough focus on lifestyle.

Daily Economic Update: April 11, 2024

Shave a point off the equities indexes as inflation comes in hot.  So much for the myth that stocks are a good inflation hedge I guess.

As for CPI, core was 0.36% above the 0.3% expectation, headline was also higher than estimates.  Auto related items appeared to drive some of the above consensus reading...good thing no one needs to insure or repair their cars.  And the so called “super-core” inflation is looking not only sticky but rising.

As you might have expected it was a tough day to auction 10Y Treasuries, given 10Y yields saw double digit moves higher in yields.  The 2Y is nearing 5% at 4.96% and the 10Y is back over 4.50 at 4.54%.

Essentially every headline on the FOMC Minutes started with the words 'uncertainty' and the need for further 'confidence' that the data shows inflation will come back to 2%.  The line that some participants warned that  inflation "had been relatively broad based and therefore should not be discounted as merely statistical aberrations," 

We'll see what PPI does today.

XTOD: For currency-issuing governments, bonds are a policy choice, not an economic imperative. You can prune the debt tree by leaving reserve balances in the system (as central bank liabilities) instead of forcing them to convert to government bonds (liabilities of Treasury). 

https://on.ft.com/3UaSCEa

XTOD: Find myself in a virtually unoccupied middle ground on this issue. Yes, composition of the debt b/w (base) money & bonds is a policy choice. But "monetizing" the debt does not "prune" the debt tree--it simply relabels it (e.g., as interest-bearing reserves in the U.S.)  Swapping bonds for interest-bearing money mainly shortens the maturity structure of the outstanding supply of government securities. The total supply of debt (rather than its composition) and its path (relative to demand for this debt) matters more, in my opinion.

XTOD: Can we finally get a mea culpa from Krugman, MMT clique & other transitory truthers?

Would be congratulating themselves like crazy rn if data were good, despite 2 yrs too late.

PISS POOR analysis & forecasting, confidently issued w/ political motives & no actual insight. OWN IT

XTOD: “The 3-month annualized change in supercore inflation is now over 8% and accelerating… The 6-month annualized change is 6%, and the year-over-year change is 5%… We are sticking to our view that the Fed will not cut rates in 2024”  Apollo’s Torsten Slok

https://x.com/StephanieKelton/status/1778025062647357738

https://x.com/dandolfa/status/1778041930276041019

https://x.com/Jesse_Livermore/status/1778050504779608131

https://x.com/FerroTV/status/1778094795119907068

Daily Economic Update: April 10, 2024

CPI Day is upon us.  Expectations are for both headline and core CPI to rise 0.3% MoM.  Speaking of inflation, yesterday's NFIB Small Business Optimism provided the following:

“Small business optimism has reached the lowest level since 2012 as owners continue to manage numerous economic headwinds,” said NFIB Chief Economist Bill Dunkelberg. “Inflation has once again been reported as the top business problem on Main Street and the labor market has only eased slightly.”

I was as shocked as you, I didn't know inflation could be so problematic, in fact I thought it was business greed that was causing inflation.  How could business be harmed here?  

Maybe 'Money Illusion'?   

"Business is always injured by uncertainty. Uncertainty paralyzes effort, and uncertainty in the purchasing power of the dollar is the worst of all business uncertainties."  - Irving Fisher

Don't worry I'm sure crypto solves this or if not AI will.

Yesterday's 3Y auction wasn't super pretty with a 2bp tail, we'll get CPI and 10Y Note auction today.  Markets also keeping an eye on the geopolitical risk with tensions escalating in Gaza.

XTOD: TODAY IS THE MOST IMPORTANT CPI REPORT OF YOUR LIFE SO READ THIS THREAD🧵

XTOD: Is the U.S. deficit growth a problem which will necessitate YCC one day?  Maybe.  But talk to me when the yield curve is positively sloped by 250bp AND our currency is weak relative to other fiats AND our economy is in a recession.  Otherwise STFU about #YCC

XTOD: Here's a crazy stat that no one will believe.  The universal investment benchmark is the 60/40 portfolio of stocks and bonds.  What if you replaced the bonds entirely with gold....crazy right? 

Turns out it makes no real difference.

XTOD: Manley: "Lower mortgage rates would prompt more people to sell their homes, leading to more supply and potentially softer prices."

"Manley’s idea is a provocative one." That's provocative: "P-R-E-T-T-Y-S-T-U-P-I-D."

XTOD: Who are you riding with to take home the green jacket?

Daily Economic Update: April 9, 2024

One of those weeks where everyone is kind of waiting for inflation data.  Stocks fell slightly while yields rose again.  The 2Y is sitting right around 4.80% and the 10Y at 4.43%.  Market continues to reprice the number of rate cuts on the remainder of the year lower.

In the interim there is more student loan related forgiveness talk, this time using something through the Higher Education Act.  The plan reportedly would cancel up to $20K in interest for borrowers up to certain income caps and has several other categories of debt eligible for cancelation, including those whose loans have been outstanding for greater than 20 years.   

Yellen talks tough on Chinese banks for supporting Russia.  

On the inflation front, the NY Fed SCE showed consumers continue to have 1 year ahead inflation expectations of 3% and once again increased their 3 year ahead expectations.

On the day ahead it's NFIB Small Business Optimism and 3Y Treasury Note auction.

XTOD: Slide deck from Jim Bullard's talk on April 2, 2024 at the University of Miami.   Basic message: TR says Fed was too slow in raising policy rate and is now too slow in cutting.   https://docs.google.com/presentation/d/1Qi6jBL4htNvkXa7-7e1PRtJyAXtFQTPe/edit?usp=sharing&ouid=115002303683574113856&rtpof=true&sd=true

XTOD: Leon suddenly became the element Curb couldn't do without. New  mansions in new neighborhoods, a move to New York for a season, even a  five-year hiatus—Leon and his durags have persisted through it all. And  in the process, JB Smoove became one of Hollywood’s most prolific  comedic character actors.  https://gq.com/story/jb-smoove-hype?utm_brand=gq&mbid=social_twitter&utm_social-type=owned&utm_medium=social&utm_source=twitter

XTOD: The focus is on big name MLB elbows, but what should get as much attention/concern are 16-year-old studs having UCL reconstructions now. They'll be throwing 100+mph in the big leagues with old ligaments 10 years from now. That's how this perpetuates. We HAVE to think upstream.

XTOD: Warren Buffett: "[My dad] taught me that what's on your inner scorecard is more important than your outer scorecard. A lot of people are concerned with what the world will think about this or that — instead of what they themselves think about it." 

XTOD: No surprise:  "Brent Clark is often asked by other parents how he and his wife Anne nurtured Caitlin to become the basketball star that she is. 

His answer? Get your children engaged with as many different activities as possible, sports or otherwise."

Daily Economic Update: April 8, 2024

Eclipse Monday.

"I'm not the only one staring at the sun" ???  

  or "Black hole won't you come and wash away the rain" ???  

or "And everything under the sun is in tune But the sun is eclipsed by the moon"

Strong job data causes equities to bounce, setting off east coast earthquake on Friday…or something like that.  Correlation is not causation.  Now we have Eclipse Monday...

Jobs +303K, well above consensus with unemployment rate at 3.8% and average hourly earnings holding in there at a solid 0.35%.   Rate cuts?  We're talking about rate cuts? 

We start the week with coming off a losing week for equities and with the 2Y yield sitting 4.76% and 10Y yield sitting at 4.40%.  

Your goal for the week: think about such elusive concepts as R*, measuring productivity, and equity risk premium.  Good luck.

Another CPI report and PPI on the come.....just consider for a moment some thoughts from Nassim Taleb on what he calls the "Noise Bottleneck"....

"In business and economic decision-making, data causes severe side effects —data is now plentiful thanks to connectivity; and the share of spuriousness in the data increases as one gets more immersed into it. A not well discussed property of data: it is toxic in large quantities —even in moderate quantities....The more frequently you look at data, the more noise you are disproportionally likely to get (rather than the valuable part called the signal); hence the higher the noise to signal ratio....To conclude, the best way to mitigate interventionism is to ration the supply of information, as naturalistically as possible. This is hard to accept in the age of the internet. It has been very hard for me to explain that the more data you get, the less you know what’s going on, and the more iatrogenics you will cause."

Monday:  Try not to get blinded by the eclipse

Tuesday: NFIB optimism

Wednesday:  CPI

Thursday: PPI, Jobless Claims

Friday: Import Prices, Consumer Sentiment

XTOD: “Knowledge compounds almost in the same way that your money compounds. In fact, only when your knowledge compounds at a faster pace, your money is safe. To me, that is a very fascinating journey and rewarding life.”  — Li Lu

XTOD: “The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays.”  — Morgan Housel

XTOD: Financial institutions operate by a kind of reverse Occam's razor.  

They have a large incentive to favor the complex and costly over the simple and cheap, quite the opposite of what most investors need and ought to want. - Jack Bogle

XTOD: 46% of people take less Paid Time Off than offered. I would’ve guessed the number is 80% tbh.   It’s a big problem for Americans either way. “Feel badly about co-workers taking on additional work.”

XTOD: Israel bombing Iranian embassy in Syria and now Ecuador invading (!) Mexican Embassy in Quito—feels like a lot of international law and taboos are being broken with very uncertain long term consequences.

XTOD: BREAKING - #Armenia's defence ministry reports numerous areas came under fire from #Azerbaijan last night, including areas around the villages of Movses, Chinari, Sotk, Verin Shorzha, Kut and Aravus. Troop movement reported near Ishkhanasar.

XTOD: Iowa-UConn WBB is ESPN’s most-viewed basketball game … ever. And it’s ESPN’s second-biggest audience for a non-football game … ever.

XTOD: The all-new 75th anniversary edition of this timeless Ben Graham classic will release on October 22, 2024.  640 pages of Graham's original book — "leaving his original text untouched" — alongside updated commentaries from Jason Zweig to explain how the Dean of Wall Street's wisdom still applies today.

XTOD: Nice review of "Getting Monetary Policy Back on Track" by Tom Hogan https://www.independent.org/publications/tir/article.asp?id=1926