Daily Economic Update: June 24, 2024

What'd I miss?  Nevermind, I'll ask AI.  With the Presidential Debate this Thursday, I'm actually surprised I haven't seen anyone use AI to simulate the debate yet (I'm sure someone has).  I know PCE is on the docket for the week ahead and I'm confident inflation will come up at the debate.

I need to keep a better list of macro topics so I can more easily forget about them and then remember them in a few months when people care about them again.  Oh wait, I do that with this blog.  One day, 25 years from now, I will have my AI and Robot assistant and the Terminator, all jointly, publish this blog under the title "the definitive guide to financial history." (yes in lowercase, to deemphasize the importance of everything documented).

Just for fun, here's a list (likely much abbreviated of the current/oft repeated macro topics):  AI, China, Geopolitics, Trade/Tarrifs, Elections, Wars, Climate, Inflation, Deficits, Crypto......at the core of how many of these "macro" topics does the saying "history doesn't repeat, but human nature does" apply?

On the week ahead PCE, Fedspeak, Debates

Monday: Fedspeak (Waller overnight)

Tuesday: Home prices, consumer confidence

Wednesday: New home sales

Thursday: Q2 GDP (2nd), Durable Goods, Pending Home Sales, Old Guys On TV in primetime

Friday: Personal Income and Spending, PCE

XTOD: When Keynes wrote “The General Theory of Employment, Interest and Money” the unemployment rate was around 20%   The unemployment rate in the US today is 4%. 

We don’t need more make-work job programs.

XTOD: For me, crypto has always been a means to an end. Crypto is the vehicle for accelerating the velocity of capital formation and allocation to effectuate all the positive change we want to see in the world. Advanced manufacturing. Small Modular Reactors. Bio-computing. Breakthroughs in Neuroscience. Photonics. 

XTOD: Michael Dell explains “AI”:  “Its going to notify you of emails and important calendar events.”

HOLY SHIT!   A top computer manufacturer can’t provide a single practical example of “AI”.

XTOD: "You only have to do a very few things right in your life so long as you don't do too many things wrong."🎯   Warren Buffett

XTOD: What did  @TheSeesEO  learn from Charlie Munger?   "Simplicity."

XTOD: One of the odder historical facts I can think of is that Reggie Jackson and Benjamin Netanyahu went to high school together

XTOD: You: Grinding 70 hours a week on Excel spreadsheets and getting a pitiful 1% match on your 401k to make $120k a year.   Hawk Tuah Girl: Goes nuclear on the timeline and sells marked-up trucker hats for $120k in one day.

Daily Economic Update: June 21, 2024

"Meaning is not something you stumble across, like the answer to a riddle or the prize in a treasure hunt. Meaning is something you build into your life. You build it out of your own past, out of your affections and loyalties, out of the experience of humankind as it is passed on to you, out of your own talent and understanding, out of the things you believe in, out of the things and people you love, out of the values for which you are willing to sacrifice something. The ingredients are there. You are the only one who can put them together into that unique pattern that will be your life. Let it be a life that has dignity and meaning for you. If it does, then the particular balance of success or failure is of less account. "  - John Gardner, "The Road to Self Renewal"

Daily Economic Update: June 20, 2024

 "Achievers are a socially acceptable form of violent men, overdoing it in one way or another.  Their casualties tend to be their marriages, their families and their their health." - John Eldredge

Daily Economic Update: June 19, 2024

                  " If you find serenity and happiness, there may be jealousy;

                                                     be happy anyway.

The good you do today, people will often forget tomorrow;

do good anyway.

Give the world the best you have, and it may never be enough;

give the world the best you’ve got anyway.

You see, in the final analysis, it is between you and God;

                                it was never between you and them anyway." 

 - Mother Teresa, Do It Anyway (excerpt) 

 

Daily Economic Update: June 18, 2024

 "..you are 100 percent responsible for your life. You alone are responsible for the choices you make and the actions you take.  That said, you must also realize your choices, behaviors, and habits are influenced by very powerful external forces...Everyone is affected by three kinds of influences: input (what you feed your mind), associations (the people you spend time with) and environment (your surroundings)."  - Darren Hardy, The Compound Effect

Daily Economic Update: June 17, 2024

The week ahead features more central bank meetings including Australia and the BoE.  Stateside retail sales and PMI's will be the highlights along with Fedspeak.  But we're overdue for a week of cutting out the noise. So as is done periodically we'll do just do a quote a day for the week.

"A good leader never becomes an obstacle or rival. She empathizes with those she leads and points the way toward a good that transcends their relationship - shifting the center of gravity away from herself."  - Luke Burgis, Wanting 

Daily Economic Update: June 14, 2024

It's a summer Friday, two days past the most important Wednesday of your career, why are you reading this?

Yesterday saw headline PPI post a decline of 0.2% MoM with core PPI flat MoM, both lower than expected.  Jobless claims rose more than expected, but remain low.  Many market participants believe the recent inflation data rules out the chance of a rate hike from here.

The 30Y Treasury auction was referred to as "stellar" as it priced 1.5bps inside when-issued. Is it falling inflation, falling growth expectations, both that helped bolster demand?  In any event today's supply didn't look like an issue.

If you guessed all-time highs on equities you were right.  

On the day head it's UofM sentiment as the highlight.

XTOD: Private equity is coming to college athletics.  As detailed in this article, the Big 12 is considering an equity investment of up to $1 billion for 20% of the conference.  Another example demonstrating that college athletes are professional athletes.  https://cbssports.com/college-football/news/big-12-considering-private-equity-investment-of-up-to-1-billion-for-as-much-as-20-of-conference/

XTOD: Private equity is going to blow up the world.

XTOD: The question for private credit is how much continued growth depends on expanding:

- retail access  - redeem-ability  - secondary market liquidity - leverage (!!) 

By all accounts, all these features are becoming more common. The asset class quickly starts looking a lot different.  Leverage is the key because it’s the only way outsize relative growth can continue. You can’t somehow recreate the 15x levered banking system on 1x leverage.

Daily Economic Update: June 13, 2024

It was the most important Wednesday in history I believe.  And I learned why I should be gravely concerned about electric boats and sharks, perhaps later than others, but educating myself nonetheless.

The cooler than expected CPI data lead to a double-digit move lower in yields and of course sent stocks to new highs.  Both moves were mostly sustained through the FOMC despite the ‘hawkish’ dot plot.

 The composition of the CPI report may not have been as promising as people think with most of the cooling coming from categories that might be considered less stable like a big reduction in airfare.  

The FOMC held rates as expected, you’ve already read 100 recaps, but you haven’t read my recap here.

And speaking of questions, why does no one ask about FAIT? If we’re targeting average inflation, doesn’t that mean we need inflation to be below 2% after being above 2% to average 2%, because like math?  Who knows.  And why did no one ask Powell to weigh in on the risk of electric boats, it would have been entertaining: “Do I stay on top of the boat and get electrocuted, or do I jump over by the shark and not get electrocuted?”  That seems like a good segue way into a discussion about the balance of risk.

I would tell you what’s on tap for Thursday, but how will it ever compare to Wednesday?  But sure, PPI and 30y auction is exciting stuff.

XTOD: Perfect time to start cutting rates https://pbs.twimg.com/media/GP4QjJ7W4AAeqgR?format=png&name=900x900

XTOD: Hawkish dot plots. Only 1 cut, AND revising up neutral rate (still low IMO) and longer term unemployment rate.

XTOD: Powell's implication remains that Fed policy can control inflation or growth just because it's part of the Fed's dual mandate. In reality, the Fed can't control geopolitics, trade wars, international development strategies, commodity sourcing or distribution costs, rents, debt-based purchasing, skyrocketing rents, the price of gold, cocoa, or a host of variables that can and will influence any randomly set target inflation rate.  

The Fed's policy hasn't kept the markets from booming either. However, it has fueled the distortion between financial assets and the real economy. #permanentdistortion

XTOD: Finally a pleasant surprise. Core CPI was 0.16% in May (2.0% annual rate). Headline was 0.01%. These are the best monthly readings since 8/21 & 7/22 respectively.  Good news but caution: just 1 print & some fluky items.  Core annual rate for 1/3/6/12 months:  2.0/3.3/3.7/3.4

XTOD: NEW: 2nd-grade teacher who was arrested for being drunk in class is no longer facing charges because "it is not illegal to teach drunk."  I love America. 

Wendy Munson was arrested after teaching her students at Nuestro Elementary School in California while drunk.  Munson failed a sobriety test and was twice the legal limit two hours after she was initially arrested.  District Attorney Jennifer Dupre announced that they didn't find any charges, noting that "it is not illegal to teach drunk."  "While the District Attorney’s Office agrees that it is highly inappropriate to teach while intoxicated, it is, unfortunately, not illegal."  "We couldn’t prove that her intoxication would endanger [the kids]."  Munson is not listed as a teacher on the school's website, indicating she was fired.

XTOD: "There’s no way to create a long-term, enjoyable, sustainable life by having a series of short-term transactional relationships that you move your life through. That’s where you end up with these people who can buy anything, who’ve made hundreds of millions, if not billions, of dollars, who are miserable. I’ve met these people. They have their IRR (internal rate of return) etched on their tombstone.   No one gives a shit. No one cares."