Daily Economic Update: June 25, 2024

Rough day for Nasdaq with Nvidia sliding again.  Treasuries did little as markets await PCE later in the week and lacked any other real catalyst.  In Fedspeak both Goolsbee and Daly were fairly dovish focusing on downside risk from keeping policy rates at their current levels, citing weakening consumer spending and some uptick in jobless claims.  For those looking at "weakening" various "surprise indexes" are showing data continuing to miss estimates, or in more economic jargon, various economic surprise indexes are registering their worst levels since 2022.  Let's be honest, data misses vs. analyst consensus estimates are likely as meaningless as data misses vs. the Fed's dot plot.    Speaking of the Fed I've seen a couple of Fed papers recently that seem to continue to downplay how long inflation has been above target (see XTOD for one of them).

The biggest immediate risks to markets is likely elections, with France and UK elections right around the corner.  With France the concern is around deficits and things ultimately becoming something akin to the "Greek Debt Crisis" of the 2010's era. 

The 2Y sits around 4.73% and the 10Y around 4.26% as we head into home price data and more Fedspeak today. 

XTOD: Apollo’s Torsten Slok: “There is a major gap opening up between the mean and the median of long-term inflation expectations, which means that half of the population has long-term inflation expectations that are dramatically higher than the other half.”

XTOD: Money leaving chips for everything else

XTOD: Higher inflation can lead to greater efficiency. It all has to do with the price dispersion that inflation generates, which might motivate some consumers to search for the lowest prices, increasing competition among sellers. https://federalreserve.gov/econres/feds/inflation-price-dispersion-and-welfare-the-role-of-consumer-search.htm #FEDSPaper

XTOD: "In my experience, high-achievers focus a great deal on becoming the person they want to be at work—and far too little on the person they want to be at home."  - Clayton Christiansen

XTOD: I suspect large swathes of people who don’t have kids or who had kids a while ago will have no idea what I’m talking about but youth sports travel teams are killing the American dream!  The current trends in how this works are bad for families, bad for social equality, bad for community, bad for public health, and just overall bad. https://t.co/QAOu3Ld0Ue

XTOD: In order to apply most of your energy in one direction, you have to say no to things that a lot of other people say yes to.   Most successful people are masters at eliminating the unnecessary from their lives.

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.