Daily Economic Update: December 3, 2024

Record closes for equities yet again. In data, the ISM PMI beat expectations with solid new orders.  Across the pond, French government as on the verge of collapse. Other than that is it just me or are food recalls at an all time high?

In Fedspeak, Bostic calls policy restrictive and is biased towards easing over time, but doesn’t necessarily believe a December rate cut is preordained.   Waller had a cool line: “Overall, I feel like an MMA fighter who keeps getting inflation in a choke hold, waiting for it to tap out, yet it keeps slipping out of my grasp at the last minute,” while stressing that they will get the eventual tap out.  Ultimately he’s leaning toward 25bps in Dec. but of course that’s data dependent.  We also had Williams late in the day explaining why the Fed can continue to cut rates: "The simple answer is that while growth in demand has been strong, growth in supply has been even stronger. Specifically, robust growth in both the labor force and in productivity has meant that the economy can expand at a higher pace than we saw before the pandemic, without creating inflationary pressures."  Of course he's also data dependent.

Yields rose some wiht the 10Y at 4.20% and the 2Y is also at 4.20%, almost back to inverted.

On the day ahead it's JOLTs and more Fedspeak.

XTOD: Art Cashin,  @NYSE   fixture for decades, dies at age 83. In the intensely competitive world of stock market  commentary, he was that rarest of all creatures: a man respected by all. He was a great drinker and a great teller of stories, and a great friend.\

XTOD: Biden's Hunter pardon riles Democrats who defended US justice system http://reut.rs/3Zy0PFb

XTOD: Missed a chance to make 4x on Biden corruption? Here is a 10x opportunity on Biden pardoning Fauci ahead of the inevitable perp walk https://pbs.twimg.com/media/Gdz4COGXAAEdaNh?format=png&name=900x900

XTOD: The world is full of foolish gamblers, and they will not do as well as the patient investor." 

— Charlie Munger

XTOD: When I came across Pareto’s work one late evening, I had been slaving away with 15-hour days seven days per week, feeling completely overwhelmed and generally helpless.  

I would wake up before dawn to make calls to the United Kingdom, handle the U.S. during the normal 9–5 day, and then work until near midnight making calls to Japan and New Zealand. 

I was stuck on a runaway freight train with no brakes, shoveling coal into the furnace for lack of a better option. Faced with certain burnout or giving Pareto’s ideas a trial run, I opted for the latter. 

The next morning, I began a dissection of my business and personal life through the lenses of two questions: 

1. Which 20% of sources are causing 80% of my problems and unhappiness? 

2. Which 20% of sources are resulting in 80% of my desired outcomes and happiness? 

For the entire day, I put aside everything seemingly urgent and did the most intense truth-baring analysis possible, applying these questions to everything from my friends to customers and advertising to relaxation activities. Don’t expect to find you’re doing everything right—the truth often hurts. The goal is to find your inefficiencies in order to eliminate them and to find your strengths so you can multiply them.  

In the 24 hours that followed, I made several simple but emotionally difficult decisions that literally changed my life forever and enabled the lifestyle I now enjoy. 

The first decision I made is an excellent example of how dramatic and fast the ROI of this analytical fat-cutting can be: I stopped contacting 95% of my customers and fired 2%, leaving me with the top 3% of producers to profile and duplicate.

Daily Economic Update: December 2, 2024

Unless you got debanked during it and couldn't invest, November was the best month of the year for the major indexes.  With December upon us, we enter yet another Jobs week, with the Employment Report on Friday.   Trump's pick of Bessent as Treasury Secretary seemed to help calm treasury markets on the week.  The 10Y yield is 4.17% after being up above 4.40% for a good part of November.  The 2Y yield which is more sensitive to the Fed fell to 4.16%.

Helping bond yields was the fact that PCE was largely in line with estimates. The headline PCE is running 2.31% YoY while the Core is running at 2.80% YoY.  Personal income and spending remain solid.  The ATL Fed GDP estimate for 4Q remains a healthy 2.7%.  The FOMC Minutes also didn't indicate anything to indicate the Fed is overly concerned with inflation, and overall offered little you haven't already heard from Fed officials, such as the idea that they'll continue to gradually move to a more neutral policy rate if the data comes in as they expect.

Away from markets, we had Buffett's philanthropic announcement where he announced he has designated 3 individuals as eventual successors to his 3 children in giving away his wealth.  As usual his announcement came with a dose of his own wisdom:

• our belief that hugely wealthy parents should leave their children enough so they can do anything but not enough that they can do nothing
• I’ve never wished to create a dynasty or pursue any plan that extended beyond the children. I know the three well and trust them completely. Future generations are another matter.
• I have one further suggestion for all parents, whether they are of modest or staggering wealth. When your children are mature, have them read your will before you sign it. 
• Charlie and I also witnessed a few cases where a wealthy parent’s will that was fully discussed before death helped the family become closer. What could be more satisfying?
• the real action from compounding takes place in the final twenty years of a lifetime. By not stepping on any banana peels, I now remain in circulation at 94 with huge sums in savings – call these units of deferred consumption – that can be passed along to others who were given a very short straw at birth.
• we shared a view that equal opportunity should begin at birth and extreme “look-atme” styles of living should be legal but not admirable. As a family, we have had everything we needed or simply liked, but we have not sought enjoyment from the fact that others craved what we had. 

In politics and perhaps economices, we had Trump promising additional tarrifs on Mexico, Canada and China if they don't help stop drugs and people flowing into the U.S.  Additionally he threatened BRICs nations with 100% tariffs if they ever decide to de-dollarize.

In geopolitics, Isreal and Hezbollah cease fire, while Syrian rebels take Aleppo.  

On the week ahead the highlight is Jobs Day, but before we get there we get ISM, JOLTs and Fedspeak.

Monday: ISM Mfg, Waller and Williams

Tuesday: JOLTs, moar Fedspeak

Wednesday: ADP, ISM Services, Powell, Beige Book

Thursday: Jobless claims

Friday: Jobs Day, UofM, moar Fedspeak

XTOD: But the system is out to de-bank us ...  Of course that’s your contention. You skimmed Breaking Banks once, so naturally, you think it’s a grand conspiracy—when really, it’s your port cos client lists being full of Balkan criminals failing AML 101. Next month, you’ll be shouting about how ‘Silicon Valley Bank was targeted,’ but the truth is if you’d read ALM by Farhvash, maybe you’d stop blaming the Fed for your bank buying 30-year MBS with 1-day deposits (which you pulled out). And by next year? You’ll be talking about, you know, how Basel III is a globalist scheme designed to choke innovation and crush the entrepreneurial spirit of the modern tech utopia.  https://pbs.twimg.com/media/Gdt3GYVWoAAhiFW?format=jpg&name=900x900

XTOD: Trump's defense of the dollar's reserve currency status is disconsonant because it's a key reason for the structural  trade deficit. Demand for dollar assets creates a capital account surplus that induces the U.S. to run a current account deficit. (Triffin dilemma, anyone?) Losing that status would reduce the dollar's value and the trade deficit. It would also mean higher interest rates.

XTOD: Great point.  If BRICs are going to be penalized for not buying USD fiat why would the SBR be a thing.  That's literally doing the same thing as the BRICs are doing.

XTOD: Third, and by far more importantly, China cannot simply sell US assets. It can only exchange them for other assets, but which assets? If it sold USD and bought RMB, the result would be an immense surge in the value of the RMB along with...a very disruptive contraction in the Chinese trade surplus. After all, the only reason China must buy foreign assets is to maintain its high trade surplus, and a refusal to do the former means the inability to do the latter.

XTOD: Jump. It’s not as wide as you think. https://pbs.twimg.com/media/GdVc7_8WMAA4UYl?format=jpg&name=360x360

Daily Economic Update: November 29, 2024

"If you are confident you have done everything possible to prepare yourself, then there is nothing to fear. There's no stress in losing under those circumstances. It just wasn't meant to be.” - Michael Jordan

Daily Economic Update: November 28, 2024

 "true power" stems from traits such as honesty, compassion, and a dedication to enhancing other people's lives......"You can't get away with lying to other human's"

- David Hawkins

Daily Economic Update: November 27, 2024

 “I don’t know what I would have done. I would have perhaps produced a few things and who knows where I would have went? But if I’d continued to dedicate my life to Bruce Springsteen’s vision I would never have realized my potential. I still haven’t, obviously, but I got a few things done and I think they wouldn’t have gotten done if I’d stayed.”   

                 - Steven Van Zandt [on leaving the E Street Band]

Daily Economic Update: November 26, 2024

 "Keeping your organization simple is not simple, but it is very important."  Robert Kierlin (The founder of Fastenal)

  "the more simple anything is, the less liable it is to be disordered…" - Thomas Paine in Common Sense

Daily Economic Update: November 25, 2024

One of the things the Federal Reserve does correctly is implement a blackout period, every once in a while it's good to cut the noise out, especially when it comes to financial news.  As I've done in the past this holiday-shortened week my economic update will consist solely of one quote.

The week ahead does feature some relatively important data with FOMC Minutes on Tuesday and PCE along with GDP data on Wednesday ahead of the market close on Thursday and a shortened day for fixed income trading on Friday. 

 "The great defect of scale, of course, which makes the game interesting—so that the big people don’t always win—is that as you get big, you get the bureaucracy. And with the bureaucracy comes the territoriality—which is again grounded in human nature...And in a bureaucracy, you think the work is done when it goes out of your in-basket into somebody else’s in-basket. But, of course, it isn’t...So you get big, fat, dumb, unmotivated bureaucracies...They also tend to become somewhat corrupt...you get layers of management and associated costs that nobody needs.Then, while people are justifying all these layers, it takes forever to get anything done. They’re too slow to make decisions and nimbler people run circles around them..." - Charlie Munger

Daily Economic Update: November 22, 2024

For all the talk that Nvidia earnings were more important than the FOMC and really everything else in the year, it just didn't seem to be the major event that options markets had implied.

Duct tape banana sells for $6.2mm, and I thought NFTs were crazy.  The DOJ continues to push towards Alphabet spinning out the Chrome browser.  SEC Gensler announces his resignation effective Jan 20, no shocker as Trump wasn’t keeping him around.  Bitcoin $100K.  Stocks were positive on the day.  Yields were little changed with the 

In U.S. data, you still can't get fired and you pretty much still can't buy a house.  In Asia, Japanese inflation data is in focus.

On the day ahead it's really just UofM survey.

XTOD: Just keeping a running list for myself to repost in future:

1. MSTR now represents a mid single digit of all converts in US

2. Meme coin bro buys 6.2m banana to eat 

3. 10 year old rug pulls greedy meme coin people for $30k -> someone kidnaps his dog and asks for money back 

4. Some of the best L/S guys I know giving up shorting stocks 

5. 2/3 my feed is not ICBM rockets but “retardio” and “fartcoin” 🚀🚀

6. DJT rumor to be buying BAKKT (FT)

7. James Howell is paying 10s of millions to search landfill for lost bitcoin 

8. SBF would be richest man in world right now 

9. Scottie Pippen knows Satoshi and talks to him in dreams

10. TikTok “ChillGuy” meme coin is now $400m mkt cap and up 400,000%

Feel free to add so we can catalogue this time in

XTOD: Nvidia keeps crushing because Jensen runs it unlike other CEOs:

- No 1:1s

- No 1 or 5-year plans

- No status reports

- 60 direct reports

Once you see why he does it, you can't unsee it  And it explains everything wrong with the traditional way of running a compan

XTOD: Breaking: Top hedge fund managers are growing wary about the debt situation — $35 trillion and counting but also how they believe  @SecYellen  and the  @JoeBiden  were manipulating interest rates in the run up to Nov 5 by selling so much short dated debt so as not to cause a spike in longer dated yields, which would upend stocks and could cause a significant economic slowdown. Now  whoever  @realDonaldTrump  nominates for  @USTreasury  will be stuck with a mess of a balance sheet, a mismatch to unwind that will put pressure on bonds and markets. Story developing

XTOD: Limiting your options now will expand your opportunities in the long run because you can remain focused enough to master something.  Keeping your options open now will reduce your opportunities in the long run because you divide your attention and end up doing an average job on seven different things.  Are you falling into the pattern of always mastering one thing or always chasing the next thing?