Daily Economic Update: January 2, 2025

 ...ignoring uncertainty, speculation, and instability does not mean that they have disappeared.

                                -Charles Kindleberger, "Mania, Panics and Crashes" 

 

Daily Economic Update: December 31, 2024

 At a late stage, speculation tends to detach itself from really valuable objects and turns to delusive ones.  A larger and larger group of people seeks to become rich without a real understanding of the process involved.  Not surprisingly, swindlers and catchpenny schemes flourish.

                            - Charles Kindleberger, "Manias, Panics and Crashes" 

Daily Economic Update: December 30, 2024

I don't really consider this a real week, so I'm going to go another week with just a quote per day for you to think about.   If you're into data, Friday, January 3rd is probably your best bet with ISM mfg and Richmond Fed's Barkin on the docket.  

If you want to think about 2025, I think we're all aware of the general topics on investors minds:  Trump's policy, equity valuations (especially AI and tech and all the related trades), crytpo, whatever is going on in China's economy and of course the Fed.  Apollo's Torsten Slok, who has been more correct than most, states: "The bottom line is that interest rates staying higher for longer is the number one theme in markets as we enter 2025."

I'm sure I'm missing some other themes, but by the end of 2025 you won't remember, just like you never remember how bad all of the prominent forecast are year after year. 

Much has been written about panics and manias, much more than with the most outstrechted intellect we are able to follow or conceive; but one thing is certain, that at particular times a great deal of stupid people have a great deal of stupid money...At intervals, from causes which are not to the present purpose, the money of these people - the blind capital, as we call it, of the country - is particularly large and craving; it seeks for someone to devour it, and there is a "plethora"; it finds someone, and there is "speculation"; it is devoured, and there is "panic."  

                                            -Walter Bagehot  "Essay of Edward Gibbon" 

Daily Economic Update: December 27, 2024

Lesson of the day from William Green's book Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life

Lesson 5 Find Yoour Passion:

"You have to play in a game where you’ve got some unusual talent. If you’re five foot one, you don’t want to play basketball against some guy who’s eight foot three. It’s just too hard. So you’ve got to figure out a game where you have an advantage, and it has to be something that you’re deeply interested in.” - Charlie Munger

Charlie Munger highlights the significance of identifying your passions. Pursuing what genuinely interests you not only enhances your motivation and drive but also leads to greater fulfillment and satisfaction in life. This applies to investing as well, where passion for a particular industry or business can drive deeper research and understanding.

Daily Economic Update: December 26, 2024

Lesson of the day from William Green's book Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life

Lesson 3 Build strong relationships:

"Who you spend your time with is probably the most important thing in life." - Ed Thorp 

The people you surround yourself with have a profound impact on your life. Building strong, supportive relationships with family, friends, and mentors contributes to happiness and well-being. Similarly, in investing, collaborating with trustworthy and like-minded individuals can lead to shared insights and better decision-making.

Lesson 4 Don't be afraid to be different:

"Indifference to other's opinion… Willingness to be lonely, take a position others don't think is too bright. An inner conviction." - Lipper 

This observation about Sir John Templeton emphasizes the importance of independent thinking. Successful investors often go against the prevailing sentiment and trust their own judgment. This can be applied to life by having the courage to follow your own path, even if it means deviating from the norm.

Daily Economic Update: December 24, 2024

Lesson of the day from William Green's book Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life

Lesson 2 Think Long-Term:

"This basic building block of society is broken when those with their hands on the permanent capital change their minds with their underwear...The Bible would say that you want to build your house on rock rather than sand." - Nick Sleep 

When investing, it's important to think long-term and not get caught up in short-term fluctuations. This is also a good life lesson to apply when making any major decisions. By considering the long-term consequences, you can make choices that will set you up for lasting success and fulfillment, rather than instant gratification.

Daily Economic Update: December 23, 2024

Friday's PCE readings came in below expectations, providing some relief for stocks.  We also got relief from a government shutdown with the passage of a stopgap measure to keep the government funded at current levels for the next 3 months.  Speaking of government there are Treasury Auctions on the 23rd, 24th, and 26th this week.

Speaking of relief, this week you'll get relief from this blogger, the post will feature one lesson a day from William Green's book Richer, Wiser, Happier: How the World’s Greatest Investors Win in Markets and Life

Lesson 1 Keep It Simple:

"Let's make it simple. Really simple.” - Joel Greenblatt

Simplicity is key to successful investing. Focus on a few key factors that are likely to drive a specific business, and don't get bogged down in complexity. Apply a similar mindset to life by focusing on your top priorities and not getting distracted.

Daily Economic Update: December 20, 2024

PCE inflation day is here.

As everyone still processes and debates the last FOMC decision and Blackstone's latest holiday video, it feels like yesterday's data got a little lost in the shuffle, so a quick recap:  

• BOJ held their policy rate at 0.25% with limited information regarding the shunto (spring wage increases), the Yen and tariffs as reasons to hold off hiking now.
  
  
• BoE held at 4.75% in a 6-3 vote (3 in favor of cuts) as they struggling with stubborn inflation, strong wages, but weakening employment picture.  They're still likely to gradually cut in 2025.
  
  
• In U.S. data, the third read of 3Q GDP was super solid, jobless claims showed you still can't get fired and homes are super expensive but still selling.

Bitcoin fell back below 100k, the Dow snapped it's 10-day losing streak while the other indexes were down slightly.  Value stocks continue to be unloved as do large pockets of the international market....and Fartcoin continues to be loved, of course....it's still got a ways to go to match the 2024 returns of CHILLGUY token.

The potential government shutdown is the other major financial news item with Elon inserting himself into the continuing resolution discussion.

The yield curve steepened with the 10Y rising to 4.57% and the 2Y falling to 4.33%, perhaps overlooked is some/most of the recent runup in yields is actually driven by "real" rates.

On the day ahead PCE and leave for the remainder of the year and of course, try not to get bird flu.

XTOD: It’s been a yeehaw-esome year here at #Blackstone... but don’t take our word for it. Listen to our leaders sing about it in the 2024 $BX holiday video.  Watch the full story on YouTube: https://bit.ly/4gL0HrT

XTOD: NEW: Hailey Welch’s “Hawk Tuah” crypto project sued after the group was accused of “rug pulling” investors when the token tanked 95%.  Investors say the lawsuit “arises from the unlawful promotion and sale of the Hawk Tuah cryptocurrency memecoin…”  Named in the lawsuit are the ‘Tuah The Moon Foundation,’ OverHere Ltd and executive, Clinton So, along with the meme coin's promoter, Alex Larson Schultz, according to Newsweek.   "Many of the investors were first-time cryptocurrency participants drawn to the project through Welch's involvement,” the lawsuit says. 

“The rapid decline in the Token's value caused substantial damages to investors who relied on Welch's participation and the project's stated road map.”

XTOD: In 20 years of managing money I have never seen more dismal sentiment for:

1. International stocks

2. Value stocks

3. Valuations in general

Sentiment is never a timing indicator but it feels like the dam has finally broken and investors are all but giving up on this stuff

XTOD: It's accepted as received wisdom that the growth of private credit is due to higher bank capital requirements.   And that's partly true, but why do banks hate capital requirements? Because equity is scarce/expensive. That will be a binding constraint on private credit too.

XTOD: The NIL AGENTS are going to come out of the woodworks ! $HOW ME THE MONEY ! That is high level college athletics! Better produce or you’ll be kicked to the curb !

XTOD: “Love your wife more than you love your own life. Never be at odds, but be true. Prefer her company at home. Esteem & admire her publicly, advise her patiently. Pray together; if your marriage is like this, your perfection will rival the holiest of monks.”  —Saint John Chrysostom