Daily Economic Update: April 23, 2025

Markets Rally On Words…so join my Signal Chat?

Have you guys joined my Signal chat? It’s all the rage. Should’ve invited Scott Bessent to it, we could have been first to hear his comments about the need to de-escalate trade tensions, words that boosted stocks yesterday, sending the S&P up 2.5% to 5,287.

Too bad as Treasury Secretary he couldn’t talk the markets into a better 2 year Treasury auction.  Foreign demand looked weak as the auction tailed.  The 2Y yield rose 5bps to 3.83% and the 10Y moved slightly lower to 4.40%.  

And despite the continued yield differential offered in the U.S. over the rest of the world the Dollar is not benefiting at present.

While the Fedspeak slate was heavy, it’s fair to say that none of that can take the emphasis off of Trump’s broader calls for Powell’s removal.

Corporate earnings will continue to be a barometer for the tariff impact and we’ll see how flash PMI data looks today.

Why This Blog Swims In A Different Ocean

When writing this blog, I sometimes feel like a fish swimming in a blue ocean that seems to exist between traditional financial media titans like CNBC and Bloomberg and the myriad of pundits that live all over social media and the blogosphere.  This is by no means to say that there isn’t value in those aforementioned mediums, in fact I find solid value in several economic blogs, X posts, podcasts and traditional news flow on financial media platforms. 

Nevertheless to me, this blog needs to stand out from real-time, often prediction heavy, and sometimes overly serious nature of traditional media and financial punditry.  It’s staying in my swim lane that embraces uncertainty with humility, that attempts to filter out the noise to get to a deeper engagement with financial concepts and make them more accessible through humor and satire.

The Daily Madness Of Mr. Market

One of the challenges of following financial markets daily is that it is easy to abstract securities into simple pieces of paper whose values flash on screens, rather than remembering that equities represent ownership of underlying businesses and bonds are promises from underlying businesses.  A daily focus can easily tilt one towards speculation, losing sight of the underlying asset – the business in the case of equities, or the promise in the case of bonds.

To protect against this I often share the Parable of Mr. Market as paraphrased here:

 
“Ben Graham and Warren Buffett have talked about a charming, seductive manic-depressive gentleman named Mr. Market. Every day he shows up on your doorstep offering to do business with you. When he's manic, he'll offer to buy your stocks or sell you his for absurdly inflated prices. When he's depressed, his prices go ridiculously low. The mistake most people make is answering the door just because Mr. Market knocks. You don't have to let him in. Why should you buy just because he's excited? Why should you sell just because he's down in the dumps? A long-term investor shouldn't care about market prices.” Charles D. Ellis

While I’m not in favor of the detachment that often occurs between quotes on the screen and the fundamental nature of securities and their relationship to underlying businesses, I do think we can all learn deeper lessons from the concept of detachment. 

Attachments: The Hidden Threat To Investors

Sticking with wisdom from Jesuits (like Pope Francis), Jesuit priest, psychotherapist and author Anthony de Mello, offers excellent insight on the problems that stem from “attachments”. 

There are various attachments we can find ourselves enslaved to, things that we falsely believe we need to be happy or secure, but because of our emotional investment we continue to cling to these things even when they no longer serve us. 

In behavioral economics we see a similar behavior known as the sunk costs fallacy. We continue to invest time and money into certain investments simply because we’ve already invested a lot, even when it’s clear continuing this investment is irrational and likely to lead to further loss.

For many of these attachments, the world is a constant threat to what we’re holding onto or attached to, so we think the answer is that we can rearrange the world and we otherwise view things in terms of how they threaten what we’re attached to.  We operate out of fear, fear of loss. 

The trouble is this framing doesn’t leave us clear-sighted, it leaves us with clouded vision that impairs our otherwise sound judgment.  

We would be better suited to drop things, to drop illusions, drop errors and overall reduce negative leverage in our lives and investments.

Reality is what it is. What is the wisest action now?

When you’re not attached to your past decisions, your hope, fear, pride, and ego, you can invest in businesses and your career with greater clarity, flexibility and peace.

When Emotional Baggage Costs Real Money
It’s a reminder to review your behavior.

Am I emotionally attached to this investment?

If I had no prior investment in this today, would I still buy it?

What is the real value of this asset based on the present facts, not my hopes?

Is my decision based on rational analysis or emotion?

Losses are part of investing, remember you’re free to change your mind when new information arises.

Detachment: The Investor’s Superpower

In fact if you study investing legends like Munger, Buffett, Marks, Sleep, you will actually find they use “detachment” as an investing philosophy. These are investors who are able to detach themselves from the often bipolar nature of markets, being willing to change their minds and overall being heroically inactive.

Clarity over comfort. Reality over fantasy. Freedom over attachment.

XTODs:  

XTOD: The system is designed to keep you comfortable, not wealthy.  This financial autopsy of a 36-year-old couple earning $350k proves it….You feel rich. But you're just a well-paid tenant of your own life.  Big salary today, nice dining chairs tomorrow, and before you know it...

You need every penny of your paycheck just to maintain your lifestyle…That’s why you need ownership….

XTOD: Nothing says its "Main Street's Turn" like dishing out market moving information early to rich clients and employees at JPM private meetings

XTOD (super long thread by someone on Dollar Milkshake Theory): Let’s briefly review the Dollar Milkshake Theory by Brent Johnson. Since the almighty greenback is the Global Reserve Currency (GRC), it is widely for a variety of purposes, including: https://pbs.twimg.com/media/GpGNXYTa4AE1Bo6?format=jpg&name=900x900  To summarize the DMT, according to @SantiagoAuFund  , the global financial system can be imagined as one giant milkshake made up of liquidity, debt, and capital. The United States holds the largest straw, allowing it to "drink" capital from the rest of the world….Anyways, what’s going on with the DXY? Well, in the last 3 months, we’ve seen a continuation of dollar weakening that is due to the market’s reaction to the trade war that Trump kicked off on Liberation Day back in early April  (Less trade means less short-term demand for dollars). This relatively cheaper dollar will actually enforce the Milkshake- I know that sounds paradoxical, but it’s true. Here goes:....when the DXY is lower - meaning the U.S. dollar is relatively weaker compared to other major currencies - it becomes easier for foreign companies to service their dollar-denominated debts…Not only can they more easily pay off existing dollar liabilities, but they may also feel confident enough to take on even more dollar debt to fund growth, expansion, or speculation…This is where the feedback loop begins. As more companies around the world borrow in dollars during periods of dollar weakness, the overall size of the dollar debt system expands. While dollar bears point to rising U.S. debt or de-dollarization efforts as signs of the dollar’s decline, the reality is that the global hunger for dollar liquidity is still very much alive, and in many ways, it’s growing, not shrinking.

XTOD: For a company that sells a product with zero volatility, Blackstone sure is volatile

XTOD: Pretty tough to have a good swing outcome from a poor swing decision.

https://x.com/Codie_Sanchez/status/1914674185512575407

https://x.com/FriendlyBearSA/status/1914720657331638623

https://x.com/peruvian_bull/status/1914461509360738702

https://x.com/dailydirtnap/status/1914774811429245425

https://x.com/sentdefender/status/1914673747681804457

Daily Economic Update: April 22, 2025

And We’re Back…it was a “Major Loser”

Market Sell-Off headlines returned to screens to start the week with major indexes falling to start the week.  The S&P closed down more than 2%, at 5,158. 

It was another one of those equity sell-offs where your fixed income holdings failed to help you, as yields rose. The 10Y closing at 4.41% and the 2Y at 3.78%

I guess China warning other countries not to side with the U.S. in this trade war and blasting your central bank don’t engender confidence in the future.

If/When This Is All Over Who Will be “Mr. Too Late”

The setup is there to see history is going to judge as “Mr. Too Late”.  Will it be Trump viewed as acting too late to quell the likely deleterious effects of his tariff policy, or will it be Powell who was slow to act against inflation and risks being slow to respond to what might be coming for the U.S. economy?

I don’t know the answer, but I wrote yesterday about the need for filtering out noise and finding timeless principles. 

Timeless Wisdom From Pope Francis
With the passing of Pope Francis, I thought I would share some lessons that might be useful to everyone, irrespective of their faith. 

In late 2023 and early 2024, Pope Francis shared a series of lectures under the title Cycle of Catechesis on Vices and Virtues in which Francis walked through the seven deadly sins (vices) and the opposing seven holy virtues. 

There is something timeless in these lectures that can apply not just to personal moral growth, but to professional growth and even to investing.

Acedia (Sloth) vs. Fortitude:  while acedia is commonly thought of as “laziness”, it is also a desire to escape from reality. For investors the lesson is to face reality as it is, setting goals that can be reached and to endure and persevere even when results are not visible.

Pride vs. Humility: the proud man always wants to see his own merits recognized and despises others as inferior. “Of all the vices, pride is the great queen.”  When it comes to investing, overconfidence and delusions of omnipotence can lead to taking unwarranted risks.  The lesson is to cultivate humility, acknowledge uncertainty, seek the counsel of others and make prudent decisions.  “Humility is the gateway to all the virtues.”

Envy vs. Gratitude:  As legendary investor Charlie Munger said, “Envy is a really stupid sin because it’s the only one you could never possibly have any fun at. There’s a lot of pain and no fun.”  We all fall victim of comparing ourselves to others and at times the resultant feeling that we are more deserving of success than others.  When it comes to investing we see investors' comparison games turn into their own dissatisfaction, which can lead to impulsive and self-destructive decisions. The lesson is to embrace gratitude, to be thankful for what we have and to be comfortable with our own definition of success.

Wrath vs. Patience:  Wrathful people always see the other person as the problem and never admit their own defects. Our anger at some real or perceived injustice can cause us to stew on things in our mind and reject reason.  The worst part is that time magnifies wrath.  When it comes to investing, wrath can manifest in impulsiveness in decision making and losing sleep thinking about whatever market fluctuations have upset us.  While wrath is magnified with time, patience is our ally and antidote.  It’s starting from a place of being slow to anger, reacting to market fluctuation with composure, patiently adhering to long-term strategies and thoughtful decisions we made when our heads were clearer.  "Patience is the virtue of the journey, the virtue of those who are on the move, not those who sit in an armchair and wait for time to pass."

Gluttony vs. Temperance:  Gluttony is overconsumption in all forms, it’s about our relationship with material things: consuming not to live, but living to consume.  “We have abjured the name of men, to assume another: “consumers”. Today we speak like this in social life: consumers.”  When it comes to investing, we fall prey to being over-consumers of financial news and we also fall prey to insatiable appetites for risk taking. We can do better, we can temper our desire for more with discipline, to know when enough is enough, to seek sustainable returns, and respect risk limits.

Lust vs. Chastity:  On its face this topic doesn’t seem applicable to investing, but lust is about possession and seeking shortcuts to obtain what we want.  In investing lust results in behavior that is seen in short-term thinking, chasing profits, engaging in speculative investments and lapses in ethics. In the financial context chastity is translated to exercising self-control in a manner aligned with ethical standards and a genuine concern for others. Fostering trust, striving to contribute to the broader well-being.

Avarice (Greed) vs. Generosity: An excessive desire or attachment to things, especially money, and a pathological desire for accumulation and compulsive hoarding. “Some rich men are no longer free, they no longer even have the time to rest, they have to look over their shoulder because the accumulation of goods also demands their safekeeping.” Our possessions often possess us when we forget that we cannot take property with us when our time on this earth is up.  In investing the consequences of greed are obvious, the unrelenting selfish pursuit of profit setting aside the consequences on relationships both personal and broader.  We can counter greed with generosity.  Investment professionals can share their knowledge, putting client interest first and acting with transparency. 

To summarize:

1. Walk humbly before markets you cannot control.

2. Celebrate others' gains without comparing your worth.

3. Be steadfast in storms; impulse is the enemy of wisdom.

4. Act with courage when action is called for.

5. Let generosity, not greed, define your pursuit of wealth.

6. Feed your mind with wisdom, not noise.

7. Master desire; invest for what is true and lasting.

We need all the wisdom we can get to navigate today’s financial turbulence.  We’ll get some earnings today and see how the 2Y note auction goes.

XTODs:

XTOD: Even if you  buy into the arguments for being contrarian, you need a "march to your own drummer" mindset, a time horizon that you control and a strong stomach, to put it into practice. https://bit.ly/3GdfVsv

XTOD: Ricardo offered a clean logic: do what you're good at, and let the market take care of the rest.  But Hamilton saw through it. He didn't argue.  He dismantled it, quietly, with precision. 

He understood that if left to Ricardo’s compass, America would become the world’s farm, 

a colony of commodities dressed as a republic. Hamilton looked out and saw Arrakis. 

Trump, perhaps, too.

XTOD: Blackstone is now down 40% from its November highs, and is right back at its post-Liberation Day lows.  Remember, this is probably the best run manager of private assets in the world, so just consider how your run of the mill PE or VC shop is looking right now.

XTOD: The reason France (and other countries) care, is bc despite all the arguments to the contrary, they need access to USD liquidity provided by the Fed in a Eurodollar crisis. And a new Trump loyal Fed Chair would be less likely to provide it.

XTOD: Kids are surrounded by social forces they don’t know how to name. The civic literacy of the future will involve showing them, at the earliest possible age, the technological, political, and social forces shaping our lives—and helping them develop real agency to contend with them.

https://x.com/AswathDamodaran/status/1914152172867969171

https://x.com/hendry_hugh/status/1913669843527557594

https://x.com/TheStalwart/status/1914398149323726864

https://x.com/SantiagoAuFund/status/1914456261699280909

https://x.com/lukeburgis/status/1914358694441312729

Daily Economic Update: April 21, 2025

Less Volatile…For Now

At least we finished last week with less volatility, but it remains unclear to me as to how much progress is being made on de-escalating the tariff induced trade war. Sometimes the headlines seem to veer towards negotiation progress with China and at other times it feels like both the U.S. and China are digging in for a protracted fight.  And let’s face it, it’s really all about China.

We start the trading week with the S&P 500 coming off another losing week ending at 5,282.  While the consensus seems to be that there has been no concerted foreign selling of Treasuries and the bar for Fed hikes sounds fairly high, the path for rates remains unclear. We enter this week with the 10Y at 4.33% and the 2Y at 3.80%.

Powell Rangers’ Arch Enemy

The Powell Rangers are constantly up against economic enemies, but no enemy may be bigger than Trump. While it’s nothing new, Trump has renewed efforts to potentially fire Fed Chair Powell. 

While most legal scholars believe the President cannot simply fire a Fed Chair without cause, some argue Powell’s prior decisions such as holding rates low during the inflation surge could be construed as “cause.”

Of course this raises risk to the Fed’s independence, presumably something investors find a favorable characteristic of the U.S. monetary system. 

I’ve provided my favorite definition on Fed independence, "it's the ability to raise interest rates when the Treasury doesn't want you to. And the Treasury almost never wants you to, because of the cost of the debt".   

Whether or not I believe Powell has done a good job or not, I’m a believer in the importance of institutional credibility as a necessary ingredient to fostering the trust necessary for a stable business environment.

Speaking of Trust…

Which Voices Should You Trust?

I think I’ve seen about a million well researched pieces covering all things macro and while most are exceptional pieces, I’m not sure what anyone is supposed to do with all the research that banks and other strategists are putting out. Are investors just supposed to pick their favorite narrative?  Are they supposed to research the researchers and read the views of those that seem to have the best track record?

A somewhat frequent reminder that providing you with a stream of data and opinion is a business, a business predicated on a demand by investors (including speculators) to be told by someone else what to do, at least according to Ben Graham. 

Rather than try to discern which voices to trust, you can develop a better filter and try to discern what to tune out, how to stay out of the noise.  So what should be in that filter?

• Consideration of the motivations and incentives - do they have something to sell? Are they monetizing your views?  We all know the primary motivation of many commentators is to drive demand, not necessarily to provide the most accurate insights.

• Wariness of those voices offering certainty about the future - the notion that the financial future is not predictable is just too unpleasant to be given any room at all in the Wall Streeter's consciousness and rarely do you get the most difficult of all answers which is simply “I don’t know.”

• A recognition of the limitations of forecasting - as Jason Zweig says, “investing on the basis of projection is a fool's errand; even the forecasts of the so-called experts are less reliable than the flip of a coin."  Place less emphasis on predictions and more on understanding risk and reward. Uncertainty is a much more accurate representation of the world than that of any prediction.

• An ability to distinguish between investing and speculating - as Robert Hagstrom says, “An investor thinks foremost of the asset first then the price of the asset afterwards...“A speculator thinks foremost of price first and then the asset later or not at all.”  So much of financial debate is just people with different time horizons.  Find voices aligned with your own time horizon.

• Identifying blind parroting with no critical thinking - charlatans use vague, simple messages often wrapped in a well crafted veneer to make their messages alluring.  If you can’t find or understand the reasoning behind their advice it’s probably not worth following.

After some solid filtering hopefully you are left with finding the voices that can share timeless principles.

Principles like…

Sticking To A Sound Process

Stay the course or react to a changing opportunity set?  This is where the often glossed over step of forming capital market expectations comes into the picture.  Forecasting is extremely difficult but there are numerous techniques that can be employed to develop expected returns for equities and bonds, including looking at historical returns, volatilities and correlations.

If this is a topic you’re interested in, NYU Professor,  Aswath Damodaran provides his estimates on his website and shares them on X.  His 2025 estimates of the equity risk premium have risen some of late, but remain below the long-term average.

Even if you feel confident in estimates investors might still be confronted with a question as to what to do about it.

Do you try to tactically tilt your portfolio or ride out your strategic allocation? Whatever the answer it should be grounded in objectives, constraints and risk tolerance.

Balancing risk without overreacting to noise.  Repeatable disciplines beat panic.

The Week Ahead

Tariff headlines likely to overwhelm economic data releases. Still, durable goods and Treasury auctions could stir some market reaction. LEI’s will lead the soft data and Fedspeak is well Fedspeak.

Monday: Leading indicators

Tuesday: Richmond Fed and Fedspeak, 2Y Note

Wednesday: Flash PMIs, New Home Sales, 5Y Note

Thursday: Durable Goods, Existing Home Sales, Jobless Claims, 7Y Note

Friday: UofM

XTODs:

XTOD: Mom: How did we get so rich?   Your dad turned 33 just as Ben Bernanke introduced ZIRP and then all the shitco software companies in his PE portfolio generated 4x MoM returns https://pbs.twimg.com/media/Go5v18MWcAA9kK8?format=jpg&name=900x900

XTOD: Scientists claim a new memory chip that’s 10,000× faster than today’s tech, with near-zero power and 100-year retention. If true, this isn’t just a tech breakthrough—it’s a global power play. Thread:

XTOD: Yale is rumored to be selling a $6B PE portfolio. As of June 2024, the endowment was $41.4B, so it’s roughly 15% of the endowment for sale. The last time I can find a disclosure of the portfolio allocation, LBOs were 17.5% and illiquids were 45% with a target of 50%.

XTOD: "Fed cut 50bps in Sept when stock market at record high, Atlanta Fed was forecasting +3% US GDP growth; Fed now determined not to cut rates after 20% market plunge, Atlanta Fed forecasting -3% GDP growth" -  Bank of America

XTOD: Marcus Freeman said, "You waste time daydreaming about an uncertain future. Who cares?"  "The future is uncertain. So focus on being the best version of you today." 

No one wins tomorrow. They win today - one rep, one habit at a time.

https://x.com/amendandpretend/status/1913589867704893862

https://x.com/wmhuo168/status/1913327200444555637

https://x.com/modestproposal1/status/1913574996858782181

https://x.com/zerohedge/status/1913632365303271505

https://x.com/coachajkings/status/1913728818264641552

Daily Economic Update: April 17, 2025

Definitely A Loser

So much for decent tariff vibes in the stock market.  Tech dragged down the major indexes with the Nasdaq falling over 3% and the S&P 500 down over 2%, closing at 5,276.  The catalyst for the decline was chip export controls which caused Nvidia to take a $5.5 billion dollar charge. 

At least bonds were well behaved, with the 10Y yield falling a few bps to 4.28%, the 2Y yield also fell, closing at 3.78%

Bonds will close at 2pm ET today and all markets will be closed in observance of Good Friday tomorrow.

Powell Rangers Can’t Find The Right Megazord

Powell will play wait and see with the rest of us. He acknowledges there may come a time when growth is falling and both unemployment and inflation are rising.  If we reach that time of tension for the dual mandate the Fed will have to make decisions as to which gap they can best fill with their policy tools. With lowering inflation unlikely as tariffs take hold, the Fed doesn’t seem poised to cut rates anytime soon.

For the time being it seems the Powell Rangers aren’t going to be able to morph into the rescuers of the stock market….at least not yet.

Everybody Gets A Car

In data, retail sales rose more than anticipated as consumers looked to take advantage of current prices before tariffs kicked in, with autos being a beneficiary.  Hope they enjoy the ride.

But For How Long No One Knows

Of course we’ve all seen data on auto loan delinquencies and repossession rates, so we’ll see how this mini auto binge ends.

Radical Uncertainty

With heightened uncertainty around tariffs on rare earth metals, pharmaceuticals, and other areas, the data seems to continue to take a back seat to “sentiment”.  Or said in the terms that economists would reference that the hard data and soft data continue to diverge with the impact of tariffs evident in soft data but not yet glaring in the hard data. 

As Keynes well knew, there are times where there is little to know scientific basis for calculating a probability, this is one of them.  Sometimes you just have to embrace the fact that the economy is a complex and adaptive system.  This is a time where the messiness, unpredictability and deeply human nature of the economy are at the forefront of economics as a social science. 

The risk is falling for overly simplistic and purely quantitative approaches to today’s market challenges. 

Combat Uncertainty With Fortitude

Risk refers to all outcomes that can be insured against, uncertainty to those which cannot. Mainstream economics does not recognize this distinction. They believe individuals can accurately calculate the odds of any action turning out one way or the other.  This is because they treat the economy like a closed system.

Fortitude is the courage to face danger and to stick things out under pain. As Nassim Taleb says it’s not delayed gratification that creates an advantage for the investor, it’s the courage to live without promises.

“Under uncertainty, you must consider taking what you can now, since the person offering you two dollars in one year versus one today might be bankrupt."  So what this idea is about isn't delayed gratification, but the ability to operate without external gratification - or rather, with random gratification.  Have the fortitude to live without promises.” - Taleb

Markets can't promise clarity. Neither can policymakers. But maybe that's the point, fortitude isn't about knowing, it's about showing up anyway.  As C.S. Lewis said “courage is not simply one of the virtues, but the form of every virtue at its testing point.”

XTOD’s:

XTOD: Fyre Festival 2 has been "postponed," according to the organizers  But don't worry, your deposit refund is in the mail

XTOD: Q: Is there a Fed put for the stock market? Powell: "I'm going to say no, with an explanation..."

XTOD: Bret Taylor quit as Salesforce’s co-CEO because AI changed everything he knew about success.   Now he’s building that future himself. Bret explains exactly why traditional companies aren’t prepared for AI, why engineers can beat seasoned CEOs, and the surprising insight he gained rewriting Google Maps from scratch.  

Listen—your career depends on it.

XTOD: If you're on the wrong train, get off https://pbs.twimg.com/media/GomBN1SWAAA6cze?format=jpg&name=900x900

https://x.com/zerohedge/status/1912609531453939885

https://x.com/NickTimiraos/status/1912566217887666304

https://x.com/ShaneAParrish/status/1912505473208660019

https://x.com/charlesmiller_7/status/1912201593581170793