Daily Economic Update: October 31, 2023

 

The last day of posting quotes from the TV series 'The Wire'.  The inspiration for using these title quotes was stated here.  That post as a whole is probably worth a second read... unfortunately for Orioles fans their playoff run was quite short.  Equities have not been spooked to start Halloween following up on solid gains yesterday.  Even as equities rose, yields were rising yesterday.  Also yesterday, we learned Stanley Druckenmiller has a negative opinion of Janet Yellen and that Janet Yellen will be issuing less Treasuries in the 4Q than the market expected, but still $776 billion.

Today yields start the day lower by 3-5bps with the 2Y ~5.02% and 10Y ~4.82%, spurred in part by lower than anticipated treasury supply, the BOJ's tweak to it's yield curve control being implemented in a 'dovish' way, redefining 1% as a "loose cap" on the 10Y yield.  As expected, BOJ held short term rates as -0.1% as they still aren't confident in inflation sustainably hitting 2% there.  USD-JPY over 150 at 150.666.  EU area inflation came in below estimates this morning at 2.9% yoy.

On the day ahead we get employment cost index data, some housing data and some consumer confidence data.

The month started with strikes front and center, worker strikes that is, and while those seem to be slowly resolving, with UAW closing in on deals, the month concludes with concerns about other strikes, the kind made with missiles and artillery, unfortunately.

On the bright side, unless today is really bad, at least this October did not have a bank panic or stock market crash that rivaled Black Monday or Black Thursday.

If you're not going as Taylor Swift or Travis Kelce for Halloween, you can go as: (via Bloomberg Opinion's Jessica Karl)

XTOD: Have you received an official looking letter in the mail, supposedly from the Federal Reserve Bank of New York – or even the Chairman of the Federal Reserve – saying you’re owed a massive amount of money and all you have to do is call a number to give some vital information and pay a transfer fee before they release it to you? DO NOT call that number! It’s a scam!  If you think your personal information has been compromised, contact your bank and local law enforcement immediately! 

XTOD: Yeah, the Fed takes money through inflation. It never gives it away. Common sense people.

XTOD: Stan Druckenmiller on bonds:  “I am currently short bonds and long the front end”

XTOD: This Gavin Newsom video is something.   Dude thinks he's on the Globetrotters.   Keeps trying to spin a basketball on his finger and then commits an egregious offensive foul on a little Chinese kid and then wrestles him after he knocked him over.

XTOD: "If the SPX closes below 4288 on Tuesday, it will be its third consecutive monthly decline. It hasn’t been down four straight months since 2011 and hasn’t been down four straight months ending in November since 1946:" BTIG's Jonathan Krinsky

XTOD: ”Defeat is a state of mind; No one is defeated until defeat has been accepted as a reality.” -Bruce Lee

XTOD: Charles Schwab is undergoing mass layoffs today per multiple employees - some laid off employees stating they will be on payroll until January 5th before being terminated.   Likely to affect thousands of employees.

XTOD: Given the gap between objective and subjective perceptions of where the US economy stands, a serious question: Can social media amplify only bad news?  Any example of good news amplification?

XTOD: Every $1 you cut IRS funding will lose about $2 of revenue.....So that means this bill would add about $30 billion to the deficit.

Daily Economic Update: October 30, 2023

FOMC week is upon us, with the market pricing in effectively no chance that the Fed adjust policy rates from their current target range for the federal funds rate at 5-1/4 to 5-1/2 percent when they make their announcement on Wednesday.  Of course markets will again look for clues as to the future path of policy in both the statement and Powell's press conference, but the consensus view seems to be that we are likely at the peak in policy rates.  

As if geopolitical risk isn't enough, there's going to be plenty of "event risk" on the week with Bank of Japan, FOMC and Bank of England as well as the Jobs Report on Friday (where impact of strikes will be a factor). Somewhat under the radar is the Treasury's Quarterly Refunding Announcement with borrowing estimates released this afternoon and an announcement on Wednesday of its refunding plans, both of which are highly anticipated.

To start the day yields are up ~3bps with the 2Y at 5.04% and 10Y at 4.87%.  Mike Pence drops out of the presidential race already.  The similarity named, Mike Prince had his Presidential fate decided in the finale of the tv series Billions (I won’t spoil it).

On the week ahead:

Mon: Dallas Fed Index

Tue: Bank of Japan, Employment Cost Index, Consumer Confidence

Wed: FOMC Day, ADP Employment, JOLTS, ISM Manufacturing

Thur: Bank of England, Jobless claims, Apple Earnings

Fri: Jobs Day, ISM Services

XTOD: Pretty amazing that there's only a 19% chance of another hike over the next two meetings when Powells favorite inflation number rebounded to 5% annualized.  

XTOD: The Fed still should not think that its job of bringing inflation down is done. In fact, there is a real risk that it drifts up to 3.5% or higher.  But with long rates and other financial conditions doing much of the work for them no need to be planning any short-term rate hikes.

XTOD: D(t) =  (1+r)D(t-1)/(1+g) + d
D is the ratio of debt to GDP
t indexes time
r is the interest rate
g is the growth rate
d is the ratio of the primary deficit to GDP
When r>g this is an explosive difference equation.
 Currently we are in this case.  This is unsustainable

Possibility 1. Congress reverses the sign of d by cutting spending or raising taxes. 

Possibility 2. Since r and g in this equation are both nominal: inflation can push nominal GDP growth above r thus causing the debt to GDP ratio to fall. This is a ‘stealth tax’.  
Possibility 3. Rationing and price controls as we had in WWII.  Prices are held down artificially and goods are rationed using coupons for food and fuel. There would be a substantial black market for those who can afford it.

XTOD: The only purpose of saving is to fund productive investment. The problem is that we live in a highly unequal global economy that systemically forces up the ex ante savings of the rich and of surplus countries seeking to externalize their own weak domestic demand.....The way for countries like the US to bring debt under control is not through austerity. It is through a reduction in income inequality and a refusal to absorb the excess savings of surplus economies. Otherwise austerity just means unemployment

XTOD: Personally this seems lost on many but I see an obvious connection between oil’s restraint so far especially in phys (Iran dumping everything they can for USD asap, just as Russia crushed wheat this past year), and crypto strength as Hamas and pals need money. It’s all connected.

XTOD: Imagine being a “long term investor” that didn’t see this coming.  If there is a ever a chance for a limit down scenario to occur, Monday is the day.

XTOD: China is massively expanding its military and frequently the technology being used was stolen from the US.

XTOD: JUST IN: New South Park episode blasts Disney and says all their movies “suck now” and specifically blames Lucasfilm president Kathleen Kennedy.   Remarkable.“Joining the Panderverse” drops today and all of the main characters have been replaced by minority women, an obvious mockery of the woke film industry.  Cartman specifically blames Kathleen Kennedy for “why the Disney movies all suck now.”  Kennedy was responsible for overseeing the Star Wars films.

XTOD: “Old George Orwell got it backward. Big Brother isn’t watching. He’s singing and dancing. He’s pulling rabbits out of a hat. Big Brother’s busy holding your attention every moment you’re awake. He’s making sure you’re always distracted. He’s making sure you’re fully absorbed. He’s making sure your imagination withers. Until it’s as useful as your appendix. He’s making sure your attention is always filled. And this being fed, it’s worse than being watched. With the world always filling you, no one has to worry about what’s in your mind. With everyone’s imagination atrophied, no one will ever be a threat to the world.”

— Chuck Palahniuk

XTOD: Don't let circumstances dictate your life. Don’t let circumstances shape whether you are working out, doing the necessary work, doing personal growth work, or anything else that is PERTINENT to YOU. Bottom line is that you have DREAMS and we can’t let circumstances deter or distract us from where we are going, what we are doing, and what we are about to create.  Can you feel me?

XTOD: So goes the leader, so goes the culture. So goes the culture, so goes the company.

XTOD: Broncos celebrate win vs Chiefs with Taylor Swift music 👀

Daily Economic Update: October 27, 2023

 

Yesterday was another tough day for equities despite GDP exceeding expectations at an annualized 4.9% (seems like Atlanta Fed GDPNow model wasn't so bad after all) and yields falling 8+ basis points with a solid 7Y auction.   Durable Goods orders beat expectations and were the best in 3 years and jobless claims increased above 200K.  AMZN beat on top line and profit after the bell which is providing relief to equities, as equity futures are positive this morning. U.S. yields up slightly to start the day with the 2Y at 5.05% and the 10Y at 4.86%.

Biden doesn't believe in the Phillips Curve: “I never believed we would need a recession to bring inflation down – and today we saw again that the American economy continues to grow even as inflation has come down" and  “The unemployment rate has been below 4% for 20 months in a row, real wages are up over the last year, and median wealth for American families has grown by a record amount, accounting for inflation," 

The ECB  left the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 4.50%, 4.75% and 4.00% respectively and will remain 'data dependent'.  ECB also touched on the need for fiscal authorities to reign in energy  subsidies and to reform debt.

On the day ahead it's PCE, personal income and spending data and UofM survey about gas prices (kind of).   Investors will continue to weigh heading into another weekend with unresolved and heightened geopolitical risk, especially as the U.S. is countering attacks against our military resources in the region.

XTOD: Unemployment rate: low 

GDP growth: high 

Household net worth: never been higher 

Inflation: coming down 

Sentiment: worst economy ever 

My replies: the data is fake

XTOD:  The qualifying yearly income for a median-priced house in 2020 was $49,680. Now it’s more than $107,000, according to the NAR

XTOD: Both of these are true: 1) She's right, a 9-5 plus commute sucks and drains your energy. We all know it.  2) If it does suck, cultivate equanimity and work on escaping it.

XTOD: Janet Yellen is a delusional national embarrassment.

XTOD: JPMorgan CEO Jamie Dimon and his family intend to sell 1 million of the lender’s shares for financial diversification and tax-planning purposes

XTOD: "Using your money to buy time and options has a lifestyle benefit few luxury goods can compete it."

XTOD: Blackstone investment strategist Byron Wien, known as a friendly optimist in an investment world often driven by fear and greed, has died at 90

XTOD: In honor of Byron Wien, essential lessons from his long life. RIP. https://x.com/EdBorgato/status/1717615113308708995?s=20

XTOD: Before you work harder on something, spend time identifying the point of leverage in the situation.   Working harder on the wrong thing won't move you forward. 

This can be somewhat counterintuitive for those of us who have been taught to work harder when you're not getting the results you want.  

Working smarter is the most valuable form of working harder.

Daily Economic Update: October 26, 2023

 

A decent move lower for equities especially the Nasdaq as Google/Alphabet shares stumbled and as yields moved solidly higher yesterday, with the 10Y moving back towards 5%.  Weakness in equities continues as META's beat did little to improve sentiment and this morning UPS missed while citing lower package volume.  USD-JPY is trading above 150 as we near next week's BoJ decision.  In somewhat positive news, the UAW appears to have reached a deal to end their strike on Ford and, as Bloomberg Opinion stated, the Republicans Pick Some Guy to be Speaker

This morning the 2Y is 5.12%  and the 10Y is 4.95% as the focus shifts to data and the ECB.  The ECB is expected to be on hold just as the BoC was yesterday.  In US Data we get a first look at 3Q GDP along with Durable Goods and Jobless Claims.  We'll also get the always interesting 7Y auction which follows a weak 5Y auction yesterday that tailed over 2bps.  AMZN earnings after the bell today.

XTOD: The biggest lie they tell you as a kid is that Santa Claus isn't real. 

It turns out that there IS one guy who air-delivers presents to every kid in the world, maintains an army of low-paid workers in freezing conditions, and knows everything you've done over the past year

XTOD: Regional bank update  Regional banks in many cases at 1/5/10-year lows with price/book ratios at 60% plus or minus and yields at 7% plus or minus. Current situation resembles the axiom of “catching a falling knife.” It hurts if done too early. I’m waiting a few more days but they are great long term holds. 

XTOD: 85% chance Newsom is the D nominee.

XTOD: Bloomberg on “Bond Market’s ‘Vicious Cycle’ Risk Puts Spotlight on Fed’s QT.”

Put another way, the bond market’s once reliable buyer, with seemingly limitless buying appetite/ability and no price sensitivity, has now been forced by inflation and other excesses into becoming the market’s reliable seller — this at a time when there is concern about other buyers, as well as about the magnitude of forthcoming debt issuance.

XTOD: Jeremy Grantham: "In the U.S., the three near perfect markets with crazy investor behavior and 2.5+ sigma overvaluation have always been followed by big market declines of 50%. The current superbubble features a dangerous mix of cross-asset overvaluation."

XTOD: It’s always a good sign when something like #volatilitylaundering is finally starting to be understood and the launderer’s response is “ok, fine, instead let’s sell it to retail!” https://www.bloomberg.com/news/articles/2023-10-25/private-equity-s-kkr-wants-part-of-retirement-savings-with-fidelity-schwab

XTOD: This generation is completely doomed. They can't even hold a 9-5 job without having a mental breakdown.

Daily Economic Update: October 25, 2023

 A little stability in yields, at least relative to the moves of the last week.  Currently the 10Y is 4.86% and the 2Y is 5.08%.  Yesterday's 2Y note auction was largely uneventful and Bitcoin continues to rise on demand hopes. Just when you thought UAW was falling out of the news they waited for GM earnings announcement and then announced strikes on one of their most profitable factories.  It appears Mike Johnson will be the Speaker of the House, but we've seen how that goes. 

On the day ahead markets continue to speculate around the BoJ and their YCC band as their 10Y JGB hit a new high.  We'll get AMZN and META earnings after the bell as MSFT and GOOG shares moved opposite directions as markets weighed the growth of each companies cloud divisions following their releases yesterday.  In data it's new Home Sales and Bank of Canada decision. We'll also get the 5Y note auction

XTOD: "I'm always amazed that the market seems to think there's going to be a hard pivot here – I think it's going to be higher for longer."  @TDCowen   President Jeffrey Solomon offers his outlook for the Fed, predicting that bond yields are now "closer to the top than not."

XTOD: Jamie Dimon said the fact that central banks got financial forecasting “100% dead wrong” about 18 months ago should prompt some humility about the outlook for next year. 

He should know since JPMorgan Chase forecasts weren't exactly, you know, accurate.

XTOD: Dozens Of States Sue Meta For Sparking Youth Mental Health Crisis

XTOD: "The fallacy of ‘Term Premium’ | Is ‘Term Premium’ the lump under the rug where undesired inflation expectations are hidden?" |  

XTOD: So many people asked us about the rampant train robberies taking place in Arizona and New Mexico that we wrote an article about it.   If you're moving cargo by rail, you need to understand this new risk to your supply chain. https://www.flexport.com/blog/the-great-train-robbery-everything-we-know-so-far/

XTOD: Regional banks taking out their post SVB lows.

XTOD: New from me: Cruise withheld key footage of its car dragging an injured pedestrian 20 feet while executing a "pullover maneuver" when showing footage to DMV investigators. When the DMV found out, it suspended their license to operate driverless cars.

XTOD: NEW: The off-duty pilot who attempted to cut off a plane's engines mid-flight told an officer it was his first time using psychedelic mushrooms, per the federal complaint 

"I'm admitting to what I did. I'm not fighting any charges"

XTOD: What we consider defining moments, like promotions or a new house, matter less to life satisfaction than the accumulation of tiny moments that didn't seem to matter at the time. In the end, everyday moments matter more than big prizes. Tiny delights over big bright lights.

Daily Economic Update: October 24, 2023

 

Volatility in bonds continues with a big intraday move in yields yesterday, as the 10Y moved off the 5% level and fell 15bps. The move was largely attributed to be market reaction to tweets by Bill Ackman and a lesser extent Bill Gross (see XTODs below).  Today yields are moving slightly higher with the 10Y up to 4.86% and the 2Y at 5.08%.  In data it will be S&P PMI's (EU PMI's were weak this morning) and Richmond Fed Manufacturing.  The Treasury will auction 2Y notes and in equities, the start of big tech earnings today with MSFT and GOOG after the close will be the highlight.  

XTOD: We covered our bond short. There is too much risk in the world to remain short bonds at current long-term rates.  The economy is slowing faster than recent data suggests.

XTOD: Bill Ackman, once a vocal proponent for higher rates and shorting Treasuries, just covered his profitable bearish bet and stated that “the economy is slowing faster than the data suggests”.  Hence this Treasury turnaround.

XTOD: This is incredible: At 9:45 AM ET today, Bill Ackman posted that he covered his bond shorts. 4 hours later, the 10-year note yield is down 15 basis points, on track for its biggest daily drop in 2 weeks. This comes nearly 2 months after he publicly took a large bond short position. Ackman said there is too much risk in the world to continue shorting bonds. He also said that the economy is slowing faster than recent data suggests. Bond markets continue to make history.

XTOD: Something's going on with NFL passing offenses.  - Lowest passing TD% since 1993 - Most sacks per game since 1997 - Fewest yards per reception .... EVER???  All 33 NFL seasons with the fewest yards per reception in the history of the sport happened after Taylor Swift was born.  These are just the facts okay.

XTOD: We made it through Black Monday

XTOD: “Everyone loves an early inflation. The effects at the beginning of inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the latter effects, but the latter effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and an ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.”  -Jens Parson

XTOD: Parents of young athletes: You're being sold a bill of goods…  Early specialization…It's a fear campaign…Its a billion dollar dumpster fire saying: To become a great athlete you must: Specialize early…Train year-round…Compete often…If you don’t your child is going to miss out and fall behind  ..And for the most part:  It’s complete bullshit…What it really is: Early Development of sport-specific skills. Early success in sport..Little to no development of fundamental movement skills ...Poor performances later in the sport..Higher chance of injury..Higher Chance of Burnout from Sport - Early start…Early finish!  It's a complete lack of understanding of how humans develop…

Daily Economic Update: October 23, 2023

 

This week starts with the 10Y yield already up ~9bps and back over 5% at 5.01%  and the 2Y climbing around 5bps to 5.12%. The catalyst cited is the unwinding of "flight to quality" positions as we headed into the weekend with unknowns in the war between Israel and Hamas.  The last time yields were above 5% "the number one song on the Billboard Hot 100 chart was "Crank That (Soulja Boy)" by Soulja Boy Tell'em (according to ChatGPT at least, I didn't verify the result). This song held the top spot for several weeks in 2007.. .  

Equities are currently looking weaker ahead of tech earnings. I'm uncertain as to whether Chevron buying Hess will increase the value of Hess toys collections.

Markets continue to wrestle with "higher for longer" as solid economic data has led Fed officials to talk up the prospect of rates not returning to lower levels for some time.  The curve has continued to un-invert via a bear steepening as opposed to the consensus view of earlier in the year that the dis-inversion would come from lower yields in the front end of the yield curve, via Fed rate cuts.  The "there is no way 10Y yields will get over 3% crowd, turned into the there is no way the 10Y yield will get over 4% crowd and is now the there is no way rates will stay over 5% crowd".  On the fringes you continue to hear some talk from the fiscal dominance camp or the treasury market instability camp around how the Fed will be forced into Yield Curve Control, but overall, the talk is about term premiums and the lags of monetary policy as the areas for markets to focus.  

Talks of strikes have fallen out of the media cycle but UAW strike is still out there and there's still no Speaker of the House.  Sunday's 60 Minutes reminding viewers that Chinese espionage is a threat to American's way of life.

The week ahead features GDP, PCE, Bank of Canada, ECB.  The Fed is in a blackout period as we approach the November 1 FOMC decision (markets are pricing in almost certainty of the Fed holding policy rates):

Today: No economic releases

Tuesday: S&P PMI's, 2Y Note Auction

Wed: New Home sales, 5Y Note Auction, Bank of Canada

Thur: GDP (3Q Advanced), Durable Goods, Jobless Claims, European Central Bank, 7Y Note Acution

Friday: PCE, UofM asking about gas prices

XTOD: Real Life Dune https://x.com/netcapgirl/status/1715747743212130398?s=20

XTOD: Workers are the unhappiest they've been in 3 years—and it can cost the global economy $8.8 trillion https://www.cnbc.com/2023/10/02/-employee-happiness-has-hit-a-3-year-low-new-research-shows.html?utm_content=Main&utm_medium=Social&utm_source=twitter%7Cmain

XTOD: Fed's latest Financial Stability Report is out. I thought it was less interesting than usual, in part because there were few special "box" sections. But there are still some helpful things:  Fed staff finds term premium still historically low (yields have risen a bit since Sept).  Common measures of Treasury market liquidity are still not good, Median interest coverage ratios for firms remain within historical ranges, in part due to much of the debt taken out a low rates. Some deterioration is being seen in the lowest rated debt. Default rates on lev loans are rising but still historically low.  House prices are expensive on a price to rent ratio. Bad for home buyers, but it is also boosting wealth of homeowners. Almost ALL homeowners have some equity. Does not look like there will distress there.  Household credit quality overall remains within historical ranges - auto loan and credit card defaults rose but are not high.

XTOD: What, precisely, can "monetary policy" do in the face of commodity shocks, transport and production shocks, and real-resource strains?

XTOD: Ah it's a Zoltan weekend I see. 1. There is a yield curve shape that would require a Fed response - current shape is not this shape by 100's of bp.  2. Before the Fed bought to constrain a 300bp positive 2's 10's slope they would change regulations on SLR to encourage private sector bank curve riding again  3. Long term treasury buying (QE not YCC) in a wartime environment is certainly possible.  What trade would one do today?  Buy gold?  Sure it's already up.  Sell USD. Probably but for what?

XTOD: I criticize parts of the Fed all the time and will continue to do so. It’s a civic duty!  With one huge exception.  @FedFRASER  is the most fabulous collection of documents and professionals there is, I will brook no dissenting views.

XTOD: Your time is your most valuable asset.  Leverage it wisely by focusing on what truly matters.  #TimeIsLeverage

XTOD: Thank you for the kind words. I hope people listen to the speech.  https://twitter.com/i/status/1715736101627834414

XTOD: Complexity is job security for many advisers.

XTOD: Connecting everything tightly together has downsides

Daily Economic Update: October 20, 2023

It hit 5 already, you could leave early... jobless claims once again proved you can't get fired (not career advice - you definitely can get fired - and probably for reading this while you should be working) and anyway I mean 5 handle on the 10Y.   The 10Y did cross 5% in the evening yesterday, but is now back down 4-5bps to 4.95%.   The 2Y is also lower, yielding ~5.16%.   Reuters reports that "The yield on the benchmark 10-year Treasury...has risen by 30 basis points this week - marking its biggest weekly rise since April 2022." (JPM research calls the WTD change 35.9bp...guess it matters what you call the open and close).  The next bond market watch is for the un-inversion of the 2s10s curve.

The prospect additional spending associated with Biden's Presidential address may have helped pushed yields higher last evening.  The USD:JPY also hit 150 last evening, despite Japanese inflation coming in at its lowest level in a year at 3%

There is no economic data today.

 

If you missed it yesterday, Powell was viewed as "dovish".  Powell gave a nod to 'long and variable lags' and the idea that the bond market is doing tightening for them, a premise that seems somewhat shaky or at least predicated on the Fed being a credible actor.  In his opening remarks Powell said the following:

• " inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal"
• "the labor market is gradually cooling"
• "the record suggests that a sustainable return to our 2 percent inflation goal is likely to require a period of below-trend growth and some further softening in labor market conditions"
• "The stance of policy is restrictive, meaning that tight policy is putting downward pressure on economic activity and inflation. Given the fast pace of the tightening, there may still be meaningful tightening in the pipeline" 
• "Financial conditions have tightened significantly in recent months, and longer-term bond yields have been an important driving factor in this tightening. We remain attentive to these developments because persistent changes in financial conditions can have implications for the path of monetary policy." 

In the Q&A he hit on some of the following - along with my commentary in red:

• economy may be less interest rate sensitive - this one bothers me because those long-dated fixed rate liabilities are someone else's assets, hasn't Powell seen everyone complaining about bond losses on bank balance sheets?
• there's no precision in our understanding of lags, because forward guidance means markets should anticipate moves - I think I agree with Powell here, but isn't he saying that long and variable lags don't exist? Or is this all a "sticky price" thing?
• he seemed to hit on aging population and the good old Bernanke 'global savings glut' and uncertainty over long run growth - still no clue what the neutral rate is
• David Westin repeatedly tried to ask Powell what his hypothesis is around how rates impact the economy and what his sense is of the neutral rate.  - I'm not sure if Powell's answers basically implied he's some sort of market monetarist now, we'll know things are working when we see things working
• tails are really wide, but they happen more regularly than they should - Powell sounds like Nassim Taleb now
• longer term yields are not being driven about expectation of higher inflation or about shorter-term policy moves, so it's really term premiums and potentially bets on higher growth, as well as deficits and QT
• Powell talks about how long term yields impact financial conditions which impacts economic activity, hiring and inflations - Powell then hits on whether the change in longer yields is endogenous (dependent upon the Fed following through).  MS Research hit on this here 
• Does Powell consider fiscal policy when setting monetary policy?  - Powell calls the fiscal path unsustainable, I sensed tears from Stephanie Kelton.  Good to know the Fed doesn't believe their at risk of fiscal dominance, I can rest easy now.
• Powell says higher bond yields literally works by tightening financial conditions, as long as yields are rising for reasons other than those that they are expecting the Fed will be doing something, then they are tightening conditions and that's what the Fed is trying to achieve -  seems a little circular, but sure
• Most of the inflation wasn't from the Phillips curve it was the collision of strong demand and constrained supply - classic, supply and demand intersects at price, well played

XTOD: Powell: "We don't focus on fiscal policy."   Sure, for now. However, an "unsustainable (debt) path" can lead to fiscal dominance where the Fed is forced to keep the U.S. government solvent, gives up control of the price level, and becomes one with fiscal policy.

XTOD: I love the new way of baseball….where the pitcher is dominating and they go to the bullpen to see if one of those guys can pitch as good as the starter!

XTOD: Powell engages in a little trash-talk to kick off the game of chicken that Sargent and Wallace envisioned.

XTOD: Focusing on stable prices require fiscal policy to be consistent with that goal. On the other hand, what else could he say? He is trying to do his job

XTOD: [not a tweet, but I won't tell you what twitter tells me comes after "Hot Girl Summer" for the fall moniker...maybe you'll get a different answer]

XTOD: The year is 2027. Tens of trillions of sov bonds have been added to CB balance sheets around world. A summit is held in which CBs forgive the debt owed by their respective Govs.  S&P, Fitch & Moody's immediately upgrade the Sov ratings. Fintwit freaks out and says it isn't fair.

XTOD:.....I estimate from about 35% to about 50%. A hot war in another part of the world, like the ones in Ukraine and in Gaza, with the US playing a role like it is playing in the other two wars, would strain the US in classic ways that caused other past empires to become weakened by being over-extended, which would be another notable step toward a more global war.

XTOD: your kidney can go for like $300k and you only need one to survive 

god gave us all startup capital. you just have to want it bad enough

XTOD: Cash has ZERO upside, ZERO convexity and a 💯 Reinvestment risk.Just saying.

XTOD: It’s true the classic 60/40 stock-bond portfolio had a bad 2022, but that doesn’t make it a bad long-term strategy. A 60/40 portfolio “reduces the probability” of a large loss, it does not eliminate losses. If you were told anything else, you were told in error.

XTOD: If you have a 2.9% mortgage locked in, I have one piece of advice for you:

Refinance at 8% right now

The higher rate will motivate you to grind harder, and you'll end up becoming much wealthier in the long run