sellside observations; the hobbit 'Throws Biden Under The Bus...' and an economic calendar or two ...
Good afternoon.
Rafa does it again and in another convincing fashion.
NFP, too, confounding the CONsensus (as is normally the case) and ONE way in which to view the data, offered by @MacroMarketsDaily,
Forget the jobs number, the most important figure from non-farm payrolls is the modest 0.3% m/m rise in earnings. The 3m-3m annualized measure fell to a 12-month low of little more than 4%, down by 2%-points in six months, which will provide some relief to the Fed
I mention it because I find the logic hard to disagree with and the visual compelling.
It' was, as always, an economic ink blot test. You’ll find another on this weekends Sellside Observations from Morgan Stanley where they offer updated ReSale Tales tracker. It’s title, “Decelerating Growth”
Which do YOU see as more important. Decelerating or Growth?
Do you have that Elon Musk “Super Bad Feeling” ‘bout the economy, too? Are you like one of the many (36% — not insignificant) earning $250k and livin’ paycheck to paycheck?
And in as far as the hobbit goes, ZH has a most interesting ‘post’ which which, come end Sept, I’d like to NOT forget so I’m going to mention it here and now in case you hadn’t seen OR been aware of the upcoming book deal,
... Yellen has decided to strike back, and as Bloomberg reports citing an advance copy of the Treasury secretary's biography- due out on Sept. 27, just weeks before the midterms - the treasury secretary initially urged Biden administration officials to scale back the $1.9 trillion American Rescue Plan by a third "worried by the specter of inflation"... the same stimulus plan that she herself said last March would not lead to an inflation problem. But, in retrospect, she appears to have changed her mind.
“Privately, Yellen agreed with Summers that too much government money was flowing into the economy too quickly,” writes Owen Ullmann, the book’s author and a veteran Washington journalist who has covered economics and politics in Washington since 1983, referring to former Treasury Secretary Lawrence Summers, who severely criticized the size of the aid plan …
Thankfully, build back biden plan didn’t pass but you know what did … PPP loans and you and I know many / much of this funding ended up not exactly where it was NEEDED (or designed). There were many cases (I know of a few personally) where folks who didn’t NEED the funding took it because, well, they could.
To clarify, they COULD because they COULD afford accountants to figure out ways around securing the ‘free money’ to fund their businesses and pay back only what was neccessary. Taking the ‘free’ $$ as was offered.
This, as there were many cases of those without accountants to figure out how to ‘play the system’ were relying on the kindness of friends and family to get by, making mortgage payments, putting food on the table, gas in the tank and keeping their kids in school …
To this point and another aspect of the ‘free money’ syndrome, the next time you think REAL ESTATE BOOM and of your real-estate buddy, lets not let this (also from ZH) get too far removed,
Real Estate Agents Raked In $3.9 Billion In PPP Loans, Only To Pocket The Money Amid Housing Boom
… According to data from the government's Pandemic Response Accountability Committee, some $3.9 billion was given to real estate entities claiming just one employee. While the average loan was around $13,000, 146 entities received more than $90,000 each, NBC News reports.
Many of the loans, as were the case in other industries, were forgiven if the recipient met certain criteria, including spending 60% of the loan on payroll and the rest on eligible expenses. For realtors, $3.1 out of the $3.9 in PPP loans have been forgiven - which has been rapidly sped up over the last eight months…
With real-estate boom (and busts)in mind, one more from ZH for those NOT priviledged to having ever visited the Hamptons,
Perhaps now’s our chance?
Turning attention away from PPP, the real-estate markets and ZH for just a moment, a few thoughts from Global Wall Streets sponsors (aka The Sellside and a few observations),
It is HERE I’d note many of the sharpest tools in the shed … the brightest bulbs on Wall Street ALL selling a firms narrative getting YOU to buy in to whatever it is THEY see as coming next.
Here’s one thing that stood out to ME — an attempt to learn from history (or be doomed to repeat), via Jefferies,
Wage-Price Spirals And Lessons From The 1960s.
… The 1960s offer two important lessons about dealing with wage-price spiral:
1. The first is somewhat obvious: in order to break a positive feedback loop between prices and wages, the Fed needs to engineer positive real interest rates. In the 1960s, the Fed did push the real funds rate north of 3% (which meant pushing nominal rates to 9%), which ultimately caused a recession and pushed inflation down.2. Another lesson, which may be less obvious, is that when faced with a feedback loop between prices and wages, the Fed has to remain tighter for longer. This was another policy mistake in the 1960s: after tightening aggressively in 1968/69, the Fed quickly reversed course and cut the funds rate from 9% to less than 4% by early '71. The unemployment rate peaked at 6% and began to decline again, which wasn't high enough to dampen wage pressures. Wage growth never slowed meaningfully, and began to reaccelerate from 6%, quickly reaching 8%. Put differently, the Fed did not create enough slack to squeeze inflation and stabilize inflation expectations. Policymakers repeated the same mistake in the mid 1970s, hiking aggressively and causing another recession, but then easing too soon and allowing inflationary pressures to reassert themselves.
… Of course, one big difference between today and the 1960s is that today's Fed has the benefit of hindsight, and it has learned a lot from the mistakes of past policymakers. We certainly don't expect the current Fed to make the same mistakes. That's why we expect the nominal funds rate to reach 4% in this cycle. It is also why we expect it to come down more slowly in the next downturn compared to the last three easing cycles when inflation wasn't a problem.
A couple MORE things to consider if yer not asleep yet, the Fed tweeted
@FedResearch
New #FEDSNote: Substitutability between Balance Sheet Reductions and Policy Rate Hikes: Some Illustrations and a Discussion12:49 PM · Jun 3, 2022
And the short version via @FedGuy12 (Joseph Wang) is that Fed research suggests $2.5tril QT = 50bps in hikes.
I’ll let YOU decide how to place your chips in this parlor game — where are the next 25 - 50bps on the long bond, for example? Here’s a MONTHLY visual of 30yy where I’ve highlighted momentum — overSOLD — but the trend(line) has clearly been broken,
The ink blot test continues …
In closing a couple economic calendars and links for any / all still attempting to trade funDUHmental information flows … First, this from the best in the strategy biz is a LINK thru TO this calendar,
Wells FARGOs version, if you prefer …
… and lets NOT forget EconOday links (among the best available and most useful IMO), GLOBALLY HERE and as far as US domestically (only) HERE …
Attempting to put it all together, HERE is a visual of the SUPER BAD movie in theaters soon,
And here’s visual of whats going thru MY mind as I plan my trades and attempt to trade my plans into the week ahead …
… THAT is all for now. Back TO what is left of the weekend …