Up A Creek Without A Paddle

Ian Reynolds November 16, 2024

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"I doubt Fed Chair Powell will do another interview like this anytime soon. He struggled with some of the smart questions, often deflecting with historical explanations, and he confused the economics of different possible scenarios. His response to the question on a new monetary framework will likely leave many perplexed." Mohamed A. El-Erian [X]

FED Chair Powell is in a bit of a fix, and his (and the FED's) credibility is on the line. And this week's slightly stronger than expected PPI and steady CPI hasn't helped his cause.

In the last 5 years

Inflation is transitory (went to >9%)
Hiked rates so much that we have commercial real estate armageddon
Said no cuts needed then did 50bp cut before election (he's politically motivated)
When he cut, market rates went up alarmingly
Now, no need to cut having cut a further 25bps

No wonder he has lost control of the bond market.

The mantra of being data dependent doesn't work, just makes them reactive. You can't manage monetary policy of the biggest economy in the world without a strategy.

We didn't even mention Trump.

Fed's Logan: Models show that Fed funds could be 'very close' to neutral [Forex Live]

Economy not signalling Fed needs to be hurry to cut rates, Fed's Powell says[investing.com]

If Trump Tries to Fire Powell, Fed Chair Is Ready for a Legal Fight [Wall St Journal]

Breaking

Trump only 95% likely hood of being inaugurated as President [Polymarket]

Indian cenbank likely selling dollars to support rupee amid Asian currencies' slide [Reuters]

In Focus

Bitcoin

Bitcoin Monthly

Whether you like it or hate it (there's no in between), it's the chart of our lifetimes. Hard not to be super bullish as previously hostile actors are now supposedly embracing it ( US Govt, municipalities ).

Options got the green light from CFTC so more trading and liquidity.

CRE / Banks / CLOs

The pain continues and now rents may be moving lower too.

China

China M2 YoY October 2024

China House Prices YoY October 2024

China Industrial Production October 2024

china housing-1

China House Prices YoY Since 2012

Chinese money supply unsurprisingly increasing with all the stimulus but no joy in the housing market still.

yuan

USD / Offshore Yuan Monthly

PBoC desperately trying to keep the Yuan afloat as we wait for news about tariffs.

Japan

Japan PPI October 2024

japan gdp-3

Japan GDP Q3 2024

BOJ calls for vigilance to presence of non-bank financial institutions [Reuters]

BOJ divided on rate hike timing as U.S. election loomed, Oct summary shows [Reuters]

Yen Weakens to 155 Against Dollar, Raising Intervention Risk [Bloomberg]

Japan's economy has been stagnant for over 30 years. All that government debt has killed all chances of a happy life for so many Japanese citizens.

The Japanese government and central bank have lost control of markets and the Yen continues to weaken.

USD / YEN Monthly

US

US CPI October 2024

US PPI October 2024

NY State Manufacturing Index November 2024

Traders Ramp Up Bets on a Treasury Selloff After Trump’s Win [Bloomberg]

Financial trade group calls on SEC chief Gensler to ‘immediately’ step down [The Hill]

Trump Picks Musk, Ramaswamy for Government Efficiency Effort [Bloomberg]

CPI and PPI slightly higher means less rate cuts and stock markets moved lower. The USD strength isn't helping and once the Trump euphoria ( 2 words that have never been used next to each other) wanes we'll find out what the bond vigilantes have in store for us.

The US Treasury 10 year yield looks ominous.

US 10 Year Treasury Yield Monthly