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2024-09-13 07:00 by Karl Denninger
in Macro Factors , 264 references
[Comments enabled]  

Not so fast.....

First there is no un-inversion happening in the curve between the 13 week bill and 10 year.  There should be if the economy is stabilizing -- that is, a "soft landing."  That's not happening despite the repeated recovery from dips (and quickly too) in the equity markets.

Second, the CPI continues to show triple the so-called "target" in housing costs, which is extremely bad from a consumer point of view and quadruple the target for transportation services.  Yes, last month was very cool -- last month.  But car insurance continues with an annualized rate of 16.5% and last month was 0.4%, which again annualizes out to triple the target, more or less.

What kept a cap on things was energy prices, specifically fuel oil (diesel) and gasoline.  That spread has been contracting for the last year or so and its bad, not good, because it indicates slack demand on the transportation side.

One month does ot a trend make but the Trade and Transportation sub-indices in the PPI report do not indicate a strongly-growing economy.  In fact, they indicate weakness and have all year.  This is when the ramp-up should be starting for the holiday season -- and there is no evidence of it.

If you believe that a bunch of "AI will make everything double in the market!" realize that if you're right it will also mean the lower half of wage-earners will now make zero and the result will be a collapse of tax receipts and consumer spending.  Oh, it may take six months or a year beyond when that claim proves to be true for it to happen, but it will happen.

If you're wrong then all that air comes out of the market, the economy does not collapse nor do government revenues but your stock portfolio does.

Incidentally the current MTS is out and its ugly.  $307 billion was collected in revenue last month by Treasury but they spent more than double that, $687 billion. We are currently, with one month left to go, running a 30% fiscal deficit for the fiscal year which is directly levitating asset prices and providing a false belief that the economy is actually reasonably healthy when it clearly is not.

How fast do you go broke when you spend 223% as much as you make, and how well-off do you appear to someone looking at you from the outside without knowing your financial condition when you spend more than twice what you earn?  You're drinking Blanton's Special Reserve when you can't even afford a bottle of Mad Dog 20/20.

Want to know why the stock market is holding up?  That's the reason and yet if you think that can continue on a permanent forward basis whatever you're smoking its not legal anywhere in the United States.

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2024-09-11 08:54 by Karl Denninger
in POTD , 141 references
 

 

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2024-09-11 07:00 by Karl Denninger
in Politics , 578 references
[Comments enabled]  
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Good Lord we're screwed.

Who lost?  The American people.

Harris didn't answer anything.  She took questions and then immediately pivoted to going after Trump, throwing chum in the water.  Trump, for his part, hit the hook in the chum and thus negated his capacity to point out actual policy -- and that she had evaded and didn't answer the question.

The moderators were wildly biased and failed to enforce the rules, specifically related to any sort of containment of the two of them going back and forth and the alleged muting of the mics.

None of what Harris proposed she had a way to pay for.  Zero.  $25,000 for a house sounds nice, but it will simply make the price of houses go up -- by $25,000.  The problem isn't down payments its that prices are too high.  You can't wish supply into existence which means dealing with demand is the only option.  How do you deal with demand?  Well I can tell you what you don't do: Put 10,000 new people you fly into the United States into a town of 60,000 all of whom have $1,000 a month government checks and will live 10 to an apartment, which is what's happening in Ohio and elsewhere!  All that does is force the existing residents out because they can't afford that escalation in cost -- and thus makes the problem worse.

Did Trump key up on this?  No, and if he had he could have mopped the floor with Harris since that is explicitly her position that these Haitians are "good" and in fact she supported bringing 100,000 of them in directly, in her own words.  Leave the cat situation alone because you don't have to go there -- you can win on pure economics and its irrefutable.

Trump was right about foreign policy; nobody attacked anyone when he was President.  When Biden and Harris came into office both the Ukraine and Israeli conflicts occurred.  These are facts and may I remind you that Reagan, for all of his flaws, did get "caught" on an open mic during a mic check saying "I've just signed legislation to eliminate the USSR; the bombing starts in 10 minutes."  No, it wasn't policy but if you think the Kremlin didn't know about that within 30 seconds you're not very smart and like it or not there is real value in Foreign Policy with having the other guys out there who have designs on things you don't want to happen wondering if you might be just crazy enough to push the button.  There's an art to that; you never want them to be convinced you're nuts because then they have to shoot but at the same time the last thing you want is for them to believe you'll send money, guns, ammunition and planes in drips and drabs to someone fighting but under no circumstances will you personally blow them up.

That, by the way, is why we have two wars going on right now that we're funding and arming.  Both sides of both conflicts are utterly convinced we will not come and blow anyone up -- while at the same time we keep demonstrating that perhaps we can't  even if we changed our mind to the degree we've put forward through bravado for oh so long (and not without cause, until the last 20 or so years.)  May I remind you that we can't even manage to build a pier that will withstand utterly common weather conditions to offload supplies anymore -- and we proved it at Gaza.

There was much more but this was more than enough.

We had two unserious people on stage and a pair of "moderators" who weren't.

I could spend an hour or more on a 20 page analysis but honestly its not worth the digital ink to do so.

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2024-09-06 09:28 by Karl Denninger
in Employment , 398 references
[Comments enabled]  

..... plus 142,000.

Total nonfarm payroll employment increased by 142,000 in August, and the unemployment rate changed little at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in construction and health care.

Ah, more people who become sick (we didn't cause that did we?) and then we have to hire 10 people to make sure you pay for every one who fixes your busted-up body when you have a car accident.

The market appeared to be expecting a disaster and didn't get it; what had been a decently-red futures number before the print went positive and as I write this is just above zero.

The unadjusted household number is -690,000, however, which is certainly not a positive print, and what's additive to that is that 1.171 million more people said "screw this!" and started to couch surf (not-in-labor-force.)  What's incongruent with that is that all four of the subtables for educational attainment had either flat or positive change, so obviously there is a data discontinuity in there somewhere.  Exactly where is tough to suss out, but this is not all that unexpected in the area of turning points -- these are surveys and not exhaustive, so sampling error does occur.

Speaking of which the usual pattern of "errors" in one direction continues with both of the last two months revised downward -- seriously so.  May I remind anyone who has had a stats class that errors are normally distributed; if what is reported is abnormally in one direction it is not an "error" but rather either poor data (in which case you can't trust it at all) or deliberate.  It doesn't matter which if you're trying to make decisions based on said "data."

Of much more important note is the population-adjusted employment data, which has always been a key metric.  Its a lagging indicator and thus useless to predict the future, but trends are still useful to keep an eye on although obviously huge dislocation events (like the pandemic) skew it.  We're well out that zone now and it is trending negative, now on 12 months basis being -1.722 million employed having failed to pu tup a positive print since last November, and that only a small and expected result of holiday temporary hiring.  Discounting that one-month number its been negative since May of 2023.

A large part of this is demographic and there is no way to solve it with immigration despite what some will try to claim because otherwise the data would have inflected the other way by now in the current administration  This is the longer-term consequence of policy decisions going back two decades and continuing on an unbroken basis since irrespective of which party has control of Congress or the White House -- and there is no indication anywhere in the data that it has or will turn.  It should not be expected to do so until and unless policy changes.

This report looks to me a lot like good old Wile-E -- you know, the oft-repeated scene in Looney Tunes where there is no gravity for a short while after he runs off the cliff -- until he looks down.

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2024-09-05 07:00 by Karl Denninger
in Technology , 995 references
[Comments enabled]  

Amazon thinks people will pay for Alexa?

I'll make a prediction: No they won't.

But this is, after all, the test -- right?  "AI" has to generate revenue somewhere or its just a bunch of people playing with very expensive computers that use a lot of power -- twice, once to run them and then again for the A/C so they don't melt.

Remember that when this stuff first showed up as "customer service" went more-and-more toward automated response systems (which was, at first, "supervised" and in some cases still is, which is an easy "carry" from a human to a robot; you're none the wiser if its a chat window) the prediction was that basically everything would go this way.

It has, kind of -- but only in terms of the "initial" customer service line stuff.  If its "which item are you returning?" then its pretty easy, but really not any different than the same interaction with a mouse on a keyboard when you get down to it.

What hasn't happened is widespread adoption of "digital assistant" stuff that is actually, well, worth something aka "Jarvis."

My prediction: Free works for the here and there, but a subscription will not unless it actually does useful things with near-100% reliability, and I don't believe either of those two metrics will be met.

This isn't like Adobe going to subscription software where they have a "hook" in that your 10,000 prior edited pictures suddenly become inaccessible if you don't pony up the next month's (or year's) fee.  Now you have to get continuing and daily value -- which means it has to be timely, save you time or effort and  be accurate or you're not going to pay.

Unlike a Starbucks coffee you can't drink this one.

My bet is that it fails.

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