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Weekly: Don’t Forget The Fed
The disorienting to-and-fro of momo and meme stocks -- and associated fretting over the psychologica
To me it is starting to feel like the Fed is late, I based this purely on anecdotal evidence, but combined with the little private an official data we have I believe the cracks in the labor markets will soon become pot holes. I know personally a few well educated professionals (one harboring an MBA from U Chicago) that have been “let go” recently. All white collar jobs with decent pay, add that to the tight conditions for Main Street (inversely proportional to FCI) and the picture starts to look grim. I realize inflation is a concern, but keeping rates where they are at this point won’t really alleviate inflation concerns either. If the Fed holds in December I hope they do so while conveying a dovish tone, otherwise we could have a repeat of late 2019 when Powell had to walk back his December hike in short order.
Yeah, I agree. On pretty much every point.
People in their 20s are screwed unless they are one of those chosen few that are starting a company or have deep expertise in AI. The entry level tech jobs of the past are going to be fewer and farther between. Five years ago, I would’ve needed a team of 2 or 3 to manage my current responsibilities, but with AI, I only need a team of 1 because AI can get me 80% of the way there on the stuff I need to get done and I can do the rest. Yes, there are plenty of roles where precision matters, but again, that’s the 20% of the work that I still need to do.
AI is also compounding the issues for younger employees who started working in a remote environment. I’d rather manage AI than a younger remote employee because it’s always available and I don’t need to think about whether or not I’m balancing its workload appropriately or hurting its feelings when I give it feedback.
All those parents who thought coding would be their kids’ ticket to success ought to be rethinking their approach. Don’t underestimate those soft skills.
it’s starting to feel very much like late 2018, except that everyone seems much more aware of the potential outcomes this time. Last time, Powell’s “long way from neutral” comment caught markets by surprise, infuriated Trump, and led to a sharp market decline. Unless the Fed chooses to raise rates, I don’t think anyone will be too shocked this time around.
I think the US economy excluding AI is already in or starting a recession, while the AI part is in a bubble involving credit in addition to equity. The ex-AI part wants Fed easing, but that could make the AI bubble worse, the bust bigger, the recession deeper. Looking at the chart, seems FCI is already as loose as during the response to prior crises. Progress on inflation has stalled, if not started reversing. I can see why the hawks are hawkish.
Agreed. I like Ur comparison to Dec 2018: Powell’s infamous “autopilot” comment and then suddenly in January 2019 Powell had to turn monetary policy completely around. If one looks myopically at the S&P 500 index and how well the top 5% of people are doing then it’s reasonable to even raise rates. But aside from AI boom, the RSP (equal weight) is barely half of SPY. Shareholder Capitalism clearly isn’t working for the bottom 70+% of people. And it’s no surprise that the economically illiterate are embracing socialist fantasies in NYC and Seattle. Keeping monetary policy restrictive isn’t going to help restrain inflation from rising costs of electricity and rising health insurance premiums, rising deductibles, co-pays etc. As an institution, the FED, as usual, isn’t inspiring confidence.
“embracing socialist fantasies…”
By “socialist fantasies” do you mean policies which seem so obvious as to be common sense in more or less every developed country in Europe?
The “fantasy” is the idea that American capitalism “works.”
I mean my goodness, is the entirety of the US electorate really that brainwashed?
Mamdani’s platform only counts as “radical” to Americans. We’ve lost the plot entirely over here.
It’s one thing to say capitalism’s incentive structures are a good thing and foster innovation, or even to argue that it’s not such a bad thing that America’s more unequal than other countries if we get something back from that in terms of economic vibrancy.
But this pathological obsession with material wealth and determination to explain away even the most absurd manifestations of inequality as just “the meritocracy at work” is stone, cold crazy by now. We’re in denial about our system.
“Free buses?! Not on my watch!” How lost do you have to be to say that?
And as I’m always keen to remind Americans, the vast majority of people pushing an extreme version of the survival of fittest argument only want it in the context of a rules-based system that favors them and their ilk.
The same people suggesting all’s fair and anything goes to get ahead of the next guy are the first people to call the police when they get robbed or car jacked.
It boggles the mind. Socialism for the rich is in full effect as they privatize profits and dump debt on the public, but if the poors dare ask for the basic necessities for survival, the billionaires threaten to take their ball and go home.
It’s really no surprise though when we can’t pass the most basic litmus test: electing Donald Trump. The guy was on the verge of squandering an inheritance worth hundreds of millions of dollars, only to be saved by pretending to be a successful businessman on tv, and then parlaying that into the presidency where he became a billionaire several times over despite not creating any value whatsoever via his business enterprises. Truth social, WLF, real estate development deals in foreign countries…no actual economic value or profit has been created by any of that and yet those enterprises are worth billions? Pure insanity.
Agree.
A sentence in the middle of the paragraph I wrote above clearly states: Shareholder capitalism clearly isn’t working for most people. If his policies, or socialism in general, were just free bus rides, then 99.9% of people would happily be in favor of free bus rides. An intelligent policy I along with most voters would also be in favor of is reducing the age of eligibility for Medicare to age 40, and eventually Medicare for everyone, so that employers are unburdened from the costs of providing health insurance benefits and all the convoluted regulations and arguments about the Affordable Care Act vanish once and for all. The $$$ saved by eliminating ACA subsides would be used to expand Medicare eligibility. And by helping employers eliminate their health insurance costs, maybe they would be more likely to employ more people and pay them a little more. So I’m all for intelligent solutions that deliver economic security and upward mobility for all people, rather than straw man diatribes devoid of workable policy solutions.
“A sentence in the middle of the paragraph I wrote above clearly states: Shareholder capitalism clearly isn’t working for most people.”
Listen to Ricky Bobby over here. (“What?! I said ‘with all due respect!”)
You said: “…it’s no surprise that the economically illiterate are embracing socialist fantasies.”
How do you expect me (or anybody else for that matter) to interpret that? Give me a break. You know what you said, and I’ve been doing this long enough to recognize that kind of rhetoric for exactly what it is.
I’m a very small business owner who pays 100% for health care for my full time staff, so I can appreciate the comments about removing that burden from businesses. But maybe a reminder is needed that some giant, highly profitable companies owned primarily by billionaire families are paying below-subsistence wages to the point that a large swath of their workforce is on public assistance. Socialism, indeed! But for the wealthy.
Bravo. Of course the Upper East side of New York went powerfully for Cuomo. That is where the 5% live.
Heck yeah I’m Gen-X and having fantasies! Twice in my life forces way out of my control knocked me back years while my staunchly meritocracy holier than thou parents doubled up on their net worth twice.. And yes for the record I graduated top of my class and have hustled my ass off for 35 years. I’m having visions where I can stop being paranoid about the next insanity that will knock me back once again…
We need k shaped rates. Meritocracy is a freaking joke in this country.
Absolutely. Credit card rates are 20+ percent. After slicing, dicing and repackaging – which involves paying off a lot of brokers, lawyers, accountants, etc,, – those same credit card receivables get purchased for a (about) 15% return. How about just lowering credit card interest rates?
I realize this is an oversimplification, but my point is that the 20% is overcharging, so that a lot of people can skim off profits from that pool. Collusion seems to be involved.