I hope everyone is having a nice weekend. Last week was both quite eventful and frankly exhausting. This will be a less eventful week, filled with speeches from Fed officials basically patting themselves on the back for cutting rates, which they think was the right thing to do while also discussing how complicated the situation is. Personally, I think the Fed’s actions have eroded their inflation credibility with what was one of the most ridiculous FOMC meetings I have ever seen, and we will discuss that below.
In terms of data, on Tuesday we get the current account deficit, Redbook, Money Supply and S&P PMIs. Wednesday has MBS apps and new home sales. Thursday we get durable goods, Q2 GDP revision, existing home sales, initial claims and inventories. On Friday we get PCE and UMICH.
A housekeeping item before we begin. As a reminder, if you are a paid sub and refer a friend, you get a month free. I don’t think anyone out there is generating the type of macro content I am, from discussing the macro developments weekly to quantitative research and models to detailed thematic notes and trading ideas. On top of it, we have the best chatroom in the business, which is never dull to the myriad characters who are involved daily. Recommend the publication to friends and get yourself a month free.
Here are some of my favorite thematic notes. They each took weeks to research and put together and I think anyone who is involved in trading will find them thought provoking.
Volatility Almanac is a good introduction to my framework for options trading strategies.
The Loop is a deep dive into the financial conditions loop that has driven markets since 2022.
Financial Conditions Reborn is an update to the above and introduces my proprietary models for assessing the impact from FCI on the economy in real time.
The End Goal is my theory for the urgency behind trade wars.
Beware the Doom Loop is the circular aspect of how currency weakness manifests into more inflation due to the Fed being too dovish. This is a medium term view on how I think they will be boxed in by their bad choices.
The Tokyo Trilemma is a deep dive into the challenges in dealing with inflation for Japan, and it provides a roadmap for how I structure my Japan trading theme.
The Case Against Rate Cuts is a breakdown of all the supply and demand forces hitting the economy and why rate cuts are the wrong medicine.
Lost Generation is a deep dive into the youth unemployment situation and their overall discontent with the status quo.
The Impulses is my detailed outlook on inflation, including all of the models and indicators I have built.
Anatomy Of A Policy Mistake was my FOMC preview last week and explained why their impending rate cut will be a mistake.
The North's Potential is my most recent note and a deep dive into Canada’s cyclical and structural issues and how they can turn this ship around.
Last but not least, if you are a crypto fan, I will have an update this week with a new model I built for ETH as well as a BTC model update. I have also been building my old models for technical, positioning and fair value indicators. Stay tuned for these in the near future.
We will now have to deal with the consequences from that cut. Let’s dig in.