Obama Was Right, You Didn’t Build That, I Did
We Run Things, You Must Follow Orders
The Tin Man has been out and about for campaign events, which is both interesting and dangerous. Last Friday he was speaking in Philadelphia. This is a quote, “I can’t guarantee it. But – you betcha – those rates come down more, because I bet you that that little outfit that sets interest rates, it’s going to come down.” Then this week at Jay Powell’s press conference on Wednesday, Jay confirmed it. The fix is in. Now, it’s getting a little hard to follow what the Tin Man means when he speaks but it sounds like he knew something about the Fed’s plans. Or more likely, he and Janet Yellen told Jay what his little outfit was going to do. By the way, when Nick Timiraos first published his article on the Fed meeting in yesterday’s WSJ, it included the Tin Man’s quote. Someone got it removed before the print edition was published Thursday morning.
Speaking about Washington managing the economy, Greg Ip has a very interesting article in today’s WSJ, linked here. It’s titled, “America Is Sliding Toward Chinese-Style Capitalism.” I copied the opening paragraph because it says it all.
It does seem like Washington is running things and it’s not the Tin Man. It’s Jake and Jill, the handlers. I guess the Tin Man’s handlers want to build things and prove Obama correct. “You didn’t build this”. Washington built the economy just like Al Gore built the internet. The Tin Man’s “industrial planning” has arrived and Greg Ip has called it out, “State Capitalism”. Greg also points out that the Orange Mad King I started “State Capitalism” when he used tariffs to punish foreign competitors. The Tin Man’s handlers just continued on, only more aggressively. Now the handlers are using every agency in Washington to manage the economy. What could go wrong? I am guessing something will- inflation, trade wars, real wars or maybe a debt crisis. So many possibilities.
It’s always interesting to take a week off from watching markets. In the last week not much changed. Risk assets are still ripping higher. The Fed and the Tin Man confirmed an easing of monetary policy is near. More fuel for the risk asset fire. One market has surprised a little. The U.S. dollar is stronger despite the Fed’s dovish tone. I think that the Fed will ease but I also think that the dollar will fall and commodities will rally. One problem with that theory is that other central banks will also be easing. The Swiss already started this week with their first interest rate cut. This morning markets are higher again after making new all-time highs yesterday. This weekend is the 24 year anniversary of the dotcom bubble peak. This AI bubble feels like it’s going to continue on and get even bigger. After all, we have a Fed easing coming in June.
I updated the U.S. Dollar Index, U.S. 10yr yield, U.S. 10yr-2yr yield spread, WTI crude oil, copper, spot gold, bitcoin, S&P futures and NASDAQ 100 futures charts below.
The dollar is stronger today even with lower yields. The curve has steepened a little. Maybe we are going to get a steeper curve when the Fed eases and inflation remains sticky.
Crude oil is holding the $80 support level. Copper is holding the $4 support level. I think both will rally as we get closer to the first Fed rate cut. Gold pulled back after making new all-time highs yesterday. The stronger dollar triggered some gold selling. There is good support for gold around the $2,135 level. Bitcoin has been consolidating just below the 2021 high of 68,900.
S&P and NASDAQ 100 futures are a little higher this morning.
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Unless otherwise stated, Bloomberg is the source of all data and charts.
S&P 500 futures are a type of derivative contract that provides a buyer with an investment priced based on the expectation of the S&P 500 Index’s future value. Nasdaq 100 futures are commodities futures products traded within the equity futures sector. West Texas Intermediate (WTI) oil is a benchmark used by oil markets, representing oil produced in the U.S. Brent Crude Oil is a blend of crude oil recovered from the North Sea in the early 1960s, whose price is used as a benchmark for the commodity's prices. The U.S. dollar index (USDX) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners. UBS Bloomberg Constant Maturity Commodity Index is a total return rules-based composite benchmark index diversified across commodity components from within specific sectors.
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Great meeting you last night. I am embarrassed that I didn’t put 2+2 together to realize that I read you piece while drinking my coffee in the am!
Let’s play some golf this year