Today's topics include Timiraos on the Fed's path in 2023, volatile times, pension funds enjoying higher rates, demographic & deglobalization headwinds, consumer credit deteriorates, lower productivity, a falling dollar helps tech stocks, trimming the fat from big tech, and Grayscale's massive discount
Today's topics include hard vs. soft data, dollar reversal, the decline in temp jobs, the labor force participation rate, could the Treasury's quarterly funding report give clues on debt ceiling?, meme stocks benefit since frenzy, digging into 0DTE options, Gautam Adani's bad week, and thinking about CBDCs
Outside the U.S., the world's money supply continues shrinking at a fast pace.
For the last few decades we have been in a low interest rate environment where deficit spending would not cause major issues. However, a 40-year high in inflation prompted the Fed to tighten monetary policy at a fast pace. Higher rates mean the cost of servicing U.S. debt will follow higher.
As part of the planned transition away from LIBOR, the CME will convert any remaining Eurodollar positions to SOFR positions on April 14. SOFR futures recently surpassed Eurodollar futures as the world's largest interest rate futures contract.
A 25 basis point hike is almost universally expected at the February 1 FOMC meeting. Traders still expect an additional 25 basis point hike at the March meeting, but there is a small chance of a pause.
DeFi lending rates have moved lower as borrowing demand has subsided. As a result, Treasury yields are now higher than the yields offered by some of the biggest, most reliable DeFi protocols.
Flows follow performance, except for when they don't. Cathie Wood's investors seem willing to ride out market losses even as they have lost over 60% of their investment in just over a year.
A long-term look at the Consumer Price Index
Some interesting charts from our recent posts