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No-Landing and the Anti-gravity Economy [kyla scanlon, Kyla’s Newsletter]

By William McClain
In Kyla Scanlon [Kyla's Newsletter]
February 17, 2023
271 views
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  • Retail Sales increased the most in TWO years in January, driven by food services and dining, motor vehicles and people spending in general.
  • For inflation, The CPI print came in kind of hot with core services and goods continuing to rise, mostly driven by shelter costs.
  • The labor market is still strong, with people looking for cars and homes again.
  • The worry now is that there is a new normal of inflation, that it will just hang out around 4-5%.
  • The economy is still moving and grooving, but dancing to the wrong song.
  • The market believes that the Fed will continue its hiking journey, but financial conditions have loosened.
  • People are still spending money on vacations, despite vacation inflation.
  • People are so sick of Things, they don’t care anymore, a phenomena known as the yoloconomy.
  • The market wants to keep dancing, but the Fed is moving towards them quickly, slowly wagging their finger in the no-no motion.
  • The Fed rate hikes have not moved through the economy yet, due to the design of the 30Y fixed-rate mortgage.
  • People are spending more money because of credit card debt and continued dip into savings.
  • People are exhausted and want to consume passively.
  • The economy is booming despite the Fed’s pressure because people are prioritizing profit over people.

Published February 16, 2023
Visit Kyla’s Newsletter to read kyla scanlon’s original post No-Landing and the Anti-gravity Economy

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Peter Zeihan – Why the Fed Is Shrinking the Balance Sheet [Peter Zeihan, Zeihan on Geopolitics]

By William McClain
In Peter Zeihan [Zeihan on Geopolitics]
February 16, 2023
266 views
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  • U.S Federal Reserve chairman Jerome Powell has indicated that he plans to shrink the balance sheet down to zero over the course of the next couple of years.
  • The Federal Reserve uses interest rates and money operations to manipulate the financial system to regulate the flow of capital, the cost of capital, and the wider world.
  • From 2008 to two years ago, the Federal Reserve printed currency and used it to purchase Bonds on the second Market.
  • The economy is on sounder footing with record low unemployment levels and moderate to strong growth for three years in a row.
  • As a result, the Federal Reserve is getting out of this business and getting back to normal at three to four times the speed they built the balance sheet up.
  • Typically, this should mean slower economic growth and less funding for emerging technologies and projects that don’t make sense from a cost/benefit analysis.
  • The economy should be more efficient overall, but this is not necessarily good for each individual piece.
  • The Federal Reserve is not done raising rates, and is expected to go up another full percentage point (or more).
  • The Baby Boomers are retiring, which means their money is rapidly draining away from the system, and at the same time the Federal Reserve is tightening policy.
  • Over the next two to three years, this will result in a global reduction in available capital of at least a third, and a similar number of people employed in the financial sector in the U.S.

Published February 16, 2023

Visit YouTube to read Peter Zeihan’s original vlog Peter Zeihan – Why the Fed Is Shrinking the Balance Sheet

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Don’t Read His Lips [James Surowiecki, The Atlantic]

By Spencer Chen
In [The Atlantic]
February 8, 2023
264 views
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• Jerome Powell, the chairman of the Federal Reserve, spoke last week after the Fed’s monthly meeting, conveying the message that the fight against inflation was not yet won and that the Fed anticipated continuing to raise interest rates over the next few months.
• Investors ignored Powell’s message and leaped to the conclusion that the Fed was no longer as hawkish as it had been, sending stocks soaring.
• When Powell spoke yesterday at the Economic Club in Washington, D.C., he wanted to make sure that no one missed the point and reiterated that the process of getting inflation down would be “bumpy” and was likely to take “quite a bit of time”.
• Until 1994, the Fed didn’t even announce at its monthly meeting whether it had raised or lowered interest rates.
• Alan Greenspan, Ben Bernanke, Janet Yellen, and Jerome Powell have all been open about their thinking and have moved steadily toward more transparency and public communication about their policies.
• The job of central bankers has changed and they now have to be good at communicating without any real rule book.
• Powell did a fine job of explaining that the Fed was sticking with its target of 2 percent inflation, and that, as a result, it planned to keep hiking interest rates.
• However, the market rallied strongly, and by day’s end it was up by more than a percentage point.

Published February 8, 2023
Visit The Atlantic to read James Surowiecki’s original post Don’t Read His Lips

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TikTok’s CoreCore and the Federal Reserve [kyla scanlon, Kyla’s Newsletter]

By Spencer Chen
In Kyla Scanlon [Kyla's Newsletter]
February 2, 2023
258 views
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• The article discusses the current balancing act of the Federal Reserve and the 6 things they must pay attention to.
• It also looks at the trend of corecore on TikTok, which is a reflection of the Internet on the Internet and a message against capitalism and income inequality.
• The Fed is charged with creating aspects of financial nihilism right now, and is looking at wages, labor market, and economic growth to slow inflation.
• Data points show a slowdown in manufacturing, labor market, and wages, but no recessionary warning signals.
• The Fed wants the market to take it seriously, but markets often lose the plot.
• The article concludes that people are the economy, and the Fed is paying attention to the right things.

Published February 2, 2023
Visit Kyla’s Newsletter to read kyla scanlon’s original post TikTok’s CoreCore and the Federal Reserve

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Is the Fed hiking too fast? [Noah Smith, Noahpinion]

By Spencer Chen
In Noah Smith [Noahpinion]
January 14, 2023
255 views
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• Inflation is slowing but still above target, with headline inflation very low and core inflation moderate but above target.
• Many are worried about a recession, with an inverted yield curve being a decent predictor of slowing economic activity.
• The labor market is still strong, with payrolls adding 223,000 jobs in December and the prime-age employment-population ratio still around 80%.
• The Fed started hiking rates in March 2022, but some argue that the rate hikes haven’t had time to affect the economy yet and are unnecessary.
• Research is divided on how long it takes for rate hikes to have an effect, with some studies predicting a hump-shaped effect and others predicting a gradually increasing impact.
• It’s possible that fiscal policy is playing a role in the moderation of inflation, with deficits closing in late 2021 and disposable personal income stopping being anomalously high around the same time.
• As long as the trend continues, the Fed will likely taper off its rate increases, with the conquest of the post-pandemic inflation underway.

Published January 14, 2023. Visit Noahpinion to read Noah Smith’s original post.

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The Eggconomy [kyla scanlon, Kyla’s Newsletter]

By Spencer Chen
In Kyla Scanlon [Kyla's Newsletter]
January 12, 2023
176 views
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• Eggs are expensive right now, but they are actually less expensive than they were – according to Brighton Capital, the wholesale price for large conventional eggs has fallen from $5.10/dozen to $4.63.
• The eggconomy is emblematic of the broader economy – driven by the laws of supply and demand, and the hen/human ratio is at a 15-year low.
• The Federal Reserve is focused on a few things within their 2% inflation target – Fed cred, Fed recession goals, Fed beef, and 2% inflation.
• A soft landing would be when vacancies can decline substantially taking pressure off inflation without driving unemployment way up.
• The housing market is bonkers – housing inflation, consumers freaking out, and rents slowing down.
• Flight delays due to an ancient piece of technology is emblematic of a lot of American infrastructure.
• The debt ceiling debate is a stupid bargaining chip in a larger stupid circus.
• The economy is a fragile piece of technology that needs to be carefully managed.
• Hope is an ax you break down doors with in an emergency – it calls for action and is impossible without it.

Published January 12, 2023. Visit Kyla’s Newsletter to read kyla scanlon’s original post.

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The Fed is Hiking Up That Mountain [kyla scanlon, Kyla’s Newsletter]

By Spencer Chen
In Kyla Scanlon [Kyla's Newsletter]
January 5, 2023
265 views
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• The Fed is approaching economic switchbacks, which could make the overall endeavor of a soft landing easier, but could also make the climb more difficult if ignored.
• The Fed wants to slow down the labor market, but is cognizant of the potential for an unwarranted easing in financial conditions.
• Complacency is pervasive in the labor market, with workers not being respected and incentives leading to less disruption.
• The Fed is trying to bring the labor market back into balance, but there is a need for central bankers to not always rely solely on their econometric models and instead throw in some human nature common sense.
• Albert Camus said it best when he said “real generosity toward the future lies in giving all to the present.”

Published January 5, 2023. Visit Kyla’s Newsletter to read kyla scanlon’s original post.

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Mind the Cup [kyla scanlon, Kyla’s Newsletter]

By Spencer Chen
In Kyla Scanlon [Kyla's Newsletter]
December 29, 2022
288 views
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• This year was a year of uncertainty, with many systems being fragile and the promise of “This is How It Will Be” being broken.
• The Federal Reserve’s job is to manage expectations and to make sure that inflation expectations do not become unanchored.
• Causes of inflation include deglobalization, tightness in labor markets, sky high energy and commodity prices, WFH trends, and supply bottlenecks.
• The Fed’s tools are ambiguous in the context of real world narrative, and their treatment plan should be bolstered by additional toolsets.
• On a micro level, uncertainty can be a fuel as we navigate new normals, and individual actions are what shape the world that we live in.
• Love is an action, a way that we exist in the world rather than a relationship, and this year was a year to recognize that the world does react to us.

Published December 29, 2022. Visit Kyla’s Newsletter to read kyla scanlon’s original post.

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2022 was Really Weird [kyla scanlon, Kyla’s Newsletter]

By Spencer Chen
In Kyla Scanlon [Kyla's Newsletter]
December 22, 2022
268 views
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• This year has been a gift, with many opportunities for growth and learning.
• Three quotes that summarize the year:
– “It is easier to fool a man than to convince him he has be fooled” – Mark Twain
– “Panics do not destroy capital. They merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works” -John Mills
– “One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.” – Carl Sagan
• Crypto: The web3 spectacle was far removed from reality, and the land war in Europe and worries over food and energy resources caused the crypto world to come crumbling down.
• Commodities: Tech is the new FAANG, and as resources get cheaper, we find progressively dumber uses of them.
• The Federal Reserve: Expectations are all that matter, and the Fed is facing the verifiable metrics slowing inflation contrasted against the heavy burden of Ego.
• Venture Capital: The incentives are misaligned, and the focus is on venture funds and founders, not on building enduring companies.
• Housing: Mortgage rates have skyrocketed, and private equity firms are nosing their way into mobile home parks, nursing homes, and student housing. Housing is in a deep recession, and weakness i1n housing is a core part of recessions.
• 2022 was a year of economic and human behavior changes.
• The economy was in flux, with bonds and stocks moving together, market fundamentalism becoming dominant, and an over-reliance on tech and finance layoffs.
• Human behavior was characterized by anger, doomerism, and a lack of cooperation.
• There was a sense of fragmentation, with a monoculture emerging and a focus on profit and growth over creativity and expression.
• People were degraded to the status of mere consumers, and there was a deep sense of nihilism in Gen Z.
• The article calls for reconnection and understanding, and for people to recognize their passions and create a living world.

Published December 22, 2022. Visit Kyla’s Newsletter to read kyla scanlon’s original post.

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A Non-Zero Interest Rate World [kyla scanlon, Kyla’s Newsletter]

By Spencer Chen
In Kyla Scanlon [Kyla's Newsletter]
December 17, 2022
272 views
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• The Fed is trying to manage the economy, but the market is starting to rebel against them.
• The market thinks rate cuts are likely relatively soon, whereas the Fed is like “well hm, no, we plan to keep hiking”.
• There is an idea in some corners of the tech world that only tech people can be executors of Goodness and that anything that stops tech people from doing what they want is Very Bad.
• We have started to see softer prints in inflation, inflation expectations ticking down, supply chains easing, and a loosening in the labor market in quits.
• The Fed is really focused on the labor market via “Things We Have To Spend Money on To Stay Alive”, which is an inflation category.
• SBF was charged with a litany of things, including “Wire Fraud, Wire Fraud Conspiracy, Securities Fraud, Securities Fraud Conspiracy and Money Laundering”.
• Empathy is a function of understanding the emotions of others, but markets don’t really price this. It requires looking beyond individual forces of supply and demand.
• Vincent Van Gogh quote: “Many people seem to think it foolish, even superstitious, to believe that the world could still change for the better. And it is true that in winter it is sometimes so bitingly cold that one is tempted to say, ‘What do I care if there is a summer; its warmth is no help to me now.’ Yes, evil often seems to surpass good. But then, in spite of us, and without our permission, there comes at last an end to the bitter frosts. One morning the wind turns, and there is a thaw. And so I must still have hope.”

Published December 17, 2022. Visit Kyla’s Newsletter to read kyla scanlon’s original post.

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