Eurodollar University

The Fed just cut its benchmark rate by 50-bps even though jobless claims are among the lowest in their history. At the same time, CPI shelter prices have accelerated. Neither seems like it would warrant the Fed action yet there are good reasons to believe true unemployment is very different from claims and current market rents are plunging. Eurodollar University's conversation w/Steve Van Metrehttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

FedEx's CEO admitted some truth about the Fed's rate cut this week, and the stock was immediately punished for it, dropping 15% on Friday. This raises a bunch of questions, starting with: what happens to stocks in general when the Fed cuts rates? The answer is not what you think.Eurodollar University's Money & Macro AnalysisCNBC FedEx quarterly profit disappoints as demand for speedy delivery waneshttps://www.cnbc.com/2024/09/19/fedex-reports-drop-in-quarterly-earnings-on-lower-demand-for-priority-services.htmlRobert Shiller 2013 Nobel Speculative Asset Priceshttps://www.nobelprize.org/uploads/2018/06/shiller-lecture.pdfhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Now that the Fed has done it, everyone wants to get in on the act. They call it "undershooting" which is just a fancy word for "bonds were right." Switzerland, Canada, even the Europeans all thinking hefty and accelerated schedules. Leave it to the Brits to be the lone exception. Eurodollar University's Money & Macro AnalysisBloomberg Bank of Canada Officials Split on Balance of Inflation Riskshttps://www.bloomberg.com/news/articles/2024-09-18/bank-of-canada-officials-are-split-on-balance-of-inflation-risksBloomberg Swiss Government Sees Sharp Drop in Inflation Rate Next Yearhttps://www.bloomberg.com/news/articles/2024-09-19/swiss-government-sees-sharp-drop-in-inflation-rate-next-yearBloomberg Swiss Economists See ‘Substantial’ Chance of SNB Half-Point Cuthttps://www.bloomberg.com/news/articles/2024-09-19/swiss-economists-see-sustantial-chance-of-snb-half-point-cutPolitico EU Portuguese bank chief: ECB may need to accelerate interest rate cutshttps://www.politico.eu/article/mario-centeno-ecb-may-need-accelerate-easing-interest-rate-date-bank-portugal/ZEW Hopes of a Recovery Are Fadinghttps://www.zew.de/en/press/latest-press-releases/hopes-of-a-recovery-are-fadingBloomberg Germany May Already Be in Mild Recession, Bundesbank Sayshttps://www.bloomberg.com/news/articles/2024-09-19/germany-may-already-be-in-mild-recession-bundesbank-saysEuronews US chip-maker Intel has announced plans to postpone the construction of a factory in Germany for at least two years.https://www.euronews.com/business/2024/09/17/intel-postpones-construction-of-german-chip-factory-for-two-yearshttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

The Fed cut its benchmark rates by 50 bps in a panicky move to catch up to both the economy and the marketplace. Reaction in the latter was muted because this wasn't unexpected. All the FOMC did was confirm everything - and then deny that it did. Eurodollar University's Money & Macro AnalysisBloomberg Fed Minutes Show Officials Rally Around Higher-for-Longer Rateshttps://www.bloomberg.com/news/articles/2024-05-22/minutes-show-officials-rallying-around-higher-for-longer-ratesFOMC September statementhttps://www.federalreserve.gov/monetarypolicy/files/monetary20240918a1.pdfFOMC September projectionshttps://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240918.pdfFOMC June projectionshttps://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240612.pdfhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

People imagine a recession is when masses of people are being laid off and so consumer spending isn't just negative, it must be crashing. While those can happen in a downturn, they tend to show up at the end. So, if you're waiting for those to make a determination you'll be way too late. Evidence consistently and conclusively shows hiring not firing creates the recession environment that is marked by a drop in real spending. We have both.Eurodollar University's Money & Macro AnalysisRobert Shimer Reassessing the Ins and Outs of Unemployment∗https://home.uchicago.edu/~shimer/wp/reassess.pdfChallenger, Gray & Christmas Job Cuts Announced by US-Based Companies Surge in August 2024; Hiring Falls to Lowest YTD Since Challenger Began Tracking in 2005https://www.challengergray.com/blog/job-cuts-announced-by-us-based-companies-surge-in-august-2024-hiring-falls-to-lowest-ytd-since-challenger-began-tracking-in-2005/NYT Layoffs Are Few. So Why Are Jobs Harder to Find?https://www.nytimes.com/2024/09/12/business/economy/layoffs-jobs-economy.htmlhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Americans' hopes and dreams of better opportunities have utterly crashed and burned over the past five months. This isn't about more price increases, rather how those in the past have combined with recession prospects to rob the future. The 2020s have taken the worst aspect of the 2010s and added more trouble on top. Eurodollar University's Money & Macro AnalysisLarry Summers The Age of Secular Stagnationhttps://larrysummers.com/2016/02/17/the-age-of-secular-stagnation/Larry Summers IMF Accepting Secular Stagnationhttps://www.imf.org/en/Publications/fandd/issues/2020/03/larry-summers-on-secular-stagnationhttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

Consumers can't afford groceries, so how is a lower reverse repo rate going to help them? Now that it is settled the Fed will cut rates next week, everyone wants to know by how much. The real story is what's behind the cuts in the first place and what that means for financial markets as well as the economy. It isn't the murder hornet rate. Eurodollar University's conversation w/Steve Van Metrehttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU

China's bond market faces a crisis as yields hit record lows despite government interventions. Economic signals reveal unsettling trends, including declining wages and rising deflationary pressures. Efforts to stimulate growth are met with skepticism, highlighting the challenges for the People's Bank of China. Job losses and cautious bank lending further complicate the scenario, raising concerns about the nation's economic stability. The discussion reveals how these factors intertwine, painting a stark picture for China's future.

The European Central Bank has slashed interest rates again, but Europe faces a severe economic slowdown. Volkswagen is contemplating factory closures due to idle capacity, hinting at wider industry troubles. The discussion reveals a lack of genuine recovery post-2020, instead showcasing a 'price illusion' that masks deeper issues. Weak domestic demand and stagnant wages threaten consumer spending, raising fears of prolonged recession and layoffs. Economic strategies to combat these challenges are critically examined.

It was all banks all day yesterday. Basel rules foul-up. Warren Buffett continuing to dump BofA. Citi dumping on credit. Deutsche unloading CRE, or trying to. JP Morgan downgrading...itself. Most of all Ally Financial admitting unemployment is fast becoming a big problem and right on its balance sheet. Eurodollar University's Money & Macro AnalysisBloomberg JPMorgan Leads Banks in Dimming Outlooks, Spoiling Win on Ruleshttps://www.bloomberg.com/news/articles/2024-09-10/jpmorgan-leads-banks-in-dimming-outlooks-spoiling-win-on-rulesBloomberg Ally Drops After CFO Flags Consumer Stress, Underperformancehttps://www.bloomberg.com/news/articles/2024-09-10/ally-drops-after-cfo-flags-consumer-stress-underperformanceBloomberg Consumers Shift Spending to Pay for Basic Staples, Citi CFO Sayshttps://www.bloomberg.com/news/articles/2024-09-09/consumers-shift-spending-to-pay-for-basic-staples-citi-cfo-saysFRBNY Household Debt and Credit Reporthttps://www.newyorkfed.org/microeconomics/hhdc.htmlCNBC Berkshire unloads another chunk of Bank of America as CEO Moynihan lauds Buffett as great shareholderhttps://www.cnbc.com/2024/09/11/berkshire-unloads-another-chunk-of-bank-of-america-as-ceo-moynihan-lauds-buffett-as-great-shareholder.htmlBloomberg Deutsche Bank Is Unloading $1 Billion in US Real Estate Loanshttps://www.bloomberg.com/news/articles/2024-08-01/deutsche-bank-is-unloading-1-billion-in-us-real-estate-loanshttps://www.eurodollar.universityTwitter: https://twitter.com/JeffSnider_EDU