Bike is totaled, thankfully I am not. Dire Straits on @pandoramusic let's go through macro. The theme this week is the first look at Fed capture, resumption of the cutting cycle, and surrender of price stability. FOMC and in line initial claims halted the curve flattening from previous employment reports.

Soft Landing🧵: Ton of comments about landings. As a veteran of many 'hard' landings I try to think about this in objective terms I could potentially trade. 2/What is a quantifiable measure of a soft landing? Mine is that the PCE Core YoY trends to 2% and the FOMC can reduce short rates toward the estimate of the natural rate of interest without NBER declaring a recession. Graphically.

Pay attention to Japan. Something weird going on with YCC. Huge improvement in Bond liquidity index. Yen moving into JGB.

The chain of arrogant incompetence.
•SVB's Becker is on the Board of the SF Fed
•Mary Daly is President of SF Fed
•Ms. Daly attends FOMC meetings in 2022, non-voter
•SVB stops hedging against higher rates in 2022
•SVB Texas Hedges lower rates
HTF does this happen? The Fed claims they are going to investigate how SVB failed and the lapse in oversight. They will likely throw FDIC under the bus when they should be perp walking the DEI staffed SF Fed into the bay. And of course we get the bill for this in lower rates from our banks.

Headline Macro Notes:
Interest rate expectations pricing in slightly more than 25bps in February and slightly less in March. Translation: 25bps each at the next 2 meetings, pause. After a brief respite this week all major UST coupon yields are <Fed Funds effective.

Zoltan is on the street. It is wwaayyy long with some thought provoking points in the initial 6 pages. Will make Luke Gromen scream plagiarism. Personal thought/bias: : Medvedev's propaganda thread and Zoltan's latest have too much overlap for coincidence. Either Medvedev's staff got Zoltan early or this is coordinated.

Treasury Tuesday Notes:
•Wholesale Inventories est +.4%
•FHFA Home Price est -.8%
•S&P Case Shiller
•Dallas Fed Mfg Index est -15👀
🌽Export Inspections
•3M TBill $54B
•6M TBill $45B
•52Wk TBill $34B
•2Yr TNote $42B Treasury auctioning/refunding $175B today in a thin holiday market. The chart on 2Yr Treasury Futures looks weak this morning. Could be an interesting day.

1/New Year's Fun for $2. I carried a stack of $2's for tips, Thank You's, and remind folks of the 2nd Amendment. Times got tight, I stopped, but recently started again and forgot how much fun you can have for $2 🧵 2/Throw $2 w/the $5 or $10 at the valet stand and usually get "Wow, haven't seen this in years". Shake their hand, say Thank You, remember the 2nd Amendment. They ALWAYS remember me next time.

🧵on Twitter conduct. This is an epic forum for finance, market enthusiasts and we have to cultivate and grow it. We have a culture and etiquette, and I am sharing a priceless lesson from last week how you can get more here. 2/Whether you realize it or not there are several people, most widely followed, running money for a living, and are consummate professionals. They are often happy to help.

One of this morning's projects was to use @TheTerminal to better analyze Macro/FX. Spent time on 🇯🇵. No alpha here and hope others will point out what I'm missing. 🧵 1/ JPY/USD Cross Rate. The Sept 22nd BOJ intervention is evident as is the 145 level where the intervention occurred. Others have mentioned it was as much the rate of change as the absolute level prompting the intervention.

Post Jackson Hole Review🧵
Treasury Yield Curve: higher on the short end and in the belly, lower on the long end i.e. flatter. Reflects expectations FOMC may raise higher than expected and keep rates there longer dampening growth/inflation in the out years. Treasury Inflation Protected Securities TIPS yield curve. Up sharply on the near.

Evidence of inflation and supply constraints easing across the macro landscape save one: Labor and the potentially dreaded wage🔃price spiral (edited for incorrect charts)🧵 2/US Civilian Labor Force (supply) <pre COVID.

TIPs Yield Curve. This is the first time in my memory since pre-2020 cold/flu season that all tenors have been >0. Interested to hear from others if a) that is correct and b) significance. The shift up in TIPS curve is more than the shift in nominal yields lowering inflation expectations derived from the Nominal - TIPS spread in the bottom pane.

Brief Credit Market Stress🧵
1/Agg Corporate - High Yield Spread narrowed from 4.23 to 2.87 in just over a month. 2/MOVE Index is still elevated, but stable in a range around 122.5.

1/It's the weekend, macro review, and time to post Reverse Repo making ATH last week and there will be wailing and gnashing of teeth across #fintwit over this rather uninteresting phenomenon so a 🧵on why it is so high. 2/Fed Balance Sheet Assets: prior to GFC this was <$1T and reflected NY Fed OMO to maintain Fed Funds, then Bernanke lost his mind IMO and started QE. The balance sheet grew from $946B to $4.5T ~8Yrs. We👀paint dry as the balance sheet shrank $700B until August 2019.

I've run a weekend macro routine for a decade+ based on Anthony Crecenzi's work (recommend). This began using Excel free data, then imported to Updata Analytics, and now built in Bloomberg. This is a top-down process and I will share the screens. Please comment/criticize. I start with Interest rates, central banks, treasury, etc.

Easy Monday Notes:
•Fallout from Friday NFP
•PMI Final
•ISM Service Index, service hopefully strong as mfg.
•TBill Auctions
•POMO $12.8B Bills and short dated Notes
•FedSpeak: None🎉 I forgot to note Factory Orders also this morning, 10Eastern.

All measures of Construction Spending down slightly last week. The shock is Residential cooling off in light of limited inventory.

https://twitter.com/calculatedrisk/status/1378399197460766722?s=20

Fed Policy Forecast🧵
This is a timeline and thread open to criticism (constructive please, not 'orange man bad'). I hope others will throw some rocks at this and we all are better for it.
*Fed doesn't raise before Q1 2023 earliest and AFTER QE tapers off. 2/J. Powell is focused on full employment that according to the Fed we DID NOT achieve post GFC. The new AIT regime allows inflation to run🔥so it averages 2% over some period. He is consistently dovish in this regard IMO.

Time for the Fed Balance Sheet...Weekend Update Sheet Assets experience a glitch in the matrix and decline $42.4B

1/The Fed released its Financial Stability Report for Nov 2020. It is always interesting to read the Fed's take on markets and its degree of self awareness. federalreserve.gov/publications/2… 2/Asset Valuations
-Asset prices have generally increased since May, and, when adjusted for low interest rates, valuation pressures appear roughly in line with their historical norms
Seems correct. When expected future cashflows are discounted at these rates, the PV isn't insane