1/ Jamie Dimon's 61 page annual shareholder letter is finally out for FY2023! $JPM
-Says Federal deficit is a real issue hurting business confidence (govt spending could keep rates high)
-A rate spike is very possible with stickier inflation
-US economy resilient so far with consumer spending, but the economy has also been fueled by government deficit spending and past stimulus
-Market is pricing in 70-80% chance of a soft landing/no landing...Dimon thinks that is too high
-Inflation resurgence, political polarization are risks for this year (Ukraine, Middle East, China)
-AI may be as impactful on humanity as the printing press $NVDA $AMD $MSFT $GOOG 2/ The bank is reporting 1Q earnings on 4/12/24, but earnings over the past 20 years have been incredible

1/ FOMC Thread: increases Core PCE expectation for 2.6 vs 2.4%
-SEP is the same for 2023, but expect Fed Funds to stay higher in 2025 (3.75% 2/ FOMC median rate forecast for 2025 rises to 3.9% from 3.6%

Rates unchanged

SSR FOMC Thread (1)
Fed: risks to the economy are balanced, but don't expect cuts soon
-No QT changes imminent, $60bn on treasury cap and $35bn on MBS continues
-Don't see cuts until more confident inflation nearing 2%
-Holds benchmark rate in 5.25-5.5% range 2/ Rates to stay at 22 year highs in near term
-Wage inflation probably 1% higher than Fed would like in the long term
-ECI probably a bit too hot for the Fed as well
-In the wake of 4Q GDP rising more than forecast, FOMC says economic growth is solid and job gains remain strong

1/ FOMC minutes were not dovish, despite confirming rates near peak 2/ rate of job openings to seekers still at 1.4, but down from 2.0 in 2022

No recession in sight yet

Market is pricing in 6 to 7 cuts, which is excessive

Fed SEP showed 3 cuts (up from 2)

SSR FED THREAD

1/ Fed holds rates at 22y high, as expected 2/ “Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” the US central bank’s policy-setting Federal Open Market Committee said in a post-meeting statement published Wednesday in Washington, adding the word “financial” to language that previously referred only to credit conditions. “The extent of these effects remains uncertain,” the Fed said, repeating that it “remains highly attentive to inflation risks.”

Reasons why individual investors tend to gamble 🎰 in the market, instead of making decisions using risk reward and sound capital allocation framework:

1/ dopamine release from gambling, which the 🧠 gets used to over time, resulting in bigger & bigger bets (and potential loss) 2/ lack of knowledge or experience: retail investors may not have deep understanding of how market works or how to properly analyze & evaluate investment opportunities. Instead, may make decisions based on squiggly lines, speculation or intuition rather than financial analysis

1/ What the banks are doing is taking their collateral and exchanging it for cash at the discount window to fulfill deposits. This does not create new money in the system. It is just a temporary fix for liquidity. Not QE.

$jpm $bac $gs $ms $c $frc $pacw 2/ Fed is taking in the bonds as collateral and that is what is inflating the Fed’s balance sheet. However, these are just being held as collateral against the loan given to the Banks and therefore, they will be returned as the Banks pay off the loan.

1/ Fed presser summary
- fed due to everything to support banking system after recent volatility
- inflation remains to high
- gdp rising at below trend pace
- consumer spending recovered, could be weather
- housing sector weakening
- business fixed investment slowing 2/ GDP growth risks weighted to downside 0.4% this year, 1.5% next year
- labor market very tight
- labor force participation up
- job vacancies very high
- expect supply/demand in labor to normalize over them
- 4.5% unemployment end of this year in SEP and 4.6% next year

1/Powell thread 2/7 interview:

Powell did not expect this labor report to be this strong...

Why rates higher for longer... twitter.com/i/web/status/1… 2/ Could raise rates more if need be, 7 governors in board

Nominated by President and confirmed by Senate

12 Reserve Bank Governors; vote on rotating basis, except NY, which votes every year

19 people sit on the Board

1/ The banks, they don't care, they're ignoring the SIGNS
They're making their forecasts, but they're not in LINE
With the reality of the S&P 500
They're pretending everything's just FINE

$C $GS $BAC $WFC $DB $CS $UBS $MS 2/ But we know the truth, we see the DATA
Earnings recession, it's not just a MATTER
Of opinion, it's there in black and WHITE
But the banks, they're ignoring it, out of sight, out of SIGHT

According to a Dallas Fed paper published this afternoon, U.S. housing prices could fall 15-20% in reaction to higher interest rates... 2/ "U.S. house prices appreciated a remarkable 94.5% from 1Q2013 to second quarter 2022—a 60.8 percent rise after adjusting for inflation. The magnitude of the increase is even larger than that of the preceding housing boom, from first quarter 1998 to second quarter 2007."

1/ Fed's Waller said “we’ve still got a ways to go” before Fed stops raising interest rates, despite good news last week on CPI.

While officials could moderate size of hikes to 50 bps at their next meeting or the one after that -- Waller cautioned not close to a pause. 2/ Waller speaking in Sydney;
-Rates can still go above 5%, depends on inflation
-Markets are way out in front [of reality]
-Household balance sheets in good shape
-We are barely in restrictive policy territory (HA!)
-Will slow pace of QT when get closer to 10% of reserves

1/ Powell: real GDP has slowed considerably
-lower real disposable income
-housing has weakened considerably due to high mortgage rates
-but labor market tight, wage inflation moderate
-labor market out of balance
-participation little changed
-PCE 6.2%, Core PCE 5.1% too high 2/ High inflation imposes significant hardship as erodes purchasing power (food, energy, transportation)
-Strongly committed to 2%
-Continue to significantly reduce balance sheet as well
-Raised 3.75% this year
-Ongoing raises will be appropriate, so its sufficiently restrictive

1/ For those who don't know the different between a Treasury buyback (being discussed by TBAC) and QE, A Treasury buyback is a purchase of US Treasury debt by the Treasury and subsequent cancellation of that debt. A buyback is a consensual transaction, thus differs from 2/ a redemption at maturity or exercise of a call option. Over the past century, the Treasury has only instituted two buyback operations, the first series in the 1920s and the second during 2000-2002.

1/ OPEC THREAD
The OPEC+ group of oil producers will consider cutting output by more than 1 million barrels a day when it meets in Vienna on Wednesday, according to delegates. $USO $UCO $XLE $XOP $OXY $XOM $BP $CVX $CVE 2/ A larger-than-expected reduction would reflect the scale of concern that global economy is slowing fast in the face of rapidly tightening monetary policy. A stronger USD has also weighed on prices. Final decision on size of cuts won’t be made until meeting, delegates said.

The Japanese Central Bank (BoJ) owns 60% of the country's domestic government debt and 80% of the country's ETFs. Yes, eighty percent (80%) of Japan's local ETFs are owned by the central bank! This is equivalent to 7% of the country's $6 trillion stock market, owned by the central bank!

1/ Have been openly negative on $CCL and $RCL since 2021; too much leverage to be sustainable and reopening trade is over...

Cruise lines Carnival and Royal Caribbean saw their bond prices drop on Friday after Carnival reported occupancy numbers that severely missed estimates. 2/ Carnival $CCL stock collapsed more than 20% Friday to $7.02—hitting its lowest level since 1992 after the company reported a net loss of $770 million for the third quarter and revenue of $4.3 billion—far less than the $4.9 billion analysts were expecting. $RCL $NCLH

1/ PUTIN AND PRO MOSCOW LEADERES SIGNED ILLEGAL ANNEXATION DOCUMENTS FOR 4 OCCUPIED REGIONS IN UKRAINE

PUTIN: RUSSIA WON'T NEGOTIATE ABOUT ANNEXED TERRITORIES

PUTIN: WE ARE READY FOR TALKS

DMITRY PESKOV CALLED NUCLEAR ESCALATION TALK IRRESPONSIBLE (POSITIVE) 2/ Russian missile strike killed >25 civilians near Zaporizhzhia early Friday, Ukrainian officials said. City is one that Russia included in territory it claims to annex, although forces never reached it. Victims were traveling toward Russian-occupied zone to evacuate relatives.

1/ Bullard just told other central banks (BoE, ECB, BoJ) to go F themselves:

FED'S BULLARD: OTHER CENTRAL BANKS WILL HAVE TO REACT TO THE FED'S INTENTIONS.

FED'S BULLARD: INFLATION WILL BEGIN TO FALL IN 2023, BUT HOW QUICKLY IS UNKNOWN. 2/ FED'S BULLARD: THE US CENTRAL BANK WILL DETERMINE THE APPROPRIATE POLICY RATE FOR THIS SITUATION, AFTER WHICH IT WILL BE ABLE TO RESPOND TO INCOMING DATA MORE NORMALLY.

1/ Warren Buffett's buy-and-hold-strategy $BRKB is not for everyone. Buying great businesses & holding works over long investment horizons, but Buffett sometimes went years w/o positive returns (70s). He also didn't beat market for many years after GFC. Patience + high quality. 2/ The strategy only works when you buy top decile businesses (brand, IP, oligopolies, cash flow machines), not the "exciting" high multiple or high vol trash most on #fintwit buy. The problem is people trying to pretend to be Buffett and buy trash cos with no free cash flow.

Fertilizer plan shutdowns in Europe 🇪🇺... $ung $cf $ipi $cvr $ntr $most $ande Due to skyrocketing natural gas prices, Europe this summer has lost about half of its ammonia production and 33% of its nitrogen fertilizer production, according to London-based research firm CRU Group.