L. Cassius ille, quem populus Romanus verissimum et sapientissimum iudicem putabat, identidem in causis quaerere solebat, cui bono?
—Cicero: Pro Roscio Amerino, §§ 84, 86
God Oh Mighty. I must be getting old. For one thing, I’ve resorted to (ostentatiously) busting out my Latin chops. And, if that weren’t shameful enough, to retreading on old thematic ground.
Oh well, at least I was able to shout a holler to my ol’ pal Marcus Cicero — always a plus.
And besides, the whole cui bono (in English “who benefits?) thing is everywhere one cares to cast one’s eyeand I have long found the answer to this question to be quite handy in determining root causes and likely outcomes of any number of issues. It is so today, as applied to the full range of challenges we face. Thus, cui bono, abides.
It came up, for instance, just the other day at work, in a pre-FOMC discussion about Wednesday’s pending rate announcement.
Perhaps out of sheer boredom, the crew was engaged the old “what are they gonna do?” chatter, even though we all knew they was gonna stand pat and talk tough. One of our newer members, however (who can perhaps be forgiven for having attended the Kennedy School of Management at Harvard University), looked at me, surest on the point and asked “why?”
“Because it is in their interest to do so” I responded. However, as this was an insufficient explanation, I went on to offer by belief that the other options were sub-optimal to the Fed’s agenda. Surely, amid the other two choices, a rate cut was off the table, and, as for another hike, well, to me it was abundantly plain that the associated juice wasn’t worth the squeeze.
Sure, if it subsequently came to pass that Inflation surged, they’d look like geniuses, but, on the other hand: a) this is a low-probability outcome; and b) they’d be annoying everyone by doing so in the meanwhile.
And, as it turned out, we were right. They held. And talked tough. So, what happens now? The over/under centers around one more rate hike this year, which sounds about right to me. Why? As a political enterprise, I believe they’d like to take rates as high as they can without crippling the economy, thus enabling them to be as generous as possible/necessary with their cuts in the election year of 2024. This, of course, pre-supposes that their sympathies lie with the current administration, but I simply fail to see how that point can possibly be up for dispute.
To whatever extent this cui bono line of argument is valid, our Central Bank is receiving a massive assist from that unstoppable juggernaut otherwise known as the United States economy. Its Atlanta Division is forecasting an astonishing 5% growth rate for Q3.
And even the curmudgeons that gin out such prognostications for the Banks and Brokerages that track these matters have taken their estimates up to 3%:
Economists, who Nobel Laureate Paul Samuelson once famously said have predicted nine of the last five recessions, are calling for a major slowdown in Q4. As they have all year. Cui bono suggests that they don’t want to be tardy or absent for the next decline in economic activity.
Major headwinds include, for one, the potential for a government shutdown, and I am unable to resist the temptation of pointing out that the correct answer is omne beneficium – all benefit. A big part of me wishes they’d close up shop forever, and, as to those lingering questions – Besos can deliver the mail and Musk can defend the shores.
Convince me that we’d be worse off in any way, and significantly better off from any number of perspectives. Go ahead. I’m waiting.
But I reckon we’re stuck, not only with a government, but one that takes a notion to shut down every other lunar cycle.
That the government itself would be a loser if it were to peace permanently, we will take as a given. It remains, though, to wonder who benefits, from a showdown that both sides know they will ultimately abandon. Mostly, and especially this time, it seems that what is really at play is the battle between factions both within and across the two political parties. Certainly, this is visible on the Republican side, with the hardcore segment wishing to push the hard line as its forever policy stance.
On the Dem side, there appears to be more harmony, as the entire caucus agrees that the more we spend, the more we tax, the better of we, or at any rate, they, are.
Given the way the cui bono chips are stacked, I anticipate a more rather than less annoying cycle, which, when it is finally resolved, will find both sides claiming victory in the name of public good.
Will the markets care? History says no, but I think we gotta keep an eye on this thing nonetheless.
Energy prices are rising, benefitting the Russians, the Arabs, and few others, but threatening our current serene domestic state. If the trend continues, then there’s no possible way to win the next inflation battle, so I’d keep an eye on those markets as well.
And, while we’ve checked in at the commodity store, we may want to take a sticker shock glimpse at Live Cattle and Chicken – getting more expensive in their pens with every moo, every cluck:
The USD is at multi-year highs, but nobody seems to want this.
Given all the above, it strikes me that we are in a cycle of nullus beneficia – nobody benefits. From anything.
But I hate to lay that kind of buzz kill on y’all, in the last week of what the Atlanta Fed projects to be a quarter of 5% GDP growth.
So, maybe we should count our blessings. And that means you, my whiny traders. The Naz is, after all, still up 26% this year, and if you can quit complaining and gather yourselves, maybe we can end the year like we began it.
And please don’t come to me with that cui bono bullsh!t – especially in a raging bull cattle market.
Cui bono? Omne bono.
And with that, you know what to do….
TIMSHEL