Well, we survived, that is, after a fashion. Four long days of over-produced self-congratulation in Chicago, and then a 72 hour economic coffee klatch in J-Hole, capped off, on Friday, by the only relevant aspect – Chair Pow’s “will-he-or-won’t-he-and-if-so-when” Policy Statement.
The answer to the latter was “not yet, but soon” – a stance for which I forgive his having denied me yet another stroke of prognosticative glory, by surprising everyone, as I predicted he might, with a big cut then and there.
But I anticipate myself. So, first things first. Our theme derives from “Duck Soup” – a fabulous film by the fabulous Marx Brothers, who are not everybody’s jam but are most decidedly mine. The punchline in question is so pithy that it is uttered twice in the script: once by Groucho and once by Chico.
And the rhetorical choice enunciated by the brothers continues to prevail across various realms of our existence. Case and point: against last week’s orgy of economic and political theater that swallowed up the news, came an announcement, issuing from the eastern bank of the Hudson River, that Manhattan College, formed in 1853 by 5 De La Salle Christian Friars, is, as of August 1st, Manhattan University.
The modified nomenclature is entirely appropriate, particularly insofar as, if you define a university as a college with graduate programs, the institution has long since met the criteria, and its new name simply reflects this longstanding reality.
However, its principal, indisputably visible deception remains – it is located not in Manhattan, but rather in the Bronx. Bronx University would thus always have been a more apt moniker than Manhattan College, but the former hardly trips of the tongue, and now they’ve corrected half of the problem.
But back to Powell, who was compelled to confront the me-or-your-lyin-eyes conundrum himself at J- Hole, as his speech transpired three days after the Bureau of Labor Statistics announced that it had overstated year-over-year job creation by an estimated 818,000 gigs.
Oopsies.
To make matters worse, a few banks had advanced knowledge of the tape bomb, and the best that can be said about this is that they weren’t tipped off. Instead, in their justifiable panic, the propellor heads at BLS first delayed the announcement by more than half an hour, offering, as consolation, a number to call for further inquiries. A few enterprising financial institutions took them up on this offer, and, so doing, got the news early. Good on them, says I. I hope they crushed the associated trades.
Meantime, the official numbers, while now in the books, beg a few questions.
It should come as a surprise to none of my readers that I smell a political rat, that the number crunchers had their fingers on the scales in hopes of creating Labor Market optics superior to associated reality.
But what puzzles me is the timing of the revisions. If whoever engineered this feint had a notion to push the correction beyond the November election, it would all make sense. But no, the adjustment came in August, annoying everyone, embarrassing its sponsors (to the extent that they are capable of feeling embarrassment), and creating, if anything, a political liability.
This is the sort of thing that calls into question the reliability of the entire economic reporting complex, a concept that I find particularly triggering, for the following reason. Occasionally, in my day job providing risk analytics to hedge funds, a client will spot an error in our reports, and, when this happens, they invariably question me as to the validity of every number my system has ever produced.
So, I empathize with the statistical bureaucrats, but only up to a point. For one thing, my livelihood depends on pumping out accurate digits, and I’m not sure that theirs does. In addition, on those rare occasions when a bona fide error does pop into one of my reports (much more frequent are instances of bad data sent to us or misinterpretation by the client), my company is excoriated for it. But while a few bond-trading Wendy Whiners might make some noise about misplacing >800K gigs, at the end of the day, the act caries no consequence for its perpetrators. Whatever its cause, they just shrug their shoulders, blame some unintended but not ill-intentioned glitch, and offer the following platitude:
“Who are you gonna believe? Me or your lyin’ eyes?”.
The markets took the whole thing in touching stride, focusing perhaps more directly on the potential contribution the downwardly adjusted numbers will have on the prospects for rate reduction. They rallied ‘em all week.
Except for Thursday, which featured what I would describe as a modest “don’t get any ideas, Powell” selloff, which was offset and then some on Friday. The Gallant 500 now resides a skinny 30 index points from its all-time highs.
And things ought to quiet down next week. Yes, there’s the NVDA earnings, and, as the stock has already largely recaptured the unseemly selloff manifested earlier this month, a surprise in either direction could indeed move the markets.
But then comes the big Labor Day exodus, which traditionally features the emptying of trading desks. And here, our lying eyes again impose upon us a veracity test. Because trading desks by and large are a thing of the past. Case and point: the trading floor at UBS American HQ in Stamford, CT.
A generation ago, it was the Taj Mahal of the trading industry, with world class workout facilities, a state-of-the art espresso bar, etc. It was the largest floor of its type anywhere in the world. I also remember that its opening was ushered in by the Bank’s purchase of ~25% of the area’s houses – at a fat premium, in order to supply dwellings for the legions of ex-pats designated for assignment.
But that was then. Technological advances in the science of trading, combined with the ubiquitous, and now seemingly permanent impacts of them damned lockdowns have rendered the facility obsolete.
And now, if one passes Exit 8 on I-95, in either direction, one finds that the facility is the global headquarters of the World Wrestling Entertainment enterprise:
There’s something entirely relevant to our theme in the conversion of a trading floor that once processed trillions of dollars a of financial transactions volume a month into an office whose main business is to produce scripted battles between bearded, jeweled behemoths, that all involved parties (participants, sponsors, audience) acknowledge to be not sport, but mere show.
Trading, across dispersed physical locales ensues, and here too, participants must choose between what is in their field of vision, and what the tape is telling them. Other than the political St. Vitus dance, the data flows should be finite. There’s the next Jobs/Inflation reports, which now, in addition to the implications of various outcomes, must be questioned from an accuracy perspective. The Big FOMC meeting, with its promise of rate cuts dancing in our heads, comes a couple of weeks down the road.
Though wrong about the J-Hole surprise, I continue to believe the Fed wishes to dazzle us. So, I’m guessing 50 bp is on the docket.
By all rights, this should goose the market, but I am obliged to urge caution, nonetheless. September is by a wide margin, the worst return month on the calendar, and the trend has been acute these past 4 years, which, try not to remember though we might, has produced G5 returns of -3.9%, -4.8%, -9.3%, and -4.9% respectively.
I am not overly worried about this. But then we’ll be in the home stretch of this fucked up election cycle, and probably, it will behoove us to pay attention. All candidates will ask us the question first put forward by Groucho and Chico. And it will be up to each of us to determine whether we can believe our own lying eyes, or, alternatively, the spiel of either of the dissembling consortiums seeking to sell us their bill of fare. But, FWIW, I will cop to having less faith in the the krew that continues to undertake undemocratic actions in the name of “saving democracy”, who fly their private jets into O’Hare to lecture us about carbon emissions, who cry crocodile tears about working families and the poor while the cameras roll, and then excuse themselves to Dom Perignon/caviar parties on Lake Shore Drive.
I’m left wondering what those 19th Century La Salle friars would’ve thought of it all. They did establish their organization in lower Manhattan, and only migrated it to the Bronx a couple of generations later. Their leader was a guy named Jasper, and their teams still honor him in their nomenclature. In light of it all, the Manhattan University Jaspers will have my full support this coming basketball season. My lying eyes will ignore their Bronx locale, and celebrate their overdue elevation to university status.
TIMSHEL