“Since I’ve become a central banker, I’ve learnt to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said”.
Alan Greenspan
We are plainly operating on a rate-sensitive tape – perhaps as best exemplified by the market’s giddy reaction to Powell’s dovish tilt at J-Hole this past Friday. As I will further argue below — and particularly given the uber-politicized nature of the issue, I believe Chair Pow indeed spoke with undue clarity – for a Central Banker at any rate. Perhaps he should’ve taken a page out of predecessor Greenie’s book. On the other hand, he may not have had the luxury to do so.
But we’ll get to all that.
Meantime, I’ve been jonesing to give a shout out to my main man Gaius Plinius Secundus (AD 23/24 – 79) – known to us street cats as Pliny the Elder – Warrior, Man of Letters, Statesman. He was also the, er, spiritual guide of Gaius Plinius Caecilius Secundus (AD 61 – 113), — known by the same crew as Pliny the Younger and mostly famous for writing letters about the Elder.
Historical records indicate that the latter was the former’s nephew. But one look at them side by side gives rise to the hunch that perhaps the Uncle/Nephew link was nothing more than a ruse, employed throughout the ages, to mask a more – shall we say – in depth relationship:
The Plinys – Oncle et Neveu:
No matter. I’m not here to judge.
What is more to our purpose is that P the E (a prolific author if ever there was one, having penned, among other works, the 37 book/10 Volume “Naturalis Historia” – the first ever compendium on the History of the Natural World) is widely credited with having coined the phrase “cum grano salis” – “a grain of salt”. In modern-day vernacular, the inference is one that challenges the veracity of any claim or statement – as opposed to its original application: implying the powers of small amounts of sodium as an antidote to certain poisons.
In today’s world, there are probably better correctives than salt to menacing materials. But I still believe that much of that which our crania consume should indeed be so taken.
But perhaps not Chair Pow’s J-Hole remarks. He tells us that he’s now more worried about the Jobs picture and less so about Inflation. And we should believe, if not whether this truly reflects his mindset, then at least its implications for going forward monetary policy.
I believe there is undue clarity on the latter – not so much owing to a sober reading of macro trends, as of the political forces impelling the statement. Because politicians of every stripe are indisputably on the warpath for these and other policy objectives. Trump, for instance, has dispatched one Fed member, threatened the liberty of a second, flipped two others. Most importantly, he’s neutered the Chairman.
And he’s just getting started. You can bet your boots that he and his crew are working every single FOMC voting member – 24/7.
All of which has me thinking that: a) a 25 bp cut next month is in the bag, and b) if anything, the Fed might go big and cut 50.
But investors are taking it all with a grain of salt. Instead of shifting the futures market, which was ~90% 25 cut/ ~10% flat to some split between 25 and 50, they have instead reduced their expectation of any rate cut at all — down to a paltry 75%:
Last Week: This Week:
Maybe somebody knows something I don’t. But I stick to my guns here, not only in my conviction about the Fed’s next moves, but in my belief that the Treasury will manage, over the next several months, to slash rates across the entire curve.
One only need review the overall news flow to understand indisputably that it’s adult swim in macro land. The political sharks are circling and gobbling up everything within reach. Texas passed its gerrymander stunt this past week, and is being seen and raised by California, New York and Maryland. The FBI raided Bolton’s crib, and not just for yuks. Albeit with some justification, the Administration has co-opted the funding and/or mission of the Corporation for Public Broadcasting, The Kennedy Center and the Smithsonian Institution.
Finally, and as important as all the others, the Government has announced the finalization of its intent to purchase approximately 10% of chip-maker Intel. And this just weeks after practically accusing the Company’s Chair of being a Chinese spy.
All of which offer examples of an approach to governance which features acute long-term memory, and a penchant for score settling.
Impacted agents are taking notice. A judge threw out that (admittedly ridiculous) $0.5 Bil levy against the Big Guy. Epstein’s Girl Friday is now certain that, while Trump did indeed visit the former’s eponymous island multiple times, he apparently, on each occasion, acted with the utmost decorum.
And, under the circumstances, can anyone doubt that until the political winds shift (and they will), if Trump wants lower rates, he is, by God, gonna get ‘em?
So, the markets ended last week with a resounding rally, but between now and Labor Day, there’s not much on the scheduled tape to either extend or impede this trend. Except, of course, the most important data point of all – the Life and Death NVDA earnings drop on Wednesday. Not much else really matters in this world. Humanity, at this point, is little more than an NVDA derivative, a single-stock ETF, a wholly owned subsidy thereof. And there’s not much more to say on the subject.
It’s probably worth checking in on their latest tidings Wednesday after the close. After that, y’all have my permission to bounce, to focus on the long bittersweet weekend ahead, the one that marks the end of yet another summer season, gone forever and gone too fast.
We will return to greet the last trimester of what has been, to say the least, an interesting year. I don’t think we will enter the proceedings with an abundance of undue clarity.
Heck, the Fed doesn’t even weigh in until just before the Autumnal Equinox, and I do expect a frenzy of speculation in the lead up to this watershed announcement.
In extended closing, it should be noted that Pliny the Elder died saving people from a rather nasty eruption of Mt. Vesuvius — in AD 79. He was in his mid-50s. He left behind quite a legacy. Including the above-mentioned Naturalis Historia, which is the largest written work to have survived from the Roman Empire. In addition to the grain of salt bit, he is the author of record of the quote “nothing is certain but uncertainty”, and several other idioms we still use to this day.
He is also immortalized by a malted beverage, produced by a Northern California brewery:
I have never sampled this libation. But seeing as how it’s the end of summer and all, it might be worth choking down one or two of these bad boys.
You could probably do worse than by emulating my example.
And if you do, you might spare a thought for Gaius Plinius Secundus. Pliny the Elder.
He covered a lot of ground during his five and a half decades on this earth. He has a beer named after him. And he left behind a nephew to tell his story.
“Nothing is certain but uncertainty” he informed us, while, elsewhere, admonishing us to take things with “a grain of salt”. Both statements are applicable across the ages. Maybe no one understood this better than former Fed Chair Alan Greenspan. Who, with elegant purpose, mumbled a lot.
Greenspan is an economist/amateur musician, as am I. In his younger years, he jammed with the Great Woody Herman and Stan Getz. Whereas I have never jammed with no one famous, not once. We both attended Columbia University, but he completed his PhD, and I did not.
But neither of us are Warriors, never, unlike our hero Pliny, having saved a single soul from an erupting volcano.
Neither Greenie nor I, to the best of my knowledge have a beer named after us.
So, perhaps on this late summer day, it would be wisest to take what we say with a grain of salt.
And if I have been unduly clear in this note, then you have most certainly misunderstood me.
TIMSHEL