DRUNKENOMICS

Jobs report, check. Inflation report, check. Retail sales, check. Three key pieces of economic data for the month of January came out over the past week and all of those signs point to a strong economy; meaning inflation has not cooled at all. Now, hindsight 20/20, the 25 bps hike last meeting now seems weak and cowardly. The contrarian view, however, is that government interest expense is pushing $1 trillion while personal credit card debt is also nearing that benchmark. Maybe it makes sense, idk I'll ponder it over a bottle of whiskey.

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The Jobs report on Friday proved that the Fed has a lot more room to tighten monetary policy even more. The only thing we now need to see is the CPI report that conveniently comes out on Valentines Day. Additionally, Lebanon felt the appropriate move for their country is to devalue their currency by 90%. Why would they do that? Well, pour yourself a dram and find out.

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Well, 450 basis points later and the Fed has not been able to control inflation...especially in chicken/egg prices (although it would be cool if the Fed had a tool in their arsenal to increase chicken & egg supply). But in all seriousness, in the biggest earnings week of the first quarter, the markets also decided to get optimistic about a potential Fed pivot taking place before the end of the year. In other words, being "data-dependent" really means they have the ability to be totally flaky and still have more attention than the prom queen. 

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As the entire world (including Saudi Arabia) gets to know China a little better, the prospects of the petroyuan taking over seems less and less likely. And that's even with all the trade partnerships in the works for China. Seriously, their municipalities are running low on cash, their real estate market is in shambles, and their leadership is seemingly oblivious to their economic deterioration. However, to throw another turd in the punchbowl, talks of the petrogold are starting to materialize. On the homefront, debt ceiling concerns are back as it was kicked down the road back in 2021. What will these concerns potentially turn into?

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Inflation print came in a lot cooler last week, which leaves some odd balls to believe the Fed's chance of navigating a soft landing has actually increased. However, if you actually examine the CPI basket of goods and see the drivers of inflation, the news really isn't that good. Better than last month, I'll admit; but still not good. Additionally, international trade agreements are starting to gain momentum as BRICS and the NDB are starting to attract suitors. Now the 'developed' world has some competition.

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Now that we got all the new year shenanigans out of the way, we're right around the corner from the first wave of economic data coming out (although a ton of data has already been released); which means the powers that be will have a ton of soul searching to do post-reckoning. But all that really means is that they're just gonna continue to be 'data-dependent,' whatever the hell that means. Also, the fixed income market has forced pensions to beg their public relations departments to fend off mark-to-market inquiries. Lol.

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Despite pretty much every asset class experiencing some major carnage last year...it could be worse. Although most major investments were down, it did present an opportune time to do some tax-loss harvesting; which, the subject alone is pretty touchy. Additionally, we finally decided to follow up the potential tinfoil hat story about the potential currency war between China and the U.S. So it's about time we poured one out for the Petrodollar.

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We all got by 2022 inflation adjusted...congrats y'all & cheers to you. In our last presentation of the year, we actually tried to not talk about the Federal Reserve since they were pretty much the only topic of conversation all year. Instead, we talked about household debt levels, real estate, and of course some billionaire gossip. See you in 2023, in the meantime, feel free to hit us up...

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With all due respect, the Fed has no balls. Even after admitting the strong labor markets and the pain inflation is causing on the American economy, they still only chose to raise the Fed funds rate by 50 basis points. In their desperation to navigate a soft-landing, inflation may continue to persist well into the new year. Also, European Central Bank is facing even larger problems.

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As promised..here is our presentation (episode) about complex options trading strategies. When we say complex strategies, we mean option trading strategies involving more than one option contract. These strategies include credit/debit spreads, iron condors, protective puts/covered calls, collars, calendars/diagonals,   straddles/strangles, and even butterflys. We will meet again this week for another drink as toast to CPI results and Fed decision. In the meantime, feel free to send any questions about options trading to us by...

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