DRUNKENOMICS

Sorry for the short & solo presentation...some of us were still recovering from a hangover. But we wanted to give a quick update post CPI and what the market outlook vibes are now that we have a seemingly positive real interest rate. More to come in the next week!

Cheers,

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It should be noted, that this is not an attempt to call Speaker McCarthy a zombie. However, we had to come up with somewhat of a title to combine the subject of a what a zombie company is along with the fact that the largest zombie company in the world might in fact be the U.S. government. Even then, the arbitrary debt ceiling has even stirred some worry that a U.S. government default might actually happen. And if you remember, the banking crisis is seemingly starting to show some real contagion through First Republic...don't want to be crying wolf though.

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Seriously, when is it ever not pending...but it seems at though this current pending phase is starting to wear out it's welcome. CPI data came in promising, but retail sales slumping maybe suggests that we might have some weakness ahead. But all this data also might suggest that the Fed's policy might be working and that a soft landing might be within the cards. Also, happy Tax Day. I hope you filed on time or at least got an extension approved. Pretty hectic time of year I know...

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After a refreshing holiday weekend, the BLS is now releasing a ton of important economic data that the Fed will no doubt overreact to. What economic data might you ask? Well for one, jobs data came out on Good Friday, CPI came out earlier today, and retail sales will be released on Friday. In the last couple years, the Fed has been known to try and solve every little forecasted problem without considering the repercussion of creating other ones. Take the supply chain issues, droughts, fixed income portfolios for banks, etc. as an example. Like dude, just focus on your main objectives; inflation & employment.

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So...OPEC+ in their infinite wisdom (actually lack thereof) recently made the 'brilliant' cartel decision to cut oil production by 1.5 million barrels per day. All the while, Saudi Arabia smoothed over tensions they had with Iran, courtesy of China, and speaking of China, they agreed to let Saudi Aramco buy into two of their largest oil refineries. Now, the notion of buying stake in China certainly does seem foolish, but this one comes with a rather unique twist. What might it be? Listen & find out.

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I guess the fruits of the Federal Reserve's labor is really coming to fruition. Because of this, they had to succumb to a 25 basis point rate hike to at least keep up the appearance of not completely falling on their sword. Additionally, SVB got bought by First Citizens on a sweetheart deal from the FDIC and the lack of interest in the SVB's assets. And cheers to Gamestop for posting a profitable quarter...

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I guess the main takeaway from this whole bank fallout out is that the Fed ended up only raising by 25 bps rather than the projected 50 bps by the bond market earlier this month. That and UBS and Credit Suisse are now the same company; which really was a long time coming one way or another. However, the overhanging paradox remains: on one hand, banks that make poor decisions deserve to fail; on the other hand, loss of faith in the overall banking system would be catastrophic for the overall economy. Hmmmm......

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I guess the cat got out of the bag and became the elephant in the room. As far as how that happened, Silicon Valley Bank had a balance sheet so ugly that the Motion Pictures Association would have to create a might need to create a new rating class for it. Like seriously, how can you have a portfolio duration that is so exposed to the interest rate hikes of the last two years. Now the question is how much contagion is there? Let's hope this doom loop doesn't get out of hand.

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Welcome back everyone, hope you had a chance to recover from your accumulative hangover; and what a week to come back to. So far, we've had a Fed presser, a Beige Book release, and a JOLTS report. As expected, we received astoundingly hawkish tone from JPow and the markets reacted accordingly. Additionally, the Chinese doom loop seems look more and more vicious; which can lead to some severe economic implications...more to come.

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In lieu of our 3-year anniversary episode, we decided to form some sort of market outlook for this year. Since we've started, inflation has gotten out of control, markets have been unbelievably volatile, and the Fed is now functioning more like a popularity contest rather than a central bank. However, the constant throughout this time has been the amazing taste of whiskey and the undeniable fulfillment we get when we share a dram with you all. Here's to three more.

Cheers,