Tom Graff

I'm sure this is true, but it is also true that *every* correction ends with a short-covering rally. You just don't know which one is going to mark the bottom.

a man wearing a sweater with a maze pattern on it is talking to another man ALT: a man wearing a sweater with a maze pattern on it is talking to another man

Absolute disgrace that so many of the articles about the late great Val Kilmer don't mention his greatest role: that of Chris Knight.

Bond market is bull flattening: long-term yields are down, short-term yields are flat.

That's what happens when the market thinks high Core PCE will keep the Fed from cutting short-term, but the economy will be weaker long-term.

IOW, soft spending number >> hot inflation number

This is big if true. I can't help but think about when Goldman backed out of the subprime MBS game ahead of everyone else. This isn't going to be a macro disaster on that level of magnitude, but it could be a case of one player realizing the market is shifting ahead of others.

Give Bessent credit: he's consistent. IMV stuff like the size of auctions or minor tweaks to fin reg is only going to impact rates on the margins.

But Bessent always claimed Yellen was moving the 10yr materially (calling it stealth mon pol). So it makes sense that he believes this stuff will work.

Yes, that's king of my point.

Sometimes the thing in the news isn't really what is driving markets.

If you privatize the GSEs, the key will be to retain the TBA market. There are fairly easy ways to maintain an effective govt gtee. TBA is trickier. Not impossible, but trickier.

W/o TBA, mortgages become harder to trade and hedge for originators. That would drive mortgage rates up.

Trump’s Housing Chief Embarks on Shake-Up at Mortgage Giants Fannie Mae and Freddie Mac Board members and senior managers have been ousted, and the administration is weighing proposals to privatize the mortgage giants.

I'm certain real work will be put in on privatizing FNM/FRE, but it is logistically and politically difficult. It would be difficult to pull off without mortgage rates rising, which is something voters watch carefully.

I'm skeptical Trump ever pulls the trigger on it.

www.wsj.com/finance/regu...

YouTube video by Facet Will Government Layoffs Crash the Economy? What Investors MUST Know!

While we wait for the Fed, check out my take on how DOGE and Trump's government layoffs could impact the economy.

www.youtube.com/watch?v=DaYy...

In fairness, this is heavily because of the huge increase in the trade deficit, which is almost certainly going to be a one-quarter thing.

It is widely assumed that Waller is auditioning for the Chairmanship should Powell step aside. I don't disagree, but I do think Waller is a guy who charts his own path. Witness his dissent today, arguing that the Fed should continue with QT. That's not the kind of dovish dissent the WH would want.

Welcome! You are invited to join a webinar: Meet Facet's Chief Investment Officer (CIO) Tom Graff. After registering, you will receive a confirmation email about joining the webinar. Interested in learning more about Facet's investment strategy? Join us this Thursday, March 13th, at 12:00 PM ET, when Tom Graff will share insights into how Facet manages members' portfolios, provide...

If anyone is interested in how I'm navigating the current market volatility, we're running a 30 minute webinar tomorrow afternoon. I do this every month for Facet members, but this one is open to the public. Would love to see you there.

facetwealth.zoom.us/webinar/regi...

I'm willing to give this site time. It def doesn't have the engagement (even excluding the bad engagement) of the orig.

Unfortunately right now, neither site is has the diversity of opinions that I'd prefer.

Lastly, the public simply isn't going to make the distinction btw 1x price increase vs on-going inflation.

Say inflation accelerated from 2.5-3% to 3-4% just for a year. Then reverts back.

Interest rates are higher, the media is talking abt inflation non-stop... The politics won't be great. (fin)

Next, I'm not so sure that the cutting of government spending + a tax cut later this year won't also be inflationary in the more traditional sense.

I.e., you're probably shifting demand from government goods to consumer goods at a moment where you are also creating a supply shock. 4/

Companies are more used to raising prices than they were pre-COVID. Consumers are more used to prices going up.

This means there will be less price increase friction than there was before 2020.

To put it in monetarist terms: I think there's a risk that velocity has become unstable. 3/

Bessent is thinking like a 1980/1990's style monetarist: tariffs can't cause *on-going* inflation because they don't expand the money supply.

There's def something to this POV.

However I think this ignores the expectations channel. Expectations are way less anchored than they used to be. 2/

YouTube video by CNBC Television Treasury Secretary Scott Bessent: Tariffs are a 'one-time' price adjustment

If you think like an economist drawing curves on a whiteboard, I think Bessent is right. Tariffs are a 1x supply shock, which should cause a 1x price increase. That technically isn't inflation.

I think in reality, it isn't that simple. 1/

www.youtube.com/watch?v=HeZS...

I think of this as a kind of stall speed. If the economy isn't growing enough to keep companies hiring, income growth slows, then spending slows, and suddenly companies are laying people off.

US job gains are always either good or bad. They don't stay mediocre for long. This chart shows that job growth never sits btw 0-1% (red line). If it falls below 1%, it either rebounds quickly or goes negative. This is rolling 6mo to take out noise.

Rn we're fine, but it can't go much lower.

There's at least 100k worth of layoffs + buyout that is going to flow through the system at some point. Some will quickly get other jobs, but I'd also assume the Fed job loss number keeps climbing. So this will be impacting the data for a while.

Basically an in-line payroll number, spoos jump 35 points. Exactly what I was saying here. Remember folks, when the market is on edge, you get big moves in both directions on relatively minor news.

If people want it, the ETF industry will produce it. I'll bet there are lawyers drafting prospecti right now.

Based on what I'm hearing from clients, if someone launched an ex-Tesla ETF, it would sell like hotcakes.

Great episode. One thing that didn't come up is how wildly underweight most US investors are to Europe. Markets-wise, a little economic outperformance could cause a big shift in asset allocation.

IMV, stocks aren't falling bc of spending cuts or anything DOGE is doing. Stocks don't like tariffs and esp the haphazard way they are being implemented. If the House budget were to pass as is, I don't see that as economically contractionary.

I would guess, emphasis on guess, there's an unusually large reaction in stocks to this payroll number. A tiny beat might set off a pretty big relief rally.

I'm not crazy worried about this. But I think the right interpretation is that consumers don't have a lot of give. If income growth wanes, consumer spending will slow in a hurry.