Unexpected?

Now that the slowdown is being absorbed and even talked about openly, it will require a period of heavy CYA. This part is, or at least it has been at each of the past downturns, quite easy for its practitioners. It was all so “unexpected”, you see. Nobody could have seen it coming, therefore it just showed up out of nowhere unpredictably spoiling the heretofore unbreakable, incorruptible boom everyone was talking about just last week.

A prime example from yesterday’s “unimaginable” market display:

“What is the most striking aspect of this move is the extent of it in just two days and how the acceleration came out of nowhere right after a supposed amicable meeting between the U.S. and China,” Peter Boockvar, chief investment officer of Bleakley Financial Group, said in a note. “It’s almost as if the bond market screamed out, ‘It’s too late, the growth slowdown underway can’t be reversed”’.

Maybe it doesn’t have anything to do with US/China trade disputes? As I wrote yesterday, there is an inevitability to the downside now that derives from this constant misunderstanding of the underneath. That’s because the very idea of a boom was made up from nothing.

The narrative that there was had been pieced together from fantasy, a purposeful misreading of the situation to make it sound like recovery was, excuse me, inevitable. But if you listened closely to what policymakers were really saying, given how the media narrative is set that’s where everyone starts, they were actually describing a two-step.

Markets were thinking the same way, too. In other words, it was for investors (bonds, not stocks) “show me the inflation” and only then do we (literally) buy into the growth paradigm. If the unemployment rate was the correct gauge of economic conditions, wages would accelerate (LABOR SHORTAGE!!!) leading to companies raising their prices to offset these new labor costs which they could do for once because the economic boom would allow it.

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Gary Anderson 4 months ago Contributor's comment

I love your chart at the end showing commercial paper. So now we have a series of additional lies, like Williams saying the RStar is obsolete, when they still try to measure it and Wilbur Ross saying we have labor shortages and not enough workers. In Ross's case, if there is a skilled worker shortage, that is a function of education, not of a total labor shortage.