As highlighted by Otavio (Tavi) Costa, the need for the FED to cut interest rates is not driven just by labor data and inflation.
As shown on the chart below, the costs of servicing Federal debt in the US is soaring more than in any other country. Not just once, not twice, or even three times — multiple rate cuts would be needed to bring US interest payments as a percentage of GDP in line with the rest of the world. This is what financial repression is about. Source: Tavi Costa, Bloomberg
The recessionary trade was in full effect yesterday following weak ISM data.
Cyclicals underperformed Defensives by 429bps, one of the worst days in the last 16+ years. The only other comparable days were during the March 2020 Covid crash and 2008 GFC. $SPY $QQQ $IWM Source: David Marlin, Bloomberg
BREAKING: US job openings declined to 8.18 million in June, down from 8.23 million in May, near their lowest level since 2021.
Year-over-year, job openings fell 10.3%, marking the 23rd consecutive monthly decrease, the longest streak since the 2008 Financial Crisis. The ratio of vacancies per unemployed worker, a metric the Fed follows closely, fell to 1.20, the lowest since June 2021. At the same time, the private sector hiring rate declined to 3.7%, the lowest level since April 2020. The private quits rate, measuring the number of people who voluntarily leave their jobs, fell to 2.3%, the lowest since August 2020. This means that Americans are the least confident that they will find a new job since the 2020 Pandemic. => The US labor market is weakening. Source: The Kobeissi Letter
ISM PMI Employment came in at 43.4.
Only time lower: 1) the internet bubble popping. 2) the GFC. 3) Covid-19. Source: James E. Thorne, Bloomberg
Delinquency rates on Office building loans hit 8.11%, the highest in more than a decade 🚨
Source: Barchart
Loose policy = Bull market
Even if the BOJ hikes a few more times, real rates will remain deeply negative, a sign of accommodate policy. Chart tracks Japan real rates & market performance ➡️ 2009 -2013: period of high real rates, languishing stock market🔻 ➡️2013-2021: BOJ floors rates, pushes rates negative and fuels stock rally ✅ ➡️ 2021-2024: inflation picks up, real rates drop even further negative, Topix rallies 50% ✅✅ Source: David Ingles, Bloomberg
Total US Federal debt has officially hit $35 trillion for the first time in history.
Since 2020, the US has now added ~$12 TRILLION in Federal debt. In other words, the US has added an average of ~$280 BILLION of Federal debt EVERY MONTH since January 2020. This means that the US now has ~$105,000 in Federal debt for every person living in the country. All while deficit spending as a percentage of GDP is currently at World War 2 levels. Source: The Kobeissi Letter
German inflation unexpectedly accelerated in July to 2.3% YoY from 2.2% in June as food price inflation keeps rising, core inflation, and services inflation remain sticky at 2.9% and 3.9%.
Source: HolgerZ, Bloomberg
