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Thoughts From The Divide - Archive

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SBOI, Inflation and the Fed - February 12, 2019

The NFIB released its Small Business Optimism Index and, while the press was quick to comment on the weakness of the data, the numbers were not all bad. Research suggests that recent inflationary pressures are something to shrug off and allowing inflation to run hot could have helped reduce economic slack.

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Cause and Effect - January 29, 2019

Jerome Powell and the Federal Reserve do not see the Fed Balance Sheet runoff creating problems, but the tide may be changing as QT may reverse the virtuous cycle created by QE. Recent housing data has further shown mixed signals and the government is a bit worried about mortgage lenders.

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Shades of Dove and Volatility - January 15, 2019

Whether you are bullish or bearish, the right side of the trade in Fed speak has been dovish. Current and previous Fed officials have been worried that the Fed is nearing policy error and could tip the economy into a recession. Chris Cole of Artemis Capital thinks more volatility is in store, which could pose a challenge to certain strategies and market participants.

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Economic & Policy Incongruities - December 11, 2018

Recently we’ve highlighted some US economic data has displayed some incongruities between ISM and Markit Manufacturing. Now, NFIB’s Small Business Optimism data, former Fed officials, and news sources have mixed signals.

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Rates, Rates, and More Rates - November 27, 2018

Going into the FOMC meeting in December, a number of important "rates" are making headlines. Vice Chariman Clarida discusses u* and r*. Research from the San Francisco Fed disagrees with Neel Kashkari's belief that the Labor Force Participation Rate implies Labor Slack. And, Mortgage Rates are the scapegoat for recent problems in the Housing Market.

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Where is Labor's Share - November 20, 2018

With much recent talk of workers being left behind, this weeks TFTD's focuses on a paper on the Labor Share from the NBER. While median labor share has increased, there are some negative trends, including increased value added at firms with low labor share, and asymmetrical responses to productivity shocks.

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Dovish Daly? - November 13, 2018

In a recent speech, San Francisco Fed President Mary Daly gave hope to those worried that the Fed was on a set path of hiking. First she assured the crowd that the Fed was data dependent, ignoring its horrendous record of forecasting problems and the massive transmission lag. Second she highlighted benign inflation numbers. Though inflation is still contained, recent job data indicates that wage inflation is on its way.

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Fed Themes and The Consumer - October 30, 2018

Recent Federal Reserve surveys show the economy is still expanding, albeit at a slower rate, with tariffs, labor, the supply chain, and housing discussed as problems. Consumer Confidence was, however, undaunted. President Trump tweeted about the record numbers, which were partly due to strong employment growth and strong Expectation Index.

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Housing Daunted - October 23, 2018

Following the optimism of the previous week's builder data, a recent flood of data indicates potential rain in the housing market, including permits, starts, and applications. Paramount among the problems was affordability, which is becoming problematic due to higher mortgage rates and price inflation. Wage inflation could help with affordability, but has not accelerated past rising costs.

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Independent Fed and Housing Optimism - October 16, 2018

As President Trump and Fed members exchange words following the recent market wobbles, we discuss 2005 research from the St. Louis Fed analyzing the Great Inflation, analyzing the human and political elements that complicated and informed the decision making. Housing remains in focus as builders continue to be optimistic, despite continued tightness in the labor market.

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NFIB Warning and Improving Conditions - October 9, 2018

Contrary to the Fed's rosy outlook on inflation, the lasest NFIB Small Business Optimism data indicates that the economy is running too hot and growing at an unsupportable rate. The same dynamics leading to overheating are helping workers, and certain demographics, including those with less than a high school diploma, are seeing strong earnings growth along with reduced unemployment and an increased participation rate.

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