Month: October 2023

PCE inflation settled down a little bit in September but core inflation was up:

Why the sudden spike in core inflation? As usual, it was mostly in core services, which were up at an annualized rate of 5.0%. Overall, this is not good news on the inflation front.

On a year-over-year basis, the headline PCE rate was up 3.4% and core PCE was up 3.7%.

Three weeks ago Hamas launched a surprise attack on Israel. Multiple thousands of rockets were launched at Israeli targets, killing hundreds, but I suppose that to some people this seemed unremarkable. Rocket attacks? It's happened before and it will happen again. That's what Iron Dome is for, isn't it?

Of course the attack was far more brutal and monstrous than that. But even at this late date I wonder if everyone entirely understands the nature of the hundreds (or thousands) of war crimes committed by Hamas during their attack:

• Thousands of Hamas soldiers swarmed into Israel and slaughtered everyone they could find. Many of the bodies showed signs of torture and rape.
• Among the dead were children and babies, some of whom were burned alive.
• Soldiers in paragliders and pickup trucks attacked a music festival and methodically gunned down nearly every person there.
• Hamas fighters have taken more than 200 civilian hostages who are currently being held in Gaza.

I'm not sure why I'm writing this. Everyone already knows all about it, don't they? I wonder. Maybe not.

Now, as sickening as this all is, it doesn't justify Israel's ongoing campaign to deprive two million civilian Palestinians of food, water, and fuel. And God only knows what they're going to do when they finally start their ground offensive in Gaza. I can only hope it's less barbarous than I suspect it will be.

There are—and have been for decades—plenty of recriminations to go around on all sides for the endless cycle of war and killing in Israel and Palestine. There are no clean hands here. That said, Hamas started this war, and did so in the most brutal and repellent way imaginable. We can all plead for a certain level of restraint from Israel, but we can hardly be shocked that they're committed to destroying Hamas once and for all. The blame for that is easy to place.

At the FTX fraud trial Sam Bankman-Fried has decided to testify in his own defense. Today he's getting sort of a trial run without the jury present, and it's not going well. Here are opening snippets from the Wall Street Journal's updates throughout the day:

After Bankman-Fried gave several evasive answers.... Sam Bankman-Fried said he didn’t recall.... Sam Bankman-Fried said he’s “not sure”.... The FTX founder said he couldn’t recall.... U.S. District Judge Lewis Kaplan criticized Sam Bankman-Fried for continuing to be evasive....

I've become sort of half convinced that SBF is delusional about the entire FTX affair and truly believes his own story, namely that FTX imploded because of honest mistakes, not knowing fraud. But now I'm not so sure. If he really believed his own version of events, would he be so consistently evasive? Or would he have innocent explanations at hand for all this stuff?

But it doesn't matter. Regardless of whether he's lying or delusional, his story can only survive friendly questioning. Prosecutors are going to tear him to shreds when this gets going for real.

I know I'm a bug about adjusting things for inflation, but I still wonder: Why is it that stock market charts are never adjusted for inflation? Here's the post-pandemic S&P 500 adjusted for inflation:

In nominal terms, the S&P 500 is up from 3800 to 4155 since the start of 2021. In real terms it's down from 4500 to 4155.

Keeping up with inflation ought to be the minimum baseline for looking at the stock market. Instead, it seems to be actively avoided. Even in text you never see analysts comparing gains to inflation. In times of low inflation this doesn't make too much difference, but it sure does over the past couple of years.

This is the Rodin Museum in Paris. It is practically the definition of lovely and serene, right in the heart of the city. Plus there are sculptures by Rodin all over the place!

The GDP price deflator came in at an annualized rate of 3.5% for Q3. If the PCE inflation number is close to that—which it usually is—then PCE inflation for the quarter will also come in around 3.5%. Given the numbers for July and August, this suggests that PCE inflation for September was 3.1% ± 1%.

If this is the case, it would be well under the September CPI number of 4.9%. We'll know for sure tomorrow.

And the winner is.......the Atlanta Fed's GDPNow forecast. Here is the BEA's official first print of Q3 GDP:

Real GDP grew a whopping 4.9% in Q3, very close to the Atlanta Fed's 5.4% forecast. Never doubt the Atlanta Fed!

I assume this presents us with the usual dilemma: Is it good news because the economy is going gangbusters, or bad news because it might prompt the Fed to raise interest rates? Count me in the good news camp.

The Atlanta Fed's GDPNow model is currently predicting that Q3 GDP will come in at 5.4% growth (!). The New York Fed is at 2.5%. The "blue chip consensus" has converged on 3.5%. On Thursday morning we'll get the official number from the BEA and declare a winner.

The auto strike isn't over yet, but the Wall Street Journal reports that the UAW has reached agreement on a new contract with one of the Big Three:

As part of the proposed contract, Ford has agreed to give factory workers a 25% wage increase over the life of the agreement, including a 11% bump in the first year, according to people familiar with the details. The wage increase would bump the top pay for assembly line workers from around $32 an hour to roughly $40 an hour.

The UAW has also reduced the time it takes for new hires to reach the maximum wage, reducing it to three years from eight previously.

There's nothing in the story about ending the two-tier wage structure currently in place, but it sounds like it's probably gone. New hires will be paid the same wages as everyone else within three years of being hired.

The UAW membership still needs to vote to accept the deal before the new contract becomes final. Presumably GM and Stellantis (Chrysler) will follow along fairly quickly now that Ford has come to terms.

In 1999 Supreme Court justice Clarence Thomas bought a luxury motor home for $267,000. It was financed by a loan from his friend Anthony Welters, a health insurance millionaire.

In interviews, Welters said the loan had been "satisfied" in 2008 but declined to say just what that meant. So the Senate Finance Committee subpoenaed him to get the details. It turns out that Thomas was required only to make interest payments on the loan. The New York Times tells the rest of the story:

The principal amount borrowed would come due in a balloon payment on the loan’s maturity date, in December 2004....But in 2004, when the principal came due, Justice Thomas did not make good on his debt, according to records obtained by the committee and cited in their report. Instead, Mr. Welters granted him a 10-year extension, with the same interest-only terms....Then, in late 2008, Mr. Welters simply forgave the balance of the loan, according to the committee’s report.

As usual this has tax implications but isn't necessarily an ethics violation because the Supreme Court has virtually no ethics rules. A Supreme Court justice can essentially accept a gift of half a million dollars¹ and not bother disclosing it.

¹This is adjusted for inflation, natch.