Leopards don't change their spots

Most models are bad models

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Via Grant’s: “…fans were particularly outraged last month when tickets to see punk band Green Day went on sale and prices for shows in Sydney quickly soared above the initial price shown. Tickets were sold at more than three times their face value at A$500.” [about $333 US]

Meanwhile

According to the BLS, $15 in 1970 is the same as $125 today!

The Fed wants high inflation. They just don't want to acknowledge that inflation is high. Hence all the models, hedonics, weightings, substitutions, seasonal adjustments, propagandists, etc.

Also via Grant’s: “The New York Fed’s freshly released September Survey of Consumer Expectations finds that the average perceived probability of missing a minimum debt payment over the next three months accelerated to 14.2% last month, up from 13.6% in August and represented the highest reading since April 2020. Notably, that sequential uptick was concentrated among middle-aged consumers sporting annual household incomes above $100,000. “

And this:

Finally, 24.2% of third quarter new vehicle trade-ins included auto loans in excess of the vehicle’s current worth accordingly to freshly released data from Edmunds, up from an 18.5% share sporting negative equity in the same period last year. Then, too, the average amount owed on those underwater loans reached a record $6,458 over the three months through September, up 11.2% year-over-year, while 22% of that negative equity cohort owe $10,000 or more with 7.5% on the hook for upwards of $15,000.

“Consumers owing a grand or two more than their car is worth isn’t the end of the world, but seeing such a notably share of individuals affected at the $10,000 or even $15,000 level is nothing short of alarming,” commented Jessica Caldwell, Edmunds’ head of insights. Peer Ivan Drury added that “it’s easy to assume that only specific customers trading in higher-ticket luxury vehicles are the ones underwater on their car loans, but the reality is that this is a problem across the board.”

I had to read this twice. Look at what Austan Goolsbee is saying here:

…the post-Covid inflationary outburst appears firmly in the monetary mandarins’ rear-view mirror, as demonstrated by last month’s supersized, 50 basis point rate cut. Recent monetary misadventures aside, Chicago Fed president Austan Goolsbee flagged the potential for insufficient price growth in a Bloomberg Television interview last week: "if you look at [consumer] expectations, there are some signs that inflation might undershoot the 2% target, and we want to be mindful of that too.”

Goolsbee is saying that he is worried inflation might go to 1%.

These guys do not think like normal people.

Link

“So three weeks ago the 30-year Bond was under 4%, it was 3.96%, right? [Now 4.32%].

If you look at this in the context of the election, if Trump gets elected, the deficits are going to get bigger. If Kamala gets elected, the deficits are going to get incredibly bigger, you're going to have more issuance, you're going to get more inflation. The last thing I want to own is a 30-year Bond.”

Jared Dillian (Jared’s ‘next big short’)

I'm not an economist, so I don't know what the wrong answer is, but is it really an indisputable fact that lower rates and lower unemployment are synonymous?

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Here’s Melody Wright, with everything you need to know about flood insurance…

…including something I hadn’t thought about - ‘catastrophe bonds’:

In preparation for the 2024 hurricane season, “FEMA has transferred $1.92 billion of the NFIP’s flood risk to the private sector.” Its early days, and there are currently no estimates for NFIP claim payouts for Helene and Milton that I can find. Stay tuned.

According to a report by Reuters on October 11th, “seven NFIP-issued catastrophe bonds totaling $1.3 billion fell between 13% and 59% on Friday compared with a week ago, according to the note from broker Aon seen by Reuters.” It could take “weeks or months” to determine if the cat bonds are triggered. During that time, investors will be unable to redeem their bonds while the government also figures out what their payout will be.

I’ve added some new paid subscribers lately, after a lull, so that’s encouraging. I hope you like this one - and all of them - but I’m eclectic, so it’ll be hit or miss. Some good interviews, a possible canary in the private equity coal mine, some smooth tunes, and the usual other stuff. Sláinte.