Things aren’t broken, they are just different

TheMancusoWatch Teaser 19

Before I hop on my soapbox let me just say that it looks like today’s NFP isn’t enough to lock up 3-4 2017 hikes by itself.  Therefore, it seems that those who were pricing in armageddon are covering some shorts here.  Fannie 3’s are up 9 ticks and the 10 year held the pivotal 2.62 level.  My sense is while I didn’t love the number, the range seems to be intact, until next Wednesday at least.

On to the business at hand. 

Anyone that has read my rants for the last few years knows that I’ve been a huge bond bull.  Since 2002.  Said on CNBC in August 2005 that the Fed was killing the economy with unjustified rate hikes.  You know what happened shortly thereafter.   If you’ve missed my thesis, here’s the readers digest:  The economy is not broken, it’s evolved.  I argue that you can clearly trace the “new normal” back to the release of the web browser and the information and automation boom of the dot.com boom and bust.  Margins have been crushed by information, competition and automation and historical growth and inflation assumptions simply do not apply to the new economy.  That’s why the Fed can’t get it right.   

There’s something else.  We have now been conditions to almost NEVER pay full price.  That is unless you are buying an iPhone.  Why?  Well Macy’s one day sale is now every day.  Nordstrom’s semi-annual sale seems to be bi-daily at this point.  If I need a gallon of milk I don’t have to pay a 300% markup like my grandmother did, a drone flies it in from Amazon at a cut rate price.  Etc, etc, etc.  

I’d also argue that the concept of the so-called American dream has changed and our ego’s, priorities and spending habits have changed with it.  I argue that it’s chic to be cheap.  In 1985 you’d say “Guess how much I paid for my widget?”  Today, you might say, “You can’t believe the deal I got on my widget!”  Folks celebrate shopping at Target, building tiny homes, going off the grid.  In a nutshell, we are just less interested in keeping up with the Joneses than we used to be.  

Wait for it.  So combine changing behaviors, technology, information distribution, product and service delivery and add a sprinkle of being haunted by 2008 and everything that has come with that and you get?  Sub 3% GDP since what seems like forever.  AND the Fed mindlessly chasing 4%.  

I’ll ask this question to the Fed chasing 4% and for those of you worried rates are about to go through the absolute roof:  If we’ve been unable to reach our economic goals in the early stages of this new industrial revolution, is it going to get easier as the revolution gets better?

Then I stumble across this article last night.  You heard it here first, like 10 years ago.  It’s not broken, it’s just different.  Enjoy…

https://www.yahoo.com/finance/news/department-stores-face-bigger-competitive-172346916.html

-Philip Mancuso

3 thoughts on “Things aren’t broken, they are just different

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