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Max Notes
Iâm continuing to dig into financial reporting and economic data releases because this is a bizarre time. Because weâre still feeling the effects of high inflation and the COVID hangover, many economic indicators are hard to follow. The recent Conference Board Leading Economic IndexÂź (LEI) is a particularly fascinating one because itâs typically plotted against something called the Coincident Economic IndexÂź (CEI). (This is also our Chart of the Week.)
What weâre seeing is a tension between the real economy (CEI) as it is currently and what consumers are expecting (LEI). The Conference Board has adjusted its 2025 GDP forecast down to 1.7% while the Federal Reserve has it pegged at 2.0%. Both are below the desired targets of âhealthyâ economic growth of 3% or higher. Recall that two or more quarters of negative growth is considered a technical recession. So, as of now the leading economists are putting their chips on slowing growth, but not a recession.
For his part, Fed Chair Jerome Powell tried to strike an optimistic tone (called âdoveishâ) in the most recent Fed remarks, but many market observers remained skeptical of this stance given the softness in sentiment data. Translation: People are calling bullshit. But he did indicate that two more rate cuts were potentially on the horizon this year. Another interesting development considering inflation isnât yet under control and the Fed is forecasting a slight increase in unemployment over the next few months.
What this all boils down to is uncertainty. Several of the inputs into the real economic data reflected in the CEI figures are related to American businesses trying to get ahead of tariffs. So theyâre ordering more goods and raw materials before prices increase. This increases GDP. Consumers have also been pushing figures higher, which could be taken as a positive sign. But I would contend that the increase in household debt means that weâre all just spending money we donât have.
The part that Iâm fixated on is the inversion between CEI and LEI. The last and only time we really saw that in the past 25 years was in 2007, the calm before the storm. And the turn was incredibly fast. This time itâs taking longer but the decline in sentiment is much steeper. Remember that in 2007 there was no such thing as a bailout or stimulus. Since that time weâve had two major bailouts; one during the financial crisis and one during COVID. My contention is that weâre still operating under the false notion that if everything falls to shit the government will be there with welfare programs for citizens and quantitative easing for corporations. Itâs worth mentioning that corporations are still sitting on more than $200 billion in âcash on handâ as of the end of 2024. This is after a decade of historic stock buybacks in the trillions of dollars.
Hereâs the thing about sentiment; it has a way of becoming reality. Consumer spending dropped in January, a combination of Trump policy uncertainty, DOGE layoffs and stubborn inflation. It picked back up slightly in February, but only by .2%. Most of the big guys like Deloitte and EY were predicting an increase in 2025 of between 2.5â3% so weâre already missing targets. When things spiral like they did in 2007 heading into 2008, consumer confidence declines turn to spending declines rapidly. And if things are propped up under some latent fantasy that the government is going to suddenly increase spending to bail us all out, weâre in for a rude awakening.
Other things Iâm obsessing overâŠ
How obsessed with Alan Alda am I really? This much. When the Netflix trailer for Four Seasons (Tina Fey, Steve Carell) I was incensed. I donât like when people fuck with perfect things. The original Four Seasons is one of the reasons I love Alan Alda to this day. So I researched it and found that heâs listed as a producer. Now Iâm delighted that itâs being rebooted, but there better be a cameo. And if you really want to delight me, a Carol Burnett cameo would seal the deal.
I think about 10% of Canada watched my quick apology video. Of that sample, my unscientific finding is that 70% of Canadians welcomed the message. The other 30% live in either Quebec or Alberta.
After being mercilessly teased by Bobby McD since the election, I was finally able to return the favor when Ireland didnât send its best to the White House.
-Max
This Week on the Pod
Show Notes
The Climate Trust: Non-Negotiable #5.
Fresh off the heels of our fifth and final Non-Negotiables of the Left series, 99 and I spent some time in the studio reviewing feedback from the UNFTR audience. While I stomped my feet like a toddler, 99 was able to finally get me under control and a productive conversation ensued.
The upshot is that the feedback was fairly muted, with most of you signaling that the Climate Trust is out of step with the other four Non-Negotiables. While I stand by the concept of Social Security for the planet and the funding mechanism behind the idea, I hear you. In the consolidated episode that will serve as the baseline for our curriculum moving forward, Iâm making notes and adjustments to improve this perspective.
Also this week, in advance of Trumpâs executive order to begin dismantling the Department of Education, I updated our student debt episode from a couple of years ago in a new video on the YouTube channel. It addresses the growing student loan crisis in the context of the failing economy and cuts to social services. Check it out when you have a chance and share it with a Gen-Zer who voted for Trump.
Hereâs the chart I was referencing in the Max Notes section. Youâll notice the LEI has continued to tank since the height of post-COVID inflation crisis, while the CEI is still steadily increasing. The LEI is about sentiment. Itâs forward looking. But it includes some hard metrics like manufacturing orders and building permits. The CEI consists of real inputs like payroll, spending and production. Whatâs fascinating is the inversion of these numbers. Itâs even more dramatic than the inversion right before the financial crisis.
âGiven substantial policy uncertainty and the notable pullback in consumer sentiment and spending since the beginning of the year, we currently forecast that real GDP growth in the US will slow to around 2.0% in 2025.â
Headlines
Weâre Looking Away
The whirlwind distraction machine in the Oval Office has effectively neutralized the mainstream coverage of the ongoing horror in Gaza.
From the article:
âIt was a brutal act of wanton killing. In the span of hours, entire Palestinian families were wiped out and buried in the rubble of their homes. Children and women were burned alive and murdered in their sleep. Survivors include a month-old girl, who was pulled from the rubble after the air strike killed her parents and brother.â
Nayib Bukele is a complicated figure. On the one hand, he restored order to a nation that failed to contain gang violence. On the other hand, to accomplish this Bukele essentially ripped up the countryâs constitution and stripped Salvadorans of any rights. As Orwell famously wrote, âno one ever seizes power with the intention of relinquishing it.â Bukeleâs success has given him tremendous popularity even though the country still struggles economically and he has become increasingly hostile to all things democratic. If this is the model Trump and his followers most admire (it is) then the Left must look to the success of Lula in Brazil for how to successfully win back hearts and minds.
From the article:
âIt was easy to mistake this episode for an example of a Central American leader expediting the inevitable, offering up his country as a dump site for Trumpâs deportees before the administration could resort to threats, as it has against Panama and Costa Rica. But that would underestimate how much of an aspirational figure Bukele is for American conservatives, many of whom yearn to implement his authoritarian transformation of El Salvador at home. In fact, in many ways, Bukeleâs El Salvador is already here.â
Danny and Derek over at American Prestige are still my go-to for all things foreign policy. If you ever want a breakdown of things happening outside of our little bubble, theyâre the ones to listen to.
âIsraelis break the Gaza ceasefire; Trump resumes Americaâs war on Yemenâs Ansar Allah/Houthis; clashes break out on the border of Syria and Lebanon; a presidential candidate is arrested in Turkey; the South Sudan peace process continues to break down; calls for a ceasefire go unheeded in the Democratic Republic of the Congo; the US expels the ambassador from South Africa; in Russia-Ukraine news, Trump and Putin talk by phone while the Kursk operation is effectively over; Canada welcomes its new prime minister, Mark Carney; and Donald Trump ignores a court ruling in order to deport hundreds of Venezuelans.â
Just got my hands on a copy of this new release. Have to see what the fuss is about. ICYMI: Meta is trying desperately to kill this book. (Itâs not working.)
âCareless People is a deeply personal account of why and how things have gone so horribly wrong in the past decadeâtold in a sharp, candid, and utterly disarming voice. A deep, unflinching look at the role that social media has assumed in our lives, Careless People reveals the truth about the leaders of Facebook: how the more power they grasp, the less responsible they become and the consequences this has for all of us.â
From @jenniferhutson8579: âFor me, this is a simple choice between: Banker or Wanker.â
UNFTR YouTube Highlight
ââStudent debt has been a crisis for a long time. But the Trump administration is about to make life impossible for current students and student debt holders. Among voters under the age of 26 in 2024, women of color were the only ones to break for Harris. White men, white women and men of color under 26 broke for Donald Trump. This is an astonishing trend. Yet both Democrats and Republicans have failed to address a broken student debt situation for several decades and now the entire system is set to crash. This video explains how student debt grew to crisis levels, how the Trump administrationâs policies will push it over the top and the only way to ultimately fix the system once and for all.â
Because we have so many new subscribers to this email and new followers on YouTube, itâs important to âdance with the one you came with.â The podcast that discovered us and gave us our break: The Best of the Left.
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