This week we will answer the question that no one asked, “What would the Interest Rate Olympics look like?”
This Week
- 10T: 3.94%
- German Bund: 2.23%
- 2T: 4.05%
- SOFR 5.34%
- Term SOFR 5.33%
- SLOOS Report – for CRE Loans, lender standards were on the tighter ends of their historical ranges for all categories
Australian Break Dancer – Rate Cut Haters
First of all, not everything needs to be an Olympic sport. I’m looking at you 3 on 3 Basketball…
Break dancing is right up there. Excuse me…breaking. I guess adding the “dancing” made it too soft. For those of you that weren’t alive in the ‘80s, all it took was a broken-down cardboard box, a boom box, and sweet moves. I had two out of three. If you look closely in the picture below my mom sent me, you can see I am nowhere to be found.
The Australian breakdancer was so terrible it made we question whether I was actually better than her. Not that I am, but it’s close enough that I considered it. She basically just contorted her body and imitated Michael Jackson’s Thriller. If you haven’t seen it, it’s so much worse than you’re imaging. She might be the first person to compete in the Olympics sarcastically.
This pic is very reminiscent of all the market observers over the last week trying to change their mind that the Fed is cutting this year…
Meanwhile, me looking at everyone that is suddenly on “the Fed is cutting” train…
That’s also how I try to sleep to avoid waking up with an aching body.
Turkish Pistol Shooter – Jay Powell
This guy just strolled out of the stands, put out a cigarette, and took home the silver. Who would you be more nervous to bump into in a dark alley?
I think Powell has been far more dovish than his colleagues and feels vindicated after the labor report. He took that pot shot (see what I did there?) at the members that couldn’t be bothered to update their forecast despite new inflation data. He was consistently more dovish than the statement and his inflation hawk buddies.
At the September meeting, he’s stroll right up to the podium in his purple tie, put out a cigarette, stick a hand in his pocket, and deliver a 25bps cut.
That’s right, I said 25bps not 50bps. I think the 50bps is a panic move and we shouldn’t be dealing with a panic right now.
Steph Curry – Inverted Yield Curve
We love Steph Curry in our house. He’s a hometown boy from Charlotte. Underestimated his whole life. Went to Davidson. Proceeded to torch the NBA. Plus, he had a house on our street while our boys were growing up. When we first moved in, he pulled into the driveway and all the kids in the neighborhood swarmed him. In short, we root for Steph.
To be honest, I love Steph, but I don’t love him the way I love MJ or Kobe. Steph dances and is at his best when he’s having fun. That’s not me. I grew up watching MJ break people’s will to live. Ripping their hearts out and showing it to them. MJ would invent slights to make himself so angry he would punish the other team. The greatest athlete of all time completely made up trash talk in his own head just so he would punish the competition? Insane.
And the Kobe Effect. Our teammates get tired of me saying, “Everyone wants to be Kobe, but no one wants to work like Kobe.” One of my favorite clips about Kobe is when he steamrolled his closest friends in the 2008 Olympics to send a message to his US teammates. The US had finished a catastrophic 3rd in the 2004 Olympics, and Duke’s Coach K was brought in to return the US to glory. He, in turn, brought in Kobe to provide the killer instinct the team lacked. Kobe brought a mentality and a work ethic that led the team back to gold and they haven’t lost since. After he trucked Pau Gasol to start the game against the world’s second best team, Lebron said, “Oh, ain’t no way we’re losing this game. We’re about to beat the sh*t out of Spain.” That’s the Kobe Effect. I love that mentality above all else. When a Philadelphia-based competitor gently threatened to crush me when I refused to sell because we couldn’t really compete with them, I said, “Good, because I f*cking love competition.”
This past year I developed an appreciation for Steph’s killer instinct because our youngest son, a high schooler, has a similar approach. He’s at his best when he’s having fun. I’m at my best when I’m so locked in nothing else matters, but he’s at his best when he’s dancing on the court. For the biggest game of the year, I got him too hyped. I was trying to get him riled up the way I would do it and it backfired. He got too amped and didn’t play well. So in the playoffs, I instead sent him Steph videos. Dancing. Joking. Relaxed. “Be Steph.” He played much better, and I learned an important lesson that everyone has different ways to be play their best.
Fast forward to Saturday’s gold medal game and Steph is going off in the fourth quarter. If you didn’t see it, you missed out on an all-time sports moment. Steph draining the fade away three, while being double-teamed and two wide open teammates was nuts. I yelled “WHAT?!?!” so loud I woke up the Real Boss from a nap. He had no business taking this shot…but who am I to argue with the greatest shooter of all time?
The yield curve is the greatest predictor of recessions of all time. It’s been inverted for so long I almost forgot it was inverted until it uninverted temporarily. Everyone wondering if that means we’ll avoid a recession…it doesn’t. It uninverts when the Fed starts cutting because we’re already in a recession and just don’t realize it yet.
If you’re wondering why I needed five paragraphs and over 500 words to just say the inverted yield curve is gonna be right again, maybe I just need an excuse to show this photo. What?!
Steph being Steph.
Also, I might have invented that slight from that competitor…
French Pole Vaulter
JK, despite the cuss words this is still a family-friendly newsletter.
US Pommel Horse Guy – Unemployment Rate
Stephen Nedoroscik, aka Clark Kent.
Not all heroes wear capes…“Some wear glasses,” Ms. Pommel Horse. That’s an actual IG exchange between his girlfriend and a fan!
This guy is the opposite of me. Totally quiet, unassuming, comes off the bench to save the day. I’d be the most insufferable superhero ever. I’d never change out of the Superman cape.
I think Pommel Horse Guy is the Unemployment Rate. It’s been totally overlooked for years and then when the call comes in, it delivers on the biggest stage and now has the market pricing in 7 cuts by year end next year.
Also, he’s a Penn Stater. James Franklin should let this guy call plays in the 4th quarter against Ohio State and get out of the way.
US Cyclist Kristen Faulkner - Inflation
She wasn’t even in the race a few days before! She was in the Olympics as a member of the track cycling team, a sprint. A teammate dropped out of the road race, giving Faulkner the spot.
After shocking her own parents (and the world), she recovered by helping the team also win gold in the sprints.
Faulker is inflation in this story because she came from nowhere to dominate the news cycle (get it?) for a brief moment…and then returns to obscurity because, you know, it’s cycling (sorry Tom).
Oh, and Faulkner picked up cycling as a hobby seven years ago. Can you image saying, “I wanna try this” and then seven years later winning a gold medal? If I win a gold in breakdancing at LA ’28 I’ll recreate this photo.
Gabby Thomas – Us After the Jobs Report
Gabby might be my favorite athlete at the Olympics. She studied neurobiology at Harvard with plans on becoming a doctor. Turned out she was so good at track she put medical plans on hold to pursue the Olympics, but still found time to complete a master’s in epidemiology. My kids act like they won a gold medal if they wake up before 11am. In fact, she’s so exceptional I’m willing to overlook the fact that she’s a Texas Longhorn…
I watched her semi-final 200m. The announcer warned that British sprinter Asher-Smith was a “phenomenal turn runner” and sure enough, Gabby came out of the turn trailing her.
And then she engaged the afterburners and absolutely smoked her. And I mean smoked her. In the post-race interview, Gabby said making the turn and seeing the finish line 100m away is her “happy place.” How do you beat someone with that mentality?
On to the finals. I know if Gabby is even remotely close coming out to the turn she’s winning.
She gets an amazing start and comes out of the turn with the lead. I say aloud to the Real Boss, “It’s over. It’s over.” Watching someone that is so good at what they do that it’s over before it’s over…goosebumps. It was like watching Usain Bolt or Katie Ledecky.
Gabby destroyed them. She crossed the finish line and burst into a combination of joy/disbelief/relief/exhilaration. For my money, this is the photo of the Olympics. It’s also how all real estate pros knowing cuts are around the corner.
Joel Embiid – Gracious Winners
French fans booed Joel Embiid constantly because he could have played for France because he grew up in Paris and they were mad he chose to play for the US…oh, what’s that? He grew up in Cameroon? He only gained French citizenship in 2022 when French President Macron was trying to recruit him for these Olympics? Got it, I can see why the French fans booed him constantly…
Sorry Frenchies, Embiid’s true home is Philly. He’s used to getting booed by his own fans, you think he gives two sh*ts what you think? Here’s Joel rubbing it in the nose of all the French fans.
Also, me to the haters when the Fed starts cutting.
Snoop – The 10 Year Treasury Sub 4%
The real winner of the Olympics has to be Snoop. This guy was a Rollin’ 20s Crips gang member in the ’80s and now he’s representing the US in Paris? Only in America.
Last year at this time, a broker told me deals would start getting done if the T10 could get to 3.90%. It might have taken a year, but that’s still three years less than Olympians need to wait for their opportunity.
I said last week I thought the T10 would gravitate toward 3.90%, which is right in the middle of the current range. We woke up Monday am to a full-blown panic trade and the T10 ran down to 3.78%. It was insanity.
Cooler heads prevailed and the T10 moved back up to 3.93%. I think the current range of 3.81% - 4.03% holds until a catalyst forces markets to adjust.
But as long as it stays below 4%, I think this is most brokers right now…
The Week Ahead
Sadly, the Olympics are over and I don’t have any low hanging fruit to leverage for newsletter themes until football starts at month end.
This week, CPI is the headliner. That could absolutely break the range on the T10 one way or the other.
