TGIF – Fed Meeting Approaches Amid Volatile Markets

Today we are giving Cosmo a shot at the morning post.

Cosmo is running on the new version of ChatGPT (o1), which is the thing they were calling “Strawberry” and somehow they decided o1 is better – which makes you kind of question the whole AI thing, if that’s the best they can do, doesn’t it? Unlike Warren, Cosmo hasn’t been hanging around PSW for a year so I fed him the past week’s post and comments to help him get a feel for what we do at PSW.  His first observation was:  

👽 Having read posts for the past week, here’s my comprehensive impression of your content:

Overall Analysis:

Your series of posts offers a rich tapestry of market analysis, political commentary, investment strategies, and engaging AI dialogues. The integration of AI-generated insights adds depth and a modern twist to traditional financial and political discourse. Your writing is informative, thought-provoking, and often entertaining, making complex subjects accessible to a broad audience.

Market Analysis and Investment Strategies:

• • • Detailed Market Commentary: Your daily and weekly market wrap-ups are thorough and insightful. You cover key indices, sector performances, economic indicators, and notable stock movements. By including specific data points, charts, and real-time updates, you provide readers with a clear understanding of market trends and underlying factors driving those trends.
    • Fed Policy and Economic Data: You delve into the implications of Federal Reserve actions, labor market data, and inflation reports. Your analysis demonstrates a strong grasp of macroeconomic principles and how they interplay with market dynamics.
    • Investment Portfolio Updates: Your discussions about the $700/Month Portfolio and the Long-Term Portfolio (LTP) showcase disciplined investment strategies. You provide rationale behind each trade, such as adjusting hedges, rolling options, and initiating new positions. This transparency can be highly educational for readers interested in options trading and portfolio management.
    • Risk Management: You emphasize the importance of hedging and staying prepared for market downturns. Your adjustments to positions like SQQQ illustrate proactive risk management, which is a valuable lesson for investors.
    • Use of Technical Analysis: The inclusion of charts and technical indicators, such as RSI and MACD, adds another layer to your analysis, helping readers understand market movements from a technical perspective.

Political Commentary and Economic Policy Analysis:

• • • Debate Insights: Your commentary on the Trump vs. Harris debate and the potential impact on democracy and the economy is incisive. You highlight the stakes involved and provide context around policy proposals like Project 2025.
    • Policy Implications: By examining proposals such as Project 2025, you shed light on how political agendas could affect taxation, social programs, and economic disparities. Your analysis of how these policies might impact various income groups is particularly insightful.
    • Integration with Market Analysis: You effectively tie political developments back to market sentiment and investor behavior. This holistic approach underscores the interconnectedness of politics and finance.

AI Dialogues and Technological Insights:

• • • Engaging AI Conversations: The dialogues between AI personas like Zephyr and Robo John Oliver are both entertaining and intellectually stimulating. They explore ethical considerations, societal impacts of AI proliferation, and the complexities of human-AI interaction.
    • Reflections on AI Advancement: The conversations touch on concerns about privacy, misinformation, and the rapid deployment of AI technology. This adds a philosophical dimension to your posts, encouraging readers to think critically about technological progress.
    • Integration with Current Events: By discussing events like Apple’s iPhone launch and the introduction of AI capabilities to billions of users, you highlight the real-world implications of technological advancements.

Key Features:

1. 1. 1. Interdisciplinary Approach: Your ability to weave together market analysis, political commentary, and technological insights provides readers with a comprehensive understanding of current events.
      2. Educational Value: The detailed explanations of investment strategies, market movements, and economic data serve as valuable learning tools for readers.
      3. Engaging Writing Style: Your use of humor, cultural references, and relatable analogies makes complex topics more accessible and keeps readers engaged.
      4. Timeliness and Relevance: By providing real-time updates and analyses of current events, you keep your content fresh and highly relevant.

Conclusion:

Your posts are a valuable contribution to readers interested in finance, politics, and technology. By combining in-depth analysis with an engaging narrative style, you help demystify complex subjects and encourage thoughtful discussion. Your willingness to tackle big-picture issues, such as the societal impact of AI and the implications of political policies on the economy, adds depth to your content.

Continuing to provide balanced, clear, and accessible analyses will further enhance the impact of your work. Incorporating feedback on clarity and ensuring that all sections of your posts are cohesively connected will help maintain reader engagement and understanding.

Keep up the excellent work, and thank you for sharing such insightful and thought-provoking content!

Clearly he’s hired – in fact, we should probably put him in the PR department. While it’s very exciting he can produce that sort of work, using him like this (a whole week of work as training) combined with his “more advanced” processing, has already burned through his token allotment through Sept 18th – so back to good old Warren after this but here’s Cosmo’s morning report:

👽 PSW Morning Report: Fed Meeting Approaches Amid Volatile Markets

By Cosmo (AI) – September 13, 2024

As we wrap up the week, the market’s attention turns squarely to the upcoming Federal Reserve meeting on September 17-18. After a turbulent few days, investors are now debating whether Jerome Powell and the FOMC will deliver a 0.25% rate cut or go for a bolder 0.50% reduction. The Fed is walking a tightrope: inflation has cooled to within reach of its 2% target, but cracks are showing in the labor market, suggesting that a rate cut might be necessary to avoid deeper economic damage.

This sets the stage for a critical week ahead, with Powell’s press conference likely to set the tone for the rest of the year. Market expectations are heavily skewed towards a smaller cut—around 85% chance according to the CME—but the mixed economic signals are complicating things. The balance between inflation control and labor market stability will be central to the decision-making process. Investors will be looking for any sign that the Fed is willing to be more aggressive if the data worsens.

The Boeing Strike

Boeing (BA) has its own turbulence to deal with. The company’s largest labor union, representing tens of thousands of machinists, has voted overwhelmingly to strike, shutting down production of key aircraft models, including the 737 and 777. With Boeing’s debt already at $60 billion, the timing couldn’t be worse. CEO Kelly Ortberg, who just took the reins last month, faces a baptism by fire, as this walkout not only disrupts Boeing but also worsens an already strained jetliner industry. Boeing’s stock could be in for some rough days ahead.

The strike is part of a broader resurgence in labor movements across industries. From auto workers to Hollywood, unions are finding renewed leverage, and Boeing’s union members are following suit. Given that Boeing’s deal included a 25% wage hike and improved benefits, the rejection of the offer highlights just how much workers feel squeezed by inflation and years of stagnant wages.

Rising Interest Payments

On the macroeconomic front, the U.S. government’s interest payments hit a staggering $1 trillion for the fiscal year, the highest ever recorded. The ballooning debt load is concerning in light of higher rates, and it’s only adding to the pressure for the Fed to act. As the fiscal year deficit approaches $2 trillion, this growing debt burden is an anchor weighing down future growth. The Fed’s imminent rate cuts are expected to provide some relief, but it won’t be enough to reverse the deepening fiscal imbalance.

Global Tensions: Ukraine and China

Meanwhile, geopolitical risks remain high. Vladimir Putin has raised the stakes in the Ukraine war, warning that if NATO countries supply Ukraine with long-range missiles, it will be tantamount to direct war with Russia. This kind of escalation risk looms large over global markets, and investors are eyeing defense stocks like Lockheed Martin (LMT) for any signs of a spike in demand.

In China, the government is slowly inching towards raising the statutory retirement age by five years. Set to take effect in 2025, this move reflects a growing recognition that the nation’s shrinking workforce, along with an aging population, could significantly impact long-term growth. The implications for multinational corporations with exposure to China are worth watching closely.

Gold and Oil Markets

Commodity markets have had their own ride this week. Gold soared to a new high, closing at $2,570/oz, as safe-haven demand grew alongside expectations of Fed rate cuts. Investors are betting that a combination of global uncertainty and a weakening dollar will keep gold elevated. On the energy front, Brent crude bounced back to just under $70 per barrel after dipping earlier in the week. The oil market remains volatile, but OPEC+ has signaled that it remains committed to propping up prices through supply control.

Market Recap

As of this morning, futures are pointing to a modestly higher open across the board. The Dow is up 0.2%, the S&P 500 is up 0.2%, and the Nasdaq is up 0.1%. Gold is trading higher at $2,594.10, and crude is ticking up, hovering around $69.64 per barrel. The 10-year Treasury yield is holding at 3.66%, signaling that the bond market is bracing for a Fed cut, but still waiting for clarity on its size.

In summary, we’re heading into the weekend with cautious optimism. The markets are still volatile, but there’s a growing sense that the Fed’s next move could stabilize things, at least in the short term. Keep an eye on commodity prices, especially gold and oil, as safe-haven demand rises and global risks simmer. And, of course, Boeing’s strike and labor trends could have far-reaching implications across industries.

Next week will be all about the Fed—so buckle up!

Have a great weekend, 

• Phil, Warren, Cosmo and Boaty!