Summer Potpourri

NEWS FLASH 1:  I will be on another X (Twitter) Spaces on Friday July 26 at 7:30am EST with @Livesquawk.  I will be discussing my expectations for the Fed meeting and some thoughts on PCE.

NEWS FLASH 2:  I wrote this issue before the news of Biden dropping out.  I decided not to do a rewrite, as nothing has changed for me, so read it in that context.

We had a large number of small news tidbits last week that could affect probabiltiies on the the yield curve.  As a warning, I’m going to have to talk some politcs again!  I feel like Michael Corleone in Godfather III: “They keep pulling me back in!”

BIDEN MAY STEP DOWN

It is borderline insane that Biden wants to keep running.  He’s not going to get sharper making frequent campaign stops all across the country for the next 3.5 months.  I put the likelihood of a handful of gaffes per appearance at over 50% (per hour, when he is not reading).  And the probability of major incompetence at 20% PER APPEARANCE (per hour, when he is not reading).  I just don’t see how the senility situation gets better.  In any event, we deal with the odds as they happen. 

HARRIS IS BETTER THAN BIDEN

Speaking of which, the prediction markets seem to be giving Harris approximately the same odds of beating Trump as the odds of Biden beating Trump.  You can back this out from the Presidential odds vs the Democratic nominee odds.  I think Harris’s odds of winning are ~50% greater than Biden’s.  Of course, there are even better candidates.

JULY CURVE MOVE

The major curve move since the debate was the bull-steepening.  The weaker data was responsible for most of the rally, and part of the steepening was from the increased probability of Trump’s red wave (where he wins and takes both houses of Congress).  I think this move could reverse AOTBE, for some of the following reasons: