The Switch
NOTE: I may do an FOMC Preview with @Livesquawk on Wednesday. Watch their site for details.
I had no idea who Charlie Kirk was, since I am not on social media. My family all saw his clips but never mentioned him to me. Maybe it’s because one of the things on my tombstone could be “I don’t care what some random person on the internet thinks.” I hear he talked a lot about how successful Asians are. Today, I will risk going excommunicado from the Asian Brotherhood by giving away what I believe is our secret.
But first an advertisement of sorts… I found out earlier in the week that a young member of my broader family wrote a free e-book on Amazon. It coincidentally relates to the topic of the week. The title is When Hallyu Hit Home: The Stories of Korean-American Entrepreneurs. It’s not a coincidence most of the Korean immigrants I know have come here without speaking English well but ALL of them somehow manage to be productive members of society. This is a general self-improvement post, so I will make it free in a month.
The week in news:
· We finally got some real data! CPI was softer than expected, but supercore was a little firm. Basically the lower-than-expected inflation was that rents had a huge miss to the downside. That, plus firm S&P sentiment data caused no real move on the curve.
· The bigger CPI news was that we won’t get a CPI for October (at least). Given that the sides seem to have no interest in budging, it’s not implausible that we don’t get data for longer. I thought it was interesting that there was no mention of the October Employment Report. I’m not sure what is involved in the data collection process, but I would think they may not be able to tabulate or collect data for the ER either. That leaves the prospect of the Fed having to make policy with only secondary data.
· Speaking of data, it appears that ADP stopped releasing their private data to select institutions (https://x.com/NickTimiraos/status/1981037550694535179). I mentioned that the Fed was using it (especially Waller and the Chicago Fed). So now our glasses are fogging up driving down a foggy road. I’m assuming that ADP figured they could make some money off of it. Or some hedge fund made them an exclusive offer. This all speaks to the increasing importance of higher frequency data I was talking about in recent posts. If it’s worth something, so why give it away for free?
· Nobel laureates signed a letter calling for ban on AI superintelligence. How can people so smart be so stupid? It’s the similar family of dopes who sign on to climate friendly pledges only to see countries like Germany crush their industrial base and then having to fire up coal plants when there is no wind or sun. They closed many of their nuclear plants. In the meantime, China and India are happily stoking their coal and oil burning factories to take European manufacturing jobs. Some things require genuine UNIVERSAL agreement. It’s a dog-eat-dog world (especially in the developing world). Unless you KNOW everyone is going to GENUINELY agree (and not just agree to sucker you in while they break the rules and PROFIT), there is nothing to do. So before you take a break from the Ivory Tower to sign something so fanciful, just ask yourself, is there money to be made? If yes, then you need to go and lock yourself back in the Tower. If you think your life will suck if AI takes over the world, it will be an order of magnitude worse when Chinese AI takes over the world. It’s like when Elon signed the last well-publicized “halt AI” petition (because he was behind) and now his most promising business is probably… xAI. Imagine that! PSA - I don’t care how smart you are on paper. Learn some basic game theory before you go spouting off about your clueless schmuck policy views! It’s like listening to idealistic children talk about governing the world. It would be cute - if it wasn’t dangerous. But I digress… I feel like some of the above rant could be something Charlie Kirk could say, which leads me to this week’s essay…
EVERY Korean immigrant I know from my generation had a similar story – IMMIGRATED to the US at an early age, didn’t speak much English, knew very few people, many didn’t have much money, struggled, persevered and somehow managed to find “success” in their own way. Typically, “hard work” is attributed. The humble ones will credit “luck.” But as my old JPM trading manager used to say, “you put yourself in a position to get lucky.” I have a similar message, but a slightly nuanced take on why Asians tend to be “successful,” and I call it the “Switch.”
What is it? There are 168 hours in a week. Say you sleep 8 hours a day and need an hour to take care of bodily functions. That leaves you with 105 hours a week. Most people work 40 hours a week (unless you are stereotypically French) and consider that a full workweek. Then you have 65 hour a week left to live the American dream! If you are somehow unsatisfied with your life, think about the ratio of 40 to 65. Is one of those numbers noticeably greater than the other?
Some of you may be saying, “hey… wait a sec… aren’t you the same guy who wrote that you can work as little as 1 hour a day and make almost the same amount of money?” That is what I do when I am away. But most days I work over 12 hours a day. I really enjoy what I do and am always working on something.
What is the “Switch”? Most Asians I know can easily flip from a “typical 40 hour workweek” to an 80 to 100+ hour a week schedule. It can be for days, weeks, months or even years. That is the Switch. Most endeavors I’ve had has required successful mastery of the Switch – academics, law firm, management consulting, trading at an investment bank, and even helping the family construction business since I was 10. Yes – child labor laws were broken! But it’s not just the hours – it’s the MENTALITY and GOAL.
It is unbelievably empowering to KNOW that you have this additional resource at your disposal, that is the equivalent of ONE AND A HALF full-time jobs. Frame of mind is everything. I feel like most people think, “I’m getting nowhere with my full-time job. I’m doing all I can!” No. You have other options in your free time – especially in this age of gig work, social media and AI. I’m not suggesting you take two dead-end jobs. I guess you could make 2x the money, but you need to have some medium-term GOAL. Think about what you can realistically do to work towards whatever your goal is! If you are stuck, turn the Switch off until you know what you want to do or whenever you want a break. If you look at the Hallyu ebook, people usually don’t stop at just one success. They just keep on moving their goalposts. But that is up to you - it is tremendous to have the freedom to work less or more. Some people are very happy getting to the Everest base camp and chilling there the rest of their lives. Having a realistic GOAL (making your American Dream) is the objective. What’s the point of flipping the Switch if there is no light?
More than other demographic groups, I feel like Asians were raised from an early age to develop the Switch – whether it’s going to get extra tutoring, playing a musical instrument, taking tae kwon do, getting a job, etc on top of doing homework, school extracurriculars and chores. Asian kids learn at an early age that the day is not over after the “9 to 5” of the school day, and they learn to use the Switch to develop lifelong skills or to help with intermediate goals like getting into college. My wife and I always shake our heads when some well-meaning (?) parent in our area writes a cute letter about her little Jimmy is getting too much homework. I mean we are talking about an hour max a day. If your kid needs more than that, maybe he/you needed to get him some help earlier. Set a GOAL to help your kids. Otherwise you are breeding a new generation of “40 and done” disgruntled citizens (aka the stereotypical millennial or Gen Zer). Thinking of a Switch you can turn on an off when you want seems less onerous than “working hard” (which is the generic Asian advice) the rest of your life.
Having trouble carving out some time in your 65 free hours a week? This is going to be a hot take, but start with cutting out a majority of sports and/or TV watching. Those activities are what I call “watching other people live their lives.” Think about it – THAT IS EXACTLY WHAT YOU ARE DOING! Seen in that context, how pathetic does that sound, unless you’ve hit ALL your life goals? When I was younger, I used to watch 150+ Yankee games a year, and probably 4 football games a week (3 pro, 1 college). I used to watch golf, swimming, sailing, darts, pro wrestling, world’s strongest man and pretty much any “sport” you can imagine. I saw multiple championships, and felt great for a few days. But it did absolutely nothing for me after that. It’s not like I owned the team. Whether it’s the Roman gladiatorial games or the Hunger Games, entertainment is a diversion to distract from the real issues in your life. I’m not saying to cut it out completely. Sometimes you can bond with friends and family over sports or TV. It could help your career to be able to engage in water cooler banter. I’m just saying, do I really need to watch some sporting event or three hours of Netflix every day? I’m aware that the Las Vegas Aces crushed the finals, Shohei had a monster game, Messi had a brace, etc. But I get the same information content from watching select highlights. I still haven’t watched K-pop Demon Hunters yet. That may get me excommunicado more than giving away the secret. I like trying to keep up with pop culture. Find some balance.
Sometimes, you need a little jolt to remind you to take your head out of the grind to see where you are going. Never despair about your current situation. Think about where you would like to be in say 1,3 or 5 years. Make a realistic plan and use the Switch to turn it on. If a bunch of immigrants who barely speak English can succeed, so can you! That is what Charlie Kirk would probably say.
VALUE ON THE CURVE:
We got a lot of data Friday, but no real clarity. CPI was lower but supercore firmer. S&P was firmer, but Bloomberg is saying ISM could be weaker. I’m wondering if we will get any interesting developments from the FOMC. There are TWO areas in particular from the FOMC meeting that I will be focusing on:
1) I am wondering if the message will be firmer towards “data dependency” or “continued easing.” It was a very close vote between 0 and 2 more eases this year at the September SEP. There were ten votes for 2 eases (or more) and seven votes for ZERO eases (or less). Now that we have another ease in our belt, it would only take one dot to change the voting to NO ease in December. I know the ADP was very weak, but we get two more ADP prints before the Dec meeting. I’m thinking AOTBE it would only take like a 75K per month average to make the Dec ease < 50%.
2) I am wondering when we will get an IORB (interest on reserve balances) move. SOFR and FF fixings have been creeping higher, and a 5bp IORB move is very possible some time this year. I forgot to mention the IORB possibility last week as one of the reasons for a > 25bp move to be priced. But these are typically only 5bp moves. I’m not wired into Fed plumbing developments. But SOFR seems to be bumping against the upper target, and that is when we start seeing an IORB adjustment. The market seems to be pricing in a negligible amount of an IORB move next week and a more substantial amount for December. I’m not sure the move couldn’t happen next week. I used to work with Alex Gurevich, who used to like betting on “mostly priced” Fed moves. His logic was that the Fed will not shock the markets. They always have the WSJ if the markets are leaning the wrong way. If you are in this camp, then you can get the IORB move for “free/cheap”. I suppose it’s possible we get IORB moves in BOTH meetings, but that seems somewhat unlikely.
I am also thinking about rolldown structures in the whites.
LOOKING BACKWARD:
* CPI. The signal was muted, but the higher tariff tail print has been removed (again).
* U Mich. Sentiment continues to drift lower.
LOOKING FORWARD:
* Auctions. These have held up pretty well post-tariffs.
* Fed meeting. I discuss the two main things I will be watching for in the News section. Catch me on the podcast for my latest thoughts.
WORTHWHILE LISTENS OR READS:
* Doomberg. This was from the week before, but I hadn’t gotten a chance to listen to it. I’m slowly starting to develop an opinion on AI, that I will write about in a future episode.
* Cents and Sensibility. Since CPI is the only significant piece of data we got, I want a thorough analysis.
https://inflationguy.podbean.com/e/ep-152-this-months-cpi-report-see-you-in-december/
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Note that this is not investment advice, you can lose money, I could be a contrarian indicator, all that glitters isn’t gold, haste makes waste, and any other saying that may denote the non-seriousness of this post.
Happy trading!