Shari Noonan

Every day the markets are trying to predict how many rate cuts we’ll have this year and when they will happen. I recently sat down with Joseph LaVorgna, Chief Economist of SMBC Nikko Securities America, Inc., and asked him what Powell would do. (https://lnkd.in/e9HbXXeD) I appreciated Joe's uniquely nuanced perspectives as we discussed the tools Chair Powell has at his disposal. When there’s this much disagreement among economists about what the Fed should do, Joe reminds us that sometimes it’s Wayne Gretzky who has the answer. Many thanks, Joe, for an illuminating conversation. Joe's frank analysis of our economic policy is essential viewing for market participants. I encourage you to watch the entire conversation on our site. https://lnkd.in/e9HbXXeD #expertconversations #capitalmarkets #federalreserve #economics #interestrates

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I spoke with Bilal Jafar at Financial News about the FTCs recent ban on non-competes. While senior PMs can make as much as $120MM, they often have to sign straight non-competes to not join rivals or launch their own fund, sometimes for years after leaving their current firm. “The FTC’s announcement will not only increase the flow of talent and growth of newer funds, it could also force firms to be more competitive with retention strategies instead of the threat of sitting out for 18 months,” said Max Heppleston, managing director at hedge fund recruitment and consultancy firm Fredriks. “This could be massive for newer funds as top portfolio managers, analysts, and teams will be able to move more smoothly, and startup hedge funds can get going quicker, which can be so important to their success,” he added. Obviously, as a headhunter I am slightly biased, but the unrestricted flow of talent is core to a free market, I believe this will drive healthy competitiveness in the space and could help reverse the trend of declining launches of new funds.

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Is the U.S. Economy Stronger Than We Think? At Yale's recent CEO Caucus, 84% of top CEOs expressed optimism, predicting a "soft landing" for the U.S. economy. Surprisingly, 81% were taken aback by the economy’s resilience, despite widespread pessimism in public polls. With inflation dropping and unemployment at historic lows, real wages are growing, and GDP surpassed expectations. CEOs agree: the economy is outperforming the gloomy forecasts. What’s your take on that? Source: https://bit.ly/47Sds0i

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A US appeals court has struck down the overreaching SEC rules that would have burdened private equity and hedge funds with unnecessary requirements. The Fifth Circuit Court of Appeals recognized that the SEC exceeded its authority by mandating detailed quarterly reports and limiting side deals. This unanimous decision is a major victory against Gary Gensler's excessive regulatory agenda, which threatens to stifle growth and innovation in the industry. The court's ruling sends a message that regulators can't bypass Congress to push their ridiculous policies. The SEC's failure to link these new rules to fraud prevention only highlights their lack of justification. It's great to see the court protect our industry from costly and intrusive regulations. This decision reaffirms that the $27 trillion private funds industry, which supports pension funds, universities, and individuals, should not be hindered by unwarranted constraints. While the SEC may consider appealing to the Supreme Court, hopefully, the courts will continue to curb such regulatory overreach.

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Very helpful review of the UK’s LDI crisis with Rod Goodyer asking the key question if we have ended up in a suboptimal place. My colleague Sean Boland, CFA and I have been highlighting the benefits of combining credit derivatives (CDS) directly into LDI mandates. Reliency is improved by moving a highly-liquid return-seeking asset into the same collateral pool. Let us know if you would like to discuss/challenge this approach!

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The futures market remains optimistic about rate cuts, with SOFR falling to 3.0%. ChatGPT summary of this morning’s inflation report: Major Sectors with Low or Negative Inflation (Year-Over-Year) 1. Gasoline (all types) (-10.3%): Gas prices continued to fall, significantly lowering energy costs. 2. Used cars and trucks (-10.4%): Prices of used vehicles dropped further after the pandemic-era price spikes. 3. New vehicles (-1.2%): New car prices also fell, helping consumers. 4. Apparel (0.3%): This category includes clothing and footwear, but excludes accessories like jewelry. 5. Fruits and vegetables (-0.2%): A decrease in produce prices helped moderate food inflation. 6. Cereals and bakery products (-0.3%): Slight deflation in this food category contributed to overall stability in food prices. 7. Nonalcoholic beverages (1.3%): Includes drinks like coffee, tea, and soft drinks. 8. Fuel oil (-12.1%): A steep decline in fuel oil costs contributed to lower overall energy prices. Major Sectors Where Inflation Remains High 1. Owner’s equivalent rent of residences (5.4%): This is an estimate of what homeowners would pay in rent, a key driver of inflation. The methodology behind this measure is considered by many to be problematic. 2. Rent of primary residence (5.0%): Actual rent payments continue to grow, though at a slower pace. 3. Electricity (3.9%): Electricity costs are still climbing, adding to household expenses. 4. Food away from home: Limited service meals and snacks (4.3%): Fast food and takeout prices continue to rise, contributing to higher dining costs. 5. Hospital services (6.1%): Hospital services, including both inpatient and outpatient care, saw a steep increase. 6. Motor vehicle insurance (16.5%): Insurance prices remain a standout for high inflation, driven by rising repair and replacement costs. 7. Transportation services (7.9%): Public transit and airfares have risen substantially, although gasoline is excluded from this category. 8. Meats, poultry, fish, and eggs (3.2%): Food inflation, particularly in proteins, remains problematic.

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Yesterday, ERCOT hit a new record, with system load reaching an all-time high, breaking the August 10, 2023, benchmark. But here’s the twist: despite this surge, prices stayed comfortably under $100/MWh, a far cry from the $5000/MWh frenzy we saw last August. That’s a $4,900 difference. This isn’t just luck—it’s a testament to the power of bitcoin miners stepping up and pulling back when it matters most. By curtailing their energy use during peak hours, they’re not just saving their own skin; they’re helping keep energy prices in check for everyone in Texas. It’s a real-world example of how smart, flexible responses can turn potential chaos into a win for all.

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