The Impacts of Over-Hiring, Eurodollar Futures vs The Bond Market. Recession or Disinflation?

Here’s what we are getting into today:

1. Tech CEOs Admit Over Hiring, Leading to High Office Vacancy Rates.

2. Global Economic Slowdown &The Impact of US CPI on 2022 and 2023.

3. Bond Market's See Disinflation not Recession.

4. Fed Rate Hikes to Support Rally in Cryptocurrencies and Stocks?

Website: Wolf Street

Title: Whats Behind the Tech & Social Media Layoffs?
Link: https://wolfstreet.com/2023/01/25/whats-behind-the-tech-social-media-layoffs/

Here are the top takeaways:

• Alphabet CEO Sundar Pichai has admitted that the company over hired in preparation for a future that never arrived. He’s not the only tech CEO admitting that was overly optimistic and over hired.

• Elon Musk fired over half of Twitter's employees and thousands of contractors in one fell swoop. Twitter is now defaulting on some of its leased office space and is getting sued for not paying rent.

• While Musk’s moves have given a reason for advertisers to cut budget spend at twitter, many of the social media companies are seeing significant cuts in revenue which is due to lower ad spend and is why they are having to do layoffs now.

• The office vacancy rate in San Francisco has reached a new high, as companies attempt to shed office space in the wake of the pandemic. In SF in 2018, there was only 8% office availability rate. That is now closer to 33% in 2023. Vacancy rates continue to rise, not only in SF, but across the US.

• The commercial real estate office sector is a slowly unfolding disaster that will require a great deal of time and investment losses on the part of lenders and investors to resolve.

YouTube Channel: Eurodollar University

Title: They are powerless to do anything now.
Link: https://www.youtube.com/watch?v=vHcHfbwBCgI

Here are the top takeaways:

• The U.S consumer price index (CPI) is just a small part of what is driving the US economy in 2022 and 2023.

• The real story is global, with trade prices falling as demand for US goods declines.

• This is a supply and demand issue, and the cure for high prices is high prices.

• The US economy is just a small part of the global economy, and the global economy is slowing down.

• The Eurodollar Futures market is signaling that the global economy is going to slow down in the months to come, and this is likely to be validated by official data.

• This is a supply and demand issue, and the market is perceiving that the cure for high prices is high prices, and that the FED will eventually cut rates. This is a real concern, and the market is saying that we should be worried about it.

Newsletter: The Macro Compass

Title: Recession or Soft Landing? (FREE ARTICLE) .
Link: https://themacrocompass.substack.com/p/recession-or-soft-landing

Here are the top takeaways:

• The bond market is not pricing in a recession, it is pricing in immaculate disinflation. This is evident in the expected path for real yields, which compares expectations for Fed Funds against inflation expectations.

• In any recessionary or growth slowdown episode of the last 15 years, real Fed Funds 2-year ahead were priced to be between -100 and -200 bps. That’s the bond market asking the Fed to be very accommodative given poor growth.

• The current situation is not consistent with a recessionary outlook. Rather, it points to a period of below-trend growth as the economy bottoms out.

• The credit market agrees as US high-yield credit spreads are trading barely above 400 bps. This is far away from recessionary spreads that are ~1000 bps or higher.