Crypto News: 🟪 Friday Worry-free Charts

"Worry is interest paid on trouble before it is due."

— William Ralph Inge

It's been six weeks since Silicon Valley Bank failed, five weeks since ChatGPT4 launched, and a couple of weeks since the last major UFO sighting.

And yet, much to every thinking person's surprise, the banking system remains standing (if a little tattered), humans are still in control of things (for better or worse), and the aliens do not appear to be hostile (unless that was a warning shot at SpaceX yesterday?).

So, was it all much ado about nothing?

The market seems to think so: Despite full valuation metrics and rocky earnings reports, the S&P is meandering placidly sideways, as if it doesn't have a care in the world.

We don't even seem to be worried about inflation anymore. Or recession. Or the debt ceiling.

Perhaps there never was all that much to worry about. Perhaps inflation was always going to be transitory, a recession was always going to be mild, and the debt ceiling was always going to be raised.

So, should we be taking it as easy as Ferris Bueller on a spontaneous day off?

Or is Mr. Market lulling us into a dangerously false sense of security?

Let's check the charts to find out.

The CDS market is at least a little worried:

Political wrangling this week has pushed the cost of insuring US debt via credit default swaps to the highest on record. But those CDS contracts have never yet paid out: We've been here before, and it's always worked out in the end, so surely it will this time, too?

It may have to be worked out sooner than expected:

Goldman Sachs noted this week that, as of April 14, federal tax receipts were down nearly 40% YoY. Which is a lot.

Per the chart above, receipts have never fallen more than 30% for a full quarter. And on April 18, tax day, the Federal government received a lower-than-expected $108 billion of net payments. Lower-than-expected tax revenue means a sooner-than-expected problem with the debt ceiling.

Time to worry about our jobs yet?

Jobless claims, presented here as a percentage change for dramatic effect, rebounded to 245,000 this week, the highest level since 2001. That's a 22% YoY increase, but from a very low level, so still nothing really to worry about (yet).

Higher-income workers are feeling a little more worried:

The share of high earners who reported a loss of pay or income rose in March — and much faster than it has among respondents in the lower-income group. The increase is again from a low level, but we're at least worried enough to be doing more of our grocery shopping at dollar stores.

IT employees can worry a little less:

Tech sector layoffs have decelerated in April — reassuring evidence that the robots are not ready to take over just yet.

Collectively, we're looking pretty trim:

At about 13%, our liabilities as a percent of our net wealth are less than half what they were in 2008. We haven't been this fighting trim, economically speaking, since the 1980s and that should cushion the blow of any coming downturn: On an earnings call this week the CEO of Bank of America told us that "everything points to a relatively mild recession given the amount of stimulus that was paid to people and the money they have left over."

Banks are in surprisingly good shape, too:

Despite all the talk of renewed competition from T-bills and money market funds, banks are still only to pay us 0.5% on deposits. As long as we don't worry much about the lousy interest rates we're getting, banks won't have much to worry about either.

There's gotta be something:

The Cleveland Fed InflationNow forecast sees CPI ticking back up to 0.59% in April. If you don't have a calculator handy, that annualizes to 7%, which will worry the worrywarts that make up the FOMC. NY Fed president John Williams is even worried that things are too good: "There's a lot of factors that tell me the economy is doing better and could even surprise further on the upside," he told Bloomberg this week.

The market always has to worry about something and with banking, AI, and alien fears behind us, maybe it has to be that things are too good?

Even so, the next CPI report is not until May 10, so we should have at least another three weeks to enjoy these worry-free times.

Have a great weekend, relaxed readers.

— Byron Gilliam

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