Dear heart, I told you so... but you didn't listen. Brain.

The global economy is still struggling to hire workers, as a Manpower survey of 45,000 employers spanning 43 countries showing almost 70% of them are having troubles finding workers. They also found that 15 countries across Europe and North America are reporting the highest demand for workers since Manpower began these surveys in 1962. Job vacancies in Britain have broken records.

It suggests the world economy is strong. News this week that US inflation climbed more slowly in August was also good news (blue bars falling to the left of the black vertical line). Among other things, it reduces pressure on the Fed to act.

(source: Pantheon Macroeconomics)

The biggest driver to the jump in inflation and now drop? Used car prices. The latest chart suggests those prices have fallen back to normal.

(source: Pantheon Macroeconomics)

Despite the correction in car prices, retail sales unexpectedly went up 0.7% last month (expectations were that it would decline 0.8%).

It makes one wonder why the CNN Fear & Greed Index is below the half-way mark. But emotions can be powerful and don’t necessarily follow what the head is thinking:

In Canada, where a close election is about to take place, inflation hit an 18-year high of 4.1% and well above the Bank of Canada’s target 2% rate. And that’s not even including housing prices which are huge ticket items up double-digits.

“The numbers released today make it clear that under Justin Trudeau, Canadians are experiencing an affordability crisis,” O’Toole tweeted. It’s nice to see a Conservative concerned with affordability.

By the way, do you recognize any of these watches? The one on the left belongs to Jagmeet Singh. It’s a stainless steel Rolex Submariner which retails for $9,500 but sells for about double in the secondary market, as stainless steel professional line Rolexes are the most sought after. Singh’s other Rolex is a gold-stainless Oyster Perpetual Date just (“Oyster” means it’s waterproof, “perpetual” means it is self-winding, and “Date just” means it displays the date).

The one on the right is by the German brand IWC, called the Regulateur. It’s in stainless steel with a separate hour and second dials and sells for about $15,000.

The guy in the middle? You guessed it, a relatively conservative $529 Apple watch for the Conservative candidate.

Biden, go tax yourself

Fortunately, Democrats on the House Ways and Means Committee agreed to do away with President Biden’s proposed tax on unrealized capital gains. He was probably imagining Bill Gates’ estate one day getting taxed to the horror of nobody but he should have been thinking about farmer owners and small businesses.

But that doesn’t mean Bill Gates is off the hook, as the top marginal tax rate is being increased from 37% to 39.6% while also adding a 3% surcharge for individuals earning over $5 million. The surcharge is not just subject to income but capital gains as well, which will see its rate move from 20% to 25%. Corporate taxes are to move from 21% to 26.5%, a hefty increase even though it is nowhere near the rate it was when Obama left office.

Fed up or Fed a bunch of bull?

The U.S. president needs to soon decide if he will reappoint Jerome Powell when his term ends early next year or appoint Lael Brainard, a Fed governor who is said to be the leading contender after Powell.

What’s frustrating about this current debate is that Powell is widely credited with having done an exemplary job implementing monetary policies that have worked. Especially during the pandemic, where his Fed acted with an accommodative and patient hand. Powell happens to be a Republican but his connections and ability to work Washington is legendary. He has tirelessly met with politicians on both sides of the isle to ensure calm buy-in from all sides, even when the pandemic rendered the entire global economy and markets not so calm. Powell is reportedly a workaholic who has more face-to-face meetings than possibly anyone in Washington.

Powell is also a supporter of the philosophy of letting the economy run hotter than normal so as to help ensure good economic tides hit the shores of poorer people and minorities. It’s a left-leaning ideal.

So why would a Democratic president attempt to fix something that isn’t broken? Moreover, why politicize what is supposed to be – and usually is – a non-partisan branch of government?

Markets and the economy thrive on confidence and visibility. A changing of the guard would risk upending this well-earned confidence.

Musing Beyond the Markets

From Robert Cialdini’s newly updated classic Influence: the psychology of persuasion:

Back in the 1960s, a man named Joe Pyne hosted a rather remarkable TV talk show syndicated from California. The program was made distinctive by Pyne’s caustic and confrontational style with his guests – for the most part, a collection of exposure hungry entertainers, would-be celebrities, and representatives of fringe political or social organizations. The host’s abrasive approach was designed to provoke his guests into arguments, fluster them into embarrassing admissions, and make them look foolish. It was not uncommon for Pyne to introduce a visitor and launch immediately into an attack on the individual’s beliefs, talent, or appearance. Some people claimed Pyne’s acid personal style was partially caused by a leg amputation that had embittered him to life; others said, no, he was just offensive by nature.

One evening, the rock musician Frank Zappa was a guest on the show. This was at a time in the 1960s when very long haired men was still unusual and controversial. As soon as Zappa had been introduced and seated, the following exchange occurred:

Pyne: I guess your long hair makes you a girl.

Zappa: I guess your wooden leg makes you a table.

Aside from containing what may be my favourite ad-lib, the dialogue between Pyne and Zappa illustrates a fundamental theme of this book: often when we make a decision about someone or something, we don’t use all of the relevant available information. We use only a single, highly representative piece of the total. An isolated piece of information, even though it normally counsels correctly, can lead to clearly stupid mistakes – mistakes that, when exploited by clever others, leave us looking silly or worse.

At the same time, a complicating companion theme has been present: despite the susceptibility to stupid decisions that accompanies reliance on a single feature of the available data, the pace of modern life demands that we frequently use this shortcut.