Blain’s Morning Porridge Aug 4^th – Without data we know nothing. Walk away.

 “It was a bright cold day in April, and the clocks were striking thirteen.”

Friday August 1^st might go down in history as the day the US Treasury Market died. There was an art to reading US Data. It relied on trust. Now that is broken – if you can’t trust the data, what can you trust? Other govt bond markets are available.

Maybe it’s due to some tiny vaguery in the earth’s magnetic field, or a dodgy flux capacitor in the Rangey as we drove back from Wales, but Morning Porridges from the future keep tumbling through the space-time vortex into my inbox. It happened again over the weekend… A Porridge from May 2031 contained a link to a release from Trump’s Ministry of Economic Truth, formerly the US Treasury:

“Under the leadership of President Trump, the US economy continues to grow at record speed. Payrolls data from the Ministry of Truth, a subsidiary of Truth Social, show full employment across America. Tensions in the inner cities have never been so low. All recent graduates have found highly paid jobs across America’s expanding manufacturing sector, causing many large companies in Trump Inc to report significant labour shortages. Due to this success The Ministry of Plenty is cutting the bread ration by a further 30% to reward workers for choosing to do more overtime. Meanwhile, the Ministry of Love has tightened quarantine restrictions on West Coast cities hit by the latest Chinese plague to facilitate the swift movement of ICE logistical heavy units, with supporting US Marine units, to these areas. The president remains in robust health and is fighting hard from the White House South to ensure the ongoing success of the economy and prosperity on behalf of all Americans.”

With that picture of tumbleweed blowing down main-street America and vast acres of half-build, unfinished data centres fresh in my mind, I can’t but feel last Friday’s Jobs Data might have been a critical implosion point for the global markets… as for then sacking the messenger… well… that’s a whole other can of rotting worms…

Like everyone else of my market generation, I’ve been watching the Non-Farm Payroll data released by the Bureau of Labour Statistics my whole career. Fed-Watching was once an honourable financial career – understanding the data, and its’ nuances that would determine the Fed’s perspectives and shift policy. One of the most meaningful things to watch was the revisions – particularly how these could change the picture painted by the monthly headline number.

We all knew the headline number on the first Friday of a new month was largely an estimate, while the revisions were real data filtered from companies into the picture. We understood the headline was a snapshot, the revisions revealed the whole picture. Sometime, spectacular truths were revealed– on Friday it showed how much weaker growth in the economy has been, suggesting the US economy hit an economic top some time ago.

Now we know for sure the real US economy is feeling the costs of tariff and economic uncertainty. A downturn or recession looks increasingly likely. The revisions reveal it is weaker shape than we thought. We know over a quarter million jobs we thought had been created, were not. We now know over half-a-million jobs we thought were in place, no longer exist. These numbers are exactly what economists, analysts, and seasoned financial professionals feared – the potential consequences of Trump taking a sledgehammer to trade, alliances and cheap labour. The payrolls number suggests a deepening weakness across the economy. These fears will now bite deeper as the dislocations to the economy become increasingly apparent in coming economic data reflecting:

• The degree to which the weaker dollar and tariffs will impact inflation, and how these will further impact consumers. The question is not will there be damage, but how deep will it be?
• Consumer confidence is already low, and set to fall further as the impact of loans, medical care and inflation mount. How will that impact the economy?
• Business investment was hit by tariff uncertainty – headlines on massive Trump deals do little to build real confidence. How much will investment be scaled back due to a weakening economy?
• How will the economy adjust to the massive inventory build-up during the May-July tariff-time and the ongoing trade-frictions on supply chains as China realises it has the upper hand in negotiations?
• How much more will Trump’s mercurial lashing out damage business confidence and global confidence?

All these and more coming to the US market – even as stocks hit new tops and the AI bubble expands…

There is an argument that a 3-month lag in the release of critical economic data on employment is a bad way to inform critical policy decisions by the Fed. It is. The BLS should have been working towards providing far sharper and time sensitive info to visualise real-time employment data on the US economy for policy makers. Unfortunately, that is not the way government bureaucracies work.

This morning that is the post-factual “narrative” being fed to markets this morning by the intellectual wing of the Republican Party, as they seek to rationalise the sacking of Erika McEntarfer, the commissioner for the BLS, last Friday after her agency released a frightening picture of the US economy. They are arguing she deserved to be sacked for not innovating better data collection and economic surveillance that would given the Fed  a real-time employment picture. Well to be wise after the event.

What the market heard on Friday was Trump dramatically sacking Ms McEntarfer, screaming that she was manufacturing bad economic data designed to make him look bad because she is a political enemy. The apologists of the Republican party are now trying to spin it in terms of long-term “frustration” with the “structural overstatement” of jobs statistics in favour of former President Biden, during the last administration.

What the market saw was pure Trump temper tantrum. A man not in control of himself. Some say it’s because he in increasingly beleaguered by the swirling murk of Epstein. More likely because he’s acutely aware of the mounting economic challenges which threaten to reveal the shallowness of Trump’s “Potemkin” economy.

What the market now sees is US economy where Data can no longer be trusted. That was once the prime reason not to invest in China. It will now be a reason to look elsewhere rather than the US. The reliability and investibility of data, including critically that it is not politicised, is a critical element of political competency in successful economies. Trump just blew that.

There was no reason to sack the messenger – there was no plan to fix the BLS. But this is Trump World so Erika McEntarfer had to go. Just like Rhodes Scholar and decorated Army Vet, Jen Easterly, who had been appointed to West Point last week, but was summarily dismissed last week because Trump’s Witchfinder-General, Laura Loomer, didn’t like something she’d written. Easterly described her dismissal as: “a casualty of casually manufactured outrage that drowned out the quiet labor of truth and the steady pulse of integrity.”

America…. Is going mad. And that is a problem.

It’s not just Trump and his apologists. It’s Meta spending billions to try and rewrite AI so it can destroy Apple with new consumer wearables. Remember last time Meta tried to change the world – renaming itself to reflect the Metaverse Zuckerberg told us was worth trillions? Tumble weed blowing down its pixelated streets.

At some point this growing American madness is going to break Market confidence. It won’t just be Trump’s tantrums, or the consequences of his bad trade deals breaking long-established trusts, or the vision of American Technological Exceptionalism looking increasingly tarnished. It will be a combination of them all. Camels backs and all that. It won’t happen suddenly, but over time… nations and consumers just looking away and going elsewhere…

“And thus is was the Empire fell not in a rain of fire and torment, or a torrent of destruction, but with barely a whimper in a world that did not notice…”

I’m supposed to be on holiday for next few weeks, but will continue intermittent porridges weather dependent! Out of time and a last day of doing the day job before I fix the boat..

Bill Blain

Author, The Morning Porridge

CEO Windshift Capital

Partner Shard Capital