⚖️The Whole Truth?

It is nearly Christmas. That means it's best to avoid any type of mall if at all possible. If you find yourself having to go to the mall from now until New Years, I have pity on you. Finish up any of that last minute shopping, because most things on Amazon can still get here by the holidays.

In this week's email:

👉 Recap: Cuts in Sight
👉 Insight: Why's the Fed's So Sneaky
👉 Grab bag: Can't Sleep on Anything Else
👉 Dad joke of the week

Weekly Recap

The S&P 500 increased by 3.13% throughout the last 5 trading days. The primary driver was the Fed meeting held on Wednesday afternoon. Markets were anticipating positive signals from the Fed, and you can see the slight but steady increase in anticipation of the meeting's results.

The results of the meeting were two-fold. First, interest rates held steady without increases with the market already anticipating no more increases this year. The bigger factor was the Fed signaling interest rate cuts as we move into next year. The market had approximately 5 interest rate cuts priced in, but the Fed stated they anticipate approximately 3 cuts over 2024.

After the announcement, the market surged by over 1% within hours. The larger question remains: if the market was pricing in 5 cuts and the Fed signaled for 3, wouldn't that be a negative surprise? As I'll explain more in the article below, the Fed never tells the whole truth. The Fed is signaling that it is time to move to a looser monetary stance and that's enough for the markets. We can't tell what they'll do for sure, but it seems like they are now taking a defensive position.

Why's the Fed's So Sneaky

I was always taught that a person is only as good as their word. However, the Fed never seems to be held accountable to their so called "word". They say that there are a certain number of interest rate hikes in line for the year, but that exact number never seems to materialize. They often talk in esoteric terms and hint at certain things without much clarity. It's not just that Jerome Powell has a nine figure net worth and is out of touch with the large majority of people. There is actually a very good reason the Fed is so sneaky. It's the only way the policies would ever work.

Most public information is already priced into the market. For a more detailed explanation on this see the previous article: Already Priced In. Because markets are quick to account for new information, they certainly try to take anything the Fed does into account. On the flip side, monetary policy only really works due to the lag in pricing this information into the market. We'll take a look at the oldest example of this in American history: the Revolutionary War.

During the Revolutionary war, the United States needed to secure additional equipment to fight off the British. However, it didn't quite have the funds necessary to do so. There were really only two options left at the time: take out debt, or print more money. The government actually did both, but relied more heavily on printing money. This allowed the government to secure enough weapons to fight off the crooked teeth dastards.

If all the other nations actually knew that America was printing tons of cash to fund it's war, they would have never secured the weaponry that allowed the US to hold off the British. Other nations would have taken this into account and revalued the currency according to the money in circulation. We have sneaky monetary policy to thank for the entire existence of the United States, because it would have been impossible otherwise.

Eventually all the extra money in circulation caught up with us causing hyperinflation. By that time, the United States had already secured the weapons and equipment needed to fuel the war. It very narrowly escaped any default on debt and successfully made it out of the woods to become the great nation it is today.

Skipping forward to the current day and age. If it was clear exactly what the Fed was going to do, it would get immediately priced into the market. This would actually lead to a lack of flexibility in the way they manipulate the money supply. Without some opaqueness, monetary policy just wouldn't work at all.

The Federal Reserve has continued to be as sneaky as ever. Does it mean that we shouldn't trust the Fed? Well, kinda. They generally aren't going tell the whole truth and talk in riddles, but that's because it's the only way monetary policy really works. They still are still doing the best they can for our nation.

Can't Sleep on Anything Else

As the night draws to a close, one of my favorite activities is always laying down on my custom built bed. It's just the right amount of sink-in softness and springiness. It feels like what I always imagined laying on a cloud would feel like. While I have always enjoyed sleeping, my bed wasn't always so comfortable. I remember the time before I tore apart my bed and rebuilt it from the bottom up. It felt like I was getting sucked into a sink hole. However, I spent hours upon hours researching how to custom build beds and finally put together the perfect split king for myself and my wife.

The journey first began with back pain. I would wake up every morning feeling like I had a crick in my back. I knew that it was likely because of the bed I was sleeping in but didn't quite have the initiative to do the whole bed shopping ordeal. Eventually, I had to give in because not only did it disturb me the morning after, but I was having trouble falling asleep. In addition to my personal woes, my wife was pregnant at the time, and I felt it was my duty to get ourselves something better to sleep on.

I finally made the trek to the mattress store. The prices ranged into past the $8,000 range for a king mattress we were interested in. It was even more expensive for a split king so that we could have different levels of softness on each side (it's totally worth it to get a split king comfort-wise). I knew that the money was in the bank, but I just couldn't help but think that it wasn't quite worth the cost for a few springs and some padding.

Researching the mattress industry led to a revelation: mattresses are one of the highest markup consumer items. While nearly all items sold at the store are marked up to some extent, mattresses in particular are priced at 3x or more the cost to create them. I eventually stumbled upon a relatively small community of people that would build their own mattresses. One of primary sites that everyone recommended was Arizona Premium Mattress.

Although I had already gathered the learning resources needed, the adventure had just begun. One of my many faults is that I like to make optimize each of my decisions. Instead of just looking at the data I'm presented, I tend to get stuck arguing in my head about all the possible combinations. I remained in a state of analysis paralysis for some time before finally making it out of the mire.

There were a few major fundamentals I was able to sort out after reading hundreds of posts about the topic: materials, height, and layers.

Materials are an important aspect in a mattress. They are fundamentally in approximately 3 categories: spring, foam, and latex. There may be a more niche material I have omitted, but those are the primary materials used to build any mattress. Both foam and latex can be used at any location in the mattress and come in varying densities.

Height of the mattress is also a huge factor. For a premium mattress feel, you generally want a heigh in the range of 10-12 inches. In larger mattresses, the padding can compress too much leading to a sinking feeling. Smaller mattresses don't quite have the premium feel as the layers between you and a hard surface aren't quite enough.

Layers are primarily composed of three different segments: the base, the middle, and the comfort layer. The base could be either high density latex or foam. There is also a third option for springs that give the mattress a bouncier feeling. The middle layer provides additional support and can act as a barrier for the springs. The comfort layer on top is what gives the mattress that nice soft cloud-like feeling.

After long deliberation, I was able to settle on the final arrangements for what would become the mattress of my dreams. We'll cover exactly what I picked and the process I used to build my new mattress in the next newsletter so stay tuned.

Dad joke of the week