It's a house of smoking mirrors...its a microcosm of all of the shitshow dynamics we are living thru...
In the developed world since the Great Moderation, macroeconomic policy can be boiled down to one simple rule – prop up asset prices. In the Anglo-Saxon world, the rule is even simpler – prop up house prices. Never forget this...So much misinformation...so many agenda's...So many competing incentives...You can bet when the FURUs come on TV they have already placed there bets to front-run all!
** Companies have announced $173.5 billion worth of planned buybacks so far this year, just over double last year's pace, according to data from EPFR TrimTabs as of Monday. In 2022, buyback announcements reached a record $1.22 trillion, according to EPFR TrimTabs. Shhhhhhh....
Great work...Last Bear! and to be clear...I am not complaining, I have/will place my bet, I just dont believe anyone individual or any other Political-Tribal-Belief BS!
INFLATION: This same time last year, inflation numbers were peaking, meaning the change in price from the same month of the previous year was significant. Even if inflation numbers in terms of % are lower when compared to this peak last year, the impact is not linear, its an increase on top of an increase! I know that reports are simply showing a trend in the correct (lower than last year) direction, but I believe the impact is underestimated. In other words, what are people so happy about, not only have we not stabilized, but we continue to climb!
FED CONCERNS: You claim that the fed cares more about stability than inflation, I am wondering if you considered the extremes or that inflation can also mean instability in society (due to affordability). I am referring to historical events of hyperinflation leading to currency failure. Being the reserve currency definitely helps manage this, but I do believe that this risk is more significant than the one of depression/stability.
I believe that the concept of MMT can only work if we aggressively reverse the borrowing during times of growth. Unfortunately the nature of human greed will make these efforts virtually impossible.
In footnote #2, you make reference to potential data distortions due to seasonal adjustments. How is it that increasing bank credit enormously 3 years ago leads to numbers being potentially artificially too low today? A simple example could help a curious cat :)
And a further reflection is that, if your hypothesis is true and the March 2020 credit numbers have ripple effects that extend to today, then the same should hold true for April 2020 figures. 2 continuous months of decline in bank credit issuance can reinforce a narrative, which would of course impact markets.
New ‘Higher for Longer’ messaging pattern from Daly, Waller, Dimon, Fink and Rubenstein.
Dimon ‘warning’ of the potential for 6% Fed funds rate, with 5&10 years over 5%.
Also note that that finance/CRE people are now privately nervous about being laid off. This is probably shaping the popular economic commentary to some degree?
Lots of ‘its ok today, so it’s ‘probably going to be ok tomorrow’ narratives.
If you’re employed in banking, finance or real estate, your public narrative is increasingly becoming personal.
“Bank loans were flat from early 2020 to mid-2021, by the time CPI inflation already exceeded 5%.”
If QE withdrew UST from duration taker addict like pension funds for corporates to issue duration like crazy incentivized by low rate ever accompanied by hedged-against-duration-basis-arbitrageur type of duration givers, low interest rate may have played.
I think they should pause at the next meeting. The yield curve is inverted as steeply as it's been maybe ever (depending on which spread you look at), inflation has been heading downward the last six months, and there's a lot of financial fragility. The point should not be to prop up financial markets, but to avoid a deep recession. The mythical soft landing is just that, has never happened, but a moderate downturn is better than a crash. It may be too late already, but continuing to ratchet up rates until they see the whites of the recession's eyes, as they usually do, is not necessary. They can continue to do modest QT and inflation will likely drift down. They can indicate a readiness to make further increases down the road as needed, but it's not needed right now.
Well written article. Thanks for sharing. I especially appreciate your conclusion regarding the relative importance of QT. The Fed must end QT before YCC can begin. We all know YCC is coming, but we don't know when... How bad does the crisis need to be to kickstart YCC?
with recent headline inflation numbers, my suspicion is their grip is slipping. I just don't think they can hold for that long, especially since every central bankers tendency, except maybe Knot, is to be a dove
Thank you for your is insightful article. I am curious if you have started putting money back in the market yet? Do you personally favor individual stocks or the indexes? If you jane not started what would make you change your mind? I sense you are feeling better about the market then you did several mo the ago. Enjoy the weekend
It's a house of smoking mirrors...its a microcosm of all of the shitshow dynamics we are living thru...
In the developed world since the Great Moderation, macroeconomic policy can be boiled down to one simple rule – prop up asset prices. In the Anglo-Saxon world, the rule is even simpler – prop up house prices. Never forget this...So much misinformation...so many agenda's...So many competing incentives...You can bet when the FURUs come on TV they have already placed there bets to front-run all!
** Companies have announced $173.5 billion worth of planned buybacks so far this year, just over double last year's pace, according to data from EPFR TrimTabs as of Monday. In 2022, buyback announcements reached a record $1.22 trillion, according to EPFR TrimTabs. Shhhhhhh....
Great work...Last Bear! and to be clear...I am not complaining, I have/will place my bet, I just dont believe anyone individual or any other Political-Tribal-Belief BS!
Fantastic read, as always.
INFLATION: This same time last year, inflation numbers were peaking, meaning the change in price from the same month of the previous year was significant. Even if inflation numbers in terms of % are lower when compared to this peak last year, the impact is not linear, its an increase on top of an increase! I know that reports are simply showing a trend in the correct (lower than last year) direction, but I believe the impact is underestimated. In other words, what are people so happy about, not only have we not stabilized, but we continue to climb!
FED CONCERNS: You claim that the fed cares more about stability than inflation, I am wondering if you considered the extremes or that inflation can also mean instability in society (due to affordability). I am referring to historical events of hyperinflation leading to currency failure. Being the reserve currency definitely helps manage this, but I do believe that this risk is more significant than the one of depression/stability.
I believe that the concept of MMT can only work if we aggressively reverse the borrowing during times of growth. Unfortunately the nature of human greed will make these efforts virtually impossible.
How we can see the market odds/expectation of a rate hike? What charts are people looking at to determine that? thx
Hey bear, thanks for the great article.
In footnote #2, you make reference to potential data distortions due to seasonal adjustments. How is it that increasing bank credit enormously 3 years ago leads to numbers being potentially artificially too low today? A simple example could help a curious cat :)
And a further reflection is that, if your hypothesis is true and the March 2020 credit numbers have ripple effects that extend to today, then the same should hold true for April 2020 figures. 2 continuous months of decline in bank credit issuance can reinforce a narrative, which would of course impact markets.
New ‘Higher for Longer’ messaging pattern from Daly, Waller, Dimon, Fink and Rubenstein.
Dimon ‘warning’ of the potential for 6% Fed funds rate, with 5&10 years over 5%.
Also note that that finance/CRE people are now privately nervous about being laid off. This is probably shaping the popular economic commentary to some degree?
Lots of ‘its ok today, so it’s ‘probably going to be ok tomorrow’ narratives.
If you’re employed in banking, finance or real estate, your public narrative is increasingly becoming personal.
“Bank loans were flat from early 2020 to mid-2021, by the time CPI inflation already exceeded 5%.”
If QE withdrew UST from duration taker addict like pension funds for corporates to issue duration like crazy incentivized by low rate ever accompanied by hedged-against-duration-basis-arbitrageur type of duration givers, low interest rate may have played.
Love the commentary, especially the balance between solid thoughts and humility.
I think they should pause at the next meeting. The yield curve is inverted as steeply as it's been maybe ever (depending on which spread you look at), inflation has been heading downward the last six months, and there's a lot of financial fragility. The point should not be to prop up financial markets, but to avoid a deep recession. The mythical soft landing is just that, has never happened, but a moderate downturn is better than a crash. It may be too late already, but continuing to ratchet up rates until they see the whites of the recession's eyes, as they usually do, is not necessary. They can continue to do modest QT and inflation will likely drift down. They can indicate a readiness to make further increases down the road as needed, but it's not needed right now.
Well written article. Thanks for sharing. I especially appreciate your conclusion regarding the relative importance of QT. The Fed must end QT before YCC can begin. We all know YCC is coming, but we don't know when... How bad does the crisis need to be to kickstart YCC?
Thank you for putting this together TLBS! Decaffeinated coffe was ok for todays post. Keep it up!
A surprisingly extraordinary sentence, thanks for writing it.
"Perhaps because of differing political and economic perspectives or because of some implied moral undertones, we struggle to state the plain fact."
Great post!
with recent headline inflation numbers, my suspicion is their grip is slipping. I just don't think they can hold for that long, especially since every central bankers tendency, except maybe Knot, is to be a dove
Thank you for your is insightful article. I am curious if you have started putting money back in the market yet? Do you personally favor individual stocks or the indexes? If you jane not started what would make you change your mind? I sense you are feeling better about the market then you did several mo the ago. Enjoy the weekend