So, QE began in Q4 2008, and never ended. How’s that larger pie been sliced?
Corporate equities and mutual fund shares by wealth percentile group
I had a number of tweets quoting Nick Halaris on housing (and QE’s affect on it) last year. Check this fun thread out from April 2021. (Remember, since fascists Paraga and Vijaya banned me, my old archive has to be retrieved one annoying piece at a time, so be patient on the links - archive.org can take a while to load).
There was a sense in which the Fed in particular was deliberately trying to ignore the reality of inflation of housing costs or just hoping that people wouldn't notice, because it went against the general narrative of what their policy was attempting to achieve…
We were at the time investing in value-add multifamily properties in Atlanta, and we were buying properties where the rent would be $500, for example, for one bedroom, and by the time we sold it, it would be like $1000. This was happening in just a number of years…
I started noticing that there was this disconnect between the popular narratives in the market, which is that quantitative easing is relatively benign when it comes to inflation, and what I was seeing in real estate, which was like massive inflationary forces…
I was seeing real life inflation in the cost of living, like 100%. Meanwhile, we were getting CPI prints that look below 2% and we're talking about this permanently low inflation problem that we were having…
I think now, it's getting to a point where it's hard to ignore when the median house is up 15% or 20% year-on-year, up to 340,000 from where before it was in the two hundreds. They're starting to lose control of this narrative…
One of the fascinating things I found was that in the CPI calculation methodology, they have this concept called owners' equivalent rent…
I'm not a believer in conspiracy theories [𝘐 𝘢𝘮 - 𝘙𝘏] but I do think that the runaway inflation, what I consider to be runaway inflation in housing is something that the Fed in particular and the government in general was trying to avoid because it's a serious problem…
...you start to think about life, okay, so if your house is up 100%, the cost of education is up 100%, healthcare, I don't know how the CPI could be registering under 2%. It makes no sense, really…
As I started to think about the whole issue, it brought me back to QE and it brought me back to the original intent of the program. I think that that's where the secret lies in this whole thing…Wealth inequality is a product of many years of policy, but in particular, this QE policy. The intent of it was...this trickledown effect on the economy….
Real estate is such a huge piece of the spending...it's so dangerous from an inflationary standpoint. If you take a big city where people are spending...50% of income on housing, and you put some inflation into that, it gets really dangerous for standard of living very quickly…
Also, a good June 2021 podcast with Halaris and Tyler Neville is here.
There was this really high profile transaction in Houston where - I think it was Blackstone - went in and paid like 50% more than what these houses would have traded for if they sold to first time home buyers. - Halaris
One of the things you said...was people don't get the QE mechanism. Everyone thinks it's just an asset swap, but you're sitting front and center in an asset class, which is housing and in commercial real estate that you think is the number one beneficiary. - Tyler Neville
All those homes...quickly got gobbled up by these institutions...who are doing this buy to rent strategy....all of a sudden Blackstone and Colony raised these funds. And they literally bought everything. Every foreclosure that was at the auction, they bought them all. - Halaris
At the end of the day, it's too expensive: $600,000 - the median home in America is $330,000, yet here in LA, we can't build homeless housing for $600,000 a unit. It's insane. - Halaris
It's one of the reasons why we sold that apartment in Atlanta....the only way that deal makes any sense for the buyer is to literally raise rents by double digits...they're trying to make...10% or 15%. There's no way you can do it unless you raise the rents. - Halaris
Remember, that wealth-inequality machine known as QE is going away, as the Fed balance sheet falls back to a trillion dollars or less, any day now. The Fed would not lie.
Anyway, there’s a new interview out with Halaris. (I like Nick, but for me in this one MI2’s Harry Melandri stole the show.)
James Aitken on the ECB, in a chat with friend of the show Grant Williams:
…thinking longer term, all right, you’re tightening policy in the front end and crossing your fingers, but committing to open ended asset purchases at some price to hold the thing together. What does that mean for the euros a store of value? Right? What does that mean long term? I mean, what are you doing?
There was this though:
We were effectively a tool of the central banks and we all benefit from that massively and this is pay back. This is pay back for all the super normal profits that we all enjoyed in the privileged cocoon of financial markets between 2009 and late last year
No, we didn’t all enjoy these “super normal” profits. James did, and I did, and the top 10% or 20% or so of Americans and Brits did, but most just saw higher housing, healthcare and tuition costs, and 20% credit card rates.
Mr. Aitken has much more faith in central bankers’ intestinal fortitude to fight inflation than I do.
The Fed has been quite clear about their intentions, if you paid attention. Note the dates, which coincide with Fed meetings…
A couple other Aitken quotes I noted:
"On a lot of occasions over the past dozen years or so, it often pays to leave your brain at home." - Dec. 2020 (Grant Williams added, "It's now safe to drive through red lights.")
On Central Bankers: “Arguably, too many of them are obsessed with their models, tweaks, thumb-dials and everything else, most infamously, John Williams, who, without any manifest understanding of financial markets, was made President of the New York Fed..." - June 2020
Looks like that low-rate era of 19.55% credit card rates is over…
The more I see from the Financial Times, the more nauseated I am by their fawning worship of the uber-elite clowns who have led us to where we are today.
The Financial Times bills “Lunch with the FT” as “a weekly interview with leading cultural and business figures.” The conceit is that an FT reporter takes a celebrity to lunch, and interviews them, while also describing the (posh) venue and meal choices.
Sounds awful.
Here’s a snippet from the FT’s latest droolfest:
[Hillary]Clinton is puzzled why people are so nostalgic about the mining life. “Whether they were from West Virginia or Tyneside, their lives were so grim and disease-prone and unhygienic — but the nostalgia for those days. I don’t know,” she says, trailing off.
I was waiting for “deplorables,” but no.
Note that Hillary is saying things like this at “Washington’s sleek Park Hyatt hotel,” in “a semi-enclosed dining area of the Blue Duck Tavern, the hotel’s Michelin-starred, locally sourced restaurant.” You probably don’t eat there much, peasant!
Bernanke, 61, is waiting for me. He is wearing a plain brown suit and a yellow tie. I have met him often since he became a governor of the US Federal Reserve in 2002. He is always very much the deliberate and precise academic. It was a happy chance that this scholar, known for his work on the Great Depression, was chairman of the central banking system of the US during the biggest financial crisis since the early 1930s. His new book, The Courage to Act, provides a fascinating account of the effort to save the world from another such catastrophe.
Martin Wolf here is like the FT’s Nick Timiraos, or Aaron Ross Sorkin slobbering over Tim Geithner - just another Sycophant to the Stars®. Again, what Wolf writes here is fan fiction, not reporting. Outside the Beltway and NYC, Bernanke is a sociopathic financial villain of the highest order.
The waitress takes our orders. I choose pan-seared swordfish with fingerling potatoes, onions and Brussels sprouts. He selects grilled halibut with green beans, blue cheese and mashed potatoes.
Hang on a second…
Sorry. Enough f’ing Martin Wolf.
TL:DR: Our mainstream financial media is an embarrassment.
The Federal Reserve's low interest rate policy for much of my adult life has led to yield farming in every nook and cranny in the economy/life. Every need a person must have has been cornered, controlled, made scarce, and is being farmed for cash flow by wealthy investors.
Case-Schiller index up 20% between 3/2021 and 3/2022. Up 17% annually the past two years. Oh, and between 3/2012 and 3/2020 the annual increase in the CS Index was 5.8%. All the while the FED was demonstrably concerned that inflation was running below target. Yea ,The FED is lying and they don't care. They even publish the lie on their website.
The Federal Reserve's low interest rate policy for much of my adult life has led to yield farming in every nook and cranny in the economy/life. Every need a person must have has been cornered, controlled, made scarce, and is being farmed for cash flow by wealthy investors.
Case-Schiller index up 20% between 3/2021 and 3/2022. Up 17% annually the past two years. Oh, and between 3/2012 and 3/2020 the annual increase in the CS Index was 5.8%. All the while the FED was demonstrably concerned that inflation was running below target. Yea ,The FED is lying and they don't care. They even publish the lie on their website.
https://fred.stlouisfed.org/series/CSUSHPISA