Bill Ackman Redux

Weekend beach reading.

Rudy Havenstein

Mar 11, 2023

Dine by candle light
And hold your savings tight
You never, you never know
When the bridge falls apart

Pavement

Two posts in a day - I know, I know - but there’s a lot going on.

So let’s see…

“…the long-term goal of QE was, in fact, to make saving money and expecting to earn a decent interest rate on it a fool’s errand year after year, thus forcing millions of people into riskier and riskier areas of investment, which has led to the unprecedented bubble in markets that we find ourselves in today – with no reliable exit plan by the Fed.”

- Pam Martens and Russ Martens, reviewing The Lords of Easy Money

To Chris Whalen’s point below, the Fed’s irresponsible efforts to force everyone out on the risk curve largely led to the demise of Silicon Valley Bank.

Grant’s Interest Rate Observer explains:

"The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen. .the bad economist pursues a small present good that will be followed by a great evil to come..." - Bastiat

When does Bernanke give back his “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”?

Meanwhile…

Maybe Kashkari Et al. should’ve paid more attention to bank regulation.

Anyway, here’s a sobering interview. Reminds me a bit of Bill Ackman in mid-March 2020, although, unlike Ackman, Chris Whalen had been critical of the Fed’s idiotic ZIRP and QE policies…

I think next Monday (the 13th), the Fed’s gonna have to drop interest rates fifty bips, and they’re gonna have to open the discount window and say, “Guys - we’re here to take any collateral you have, but we’re not gonna look at the coupon, ok? No haircut. They have to do things like that to get ahead of this. Otherwise we’re gonna have a problem. Forget about raising interest rates, even if we leave rates where they are, the banking industry has got a solvency problem.
- Chris Whalen

Yay! Another bank bailout!

“You don’t want to raise in May and cut in January. You look like Mexico for heaven’s sake!”

**- James Cramer, December 2006 (For historians: The Fed raised in December 2018, and cut in July 2019.)**

On the Wednesday and Thursday after Lehman filed for Chapter 11, I asked my wife to please go to the ATM and take as much cash as she could. When she asked why, I said it was because I didn't know whether there was a chance that banks might not open.
Mohamed El-Erian

“The Fed can’t fight inflation anymore.”

Quantitative easing was a mistake in many ways. We see with Silicon Valley what’s happened….The Fed can’t fight inflation anymore. They can’t raise interest rates, even to current levels. I think we’re gonna see rates go back down. And then this whole narrative about the Fed, their responsibility for defending us from inflation - that’s all gonna be finished. We’re not gonna even be able to talk about that anymore.
- Chris Whalen

**Really hope Chris Whalen was drunk during this interview.**

An alternate explanation of why Silicon Valley Bank failed: “The reason SVB went down was because their asset liability management was being run by morons.”

**Deposits Less Than $250K as a Percentage of Deposits (no link)**

This is amusing. Crytpo investors need to be careful when investing in something risky like a large U.S. bank: Circle’s USDC, the second-largest stablecoin, with $43 billion market capitalization, held an undisclosed part of its $9.8 billion cash reserves at failed Silicon Valley Bank.