Excellent post. Lots of great nuggets. I just finished Peter Turchin’s book (End Times) about elite overproduction. Have you read it? Can’t wait to hear 2nd episode.
Not sure about the Dredge comment on banks. Many have gone broke taking too much risk in CRE, notably Wachovia and Corus but many more if not most. CRE has numerous well known risks, but most obvious and least discussed is covariant risk with bonds as both long term financing rates and values are a function of the 10 year Treasury. Banks which added large bond exposures with CRE exposures should have new Senior Management.
I get the stock market, they don't take Powell or the Fed seriously. They know that Powell is weak and will cave in to the political pressure to accommodate during an election year. What I don't get is bonds. Who could possibly trust these clowns? They've demonstrated over and over that they have no clue what they're doing, and the first hint of economic pain you know they'll reflate like crazy. Baffling.
I've never been bond investor (during this 40 year bull market in bonds!) but I've done fine. I only own some i-bonds from 20 years ago. I'd rather own dogecoin for the long term (only half-joking)
Rudy, You must spend all day, 7 days a week, listening to podcasts and reading reports, and then distilling the most compelling material for your readers. And you do it better than many readers, including me, can do it for themselves. I, for example, am a lifetime subscriber to both Jim Grant and Grant Williams, and you posted material from them that I had missed. Very valuable! jpm
I agree that some of the best insights are in the comments sections - whether it be to confirm or challenge a claim made by the tweeter/poster, or just to gauge the mood. I don’t know how big the online universe is - and it may not reflect the majority - but I like to think it contains a substantial portion of people who aren’t buying what the traditional media are selling.
When you say probably illegal, can you flesh that out a bit more. I’m a (thankfully retired) lawyer and ‘probably illegal’ (which you have said a few times if my recollection is correct) is a term with which I am not familiar. LOL. It’s either illegal. Or it’s not. I did some minimal poking around and I could not find any source document that tells me it is illegal for the FED to hold MBS. But unlike you, I haven’t been a Central Bank President. So. Help me out here, I would be happy to do a deeper dive if I knew where to look. Merci.
I added a footnote. I'd be curious to see what you think of the text. I'd have to look into legal definitions more. I could change my comment to "should be illegal" :)
Also, the authority provided is very narrow…maturities limited to 6 months is one example…on that basis alone one could argue that what they have done w/MBS violates the Act. Somehow I don’t think the intention of that section was for the FED to be buying billions of MBS w/30 year maturity.
I suppose the entire point of legality is moot because no one in Congress to my knowledge has ever spoken up against MBS purchases. If it came to a vote in the Senate a rule change allowing Fed purchases of baseball cards would pass 98-2.
Interesting. Well, I read Section 1 and my first thought was, that is not exactly what they are doing…because they aren’t really doing it in the open market.
Then I read the commentary you posted re: 2008 and the alleged illegality and my second thought was that nothing has changed.
Which, as you have been pointing out for years, is par for the course.
Excellent post. Lots of great nuggets. I just finished Peter Turchin’s book (End Times) about elite overproduction. Have you read it? Can’t wait to hear 2nd episode.
Have not read it.
Fed lulled everyone to sleep with MMT in the background, but... Not a risk Senior Management in banks should have missed
Recommend reading Kerrisdale Capital's takedown of Joby Aviation if you want to see how deluded the EV space has gotten.
I'll look for it
https://www.kerrisdalecap.com/investments/joby/
It's a niche subject, but has been an interesting capital sink over the last 5 years. Like self driving taxis on steroids.
Not sure about the Dredge comment on banks. Many have gone broke taking too much risk in CRE, notably Wachovia and Corus but many more if not most. CRE has numerous well known risks, but most obvious and least discussed is covariant risk with bonds as both long term financing rates and values are a function of the 10 year Treasury. Banks which added large bond exposures with CRE exposures should have new Senior Management.
I agree, but I liked the 'leveraged stuff they think is riskless' part
I get the stock market, they don't take Powell or the Fed seriously. They know that Powell is weak and will cave in to the political pressure to accommodate during an election year. What I don't get is bonds. Who could possibly trust these clowns? They've demonstrated over and over that they have no clue what they're doing, and the first hint of economic pain you know they'll reflate like crazy. Baffling.
I've never been bond investor (during this 40 year bull market in bonds!) but I've done fine. I only own some i-bonds from 20 years ago. I'd rather own dogecoin for the long term (only half-joking)
Rudy, You must spend all day, 7 days a week, listening to podcasts and reading reports, and then distilling the most compelling material for your readers. And you do it better than many readers, including me, can do it for themselves. I, for example, am a lifetime subscriber to both Jim Grant and Grant Williams, and you posted material from them that I had missed. Very valuable! jpm
Thanks. If I'm not with the grandkids, I'm always reading during the day, and listening to interviews - usually while walking (generally 3-4 miles).
Excellent fix with the pic’s separate from the links!
I'm gonna try to separate the eclectic topics more that way
My 23 yr old daughter has recently discovered and become infatuated with Buckley. Now, I’m surrounded.
Another one lost way too young.
I agree that some of the best insights are in the comments sections - whether it be to confirm or challenge a claim made by the tweeter/poster, or just to gauge the mood. I don’t know how big the online universe is - and it may not reflect the majority - but I like to think it contains a substantial portion of people who aren’t buying what the traditional media are selling.
“The Fed's probably-illegal MBS holdings”
When you say probably illegal, can you flesh that out a bit more. I’m a (thankfully retired) lawyer and ‘probably illegal’ (which you have said a few times if my recollection is correct) is a term with which I am not familiar. LOL. It’s either illegal. Or it’s not. I did some minimal poking around and I could not find any source document that tells me it is illegal for the FED to hold MBS. But unlike you, I haven’t been a Central Bank President. So. Help me out here, I would be happy to do a deeper dive if I knew where to look. Merci.
I added a footnote. I'd be curious to see what you think of the text. I'd have to look into legal definitions more. I could change my comment to "should be illegal" :)
Also, the authority provided is very narrow…maturities limited to 6 months is one example…on that basis alone one could argue that what they have done w/MBS violates the Act. Somehow I don’t think the intention of that section was for the FED to be buying billions of MBS w/30 year maturity.
I suppose the entire point of legality is moot because no one in Congress to my knowledge has ever spoken up against MBS purchases. If it came to a vote in the Senate a rule change allowing Fed purchases of baseball cards would pass 98-2.
Hehe. 98-2 is likely the same ratio of Senators who ever ever read a single word of the Federal Reserve Act. 2 might even be stretching it.
Interesting. Well, I read Section 1 and my first thought was, that is not exactly what they are doing…because they aren’t really doing it in the open market.
Then I read the commentary you posted re: 2008 and the alleged illegality and my second thought was that nothing has changed.
Which, as you have been pointing out for years, is par for the course.
Let me look for some reasonable doubt and get back to you. I will look at the Federal Reserve Act.
EVs of all types are retarded. (Like the “retarded” that was okay until a bunch of retards changed its rules of usage.)
I would never use that word as a slur against a mentally challenged person, but it's a perfectly good word otherwise.
Exactly. For example, it’s quite useful for people who thought long-term financing of a gender studies degree was a good life choice.