I'm not too big to fail
Caligulan Capitalism
“Today most Americans BELIEVE there was a conspiracy to kill President Kennedy, but they don’t KNOW it. They don’t want to KNOW it—and our Government doesn’t want to KNOW it and our elected representatives don’t want to KNOW it because KNOWING it would mean having to do something about it. That’s an awesome thought.”
Gaeton Fonzi, The Last Investigation
Besides the “Trump Put,” everyone on CNBC is talking about the Fed “stepping in” at some point.
Maybe many of the problems we have are a result of the Fed "stepping in" over recent decades. No one ever mentions this strong possibility.
"We are now awash in something that might best be labeled "Caligulan Capitalism.""
People like Janet Yellen rarely just fade away into obscurity, with their immense wealth and amorality. They feel they must keep popping off.
This is not a defense of Trump, but Yellen has been harming America for nearly 50 years.
Core CPI has been above the Fed's made-up "2% target" now for FOUR YEARS, 48 months in a row.
Last Week
Following its worst week in over five years, the S&P 500 staged a significant recovery, posting its best week since November 2023 with a 5.7% gain. This rebound was largely fueled by Wednesday's dramatic 9.5% surge, its biggest single-day increase since 2008. The index remains in correction territory, however, sitting 12.71% below its record close from February 19th, 2025.
Stream of Consciousness Friday Night Rant
Half of America owns no stocks. The top 10% supposedly own 93% of the stock market. For most Americans, stocks are largely irrelevant.
Fintwit hates it when I say this, but Fintwit is not representative of America (either am I.)
Government policies, though, are relevant, and we do indeed live in a sort of late 18th-century French economy where the very richest are a large proportion of consumption - but that’s a very unhealthy situation we should seek to correct. The fact is, the majority of people own little to no stocks.
I am a caveman. I buy stocks and sometimes sell them. Once in a great while I’ll buy a put option. I’ve been doing this for over 40 years and done pretty well.
I’ve seen twice in the last 22 years the S&P 500 INDEX fall over 50%. I’ve seen over a dozen years of batshit crazy global monetary policy. U.S. fiscal policy left much to be desired as well.
I heard the giant sucking sound Ross Perot predicted. I saw the rise of predatory consumer finance, parasitical private-equity, massive debt, endless wars, the trashing of the Constitution, and the financialization of literally everything (worst of all housing) - essentially we’ve had corporatist fascism run amok.
Private profits and socialize losses. The Golden Age of Grift.
Greenspan was Patient Zero. Rubin, Paulson, Bernanke, Geithner, Summers - all w****s for Wall Street, as was Yellen, the demented academic grifter. Now we have Private-Equity Man. We used to have a proper country.
I’d have to look up what a Gamma Vortex is. I never got a $100 million 0.75% TALF loan through a Cayman Islands LLC. I’ve flown on a private jet exactly once (it was awesome).
That said, I have paid attention at times over the decades and am familiar with much of the insanity that passes for our financial system now, as an observer more than a participant.
I have no FOMO. If you made $8 billion in a SPAC that sold NFT’s paid for with Dogecoin, good for you. If you turned $27 million into $2.6 billion a week after going on CNBC in March 2020 crying for a bailout - like Bill Ackman claims - good for you.
Just don’t ask to be bailed out if a trade moves against you.
I am not too big to fail.
Most Americans aren’t, and I’d guess most of them are more than a little pissed off at those who somehow always do get bailed out when they screw up with 100-1 leverage.
Then again, maybe the serfs should just hire Ben Bernanke and Stan Fischer and be in the club, right Larry?
Ten-year’s at 4.5%? So?
If I had a nickel for everyone who became a bond market expert this past week I’d be richer than Kyle Bass. Credit card rates are at 23%, and you don’t see whiny post after scaremonger post on Fintwit, or guest after guest on CNBC, crying over that.
Nobody cares about the little guy. They don’t have good lobbyists. They don’t get invited onto Bloomberg or CNBC. They don’t exist, except as props for billionaires to use when their own net worth is threatened.
Volatility? I love it. I could’ve sold Berkshire Hathaway at $539 this week and picked it back up for $462 and change three days later (down 14%), then watched it bounce to $524. What a gift!
Did I do it? No, but I could have - without even knowing how the Basis Trade works!
The Dollar’s down? Are you kidding me? The dollar has been down forever. I can’t believe they still publish this chart (and this is IF you believe the CPI isn’t understated nonsense!)
As I wrote somewhere last week, unless you’re really old, highly levered, or own a bunch of garbage stocks, you’re fine. Heck, a 25-year old kid starting out with an IRA must be loving the lower stock prices (and we’re, what? 12% off all-time S&P 500 highs?) The horror.
There’s always winners and losers, mostly the same people, every time. The Fed, for example, consistently picks the top 10% and especially the top 0.001%. That’s who they go work for. Show me the incentives, someone once said. I hear Bernanke makes $20 million a year. It’s a big club.
Lately maybe the losers are different people than usual. The horror.
I posted this when the market was down 8 million points on a Thursday:
This too shall pass.
What year is it again?
This “cryptopunk” just sold for $6 million. It sold for $19 million a year ago.
Some sort of money laundering? Anyone know? I always wondered.
Sentiment
“Consumer Sentiment Falls Further as Inflation Expectations Soar”
Consumer sentiment fell for the fourth straight month, plunging 11% from March. This decline was, like the last month’s, pervasive and unanimous across age, income, education, geographic region, and political affiliation. Sentiment has now lost more than 30% since December 2024 amid growing worries about trade war developments that have oscillated over the course of the year. Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month. The share of consumers expecting unemployment to rise in the year ahead increased for the fifth consecutive month and is now more than double the November 2024 reading and the highest since 2009.
Year-ahead inflation expectations surged from 5.0% last month to 6.7% this month, the highest reading since 1981 and marking four consecutive months of unusually large increases of 0.5 percentage points or more. This month’s rise was seen across all three political affiliations. Long-run inflation expectations climbed from 4.1% in March to 4.4% in April, reflecting a particularly large jump among independents.
Real Weekly Earnings
“Here is the real hourly data multiplied by the average weekly hours…adjusted using the less familiar CPI for urban wage earners and clerical workers, the CPI-W, which is theoretically a better match for the production and nonsupervisory cohort.”
Listen Now, Pay Later
The Basis Trade
“Basis trades involve hedge funds taking advantage of small differences in the prices of Treasuries and associated futures contracts to generate profits.
They involve the use of enormous amounts of leverage (as much as 50 to 100 times) which means they can trigger large losses when go wrong (for example, when markets suffer unexpected volatility as they are doing now).
When volatility rises, prime brokers require the hedge funds to put up more collateral which reduces the potential profitability of these trades and generally leads to the trades being unwound. This becomes a source of selling and instability in the market because it places pressure on all of the participants in the Treasury market. Funds are like wolves and tend to trade in packs in today’s momentum-driven markets. And that’s what we seem to be seeing now in Treasuries.”
Why do the Fed and Treasury ALLOW hedge funds to do this?
I’m not a plumbing expert, but they could absolutely end this insane leverage if they wanted to, and then Joe Six-Pack wouldn’t have to bail these guys out every few years when they blow up.
For example, as Chris Leonard wrote about September 2019 (PRE-Covid mania!):
“…the Fed stepped in, almost instantaneously, and initiated a $400 billion bailout. This bailout was unprecedented, and it benefitted a small group of hedge funds that had essentially hijacked the repo market and used it as a vehicle to make risky bets. The Fed saved them from the consequences of those bets.”
“Any trade that uses this much leverage can be compared to trying to pick up pennies in front of a steamroller. After all, one has to ask whether any trade that requires ridiculous amounts of leverage to generate a profit is particularly attractive in the first place (my answer is a resounding “No!”)…
In March 2020, the US Treasury market nearly blew up due to hedge funds (reportedly led by Citadel [Bernanke’s outfit] and Millennium, but there were others) carrying huge volumes of leveraged basis trades. The Federal Reserve had to inflate its balance sheet by $1.6 trillion in a single month to prevent these funds from blowing up and creating a financial crisis (shades of heavily leveraged Long Term Capital Management in 1998). The bailout of these huge hedge funds was largely kept under wraps but points again to the fact that America has a system of socialism for the rich and capitalism for the poor.
Proponents of the basis trade - including Citadel’s Ken Griffin - correctly argue that it helps lower overall debt issuance costs for the US government. But whether Mr. Griffin and others should be rewarded with billions of dollars of bailouts for providing this public service at the risk of creating a financial crisis is a question worth asking.”
If you want another take on the basis trade, here you go: Everything You Need to Know About the Basis Trade Spooking Markets
The important thing to remember is that we always need to bail out Ken Griffin so the ATM’s don’t go dark.
Bill Ackman on Friday
Bill Ackman on March 18, 2020…
Bill Ackman ONE WEEK later…
I’m sorry, but I just don’t view the 10-year rate as ranking right up there with nuclear war. Everyone and their mother is suddenly a bond trader decrying higher rates.
Even the complete nutjobs on Reddit were howling about “the ten-year!!!!” this week.
Since 1962, the average 10-year yield is 5.84% and the median yield is 5.53%. We were at 4.494% on Friday.
Yes, I know our debt has exploded since 1962. Gee, how did that happen?
As a start, put an end to insane leverage and I think everything would be much safer.
Anyway, junk Bonds don’t look too terrible, yet:
I’m told that the bonds in the above index are better-quality than they used to be, but who knows (see the Mike Green/John Toohig exchange below.)
Mike Green
“The entire point of a capitalist system is to use price as a mechanism of information exchange. If you suppress price, if you suppress information, in a capitalist system you're going to get malinvestment. You're going to get money allocated in ways that it shouldn't have been.”
Green: “One of the things that people bullish on the economy and the credit formation have pointed to, they've said, look, there's not a lot of low-quality credit borrowing happening, this is actually largely higher quality credit that's occurring, but it turns out that those were just low-quality creditors in high-quality sheep's clothing. Effectively, we're seeing the behavior that suggests that a 550 borrower relabeled as a 650 borrower behaves like a 550 borrower. A 620 borrower relabeled as a 700 borrower behaves like a 620 borrower, particularly once they begin to exhaust the new access to credit that they've experienced.”
John Toohig: “You're talking about FICO inflation. It's something we've seen. If I could bring one of my underwriters on the phone and we could talk about 2008…a 720 FICO score that's wildly different than a 720 FICO score today. We've monkeyed with the algorithm for a while now. We've removed certain pieces of the algorithm that help and inflate…”
And then there’s the U.S. dollar…
Chris Whalen
“This debate over tariffs is a bit of a distraction, because Trump is doing this deliberately. He is using shock and awe to get our neighbors off the dime and come and talk to us. This wouldn't happen otherwise. If he didn't put a gun to the head of the Europeans, they wouldn't respond. Well, they're responding. Trump has kind of turned the card table over, and he's saying "No, we're going to use different rules from now on." And that confuses and I think puts some fear into the minds of investors and whatnot. The reality is I think we should be looking at stocks and doing our homework.”
“We've had tariffs in this country going back to the inception of the republic, and it was to protect us from European predatory competition. Now we have China, which is not much different.”
“This is Trump prioritizing Main Street over Wall Street. That's the narrative. We'll see.”
“There's a whole class of people out there who can talk about tariffs all day long. It's like talking about monetary policy, right? These same people can't talk about credit or markets or stocks with any specificity, so tariffs is welcome in the media community, because they can talk about it, and they don't have to say anything.”
“There's a whole pile of stuff that's sitting inside the FDIC's bank insurance fund, left over from Signature Bank, that the Biden Administration didn't feel like selling. They will sell it, and they're not going to get much for it. The market
indicators for those types of properties in New York City are at least 50 cents on the dollar below the last sale.”
Chris Whalen, published April 5, 2025. Good interview.
Some legitimate criticism of Trump, and a prediction. We shall see.
“Now you've seen Trump launch a Solana memecoin out of a Delaware LLC. You've seen him on Twitter pumping his memecoin, making billions of dollars. You've seen him install a crypto-czar who announced a strategic crypto reserve that's going to be buying all of the coins that are in his personal venture capital investments. That's what being self-interested does. You can just kind of loot the government, and loot the country, and I think that's much more interesting to Trump than taking care of the needs of of people, or businesses, or whatever. I think that's just going to continue to be more and more clear over the next four years. This idea that Trump is a pro- markets force I think is quite backwards, and the markets are going to come to understand that over time.”
Jim Chanos
“The SEC and and others will tell you with great clarity what happened at Nikola Motors or Enron or what have you, well after you've lost most of your capital.”
“As long as the company has a plausible explanation in a bull market people will generally believe it.”
“I think probably one of the reasons I've made the most money in my career is by not meeting with management. Really good financial sociopaths believe their own b.s. and will lie with impunity, and you will believe it as a human being - for the most part - if they have a a glib explanation for something that you realize later didn't make any sense.”
Realtor.com: Active inventory climbed 30.3% from a year ago
The number of homes actively for sale remains significantly higher than last year, continuing a 74-week streak of annual gains. This year-over-year inventory growth gives buyers more choices and encourages more competitive pricing among sellers. Generally, the number of homes up for sale is still below pre-pandemic norms, and the long-standing supply gap will continue to put pressure on prices in under-supplied areas.
"It is so important to understand that one of the primary means of immobilizing the American people politically today is to hold them in a state of confusion in which anything can be believed but nothing can be known, nothing of significance that is. And the American people are more than willing to be held in this state because to know the truth - as opposed to only believe the truth - is to face an awful terror and to be no longer able to evade responsibility. It is precisely in moving from belief to knowledge that the citizen moves from irresponsibility to responsibility, from helplessness and hopelessness to action, with the ultimate aim of being empowered and confident in one's rational powers."
Unpublished letter, E. Martin Schatz to Vincent J. Salandria, May 14, 1992
Love that bit about Coachella…did you see that people are now financing DoorDash deliveries?
Thank you for a glimmer of sanity in this highly leveraged, financially bankrupt world full of grifters.