Much Wow.
“We positioned ourselves for a kind of market that didn’t end up happening.”
“Yeah, I suppose I've had this feeling that half the ills of this world originate in Twitter and the other half perhaps from the Federal Reserve.” - Edward Chancellor
“How come 250 PHD's in the Fed know much better than the market consisting of billions of people what level interest rates should be?” - Jim Walker in above podcast (Interview from July here)
“Policy accommodation...is distorting asset prices. Most of this distortion is deliberate and a desirable effect of the stance of policy. We have attempted to lower interest rates below long-term equilibrium rates & to boost asset prices…” - Donald Kohn, March 2004
“So this is a central banker saying actually we're in the job of distorting asset prices and distorting capital allocation.” - Russell Napier to Edward Chancellor, talking about Donald Kohn
Edward Chancellor with Demetri Kofinas on the Hidden Forces podcast.
"Is the FOMC’s Policy Inflating Asset Prices?" (2011)
"Keeping the policy rate significantly and persistently below “long-run equilibrium rates” [via QE & ZIRP] may inflate asset prices."
I will concede that the Fed's QT may be "going as planned," - I just think the plan is to never do meaningful QT.
The Crypto Geniuses Who Vaporized a Trillion Dollars
…it would be “bigger than all of the richest billionaires’ yachts in Singapore”…a triumph of crypto’s nouveau riche…The name the buyers had in mind was cleverly chosen — an inside joke nodding to the cryptocurrency dogecoin that would both thrill their social-media acolytes and be intelligible to all the pathetic, poor “no coiners” out there: Much Wow.
Her buyers, Su Zhu and Kyle Davies, two Andover graduates who ran a Singapore-based crypto hedge fund called Three Arrows Capital, never got the chance to spray Champagne across Much Wow’s bow. Instead, in July, the same month the boat was set to launch, the duo filed for bankruptcy and disappeared before making their final payment…
…Everyone in crypto, from the largest lenders to wealthy investors, seemed to have lent 3AC their digital coins, even 3AC’s own employees, who deposited their salaries with its “borrowing desk” in exchange for interest…Meanwhile, the unclaimed yacht looms as a slightly ridiculous avatar of the hubris, greed, and recklessness of the firm’s 35-year-old co-founders…
“This was all planned, man, from the way they established credibility to the way the fund was structured.”
…A number of investors remember having their first sense that something might be off with Three Arrows in 2019. That year, the fund began reaching out to industry peers with what it described as a rare opportunity. 3AC had invested in a crypto options exchange called Deribit, and it was selling off a stake; the term sheet set the value of Deribit at $700 million. But some investors noticed the valuation seemed off — and discovered its actual valuation was just $280 million. Three Arrows, it turned out, was attempting to flip a portion of its investment at a steep markup, essentially netting the fund an enormous kickback.
“…the usual objections any Wall Street bond customer voiced to any Wall Street bond salesmen--If it's such a great trade, why are you offering it to me?” - The Big Short
“They had ample opportunity to get out with a graze but not blow themselves up,” says Fauchier. “I didn’t think they could be stupid enough to be doing this with their own money. I don’t know what possessed them. This was obviously one of those trades you want to be the first one in, and you desperately don’t want to be the last one out.”…
“It became clear that they were insolvent but were continuing to borrow, which really just looks like a classic Ponzi scheme,” says Kasselman. “Comparisons between them and Bernie Madoff are not far off.”
“More money has been lost reaching for yield than at the point of a gun.” - Ray DeVoe
I’m at a stage in my career where I’d say human behavior is the most important determinant of a business’s long‐term success. I don’t care how smart an analyst you are, you can’t really know what’s going on inside a business. We want to invest not only in highly capable managers, but also those with clear track records of integrity and acting in shareholders’ best interest. - Chuck Akre
Wells Fargo Plans Major Retreat From Mortgage Business It Long Dominated Seems like a big deal, considering:
The main thing people at Wells Fargo did wrong was to commit fraud so simple that even someone in Congress could understand it.
We're still acquiring, but it has had a very significant or very reduced level, probably more than 80% reduction from what we were seeing earlier this year…With respect to other acquisition channels, it is a very interesting time. We are receiving many inbound telephone calls that we were not receiving previously, whether it's from owners of small portfolios or even national homebuilders with excess inventory. Where we are, though, in those -- in that process is we still have a gap in our bid to ask expectations between buyer and seller. - American Homes 4 Rent CEO David Singelyn
Maricopa County eviction filings in July climbed to their highest monthly level since 2008. Evictions were filed against 6,405 renters last month. It's the highest tally since October 2008, 13 years ago, when there were 6,975 filings tracked by the courts…rents shot up 30% last year, putting more financial pressure on tenants. In addition, more corporate out-of-state landlords are paying record prices for apartment complexes, then upgrading the properties and raising rents.
The Bay Area has the largest gap between renting and buying a home in the nation SmartAsset had three Bay Area cities in their top five highest price-to-rent ratios list in a report earlier this year, with San Jose taking the top spot with a ratio of 42.2. That meant that between March 2021 and February 2022, with San Jose’s average annual rent at $29,929 and an average home sale price of $1.26 million, that home costs 42.2 times more than a year’s worth of rent. Any ratio over 21 typically means that renting is more advantageous. San Francisco has a ratio of 37.3 and came in second in SmartAsset’s analysis, while Oakland came in fifth with a ratio of 32.
The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased 2.0 points in July to 62.8, its lowest level since 2011…with only 17% of respondents reporting it’s a good time to buy a home.
Newly-Listed Homes Fall Most Since 2020 as Sellers Pull Back New listings of homes for sale dropped 12% year over year during the four weeks ending August 7, the steepest decline since June 2020…Despite the decrease in new listings, overall housing supply continues to grow—a sign that homebuyers are pulling back more than home sellers. The total number of homes for sale is up 4% year over year…Only two metro areas saw a year-over-year decline in the median home sale price: Oakland, CA, where prices fell 1.5% to $940,994 and San Francisco, where prices were down 2.4% to $1,502,500...43% of homes sold above list price, down from 52% a year earlier.
U.S. Housing Affordability in June Was the Worst Since 1989 It seems like a blip now, but I remember California home prices getting slammed in the 1990’s. At best they went nowhere (according to FHFA at least) from 1990 to 1998.
Inflation: Zero percent, or 8.5 percent?
The ancient art of deception is this: to present two lies, and get the people arguing viciously about which is true…You’re being handed a narrative and the bounds within which you can argue about it, and then you’re accepting that narrative and picking a side. That’s all. No free thinking is happening here.
Whitney Webb gives an overview of her upcoming book "One Nation Under Blackmail."
"This stuff would be funnier if it wasn't so evil." - Webb
Whitney makes the good point that if you tell someone the CIA did horrible things in the 1950's, they'll say, "Oh yes. That was terrible." But if you suggest that the CIA did horrible things three years ago, you'll get, "Oh come on you conspiracy theorist!"
One takeaway from the above interview is that we really need to look into Mark Middleton, who, oddly enough, was also recently suicided.
I had the 'CIA did horrible things' conversation with my mother, who was very much alive during the well-covered at the time Church Commission, and she looked at me like I had three heads.
People just forget these things, like it's no big whoop. But of course, they did promise not to be bad anymore, so I guess we'll just go ahead and take their word for it. It's not like the CIA would lie.
BTW, on October 8th a human chain will be formed around the DOJ and UK Parliament to demand immediate release of Julian Assange. Anyone able to participate or protest in support, please do so.
“ The Bay Area has the largest gap between renting and buying a home in the nation SmartAsset had three Bay Area cities in their top five highest price-to-rent ratios list in a report earlier this year, with San Jose taking the top spot with a ratio of 42.2.”
Very ordinary homes in the very ordinary (formerly) middle class neighborhood that I grew up in are selling for $2.5-3.5 million based on a Redfin search tonight. It’s utter insanity. I need to go back there someday and see who’s living in those homes today.