The Dog and Pony Show
An impenetrable veil
Russell Clark, Vincent Daniel and Porter Collins, Thomas Hoenig, Louis Gave, Dan Rasmussen, Francis Bacon, Social Security, Private Equity, the Iran kerfuffle, and other fun things…
"What is eternal and important is often hidden from a man by an impenetrable veil. He knows: there’s something under there, but he cannot see it. The veil reflects the daylight."
Wittgenstein, “Culture and Value”
“During my eighty-seven years I have witnessed a whole succession of technological revolutions. But none of them has done away with the need for character in the individual or the ability to think.”
Bernard Mannes Baruch, Baruch: My Own Story
January 1932 C.W. Anderson cartoon about concerns that heavy equipment will take away jobs:
Thomas Hoenig: The Fed’s Balance Sheet Girth: A Symptom, Not the Problem
The Fed’s large balance sheet is not the problem but a symptom of the problem.
The problem is that the U.S. fiscal authority is running annual deficits of $2 trillion.
The problem is that the Federal Reserve System has allowed itself to become subservient to fiscal policy and has adopted an implicit mandate to keep the Treasury market “smoothly functioning” and highly liquid.
So long as this mandate dominates policy, the Fed’s balance sheet must grow and/or the rules regarding bank capital and liquidity must be eased to allow the private sector to hold more Treasury debt.
It is no coincidence that, since December 2025, the Fed’s net holdings of U.S. securities have increased $200 billion, approaching a total of $4.5 trillion, and that bank regulators are easing the rules governing both capital and liquidity.
If the Fed and regulators don’t accommodate Treasury debt growth, interest rates will rise until something breaks. If they continue to accommodate Treasury debt growth, interest rates will be subdued until inflation forces everyone’s hand.
Only Congress can solve the problem.
For an overview of Hoenig’s courage, read this from 2021: The Fed’s Doomsday Prophet Has a Dire Warning About Where We’re Headed
This is NOT QE!!
These are "Reserve Management Purchases":
"QE involves buying longer-term assets to actively suppress long-term interest rates. RMPs target short-term Treasury bills strictly to manage market liquidity.”
Some people, mostly Fed reporters, buy this bullsh*t.
Great news. Kids, this is called “free markets”:
CNBC: "High mortgage rates coupled with record-high prices are causing homebuyers to pull back."
Mortgage rates are not high.
They are below historical averages.
Since 1971, the average 30-year fixed rate is 7.68% & the median is 7.23%.
The prices are aberrant.
Chris Whalen: “Housing prices went up after COVID because of the Fed. Janet Yellen and Jerome Powell did too much for too long and that’s why we had a 50% increase in home prices in five years.”
Nick Gerli: “There’s this perception that we have good mortgages being made now. There’s this perception that there’s no bad mortgages. That’s all based on the fact that our government has simply loosened the lending standards over the last 20 years.”
“The big lesson of the Iran war - there’s several lessons - but the first and most important lesson is that the U.S. no longer controls the world’s sea lanes, because warfare has changed. We now live in a world where you cannot protect billion dollar ships with million-dollar missiles against $10,000 drones. The math no longer adds up. So the U.S. couldn’t control the Red Sea. U.S. can’t control the Persian Gulf. This is a massive, massive shift.
Seems to me we had "secure and safe passage of commercial vessels through the Strait of Hormuz" back in February, and, of course, over a year ago…
The real cost of the Iran War: $103 billion in 120 days That used to be a lot of money.
Shawn Ryan: "I just had a really good friend get deployed, a Green Beret. I won't even say what group he's at. And he jokingly - but you can see it in his eyes - says, "Uh, I'm getting deployed early. I've got to go fight for Israel." And you could see just he wants out.”
“Fattened by the Horrors of War“ by artist Art Young, originally published in the July 1915.
Russell Clark
For me, once you gate a fund, it pretty much a dead product. Fund management is a trust game - and if people want their money back you should give it to them. And once you gate, you create terrible incentives for other investors. Gating means or implies you have a bunch of assets that cannot be priced or sold. And for investors who have not asked to redeem, they start asking themselves some difficult questions. Will the fund manager have to sell the liquid positions to meet redemptions, leaving the fund only with illiquid assets? The answer is almost certainly yes in my experience. And does anyone want to then invest into this fund, with only illiquid assets that cannot be priced? Not really. Cliffwater is a good example of this phenomenon.
“And with more money going out than coming in - you would wonder if that NAV is correct.”
“Cliffwater has capped redemption at 5% of assets, despite having 17% redemptions. Following the logic laid out above, this looks to be a dead product. Who would put money in this now? The one thing I find very odd about this is that Cliffwater is getting into trouble when high yield spreads are at all time lows.”
”For reference - Blackstone listed in 2007, just before credit spreads blew out - and fell 90%.”
”One wonders what private credit would actually do in a recession?!?”
Vincent Daniel and Porter Collins
VD: “We have created a bailout mentality, particularly the higher you go up on the totem pole, the higher the ability for you to get bailed out. 14 or 15 years of that type of behavior is going to create a type of market that we have today…we could have a bad 2 to 3 weeks, maybe the VIX will go to 30, but trust me when I tell you, somebody’s going to come out with something to push that VIX down and get everything all hunky dory again. I hate it but it is what it is. You have to learn to live with it.”
PC: “Trump enjoys manipulating markets.”
PC: “You talk about the the the bifurcation of wealth in this country. That’s…the manifestation of that K [shaped economy], because the poor people don’t have assets. They’re long dollars. They’re not short dollars. The wealthy people are all short dollars.”
BK: “Also, if the only way you’re getting paid is through salary or wages, it’s not like that’s kept up with inflation.”VD: “Price discovery is gone, right?”
VD: “This is the most transactional-oriented mafia-run administration we have seen in our lifetime…It’s run like Gotham, right?”
VD: “We’re card carrying believers in the debasement theme, and the way we express it is in the form of gold.”
PC: “There’s no adults running the system. None. They’re gone. They’ve killed them all…They’re allowing all these 2x and 3x funds. What are you doing? Really? That’s what we’re doing? Where are the adults in the room? They are gone. Certainly not at the presidential level, not in the courts, not in Congress. They’re gone.”
“The Invesco Global Listed Private Equity ETF (Fund) is based on the Red Rocks Global Listed Private Equity Index (Index). The Fund will normally invest at least 90% of its total assets in securities, which may include American depository receipts (ADRs) and global depository receipts (GDRs), that comprise the Index. The Index includes securities, ADRs and GDRs of 40 to 75 private equity companies, including business development companies (BDCs), and other vehicles whose principal business is to invest in, lend capital to or provide services to privately held companies (collectively, listed private equity companies). The Fund and the Index are rebalanced and reconstituted quarterly. Master limited partnerships (commonly known as MLPs) are not eligible for inclusion in the Underlying Index.”
Looks like during the last real recession $PST fell from $45.69 to $5.73, and 87% drop (reminiscent of the Nasdaq from 2000-2003).
Here are their largest holdings:
Big private equity firms pull in more cash as winners take all
Global fundraising surpassed $260bn in the first half of 2026, putting the private equity sector on track to raise 17 per cent more this year than last year, according to PitchBook. Funds raised $447bn in 2025…Per Franzén, chief executive of Stockholm-listed buyout house EQT, last year predicted that 80 per cent of all private capital groups could be zombie firms within the next decade.
Dan Rasmussen: “Think about how well A.I. is going to do at improving the efficiency at your car wash…just wait until they get the A.I.-enabled pool cleaner.”
“Fiscal policies around the world are ludicrous. The U.S. is running budget deficits of 7% of GDP at a time when asset prices are making all-time highs, when capital gains taxes should be great. Employment rates in the fours…What’s the budget deficit going to be in the next recession? 12% or 13%. So given this backdrop, why would I want to be a bond holder?”
Louis Gave
Social Security Insolvency
Via Larry Kotlikoff, who has been on this topic for years:
…the System needs a 31 percent permanent cut in benefits, not a 22 percent cut, starting immediately, not in 2032, to preclude an even larger benefit cut—greater than 31 percent—farther down the road. Alternatively, we can immediately and permanently raise the Social Security FICA OASDI payroll tax rate from its current 12.4 percent value to 18.1 percent. This would suffice, given current estimates, to ensure that Social Security’s payroll tax rate never needs to rise above 18.1 percent.
In short, Social Security is extremely far up the creek with no paddle.
I think most people think there’s some fund with their name on it somewhere where all the Social Security and Medicare taxes they’ve ever paid has been invested for their entire life. No. It’s just a transfer from one person to another at this point.
Can’t even feed my cat
On Social Security
‘I don’t want to participate in the dog and pony show anymore. I want to lay in the grass.’
“Go to meeting. Boss shares the conversation he had with Claude and stone cold serious tells us we need to appease Claude and meet “his” projections…I’m watching him get deeper and deeper into the hole and it’s f*#king depressing to watch, and for his sake too. This can’t be good for his mental health, it’s not good for any of us. I don’t want to participate in the dog and pony show anymore. I want to lay in the grass.”
“Little do men perceive what solitude is, and how far it extendeth. For a crowd is not company; and faces are but a gallery of pictures; and talk but a tinkling cymbal, where there is no love.”
Francis Bacon, “Of Friendship”
I am so glad I found this… best fucking thing I’ve seen on Substack ever. Please keep going.
The first ever shopping cart theme substack in the entire world!
Bravo!!