The increasing economic fragility of middle-class families
Computers have no b.s. meter.
Hope everyone had a nice Thanksgiving. We do have a lot to be thankful for.
My football picks are doing mediocre today, so I figured I’d finish this off to start the week fresh…Godspeed.
Grant Williams talking about Tony Deden:
Tony has always stood apart from the financial world—not only because he consciously tries to, but because he simply doesn’t care to engage with its incentives. He doesn’t read research reports or subscribe to the Financial Times or the Wall Street Journal and he has no interest in what the market thinks.
He’s not posturing; he genuinely doesn’t care.
But his staunch indifference isn’t laziness—far from it. What Tony’s attitude affords him is freedom. Freedom from the distortions of consensus, from the tyranny of comparison and from the endless, exhausting pursuit of what others might decide has relevance.
“Can any of this information add to my tools?” he likes to ask himself and, of course, most of the time, the answer is a resounding no. When he listens to a podcast—mine included—he doesn’t care whether the guest is intelligent, celebrated, or highly credentialed. He cares only whether what they say gives him a deeper understanding of something he is already thinking about. He cares only whether what they say gives him a deeper understanding of something he is already thinking about.
I try to be like this.
I love a similar quote from Marc Cohodes: “You guys dig into all that stuff, and you get all sorts of data - I just like try to back-up, and go for a walk and just start to think...”
“Foreign private purchases of US equities totaled a record $646.8 billion over the past 12 months. Over the past 12 months, foreign private purchases of US equities outpaced those of US Treasury notes and bonds.”
I guess foreigners still want to be invested in America (and the dollar).
Back in 1963, minimum wage was $1.25 an hour.
Five silver quarters are today worth $51.
The silver didn’t change, the currency did.
I like to post this from time to time to tick off a lot of people on Fintwit.
Sure, why not.
It’s not as if they were doing a good job anyway. Heck, Mary Daly still has a job.
I last mentioned the Austrian 100-year bond a couple years ago. It was a ringing bell in the global era of insanely-low manipulated rates, as Central Bankers went insane. I can’t blame those who SOLD stupid debt during the era - Yellen should’ve issued 100-year bonds at 0.5%. It’s the buyers who were fools.
Almost total bondholder wipeout
“When interest rates were super low, investors couldn’t get enough super long-dated bonds. And Austria was happy to supply them.
We’ve written before about Austria’s first century bond, due 2117. Issued with a coupon of 2.1 per cent, bondholders more than doubled their money in the first two and a half years of its life. But as yields rose, price came crashing down…”
“Keen readers will recall that the government tapped the century bond market again three years later, this time needing to attach only a teeny tiny 0.85 per cent coupon. That 2120 century bond now trades at thirty cents on the euro.
“But even we had missed that there is at least one more Austrian centurion knocking around. It’s a €100mn private placement zero coupon century bond issued off the government’s European medium term note programme a few weeks ahead of the ‘second one’”
Since 1953, the average 10-year Treasury yield is 5.54%, and the median yield is 4.75%. Today we’re around 4%.
Wall Street Firms Fortress, Ares Face Total Loss on Portable-Toilet Deal
Fortress Investment Group, Ares Management Corp. and Blackstone Inc. are set to lose a combined $1.4 billion on United Site Services Inc. as Platinum prepares to hand control of the company to lenders.
The deal was part of a continuation vehicle that Platinum created in 2021 to buy USS from another of its private equity funds, valuing USS at $4 billion.
The company has struggled due to higher interest rates and disappointing performance, and Platinum is close to a deal that will turn over the company to lenders including Clearlake Capital and Searchlight Capital Partners.
The funds were among the anchor investors in a so-called continuation vehicle that Platinum created in 2021 to buy USS from another of its private equity funds. The deal valued USS at $4 billion, allowing investors in the older fund to cash out roughly $2.6 billion. But it also left investors in the new vehicle with a concentrated bet on the portable-toilet company, which was its sole asset, the people said.
The unraveling of USS stands as one of the most high-profile examples of how continuation vehicles — which give private equity firms the opportunity to monetize assets without an outright sale — can backfire. The deals have exploded in popularity in recent years amid a slump in dealmaking and a lackluster environment for initial public offerings, the two main avenues for buyout funds to exit investments.
Sorry, kids.
Case-Shiller: National House Price Index Up 1.3% year-over-year in September
FHFA House Price Index up 1.73% year-over-year
Consumer Confidence Dropped Sharply in November
Don’t people know that stocks are near all-time highs??
“The average of the consumer confidence index at the start of recessions is 101.9, a level we have been below since January 2025.”
More Americans are getting their power shut off, as unpaid bills pile up
“Average electricity costs have risen 11 percent since January, more than three times the rate of inflation.”1
Misty Pellew’s family lived in the dark for several days this month.
Pellew’s power was shut off Nov. 13 because of $602 in unpaid bills, the latest in a string of financial humiliations that began six months ago after her husband lost his $20-an-hour excavation job in northeastern Pennsylvania. The recent government shutdown dealt another blow, delaying federal funding for programs that helped the family pay for food and utilities.
Although Pellew’s lights were temporarily turned back on last week, they were set to be disconnected again if she didn’t pay another $102. With an overdrawn bank account, she was bracing to be without power again. Last time, her family ate peanut butter and jelly sandwiches for dinner and slept in hoodies and gloves to keep warm.
“I feel so useless and helpless,” the 44-year-old said.
Soaring electricity prices are triggering a wave of power shutoffs nationwide, leaving more Americans in the dark as unpaid bills pile up. Although there is no national count of electricity shutoffs, data from select utilities in 11 states show that disconnections have risen in at least eight of them since last year, according to figures compiled by The Washington Post and the National Energy Assistance Directors Association (NEADA). In some areas, such as New York City, the surge has been dramatic — with residential shutoffs in August up fivefold from a year ago, utility filings show.
ICE BofA US High Yield Index Option-Adjusted Spread
Still no fear, in spite of this strange indicator:
I still think about his chart once in a while:
10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity
Where Insurance Companies Are Investing
Softbank
Podcasts
Karl Denninger: “Computers have no bullshit meter.”
Good discussion of A.I., Nvidia and margins, health insurance, childcare, etc.
“Our solution to inflation in the 1970s - which was mostly Nixon and Ford, but Carter got the blame for it - the solution to that was to force women out of the house and into the workforce. And when that started…you had the whole generation that was called latchkey kids. You came home from school and basically you’re in the house until mom got home, right? Well, then we ratcheted that down to the point that now you need daycares for infants. Well, okay. That for a couple of kids is, what, 30 grand a year? $30,000 a year. Thousand dollar a month per kid, something like this, right? You can’t make that work unless you’ve got a $150,000 income between the two of you. Your wife goes to work, or you go to work, and when neither of you stays home, you both go to work. Basically, none of that second salary ends up going to the improvement in your standard of living because it all gets sucked up by the health care and the child care costs if you have children.
So, what happens? People decide not to have any kids. How do they get away from it? Well, that’s one way. That’s a veto you can’t overrule. And you see it in the data. It’s very clear. It takes 20 years to decide to have a child and grow that child to adulthood from the time you make the decision. You don’t get the kid in the workforce being productive for 20 years. Like it or not, that’s the way it works. If we continue to do this in another 10 or 20 years, you’re not going to have to worry about house prices. You’re not going to have to worry about asset prices, because you’re not going to have any people who are going to be able to wipe the old people’s ass. And there aren’t going to be any young people that want to buy your house when you don’t need the large house anymore.”
Denninger’s comments reminded me of this excellent recap, from, of all people, Elizabeth Warren in 2010:
“...it would be important to think about the increasing economic fragility of middle-class families, starting in the1970’s: a combination of flat wages for fully-employed men, and rising core expenses in housing, in healthcare, in transportation – put a lot of pressure on middle-class families. Many families responded by sending, if they had two parents in the household, sending both parents into the workforce. That kept family income rising, but it was taking two earners to get them in a position where one earner would have been a few years earlier.
Core expenses continued to rise, families stopped saving, and began to take on more debt, to make ends meet until the end of the month, or deal with emergencies that came up. The consequences of job loss or unexpected medical bills became harder and harder hits on the family...
That’s the position that families are in when they hit the, really the late 1990’s. So, families are taking on more debt. The consumer credit market is largely deregulated starting in about 1980. Credit cards are effectively deregulated – when I say “deregulated”, the usury laws were the “tentpole” of consumer regulation since the Code of Hammurabi in the 15th century B.C. through Biblical times through Colonial times in America, through every state in the union. That tent pole of usury is knocked out, effectively, first for credit cards in 1979 and then explicitly by Congress on mortgages in 1980.
It takes more than a decade for the industry to begin to adapt new business models, but the old model, of screening customers carefully, and only lend to those whom you have a fair amount of confidence will be able to repay, gave way to a far more profitable model of lend widely, and in large amounts, and reap large short-term profits from people who have only a marginal capacity to repay.”
“Trying to predict lightning strikes is is a waste of time. But understanding the the accumulated interconnectivity of dry brush” [is what counts]…”The risk that we always are focused on is the endogenous risk. And that connectivity of dry brush in the market sense is leverage, is where has leverage built up”
“I have a pretty good idea of where the tail risks are, because that’s the leverage that’s building. So you don’t have to be a rocket scientist. All you have to do is read the newspaper or watch the financial news channels to know that the Vol selling in particular, and leverage and activity and levered ETFs and covered call ETFs etc. has massively concentrated around the biggest highest flying single-name stocks in the US, and so it’s not surprising when the market starts
to shift a little bit, that’s where the volatility really picks up.”
People have asked how normal people can utilize Dredge’s strategies. What I’m looking at for my personal portfolio is buying long-dated deep out of the money puts as disaster insurance. Most of the time I’ll lose money but if we get another 2008 or 2020 I could recoup a little of the damage to the long side.
This is not investment advice. Nothing here is investment advice.
I might ask Dave if he has any words of wisdom for the plain vanilla investors I could publish here, but it’s holiday week. Stay tuned.
Jim Welsh of Macro Tides. Not that familiar with him, but this was an interesting investing overview.
Vincent Deluard: Fiscal Dominance, Inflation Waves & the Future of the U.S. Economy. Very good, but I don’t see it on Youtube, so I have no transcript.
When I was 17 or 18, some friends ten years older would pay me and my buddy $100 each to drive to Vegas and make NFL bets. We would walk the entire Strip, going into all of the sports books, looking for an extra half point. No cellphones, no internet. In person. Once I put $400 on the Chiefs and they actually moved the line a half point after. I felt like a big shot.
We’d almost never get carded, but we had fake ID’s anyway. They were easy to make then. We’d get a room somewhere for, hell, I don’t remember for sure, but it was cheap, without a “resort fee,” and we could even use the pool! Steak and eggs might be a few bucks.
The casinos then didn’t tower over the sidewalk, but were set back. I was last in Vegas in October, on the Strip, and every casino comes right up to the sidewalk. Very claustrophobic. It’s like you’re in a slot canyon. I know attendance is supposed to be down 20% or something, but it was a zoo. Then again, this was on a Friday at 5pm. I quickly remembered why I had avoided the Strip for years. I parked for a half hour at the Venetian and had to pay $25 to leave.
Corporations have ruined Las Vegas. Now they nickel and dime (what a quaint saying) the hell out of you.
Things were better when the Mob ran it2. They knew how to treat customers. I still go out there once or twice a year to play poker (and my favorite, real craps - which you can’t play in California for some insane reason), but it’s sad to see what’s happened.
“This is just itemized greed.”
Later, I had to post this on the Twitter:
Gonna mute this insane “conversation.”
I’ve blocked more people over this stupid throwaway Cosmo tweet than I think I have on any other in 12 years.
1. It’s not MY bill.
2. Yes, turkey bacon is an abomination.
3. To all those crying fake, I included the original link, which explains the extra $10 not shown in the screencap. My point about Vegas stands. I was there last month. Price gouging is worse than ever.
4. An awful lot of people gave me shit for being “too poor” to go to Vegas. I am not. I do have eyes and a memory though.
5. The number of randos who see one tweet and then scream obscenities at me is remarkable. A lot of sad, hateful, stupid people out there. I try to punch up.
6. I’ve had several throwaway tweets lately that went viral, and I got a ton of non-follower likes & replies. This is new - maybe the algo changed. It is also awful. I’m used to doing what I do without 1,000 brain-damaged non-followers replying with garbage. I am quite used to people being upset with me, but not like this swarm of gnats lately serving no social purpose.
7. I’m not going to delete the top tweet because I’m not gonna let the h8ters win.
8. Put on some Al Green and chill.
S&P downgrades Tether’s assets to lowest level
Tether’s ability to maintain its peg to the US dollar has been called into question by S&P Global Ratings, which downgraded the stablecoin operator’s reserves to its lowest measure due to rising exposure to high-risk assets. In a note on Wednesday, the rating agency downgraded its assessment of Tether’s assets to “weak” from “constrained”. It also flagged “an increase in high-risk assets” backing the stablecoin, with corporate bonds, precious metals, bitcoin and secured loans accounting for 24 per cent of total reserves at the end of September, up from 17 per cent a year ago…
Tether is one of the world’s biggest buyers of US Treasuries, which comprise 75 per cent of its collateral, a decrease from 81 per cent, according to the rating agency’s last review. It made $10.1bn in net profits this year to September. The company largely makes money by pocketing the interest that it earns from holding Treasuries.
Since being founded 11 years ago, Tether has been dogged by concerns over its poor disclosures and a lack of transparency. Ardoino has previously said that hiring an auditor was a top priority, but the company still puts out attestations — reviewed by BDO Italia — instead of full audits of the reserves backing its stablecoin.
“How could people within the CIA be doing these kinds of drug experiments3 on people unwittingly and yet never face any consequences for their actions?”
Here’s the “Collateral Murder” in Iraq snuff film. (Warning: Pretty bad)
No doubt because CPI is a nonsense model.
Back in the 1980’s we were staying at The Mirage, and one of my buddies got really drunk and climbed the volcano out front (both are gone now, the Mirage and the Volcano). He was chased and arrested and spent the night in jail. The cops told him to leave town, and that if he ever showed up again they would take him out to the desert and kill him and bury him. The next day he was back at the Mirage asking a bunch of us if he could stay in our rooms. He’s still alive as far as I know.
MKUltra
Loved the Porta Pottie piece. In 2004 during the Shale Drilling boom in Texas, an oil patch driller friend had trouble finding enough PP's for his rigs. Seizing on this investment opportunity, he started a big PP business to compete with the area Mom and Pop poop pumpers, and quickly flooded the market with portable s*it houses. He found out that that if poop pumpers do not have a bottom line incentive to go out and pump sh*t every day, it is really hard to find hourly workers legal or illegals, who will do this job. He could not wait to dump the PP business! I had to chuckle that the Wall Street and PE guys thought that they could make a killing in this sh*ty business.
Re: the Collateral Murder film, which is just horrific to watch, then to hear Mark Kelly say, "we're America, we don't commit war crimes." We have a long and distinguished history of committing war crimes; Hegseth is just carrying on the tradition.