The Philly Freeze
"The difficulty lies, not in the new ideas, but in escaping the old ones" - Keynes
That Keynes quote is from the preface to The General Theory of Employment, Interest and Money, 1935. Now his ideas are the ones we need to escape from (at least the Bernanke/Yellen interpretation of them)
Thanks for the shout out Chris Irons (4 minutes 30 seconds in). I think Chris cusses more in the first four and a half minutes than I have in the past 20 years. I kinda like it.
If you haven’t tried a 7-day free trial to my infamous Substack, maybe try it and see what you’re missing (all my posts prior to March 17 are free. Or, better yet, spring for the 27 cents a day. Or not.)
BREAKING
What year is it, 2021?
Spoiler Alert
My favorite scene in Captain Phillips:
That scene always tears me up. Besides being able to relate to Tom Hanks' situation, I know young women just like the corpsman in that scene. Wonderful people helping others daily. Gives me hope.
Attention Barry Sternlicht
“Rent Inflation in the United States continued to climb to 8.2% in March 2023, up from 8.1% in the prior month. It was the highest reading since June 1982.”
This is what scared people slightly today - the Philadelphia Fed Manufacturing index.
The Philadelphia Federal Reserve Manufacturing Index rates the relative level of general business conditions in Philadelphia. A level above zero on the index indicates improving conditions; below indicates worsening conditions. The data is compiled from a survey of about 250 manufacturers in the Philadelphia Federal Reserve district.
I Spent a Week in Philadelphia One Sunday
One must-follow website is WallStreetOnParade.com. Their two-person operation delves more thoroughly into the too-big-to-jail gangsters running the country than anybody.
The good ole Fed is now doing something it has never done before in its 110-year history. It is accepting underwater bonds as collateral for emergency loans to teetering banks and paying 100-cents on the dollar on that collateral for loans of up to one year. (Historically, the Fed has imposed a haircut on collateral and made overnight loans through its Discount Window.) The Fed calls its new program the Bank Term Funding Program (BTFP).
The first banking crisis since 2008 began on September 17, 2019 – for reasons the Fed has yet to explain with any credibility. In the last quarter of 2019, the New York Fed had to shovel emergency repo loans cumulatively totaling (on a term-adjusted basis) $19.87 trillion into Wall Street banks. As the chart below indicates, just six trading units of the mega banks on Wall Street received 62 percent of that amount. (Unadjusted for the term of the loan, the cumulative total was $4.5 trillion.)
The next banking crisis occurred in March 2020 and was blamed on the pandemic. The share prices of the four largest banks (by deposits) collapsed by as much as 40 to 60 percent between January 2, 2020 and March 18, 2020…The Fed rolled out the same alphabet soup of emergency lending programs that it had rolled out in 2008 – with the New York Fed once again in charge of the bulk of those programs.
As Fears of Banking Crisis Surged, Members of Congress Sold Bank Shares
“If the banks can’t handle [5%], if that is too much for the system to handle, then we have a major problem in this system, and we do.”
Good podcast with friend of the show Phil Bak: Econ Policy and REITs
Everything is based on keeping this thing at these elevated levels. We’ve gotten ourselves into something that clearly we have no way out…Wars and ZIRP. Two things that are easy to get into but impossible to get out of…Raising rates to 5% is not a Black Swan event. That’s below the historical average. 5%, while CPI is above that, is not fighting inflation. That’s like doing the bare minimum you have to do to try to get inflation out of the way, and if the banks can’t handle that, if that is even too much for the system to handle, then we have a major problem in this system, and we do.
“High real interest rates are the sign of a strong economy. They reflect attractive investment opportunities that can earn attractive returns. Zero (or negative) real interest rates reflect a weak economy with poor investment opportunities, and difficulty servicing its debts.”
“You wouldn’t think a portfolio consisting of bank loans and high-quality Treasury and mortgage-backed bonds could be vulnerable to a meltdown that would render a bank insolvent.” - Howard Marks
"In any future crisis, sovereign debt will be a propagator of risk rather than a refuge." - Satyajit Das, December 28, 2019
Headline yesterday:
As George W. Bush once said: “There's an old saying in Tennessee - I know it's in Texas, probably in Tennessee - that says, fool me once, shame on, shame on you. Fool me - you can't get fooled again.”
The Repo Man Returns as More Americans Fall Behind on Car Payments
I asked a young car salesman a couple years ago what % of his deals were cash. He looked at me funny and said almost none. This is different from years ago, but then again the vehicles are ridiculously more expensive now.
Average FICO Score Lake Wobegone credit risk.
This is an April 2022 report. Apparently a 70+% “revolving utilization” is a danger zone they look at.
How much of one’s available revolving credit is being used (commonly referenced as “revolving utilization percentage”) is an important credit behavior evaluated in a FICO® Score calculation. Analysis of millions of credit reports has found that the higher the percentage of available revolving credit being utilized by a consumer, the greater their risk of defaulting on a credit obligation in the future.
2023 Credit Card Debt Statistics More recent data from Lending Tree
Overall, the national average card debt among cardholders with unpaid balances in December 2022 was $7,279. That includes debt from bank cards and retail credit cards. The four states with the highest debt are in the Northeast, while three of the four with the lowest are in the South…Americans carried a balance on 53% of all active credit card accounts in the second quarter of 2022, according to the most recent available data from the American Bankers Association.
There was never any ZIRP for most Americans:
“For all credit cards, the average APR in the first quarter of 2023 was 20.09%. For cards accruing interest, the average in the first quarter of 2023 was 20.92%. For new credit card offers, the average today is 23.65% — the highest rate since we began tracking rates monthly in 2019.”
“Just 2.25% of Americans’ total outstanding credit card balances are currently at least 30 days delinquent.”
We’ll see how that goes.
On the heels of billionaire investor Wilbur Ross announcing on Wednesday that he was raising some $4 billion to gobble up hobbled banks, one prominent Wall St. analyst is aiming to do the same thing…Outspoken bank analyst Richard Bove at Punk Ziegel, who scores regular face time on CNBC and Fox Business Network, wants to put his money where his mouth is…“The last time an opportunity of this nature existed to buy bank stocks this cheap was in 1990,” Bove wrote in a recent research note. “The next time will be in 20 years. This is a once in a generation opportunity,” he added, writing that interest rate reductions and steps to inject more cash directly into the banking system will help banks generate profit.
Speaking of the incredible carnage in regional bank stocks…
I don’t remember any weeping and gnashing of teeth when the Regional Bank ETF popped 142% between late 2020 and early 2022.
Now the ETF is 43% off its high, but 38% ABOVE late-2020. Seems like the bank stock bulls doth protest too much.
Maybe we’re just reverting to sanity.
The Reuben brothers paid $1 billion for Michael Rosenfeld’s Century Plaza development, through a foreclosure earlier this month, The Real Deal has learned. On April 6, David and Simon Reuben placed a winning credit bid that equaled a portion of both the senior and mezzanine debt, which gave the brothers control of the hotel, retail properties and some of the condo units, according to records filed with L.A. Superior Court this week. No other bidders appeared at the foreclosure auction. Century Plaza cost $2.5 billion to build, meaning the Reubens snapped it up for just 40 percent of the development cost.
The Fed’s H.4.1 thing is out today.
Just a bunch of unimaginably large numbers. They still own $2.6 trillion of MBS.
At year end, Opendoor had nearly 13,000 unsold homes, out of about 35,000 homes purchased in 2022. By comparison it bought just under 37,000 homes in 2021.
How many AirBnb listings are there?
There are 6 million active listings on Airbnb as of March 2022. There were only 300 thousand listings in 2013, which shows a twenty-times growth in only nine years.
This is an astounding number compared to the 742,728 hotels and resorts worldwide.
The way I look at the above is that - largely due to a desperate reach for yield from the Fed’s idiotic ZIRP policies - up to 5.7 million housing units were taken away from potential buyers so that someone could set up a motel in your neighborhood.
I found during the last couple bubbles that anecdotal evidence was generally much more accurate than official pronouncements.
I see comments like this all the time, just not on CNBS or Bloomberg:
I'm just glad when I went to the mailbox today I knew that inflation is only at 6%. Just think how much more my taxes would have been if inflation was any higher. /S . Also I went to the grocery store and clorox is up around 80% and other groceries up too. A bit more than 6%. Where do they get these numbers from exactly??
Last year, across all workers at the Menlo Park, California, company other than CEO Mark Zuckerberg, the median total compensation was $296,320, according to a filing Meta made Friday with the Securities and Exchange Commission. That amount includes includes salary, stock awards and bonuses.
According to the Social Security Administration, the median net compensation for American wages earners in 2021 was $37,586.03.
I haven’t been closely following the leak story much (I don’t watch cable news), but I found these comments from Yves Smith and her source interesting.
I highlighted my favorite part:
“Last week, I asked a contact who has done a lot of classified IT forensic/analytical work for the DoD and a three-letter agency for his take. His reply:”
I have to admit, I have not been following this story beyond the headlines. From the little that I have gathered, the pilfered documents are in the highest sensitivity levels. It is hard to understand how this 21 AF Guard member would even know where to look for them, let alone have access to them.
I have avoided wasting my time because with stakes as high as theses documents have, I would have good reason to doubt any “fact” out in the public domain. There are a number of valid reasons (and other dubious too) to engulf the narratives with smoke. Therefore, I follow stories like these more for the reactions than the story itself.
To have access to classified materials, a person needs a clearance AND need to know. Also, JWICS is only the network that connects together TS systems, repositories, computers, and printers. These documents are not the kind that would be available to just anyone with a JWICS account. He would need to request and be granted access to the repositories based on his need to know.
The most interesting thing that jumped out at me was that they were photos of the documents. This would mean that he either smuggled the docs out or smuggled a camera in (and back out). EVERY printed classified document is recorded, logged, and inventoried. You can’t even destroy a classified print out without going through specific procedures. If he smuggled them out, procedures should catch that they were missing. He would have to had brought them outside the SCIF (maybe for lunch) and brought them right back so they were not missing. That is very overtly criminal.
Taking photos inside is even more crazy. Because of security protocols, SCIFs have almost no electronic devices in them. Radio frequency scans are run regularly. Bringing a cell phone (even in airplane mode) into a SCIF would be as detectable as trying to find a blaring boom box in a library.
John Keel on the Fu-Go balloon bombs, 1993
Near the end of World War II the Japanese built and launched 9,000 bomb-carrying balloons against the United States. Hundreds of them actually managed to drift across the Pacific on the Jet Stream and drop their bombs on the U.S., Canada and Mexico, causing numerous forest fires and a few deaths and injuries.
At least two 9/11 hijackers had been recruited into a joint CIA-Saudi intelligence operation that was covered up at the highest level, according to an explosive new court filing.
CHENEY, BANDAR, RICE & BUSH, 9/13/01
Disney CEO Bob Iger discusses upcoming children's movie based on the Jamal Khashoggi killing tentatively titled "The Prince and the Bone Saw."
Hilarious: "so that someone could set up a motel in your neighborhood."
Been diving deep into this Florida insurance thing and Citizens. Doing a Spaces on Monday (will record). This is a really, really big deal, and it is about to get super political.
And, then in other news, spent all day explaining to a client why their servicer advance went up so much in CA last month.....tax bills. No one was ready. Looking at borrower weakness this could really be a default trigger as their payments go up to replenish escrow.
Watching the film clip, Imagine our country (or world) if we rewarded the people who made us better (emotionally and intellectually) rather than those who make us feel worse (though financial shenanigans and greed). I believe it’s very hard to become a teacher in Norway - not because the job pays well, but because it’s the profession is so highly respected it’s competitive. We have good people in the US, we just don’t celebrate and reward them.
As for Philly, I just saw a drive-by clip on Twitter of extreme homelessness, drug use and filth shared by a European who rightly points out, whatever Europe’s troubles, we don’t have that.
And as for the value of anecdotal information, when I emigrated to Ireland 32 years ago, the Irish shook their heads curious as to why I would leave the US for Ireland (for love). Now, to a person - Irish friends and strangers alike, express shock and dismay and the tragic state of the country - recalling how it was the place to go to when they were young - now their kids ‘never would want to live there.’ I wonder do the Americans living there see that? Or are they boiling frogs? Or are the decision makers and influencers too cosy in the ‘nice’ neighbourhoods to notice. Foreigners notice (and so do some Americans who I meet who stay at my neighbour’s Air Bnb).