“We can never recapture the purchasing power of the dollar that has been lost.”
William McChesney Martin, the longest-serving Fed chairman, August 1955
The Great Liquidity Debate | Michael Howell & Andy Constan Oh boy. High-level discussion here (they spent the first 5 minutes dissing a chart I like to toss out from time to time of the Central Bank balance sheets vs the SPX). Howell seems to be pro-equity but negative on bonds, while Constan is shorting both equally apparently. Anyway, still plenty of liquidity! The depressing part is their prophecy that the Federal Reserve and Janet Yellen will mess far more with what remains of “markets” in the future.
$2 Trillion deficits as far as the eye can see, financing over 20% of that at the short-end while we have a ridiculously inverted yield curve, “Not-QE QE”, Yield Curve Control, private investors levered up 50-1 on bonds, human sacrifice, dogs and cats living together, mass hysteria... Truly a dystopian future, where the same statist, unaccountable clowns who led us into the desert remain in charge of leading us…further into the desert. But that’s just my take!
Howell and Costan talk a lot about how the watch works, while I just try to look at the time.
I wonder if they had podcasts like the above back in early 1920’s Weimar Germany.
Von Havenstein faced a very real dilemma. Were he to refuse to print the money necessary to finance the deficit, he risked causing a sharp rise in interest rates as the government scrambled to borrow from every source. The mass unemployment that would ensue, he believed, would bring on a domestic economic and political crisis, which in Germany’s current fragile state might precipitate a real political convulsion. [Remember, Hitler’s Beer Hall Putsch was in Nov. 1923, at the peak of the hyperinflation. - RH]
As the prominent Hamburg banker Max Warburg, a member of the Reichsbank’s board of directors, put it, the dilemma was “whether one wished to stop the inflation and trigger the revolution” or continue to print money. Loyal servant of the state that he was, Von Havenstein had no wish to destroy the last vestiges of the old order.
The Move Index
No fear VIX.
Related: BusinessWeek cover story, August 13, 1979: "The Death of Equities - How inflation is destroying the stock market"
Whatever caused it, the institutionalization of inflation—along with structural changes in communications and psychology—have killed the U.S. equity market for millions of investors. "We are all thinking shorter term than our fathers and our grandfathers," says Manuel Alvarez de Toledo, of Shearson Loeb Rhoades Inc.'s Hong Kong office.
Today, the old attitude of buying solid stocks as a cornerstone for one's life savings and retirement has simply disappeared. Says a young U.S. executive: "Have you been to an American stockholders' meeting lately? They're all old fogies. The stock market is just not where the action's at."
This is excellent: "The banks own the place." Jeff Connaughton, author of “The Payoff: Why Wall Street Always Wins”, in 2014.
Multi-Family Serious Delinquency Rate
LA tenants have until Aug. 1 to pay 18 months of back rent
Under a tenant protection package passed early this year, tenants have until Aug. 1 to repay the debts incurred between March 1, 2020 and Sept. 1, 2021…Yukelson said landlords were “left powerless” against non-paying tenants and were taken advantage of during the pandemic. There were instances, he said, where landlords didn’t receive rent payments while their tenants bought new cars, went on vacations and even bought properties.
I thought this was good (unedited):
The purpose of homeownership has been lost
It used to be that you'd work at your job and rent until you could save up 3.5-20% for a mortgage downpayment. That had been the traditional path to generational wealth for decades, because instead of burning money with rent payments, you'd have equity in an appreciating asset* you could live in.
Some people could afford 2nd homes for vacations or as an additional asset to grow wealth through rent, and that was okay.
But then real-estate investors went nuts with properties. And after that, social media influencers got popular with one simple trick: Buy properties, and then use those properties as leverage to finance the purchase of new properties until you felt happy with the cashflow.
But now there's a monster in the system. Institutional investors and private companies have been buying homes all over the country and reducing supply, pricing out individuals and families who can no longer afford downpayments, let alone full cash purchases above asking price.
This isn't going to change and the market won't correct itself. The level of greed has become unmanageable and housing prices will keep rising, while we sit on the sidelines waiting for a bubble that will not burst until something worse, like the USD collapsing, occurs.
Whatever this country is doing is clearly not working for
the majoritya lot of people and only bold legislation that serves individuals rather than profit-driven companies can fix this, perhaps at the cost of losing the super appreciation of properties in the middle and long term.We are now divided into those who bought homes before the rate hikes and those who didn't. The inequality that will arise from this will take time to show its ugly head.
Edit: ITT some people don't know what "generational wealth" means.
*Rent = burning money, mortgage = putting money into an asset that keeps up with inflation. I'm not saying you build wealth through the appreciation itself.
I wouldn’t have crossed out “the majority."
Some comments…
Just fyi - this comment below I agree with most: “The purpose of homeownership is to have a place to live, not generate wealth.”
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