Tightening Deniers of the World! Unite And Take Over.
Good stuff!
“We are going to debauch the currency. I still think QT is a myth, and even if they try, I think the balance sheet will be materially higher, because Japan said they were going to end QQE in 2007, at 80% of GDP, now they’re at 136. We’re at 85 or something like that - we’ll be at 130 someday, there’s no question in my mind. But, in the short run, applause to Jay Powell, for being back to Jerome, the hawk.” - Mark Yusko
Hey Steve Bregman, what do you think?
“Fed’s QT Kicks Off: Total Assets Drop by $74 Billion from Peak, New Era Begins”
Total assets on the Fed’s weekly balance sheet as of July 6, released this afternoon, fell by $22 billion from the prior week, and by $74 billion from the peak in April, to $8.89 trillion, the lowest since February 9, as the Fed’s quantitative tightening (QT) has kicked off…So when the tightening-deniers – including a hedge-fund guy with a big Twitter following – trolled the internet and the social media about QT not happening because MBS balance ticked up by $1.2 billion on the June 23 balance sheet, they got tangled up in their own underwear.
I generally like Wolf, but this seemed a bit much. fyi Wolf was not referring to me, because I’m not a hedge-fund guy, and I no longer have a big Twitter following - although my 81 million Substack subscribers RULE!
Anyway, Let’s break it down and keep it simple, because I’m slow, looking just at Treasury Securities and MBS:
Let’s start with Treasuries.
So it looks like Fed Treasury security holdings peaked (so far) a month ago in June at around $5.771 TRillion (remember that on December 31, 2008, we were at $475 Billion, with a ‘B’.)
Since we’re now down to $5.743 TRillion, a drop from the peak of $28 Billion, or a 0.48% decline (and still 12x 2008 levels). Very impressive.
Now let’s do MBS, which if anyone remembers were at ZERO on the Fed’s balance sheet on December 31, 2008 (for most of Fintwit, history began in early March 2009.)
Looks like the MBS Fed Fun Coupons peaked in April at $2.740 TRillion, and have now plummeted to $2.709 TRillion. That is a drop - using traditional math - of $31 Billion (with a ‘B’), or 1.1%.
Again, very impressive. I’m stunned by the hawkishness (why many more are not stunned by the 14 1/2 year orgy of Fed dovishness that preceded this, I don’t know.)
Anyway, I tried to divide todays $2.709 TRillion in Fed MBS holdings by the MBS holdings on December 31, 2008, but I kept getting this error message:
Does anyone else remember Citadel Ben talking about the Fed balance sheet back March 25, 2010? Good times.
Dr. Paul. Can you give me a rather quick answer on this? Do you have any idea what percentage the base should shrink or might shrink, or is that something that you don't even want to address?
Mr. Bernanke. No. I think we would like to bring the balance sheet back to something consistent with where it was before the crisis, which means enough to accommodate Americans' demand for currency plus a modest amount of reserves in the banking system, and that would suggest something under a trillion dollars I think would be--
Dr. Paul. A trillion dollars?
Mr. Bernanke. Or less, yes.
Then again the same Bernanke said in December 2010, “We will not allow inflation to rise above 2% or less...We could raise interest rates in 15 minutes if we had to,” so his credibility was never very high.
Whatever - count me in as a Tightening Denier, at least until the Fed’s balance sheet gets back to “enough to accommodate Americans' demand for currency plus a modest amount of reserves in the banking system.”
‘It was a licence to steal’: Jeremy Grantham is no fan of private equity
Jeremy Grantham has no love for private equity. The GMO founder and veteran value investor has branded the alternative area of investment as ‘a licence to steal’ in a low-rate environment…Private equity is shuffling the same paper that institutional investment managers do. It adds very little value and leverages the system up.’
‘It was a licence to steal as long as the rates were coming down. Over the last few years, where debt after inflation was practically free, how could you not make money buying a company and leveraging it with free debt and holding, or reselling it?
Time to read this again: Jerome Powell’s Fed policies have boosted the system that made him rich and Jerome Powell: Our Man in Washington
CalPERS Cooks the Books While Taking an Unnecessary Loss to Exit $6 Billion of Private Equity Positions “this amounts to an admission that the private equity team is incompetent.”
No problem. The taxpayers will simply backstop CalPERS incompetence.
The Housing Boom that Won’t Go Bust Saving for posterity.
Seemed worth bookmarking. I looked up “Non-QM”: “In some ways, non-QM loans are the new subprime mortgage.”
#1? Acra Lending. Then I wondered who owns Acra Lending, and saw this, “Non-QM lender Citadel Servicing rebrands as Acra Lending”. I don’t know for sure if this “Citadel” has anything to do with one of Ben Bernanke’s new homes, but I was reminded of this…
Before Trish Arcaro, a Maine-based real-estate agent, begins a new workweek, she pulls cards from her tarot deck, lights a candle, recites a series of affirmations, and holds her sunstone crystal, which helps to foster abundance and joy. She will occasionally burn palo santo around a new home for a client in order to clear the space of bad energy before the move-in. And when she announces a successful deal on Instagram, she doesn’t put SOLD or PURCHASED on the listing — she puts MANIFESTED!
I guess I will never own a legal gun in New York.
Big Tech isn’t Woke. It’s Totalitarian
“Messy politics” at Bloomberg means any opinions to the right of Bill de Blasio. Goldman Sachs does business all the time with the SAUDIS, for cryin’ out loud. I think they can handle Texas, as long as there’s money to be made.
They’re trying so hard: Falling Food Prices Give Hope for Peak Inflation Bets
You ever notice that, while, say, corn may fluctuate, the price of a box of corn flakes always seems to go up?
Which reminds me - I used to do this on the Twitter - my infamous and proprietary (protected by U.S. copyright law!) Bitcoin to Corn Ratio (Bitcorn) - the only market indicator you need:
Thanks to Bloomberg for covering this important story.
Now how about a list of Epstein and Maxwell’s clients?
Super. Glad the adults are in charge.
HOUSTON, July 5 (Reuters) - More than 5 million barrels of oil that were part of a historic U.S. emergency reserves release to lower domestic fuel prices were exported to Europe and Asia last month, according to data and sources, even as U.S. gasoline and diesel prices hit record highs.
Gold falls below $1,800 as investor appetite wanes
Is the Market Still Overvalued? TL;DR: Yes.
Then again…
So I have about 1,000 podcasts in my app queue. Some I never get to, others I listen to right away (like anything with Louis-Vincent Gave.) Sometimes I listen to part of one, and then go back and finish them (up to years) later.
Friend of the show Marc Cohodes (from 2017)
Friend of the show Demetri Kofinas with Rana Foroohar (from 2019)
The recent escalation of U.S. sanctions blocking Europe, Asia and other countries from trade and investment with Russia, Iran and China has imposed enormous opportunity costs – the cost of lost opportunities – on U.S. allies. And the recent confiscation of the gold and foreign reserves of Venezuela, Afghanistan and now Russia, along the targeted grabbing of bank accounts of wealthy foreigners (hoping to win their hearts and minds, along with recovery of their sequestered accounts), has ended the idea that dollar holdings or those in its sterling and euro NATO satellites are a safe investment haven when world economic conditions become shaky. - Michael Hudson (Gave’s interview made me think of Hudson’s comments)
Steven Grey, chief investment officer at Grey Value Management, via @Grantspub
We've all read about a number of high profile, multi-billion-dollar hedge funds that have – as a transparent result of some ill-advised, extreme risk taking – experienced massive losses.
Investors' ultimate, realized losses may be smaller - or perhaps larger. But consider this: At this point, investors victimized by Bernie Madoff's Ponzi scheme have recovered over 80% of their losses.
In other words, the losses incurred in those legitimate hedge funds may ultimately dwarf those absorbed by victims of Madoff's deliberate fraud.
I’m gonna miss Boris Johnson
Perfect Friday post!
By the St. Louis Fed’s own definition, the Fed has absolutely monetized the debt. For some reason, few reporters have noticed. From 2013: https://research.stlouisfed.org/publications/economic-synopses/2013/02/01/is-the-fed-monetizing-government-debt/
I recently finished Kelton’s “The Deficit Myth” promoting MMT. Although full blown MMT promoted by Kelton is far more expansive than the monetization we have seen so far, I’d say we are adopting much of her playbook without anyone wanting to acknowledge it.