You get no premium for illiquidity
Even Kashkari laughed at the absurdity of it all...
"Inflation is not a glitch in the Fed’s manipulation of our economy; it’s a critical feature. As is keeping you as far in debt as possible."
The CPI has been above the Federal Reserve’s made-up 2% YOY target every month since April 2021, 43 months.
Actual Fascism Alert
Identities of Shadow Banks That Use New BOE Tool to Be Secret
“The Bank of England will hide the identities of any pension funds, insurers or hedge funds bailed out under a new financial stability tool to prevent a wider crisis engulfing the economy, Deputy Governor Dave Ramsden said.”
History Repeats Exactly: April 2020
Bill Moyers: Doesn’t this new bailout, include a provision which allows the Fed to meet in secret with no records kept? I mean what the hell is that about?
Neil Barofsky: It’s not encouraging, Bill. It is not encouraging. To put it mildly.
"The text of the final bill was breathtaking in the breadth of new powers it bestowed on the Federal Reserve, including the Fed’s ability to conduct secret meetings with no minutes provided to the American people."
Section 8 of the Original 3-page Paulson/Kashkari TARP Bill, September 2008
“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
From Sorkin’s paean to plutocracy, “Too Big To Fail”:
“Paulson had intentionally chosen not to mention how much the program would cost; after a briefing earlier that morning from Kashkari, he now feared that he might actually need more than the $500 billion he had mentioned to the president a day earlier—a great deal more. Back in his office after the speech, he met with Fromer and Kashkari and debated what the precise cost might be.
“What about $1 trillion?” Kashkari said.
“We’ll get killed,” Paulson said grimly.
“No way,” Fromer said, incredulous at the sum. “Not going to happen. Impossible.”
“Okay,” Kashkari said. “How about $700 billion?”
“I don’t know,” Fromer said. “That’s better than $1 trillion.”
The numbers were, at best, guesstimates, and all three men knew it. The relevant figure would ultimately be the one that represented the most they could possibly ask from Congress without raising too many questions. Whatever that sum turned out to be, they knew they could count on Kashkari to perform some sort of mathematical voodoo to justify it: “There’s around $11 trillion of residential mortgages, there’s around $3 trillion of commercial mortgages, that leads to $14 trillion, roughly five percent of that is $700 billion.” As he plucked numbers from thin air even Kashkari laughed at the absurdity of it all.”
This is a like Ted Bundy bemoaning a rising murder rate:
United States Nfib Business Optimism Index
“The NFIB Small Business Optimism Index in the US jumped to 101.7 in November 2024, the highest reading since June 2021, compared to 93.7 in October and beating forecasts of 94.2. It is also the first time in 34 months that the reading is above the 50-year average of 98, in response to the presidential election.
“The election results signal a major shift in economic policy, leading to a surge in optimism among small business owners. Main Street also became more certain about future business conditions following the election, breaking a nearly three-year streak of record high uncertainty. Owners are particularly hopeful for tax and regulation policies that favor strong economic growth as well as relief from inflationary pressures. In addition, small business owners are eager to expand their operations”, NFIB Chief Economist Bill Dunkelberg. The net percent of owners expecting the economy to improve rose 41 points to a net 36%, the highest since June 2020.”
Income vs Stock Prices Expectations
Wait - aren’t rising stock prices considered income nowadays?
“The percentage of respondents that expect stock prices to rise over the next 12 months. The survey began in May 1987.”
FOMO YOLO!
"We have a good deal of comfort about the capital cushions at these firms at the moment.”
S.E.C. Chairman Chris Cox, March 2008
Below the fold, people named “Porter”, Jesse Felder, Tim Price, Mike Green, Felix Zulauf, Jim Grant, Microstrategy, Consumer Sentiment, the Nasdaq, expensive stocks, apathy, dumb money, Farcoin, Dogecoin, chicken wings, OPEC, finfluencers, Dan Rasmussen, Dating the Rate, mall living, CRE, Canada, the EU, China, Australia, the Rupee, Whitney Webb, Trump Towers, Syria, Marc Faber, Mark Twain, drones(?), cocoa and more!
Porter Collins on Political Influence in Market Strategies, and Tail Events Analysis “If they actually believed Elon they’d be buying the ten-year, but they’re not.”
Jesse Felder: Warren Buffett & CEOs Are Cashing Out “The message from insiders is very clear. The economy and earnings are likely to disappoint over the next 12 months.”
Tim Price: Real Assets are Returning to the Playbook of the 1970s “Gold is for optimists.”
Felix Zulauf
“I don't like relative performance because I cannot eat relative bread.”
“I see Europe in an ongoing recession for the next three to four years. My outlook for Europe is really ugly because these the guys do not get it.”
I just I just think that there is a a fiscal Moment of Truth at hand. I think the interest bill on the debt this fiscal year is going to be $1.1 trillion, which is more than half of the expected deficit. There's a level of financing where you borrow to pay the interest bill. It's called Ponzi Finance. We're kind of there.”
Mike Green
He discusses “the potential for vol amplifying feedback loops that result from the extremely large daily re-hedging,” particularly in Microstrategy and its derivatives.
“Effectively he (Paul Tudor Jones) was saying portfolio insurance is not dissimilar to the subsidized flood insurance - along the Mississippi or any other river or along the coast of Florida - that encourages people to make investments that they otherwise would not make right.”
“Mark (Rubenstein) was a finance professor whose ideas around Delta hedging actually underpinned what called the Cox-Rubenstein model of options, the binomial pricing trees, and what Mark told me was that when it got to that point the next sale was going to be so large his trader actually came to him and said, Mark, if we execute this trade we will send the market to zero, Mark took the fiduciary responsibility and said no, we're not going to do the trade. We will take the loss rather than send the market to zero. I think that's a really critical…We were still existing in a world there where there was a human check - do we do this trade? This trade now - it's largely embedded in algorithms. So one of the things that you always have to think about is what would have happened if that human intervention hadn't existed?”
“Once you get to that size that your Delta hedging is actually a critical input to the price behavior of the underlying, then you have the potential for feedback loops.”
“There's been an incredible injection of leverage into the system in very short order”
More color here: Is MicroStrategy a Pyramid Scheme? I have no position.
Household finance outlook hits highest since February 2020 following Trump win, New York Fed survey shows “Households expecting their financial situation to be better a year from now jumped to 37.6%, the highest since before the Covid pandemic”
Housing sentiment has been recovering for almost two years for some reason, and now we are in a post-election euphoria, which I hope proves justifiable: Consumer Housing Sentiment Up Significantly Year over Year
Impressive - Nasdaq Composite
Stocks are expensive, and nobody cares
"Not only are well-known bears capitulating, but banks are publishing research notes about how this time is really really different, which we’ve heard is always a good sign."
“Four reasons that this state of denial bullishness should continue”:
A greater share of the S&P 500 is tech stocks now, and those businesses are inherently better and growthier.
Companies have higher cash flows now, so they deserve higher valuations.
Companies still have a low cost of capital.
There’s no recession in sight.
Chasing ‘Dumb Money’: Hedge Funds Target Mere Mini-Millionaires
"Why? The smart money hasn’t been looking so brilliant lately....Plus, giant investors tied up in private equity bets that haven’t produced distributions yanked their cash from hedge funds for added liquidity. That has diminished institutional appetite."
"If it's such a great trade, why are you offering it to me?" - a line from 𝘛𝘩𝘦 𝘉𝘪𝘨 𝘚𝘩𝘰𝘳𝘵
“It was the most regulated of times, it was the least regulated of times.
I was recently told by our medallion distributor, representing Finra rules, that in a letter to our investors I could not refer to one of our funds as “unique”. After much back and forth, it was decided that I’d be allowed to use the word “distinct”. For a regulated asset manager, the precise line between compliance and fraud was being drawn in between those words: unique and distinct.
Around the same time, a cryptocurrency called Fartcoin launched, and has since accumulated over $200 million in investor assets.
While I wouldn’t dare challenge the intrinsic value or economic utility of a Fartcoin, I bring it up to contrast against the reality of a heavily regulated securities market.”
“Fartcoin has ridden a near 200%, one week rally to a $570 million valuation as of mid-afternoon, exceeding roughly one third of Russell 2000 Index Components.” - Grant’s
"I’m 21 years old and I’ve managed to save about 30k in the last 3 year’s driving Uber. I don’t own anything and live with my parents. I’ve decided to join the party and go all in [on Dogecoin]."
Banks sell bonds backed by revenues from chicken wings, music catalogues and oil wells
“Investors’ “relentless” appetite for juicy returns has triggered the biggest boom on Wall Street in complex financial products since the lead-up to the global financial crisis in 2007.
The global volume of structured finance transactions has hit $380bn this year, according to data from LSEG, which excludes real estate and traditional corporate loans. The figure is up by more than a fifth from the same period a year ago and about $1bn more than all of 2021, which had been the previous post-financial crisis peak.”
Counterpoint:
“Franklin Templeton Investments CEO Jenny Johnson lamented the state of private valuations at a Bloomberg-hosted conference earlier this week, noting that some investment- and junk-rated direct loans are priced at similar spreads to conventional high- and speculative-grade corporate bonds. “You get no premium for illiquidity,” she said. “That worries me.”.”
“OPEC recently extended its production cuts by three months to April 2025 and termed out the unwinding of the cuts to 2026, effectively removing 305 million barrels of cumulative production, or 0.84 million barrels per day (mbd), from the 2025 oil market.”
MP’s should quiz ‘finfluencers’, says Treasury select committee chair.
“MPs should look into the phenomenon of social media “finfluencers”, as they seek to protect consumers from ill-advised investments, the new chair of the Treasury select committee has said.”
Meanwhile, here’s the Bank of England in February 2021: “Market-implied paths for policy rates in the US, UK and euro area have been little changed since the November Report, suggesting that rates will remain at very low levels for several years”
“People would say, aren't people going to steal your ideas? And I said, you know, that's the greatest flattery that you could get, if someone steals your ideas. You want people to steal your ideas, you know? You want people to adopt your ideas.”
“Date the Rate”
This applies to parts of California too:
Apartment 3001 in The Lions at 1331 Alberni Street was listed for sale this week for $1.5 million. To market itself, it leans into the somewhat taboo topic of foreign ownership. “Overseas owner, never lived in. Like brand new unit,” the unit’s description reads.
“This sums up the problem [with] Vancouver real estate, right?” Appelbe said. “It’s one of a handful of reasons why we are among the least affordable cities on the planet. Money laundering, weak rules, weak enforcement, and bad government policy are other contributing factors.”
Mall Living
”I Googled it! The units in this building are sold by Sotheby’s (lol). The third floor units like the one in the video are 270 sqft and $135,000. The second floor units are 340 sqft and $145,000”
“The Dodge Momentum Index is a measure of nonresidential building projects in the planning process. The DMI leads nonresidential construction spending by a full year and, therefore, is carefully monitored for the future direction of construction spending.”
“According to S&P more than $2 trillion (!) of commercial real estate mortgages will mature over the next two years ('25 / '26). The average interest rate on maturing loans (underwritten in '20/'21) is only 4.3%. Good luck refinancing at TWICE that rate today. And... roughly $200 billion of these mortgages are on office properties where the underlying value has collapsed. Nobody is talking about this yet, but size of this pool of distressed capital is much larger than the subprime mortgage market at its peak in 2005 ($625 billion). The "extend and pretend" game that occurred in 2024 with the big banks will only make these problems much worse in 2025, because nobody will know where the toxic waste is buried. (Here's a hint: Bank of America.)”
This assumes you accept the CPI numbers, but on a relative basis, the U.S. and Italy are doing well, and Canada is not.
A Dying Union
GDP of course can’t be monkeyed with:
A translated December 2 tweet, describing SDIC Securities Chief Economist Gao Shanwen’s views:
“A bearish commentary by a prominent economist on China's weak consumption, unemployment and "dispirited" youth that went viral on social media has vanished from the country's tightly controlled internet.
The loss of access to the comments by Gao Shanwen, chief economist at state-owned SDIC Securities, come ahead of a meeting of Chinese leaders this month to set the economic agenda for 2025, including growth targets.”
Reminded a bit of the massive censorship efforts here at home in recent years:
“The ruling class, made up of the traditional elites that run the Republican Party and the Democratic Party, is employing draconian forms of censorship on its right-wing and left-wing critics in a desperate effort to cling to power."
“It’s been dubbed Beijing’s “do whatever it takes” moment. In a surprise move on Monday, the country’s ruling Communist party vowed to ramp up support for China’s ailing economy. With echoes of Mario Draghi’s bid to save the euro in 2012, leaders in Beijing changed their so-called stance on interest rates from “prudent” to “moderately loose”. The change may seem benign and technical, but it is one that demonstrates how alarm bells are ringing across the Chinese Communist Party…unlike a decade ago, China’s vast debt pile and weak property sector means this time around there are no bazookas to stimulate growth.”
Praying in Australia
“If you were wondering if there was any uncertainty in our economy right now, look no further than Finder’s latest RBA survey. While being asked to predict rate movements in 2025, a panel of 40 economists and experts were also asked for their one piece of economic advice for the year ahead. “Pray”, was the single word response from Richard Holden of UNSW.
Economists and desperate religious implorations don’t often go hand-in-hand. Why this advice? “Core inflation is too high and the RBA didn’t raise rates enough,” Holden explained, while predicting the RBA would hold rates until September next year.”
Who Owns U.S. Debt
Dollar/Rupee
“My whole career is trying to build common ground between the anti-war left and the anti-war right - Libertarians, I guess for people more of that bent - about common policies that tend to be bipartisan that I think are very Orwellian and and really benefit the oligarch class, and the idea that both political parties ultimately serve the same masters and advance the same policy agendas, but their sales pitches for those agendas are different.”
"The newest Trump Tower will be a hotel in Saudi Arabia"
"Look at Saudi Arabia. It is the world’s biggest funder of terrorism. Saudi Arabia funnels our petro dollars—our very own money—to fund the terrorists that seek to destroy our people, while the Saudis rely on us to protect them!" - Donald Trump
Motive
"No videos of beheadings. None of that. We're not gonna scare everybody into submission with beheading videos. We're gonna come in preaching tolerance, unification, 'all Syrians together.' Then once you get control, do whatever you want."
Marc Faber
“I sometimes feel bad, because people think that I'm anti-American. I can tell you - we grew up in the ‘50s in Europe. The young people - everything that was good - came from America. I can assure you the standing of America post-Second World War was at the highest you could imagine. The Americans were the good ones, the Russians the evil ones, but the world has changed.
The perception of the world has changed. Ordinary people around the world, they can see - especially through the social media - how the U.S. began to intervene into other people's affairs…people when they meet Americans individually, they like them. Everyone is happy, drinking and enjoying life, but politically the U.S. has suffered an unimaginable setback.”
“A man who hasn't had much experience, and doesn't think, is apt to measure a nation's prosperity or lack of prosperity by the mere size of the prevailing wages: if the wages be high, the nation is prosperous; if low, it isn't. Which is an error. It isn't what sum you get, it's how much you can buy with it that's the important thing.”
Mark Twain, A Connecticut Yankee in King Arthur’s Court
For Your Amusement…
“Moderate strength is shown in violence, supreme strength is shown in levity.”
Good Read https://convex-strategies.com/2024/12/16/risk-update-november-2024-rationality-wars/
Dear God. Fartcoin is 48% higher than when you wrote this...