A New Disturbance in the Force

My takeaway summary from that:

  1. Fed left rates too low too long after 2008 financial crisis
  2. Fed should pause rate increases for now, wait, and resume rate increases later if needed

For all to watch.

My view: The opposite. Low interest rates (easy access to money) and quantitative easing (Fed created money) for a long period (since 2008) of time with a large economic impact (COVID) have been one of the major reasons for inflation. Essentially, lots of money with few areas to invest in it (stock market rising for 10 years as well as alternative, speculative investments, like crypto/real estate compared to the debt market, bonds, which have been suppressed for a long time) while some companies had to increase costs due to the supply chain. Now that the supply chain has corrected, prices haven’t dropped, which lead to record profits in 2022.

Our national debt is extremely high (5-6x higher than 1970s, never this levered in the history of the USA: companies, people, government) and by raising rates, it’s a tool to slow this borrowing down along with inflation by decreased spending. Interest rate increases are a sledgehammer playing a huge game of Whac-A-Mole, with impacts not fully understood for multiple quarters, but the problem is 10+ years of all industries getting into wild debt and not utilizing it as planned (stock buybacks, real estate development, education costs, etc). This decreased spending will also impact future growth of companies in the form of investment and hiring. It can also stymie access to debt to buy a home, buy a car, or other credit-based transactions. On the flip side, this rate increases will help slow the runaway, hyperinflation of the USD.

I think this will require someone leading the Fed with bigger cojones than Paul Volcker. Lots of blood on the street (banks, etc). The can has been kicked for too long and Jerome Powell has proven that he flinches in the face of wall street. IMHO, rates should have been raised back to 2005-2007 levels back in 2014-2015 along with quantitative tapering, but the Fed was too squeamish to take the blame for tanking the stock market. The market enjoyed the high from the market rallying party and weren’t interested in sobering up.

Oil is an outlier because it is geopolitical, and it’s inelastic (not easily replaceable). Crude types may have preferable application and differ in direct refining purpose (e.g. plastics vs fuels), it’s all bundled up as interchangeable (crude from one place vs crude from another), so when something happens in one part of the world, it impacts the price for world oil markets (e.g. wars). At the baseline, prices change due to production increases and decreases along with +/- from foreign trade.

Watched it over the weekend. Good piece.

I’m happy I locked in some CDs and the Inflation hedged Treasury at 9.14%.

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Good on you, Bud. I had just moved to CA and my paperwork was in my moving pod, so I couldn’t send it off to Treasury Direct fast enough. I missed out, definitely. :sob: :sob: :sob: :sob: :sob: :sob: :sob: :sob:

I did mine and the wife’s online

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My TD account was inaccessible, so they wanted me to send in paperwork proving that I was who I am. Sucks!

I moved to TD from Schwab way back, but now TD is turning into Schwab!

Sorry @norbert : TD in this situation is Treasury Direct, not TD Ameritrade

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U.S. consumers’ total credit card debt exceeded $1 trillion for the first time, according to a new study by the personal finance website WalletHub.

And banks carry that debt as assets. From watching Capital One commercials, I’m not sure I’d have to actually pay the money back.

Interesting, but should note, if adjusted for inflation, Q4 2007 and Q1 2008 would come in at
1.4 trillion as the article demonstrates.

I guess one could try to interpret this as precursor conditions to the often talked about coming

Just declare bankruptcy, easy!

Office REIT Vornado Realty Trust ($VNO) at 30-year lows

(click to embiggen)

Barry Sternlicht CEO of Starwood said that they reviewed 7 reginal banks. I think they were in Florida & NY which is where he operates. He said they are all insolvent. When they did the analysis, they came up with a stock price of -$50/share.